WORLD TRADE  
ORGANIZATION  WT/DS296/AB/R 
27 June 2005 
 (05-2728) 
 Original:   English 
   
 
     
 
    
 
   
 
UNITED STATES – COUNTERVAILING DUTY INVESTIGATION ON DYNAMIC 
RANDOM ACCESS MEMORY SEMICONDUCTORS (DRAMS) FROM KOREA 
   
AB-2005-4 
     
 
    
 
   
Report of the Appellate Body 
  WT/DS296/AB/R 
 Page i 
 
 
 
I. Introduction................................................................................................................... ..............1  
II. Arguments of the Participants and the Third Participants ..........................................................4  
A. Claims of Error by the United States – Appellant .........................................................4  
1. Request for Consultations under Article 4.4 of the DSU..................................4  
2. Interpretation of Article 1.1(a)(1)(iv) of the SCM Agreement ..........................5  
3. Review of the USDOC's Evidence of Entrustment or Direction ......................6  
(a) The Panel's "Probative and Compelling" Evidentiary Standard ..........6  
(b) The Panel's Approach to the Evidence .................................................7  
(c) The Panel's Failure to Comply with Article 11 of the DSU ................11  
4. Benefit and Specificity....................................................................................13  
B. Arguments of Korea – Appellee ...................................................................................14  
1. Request for Consultations under Article 4.4 of the DSU................................14  
2. Interpretation of Article 1.1(a)(1)(iv) of the SCM Agreement ........................14  
3. Review of the USDOC's Evidence of Entrustment or Direction ....................16  
(a) The Panel's "Probative and Compelling" Evidentiary Standard ........16  
(b) The Panel's Approach to the Evidence ...............................................17  
(c) The Panel's Failure to Comply with Article 11 of the DSU ................20  
4. Benefit and Specificity....................................................................................22  
C. Claim of Error by Korea – Other Appellant ................................................................22  
D. Arguments of the United States – Appellee ..................................................................23  
E. Arguments of the Third Participants ............................................................................24  
1. China...............................................................................................................24  
2. European Communities...................................................................................25  
3. Japan ...............................................................................................................27  
4. Separate Customs Territory of Ta iwan, Penghu, Kinmen, and Matsu ...........28  
III. Issues Raised in This Appeal ................................................................................................... .29 
IV. Consultations .................................................................................................................. ..........31  
A. Introduction and Relevant Procedural Background ....................................................31  
B. Sufficiency of the United States' Notice of Appeal .......................................................34  
C. Does Korea's Request for Consultations Fulfil the Requirements of Article 4.4 
of the DSU? ..................................................................................................................35  
V. Interpretation of Article 1.1(a)(1)(iv) of the SCM Agreement ..................................................36  
A. Introduction .................................................................................................................36  WT/DS296/AB/R 
Page ii  
 
B.
 Article 1.1(a)(1)(iv) of the SCM Agreement ................................................................37  
1. The Meaning of the Terms "Entrusts" and "Directs"......................................37  
2. The United States' Appeal...............................................................................43  
3. Korea's Cross-appeal ......................................................................................45  
VI. The Panel's Review of the USDOC's Evidence ........................................................................47  
A. Introduction .................................................................................................................47  
B. The USDOC's Finding of Entrustment or Direction ....................................................48  
C. "Probative and Compelling" Evidentiary Standard .....................................................51  
D. The Panel's Approach to the Evidence ........................................................................53  
1. Examining Individual Pieces of Evidence ......................................................54  
2. Examining the Totality of the Evidence .........................................................58  
E. Admissibility of Evidence .............................................................................................62  
F. Non-record Evidence ...................................................................................................64  
G. Standard of Review ......................................................................................................70  
H. The Panel's Conclusion under Article 1.1(a)(1)(iv) of the SCM Agreement ...............74  
VII. Benefit and Specificity........................................................................................................ ......77  
VIII. Findings and Conclusions....................................................................................................... ..80 
 
 
ANNEX I Notification of an Appeal by the Unite d States under Article 16.4 and Article 17 of 
the Understanding on Rules and Procedures Governing the Settlement of Disputes 
(DSU), and under Rule 20(1) of the Working Procedures for Appellate Review  
 ANNEX II Notification of an Other Appeal by Korea under Article 16.4 and Article 17 of the 
Understanding on Rules and Procedures Govern ing the Settlement of Disputes (DSU), 
and under Rule 23(1) of the Working Procedures for Appellate Review   
 
ANNEX III Request for Consultations by Korea  ANNEX IV Request for Consultations by Korea, Addendum  ANNEX V Request for the Establishment of a Panel by Korea  WT/DS296/AB/R 
 Page iii 
 
 
TABLE OF CASES CITED IN THIS REPORT 
 
Short Title Full Case Title and Citation 
Argentina – Ceramic Tiles  Panel Report, Argentina – Definitive Anti-Dumping Measures on Imports of 
Ceramic Floor Tiles from Italy , WT/DS189/R, adopted 5 November 2001, DSR 
2001:XII, 6241 
Argentina – Footwear (EC)  Appellate Body Report, Argentina – Safeguard Measures on Imports of Footwear , 
WT/DS121/AB/R, adopted 12 January 2000, DSR 2000:I, 515 
Argentina – Textiles and 
Apparel  Panel Report, Argentina – Measures Affecting Imports of Footwear, Textiles, 
Apparel and Other Items , WT/DS56/R, adopted 22 April 1998, as modified by the 
Appellate Body Report, WT/DS56/AB/R, DSR 1998:III, 1033 
Brazil – EEC Milk  GATT Panel Report, Imposition of Provisional and Definitive Countervailing 
Duties on Milk Powder and Certain Types of Milk from the European Economic 
Community  ("Brazil – EEC Milk "), adopted 28 April 1994, BISD 41S/II/467 
Canada – Aircraft  Appellate Body Report, Canada – Measures Affecting the Export of Civilian 
Aircraft , WT/DS70/AB/R, adopted 20 August 1999, DSR 1999:III, 1377 
Canada – Aircraft  Panel Report, Canada – Measures Affecting the Export of Civilian Aircraft , 
WT/DS70/R, adopted 20 August 1999, as upheld by the Appellate Body Report, 
WT/DS70/AB/R, DSR 1999:IV, 1443 
Canada – Dairy  Appellate Body Report, Canada – Measures Affecting the Importation of Milk and 
the Exportation of Dairy Products , WT/DS103/AB/R, WT/DS113/AB/R and 
Corr.1, adopted 27 October 1999, DSR 1999:V, 2057 
Canada – Dairy  
(Article 21.5 – New Zealand and US)
  Appellate Body Report, Canada – Measures Affecting the Importation of Milk and 
the Exportation of Dairy Products – Recourse to Article 21.5 of the DSU by New Zealand and the United States , WT/DS103/AB/RW, WT/DS113/AB/RW, adopted 
18 December 2001, DSR 2001:XIII, 6829 
Canada – Dairy  
(Article 21.5 – New Zealand and US II)
  Appellate Body Report, Canada – Measures Affecting the Importation of Milk and 
the Exportation of Dairy Products – Second R ecourse to Article 21.5 of the DSU by 
New Zealand and the United States , WT/DS103/AB/RW2, WT/DS113/AB/RW2, 
adopted 17 January 2003 
EC – Export Subsidies on Sugar Appellate Body Report, European Communities – Export Subsidies on Sugar , 
WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R, adopted 19 May 2005 
EC – Tube or Pipe Fittings Appellate Body Report, European Communities – Anti-Dumping Duties on 
Malleable Cast Iron Tube or Pipe Fittings from Brazil , WT/DS219/AB/R, adopted 
18 August 2003 
Egypt – Steel Rebar  Panel Report, Egypt – Definitive Anti-Dumping Measures on Steel Rebar from 
Turkey , WT/DS211/R, adopted 1 October 2002 
Guatemala – Cement II  Panel Report, Guatemala – Definitive Anti-Dumping Measures on Grey Portland 
Cement from Mexico , WT/DS156/R, adopted 17 November 2000, DSR 2000:XI, 
5295 
Thailand – H-Beams  Appellate Body Report, Thailand – Anti-Dumping Duties on Angles, Shapes and 
Sections of Iron or Non-Alloy Steel and H-Beams from Poland , WT/DS122/AB/R, 
adopted 5 April 2001, DSR 2001:VII, 2701 
US – Corrosion-Resistant Steel 
Sunset Review  Appellate Body Report, United States – Sunset Review of Anti-Dumping Duties on 
Corrosion-Resistant Carbon Steel Flat Products from Japan , WT/DS244/AB/R, 
adopted 9 January 2004  
US – Cotton Yarn  Appellate Body Report, United States – Transitional Safeguard Measure on 
Combed Cotton Yarn from Pakistan , WT/DS192/AB/R, adopted 5 November 2001, 
DSR 2001:XII, 6027 WT/DS296/AB/R 
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Short Title Full Case Title and Citation 
US – Countervailing Duty 
Investigation on DRAMS Panel Report, United States – Countervailing Duty Investigation on Dynamic 
Random Access Memory Semiconductors (DRAMS) from Korea , WT/DS296/R, 
21 February 2005  
US – Countervailing Measures 
on Certain EC Products  Appellate Body Report, United States – Countervailing Measures Concerning 
Certain Products from the European Communities , WT/DS212/AB/R, adopted 8 
January 2003 
US – Export Restraints  Panel Report, United States – Measures Treating Exports Restraints as Subsidies , 
WT/DS194/R and Corr.2, adopted 23 August 2001, DSR 2001:XI, 5767 
US – FSC  
(Article 21.5 – EC)  Appellate Body Report, United States – Tax Treatment for "Foreign Sales 
Corporations" – Recourse to Articl e 21.5 of the DSU by the European 
Communities , WT/DS108/AB/RW, adopted 29 January 2002, DSR 2002:I, 55 
US – Hot-Rolled Steel  Appellate Body Report, United States – Anti-Dumping Measures on Certain Hot-
Rolled Steel Products from Japan , WT/DS184/AB/R, adopted 23 August 2001, 
DSR 2001:X, 4697 
US – Lamb  Appellate Body Report, United States – Safeguard Measures on Imports of Fresh, 
Chilled or Frozen Lamb Meat from New Zealand and Australia , WT/DS177/AB/R, 
WT/DS178/AB/R, adopted 16 May 2001, DSR 2001:IX, 4051 
US – Softwood Lumber IV  Appellate Body Report, United States – Final Countervailing Duty Determination 
with Respect to Certain Softwood Lumber from Canada , WT/DS257/AB/R, 
adopted 17 February 2004 
US – Steel Safeguards Appellate Body Report, United States – Definitive Safeguard Measures on Imports 
of Certain Steel Products , WT/DS248AB/R, WT/DS249AB/R, WT/DS251AB/R, 
WT/DS252AB/R, WT/DS253AB/R, WT/DS254AB/R, WT/DS258AB/R, WT/DS259AB/R, adopted 10 December 2003  
US – Upland Cotton Appellate Body Report, United States – Subsidies on Upland Cotton , 
WT/DS267/AB/R, adopted 21 March 2005 
US – Wheat Gluten  Appellate Body Report, United States – Definitive Safeguard Measures on Imports 
of Wheat Gluten from the European Communities , WT/DS166/AB/R, adopted 
19 January 2001, DSR 2001:II, 717 
  WT/DS296/AB/R 
 Page v 
 
 
TABLE OF ABBREVIATIONS USED IN THIS REPORT 
 
Abbreviation Definition 
Addendum WT/DS296/1/Add.1, Addendum to Korea's request for 
consultations, WT/DS296/1 
Anti-Dumping Agreement Agreement on Implemen tation of Article VI of the General 
Agreement on Tariffs and Trade 1994  
CRA Agreement of Financial Ins titutions for Promoting Corporate 
Restructuring (Corporate Restructuring Agreement) 
CRPA Corporate Restructuring Promotion Act 
CVDs countervailing duties 
Direction of Credit Memorandum Direction of Credit Memorandum, C-580-851, 31 March 2003, for 
Countervailing Duty Determination: Dynamic Random Access 
Memory Semiconductors from the Republic of Korea  (Exhibit US-8 
submitted by the United States to the Panel) 
DRAMS dynamic random access memo ry semiconductors (DRAMS) and 
memory models containing DRAMS 
DSB Dispute Settlement Body 
DSU Understanding on Rules and Procedures Governing the Settlement 
of Disputes  
FSC Financial Supervisory Commission 
GATT 1994 General Agreement on Tariffs and Trade 1994  
GOK Government of Korea 
Hynix Hynix Semiconductor, Inc. 
ILC Draft Articles  International Law Commission's Draft Articles on Responsibility of 
States for internationally wrongful acts, Report of the ILC on the 
work of its Fifty-third session,  Official Records of the General 
Assembly , Fifty-sixth session , Supplement No. 10  (A/56/10), chp. 
IV.E.2 
Issues and Decision Memorandum Issues and Decision Memorandum, C-580-851, 16 June 2003, for 
Final Affirmative Countervailing Duty Determination: Dynamic 
Random Access Memory Semiconductors from the Republic of 
Korea , United States Federal Register, Vol. 68, No. 120 (23 June 
2003), p. 37122 (Exhibit GOK-5 submitted by Korea to the Panel) 
KDB Korea Development Bank 
KFB Korea First Bank WT/DS296/AB/R 
Page vi  
 
Abbreviation Definition 
Micron Micron Technology, Inc. 
Panel Report Panel Report, United States – Countervailing Duty Investigation on 
Dynamic Random Access Memory Semiconductors (DRAMS) from 
Korea , WT/DS296/R, 21 February 2005 
Samsung  Samsung Electronics Co., Ltd  
SCM Agreement Agreement on Subsidies and Countervailing Measures  
Tokyo Round Subsidies Code Agreement on Interpret ation and Application of Articles VI, XVI, 
and XXIII of the General Agreement on Tariffs and Trade  
USDOC United States Department of Commerce 
USITC United States International Trade Commission 
Vienna Convention  Vienna Convention on the Law of Treaties , done at Vienna, 23 May 
1969, 1155 UNTS 331;  8 International Legal Materials 679 
Working Procedures Working Procedures for Appellate Review , WT/AB/WP/5, 4 January 
2005  
WTO World Trade Organization 
  WT/DS296/AB/R 
 Page 1 
 
 
WORLD TRADE ORGANIZATION  
APPELLATE BODY 
 
 
United States – Countervailing Duty 
Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea 
 
United States, Appellant/Appellee 
Korea, Appellant/Appellee  
 China, Third Participant  
European Communities, Third Participant  
Japan, Third Participant  
Separate Customs Territory  of Taiwan, Penghu,   
 Kinmen, and Matsu, Third Participant  
  AB-2005-4 
    Present: 
 
 Abi-Saab, Presiding Member 
Janow, Member Taniguchi, Member 
 
 
 
I. Introduction 
1. The United States and Korea each appeals certain issues of law and legal interpretations 
developed in the Panel Report, United States – Countervailing Duty Investigation on Dynamic 
Random Access Memory Semiconductors (DRAMS) from Korea (the "Panel Report").1  The Panel was 
established to consider a complaint by Korea agai nst the United States regarding the imposition of 
countervailing duties ("CVDs") on DRAMS and memory models containing DRAMS2 from Korea, 
following an investigation by the United States Department of Commerce (the "USDOC") and the 
United States International Trade Commission (the "USITC"). 
2. The CVD investigation was initiated in Novemb er 2002, in response to a petition filed by 
Micron Technology, Inc. ("Micron").3  The Korean companies i nvestigated included Hynix 
Semiconductor, Inc. ("Hynix") and Samsung Electronics Co., Ltd. ("Samsung").4  The Government of 
                                                      
1WT/DS296/R, 21 February 2005. 
2Hereinafter, these products will be refe rred to collectively as "DRAMS".  
3Notice of Initiation of Countervailing Duty Investigation: Dynamic Random Access Memory 
Semiconductors from the Republic of Korea , United States Federal Register, Vol. 67, No. 229 (27 November 
2002), p. 70927 (Exhibit GOK-2 submitted by Korea to the Panel). 
4The countervailable subsidy rate determined for Samsung was 0.04 per cent, which is below the  
de minimis  level of two per cent.  Accordingly, the USDOC made a negative finding of subsidization with 
respect to Samsung. ( Final Affirmative Coun tervailing Duty Determination:  Dynamic Random Access Memory 
Semiconductors from the Republic of Korea , United States Federal Register, Vol. 68, No. 120 (23 June 2003), 
p. 37122, at p. 37124 (Exhibit GOK-5 submitted by Korea to the Panel)) WT/DS296/AB/R 
Page 2  
 
Korea (the "GOK") participated in  the investigation as an interested party.  The USDOC published a 
final subsidy determin ation on 23 June 2003
5, concluding that Hynix had received financial 
contributions from the GOK by virtue of, inter alia , the GOK's entrustment or direction of Hynix's 
creditors to maintain the financial viability of Hynix.6  The USDOC determined that Hynix's 
countervailable subsidy rate was 44.29 per cent.7   
3. The USITC published a preliminary  injury determination on 27 December 2002 and a final 
injury determination on 11 August 2003.8  In its final injury determination, the USITC concluded that 
the United States DRAMS industry had been materially  injured by reason of imports of subsidized 
DRAMS from Korea.  On the basis of these subsid y and injury determinations by the USDOC and 
the USITC, respectively, the USDOC issued a CVD order on 11 August 2003, imposing CVDs 
of 44.29 per cent on Hynix, which wo uld be paid by importers as cash deposits at the same time as 
they would normally deposit estimated customs duties.9   
4. Before the Panel, Korea alleged that the United St ates acted inconsistently with its obligations 
under Articles 1, 2, 10, 12, 14, 15, 19, 22, and 32 of the Agreement on Subsidies and Countervailing 
Measures  (the " SCM Agreement "), as well as under Article VI:3 of the General Agreement on Tariffs 
and Trade 1994  (the "GATT 1994").10 
5. In the Panel Report, circulated to Members of  the World Trade Organization (the "WTO")  
on 21 February 2005, the Panel concluded that: 
                                                      
5Final Affirmative Countervailing Duty Determination , supra , footnote 4, amended as Notice of 
Amended Final Affirmative Countervailing Duty De termination: Dynamic Random Access Memory 
Semiconductors from the Republic of Korea , United States Federal Register, Vol. 68, No. 144 (28 July 2003), 
p. 44290 (Exhibit GOK-6 submitted by Korea to the Panel). 
6Issues and Decision Memorandum, for Final Affirmative Countervailing Duty Determination , supra , 
footnote 4,  dated 16 June 2003 (the "Issues and Decision Memorandum"), pp. 61-62 (Exhibit GOK-5 submitted 
by Korea to the Panel).  
7Notice of Amended Final Affirmative Countervailing Duty Determination, supra , footnote 5, p. 44290, 
at p. 44291. 
8DRAMs and DRAM Modules from Korea , Investigation No. 701-TA-431 (Preliminary), USITC 
Pub. 3569 (December 2002) (Exhibit GOK-9 submitted by Korea to the Panel);  DRAMs and DRAM Modules 
from Korea , Investigation No. 701-TA-431 (Final), USITC Pub. 3616 (August 2003) (Exhibit GOK-10 
submitted by Korea to the Panel). 
9Notice of Countervailing Duty Order: Dynamic Random Access Memory Semiconductors from the 
Republic of Korea , United States Federal Register, Vol. 68, No. 154 (11 August 2003), p. 47546 (Exhibit  
GOK-8 submitted by Korea to  the Panel).  Because of the USDOC's finding of  de minimis  subsidization with 
respect to Samsung, imports from Samsung were excluded from the CVD order and therefore not subject to 
CVDs. ( Ibid.) 
10Panel Report, para. 3.1.  WT/DS296/AB/R 
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... the [US]DOC's Final Subsidy Determination , the [US]ITC's Final 
Injury Determination , and the Final Countervailing Duty Order  
based thereon, are inconsistent w ith Articles 1, 2 and 15.5 of the 
SCM Agreement .  We therefore conclude that the [United States] is in 
violation of those provisions of the SCM Agreement .11 
6. The Panel rejected Korea's claims that th e United States acted inconsistently with 
Articles 212, 12.6, 15.2, 15.4, and 15.513 of the SCM Agreement .14  Moreover, the Panel did "not 
consider it necessary to address" certain additiona l claims made by Korea under Articles 1 and 2 of 
the SCM Agreement , or the claims Korea made pursuant to Articles 10, 14, 15.1, 19.4, 22.3, 
and 32.1 of the SCM Agreement  and Article VI:3 of the GATT 1994.15  In the course of its 
examination of Korea's claims, the Panel also dism issed a request by the United States that the Panel 
reject Korea's claims against the CVD order because  Korea's request for consultations did not meet 
the requirements of Article 4.4 of the Understanding on Rules and Procedures Governing the 
Settlement of disputes  (the "DSU").16   
7. In the light of its findings, the Panel recommended that the United States "bring the 
[US]DOC's Final Subsidy Determination , the [US]ITC's Final Injury Determination , and the 
[US]DOC's final [CVD] order, into conformity with the SCM Agreement ".17 
8. On 29 March 2005, the United States notified the Di spute Settlement Body (the "DSB") of its 
intention to appeal certain issues of law covered in  the Panel Report and certain legal interpretations 
developed by the Panel, pursuant to paragraph 4 of Article 16 of the DSU, and filed a Notice of 
Appeal 18 pursuant to Rule 20 of the Working Procedures for Appellate Review (the " Working 
Procedures ").19  On 11 April 2005, Korea notified the DSB of its intention to appeal certain issues of 
law covered in the Panel Report and certain legal interpretations deve loped by the Panel, pursuant to 
                                                      
11Panel Report, para. 8.1. 
12The Panel rejected Korea's clai m pursuant to Article 2 of the SCM Agreement  insofar as it concerned 
the USDOC's finding of specificity in relation to the alleged subsidies provided by public bodies. (Panel Report, para. 7.208)  With respect to other creditors, however, the Panel agreed with Korea that the USDOC's subsidy 
determination did not satisfy the requirements of Article 2.  
13The Panel rejected Korea's claim th at the United States acted inconsis tently with Article 15.5 of the 
SCM Agreement  because the USITC "failed to demonstrate the requisite causal link between subject imports and 
injury". (Panel Report, para. 8.2) 
14Ibid. 
15Ibid., para. 8.3. 
16Ibid., paras. 7.410 and 7.415. 
17Ibid., para. 8.4. 
18WT/DS296/5 (attached as Annex I to this Report). 
19WT/AB/WP/5, 4 January 2005. WT/DS296/AB/R 
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paragraph 4 of Article 16 of the DSU, and filed a Notice of Other Appeal
20 pursuant to Rule 23(1) of 
the  Working Procedures .  On 5 April 2005, the United States filed an appellant's submission.21  On 
13 April 2005, Korea filed an other appellant's submission.22  On 25 April 2005, Korea and the United 
States each filed an appellee's submission.23  On the same day, China, the European Communities, 
Japan, and the Separate Customs Territory of Taiw an, Penghu, Kinmen, and Matsu, each filed a third 
participant's submission.24 
9. The oral hearing in this appeal was held on 11 May 2005.  The participants and third 
participants presented oral arguments (with the exception of the Separate Customs Territory of 
Taiwan, Penghu, Kinmen, and Matsu) and responde d to questions posed by the Members of the 
Division hearing the appeal. 
II. Arguments of the Participants  and the Third Participants 
A. Claims of Error by the United States – Appellant 
1. Request for Consultations under Article 4.4 of the DSU  
10. The United States appeals the Panel's finding that  Korea's request for consultations met the 
requirements of Article 4.4 of the DSU.  Acco rding to the United States, Korea's request for 
consultations failed to provide the legal basis for th e complaint with respect to the CVD order.  The 
United States therefore requests the Appellate Body to reverse the Panel's finding. 
11. The United States argues that it is "not credible"25 to assert that, by referring to the fact that it 
had filed a prior request for consultations on one set of alleged measures, Korea satisfied its obligation 
to provide an indication of the legal basis for its complaint with respect to the CVD order, which was 
identified only in the second request for consultations .  The United States further contends that Korea 
cited numerous provisions in its first request for consultations and that the United States could not have been "supposed to guess which provi sion(s) applied to the [CVD] order".
26  In addition, the 
United States maintains that Korea refused to iden tify the provision(s) of a covered agreement with 
which it considered the CVD order to be inconsiste nt, even when specifically asked to do so by the 
                                                      
20WT/DS296/6 (attached as Annex II to this Report).   
21Pursuant to Rule 21 of the Working Procedures . 
22Pursuant to Rule 23(3) of the Working Procedures . 
23Pursuant to Rules 22 and 23(4) of the Working Procedures . 
24Pursuant to Rule 24(1) of the Working Procedures . 
25United States' appellant's submission, para. 143. 
26Ibid.  WT/DS296/AB/R 
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United States after the filing of the second request for consultations.  In the United States' submission 
"the requirements of Article 4.4 are mi nimal, [but] they cannot be ignored."27   
2. Interpretation of Article 1.1(a)(1)(iv) of the SCM Agreement  
12. The United States claims that the Panel incorr ectly interpreted the terms "entrusts" and 
"directs" in Article 1.1(a)(1)(iv) of the SCM Agreement28 and then applied that erroneous 
interpretation to its assessment of the record eviden ce.  According to the United States, the Panel's 
interpretation of the terms "entrusts" and "directs" is  inconsistent with the ordinary meanings of these 
terms.  The proper interpretation of "entrusts" and "directs" would have considered the multiple 
meanings of these terms found in their dictionary definitions.  In the United States' view, had the 
Panel looked to these meanings, it would have arrive d at an understanding of "entrusts" and "directs" 
that takes account of the full range of government ac tions that fall within the ordinary meanings of 
these terms, namely:  a government investing trust in a private body to carry out a task;  a government 
giving responsibility to a private body to carry out a task;  a government informing or guiding a 
private body as to how to carry out a task;  a gove rnment regulating the course of a private body's 
conduct;  as well as a government delegating or commanding a private body to carry out a task.  The Panel, however, disregarded these definitions and settle d on a definition of "entrusts" and "directs" as 
"delegation" and "command"
29, respectively.  The United States a lleges that this narrow interpretation 
fails to recognize the numerous means by which a government may provide subsidies through private 
bodies. 
13. The United States submits that the Panel also faile d to consider sufficiently the context of the 
terms "entrusts" and "directs", because the use of th e term "practice" in Article 1.1(a)(1)(iv) clearly 
implies that entrustment or direction cannot be limited to an official or formal program, but also must 
include broader "practices".  The United States ar gues that the context also makes clear that the 
negotiators did not intend that governments would be  able to evade the subsidy disciplines by using 
other means—that is, means that differ "in no real sense"30 from those normally used by 
governments—of granting subsidies.  In the United St ates' view, the words "in no real sense" as used 
in Article 1.1(a)(1)(iv) suggest that the drafters were seeking to avoid circumvention of the obligation 
                                                      
27United States' appellant's submission, para. 144. 
28Article 1.1(a)(1)(iv) of the SCM Agreement  states that a financial contribution exists where: 
a government makes payments to a funding mechanism, or entrusts or 
directs a private body to carry out one or more of the type of functions 
illustrated in (i) to (iii) above which would normally be vested in the 
government and the practice, in no real sense, differs from practices normally followed by governments[.] 
29Panel Report, para. 7.31. 
30Article 1.1(a)(1)(iv) of the SCM Agreement . WT/DS296/AB/R 
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not to provide prohibited subsidies.  This understanding, according to the United States, would 
support an interpretation of "entrusts" and "directs" that  gives effect to their full range of meanings so 
as not to permit subsidization in any form by governments through private bodies.  The United States 
further asserts that the Panel's interpretation is not supported by the object and purpose of the SCM 
Agreement  because the Panel's reading of Article 1. 1(a)(1)(iv) would cover an unduly limited range 
of government subsidization achieved th rough the actions of private bodies.   
14. Finally, the United States contends that the Panel's narrow interpreta tion of "entrusts" and 
"directs" permeates the rest of its analysis.  The Un ited States points to several of the Panel's findings 
as examples of errors resulting from this interpre tation, including the Panel's analyses of Prime 
Minister's Decree No. 408, meetings between Hy nix creditors and GOK officials, and Kookmin 
Bank's prospectus for the United States Securities and Exchange Commission.  Taken together, these 
findings undermine the Panel's ultimate conclusion of inconsistency with Article 1.1(a)(1)(iv).  
Therefore, the United States requests the Appellate Bo dy to reverse the Panel's findings with respect 
to its interpretation of "entrusts" and "directs" , as well as the Panel's conclusions based on that 
interpretation.  
3. Review of the USDOC's Evidence of Entrustment or Direction
 
(a) The Panel's "Probative and Compelling" Evidentiary Standard 
15. The United States argues that the Panel errone ously applied a "probative and compelling" 
evidentiary standard in its review of the USDOC's  subsidy determination and requests the Appellate 
Body to reverse the Panel's findings setting forth its  evidentiary standard and the subsequent findings 
based on the application of that standard.  
16. According to the United States, there is no basis in the SCM Agreement , the DSU, or any 
other covered agreement for the Pane l's finding that evidence of entrus tment or direction "must in all 
cases be probative and compelling".31  The United States recognizes that provisions of various 
covered agreements set forth a number of evid entiary standards, such  as "positive evidence"32, 
"relevant evidence"33, or "sufficient evidence".34  The United States also recalls the Appellate Body's 
interpretation of the term "positive evidence" in US – Hot-Rolled Steel  that "[t]he word 'positive' 
                                                      
31Panel Report, para. 7.35. 
32Article 3.1 of the Agreement on Implementation of Article VI  of the General Agreement on Tariffs 
and Trade 1994  (the " Anti-Dumping Agreement "). 
33Articles 3.5 and 5.2 of the Anti-Dumping Agreement ;  Articles 42 and 50.1(b) of the  Agreement on 
Trade-Related Aspects of Intellectual Property Rights . 
34Articles 5.3, 5.6, 5.8, 10.7, and 12.1 of the Anti-Dumping Agreement ;  Article 5.4 of the Agreement 
on Textiles and Clothing .  WT/DS296/AB/R 
 Page 7 
 
 
means [...] that the evidence must be of an affirm ative, objective and verifiable character, and that it 
must be credible."35  The United States contends, however, that this requirement does not translate 
into an evidentiary standard of "probative and compelling". 
17. Referring to the  definition of the term "compelling", th e United States argues that a standard 
of "compelling" evidence would appear to require ev idence that "forces" or "obliges" a fact-finder to 
reach a particular conclusion, or evidence that is "overwhelming"36 or "irrefutable".37  In the 
United States' view, such a standard cannot be rec onciled with the decision of the Appellate Body in 
US – Lamb38, according to which a panel's duty is to de termine whether an investigation authority 
provided a reasoned and adequate e xplanation as to why the evidence le d to a particular conclusion, 
rather than whether that conclusion was based on probative and compelling evidence. 
(b) The Panel's Approach to the Evidence 
(i) Reviewing the Totality of the Evidence 
18. The United States alleges that the Panel erre d by assessing the USDOC's determination of 
entrustment or direction on the basis of each piece of evidence in isolation, without considering the 
totality of the evidence.  In the Un ited States' submission, this approach necessarily led to a finding of 
insufficiency of the evidence underlying the USDOC's determination.  Therefore, the United States 
requests the Appellate Body to reverse the Panel's findings as to the individual pieces of evidence, as 
well as those findings that were the product of the Panel's erroneous approach.39  
19. The United States observes that the Panel indicat ed that it would adopt the same approach in 
examining the evidence as did the USDOC, "rel[ying] on the totality of the evidence before it, without 
attaching particular importance to one or several evidentiary factors".40  However, the United States 
argues, the Panel Report reveals that the Panel in  fact assessed whether each piece of evidence, in and 
of itself , demonstrated entrustment or direction, ra ther than assessing whethe r the evidence in its 
entirety supports the finding of entrustment or direction.41 
                                                      
35United States' appellant's submission, para. 51 (quoting Appellate Body Report, US – Hot-Rolled 
Steel , para. 192). 
36Ibid., para. 49 (quoting The New Shorter Oxford English Dictionary , L. Brown (ed.) (Clarendon 
Press, 1993), Vol. 1, p. 458). 
37Ibid. 
38Ibid.,  para. 54 (referring to Appellate Body Report, US – Lamb , para. 103). 
39Ibid., para. 73. 
40Ibid., para. 58 (quoting Panel Report, para. 7.45). 
41Ibid. WT/DS296/AB/R 
Page 8  
 
20. In particular, the United States alleges that the Panel employed this "piecemeal approach"
42 at 
several points in its analysis of the USDOC's finding on entrustment or direction.  The United States 
points to the Panel's examination of various items  of evidence relied on by the USDOC—including 
the Public Funds Oversight Act, Prime Minister's Decree No. 408, and Kookmin Bank's prospectus for the United States Securities and Exchange Commi ssion—as examples of the Panel's failure to 
consider the evidence in its totality.
43  The United States further alle ges that, even where the Panel 
claimed to consider pieces of evidence in a broader context, it "marginalized"44 this evidence, as in the 
Panel's failure to appreciate the relevance of GO K ownership or control of the dominant Hynix 
creditors.45  Therefore, the United States requests the A ppellate Body to reverse those findings that 
were based on the Panel's error of reviewing in  isolation pieces of evidence supporting the USDOC's 
determination of entrustm ent or direction.   
(ii) Circumstantial Evidence 
21. The United States alleges that the Panel effec tively required every piece of evidence to be 
direct  evidence of entrustment or direction and th ereby precluded legitimate inferences drawn from 
circumstantial and secondary evidence.  The United States therefore requests the Appellate Body to 
reverse the Panel's findings aff ected by its "legally erroneous"46 analytical framework.   
22. As an example of the Panel's error, the United States refers to the Panel's discussion of the 
GOK's coercion of Hana Bank, where the Panel stated that "[a]n objective and impartial investigating 
authority would not have treated a simple reference to a footnote in an article as sufficient  proof of 
such a significant issue as government entrustment or direction."47  The United States argues that this 
statement reveals the Panel's failure to recognize that  the value of a piece of circumstantial evidence is 
not in its sufficiency , but rather, in "the inferences created, together with other pieces of evidence, 
regarding the existence of a particular fact or set of facts".48 
23. The United States contends that instead of "f ixating" on whether certain individual pieces of 
evidence were dispositive of entrustment or direc tion, the Panel should have drawn from the totality 
of circumstantial evidence that "the GOK had an established practice, purpose, and process for 
                                                      
42United States' appellant's submission, para. 65. 
43Ibid., paras. 60-67. 
44Ibid., para. 69. 
45Ibid., para. 68. 
46Ibid., para. 85. 
47Ibid., para. 76 (quoting Panel Report, para. 7.129). (emphasis added by the United States) 
48Ibid. (footnote omitted)  WT/DS296/AB/R 
 Page 9 
 
 
entrusting and directing Hynix's creditors".49  In doing so, it should have given special attention to 
"the GOK's longstanding policy of supporting Hyni x;  the GOK's powerful influence over Hynix's 
creditors as a consequence of, inter alia , the significant GOK ownershi p interests in the Korean 
financial sector;  and the utter lack of any commercial basis for assisting Hynix."50    
24. The United States submits that the Panel's treatme nt of circumstantial evidence differs sharply 
from the way prior panels and the Appellate Body ha ve assessed circumstantial evidence.  In addition 
to the panel reports in Argentina – Textiles and Apparel  and Canada – Aircraft , the United States 
points to the statement of the Appellate Body in Canada – Aircraft  that "inferences derived may be 
inferences of law:  for example the ensemble  of facts found to exist warrants the characterization of a 
'subsidy'".51  According to the United States, circumstan tial evidence is particularly relevant to 
establishing a financial contribution under Article 1.1(a)(1)(iv).  Direct evidence of government 
entrustment or direction is difficult for outside pa rties to obtain because such information typically 
will be treated by the exporting gove rnment or foreign parties as conf idential.  As a result, the United 
States submits, the Panel's failure to appreciate the circumstantial evidence on which the USDOC 
relied effectively established an evidentiary requiremen t that is "virtually impossible" to meet in cases 
involving government entrustment or direction.52   
(iii) Burden of Proof 
25. The United States argues that the manner in which the Panel assessed the evidence in the 
present case effectively led to an improper shift in the burden of proof from Korea to the United 
States and, therefore, requests the Appellate Body to reverse the Panel's findings that resulted from 
this error.  According to the United States, the Panel recognized—in accordance with prior WTO 
decisions—that Korea bears the burden of proof as  the complaining party.  However, the United 
States alleges, the Panel analyzed pieces of evidence in isolation, required that each piece of evidence 
be "compelling", and disregarded inferences drawn from circumstantia l evidence, thereby requiring 
the United States to produce a "smoking gun"53 document that itself would be dispositive of 
entrustment or direction.  Because the Panel did not find such a "smoking gun", the United States 
submits, it concluded that the USDOC had not demons trated entrustment or direction.  Requiring the 
United States to justify the USDOC's determina tion with evidence of a "smoking gun"—instead of 
                                                      
49United States' appellant's submission, para. 80. 
50Ibid., para. 79. (footnotes omitted) 
51Ibid., para. 82 (quoting Appellate Body Report, Canada – Aircraft , para. 198). (original emphasis)  
52Ibid., para. 83. 
53Ibid., para. 87. WT/DS296/AB/R 
Page 10  
 
requiring Korea to establish how the evidence could not collectively support a finding of entrustment 
or direction—amounted to a shift in the burden of proof from Korea to the United States.  
(iv) Ex post Rationalization  
26. The United States submits that the Panel errone ously characterized the United States' reliance 
on certain record evidence during the Panel proceedings as ex post  rationalizations and consequently 
erred in declining to consider this evidence wh en assessing the USDOC's finding of entrustment or 
direction.  Accordingly, the United States requests the Appellate Body to reverse the Panel's findings 
regarding ex post rationalization as well as the conclusions  that resulted from these findings.   
27. The United States acknowledges that some panels  have rejected arguments and reasoning on 
the grounds that they constituted ex post rationalizations.
54  However, the United States argues, in 
those cases, panels objected to the introduction of new reasoning , whereas, in this case, the United 
States merely provided to the Panel additional ev identiary support relating to reasoning that had 
already been  employed  in the USDOC's published determination.  Specifically, the United States 
submits that each of these items of evidence—such as the article in the Dong-A Daily , entitled 
"'Gangster-Style' Solution for Hynix", which the Panel refused to consider55—related directly to the 
reasoning of the USDOC regarding certain fact ual inferences underlying the USDOC's finding of 
entrustment or direction, and thus, do not constitute ex post rationalizations. 
28. In support of this argument, the United States refers to Article 22.5 of the SCM Agreement , 
which provides that an agency's published determin ation at the end of a CVD investigation "shall 
contain ... all relevant information on the matters of fact and law a nd reasons which have led to the 
imposition of final measures".  In the United Stat es' view, this provision addresses what must be 
contained in a final determinati on and, by its plain language, do es not require an investigating 
authority "to cite to every piece of record evidence that supports its reasons for the imposition of final 
measures".56  Therefore, the United States contends, nothing in the SCM Agreement permits a panel to 
disregard record evidence, even when  not cited in the final determina tion, provided that it is not being 
introduced to support new reasoning.  By concluding  to the contrary, the United States argues, the 
Panel impermissibly limited the evidence on which a Member may rely under Article 22.5 of the 
SCM Agreement , in contravention of Articles 3.2 and 19.2 of the DSU. 
                                                      
54United States' appellant's submission, para. 89 (referring to Panel Report  Argentina –  Ceramic Tiles , 
para. 6.27;  and Panel Report, Guatemala – Cement II , para. 8.245).  
55Panel Report, para. 7.88. 
56United States' appellant's submission, para. 91.  WT/DS296/AB/R 
 Page 11 
 
 
29. The United States additionally points to a GATT pa nel decision applying Article 2.15 of the 
Agreement on Interpretation and Application of Ar ticles VI, XVI, and XXIII of the General Agreement 
on Tariffs and Trade  (the " Tokyo Round Subsidies Code "), which is  "quite similar" to Article 22.5 of 
the SCM Agreement .57  That panel decision recognized that a panel was not precluded, by virtue of 
Article 2.15, from considering evidence not included in a published determination, provided that it 
could reasonably be inferred that the agency ha d relied on such evidence.  The United States also 
refers to the Appellate Body Report in US – Upland Cotton .  In that case, the Appellate Body, in the 
context of the panel's application of Article 6.3 of the SCM Agreement , found no error where the 
panel did not refer to every item of evidence provi ded by the parties to the dispute because it had 
found certain items less significant for its reasoning than others.58  In the United States' view, similar 
reasoning should apply in this case so as not to require  an investigating authority to cite every item of 
supporting evidence from the agency's record. 
30. Finally, the United States argues that the USDOC did, in fact, explicitly cite, in its Direction  
of Credit Memorandum59, some of the articles that the Panel refused to take into account, such as 
articles in the Korea Economic Daily , Euromoney , and the Korea Times .  The United States submits 
that the Direction  of Credit Memorandum  had been referenced in th e USDOC's determination in 
support of the USDOC's finding of entrustment or direction.  Therefore, according to the United States, the Panel erred in basing its refusal to take th ese articles into consideration on the fact that they 
had not been cited in the US DOC's published determination. 
(c) The Panel's Failure to Comply with Article 11 of the DSU 
(i) Non-record Evidence 
31. The United States contends that the Panel im properly relied on evidence that was not on the 
record before the USDOC and that, in so doi ng, the Panel engaged in an impermissible de novo  
review of the USDOC's subsidy determination in violation of Article 11 of the DSU.  The United 
States accordingly requests the Appellate Body to re verse those findings of the Panel that were based 
on the erroneous use of non-record evidence. 
32. Referring to the Appellate Body Report in US – Cotton Yarn  and the panel report in Egypt – 
Steel Rebar , the United States submits that relia nce on non-record evidence constitutes a de novo  
                                                     
 
57United States' appellant's submission, para. 92 (referring to GATT Panel Report, Brazil – EEC Milk , 
paras. 286-287). 
58Ibid., para. 93 (quoting Appellate Body Report, US – Upland Cotton , para. 446). 
59Direction of Credit Memorandum for Countervailing Duty Investigation :  Dynamic Random Access 
Memory Semiconductors from the Republic of Korea , dated 31 March 2003 (Exhibit US-8 submitted by the 
United States to the Panel). WT/DS296/AB/R 
Page 12  
 
review and results in a violation of Article 11 of the DSU.  Additionally, the United States relies on 
Article 12.2 of the SCM Agreement , which provides, in relevant part, that a "decision of the 
investigating authorities can only be based on such  information and arguments as were on the written 
record of this authority".   
33. The United States points, in particular, to the findings of the Panel contained in 
paragraphs 7.63, 7.91, a nd 7.155 of the Panel Report.  In the United States' submission, each of these 
findings was expressly based on the Panel's finding that certain creditors of Hynix exercised 
mediation rights in connection with the October 2001 restructuring.  However, the United States 
argues, there was no evidence on the record of the US DOC that certain Hynix creditors did, in fact, 
engage in mediation and thereb y avoid the restructuring terms established by the dominant GOK-
owned and -controlled creditors.  According to the United States, the only evidence of such mediation 
was submitted by Korea in the course of the Panel pr oceedings, and not by any interested party to the 
USDOC during the CVD investigation.   
34. With regard to the Panel's conclusion that Article 29(5) of the Corporate Restructuring 
Promotion Act (the "CRPA") should have put the USDOC on notice about the possibility of 
mediation, the United States contends that, absen t evidence on the record from Hynix or the GOK 
regarding " actual instances of mediation ", the USDOC was in no positio n to consider how such 
mediation would affect its findings.
60  In the United States' view, a reference to the possibility  of 
mediation alone does not constitute record evidence that mediation did take place. 
35. Moreover, the United States argues, the USDOC, in the course of the investigation, asked 
specific questions regarding the CRPA and the differe nt options provided to Hynix's creditors at the 
time of the October 2001 restructuring.  Notwithst anding this request for information, the United 
States submits, "neither Hynix nor the GOK ever mentioned anything about mediation".61  
Furthermore, the United States asserts, neither  Hynix nor the GOK ever mentioned in their 
submissions to the USDOC that mediation had in fact taken place. 
36. The United States disagrees with the Panel's finding that a statement in Hynix's 2001 Audit 
Report indicated that the mediation provisions had been invoked and that this should have put the 
USDOC on notice that a request for mediation had been filed.62  In the United States' view, the 
referenced excerpt to the Hynix 2001 Audit Report did not indicate that mediation had occurred, only 
                                                      
60United States' appellant's submission, para. 109. (original emphasis) 
61Ibid., footnote 156 to para. 108.  
62Ibid., para. 111 (referring to Panel Report, paras. 7.85-7.86).  WT/DS296/AB/R 
 Page 13 
 
 
that certain banks had "raised objections"63, without clarifying the relationship, if any, between the 
"raising of objections" and the recourse to mediation. 
(ii) Standard of Review  
37. The United States submits that, in addition to the individual Panel errors listed above64, the 
cumulative effect of these errors also constitutes a violation of Article 11 of the DSU.  The United 
States asserts that it was appropriate  for the USDOC to examine the evid ence in its totality, to rely on 
circumstantial and secondary eviden ce, and to draw reasonable infere nces from this evidence.  The 
Panel's task in reviewing the USDOC's determin ation was to decide whether the USDOC properly 
established the facts and evaluated them in an unbiased and objective way, and whether the USDOC, 
given the totality of the record evidence, in cluding circumstantial evidence, could have found 
entrustment or direction.  In the United States' submission, however, the individual errors committed 
by the Panel led it to substitute a "new analytic framework" for that used by  the USDOC, redefine the 
scope and structure of the USDOC's analysis, and reweigh the USDOC's evidence.65  In so doing, the 
United States argues, the Panel failed to follow th e proper standard of review and thereby exceeded 
the bounds of its discretion under Article 11 of the DSU.  The United States, therefore, requests the Appellate Body to reverse the Panel's conclusions  stemming from its improper application of the 
standard of review.   
4. Benefit and Specificity
 
38. The United States appeals the Panel's findings  regarding the USDOC's determination of 
benefit and specificity.  The United States obser ves that the Panel found the USDOC's benefit 
determination to be inconsistent with Article 1.1(b) of the SCM Agreement , and its specificity 
determination to be inconsis tent with Article 2 of the SCM Agreement  insofar as it relates to alleged 
subsidies by creditors not identified by the USDOC as public bodies.  The United States submits that 
these findings are based solely on the Panel's erroneous conclusion that the USDOC's determination of 
GOK entrustment or direction of certain Hynix credito rs is inconsistent with Article 1.1(a)(1)(iv) of 
the SCM Agreement .  Accordingly, the United States request s the Appellate Body to reverse the 
Panel's findings on benefit and specificity.  
                                                      
63United States' appellant's submission, para. 111 (quoting 2001 Hynix Audit Report, p. 40 (Exhibit 
US-125 submitted by the United States to the Panel)).  The Panel also quoted the Hynix 2001 Audit Report at paragraph 7.85 of the Panel Report. 
64Supra , Section II.A.3(a)-(c)(i). 
65United States' appellant's submission, para. 119. WT/DS296/AB/R 
Page 14  
 
B. Arguments of Korea – Appellee 
1. Request for Consultations under Article 4.4 of the DSU
 
39. Korea submits that the United States' appeal re garding the request for consultations is not 
properly before the Appellate Body because the United  States' Notice of Appeal does not sufficiently 
identify the alleged errors of law and legal inte rpretations as required by Rule 20(2)(d) of the Working 
Procedures .  Korea argues that subparagraph (i) of Rule 20(2)(d) would be rendered redundant, in the 
light of subparagraphs (ii) and (iii), if it were suffi cient for an appellant to st ate merely what the panel 
holds, and claim simply that it disagrees.  In its No tice of Appeal, the United States failed to offer "the 
least bit of description of what the [United States] considers to be the legal error".66  Korea, therefore, 
requests the Appellate Body to dismiss this claim of the United States.   
40. In the alternative, Korea argues that the United States' claim regarding Article 4.4 of the DSU 
should be dismissed because Korea's request for c onsultations did satisfy the requirements of that 
provision.  Korea refers to its requ est for consultations , dated 30 June 200367, and to the addendum to 
this request, dated 18 Augu st 2003 (the "Addendum").68  Korea disagrees with the United States that 
Korea did not indicate the legal provisions with whic h the CVD order is alleged to be inconsistent.  
Korea submits that the 18 August 2003 document made clear that it was an "addendum" to the 
30 June 2003 request for consultati ons and that, therefore, the same violations set out in the initial 
request were being alleged in the Addendum with respect to the CVD or der.  Korea further argues that 
the CVD order is "dependent" on the final determ inations of the USDOC and the USITC and is 
effectively a "ministerial function without discretion".69  In Korea's view, it follows that the legal 
basis for the complaint as to the CVD order is identi cal to the legal basis fo r the complaint as to the 
underlying determinations.  Therefore, Korea submits  that its request for c onsultations and Addendum 
met the requirements of Article 4.4 of the DSU and requests the Appellate Body to dismiss the United 
States' appeal of this issue.  
2. Interpretation of Article 1.1(a)(1)(iv) of the SCM Agreement  
41. Korea contests the United States' challe nge to the Panel's interpretation of 
Article 1.1(a)(1)(iv) of the SCM Agreement , and therefore submits that the interpretation should be 
upheld by the Appellate Body.  In particular, Korea argues that the Panel's interpretation of the terms 
"entrusts" and "directs" was consistent with the ordi nary meanings of these terms.  Korea recalls that 
                                                      
66Korea's appellee's submission, para. 230. 
67WT/DS296/1 (attached as Annex III to this Report). 
68WT/DS296/1/Add. 1 (attached as Annex IV to this Report). 
69Korea's appellee's submission, para. 242.  WT/DS296/AB/R 
 Page 15 
 
 
the Panel agreed with the panel in US – Export Restraints  that "entrustment" and "direction" contain 
an element of "delegation" and "command".  Kor ea contends that the definitions of the terms 
"entrusts" and "directs" proposed by the United States were chosen selec tively and that, in so 
choosing, the United States arrives at an overly broa d reading of these terms.  Korea presents several 
examples applying the definitions suggested by the United States, arguing that such examples reveal 
that these definitions incorporate a broader range  of government action than contemplated by the SCM 
Agreement .  
42. Korea further submits that the Panel's prope r understanding of the context of the terms 
"entrusts" and "directs" supports its interpretation.  Korea rejects the United States' reading of the term 
"practice" in Article 1.1(a)(1)(iv) as implying that entrustment or direction cannot be limited to an 
official programme, but may also include broade r "practices".  Korea argues that "[t]he term 
'practices' refers to what  is being entrusted or directed, not whether  such types of governmental 
activities have been so entrusted or directed".70  Similarly, Korea disagr ees with the United States' 
assertion that by equating "entrusts" and "directs" with "delegation" and "command", the Panel did 
not take account of the "full range of methods"71 by which a government might provide a subsidy.  
Korea submits that, although there may be a broad range of the types  of financial transactions covered 
by Article 1.1(a)(1), that is a "distinct matter"  from determining whether such transactions can be 
attributed  to the Member's government due to entrustment or direction by the government to a private 
body.72  
43. Korea agrees with the United States that the SCM Agreement  aims to discipline subsidies 
offered by governments.  In Korea's view, under the United States' interpretation, a Member would be 
allowed to countervail a private body's  actions that are not affirmatively entrusted or directed by the 
government.  This would "turn the SCM Agreement  from a pro-competitive agreement to a tool of 
gross protectionism".73  
44. Korea responds to the various examples subm itted by the United States with a view to 
demonstrating the Panel's application of its interpre tation of the terms "entrusts" and "directs" to the 
facts of this case.  In Korea's view, the Panel's findings referred to by the United States are not based 
on an improper reading of Article 1.1(a)(1)(iv);  the Panel found instead that the USDOC had 
improperly relied on evidence to support conclusions that do not logically fo llow from the evidence.  
Korea further emphasizes that the Panel agreed w ith the United States on the principal legal issues 
                                                      
70Korea's appellee's submission, para. 43. (original emphasis) 
71Ibid., para. 48 (quoting United States' appellant's submission, para. 37). 
72Ibid., para. 50. 
73Ibid., para. 52. WT/DS296/AB/R 
Page 16  
 
relating to the interpretation of Ar ticle 1.1(a)(1)(iv) and that, in f act, the United States is "trying to 
appeal factual issues under the guise of spurious legal claims".
74  Korea, therefore, requests the 
Appellate Body to uphold the Panel's findings claime d by the United States to be based on the Panel's 
erroneous interpretation of Article 1.1(a)(1)(iv). 
3. Review of the USDOC's Evidence of Entrustment or Direction  
(a) The Panel's "Probative and Compelling" Evidentiary Standard  
45. Korea contests the United States' claim that the Panel impermissibly created a new legal 
standard for evaluating evidence by requiring ev idence to be "probative and compelling".  Korea 
submits that the term "probative and compelling" is  not a new legal standard, but rather, a description 
of the type of circumstantial evidence that would be  sufficient to establish entrustment or direction.   
46. In Korea's view, the Panel addressed the questio n whether an investigating authority could 
properly base its finding of entrustm ent or direction on circumstantial evidence, or whether direct 
evidence was required to sustain such a finding.  Ko rea notes that the Panel found that an agency may 
rest its finding of entrustment or direction on ci rcumstantial evidence, and argues that the Panel's 
statement at issue must be understood in this particul ar context.  Korea contends that the Panel should 
be understood to have found that the further aw ay from direct evidence one moves, the more 
important it is that the circumstantial evidence be persuasive.  When assessing what sort of evidence 
could be considered persuasive in this context, the Panel required the evid ence to be "probative and 
compelling".  Therefore, Korea submits, the Panel employed these terms merely to give a description 
of the quality or type of evidence that was require d in the specific circumstances of the present case, 
without purporting to define a new evidentiary standard under the SCM Agreement .   
47. Furthermore, Korea alleges that the United St ates mischaracterizes the evidentiary standard 
articulated by the Panel by reading the Panel's desc ription of "probative and compelling" evidence to 
require "overwhelming"75 or "irrefutable" evidence.76  Based on dictionary de finitions of "probative" 
and "compelling", as well as synonyms for "compe lling", Korea concludes that evidence can be 
regarded as "probative and compelling" if it has a "quality of proof and [has] fitness to induce 
conviction of truth".77  Korea submits that the Panel followed this standard in finding that there was 
                                                      
74Korea's appellee's submission, para. 53. 
75Ibid., para. 86 (quoting United States' appellant's submission, para. 49;  in turn quoting The New 
Shorter Oxford English Dictionary , supra , footnote 36, Vol. 1, p. 458). 
76Ibid. (quoting United States' appellant's submission, para. 49). 
77Ibid., para. 98 (quoting Black's Law Dictionary, 7th edn, B.A. Garner (ed.)  (West Group, 1999), 
p. 628).  WT/DS296/AB/R 
 Page 17 
 
 
adequate evidence that Korea First Bank ("KFB") had been coerced by reason of alleged verbal 
threats from an official from the Financial Supervisor y Service, even though the sole evidence for this 
finding consisted of a single newspa per report.  Therefore, Korea concludes, if there is any criticism 
of the Panel in its examination of the evidence,  it is that the Panel "set the bar too low".78  
(b) The Panel's Approach to the Evidence 
(i) Reviewing the Totality of the Evidence 
48. Korea challenges the United St ates' allegation that the Pane l evaluated the evidence in a 
manner that required that each piece of evidence, in and of itself , demonstrate entrustment or 
direction.  Korea submits that, although the Panel did look at individual pieces of evidence, it did not 
state that each piece of evidence, in and of itself , had to demonstrate entrustm ent and direction.  Korea 
points instead to instances in which the Panel explic itly stated that it viewed a piece of evidence "in 
conjunction with" other evidentiary factors.79  
49. Moreover, according to Korea, if the Panel found that a piece of evidence was of little or no 
evidentiary value—in the sense that it did not suppor t the conclusion that the USDOC derived from it, 
or that it was contradicted, or that it was inaccura te—there would be no merit in taking into account 
several such pieces of evidence as a whole.  In other words, Korea submits, "[i]t is a mathematical 
truism that no matter how many zeros and negative numbers one adds together, the sum can never be 
a positive number."80  Korea further alleges that, by arguing that the Panel reviewed the evidence in 
an improper manner, the United States attempts to re-argue on appeal the specific facts of the case. 
50. Korea contests the examples of Panel findings cited by the United States in support of its 
allegation.  Korea submits that a correct reading of  the Panel's reasoning does not reveal the Panel to 
have required each piece of evidence, in and of itself , to establish entrustment or direction.  Instead, 
according to Korea, these examples reflect the Pane l's finding that several pieces of evidence relied 
upon by the USDOC were not probative, that is, they did not support the conclusion of entrustment or 
direction that the USDOC sought to draw on the basi s of that evidence.  In Korea's view, the United 
States' appeal amounts to a disagreement with the Panel's weighing of the evidence, which does not 
provide a permissible basis for appeal.   
                                                      
78Korea's appellee's submission, para. 109. 
79Ibid., para. 111 (quoting Panel Report, paras. 7.56 and referring to paras. 7.63, 7.168, and 7.177). 
80Ibid., para. 114. WT/DS296/AB/R 
Page 18  
 
(ii) Circumstantial Evidence 
51. Korea argues that, contrary to the United Stat es' submission, the Panel did not effectively 
require every piece of evidence to be direct  evidence of entrustment or direction.  Accordingly, Korea 
requests the Appellate Body to uphold the findings challenged by the United States on the basis that 
the Panel erred in its assessment of the USDOC's circumstantial evidence. 
52. Korea asserts that the Panel did, in fact, acc ept circumstantial and secondary evidence.  In 
support of its argument, Korea submits that the Pa nel found entrustment or direction of KFB on the 
basis of a single newspaper article, which w as "both secondary and circumstantial" evidence.
81  
Because the Panel considered su ch evidence in its analysis, as the United States requested, Korea 
submits that there is no basis for the United States' appeal.   
53. In Korea's submission, the Panel did not reject evidence because it was circumstantial or 
secondary evidence, but rather, because much of the evidence was inaccurate, illogical, or simply not 
probative.  For example, in response to the United States' argument that the Panel did not properly 
assess the evidence regarding GOK coercion of Hana Ba nk, Korea submits that the Panel Report does 
not indicate that the basis for findi ng this evidence insufficient was its  circumstantial nature.  Rather, 
in Korea's view, this evidence w as rejected because the r ecord showed that the USDOC had not itself 
examined the evidence submitted before th e Panel, instead having relied on a mere citation of that 
evidence contained in a footnote of another document.  
54. Korea submits that the Panel's examination of  circumstantial evidence in the present case is 
consistent with prior panel decisions, in  particular, with the panel reports in Argentina – Textiles and 
Apparel  and Canada – Aircraft , cited by the United States in support of its appeal.  Korea asserts that 
these two cases essentially stand for the same propos ition ultimately accepted by the Panel in this 
dispute at the urging of the United States, namely , that a Member may establish the existence of 
certain conditions on the basis of circumstantial rath er than direct evidence.   In Korea's view, the 
Panel's articulation of a "probative and compelling"  requirement for the evidence does not diminish a 
Member's right to rely on circumstantial evidence because the "probative and compelling" 
requirement "exists whether or not the evidence is circumstantial or direct".82  
(iii) Burden of Proof 
55. Korea submits that the United States' claim—that the Panel's assessment of the USDOC's 
determination led to a shift in the burden of pr oof from Korea to the United States—is "baseless" and 
                                                      
81Korea's appellee's submission, para. 164. (emphasis omitted) 
82Ibid., para. 173.  WT/DS296/AB/R 
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should be rejected by the Appellate Body.83  Korea disagrees with the United States' contention that 
the Panel required the United States to produce a "smoking gun".84  Korea asserts that, rather than 
looking for each piece of evidence in isolation to be  dispositive of entrustment or direction, the Panel 
assessed whether an objective and impartial investig ating authority could r easonably have relied on 
the USDOC's evidence " as a part  of building a finding of entrustment or direction".85  Reliance on 
such evidence, Korea argues, was in any event found by the Panel to be inappropriate because the 
evidence was typically not relevant to the infere nce or conclusion it was meant to support and, 
therefore, was neither probative nor compelling.  In Korea's view, the Panel's refusal to accept 
unquestioningly the United States' assertions as to  the relevance of certain evidence does not 
constitute an improper allocation of the burden of proof to the United States. 
(iv) Ex post Rationalization  
56. Korea submits that the Panel correctly identif ied evidence submitted by the United States as 
ex post rationalizations and requests the Appellate Body  to uphold the Panel's findings refusing to 
consider such evidence.  Referring to Article 22.5 of the SCM Agreement , Korea contends that an 
investigating authority must cite , in its published determination, every  piece of record evidence that 
supports the agency's reasons for the imposition of final measures.  Korea submits that the United 
States' argument—that a panel must accept an y evidence not being submitted to support new 
reasoning —is not consistent with the plain text of Artic le 22.5.  Korea points, in particular, to the 
requirement that the publishe d determination contain " all relevant information" in support of its view 
that evidence not cited by the agency—and, th erefore, presumably not "relevant"—may not 
subsequently be relied on by that Member in WTO dispute settlement proceedings.  
57. Korea contends that the United States' reliance on a GATT panel decision is misplaced 
because that decision was under the Tokyo Round Subsidies Code , which differs significantly in 
pertinent respects from the SCM Agreement.   Korea notes that, whereas the Tokyo Round Subsidies 
Code  obliged an investigating authority to include "all issues of fact and law" in its published 
determination86, the SCM Agreement requires the inclusion of "all relevant information".87  K o r e a  
maintains that this difference in language suggests that, whatever may have been the understanding of 
this obligation under the Tokyo Round Subsides Code , the plain language of the SCM Agreement  now 
                                                      
83Korea's appellee's submission, heading II.E. 
84Ibid., para. 176 (quoting United States' appellant's submission, para. 87). 
85Ibid., para. 175. (original emphasis) 
86Article 2.15 of the Tokyo Round Subsidies Code. 
87Article 22.5 of the SCM Agreement . WT/DS296/AB/R 
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requires that every  piece of information upon which the investigating authority relied in making its 
determination be contained in the agency's published determination. 
58. Korea submits that the United States' re liance on the Appellate Body decision in US – Upland 
Cotton  is similarly "inapposite".
88  According to Korea, the section of that Appellate Body Report 
cited by the United States considers the question whether a panel evaluating the consistency of a 
measure with a particular provision needs to "address"89 each piece of evidence or each argument 
raised by the parties, or whether it suffices, inst ead, for a panel to explain the reasoning underlying its 
conclusions.  This issue, in Korea's view, has "nothing to do with"90 the requirement in Article 22.5 of 
the SCM Agreement  that the agency's determination contain "all relevant information".  
59. Furthermore, Korea disagrees with the United St ates' assertion that the newspaper and journal 
articles disregarded by the Panel were cited by the USDOC in the Direction  of Credit Memorandum.  
Korea submits, first, that certain of the articles implicated by this issue on appeal are not included 
among the citations in that document.  In addition, according to Korea, the  Direction  of Credit 
Memorandum is merely a list of c itations that does not contain any discussion  of the evidence listed 
and, therefore, cannot establish that the documents were in fact taken into account by the USDOC so 
that contradictions and nuances found therein could be reasonably and adequa tely explained by the 
agency.  Finally, Korea asserts that the date of the Direction  of Credit Memorandum, which is the 
same date as that of the USDOC's  preliminary subsidy determination91, as well as the fact that no 
reference is made to materials supporting the respondent's arguments, suggest that it was drafted "at 
the last second ...  to support a decision alr eady reached without reliance on the articles".92  
(c) The Panel's Failure to Comply with Article 11 of the DSU 
(i) Non-record Evidence 
60. Korea submits that the Panel did not base it s findings on non-record information and, 
therefore, requests the Appellate Body to uphold th e respective findings of the Panel as well as the 
Panel's conclusions that the United States contends r esulted from this alleged error.  The United States 
bases its argument on the premise that the reco rd evidence shows only that creditors had the 
possibility of going to mediation in connection with the October 2001 restructuring, not, as the Panel 
                                                      
88Korea's appellee's submission, para. 186.  
89Ibid. (quoting Appellate Body Report, US – Upland Cotton , para. 446). 
90Ibid. 
91Preliminary Affirmative Countervailing Duty De termination:  Dynamic Random Access Memory 
Semiconductors from the Republic of Korea , United States Federal Register, Vol. 68, No. 66 (7 April 2003), 
p. 16766 (Exhibit GOK-4 submitted by Korea to the Panel). 
92Korea's appellee's submission, para. 193.  WT/DS296/AB/R 
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found, that certain creditors exercised  mediation rights.  In Korea's view, however, the Panel's 
analysis did not rest on the fact that certain credito rs did engage in mediation.  Instead, according to 
Korea, the Panel faulted the USDOC for not conducting further inquiry on this issue, given that 
Article 29(5) of the CRPA, which was on the record, explicitly provided for the option of mediation to 
determine appraisal rights.93 
61. Korea also challenges the United States' argumen t that the record ev idence does not establish 
that certain Hynix creditors exercised their rights to pursue mediation.  Korea argues that the Panel 
linked Article 29(5) of the CRPA to other pieces of  evidence, which together could support the 
Panel's understanding that me diation did take place.94  Korea refers, in particular, to the Panel's 
discussion of the Hynix 2001 Audit Report, which stat es that three creditors "raised objections" to the 
terms of reimbursement "[b]ased on" the CRPA.95  Korea submits that this language was properly 
understood by the Panel to indicate recourse to mediation by certain creditors of Hynix. 
62. Finally, Korea contends that the United States fa ils to recognize that the Panel pointed also to 
contradictory evidence from one of the USDOC's own experts.  According to Korea, the Panel quoted 
the USDOC's expert as acknowledging that "certain cr editors were able to act independently within 
the framework of the CRPA".96  Because the USDOC did not even take this statement into account in 
its explanation, Korea argues, the Panel properly concluded that the record evidence put the USDOC 
on notice as to certain creditors' recourse to mediation in connection with the October 2001 
restructuring. 
63. Korea concludes that there was evidence on th e record that mediation occurred pursuant to 
the authority of the CRPA and, therefore, that the Panel did not impermissibly base its findings on 
non-record information, in violation of Article 11 of the DSU . 
(ii) Standard of Review 
64. Korea challenges the United States' contention that  the cumulative effect of the alleged errors 
that the Panel made in its review of the evidence constitutes a separate violation of Article 11 of the 
DSU.  Korea argues that the United States adds no new arguments when it alleges a separate violation 
of Article 11 of the DSU, relying instead on its previ ous claims relating to the totality of the evidence, 
                                                      
93Korea's appellee's submission, para. 198. 
94Ibid., para. 200. 
95Ibid., para. 201 (quoting Hynix 2001 Audit Report, supra , footnote 63, p. 40;  also quoted in Panel 
Report, para. 7.85). (Korea's emphasis omitted) 
96Ibid., para. 210 (quoting Panel Report, footnote 98 to para. 7.87;  in turn quoting Issues and Decision 
Memorandum, supra , footnote 6, p. 55). WT/DS296/AB/R 
Page 22  
 
circumstantial and secondary evidence, the burden of proof, and the Panel's alleged use of non-record 
evidence.
97  Having already established the absence of an y basis for these claims, Korea requests the 
Appellate Body to dismiss the United States' additi onal claim as to the Panel's application of the 
standard of review under Article 11 of the DSU.   
4. Benefit and Specificity  
65. Korea submits that the United States' sole argumen t with regard to benefit and specificity is 
that the Panel based its conclusions on its a llegedly erroneous findings with respect to GOK 
entrustment or direction.98  Because the Panel correctly found the USDOC's determination of 
entrustment or direction to rest on insufficient evidence, Korea contends that the Appellate Body 
should dismiss the United States' claims relating to benefit and specificity.  
C. Claim of Error by Korea – Other Appellant 
66. Korea appeals the Panel's finding that a private body, KFB, was entrusted or directed by the 
GOK to undertake a financial contribution within the meaning of Article 1.1(a)(1)(iv) of the SCM 
Agreement .  Korea contends that this finding was pr emised on the Panel's erroneous understanding 
that there could be entrustment or direction under Ar ticle 1.1(a)(1)(iv) when the action that the private 
body was supposed to "carry out"—in this case th e participation in the Fast Track Debenture 
Programme—never took place.  Korea maintains that KFB did not "carry out" the allegedly entrusted 
action and that, accordingly, the Panel was incorr ect in finding that an objective and impartial 
investigating authority could have found that there was entrustment or direction of KFB to participate 
in the Fast Track Debenture Programme.99  Korea further asserts that its appeal focuses on the Panel's 
interpretation of Article 1.1(a)(1)(iv) and th at, although Korea disagrees with the Panel's factual  
finding that there was coercion by the GOK with respect to KFB, it is not challenging this factual finding on appeal.
100    
67. According to Korea, the Panel's interpretati on of Article 1.1(a)(1)(iv)—that a private body 
may be entrusted to take an action even when the action never occurs—is legally and logically 
incorrect.  Korea submits that the terms "entrusts" and "directs" cannot be read in isolation from the 
remainder of Article 1.1(a)(1)(iv), in particular, th e requirement that the private body "carry out" one 
of the functions identified in Article 1.1(a)(i) thr ough (iii).  Korea submits that Article 1.1(a)(1)(iv) 
further requires that the private body engage in a "practice" of a governmental type and that a 
                                                      
97Korea's appellee's submission, para. 215. 
98Ibid., para. 226. 
99Ibid., paras. 15-16. 
100Ibid., para. 4.  WT/DS296/AB/R 
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"practice" is the application  of a plan, not simply the plan itself.101  In Korea's view, to read "entrusts" 
and "directs" without regard to these subsequent terms in the same provision "makes no linguistic or 
logical sense".102   
68. Korea finds support for its reading of Article 1. 1(a)(1)(iv) in the Appellate Body Report in 
US – Corrosion-Resistant Steel Sunset Review , which established that only overt government actions  
or omissions  may constitute a "measure" that can be  challenged in WTO dispute settlement 
proceedings.103  Korea argues that in the absence of su ch action or omission—in this case, the 
participation of KFB in the Fast Track Debenture Programme—there can be no basis for the Panel's 
finding of entrustment or direction. 
69. Korea additionally refers to Article 8 of the International Law Commission's Draft Articles on 
State Responsibility.104  Korea explains that Article 8, which is entitled " Conduct directed or 
controlled by a State ", provides that private conduct shall be attributed to a State only "if the person[] 
or group of persons is in fact acting on the instruct ions of, or under the direction or control of, that 
State in carrying out the conduct."105  Korea finds "striking" the simila rity of wording in the reference 
to "carrying out" a conduct and submits that th e requirement of conduct taking place in order to 
establish State responsibility is a matter of "common sense".106  Consequently, Korea requests the 
Appellate Body to reverse the Panel's finding th at the GOK had entrusted or directed KFB to 
participate in the Fast Track Debenture Programme. 
D. Arguments of the United States – Appellee 
70. The United States submits that the Panel corr ectly found, based upon press accounts of GOK 
threats directed at KFB, that it was reasonable for the USDOC to conclude that there was GOK 
entrustment or direction in respect of KFB.     
                                                      
101Korea's other appellant's submission, para. 20. 
102Ibid., para. 18. 
103Ibid., para. 21 (referring to Appellate Body Report, US – Corrosion Resistant Steel Sunset Review , 
para. 81). 
104International Law Commission's Draft Articles on Responsibility of States for internationally 
wrongful acts, Report of the ILC on th e work of its Fifty-third session,  Official Records of the General 
Assembly , Fifty-sixth session , Supplement No. 10  (A/56/10), chp. IV.E.2 ("ILC Draft Articles").  
105Korea's other appellant's submission, para. 25 (quoting ILC Draft Articles, supra , footnote 104, 
Article 8). (Korea's emphasis omitted) 
106Ibid., para. 26. WT/DS296/AB/R 
Page 24  
 
71. The United States argues that Korea has misundersto od the analysis and findings of the Panel.  
In the United States' view, the Panel addressed GOK coercion and threats against Hynix creditors as 
evidence of entrustment or direction generally, rather  than specifically in relation to the Fast Track 
Debenture Programme.  The United States asserts that  the Panel explicitly clarified in footnote 136 to 
paragraph 7.117 of the Panel Report that it would al so consider, in a subsequent portion of the Panel 
Report, "[t]he issue of the evidentiary value of  the coercion of KFB in respect of the alleged 
entrustment or direction of other private creditors".
107  Thus, according to the United States, the action 
entrusted or directed to KFB, properly understood, is KFB's participation in  the broader bailout of 
Hynix, which action was in fact "carr[ied] out". 
72. The United States considers "axiomatic" Korea's argument that "an act by a private body 
cannot be attributed to the government unless there is an act by the private body to attribute."108  
According to the United States, the existence of su ch acts by private bodies was not in dispute before 
the Panel, as the Panel itself recognized in footnote 42  to paragraph 7.27 of the Panel Report.  In the 
United States' view, Korea "confuse[s]"109 the question of "entrust[ment] or direct[ion]", in the first 
part of Article 1.1(a)(1)(iv), with that of whether one of the functions identified in Article 1.1(a)(1)(i) 
through (iii) has been "carr[ied] out" by the priv ate body, as required by the subsequent part of 
Article 1.1(a)(1)(iv).  Therefore, the United Stat es requests the Appellate Body to uphold the Panel's 
finding as to the GOK's entrustment or direction of KFB. 
E. Arguments of the Third Participants  
1. China  
73. China agrees with the Panel's interpretation of  the terms "entrusts" and "directs" as well as 
with the "probative and compelling" standard adopted by the Panel.  With regard to the interpretation 
of the terms "entrusts" and "directs", China contends that, pursuant to Article 31 of the Vienna 
Convention on the Law of Treaties110 (the " Vienna Convention "), the decision-maker begins the 
interpretive process with the ordinary meaning, but  does not end its inquiry there.  Looking beyond 
the terms "entrusts" and "directs" to the ot her language in Article 1.1(a)(1)(iv) of the SCM Agreement , 
                                                      
107Panel Report, footnote 136 to para. 117 (referred to in United States' appellee's submission, para. 5).  
108United States' appellee's submission, para. 6 (referring to Korea's other appellant's submission, 
para. 26). 
109Ibid., para. 7. 
110Done at Vienna, 23 May 1969, 1155 UNTS 331;  8 International Legal Materials 679.  WT/DS296/AB/R 
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China submits that the term "direct s", when followed by "to" and a verb, can be interpreted only to 
mean "give a formal order or command to".111   
74. Furthermore, in China's view, there is no support in Article 31 of the Vienna Convention  or in 
WTO jurisprudence for the view, implicitly advanced  by the United States, that in ascertaining the 
ordinary meaning of a certain term, all possible meanings listed in a dictionary should be taken into 
account.  A proper understanding of the terms "entrust s" and "directs" reveals that these terms do not 
include "vague concepts"112 such as the meanings proffered by the United States.   
75. China disagrees with the United States that the Panel articulated and adopted a new 
"probative and compelling" evidentiary standard.  Ch ina maintains that the Panel adopted and applied 
the general standard of review based on Article 11 of  the DSU, as specified by  the Appellate Body in 
US – Lamb .  China submits that, even though the Panel di d mention that "the evidence of entrustment 
or direction must in all cases be probative and compelling"113, this does not amount to a "special" 
evidentiary standard because the Pane l's statements purporting to apply this standard are only "general 
in nature".114   
2. European Communities  
76. The European Communities agrees with the United States that the Panel (i) erred in its 
interpretation of the terms "entrusts" and "directs" in Article 1.1(a)(1)(iv) of the SCM Agreement ;  
(ii) applied an improper standard of review;  (iii) impermissibly shifted the burden of proof;  
and (iv) incorrectly refused to consider certain United States evidence on the ground of ex post 
rationalization.  With regard to the interpreta tion of "entrusts" and "directs", the European 
Communities submits that the Panel reformulated these terms in a restrictive way, in particular by 
limiting their meanings to "affirmative action[s]" of  "delegation" and "command" as set out in the 
panel report in US – Export Restraints .  The Panel  then applied this reformul ated understanding to the 
facts of the present case.  The Eur opean Communities maintains that this constitutes legal error as the 
factual circumstances in the present case ar e fundamentally different from those in US – Export 
Restraints .    
77. The European Communities agrees with the United States that, in applying the restrictive and 
very specific language of that panel report, the Panel incorrectly discarded some of the ordinary 
                                                      
111China's third participant's submission, para. 5 (quoting Panel Report, US – Export Restraints , 
para. 8.28). 
112Ibid., paras. 13, 14, 16, and  20. 
113Ibid., para. 25 (quoting Panel Report, para. 7.35).  
114Ibid. WT/DS296/AB/R 
Page 26  
 
meanings of the words "entrusts" and "direct s", which meanings were recognized by the US – Export 
Restraints  panel.  In particular, the European Comm unities maintains that a government can entrust 
one or more private bodies to carry out not only a specific task—such as the payment of funds to a 
particular firm—but also to carry out a more  general task—such as a public policy objective.
115  The 
European Communities contends that, although the Panel recognized that leaving discretion to a private body is not necessarily at odds with entrus tment or direction of the private body, the Panel 
failed to fully appreciate this point in its analysis of the facts of the case.   
78. The European Communities agrees with the Unite d States that the conclusions of the USDOC 
were reasonable and that the Pa nel impermissibly engaged in a de novo  review of the USDOC's 
determination.  The European Communities submits that, by considering the facts and evidence only 
in isolation, without assessing the weight of the individual facts when taken together, the Panel 
effectively applied a "different methodological ap proach" from that adopted by the investigating 
authority.
116  The European Communities maintains that the Panel's sole task was to determine 
whether or not the conclusion of the USDOC with respect to "entrustment" or "direction" was "so 
outlandish, so unreasonable, so lacking in objectivity"117 that it left no choice for the Panel but to rule 
against the investigating authority.  Instead, the Pa nel examined whether certain facts, on their own, 
were decisive of the question of entrustment or di rection and, finding that they were not, failed to 
include them in its weighing of all the facts in question collectively.  In doing so, according to the 
European Communities, the Panel conducted its own independent asse ssment of GOK entrustment or 
direction of Hynix's creditors.  
79. Furthermore, the European Communities agr ees with the United States that the Panel 
effectively shifted the burden of proof from Korea to the United States through its erroneous review 
of the USDOC's evidence.  In th is respect, the European Communiti es agrees with the United States 
that the Panel's "probative and compelling" evidentiary standard has no basis in the SCM Agreement  
or any other covered agreement, and that such st andard essentially requires the investigating authority 
to produce a "smoking gun".118  Furthermore, the European Communities emphasizes the importance 
of circumstantial evidence in subsidies investigati ons, and that the Panel's approach improperly limits 
an investigating authority's ability to rely on such  evidence.  The European  Communities asserts that, 
as the complaining party, Korea bore the burden of establishing a prima facie  case and that, as such, if 
certain events—such as meetings with GOK offi cials—had no connection with entrustment or 
                                                      
115European Communities' third participant's submission, para. 10. 
116Ibid., para. 20. 
117Ibid., para. 19. 
118Ibid., para. 23.  WT/DS296/AB/R 
 Page 27 
 
 
direction, Korea should have been required to pr oduce certain exculpatory evidence, which could 
have been only in its control.119  
80. Finally, the European Communities agrees with th e United States that it is appropriate for a 
Member to provide additional details and evidence of  the elements on which its findings were based, 
provided that the Member does not seek to alter the r easoning set out in the agency's decision.  In the 
European Communities' view, the submission of r ecord evidence relied upon but not cited in the 
agency's decision does not constitute the introduc tion of new reasoning, because such evidence is 
merely an additional part of a factual or legal finding already articulated  in the agency's decision.120  
3. Japan  
81. Japan agrees with the United States that th e Panel (i) erred in the interpretation and 
application of the terms "entrusts" and "directs" in Article 1.1(a)(1)(iv) of the SCM Agreement ;  
(ii) applied an erroneous "probative and compelli ng" evidentiary standard;  (iii) improperly assessed 
the probative value of each item of evidence separatel y;  and (iv) erred in disregarding evidence not 
specifically mentioned in the USDOC's determination.  
82. With regard to the interpretation of the terms "entrusts" and "directs", Japan submits that the 
Panel did not base its analysis on the full range of meanings of these terms, but rather interpreted 
these terms in an overly narrow manner to mean only "delegation" and "c ommand".  According to 
Japan, the Panel failed to recognize that the terms "e ntrusts" and "directs" "encompass a wide range of 
acts", including "a government's offer to a person to do something ".121   
83. In relation to the standard of review, Japan ag rees with the United States that the Panel erred 
in requiring evidence to be "probative and compel ling".  Japan contends that nothing in the SCM 
Agreement  or the DSU provides a legal basis for the Pa nel's standard.  Indeed, Japan argues, the 
proper evidentiary standard for this case is found in Article 11 of the DSU, which requires a panel to 
determine only whether "an objective assessment of  evidence on the record reasonably allows the 
conclusion reached by the authority."122  The use of any other standard for the examination of an 
investigating authority's evidence, in Japan's view, amounts to legal error. 
                                                      
119European Communities' third participant's submission, para. 25. 
120Ibid., para. 26. 
121Japan's third participant's submission, para. 5. (original emphasis) 
122Ibid., para. 9. WT/DS296/AB/R 
Page 28  
 
84. Japan further contends that the Panel errone ously considered that each item of evidence, in 
and of itself , must be probative of entrustment or direction.  Japan notes that the Panel correctly 
recognized that the USDOC relied on the totality of th e evidence before it to determine entrustment or 
direction.  The Panel erred, however, in subse quently considering that it "must consider the 
[US]DOC's assessment of the probative value of each evidentiary factor separately".
123  Instead, Japan 
submits, the Panel's task under Article 11 of the DSU was simply to find  whether the USDOC's 
conclusion was supported by evidence on the record as a whole .  Reviewing the evidence in its 
entirety is particularly important in cases, such as the present dispute, where th e evidence by its nature 
would be circumstantial because "[a]n individual piece of circumstantial evidence shows a limited 
aspect of the entire picture."124  According to Japan, the Panel's failu re to evaluate the evidence in its 
totality resulted in several findings that are inconsis tent with Article 11 of the DSU and Article 1.1 of 
the SCM Agreement .  
85. Japan also argues that the Pane l erred in rejecting certain evidence submitted by the United 
States on the ground that the USDOC did not explicitly  refer to such evidence in its published subsidy 
determination.  Japan contends that neither Article  11 of the DSU, nor any other provision of the DSU 
or the SCM Agreement , obliges the authority to discuss in its  determination "each and every reason 
and fact" on which the authority based its conclusi on, or precludes a Member from relying before a 
panel on record evidence that was not e xplicitly referred to in the investigating 
authority's determination.125  Japan finds support for its view in the Appellate Body decisions in 
Thailand – H-Beams  and EC – Tube or Pipe Fittings , which explained that a panel's obligation under 
Article 17.6(i) of the Agreement on Implementation of Article VI  of the General Agreement on Tariffs 
and Trade 1994 (the " Anti-Dumping Agreement ") to review the agency's fact-finding does not prevent 
the respondent Member from relying before a panel on facts that are not discernible from the published determination.  Japan submits that, given the similar obligation of panels to review facts 
under Article 11 of the DSU, the rationale of these  decisions applies equally in the present case to 
permit the United States to rely on the evid ence improperly rejected by the Panel.   
4. Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu
  
86. The Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu agrees with the 
Panel's interpretation of the terms "entrusts" and "directs" in Article 1.1(a)(1)(iv) of the SCM 
Agreement  and submits that, contrary to the United St ates' assertion, the Panel did not erroneously 
apply a special evidentiary standard.  The Separa te Customs Territory of Taiwan, Penghu, Kinmen, 
                                                      
123Japan's third participant's submission, para. 12 (quoting Panel Report, para. 7.45). 
124Ibid., para. 14. 
125Ibid., para. 25.  WT/DS296/AB/R 
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and Matsu contends that the interpretation of the terms "entrusts" and "directs" suggested by the 
United States "blurs the line" between a subsidy captured by the provisions of the SCM Agreement , on 
the one hand, and the "general administrative discretion"126 of Members to adopt WTO-consistent 
practices to regulate or influence their industries or  markets, on the other hand.  In contrast, the 
Panel's interpretation of "entrusts" and "direct s" ensures that government actions under Article 
1.1(a)(1)(iv) are differentiated from more routine go vernment interventions in the marketplace.   
87. The Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu disagrees with the 
United States' claim that the Panel erroneously applied a "probative and compelling" evidentiary 
standard.  Pointing to the Panel's own descriptio n of what it meant by the term "probative and 
compelling"—namely, that the evidence "d emonstrate" entrustment or direction127—the Separate 
Customs Territory of Taiwan, Penghu, Kinmen, and Ma tsu maintains that the Panel's application of 
this standard does not impose additional obligations on investigating authorities.  In the view of the 
Separate Customs Territory of Ta iwan, Penghu, Kinmen, and Matsu, th e Panel's characterization falls 
within its discretion as the trier of fact, and is merely "an extension of Article 11 of the DSU".128  The 
Separate Customs Territory of Taiwan, Penghu, Ki nmen, and Matsu asserts that, even though the 
Panel could have elaborated further on its understa nding of the "probative and compelling" standard, 
it agrees with that standard and requests the Appella te Body to take its views into account should the 
Appellate Body "feel the need to further elaborate on this standard".129 
III. Issues Raised in This Appeal 
88. The following issues are ra ised in this appeal: 
(a) whether the Panel erred in finding that Kor ea's request for consultations did not fail  
to indicate the legal basis for the comp laint in relation to the United States 
Department of Commerce's (the "USDOC's ") countervailing duty ("CVD") order, as 
required by Article 4.4 of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes  (the "DSU");   
                                                      
126Third participant's submission of the Separate Customs Territory of Taiwan, Penghu, Kinmen, and 
Matsu, para. 3. 
127Ibid., para. 6 (quoting Panel Report, paras. 7.35 and 7.46). 
128Ibid., para. 7. 
129Ibid., para. 8. WT/DS296/AB/R 
Page 30  
 
(b) as regards the USDOC's finding of entrustment or direction: 
(i) whether the Panel erred in interpre ting Article 1.1(a)(1)(iv) of the  Agreement 
on Subsidies and Countervailing Measures (the "SCM Agreement
 "), in 
particular: 
(A) in finding that, in order to cons titute entrustment or direction under 
Article 1.1(a)(1)(iv), "the action of the government must contain a 
notion of delegation (in the case of entrustment) or command (in the 
case of direction)";  and 
(B) in finding that the evidence was "sufficient for an objective and 
impartial investigating authorit y to properly find government 
entrustment or direction in respect of KFB", notwithstanding that 
Korea First Bank ("KFB") did not carry out the activity allegedly 
entrusted or directed by the Government of Korea (the "GOK");  
(ii) whether the Panel erred in its review of the USDOC's finding of entrustment 
or direction under Article 1.1(a)(1)(iv) of the SCM Agreement , in particular: 
(A) in finding that evidence of entrustment or direction must be 
"probative and compelling"; 
(B) in failing to examine the USDO C's evidence in its totality, and 
instead, requiring that individual pieces of evidence, in and of 
themselves, establish entrustment or direction by the GOK of the 
creditors of Hynix Semiconductors, Inc. ("Hynix");   
(C) in declining to consider certa in evidence on the record of the 
underlying investigation but not cited by the USDOC in its published determination; 
(D) in failing to comply with its obligations under Article 11 of the DSU 
by finding that "the mediation provisions [of the Corporate Restructuring Promotion Act ("CRPA")] had actually been invoked by three creditors in respect of the October 2001 restructuring", in the 
absence of supporting evidence on the record of the underlying 
investigation;  and  WT/DS296/AB/R 
 Page 31 
 
 
(E) in failing to apply the proper standard of review and, therefore, 
failing to comply with its obligations under Article 11 of the DSU;  
and, consequently, 
(iii) whether the Panel erred in finding that  the USDOC's determination of GOK 
entrustment or direction of certain of Hynix's creditors is inconsistent with 
Article 1.1(a)(1)(iv) of the SCM Agreement ; 
(c) whether the Panel erred in finding that  the USDOC's benefit determination is 
inconsistent with Article 1.1(b) of the SCM Agreement ;  and 
(d) whether the Panel erred in finding that th e USDOC's determination of specificity, 
insofar as it relates to subsidies provided by  virtue of GOK entrustment or direction 
of certain of Hynix's creditors, is inconsistent with Article 2 of the SCM Agreement . 
IV. Consultations 
A. Introduction and Relevant Procedural Background 
89. We begin with the United States' assertion that the Panel erred by failing to reject Korea's 
claims against the USDOC's CVD order on the grounds that Korea did not provid e, in its request for 
consultations, the legal basis for its complaint agains t this measure, as required by Article 4.4 of the 
DSU.   
90. Before examining the United States' appeal, we set out the relevant procedural history of the 
dispute.  Korea requested consultations with the United States, for the first time, on 30 June 2003.130  
In its request for consultations, Korea referred to th e preliminary and final s ubsidy determinations of 
the USDOC and to the preliminary injury determ ination of the United States International Trade 
Commission (the "USITC").  The request also indicated the provisions of the General Agreement on 
Tariffs and Trade 1994  (the "GATT 1994") and the  SCM Agreement  with which Korea considered 
"these determinations" to be inconsistent.131  Consultations were held on 20 August 2003.132   
91. On 18 August 2003, Korea submitted an addendum  to its request for consultations (the 
"Addendum"), which stated: 
                                                      
130WT/DS296/1 (attached as Annex III to this Report). 
131The request refers to Articles 1, 2, 10, 11, 12, 14, 17, 22, and 32.1 of the  SCM Agreement  and to 
Articles VI:3 and X:3 of the GATT 1994.  
132According to the United States, the consultations  "were limited to the preliminary and final 
determinations of the [US]DOC". (United States' appellant's submission, para. 134)   WT/DS296/AB/R 
Page 32  
 
With reference to document WT/DS296/1 ... circulated on 8 July 2003 [the original request for consultations], my authorities have instructed me to request further c onsultations with the Government of 
the United States ... with regard to the [USITC's] final determination of material injury, ... and the [USD OC's] final [CVD] order... .  Both 
of these actions relate to the same  underlying measures at issue in our 
previous request for consultations.
133 
This language was followed by a list of provis ions with which Korea considered "these 
determinations" to be inconsistent.134  Another round of consultations was held on 1 October 2003, 
prior to which Korea and the United States exchan ged correspondence indicating that they disagreed 
about the conformity of Korea's request for consultations with Article 4.4 of the DSU.135  K o r e a  
submitted a request for the establishment of a panel on 19 November 2003.136  The request identified 
the USDOC's CVD order and stated that it "was the result" of the USDOC's final CVD determination 
and of the USITC's final material injury dete rmination.  The United States objected to the 
establishment of a panel on the grounds that the parties had not held consultations on the CVD 
order.137  The Panel was established on 23 January 2004.138 
92. The United States requested the Panel to reject  Korea's claims in respect of the USDOC's 
CVD order.139  According to the United States, Korea fa iled to comply with the requirements of 
Article 4.4 of the DSU because it did not provide "any indication of the legal basis of its complaint" in 
                                                      
133WT/DS296/1/Add.1 (attached as Annex IV to this Report), p. 1. 
134Each item on the list identified a pa ragraph of Article 15 of the  SCM Agreement  with which "these 
determinations" were allegedly inconsistent. 
135In its letter accepting further consultations, the United States noted Korea's alleged failure to provide 
the legal basis for its complaint in respect of the USDO C's CVD order. (United States' appellant's submission, 
para. 136 (referring to letter from the Ambassador and Permanent Representative of the United States to the 
WTO to the Ambassador and Permanent Representative of the Republic of Korea to the WTO, dated 28 August 
2003 (Exhibit US-2 submitted by the United States to the Panel)))  Korea responded by letter, explaining that 
the bases for its complaint were "found in both of [its] consultation requests", and that "under U.S. law, the 
[CVD] order cannot be imposed without affirmative determinations by both" the USDOC and the USITC. 
(Letter from the Ambassador and Permanent Representative of the Republic of Korea to the WTO to the Ambassador and Permanent Representative of the United States to the WTO, dated 8 September 2003 (Exhibit 
US-3 submitted by the United States to the Panel))  According to the United States, during the consultations, 
"the parties agreed to disagree concerning the conformity  of Korea's consultation request with Article 4.4 of the 
DSU" and "the United States declined to engage in any discussions regarding the [CVD] order." (United States' 
appellant's submission, para. 137) 
136WT/DS296/2 (attached as Annex V to this Report). 
137The United States observes that "[a]t the meeting of the [DSB] at which Korea’s request was first 
considered, the United States objected to the establishment of a panel on the grounds that Korea’s panel request 
sought to cover matters on which the parties had not consulted" and "described Korea’s failure to comply with 
Article 4.4 of the DSU and the resulting absence of cons ultations with respect to the [USDOC's CVD] order". 
(United States' appellant's submission, para. 138 (referring to WT/DSB/M/159, paras. 32-38 (Exhibit US-5 submitted by the United States to the Panel))) 
138Panel Report, para. 1.5. 
139Ibid., para. 7.410.  WT/DS296/AB/R 
 Page 33 
 
 
respect of the CVD order.140  The Panel disagreed, noting that Korea's second request for 
consultations referred to Korea's first request for consultations.141  This reference, in the Panel's view, 
was "sufficient for the second request to be read in  light of the first request" and consequently, "in 
addition to the provisions of the  SCM Agreement  set forth (in a non-exhaus tive manner) in Korea's 
second request for consultations, its claims in that document should also be read in light of the 
provisions of the  SCM Agreement  and GATT 1994  set out in" the original request.142  The Panel 
concluded that "the totality of th ese provisions provides sufficient 'indication of the legal basis for the 
complaint' within the meaning of Article 4.4 of the DSU ."143 
93. The United States appeals this Panel finding.  According to the United States, "it is not 
credible to assert that by simply referring to the f act that it had filed a prior consultation request on 
one set of alleged measures, Korea satisfied its oblig ation to provide an indication of the legal basis 
for its complaint with respect to a different measure."144  It adds that, given that Korea cited many 
provisions in its first request for consultations, the United States could not have been expected  
"to guess which provision(s) applied to the [CVD] order".145  "At a minimum", the United States 
explains, Article 4.4 requires "a n indication of at least one provision with which a measure is 
considered to be inconsistent".146  For these reasons, the United Stat es submits, the Panel should have 
rejected Korea's claims in respect of the CVD order. 
94. Korea requests the Appellate Body to dismiss th e United States' appeal with respect to this 
issue on the grounds that the Notice of Appeal did not meet the requirements of Rule 20(2)(d) of the 
Working Procedures for Appellate Review  (the " Working Procedures ").147  In Korea's submission, the 
United States' Notice of Appeal does not identify the "alleged errors in the issues of law covered in 
the panel report and legal interpre tations developed by the panel" as required by Rule 20(2)(d)(i);  
instead, the Notice of Appeal "repeats a [United Stat es] version of what the Panel stated and says the 
[United States] disagrees".148  In any event, Korea asserts, the Panel was correct in declining the 
United States' request to reject Korea's claim in respect of the CVD order.  Korea explains that 
"[b]ecause the [CVD] order is wholly dependant  on the administrative determinations and is 
                                                      
140Panel Report, para. 7.410. 
141Ibid., para. 7.414. 
142Ibid., para. 7.415. 
143Ibid. (footnote omitted) 
144United States' appellant's submission, para. 143. 
145Ibid.  
146Ibid., para. 144. 
147Korea's appellee's submission, para. 228. 
148Ibid., para. 230. WT/DS296/AB/R 
Page 34  
 
effectively a ministerial function without discretion,  it follows that the legal claims of the underlying 
determinations are identical to the legal claims with respect to the [CVD] order."
149 
B. Sufficiency of the United States' Notice of Appeal 
95. Before turning to the United States' claim re lating to Korea's request for consultations, we 
address Korea's assertion that the United States' Noti ce of Appeal does not meet the requirements of 
Rule 20(2)(d) of the  Working Procedures  in respect of this claim.  Rule 20(2) provides, in relevant 
part:   
A Notice of Appeal shall include ...  
(d) a brief statement of the nature of the appeal, including:  
(i) identification of the alleged errors in the issues of law 
covered in the panel report and legal interpretations 
developed by the panel; 
(ii) a list of the legal provision(s) of the covered 
agreements that the panel is  alleged to have erred in 
interpreting or applying;  and 
(iii) without prejudice to the ability of the appellant to 
refer to other paragraphs of the panel report in the 
context of its appeal, an indicative list of the 
paragraphs of the panel re port containing the alleged 
errors. 
96. In its Notice of Appeal, the United States indicates that it seeks review of: 
... the Panel's legal conclusion that, with respect to the [US]DOC 
[CVD] order, Korea's consultation request provides a sufficient indication of the legal basis of the complaint within the meaning of Article 4.4 of the DSU.  This conc lusion is in error and is based on 
erroneous findings on issues of la w and related legal interpretations.
10 
_________________________________ 
10Panel Report, paragr aphs 7.414-7.415. 
97. Korea alleges that the United States' Notice of Appeal does not identify the alleged errors in 
the issues of law covered in the Panel Report and le gal interpretations develo ped by the Panel.  We 
disagree.  Although Korea is correct  that the United States' Notice of Appeal simply tracks the Panel's 
finding150, nevertheless, the Notice of Appeal states that the alleged error of the Panel is the finding 
                                                      
149Korea's appellee's submission, para. 242. 
150The Panel found that "the totality of these provisio ns [referred to in  Korea's request for consultations 
and the Addendum] provides sufficient 'indication of the legal basis for the complaint' within the meaning of 
Article 4.4 of the  DSU ." (Panel Report, para. 7.415) (footnote omitted)  WT/DS296/AB/R 
 Page 35 
 
 
that Korea's request for consultations provides sufficient indication of the legal basis for the 
complaint;  it mentions that Article 4.4 of the DSU is the relevant legal provision, and it indicates the 
paragraphs of the Panel Report where this finding is  made.  Thus, the United States' Notice of Appeal 
provides adequate notice to Korea of the "nature of the appeal" in order to allow it to know the case to 
which it must respond.151  In our view, this is sufficient, in this case, for purposes of Rule 20(2)(d) of 
the  Working Procedures .   
C. Does Korea's Request for Consultations Fulfil the Requirements of Article 4.4 of the 
DSU? 
98. Having disposed of Korea's objection regarding the United States' Notice of Appeal, we 
examine the United States' claim on appeal.  Th e requirements that apply to a request for 
consultations are set out in Article 4.4 of the DSU, which provides, in relevant part: 
Any request for consultations sha ll be submitted in writing and shall 
give the reasons for the request, including identification of the measures at issue and an indication of the legal basis for the 
complaint. 
99. As observed above
152, Korea's initial request for consultati ons did not refer to the CVD order, 
which was not in existence at th e time the request was made.  In  the Addendum to its request for 
consultations, Korea sought "further consultatio ns" with regard to the USITC's final injury 
determination and the USDOC's CVD order.  The Addendum referred to the original request for 
consultations and expressly indicated that both the US ITC's final affirmative injury determination and 
the CVD order "relate to the same underlying me asures at issue in our previous request for 
consultations".153  The United States considers that this la nguage does not permit a conclusion that the 
claims asserted in the initial request for consultatio ns apply also to the CVD order, which is referred 
to only in the Addendum. 
100. We disagree.  The Addendum expressly refers to  the initial request for consultations.  It is 
clear that the Addendum was intended to be read toge ther with the original request for consultations;  
indeed, that is the very nature of an addendum.  Moreover, we recall that Korea explains that, under 
United States law, "the [CVD] order is wholly de pendant on the administrativ e determinations and is 
effectively a ministerial function without discretion".154  According to Korea, "it follows that the legal 
                                                      
151Appellate Body Report, US – Countervailing Measures on Certain EC Products , para. 62;  Appellate 
Body Report, EC – Export Subsidies on Sugar , para. 344. 
152Supra , para. 90. 
153WT/DS296/1/Add.1 (attached as Annex IV to this Report), p. 1.  
154Korea's appellee's submission, para. 242. WT/DS296/AB/R 
Page 36  
 
claims of the underlying determinations are identical  to the legal claims w ith respect to the [CVD] 
order."
155  At the oral hearing, the United States confirmed that this is an accurate description of a 
CVD order under United States law.  In these circum stances, it should have been apparent that the 
allegations of inconsistency, set forth by Korea in  the original request for consultations and in the 
Addendum in relation to the USDOC's subsidy determ ination and the USITC's injury determination, 
applied also to the CVD order.  Nor can it be sai d that the United States was expected "to guess which 
provision(s) applied to the [CVD] order".156  Accordingly, we find that it was reasonable for the Panel 
to conclude that the "totality" of the provisions in  Korea's initial request for consultations and in the 
Addendum provides, with respect to the USDOC's CVD order, a sufficient indication of the legal 
basis for the complaint within the meaning of Article 4.4.157 
101. For these reasons, we uphold  the Panel's finding, in paragraph 7.415 of the Panel Report, that 
Korea's request for consultations did not fail to indi cate the legal basis for the complaint in relation to 
the USDOC's CVD order, as required by Article 4.4 of the DSU.   
V. Interpretation of Article 1.1(a)(1)(iv) of the SCM Agreement  
A. Introduction 
102. We examine next the United States' and Kor ea's contentions that the Panel incorrectly 
interpreted Article 1.1(a)(1)(iv) of the  SCM Agreement . 
103. In the course of its analysis of Korea's claim under Article 1.1(a)(1)(iv), the Panel stated that 
it "agree[d] with the  US – Export Restraints  panel that '[i]t follows from the ordinary meanings of 
the two words "entrust" and "direct" that the action of the government must contain a notion of 
delegation (in the case of entrustment) or command (in the case of direction).'"158   
104. The United States asserts that the Panel's interpre tation of the terms "entrusts" and "directs" is 
erroneous because it fails to "take[] account of the full range of government actions that fall within the 
ordinary meaning[s] of th[ese] term[s]".159  In response, Korea argues that the Panel's interpretation of 
                                                      
155Korea's appellee's submission, para. 242. 
156United States' appellant's submission, para. 143.  
157Panel Report, para. 7.415. 
158Ibid., para. 7.31 (quoting Panel Report, US – Export Restraints , para. 8.29). 
159United States' appellant's submission, para. 24.  The European Communities and Japan support the 
United States' position. (European Communities' third pa rticipant's submission, para. 3;  Japan's third 
participant's submission, para. 2)  WT/DS296/AB/R 
 Page 37 
 
 
the terms "entrusts" and "directs" is "appropriate"  and, consequently, should be upheld by the 
Appellate Body.160  
105. Korea's challenge relates to a different aspect of the Panel's interpretation of 
Article 1.1(a)(1)(iv).  In particular, Korea appeals the Panel's finding that certain evidence relied on 
by the USDOC was "sufficient for an objective and im partial investigating authority to properly find 
government entrustment or direction in respect of KFB".161  According to Korea, this finding is a 
consequence of the Panel's incorrect interpretati on that an affirmative finding of entrustment or 
direction under Article 1.1(a)(1)(iv) is possible, even though the act that the private body was allegedly entrusted or directed to carry out was never undertaken.
162  The United States requests the 
Appellate Body to uphold the Panel's finding that the USDOC had a sufficient factual basis to conclude that there was entrustment or direction by the GOK with respect to KFB.
163 
B. Article 1.1(a)(1)(iv) of the SCM Agreement 
1. The Meaning of the Terms "Entrusts" and "Directs"  
106. Article 1.1 lays down when a "subsidy" sh all be deemed to exist for purposes of the SCM 
Agreement , namely, when (i) there is a "financial contribution by a government or any public body", 
and (ii) "a benefit is thereby conferred".164  This part of the appeal is concerned with the "financial 
contribution" element of the definition of a "subsidy".165  Article 1.1(a)(1) of the SCM Agreement 
states that there is a financial contribution by a government or any public body where: 
(i) a government practice involves a direct transfer of funds (e.g. 
grants, loans,  and equity infusion), potential direct transfers of funds or liabilities (e.g. loan guarantees); 
(ii) government revenue that is otherwise due is foregone or not 
collected (e.g. fiscal incen tives such as tax credits); 
                                                     
 
160Korea's appellee's submission, heading II.A.  China and the Separate Customs Territory of Taiwan, 
Penghu, Kinmen, and Matsu also assert that the United States' appeal should be rejected. (China's third 
participant's submission, para. 20;  Third participant's submission of the Separate Customs Territory of Taiwan, 
Penghu, Kinmen, and Matsu, para. 3) 
161Panel Report, para. 7.117. (footnote omitted)   
162Korea's other appellant's submission, para. 4. 
163United States' appellee's submission, para. 9.   
164We note that, pursuant to Articles 1.1(a)(2) and 1.1(b) of the SCM Agreement , a subsidy shall also be 
deemed to exist if "there is a form of income or price support in the sense of Article XVI of the GATT 1994" 
and "a benefit is thereby conferred".  This case does not raise the issue of subsidies granted in the form of income or price support. 
165We examine the United States' appeal of the Panel's finding relating to "benefit" in Section VII of 
this Report. WT/DS296/AB/R 
Page 38  
 
(iii) a government provides goods or services other than general 
infrastructure, or purchases goods; 
(iv) a government makes payments to a funding mechanism, or 
entrusts or directs a private body to carry out one or more of the type of functions illustrate d in (i) to (iii) above which 
would normally be vested in the government and the practice, 
in no real sense, differs from practices normally followed by governments[.] (footnote omitted) 
107. Article 1.1(a)(1) makes clear that a "financial contribution" by a government or public body is 
an essential component of a "subsidy" under the  SCM Agreement .  No product may be found to be 
subsidized under Article 1.1(a)(1), nor may it be  countervailed, in the absence of a financial 
contribution.  Furthermore, situations involving exclusively private conduct—that is, conduct that is 
not in some way attributable to a government  or public body—cannot constitute a "financial 
contribution" for purposes of determining the existence of a subsidy under the  SCM Agreement . 
108. Paragraphs (i) through (iv) of Article 1.1(a)(1 ) set forth the situations where there is a 
financial contribution by a government or public body.  The situations listed in paragraphs (i) through 
(iii) refer to a financial contribution that is provided  directly  by the government through the direct 
transfer of funds, the foregoing of revenue, the pr ovision of goods or services, or the purchase of 
goods.
166  By virtue of paragraph (iv), a financ ial contribution may also be provided  indirectly  by a 
government where it "makes payments to a funding mechanism", or, as alleged in this case, where a 
government "entrusts or directs a private body to carry out one or more of the type of functions 
illustrated in (i) to (iii) ... which would normally be vested in the government and the practice, in no 
real sense, differs from practices normally followed by governments".  Thus, paragraphs (i) through 
(iii) identify the types of actions that, when taken by  private bodies that have been so "entrusted" or 
"directed" by the government, fall within the scope of paragraph (iv).  In othe r words, paragraph (iv) 
covers situations where a private body is being used  as a proxy by the government to carry out one of 
the types of functions listed in para graphs (i) through (iii).  Seen in this light, the terms "entrusts" and 
"directs" in paragraph (iv) identify the instances wh ere seemingly private conduct may be attributable 
to a government for purposes of determining whether there has been a financial contribution within 
the meaning of the  SCM Agreement .   
109. With this in mind, we turn to examine the mean ings of the terms "entrusts" and "directs" in 
Article 1.1(a)(1)(iv).  We recall that the Panel stated that it "agree[d] with the  US – Export Restraints  
panel that '[i]t follows from the ordinary meanings  of the two words "entrust" and "direct" that the 
action of the government must contain a notion of delegation (in the case of entrustment) or command 
                                                      
166Like the SCM Agreement , we use the term "government" to refer to "a government or any public 
body within the territory of a Me mber", unless otherwise noted.   WT/DS296/AB/R 
 Page 39 
 
 
(in the case of direction).'"167  In so doing, the Panel effectivel y replaced the terms "entrusts" and 
"directs" with two other terms, "delegation" and "command", whose scope it did not define, and went 
no further in clarifying the meaning of any of these terms.168  The United States asserts that the Panel 
"failed to give full meaning and effect to the treaty terms at issue".169  It points out that the dictionary 
definitions of the term "entrust" include "[i]nvest w ith a trust;  give (a person, etc.) the responsibility 
for a task ... [c]ommit the ... execu tion of (a task) to a person".170  The United States also notes that the 
dictionary definitions of "direct" include "[c]ause to move in or take a specified direction;  turn 
towards a specified destination or target";  "[g]ive authoritative instructions to;  to ordain, order (a 
person)  to do,  (a thing)  to be done ;  order the performance of";  and "[r]egulate the course of;  guide 
with advice".171  The United States, therefore, would have  us adopt an interpretation of the terms 
"entrusts" and "directs" that includes all th e dictionary definitions of these terms.   
110. The term "entrusts" connotes the action of givi ng responsibility to someone for a task or an 
object.172  In the context of paragraph (iv) of Article 1.1(a)(1), the government gives responsibility to 
a private body "to carry out" one of the types of f unctions listed in paragrap hs (i) through (iii) of 
Article 1.1(a)(1).  As the United States acknowledges173, "delegation" (the word used by the Panel) 
may be a means by which a government gives respons ibility to a private body to carry out one of the 
functions listed in paragraphs (i) through (iii).  Delegation is usuall y achieved by formal means, but 
delegation also could be informal.  Moreover, there may be other means, be they formal or informal, 
that governments could employ for the same purpose.   Therefore, an interpretation of the term 
"entrusts" that is limited to act s of "delegation" is too narrow. 
                                                      
167Panel Report, para. 7.31 (quoting Panel Report, US – Export Restraints , para. 8.29). 
168The Panel's subsequent discussion of the context and the object and purpose of the terms "entrusts" 
and "directs" focused on whether Article 1.1(a)(1)(iv) requires that the government action allegedly constituting 
entrustment or direction be explicit. ( Ibid.. 7.36-7.41) 
169United States' appellant's submission, para. 28. 
 170Ibid., para. 19 (quoting The New Shorter Oxford English Dictionary , supra , footnote 36, Vol. 1, 
p. 831. 
 171Ibid., para. 20 (quoting  The New Shorter Oxford English Dictionary , supra , footnote 36, Vol. 1, 
p. 679. (original italics) 
172The Spanish and French versions of the  SCM Agreement  use the verbs "encomendar" and 
"charger", respectively, which have similar meanings . The Diccionario de la lengua española  defines 
"encomendar" as: 
Encargar a alguien que haga algo o que cuide de algo o de alguien. 
(Diccionario de la lengua española , 22nd edn (Real Academia Española, 2001), p. 612) 
Le Nouveau Petit Robert  defines "charger" as: 
Revêtir d'une fonction, d'un office. … commettre, déléguer, préposer (à).  
(Le Nouveau Petit Robert , P. Varrod (ed.) (Dictionnaires Le Robert, 1993), p. 403) 
173United States' appellant's submission, para. 24;  United States' response to questioning at the oral 
hearing. WT/DS296/AB/R 
Page 40  
 
111. As for the term "directs", we note that some  of the definitions—such as "give authoritative 
instructions to" and "order (a person)  to do "—suggest that the person or entity that "directs" has 
authority over the person or entity that is directed.  In contrast, some of the other definitions—such as 
"inform or guide"—do not necessarily convey this sense of authority.  In our view, that the private body under paragraph (iv) is directed " to carry out " a function underscores the notion of authority that 
is included in some of the definitions of the term "d irect".  This understanding of the term "directs" is 
reinforced by the Spanish and French versions of the  SCM Agreement , which use the verbs 
"ordenar"
174 and "ordonner"175, respectively.176  Both of these verbs unambiguously convey a sense of 
authority exercised over someone.  In the context of paragraph (iv), this authority is exercised by a 
government over a private body.  A "command" (the word used by the Panel) is certainly one way in 
which a government can exercise authority ove r a private body in the sense foreseen by 
Article 1.1(a)(1)(iv), but governments are likely to have other means at their disposal to exercise 
authority over a private body.  Some of these means may be more subtle than a "command" or may not involve the same degree of compulsion.  Thus, an interpretation of the term "directs" that is limited to acts of "command" is also too narrow.   
112. Paragraph (iv) of Article 1.1(a)(1) further states that the private body must have been 
entrusted or directed to carry out  one of the type of functions in paragraphs  (i) through  (iii).  As the 
panel in  US – Export Restraints  explained, this means that "the scope of the actions ... covered by 
subparagraph (iv) must be the same as those covered by subparagraphs (i)-(iii)".
177  A situation where 
the government entrusts or directs a private body to carry out a function that is outside the scope of 
paragraphs (i) through (iii) would consequently fall outside the scope  of paragraph (iv).  Thus, we 
agree with the US – Export Restraints  panel that "the difference betw een subparagraphs (i)-(iii) on the 
one hand, and subparagraph (iv) on the othe r, has to do with the identity of the  actor , and not with the 
nature of the action ."178  In addition, we must not lose sight of the fact that Article 1.1(a)(1)(iv) 
                                                      
174The Diccionario de la lengua española   defines "ordenar" as: 
Mandar que se haga algo. … Encaminar y dirigir a un fin. 
(Diccionario de la lengua española , supra , footnote 172, p. 1105) 
175Le Nouveau Petit Robert  defines "ordonner " as: 
Prescrire par un ordre. …  adjurer, co mmander, dicter, enjo indre, prescrire. 
(Le Nouveau Petit Robert , supra , footnote 172, p. 1795) 
176In this respect, we recall Article 33(3) of the  Vienna Convention , which provides that "[t]he terms of 
the treaty are presumed to have the sa me meaning in each authentic text." 
177Panel Report, US – Export Restraints , para. 8.53. 
178Ibid. (original emphasis)  WT/DS296/AB/R 
 Page 41 
 
 
requires the participation of the government, albeit i ndirectly.  We therefore agree with Korea that 
there must be a demonstrable link between the government and the conduct of the private body.179 
113. We recall, moreover, that Article 1.1(a)(1) of the  SCM Agreement  is concerned with  
the existence of a financial contribution.  Paragrap h (iv), in particular, is intended to ensure that 
governments do not evade their obligations under the  SCM Agreement  by using private bodies to 
take actions that would otherwise fall within Artic le 1.1(a)(1), were they to be taken by the 
government itself.  In other words, Article 1. 1(a)(1)(iv) is, in essence, an anti-circumvention 
provision.180  A finding of entrustment or direction, therefore, requires that the government give 
responsibility to a private body—or exercise its author ity over a private body—in order to effectuate a 
financial contribution.   
114. It follows, therefore, that not all governme nt acts necessarily amount to entrustment or 
direction.  We note that both the United States a nd Korea agree that "mere policy pronouncements" by 
a government would not, by themselves, constitute entrustment or direction for purposes of Article 1.1(a)(1)(iv).
181  Furthermore, entrustment and dir ection—through the giving of responsibility 
to or exercise of authority over a private body— imply a more active role than mere acts of 
encouragement.182  Additionally, we agree with the panel in  US – Export Restraints  that entrustment 
and direction do not cover "the s ituation in which the government in tervenes in the market in some 
way, which may or may not have a particular result simply based on the given factual circumstances and the exercise of free choice by the actors in that market".
183  Thus, government "entrustment" or 
                                                      
179Korea's appellee's submission, para. 22.  We note that  the conduct of private bodies is presumptively 
not attributable to the State.  The Commentaries to th e ILC Draft Articles explain that "[s]ince corporate  
entities, although owned by and in that sense subject to th e control of the State, are considered to be separate, 
prima facie their conduct in carrying out their activities is not attributable to the State unless they are exercising 
elements of governmental authority". (C ommentaries to the ILC Draft Articles, supra , footnote 104, Article 8, 
Commentary (6), pp. 107-108);  see also Korea's appellee's submission, paras. 58-59) 
180Appellate Body Report, US – Softwood Lumber IV , para. 52. 
181Korea's and the United States' responses to questio ning at the oral hearing.  The United States 
asserts, however, that a policy pronouncement may be relevant evidence for demonstrating entrustment or 
direction. 
 182In contrast to Article 1.1(a)(1)(iv) of the SCM Agreement , Article 11.3 of the  Agreement on 
Safeguards  uses the term "encourage".  It  reads: 
Members shall not encourage or support the adoption or maintenance by 
public and private enterprises of non-governmental measures equivalent to 
those referred to in paragraph 1. 
Paragraph 1 refers to voluntary export restraints, orderly marketing arrangements, or any other similar measures 
on the export or import side. 
183Panel Report, US – Export Restraints , para. 8.31. WT/DS296/AB/R 
Page 42  
 
"direction" cannot be inadvertent or a me re by-product of governmental regulation.
184  This is 
consistent with the Appellate Body's statement in  US – Softwood Lumber IV  that "not all government 
measures capable of conferring benefits would necess arily fall within Article 1.1(a)";  otherwise 
paragraphs (i) through (iv) of Article 1.1(a) would not be necessary "because all government 
measures conferring benefits, per se , would be subsidies."185     
115. Furthermore, such an interpretation is cons istent with the object and purpose of the  SCM 
Agreement , which reflects a delicate ba lance between the Members th at sought to impose more 
disciplines on the use of subsidies and those that sought to impose more disciplines on the application of countervailing measures.  Indeed, the Appellate Body has said that the object and purpose of the 
SCM Agreement  is "to strengthen and improve GATT discip lines relating to the use of both subsidies 
and countervailing measures, while, recognizing at the same time, the right of Members to impose 
such measures under certain conditions".
186  This balance must be borne in mind in interpreting 
paragraph (iv), which allows Members to apply countervailing measures to products in situations 
where a government uses a private body as a proxy to provide a financial contribution (provided, of course, that the other requirements of a counter vailable subsidy are proved as well).  At the same 
time, the interpretation of paragraph (iv) cannot be so broad so as to allow Members to apply 
countervailing measures to products whenever a government is merely exercising its general 
regulatory powers. 
                                                     
 
184In interpreting the phrase "payments … financed by virtue of governmental action" in Article 9.1(c) 
of the  Agreement on Agriculture , the Appellate Body has stated that "[ g]overnments are constantly engaged in 
regulation of different kinds in pursuit of a variety of objectives." It further explained that where regulation 
merely enables payments to occur, "the link between th e governmental action and the financing of the payments 
is too tenuous for the 'payments' to be regarded as ' financed  by virtue of governmental action' … within the 
meaning of Article 9.1(c).  Rather, there must be a tighter nexus between the mechanism or process by which 
the payments are financed , even if by a third person, and governmental action." (Appellate Body Report, 
Canada – Dairy (Article 21.5 – New Zealand and US ), para. 115 (original emphasis);  see also Appellate Body 
Report, Canada – Dairy  (Article 21.5 – New Zealand and US II) , para. 131) 
185Appellate Body Report, US – Softwood Lumber IV , footnote 35 to para. 52.  The Appellate Body 
referred to the following discussion of the panel in  US – Export Restraints : 
[the] negotiating history [of Article 1 of the SCM Agreement ] demonstrates 
... that the requirement of a financ ial contribution from the outset was 
intended by its proponents precisely to ensure that not all government 
measures that conferred benefits could be deemed to be subsidies.  This 
point was extensively discussed during the negotiations, with many participants consistently maintaining that only government actions 
constituting financial contributions should be subject to the multilateral 
rules on subsidies and countervailing measures.  
(Panel Report, US – Export Restraints , para. 8.65 (quoted in Appellate Body Report, US – Softwood Lumber IV , 
footnote 35 to para. 52)) 
186Appellate Body Report, US – Softwood Lumber IV , para. 64. (footnote omitted)  WT/DS296/AB/R 
 Page 43 
 
 
116. In sum, we are of the view that, pursuant to  paragraph (iv), "entrustment" occurs where a 
government gives responsibility to a private body, and "direction" refers to situations where the 
government exercises its authority over a private body.  In both instances, the government uses a 
private body as proxy to effectuate one of the typ es of financial contributi ons listed in paragraphs 
(i) through (iii).  It may be difficult to identify pr ecisely, in the abstract, the types of government 
actions that constitute entrustment or direction and those that do not.  The particular label used to 
describe the governmental action is not necessarily dispositive.  Indeed, as Korea acknowledges, in 
some circumstances, "guidance" by a government can constitute direction.187  In most cases, one 
would expect entrustment or direction of a private b ody to involve some form of threat or inducement, 
which could, in turn, serve as evidence of entrustmen t or direction.  The dete rmination of entrustment 
or direction will hinge on the particular facts of the case.188 
2. The United States' Appeal  
117. The United States alleges that, by equating "ent rustment" and "direction"  with "delegation" 
and "command", the Panel failed to interpret tho se treaty terms in accordance with the customary 
rules of interpretation codified in the  Vienna Convention on the Law of Treaties .189  In this respect, 
the United States submits that, had the Panel properl y interpreted "entrusts" and "directs", it would 
have recognized that these terms also encompass: 
... a government investing trust in a private body to carry out a task, a 
government giving responsibility to a private body to carry out a 
task, a government informing or guiding a private body as to how to carry out a task, [and] a government regulating the course of a private body’s conduct[.]
190 
The United States refers to several findings191 allegedly demonstrating th at the Panel applied an 
incorrect interpretation of Article 1.1(a)(1)(iv), and that "the Panel's errone ous interpretation of ... 
Article 1.1(a)(1)(iv) affected its entire analysis  of the [US]DOC's findings concerning the Hynix 
bailout."192   
                                                      
187Korea's response to questioning at the oral hearing. 
188The Commentaries to the ILC Draft Articles similarly state that "it is a matter for appreciation in  
each case whether particular conduct was or was not carried out under the contro l of a State, to such an extent 
that conduct controlled should be attributed to  it". (Commentaries to the ILC Draft Articles, supra , footnote 104, 
Article 8, Commentary (5), p. 107) (footnote omitted) 
189Supra , footnote 110. 
190United States' appellant's submission, para. 24. 
191Ibid., paras. 40-46. 
192Ibid., para. 46. (footnote omitted) WT/DS296/AB/R 
Page 44  
 
118. As Korea explains
 193, the issue raised on appeal by the United States—that is, the range of 
government actions that constitute entrustment or direction—was not the main interpretative issue 
before the Panel.  Instead, the Panel was consider ing whether entrustment or direction needs to be 
demonstrated on the basis of explicit (as opposed to im plicit) government acts only.  On this issue, the 
Panel essentially agreed with the United States and he ld that Article 1.1(a)(1)(iv) does not "require[] 
an investigating authority to demonstrate an e xplicit government action addressed to a particular 
entity, entrusting or directing a particular task or duty".194  In the course of its analysis, the Panel 
"agree[d] with the  US – Export Restraints  panel that '[i]t follows from the ordinary meanings of the 
two words "entrust" and "direct" that the action of the government must contain a notion of delegation 
(in the case of entrustment) or command (in the case of direction).'"195  We explained earlier that the 
terms "entrusts" and "directs" in Article 1.1(a)(1)(iv) are not limited to "delegation" and "command", 
respectively.  In our view, there may be other m eans by which governments can give responsibility to 
or exercise authority over a private body that may not fall within the terms "delegation" and 
"command", if these terms are strictly construed.  We note that the Panel initially used the expression 
"a notion of" delegation or command.196  This suggests that the Panel was using the terms 
"delegation" and "command" with a certain degree of  flexibility.  However, the Panel's repeated use 
of the terms "delegation" and "command", without qua lification, in its subsequent analysis, could give 
the impression that the terms "entrusts" and "dir ects" correspond strictly to "delegation" and 
"command".  We do not consider that these word s, on their own, convey what we understand by 
"entrusts" or "directs", as used in Article 1.1(a )(1)(iv), for the terms "delegation" and "command", as 
we have explained above, are too narrow.  Therefore, we modify  the Panel's interpretation of 
Article 1.1(a)(1)(iv) of the  SCM Agreement , set out in paragraph 7.31 of the Panel Report,   to the 
extent that it may be understood as limiting the terms "entrusts" and "directs" to acts of "delegation" 
and "command". 
119. The United States' request, that the Appellate  Body review the Panel's application of 
Article 1.1(a)(1)(iv) to the particular facts of this case197, is examined in the next Section of this 
Report.198   
                                                      
193Korea's appellee's submission, paras. 24-25. 
194Panel Report, para. 7.42. 
195Ibid., para. 7.31 (quoting Panel Report, US – Export Restraints , para. 8.29). 
196Ibid.  As the United States points out, however, the Panel did not consistently use the phrase "the 
notion of" in the paragraphs that followed. (United States' appellant's submission, para. 21 (referring to Panel Report, paras. 7.33-7.35)) 
197United States' appellant's submission, para. 46. 
198See infra , Section VI.  WT/DS296/AB/R 
 Page 45 
 
 
3. Korea's Cross-appeal  
120. We turn to Korea's cross-appeal, which challe nges the Panel's finding that certain evidence 
referred to by the USDOC was "sufficient for an objective and impartial investigating authority to 
properly find government entrustment or direction in respect of KFB".199  This finding was made in 
the context of the Panel's examination of the US DOC's reference to alleged threats by the GOK 
against KFB and another two Korean banks.200   
121. Korea pointed out to the Panel that "ultimately KF B declined to participate in the Fast Track 
[Debenture] Programme, and in fact did not particip ate in the Fast Track [Debenture] Programme, and 
exercised its appraisal rights in the October restructuring."201  "KFB's actions", according to Korea, 
"are hardly consistent with the [United St ates'] theory of coercion from the [GOK]."202  The Panel did 
not find Korea's argument relevant because "[its] analysis at [that] stage [was] concerned first and foremost with the acts of the GOK, rather th an private entities' reaction to those acts."
203   
122. On appeal, Korea asserts that the Panel's conc lusion regarding entrustment or direction of 
KFB rests on an incorrect interpretation of Article 1.1(a)(1)(iv) of the  SCM Agreement .  Korea 
explains that a finding of entrustment or direction under Article 1.1(a)(1)(iv) requires that the private 
body carry out  one of the functions listed in that provision.204  "Mere direction without action", Korea 
submits, is not sufficient.205  Korea adds that, in this case, KF B did not carry out the action it was 
allegedly entrusted or directed to carry out and,  therefore, the Panel's finding of entrustment or 
direction in respect of KFB is incorrect.206 
123. The United States responds to Korea's appeal by explaining that the Panel's finding in respect 
of KFB does not relate specifically to KFB's par ticipation in the Fast Track Debenture Programme.207  
It states that "[t]he fact that KFB did not particip ate in the Fast Track [Debenture] Program was never 
in dispute."208  The United States further explains that "the GOK's threats and coercive behavior 
                                                      
199Panel Report, para. 7.117. (footnote omitted)   
200Ibid., para. 7.107. 
201Ibid., para. 7.108. 
202Ibid. 
203Ibid., footnote 136 to para. 7.117. 
204Korea's other appellant's submission, para. 18. 
205Ibid., para. 29. 
206Korea does not challenge "the Panel's factual dete rmination that there was [government] coercion 
with respect to KFB". ( Ibid., para. 4) 
207United States' appellee's submission, para. 5. 
208Ibid. (footnote omitted) WT/DS296/AB/R 
Page 46  
 
occurred  because of  'KFB's failure to participate in th e Fast Track [Debenture] Programme.'"
209  The 
Panel record confirms that KFB participated in the financial transactions that preceded and followed 
the Fast Track Debenture Programme.210  We do not read the Panel's finding that the evidence was 
sufficient to demonstrate GOK entrustment or direc tion of KFB as necessarily related exclusively to 
the Fast Track Debenture Programme.  Thus, even assuming  arguendo  Korea is correct that a finding 
of entrustment or direction requires that the function so entrusted or directed be carried out, we are not 
persuaded that the basis for the Panel's findi ng is as narrow as that alleged by Korea. 
124. In any event, a finding of entrustment or direc tion, by itself, does not establish the existence 
of a financial contribution.  Where a government entrusts or directs a private body—by giving responsibility to or exercising its authority over the private body—it is likely that the function that is 
allegedly entrusted or directed w ill indeed be carried out.  The private body's refusal to carry out the 
function may be evidence that the government did not give it responsibility for such function, or that 
the government did not exercise the requisite authority over it such that the private body did not heed the government.
211  It does not, however, on its own, mean that the private body was not entrusted or 
directed.  Depending on the circumstances, a private body may decide not to carry out a function with 
which it was so entrusted or directed, despite th e possible negative consequences that may follow. 
125. Still, this does not mean that it is possible to make a finding of a fina ncial contribution under 
Article 1.1(a)(1)(iv) where a private body does not carry out the function allegedly entrusted or directed to it.  Failure by the private body to ca rry out one of the functions of the types listed in 
paragraphs (i) through (iii) means that nothing of  economic value has been transferred from the 
grantor to the recipient.
212  Simply put, if the private body has not carried out the function allegedly 
entrusted or directed to it, nothing will have ch anged hands.  Therefore, there is no financial 
contribution and, consequently, there would be no right to apply countervailing measures.  
126. For these reasons, we  uphold  the Panel's finding, in paragraph 7.117 of the Panel Report, 
that the evidence was "sufficient fo r an objective and impartial investigating authority to properly find 
government entrustment or direction in respect of KFB". 
                                                      
209United States' appellee's submission, para. 5 (quoting Panel Report, para. 7.117). (original emphasis;  
footnote omitted) 
210See, for example, Panel Report, para. 7.114;  and Figure US-4 submitted by the United States to the 
Panel. 
211We explained earlier that in most cases government  entrustment or direction would include a threat 
or inducement. (See  supra , para. 116) 
212See Appellate Body Report, Canada – Dairy , para. 87, where the Appellate Body explained that "a 
'subsidy' involves a transfer of ec onomic resources from the grantor to the recipient for less than full 
consideration."  WT/DS296/AB/R 
 Page 47 
 
 
VI. The Panel's Review of the USDOC's Evidence 
A. Introduction 
127. We consider next the Panel's examination of  the evidence underlying the USDOC's finding of 
entrustment or direction.  After providing a genera l interpretation of Article 1.1(a)(1)(iv) of the SCM 
Agreement , the Panel turned to the evidence relied upon by the USDOC in order to determine whether 
it was sufficient to support the USDOC's finding of en trustment or direction.  Based on its review of 
the evidence, the Panel concluded that the USDOC "could not properly have found that there was sufficient evidence to support a generalized finding of  entrustment or direction with respect to private 
bodies spanning multiple creditors and multiple tran sactions over the period of investigation."
213  
Accordingly, the Panel concluded that the USDOC' s subsidy determination is inconsistent with 
Article 1.1(a)(1)(iv) of the  SCM Agreement .214 
128. The United States alleges multiple errors in the Pa nel's application of Article 1.1(a)(1)(iv) to 
the facts of this case, in particular, with respect to  the Panel's review of the USDOC's evidence.  First, 
the United States claims that the Panel erre d in applying an "evidentiary standard"215 that required 
evidence of entrustment or directi on to be "probative and compelling".216  Secondly, the United States 
argues that the Panel erred in its approach to  the examination of the USDOC's evidence under 
Article 1.1(a)(1)(iv), because it failed to consider the USDOC's evidence in its totality, disregarded 
the inferences reasonably drawn from circumstantial  evidence, and, as a consequence, effectively 
shifted the burden of proof from Korea to the United States.217  Thirdly, the United States argues that 
the Panel erroneously refused to admit certain evidence submitted by the United States during the 
panel proceedings on the ground that argum ents based on such evidence constituted " ex post  
rationalizations".218   
129. In addition to these allegations of error in the Panel's application of Article 1.1(a)(1)(iv), the 
United States contends that the Panel failed to co mply with its obligations under Article 11 of the 
DSU by relying on evidence that was not on the record of the USDOC during the investigation.219  
Finally, the United States claims that the aforementi oned errors, taken together, give rise to a separate 
                                                      
213Panel Report, para. 7.177. 
214Ibid., para. 7.178. 
215United States' appellant's submission, para. 47. 
216Ibid. (referring to Panel Report, paras. 7.35 and 7.46).  
217Ibid., paras. 58-87. 
218Ibid., para. 94 (referring to, inter alia , Panel Report, paras. 7.88, 7.102, and 7.141). 
219Ibid., para. 101. WT/DS296/AB/R 
Page 48  
 
and additional ground of er ror under Article 11 of the DSU because of the Panel's failure to apply the 
proper standard of review to its examination of  the USDOC's finding of entrustment or direction.
220 
130. Before beginning our analysis, we briefly describe the USDOC's finding of entrustment 
or direction, as contained in its subsidy determination, to facilitate the subsequent discussion of the 
Panel's review of the USDOC's evidence.  We then address each of the above allegations of error by the United States.  Finally, we consider the impli cations of our analysis for the Panel's conclusion 
regarding the USDOC's finding of entrustment or direction. 
B. The USDOC's Finding of Entrustment or Direction 
131. In its subsidy determination, the USDOC found that numerous financial institutions, both 
public as well as private bodies, participated in fina ncial transactions related to Hynix.  For the 
purpose of this determination, the USDOC distinguished between public bodies
221, government-
owned and -controlled private creditors, and privat e creditors not owned or controlled by the GOK.222  
The Panel maintained this distinction in its analys is, adopting the categorization of Group A, B, and C 
creditors put forward by the United States.223  Accordingly, Hynix's public body  creditors were 
referred to as Group A creditors, and included the Korean Development Bank ("KDB"), the Industrial 
Bank of Korea, and other "specialized" banks.224  The GOK-owned or -cont rolled private creditors, 
which were found by the USDOC not to be public bodies225, were referred to as Group B creditors;  
these included the Korea Exchange Bank and KFB.226  Private entities in which the GOK had much 
smaller, or even non-existent shareholdi ngs, were referred to as Group C creditors227;  among these 
creditors were KorAm Bank, Hana Bank, and Kookmin Bank.228  We use the same categories herein. 
                                                      
220United States' appellant's submission, para. 119. 
221In its determination, the USDOC referred to public bodies as "government authorities". (United 
States' response to Question 3 posed by the Panel at the First Panel Meeting, Panel Re port, p. E-37, para. 10 and 
footnote 9 thereto)  See also Issues and Decision Memorandum,  supra , footnote 6, pp. 15-17. 
222See Issues and Decision Memorandum,  supra , footnote 6, p. 49.  
223Panel Report, para. 7.8 (referring to Figure US-4 submitted by the United States to the Panel). 
224United States' response to Question 3 posed by the Panel at the First Panel Meeting, Panel Report, 
p. E-37, para. 10 and footnote 9 thereto. 
225Some of Hynix's creditors were treated by the USDO C as Group B creditors despite the fact that the 
GOK held a 100 per cent ownership interest.  The Panel noted that, in its view, the USDOC might have been entitled to treat these 100 per cent-owned firms as "public bodies", but having refused to so classify them, the 
USDOC was required to establish entrustment or direct ion with respect to such creditors. (Panel Report, 
footnote 29 to para. 7.8 and footnote 80 to para. 7.62) 
226Panel Report, para. 7.8;  United States' responses to Questions 4-6 posed by the Panel at the First 
Panel Meeting, Panel Report, p E-38, para. 17. 
227Panel Report, para. 7.8;  United States' responses to Questions 4-6 posed by the Panel at the First 
Panel Meeting, Panel Report, p E-38, para. 19. 
228Figure US-4 submitted by the United States to the Panel.   WT/DS296/AB/R 
 Page 49 
 
 
132. In its analysis of entrustment and directi on, the USDOC examined, in particular, four 
financial transactions.  The first was an 800 billion won syndicated bank loan (the "December 
2000 syndicated loan") extended to Hynix at the end of 2000 in order to finance short-term debt that 
was coming due in early 2001.229  The second financial transa ction was the KDB Fast Track 
Debenture Programme, which was also designed to address the liquidity crisis caused by maturing 
bonds in the same time period.  The USDOC's Issues and Decision Memo randum describes this 
programme as follows:    
Under the Fast Track program, which was administered by the KDB, 
companies selected to participate in this program first had to redeem 
20 percent of their bonds that were maturing in 2001;  the remaining 
80 percent of the maturing bonds were purchased by the KDB, and were subsequently replaced with new bonds issued by the participating companies.  Of the bonds purchased by the KDB that were replaced by new issues, 10 percent of the new bonds issued were kept by the KDB, 20 percent of each new issue was purchased 
by the company's creditors (a bla nket waiver was issued by the GOK 
in order to allow the creditors to  exceed their loan exposure limits), 
and the remaining 70 percent of  each new issue was bundled with 
other bonds and sold as [Collateralized Bond Obligations] or [Collateralized Loan Obligations] (which were partially guaranteed 
by the [Korea Credit Guarantee Fund]).
230 
133. The third financial transaction was a restruct uring programme agreed between Hynix and its 
creditors in May 2001 (the "May 2001 restructuring").  A group of 17 major creditors formed a 
creditors' council (the "May 2001 Creditors' Counc il"), based on the debt restructuring process 
established in June 1998 by the Corporate Restru cturing Agreement (the "CRA"), which was "an 
informal agreement that comprised  210 [Korean] financial institutions".231  The May 2001 Creditors' 
Council agreed to an overall restructuring plan fo r Hynix, involving the rescheduling and refinancing 
of Hynix's debt through maturity extensions and shor t-term debt instruments, as well as the issuance 
of convertible bonds and Global Depository Shares.232   
134. The fourth financial transaction identified by the USDOC was another restructuring 
programme, developed in view of Hynix's "conti nuing financial troubles" and the downturn in the 
                                                      
229Issues and Decision Memorandum,  supra , footnote 6, p. 19. 
230Ibid., p. 23. 
231Ibid., p. 19.   
232Issues and Decision Memorandum, supra , footnote 6, p. 20.  We understand that the references in 
the Issues and Decision Memorandum to Global Depositor y Shares relate to company shares offered for sale 
globally, that is, in multiple markets around the world, by virtue of receipts that are issued by banks in several 
countries and that evidence the sharehol der's ownership interest in that company. (See P. Moles and N.  Terry, 
The Handbook of International Financial Terms  (Oxford University Press, 1999), p. 256) WT/DS296/AB/R 
Page 50  
 
DRAMS
233 market, and adopted by Hynix and its cred itors in October 2001 (the "October 2001 
restructuring").234  This restructuring plan was formulated under the CRPA, a codification under 
Korean law of the corporate workout methods u tilized informally under the CRA.  The creditors' 
council governing this restructuring plan (the "October 2001 Creditors' Council") provided Hynix's 
creditors with three options:  (i) extend new loans to Hynix;  (ii) convert a certain amount of Hynix's debt into equity, with a portion of the debt being forgiven;  or (iii) exercise appraisal rights
235, with a 
portion of the debt being forgiven.  As a result of this restructuring, almost 3 trillion won of Hynix's 
debt was converted to equity, 1.45 trillion won in debt was forgiven, and Hynix was issued new loans 
as well, having other loans refinanced or their terms extended.236 
135. The USDOC drew three factual inferences from th e evidence on the record before it:  (i) the 
GOK maintained a policy of supporting Hynix's fi nancial restructuring and thereby avoiding the 
firm's collapse237;  (ii) the GOK exercised the control or in fluence over Hynix's creditors necessary to 
implement this policy238;  and (iii) the GOK at times used th is control/influence to "pressure" or 
coerce Hynix's creditors to continue supporting the financial restructuring of the firm.239  On the basis 
of these inferences, the USDOC arrived at a conclusion  of entrustment or dir ection covering virtually 
all of Hynix's creditors and their participation in any or all of the four financial transactions examined:   
[T]he GOK has entrusted or directed financial institutions to carry 
out the GOK subsidy program to bail out Hynix.  In so doing, the 
GOK both entrusted and directed vari ous GOK financial institutions.  
As outlined above, the GOK gave authoritative instructions and directives to financial institutions , and made it well known that it 
fully backed the bailout program.  Moreover, once the Hynix Creditors' Council was formed and had a majority of GOK-owned or controlled banks, the GOK entrusted those banks with continuing the 
                                                     
 
233Dynamic random access memory semiconductors  (DRAMS) and memory models containing 
DRAMS are herein collectively referred to as "DRAMS". 
234Issues and Decision Memorandum,  supra , footnote 6, p. 20. 
235The exercise of appraisal rights involved a creditor seeking not to continue financing Hynix, which 
would have its Hynix debt purchased by the other Hynix creditors at a price determined either through 
consultation or with the assist ance of an accounting firm. (See infra , paras. 169-170) 
236Issues and Decision Memorandum, supra , footnote 6, p. 20.   
237Ibid., pp. 49-50.  See also United States' first written submission to the Panel, para. 37;  and United 
States' second written submission to the Panel, para. 10. 
238Issues and Decision Memorandum, supra , footnote 6, pp. 50-59.  See also United States' first written 
submission to the Panel, para. 37;  and United States ' second written submission to the Panel, para. 10. 
239Issues and Decision Memorandum, supra , footnote 6, pp. 57 and 60-61.   See also United States' first 
written submission to the Panel, para. 37;  and United St ates' second written submission to the Panel, para. 10.  
In its Issues and Decision Memorandum, the USDOC also categorized the second and third inferences under one 
broader finding that "evidence on the record establishes a pattern of practices on the part of the GOK to act upon 
that policy to entrust or direct lending decisions as  part of the restructurin g." (Issues and Decisions 
Memorandum, supra , footnote 6, p. 49)    WT/DS296/AB/R 
 Page 51 
 
 
bailout process to its conclusion.  Accordingly, we find that the GOK's entrustment or direction to these institutions allowed the GOK to execute its bailout policy program, thus providing a financial contribution to Hynix ... .
240 
C. "Probative and Compelling"  Evidentiary Standard 
136. We begin our analysis with the United States' ch allenge to the Panel's alleged articulation and 
application of an erroneous  "evidentiary standard".241  Having agreed with the United States in finding 
that entrustment or direction need not be dete rmined on the basis of explicit acts, the Panel 
nevertheless cautioned: 
[T]he evidence of entrustment or direction must in all cases be 
probative and compelling .  Thus, whatever the nature or form of the 
affirmative acts of delegation or command at issue, the evidence must demonstrate that each privat e entity allegedly providing, or 
participating in, a financial contri bution was entrusted or directed by 
the government to do so.
242 (emphasis added;  footnote omitted)  
Subsequently, at the outset of its examination of the USDOC's evidence of entrustment or direction, 
the Panel reiterated its unde rstanding that "such evidence [be] probative and compelling, in the sense 
that it demonstrates that each of the private credito rs participating in the financial contributions was 
entrusted or directed to do so."243   
137. The United States challenges the Panel's requi rement that the evidence underlying the 
USDOC's determination of "entrustment" or "direc tion" must be "probative and compelling".  The 
United States agrees that evidence, by its very nature, must be "probative"244, but argues that the 
standard of "compelling" evidence is not contained in either the  SCM Agreement  or the DSU.  The 
term "compelling" is understood by the United States to refer to evidence of such weight as to require 
the decision-maker to arrive at one given conclusion.245   According to the Un ited States, by applying 
such a standard, the Panel effectively required the USDOC to have "overwhelm ing" or "irrefutable" 
                                                      
240Issues and Decision Memorandum,  supra , footnote 6, pp. 61-62.  Based on its findings in previous 
investigations, the USDOC determined that "the lending and credit practices of Citibank are not directed by the 
GOK." ( Ibid., p. 17) 
241United States' appellant's submission, para. 47. 
242Panel Report, para. 7.35.   
243Ibid., para. 7.46.  
244United States' appellant's submission, footnote 56 to para. 48. 
245Ibid., paras. 48-49. WT/DS296/AB/R 
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evidence that "force[d]" or "oblige[d] " it to find entrustment or direction.
246  Korea submits that the 
term "compelling", in the context in which it was us ed by the Panel, is more properly understood in a 
sense similar to "probative", merely to describe ev idence tending to persuade the decision-maker of a 
certain conclusion.247  Korea therefore contests the United States' characterization of the Panel's 
"probative and compelling" statement as a new eviden tiary standard, arguing instead that it merely 
describes the "quality of evidence" needed  to establish entrustment or direction.248   
138. We agree with the participants249 that neither the SCM Agreement  nor the DSU explicitly 
articulates a standard for the evidence required to su bstantiate a finding of entrustment or direction 
under Article 1.1(a)(1)(iv).250  Article 12 of the SCM Agreement ¸ entitled "Evidence", specifies in 
paragraph 2 that a decision of the investigating aut hority as to the existence of a subsidy "can only be 
based on" evidence on the record of that agency;  this applies equa lly to evidence used to support a 
finding of a financial contribu tion under Article 1.1(a)(1)(iv).251  Beyond this requirement, however, 
we see no basis in the SCM Agreement  or in the DSU to impose upon an investigating authority a 
particular standard for the evidence supporting its finding of entrustment or direction. 
139. The Panel explained that, in using the term s "probative" and "compelling", it was expressing 
the view that the total evidence relied upon by an ag ency must "demonstrate" entrustment or direction 
with respect to each private body in a given financial contribution.252  In so stating, the Panel, in our 
view, did not require that the evidence relied upon by the USDOC be "irrefutable"253, nor did it 
require the evidence to be of such quality or quantity so as to "force"254 the USDOC to arrive at a 
finding of entrustment or direction.  Indeed, after reviewing the USDOC's evidence, the Panel 
concluded that the USDOC "could not properly ha ve found that there was sufficient evidence to 
                                                      
246United States' appellant's submission, para. 49 (quoting The New Shorter Oxford English Dictionary , 
supra , footnote 36, Vol. 1, p. 458;  and Oxford Dictionary of English , C. Soanes and A. Stevenson (eds) (Oxford 
University Press, 2004) 2nd edn, p. 352). 
247Korea's appellee's submission, paras. 96-97. 
248Ibid., para. 82. 
249Korea's and the United States' responses to questioning at the oral hearing. 
250In contrast, Article 15.1 of the SCM Agreement  provides that a "determina tion of injury … shall be 
based on positive evidence".   
251Other provisions of the SCM Agreement  relevant to a finding of entrustment or direction similarly 
suggest the investigating authority is to "base" its findi ng on evidence, but they do not clarify further the nature 
or quantum of evidence required to support such a finding.  (See Articles 12.5, 12.8, 22.4, and 22.5 of the SCM 
Agreement ) 
252Panel Report, paras. 7.35 and 7.46.   
253United States' appellant's submission, para. 49 (referring to Oxford Dictionary of English , supra , 
footnote 246, p. 352). 
254Ibid. (quoting The New Shorter Oxford English Dictionary , supra , footnote 36, p. 458).  WT/DS296/AB/R 
 Page 53 
 
 
support  [its] finding of entrustment or direction."255  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 .  Rather, the Panel properly examined wh ether the USDOC's evidence could support its 
conclusion.  Thus, we do not read the Panel to have imposed an "evidentiary standard"256 beyond what 
we have found in the SCM Agreement .257 
140. Therefore, we find that the Panel did not err  in finding, in paragraphs 7.35 and 7.46 of the 
Panel Report, that the evidence underlying the USDOC's  finding of entrustment or direction must be 
"probative and compelling", to the extent the Pane l understood these terms to require only that the 
evidence demonstrate entrustment or direction. 
D. The Panel's Approach to the Evidence  
141. We turn now to the United States' allegation that  the Panel employed an erroneous approach  
under Article 1.1(a)(1)(iv) to its review of the US DOC's evidence.  In particular, the United States 
alleges, first, that the Panel's approach fails to  appreciate that the USDOC's conclusion rested on the 
totality  of the evidence.258  Secondly, according to the United States, the Panel's approach 
impermissibly restricts the ability of the agency to draw legitimate inferences from circumstantial 
evidence, because it effectively requires examini ng whether each piece of evidence constitutes direct 
evidence of entrustment or direction.259  Thirdly, the United States submits that the Panel's improper 
approach to examining the evidence effectively sh ifted the burden of proof from Korea to the United 
States, because the Panel appeared not to have cons idered seriously any evidence that did not amount 
to a "smoking gun".260 
142. At the outset of its examination, the Pane l acknowledged the factual underpinnings of the 
USDOC's finding—that is, the GOK policy to save Hynix, the ability of the GOK to control or 
influence Hynix's creditors, and the pressure put on those creditors by the GOK—and structured its 
                                                      
255Panel Report, para. 7.177. (emphasis added) 
256United States' appellant's submission, para. 47. 
257We note that third participants China and the Separate Customs Territory of Taiwan, Penghu, 
Kinmen, and Matsu similarly understand the Panel not to have imposed additional obligations on Members merely by requiring evidence to be "probative and compelli ng". (China's third participant's submission, para. 25;  
Third participant's submission of the Separate Custom s Territory of Taiwan, Penghu, Kinmen, and Matsu, 
para. 7) 
258United States' appellant's submission, paras. 58-73. 
259Ibid., paras. 74-85. 
260Ibid., para. 87. WT/DS296/AB/R 
Page 54  
 
analysis along the lines of these factual premises.
261  The Panel also observed that the USDOC had 
based its finding on the totality  of the evidence, "without attaching particular importance to one or 
several evidentiary factors".262  The Panel determined that it woul d follow the "same approach" to the 
evidence.263  We understand that, in so doing, the Pane l implicitly accepted the reasonableness of this 
approach. 
143. In our view, the Panel was correct in decidi ng to follow the agency's approach to the 
examination of the evidence.  Despite its stated intention, however, the Panel followed a different 
approach, which we examine below. 
1. Examining Individual Pieces of Evidence  
144. Notwithstanding the USDOC's reliance on the totality  of the evidence, the Panel maintained 
that "[i]n order to" follow the same approach, it was required to assess the "probative value of each 
evidentiary factor separately".264  Accordingly, with respect to each of the factual underpinnings of the 
USDOC's finding of entrustment or direction265, the Panel examined individually  the pieces of 
evidence on which the USDOC relied to support the particular premise.   
145. We see no error, in principle, in a panel's review of individual pieces of evidence under 
Article 1.1(a)(1)(iv), even where the investig ating authority draws its conclusion from the totality  of 
the evidence.  Indeed, in our view, in many cases a pa nel will be able to examine the sufficiency of 
the evidence supporting an investigating authority's conclusion of entrustment or direction only by 
looking at each individual piece of evidence.     
                                                      
261See Panel Report, para. 7.45 and Section VII.C.1(b), sub-sections (i)-(iii).   
262Ibid., para. 7.45. 
263Ibid. 
264Ibid. 
265Supra , para. 135.  WT/DS296/AB/R 
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146. We find that the Panel erred, however, in the manner  in which it reviewed the individual 
pieces of evidence.  We note, first, that the Pane l often appeared to examine whether each piece of 
evidence, viewed in isolation , demonstrated entrustment or direction.  For example, the USDOC 
found relevant that the Financial Supervisory Co mmission (the "FSC") had increased the credit limits 
placed on banks providing loans to a single borrower so that additional funds could be provided to 
Hynix.266  The Panel disagreed: 
Even though the [United States] may be correct in arguing that 
certain creditors would not have b een able to participate in the 
syndicated loan without the loan limit waiver, we do not consider that the [US]DOC could properly have inferred from this that 
creditors were entrusted or directed  to participate in the syndicated 
loan. ... The [United States] also ar gues that entrustment or direction 
to the banks to assist Hynix would be meaningless if the banks were 
legally precluded from complying with the GOK's directives.  While this may be the case, this does not mean that there is government 
entrustment or direction every time that a loan limit waiver is 
provided .
267 (emphasis added) 
We do not read the USDOC to have inferred solely from the waiver of loan limits  that entrustment or 
direction had taken place.  Nor do we consider th at the USDOC's reliance on this evidence suggests 
that "there is government entrustment or direction every time that a loan limit waiver is provided", for 
this would follow only if the USDOC had based  its finding of entr ustment or direction exclusively  on 
the waivers of loan limits. 
147. Similarly, the USDOC also relied on documents  provided during verification meetings to find 
that an FSC vice-chairman268 had attended a meeting of the May 2001 Creditors' Council "to urge 
creditor banks to execute the r esolutions made by creditors".269  This evidence was relied on by the 
USDOC in support of its understanding that the G OK had applied pressure on Hynix's creditors to 
participate in the financial restructuring of the firm.  The Panel dismissed the relevance of this 
evidence: 
                                                      
266Issues and Decision Memorandum,  supra , footnote 6, p. 51. 
267Panel Report, para. 7.101. 
268The Panel observed that Korea disputed this f act, claiming instead that the meeting had been 
attended by an official of the Financial Supervisory Service, which was "not a governmental organization, but a 
special public corporation affiliated with FSC [and] fu nctioning as an executive arm of the FSC".  The Panel 
found that it did not need to resolve this disagreement because of its "finding regarding the DOC's treatment of 
this issue". (Panel Report, footnote 166 to 7.141)  Similarly, given the basis for our finding of error in the 
Panel's approach to reviewing individua l pieces of evidence, we do not need to resolve this factual disagreement 
of the participants. 
269Issues and Decision Memorandum, supra , footnote 6, p. 60 (quoting GOK Verification Report , p. 19 
(Exhibit US-12 submitted by the United States to the Panel)). WT/DS296/AB/R 
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[T]he fact that a regulatory authority attends a meeting of creditors at the request
 of the lead creditor in order to urge – and not instruct – 
creditor banks to execute resolutions made by creditors  would not 
allow an investigating authority to properly conclude that such attendance amounted to governmental entrustment or direction  of 
creditors to participate in the restructuring.
270 (original underlining;  
italics added) 
The USDOC did not advance the view that the atte ndance of the FSC official, in and of itself, 
"amounted to" entrustment or direction.  In arrivi ng at this conclusion, the Panel essentially faulted 
the USDOC for drawing a certain inference from a singl e piece of evidence, where,  in fact, the agency 
did no such thing. 
148. The USDOC had also pointed in its determina tion to internal documents from Kookmin Bank 
to support a link between the GOK policy to save Hynix and the actions of creditors in the bailout of 
the firm.271  One of those documents identified nine reasons for Kookmin Bank's participation in the 
December 2000 syndicated loan272, including one referring to a GOK policy relating to the role of 
financial institutions in the r estructuring of troubled firms.273  The Panel observed that the United 
States did not contest that the other eight stated reasons for Kookmin Bank's participation related to 
commercial considerations, and then addressed th e significance of the ninth reason as follows: 
[T]he above statement appears to re fer to an overarching government 
policy relating to financial institu tions participating in remedial 
restructuring, rather than affirm ative government acts of delegation 
or command made pursuant to GOK's stated policy to save Hynix.  ...  
A determination of government entrustment or direction requires 
more than finding that private bodies act with regard to generalized 
governmental policy requests .  
... [A]n objective and impartial i nvestigating authority could not 
properly have determined that conduc t with an ostensibly commercial 
rationale should be attributed to a government simply on the basis of  
a reference to a generalized governmental policy request.  As noted 
above, we do not consider that th e mere existence of a government 
policy is sufficient to establish  government entrustment or 
direction.274 (emphasis added;  footnote omitted) 
                                                      
270Panel Report, para. 7.141. 
271Issues and Decision Memorandum, supra , footnote 6, p. 59. 
272Supra , para. 132. 
273Panel Report, para. 7.167.  The reason relating to  the GOK policy cannot be quoted because Korea 
identified it before the Panel as business confidential information. (See ibid., para. 7.166 and footnote 188 
thereto) 
274Ibid., paras. 7.167-7.168.  WT/DS296/AB/R 
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The Panel overlooks the fact that the USDOC did not find entrustment or direction "simply on the 
basis of" the one non-commercial reason supporting K ookmin Bank's decision to participate in the 
December 2000 syndicated loan.  It is no doubt true , as the Panel states, that the fact that eight 
commercial reasons are provided to support the Kook min Bank loan may affect the emphasis given by 
the agency to the ninth (non-commercial) reason.  It is equally true, however, as the Panel failed to 
recognize, that that ninth reason could reasonably take  on greater meaning when viewed in the light of 
other corroborating evidence.    
149. In each of the above instances, the Panel appears to have implicitly required that entrustment 
or direction be established , or determined , or inferred , solely on the basis of the particular piece of 
evidence examined.  Furthermore, these are not isolat ed statements, but rather, reflect a view of the 
Panel that is evident throughout its analysis.275  This is troubling, especially as the Panel itself initially 
recognized that at no point in the USDOC's determin ation did the agency contend that any individual 
piece of evidence, in isolation, would be sufficien t for its finding of entrustment or direction.  
150. In our view, having accepted an investigating authority's approach, a panel normally should 
examine the probative value of a piece of evidence  in a similar manner to that followed by the 
investigating authority.  Moreover, if, as here, an investigating authority relies on individual pieces of 
circumstantial evidence viewed toge ther as support for a finding of entrustment or direction, a panel 
reviewing such a determination nor mally should consider that evidence in its totality, rather than 
individually, in order to assess its probative valu e with respect to the agency's determination.276  
Indeed, requiring that each piece of circumstantial evidence, on its own, establish entrustment or 
direction effectively precludes an agency from fi nding entrustment or direction on the basis of 
circumstantial evidence.277  Individual pieces of circumstantial evidence, by their very nature, are not 
likely to establish a proposition, unless and until viewed  in conjunction with other pieces of evidence.   
                                                      
275See, for example, Panel Report, paras. 7.62 , 7.77-7.78, 7.129, 7.141, and 7.167-7.168. 
276We note that the European Communities makes a similar observation: 
By considering the facts and evidence in isolation only,  and also failing to 
consider the weight of the individual facts taken together the panel 
effectively applied a different methodological approach from that adopted 
by the investigating authority. 
(European Communities' third participant's submission, para. 20) (original underlining) 
277We agree with the United States, and third partic ipants the European Communities and Japan, that 
this approach is particularly relevant in cases of entr ustment or direction under Artic le 1.1(a)(1)(iv), where much 
of the evidence that is publicly-available, and theref ore readily accessible to in terested parties and the 
investigating authority, will likely be of a circumstantia l nature. (United States', the European Communities', 
and Japan's responses to questioning at the oral hearing)  Moreover, strictly speaking, entrustment or direction is 
not a pure fact.  It is, rather, a legal assessment based on a proven set of facts. WT/DS296/AB/R 
Page 58  
 
151. Furthermore, in order to exam ine the evidence in the light of  the investigating authority's 
methodology, a panel's analysis us ually should seek to review the agency's decision on its own terms, 
in particular, by identifying the inference drawn by the agency  from the evidence, and then by 
considering whether the evidence could sustain that  inference.  Where a panel examines whether a 
piece of evidence could directly lead to an ultimat e conclusion—rather than support an intermediate 
inference that the agency sought to draw from th at particular piece of evidence—the panel risks 
constructing a case different from that put forward by the investigating authority.278  In so doing, the 
panel ceases to  review  the agency's determinati on and embarks on its own  de novo  evaluation of the 
investigating authority's decision.  As we explain below279, panels may not conduct a  de novo  review 
of agency determinations. 
152. In this case, as we observed above280, the USDOC relied on the evidence to arrive at certain 
factual conclusions as an intermediate step in its analysis before finding entrustment or direction.  
These intermediate factual conclusions were:  (i) the GOK pursued a policy of preventing the financial collapse of Hynix;  (ii) the GOK held  control or influence over Hynix's Group B and C 
creditors;  and (iii) the GOK pressu red certain of Hynix's Group B and C creditors into participating 
in the financial restructuring.  A proper assessment by the Panel, therefore, would have considered 
whether the individual piece of evidence being ex amined could tend to support—not establish in and 
of itself—the  particular intermediate factual conclusion  that the USDOC was seeking to draw from 
it.  By looking instead to whether such eviden ce directly supported a finding of entrustment or 
direction, the Panel determined certain pieces of ev idence not to be probative when, in fact, had they 
been properly viewed in the framework of the USDOC 's examination, their relevance would not have 
been overlooked. 
2. Examining the Totality of the Evidence
 
153. The Panel ended its examination of the USDOC's  evidence, in paragraphs 7.175 to 7.178 of 
the Panel Report, with a "global review of all th e reasoning set forth by the [US]DOC".  The Panel 
summarized its several earlier findings on the indivi dual pieces of evidence and, on the basis of this 
"global review", concluded that the USDOC "could not properly have found that there was sufficient 
                                                      
278This is not to say that a panel is prohibited from examining whether the agency has given a reasoned 
and adequate explanation for its determination, in pa rticular, by considering other inferences that could 
reasonably be drawn from—and explanations that could reasonably be given to—the evidence on record.  
Indeed, a panel must undertake such an inquiry. (See infra , para. 186) 
279We address infra , in sub-section G, the implications of the Panel's approach to the evidence for its 
application of the proper standard of review. 
280Supra , para. 135.  WT/DS296/AB/R 
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evidence to support a generalized finding of entrustm ent or direction with respect to private bodies 
spanning multiple creditors and multiple transac tions over the period of investigation."281   
154. We note, first, that the Panel's discussion of the totality  of the evidence appears to be 
primarily a summation of errors that the Panel fou nd in the course of its review of the individual 
pieces of evidence.  Such errors undoubtedly would affect an examination of the totality  of the 
evidence, as these pieces would constitute the evid ence the Panel would consider as a whole in 
assessing the evidentiary support of the USDOC's finding of entrustment or direction.  Nevertheless, 
what is absent from the Panel's "global" assessment, in our view, is a consideration of the inferences  
that might reasonably have been drawn by the USDOC on the basis of the totality  of the evidence.282  
As we have already observed283, individual pieces of circumstantial evidence are unlikely to establish 
entrustment or direction;  the significance of individual pieces of evidence may become clear only 
when viewed together with other evidence.  In other words, a piece of evidence that may initially 
appear to be of little or no probative value, when viewed in isolation, could , when placed beside 
another piece of evidence of the same nature, form  part of an overall picture that gives rise to a 
reasonable inference of entrustment or direction.  Although the USDOC relied on such an approach—
and the Panel, not finding it unreasonable, stated its  intention to emulate it—the Panel stopped short 
of assessing the evidence on such a global basis. 
155. A few examples from the Panel Report will illustra te the Panel's error.  Although the Panel 
found sufficient evidentiary support for the USDOC's determination that the GOK pursued a policy to 
ensure the financial viability of Hynix284, the Panel did not find meaningful the USDOC's reliance on 
Kookmin Bank's 2001 and 2002 prospectuses filed w ith the United States Securities and Exchange 
Commission, in which Kookmin Bank stated: 
We expect that all loans made pursuant to government policies will 
be reviewed in accordance with [Kookmin Bank's] credit review policies.  However, we cannot assu re you that government policy 
will not influence [Kookmin Bank] to lend to certain sectors or in a 
manner in which [Kookmin Bank] otherwise would not in the 
absence of the government policy.
285  
                                                      
281Panel Report, para. 7.177. 
282As a result of its approach to the individual pieces of evidence, (see supra , paras. 144-152), several 
pieces of evidence erroneously deemed irrelevant by the Panel were not part of the Panel's "global review". 
283Supra , para. 150. 
284Panel Report, para. 7.51. 
285Kookmin Bank Prospectus (10 September 2001), p. 24, Exhibit US-45 submitted by the United 
States to the Panel (quoted in Issues and Decision Memorandum, supra , footnote 6, p. 58). WT/DS296/AB/R 
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We expect that all loans made pursuant to government policies will 
be reviewed in accordance with our credit review policies.  However, 
government policy may influence us to lend to certain sectors or in a manner in which we otherwise w ould not in the absence of the 
government policy.
286 
In its determination, the USDOC stated: 
The timing of the September 2001 [United States Securities and 
Exchange Commission] prospectus ...  clearly links the statements 
about government influence over bank lending decisions to the [period of investigation].  More over, the plain reading of these 
documents, along with documents exam ined at verification, connect 
the government’s influence over [Kookmin Bank] and the 
government objective to rescue Hynix from financial collapse.
287 
In our view, the admission by Kookmin Bank that "government policy" might lead it to extend loans 
that it otherwise might not offer, and the existe nce of a GOK policy to save Hynix, should have 
prompted the Panel to consider, as did the USDO C, whether the Kookmin Bank prospectuses might 
carry greater relevance than initially believed wh en the Panel examined them in isolation. 
156. The Panel also found that evidence of coercion with respect to Hana Bank, a Group C 
creditor, would be of limited evidentiary valu e towards the USDOC's finding of entrustment or 
direction, because the evidence related to pressure placed on Hana Bank to provide funds to Hyundai 
Petrochemical, not to Hynix.288  The USDOC had noted in its determination: 
[T]he [Financial Supervisory Servic e] threatened to fine Hana Bank 
if it failed to provide emergency liquidity to [Hyundai Petrochemical], which was a part of the Hyundai Group that was going through the workout process.  Hana Bank was also an 
important Hynix creditor.  Moreove r, while [the cited newspaper 
article] discusses [Hyundai Petrochemical], as we outlined above, the GOK's policies during this period were aimed at the corporate and financial restructuring of the entire Hyundai Group, including Hynix' predecessor, HEI, which was part of that group.
289 
Although we see no error in the Panel raising ques tions initially about the evidentiary value of 
coercion taking place with respect to financial tran sactions involving a benefici ary other than Hynix, 
its subsequent failure to consider the value of  this evidence in conjunction with other pieces of 
                                                      
286Kookmin Bank Prospectus (18 June 2002), p. 22, Exhibit US-46 submitted by the United States to 
the Panel (referred to in Issues and Decision Memorandum, supra , footnote 6, p. 58). 
287Issues and Decision Memorandum, supra , footnote 6, p. 58. 
288Panel Report, para. 7.127. 
289Issues and Decision Memorandum, supra , footnote 6, p. 61.  WT/DS296/AB/R 
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evidence constitutes legal error.  Specifically, the Pa nel did not take into account in this context the 
fact that a GOK policy existed sp ecifically with respect to Hynix, and that Kookmin Bank (another 
Group C creditor) acknowledged making loans in pur suit of government policy.  If the GOK was 
pursuing a policy to prevent the failure of Hynix, and if the GOK had previously shown a willingness 
to coerce private banks (Group C creditors in the Hy nix context) into participating in other Hyundai 
Group restructurings, the Panel should have at least cons idered whether, in the light of these facts, it 
was reasonable to conclude that coercion was also likely to have taken place with respect to loans for 
Hynix.  And, having so considered, the Panel migh t have had a more complete basis for evaluating 
whether it was reasonable to find entrustment or direction in respect of Group C creditors.  The Panel's failure to approach the evidence in its totality, however, precluded such a possibility.  
157. We do not raise these questions to suggest that , had the Panel conducted a proper analysis of 
the evidence under Article 1.1(a)(1)(iv), it would ha ve discovered sufficient evidentiary support for 
the USDOC's finding of entrustment or direction.  Nor do we seek to re-evaluate the evidence before 
the Panel;  that is not our task.  Rather, we are speaking about the method used by the Panel to assess the evidence.  In our view, when  an investigating authority relies on the totality of circumstantial 
evidence, this imposes upon a panel the obliga tion to consider, in the context of the totality  of the 
evidence, how the interaction  of certain pieces of evidence may ju stify certain inferences that could 
not have been justified by a review of the individua l pieces of evidence in isolation.  Having failed to 
undertake such an assessment, th e Panel could not have arrived at a proper conclusion as to the 
sufficiency of the evidence underlying the USDOC' s finding of entrustment or direction.    
158. In sum, we are of the view that, in an alyzing the USDOC's evidence under Article 
1.1(a)(1)(iv), the Panel assessed the relevance of many individual pieces of evidence by examining 
whether each  of them was sufficient to establish entrustmen t or direction.  In so doing, the Panel 
failed to appreciate the circumstantial nature of th e USDOC's evidence and to consider the relevance 
of that evidence for the particular inferences th e USDOC sought to draw.  This error, in turn, 
contributed to various findings of the Panel di smissing or discounting individual pieces of evidence 
relied on by the USDOC.  Furthermore, in its "globa l" examination of the evidence, the Panel failed to 
consider that pieces of evidence, especially circum stantial evidence, might become more significant 
when viewed in their totality.  For these reasons, we find that the Panel erred  in failing to examine the 
USDOC's evidence in its totality, and requiring, inst ead, that individual pieces of evidence, in and of 
themselves, establish entrustment or direction by the GOK of Hynix's creditors. WT/DS296/AB/R 
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E. Admissibility of Evidence 
159. In the course of making submissions before the Panel, the United States at several points 
attempted to rely on evidence that, although contained in the record of the CVD investigation, had not 
been cited  in the USDOC's decision.  The Panel refused  to consider this evidence on the ground that 
submission of such evidence constituted " ex post rationalization" on the part of the United States.
290  
The United States acknowledges that Members may no t defend the decisions of their investigating 
authorities on the basis of a rationale not set out in those decisions.291  The United States contends, 
however, that the Panel misunderstood the scope of this prohibition against  " ex post 
rationalization".292  According to the United States, this pr ohibition limits only a Member's right to 
raise before a panel new  reasons  as the basis for its investigating authority's challenged decision, but 
not the right to rely during panel proceedings on evidence  that, although contained in the record of the 
investigating authority, is not explicitly referred to in its decision.293 
160. Korea argues that, in requiring that "all relevant  information on the matters of fact and law" 
be included in an investigating authority's published determination,  Article 22.5 of the SCM 
Agreement  supports the Panel's decision to refuse to consider the evidence submitted by the United 
States.294  Korea asserts that "all relevant information" includes any evidence on which the agency 
relies to support its decision.295  Thus, in Korea's view, the United States' understanding that only 
"new reasoning"296 may properly be rejected by panels is inconsistent with the "clear" text of 
Article 22.5.297   
                                                      
290Panel Report, paras. 7.88, 7.102, and 7. 141.  See also paras. 7.116 and 7.121. 
291United States' appellant's submission, paras. 90 and 93. 
292Ibid., para. 90. 
293The United States does not appeal the Panel's conclusion of ex post  rationalization with respect to a 
new factual argument advanced by the United States before the Panel.  The United States argued before the 
Panel that the GOK had disciplined various credit rating agencies for giving Hynix a low credit rating.  This was 
advanced in support of the USDOC's determination that the GOK exercised control or influence over Hynix's 
creditors.  The Panel found that the USDOC had not referr ed in its determination to the coercion of credit rating 
agencies and, therefore, argument and evidence relating to such coercion "[fell] outside the scope of [the 
Panel's] proceedings." (Panel Report, para. 7.135) 
294Article 22.5 of the SCM Agreement  provides, in relevant part: 
A public notice of conclusion ... of an investigation in the case of an 
affirmative determination providing for the imposition of a definitive duty ... shall contain, or otherwise make available through a separate report, all 
relevant information on the matters of fact and law and reasons which have 
led to the imposition of final measures[.] 
295Korea's appellee's submission, paras. 183-184. 
296Ibid., para. 185 (quoting United States' appellant's submission, para. 93). 
297Ibid.  WT/DS296/AB/R 
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161. There is no doubt that a Member may not seek to defend its agency's decision on the basis of 
evidence  not contained in the record of the investigati on.  Indeed, neither participant seeks to argue 
otherwise.298  Moreover, Korea acknowledges that the evid ence relevant to this aspect of the United 
States' challenge was part of the USDOC's record  and was disclosed to the parties during the CVD 
investigation.299   
162. Article 1.1(a)(1)(iv), the provision under whic h the Panel examined the USDOC's subsidy 
determination, provides that there is a financial contribution by a government or public body where: 
... a government makes payments to a funding mechanism, or 
entrusts or directs a private body to carry out one or more of the type 
of functions illustrated in (i) to (iii) above which would normally be 
vested in the government and the pr actice, in no real sense, differs 
from practices normally followed by governments [.] 
The provision, on its face, does not speak to the ev idence that a Member may (or must) adduce before 
a panel to demonstrate "entrustment" or "direction".  The Panel itself did not explain what it understood by a prohibition on " ex post rationalization", nor on what basis such a prohibition would 
limit a Member's right to present evidence —as opposed to reasoning—in dispute settlement 
proceedings.   
163. Korea suggests that Article 22.5 of the SCM Agreement  provides the basis for the Panel's 
exclusion of the United States' evidence, particular ly as it requires an investigating authority's final 
determination to contain "all relevant information on the matters of fact and law and reasons which 
have led to the imposition of final measures".  We note, first, that the Panel itself did not seek to 
justify its treatment of the United States' evidence on the basis of Article 22.5.  Moreover, Korea does 
not allege that the facts for which the evidence at issue here was introduced were not set out in the 
USDOC's final determination.
300  Nor does Korea allege that those facts set out in the final 
determination were asserted without citation of any supporting evidence.  Indeed, Korea could not so 
allege because the USDOC's final determination did set out those facts and did seek to support those 
                                                      
298United States' appellant's submission, para. 102;  Korea's appellee's submission, para. 196. 
299Korea's response to questioning at the oral hearing. 
300The facts for which the United States sought to s ubmit the excluded evidence were:  (i) the influence 
held by the GOK over Hynix's creditors by virtue of the CRPA (Panel Report, paras. 7.72-7.74);  (ii) decisions 
taken during the Economic Ministers' meetings that facilitated the extension of further credit to Hynix ( Ibid.,  
para. 7.102);  (iii) pressure applied to KFB by the GOK ( Ibid.,  para. 7.115);  (iv) pressure applied to KorAm 
Bank by the GOK ( Ibid.,  para. 7.121);  and (v) attendance by FSC of ficials at a meeting of Hynix creditors.  
(Ibid., para. 7.141 and footnote 161 to para. 7.138) WT/DS296/AB/R 
Page 64  
 
facts by referring to record evidence, even if not  the precise evidence the Pa nel refused to consider.
301  
Thus, insofar as it relates to the evidence at issu e here, the USDOC's final determination provided 
Korea with notice of the factual bases of the finding  of entrustment or direction, as well as notice of 
certain record evidence underlying each of those facts.   
164. In these circumstances, we are of the view that Article 22.5 does not require the agency to cite 
or discuss every  piece of supporting record evidence for each fact in the final determination.302  
Therefore, even assuming arguendo  that Article 22.5 of the SCM Agreement  could provide the basis 
for a panel's exclusion of evidence, we see no reas on why it would support such exclusion in this 
case.303 
165. In the light of the above, we find no basis fo r the Panel's exclusion of the United States 
evidence in question.  That  evidence was on the record of the inv estigation and it was not put before 
the Panel in support of a new reas oning or rationale.  We therefore find that the Panel erred , in 
paragraphs 7.88, 7.102, 7.116, 7.121, and 7.141 of the Panel Report, in declining to consider certain 
record evidence not cited by the USDOC in its published determination.   
F. Non-record Evidence 
166. We consider now whether, as the United States alleges304, the Panel erred in relying on 
evidence that was not on the record before the USDOC in the underlying CVD investigation.  We first 
set out the uncontested facts relating to this i ssue and then examine the Panel's approach.    
167. As noted above, one of the factual conclusions  established by the USDOC in support of its 
finding of entrustment or direction was that the GOK had the ability to contro l or influence Hynix's 
                                                      
301See Issues and Decision Memorandum, supra , footnote 6, pp. 53-55 (discussing the influence held 
by the GOK over Hynix's creditors by virtue of the CRPA);  ibid., pp. 50-52 (discussing the Economic 
Ministers' meetings);  ibid., pp. 60-61 (discussing pressure applied to KFB by the GOK);  ibid., p. 60 (discussing 
pressure applied to KorAm Bank by the GOK);  ibid., p. 60 (discussing attendance by FSC officials at a meeting 
of Hynix creditors). 
302On this point, Japan expressed the view that "no provision of the DSU or the SCM Agreement 
requires that an [investigating] authority discuss each and every individual item of evidence, which the 
authorit[y] assessed, or was supportive of its conclusi on, in a particular determination." (Japan's third 
participant's submission, para. 30)   
303We recall that previous decisions of the Appellate Body have addressed, in the context of the Anti-
Dumping Agreement , the evidence a panel may consider when reviewing decisions of investigating authorities.  
(See Appellate Body Report, Thailand – H-Beams , paras. 109-110;  and Appellate Body Report, EC – Tube or 
Pipe Fittings , paras. 131-132) 
304United States' appellant's submission, para. 100.  WT/DS296/AB/R 
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creditors.305  One of the mechanisms examined by the USDOC, through which the GOK allegedly 
exercised control or influence over Hynix's creditors, was the CRPA.   
168. According to the USDOC, under the CRPA, those creditors holding at least 75 per cent of a 
firm's outstanding debt could set the restructuring terms for  all  of that firm's creditors.306  
Article 29 of the CRPA established a mechanism wher eby those creditors that did not agree to the 
restructuring terms could be bought out by the remaining creditors.307  The price at which the 
dissenting creditors' debt would be bought was to be determined by consultations between the 
dissenting creditors and the remaining creditors.308  Article 29(5) of the CRPA provided that, if 
consultations did not result in an agreed price: 
... the mediation committee ... shall make a decision on the price of 
purchase or redemption of claims and conditions thereof.  In such case, the mediation committee shall take into consideration the price computed by an accounting specia list selected under a consultation 
between the council and opposing creditors[.]
309 
169. The restructuring terms established by the October 2001 Creditors' Council provided Hynix's 
creditors with three options, the third of which provided that: 
... creditors that did not agree to either new loans [Option 1] or the 
debt-to-equity conversion [Option 2] could exercise their appraisal 
rights for all of their secured debt and 25 percent of the unsecured 
debt based on Hynix' liquidation va lue (as established by an external 
consultant), and have the remainder of the debt forgiven.310 
170. Thus, under the third option ("Option 3"), credito rs that declined to provide new loans to 
Hynix and declined to convert their debt to equity  in Hynix could exercise their appraisal rights and 
be bought out by the other creditors on the October 2001 Creditors' Council.  The GOK and Hynix 
pointed out to the USDOC during the investigation that, in fact, three311 creditors had exercised 
                                                      
305Supra , para. 135. 
306Issues and Decision Memorandum, supra , footnote 6, p. 55. 
307Article 29(1) of the CRPA, Exhibit GOK- 22(c) submitted by Korea to the Panel. 
308Article 29(4) of the CRPA, Exhibit GOK- 22(c) submitted by Korea to the Panel. 
309Article 29(5) of the CRPA, Exhibit GOK- 22(c) submitted by Korea to the Panel. 
310Issues and Decision Memorandum, supra , footnote 6, p. 20. 
311At the oral hearing, Korea stated that, alt hough the 2001 Hynix Audit Report referred to three  
creditors that exercised their rights to mediation, th e correct number was four, as the GOK and Hynix submitted 
to the USDOC. (Issues and Decision Memorandum, supra , footnote 6, p. 61)  Korea suggested at the oral 
hearing that the reference to three cred itors in the 2001 Hynix Audit Report reflected an error in translation.  We 
need not resolve this discrepancy for purposes of resolving this issue and refer throughout our discussion to 
three  creditors. WT/DS296/AB/R 
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Option 3 and had "severed their ties from Hynix and the restructuring process in October 2001".
312  
The USDOC responded in its determination that , notwithstanding those creditors' lack of 
participation, the GOK's alleged ability to control or  influence Hynix's creditors remained by virtue of 
the fact that "the terms on which these creditor bank s terminated their relationship with Hynix were 
dictated by the banks that mattered in this  case, namely the [Group A and B] creditors."313    
171. The Panel found that the USDOC had not explai ned how the restructuring terms were "set"314 
by Group A and B creditors, notwithstanding that Article 29(5) of the CRPA provided the 
"possibility"315 for dissenting creditors to avoid these restructuring terms and be bought out by other 
creditors at a price determined through mediation.  The Panel asserted that "there was also evidence 
on the [US]DOC's record indicating that the mediatio n provisions had actually been invoked by three 
creditors in respect of the October 2001 restructuring."316  Therefore, the Panel determined that the 
evidence on record was sufficient to  "bring into question" the USDOC' s conclusion that the terms of 
the October 2001 restructuring were established by the Group A and B creditors.317   
172. The United States challenges the Panel's finding th at certain creditors of Hynix "actually ... 
invoked"318 their right to mediation under the CRPA.  A ccording to the United St ates, the evidence on 
the record before the USDOC contai ned no information relating to the exercise  of mediation rights by 
the three creditors.319  The United States submits that the only basis for the Panel's finding that certain 
creditors exercised their mediation rights was evid ence submitted by Korea to the Panel but never 
provided to the USDOC.320  By arriving at a conclusion on the basis of non-record evidence, the 
United States argues, the Panel acted inconsistently  with its obligations under Article 11 of the 
DSU.321 
173. Korea argues that the United States misstates the Panel's finding, which Korea understands to 
be that the USDOC had not undertaken a sufficient inqui ry with respect to the participation of certain 
creditors in the October 2001 restructuring.322  This finding, according to Korea, was based not only 
                                                      
312Issues and Decision Memorandum, supra , footnote 6, p. 61. 
313Ibid. 
314Panel Report, para. 7.84 (quoting Issues and Decision Memorandum, supra , footnote 6, p. 55). 
315Ibid. 
316Ibid., para. 7.85. 
317Ibid., para. 7.87. 
318Ibid., para. 7.85. 
319United States' appellant's submission, paras. 108-111. 
320Ibid., paras. 112-114. 
321Ibid., para. 117. 
322Korea's appellee's submission, para. 198.  WT/DS296/AB/R 
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on "actual incidents of mediation", as discernibl e from the 2001 Hynix Audit Report, but also on 
Article 29(5) of the CRPA and the opin ion of one of the USDOC's experts.323  With respect to 
the 2001 Hynix Audit Report, Korea notes that the excerpt from this document made clear reference 
to mediations under the CRPA, and then provided that, "[b]ased on this clause" , three creditors "raised 
objection[s]".324  On this basis, Korea submits, the USDOC  should have understood that the raising of 
objections, in connection with the future payout by Hynix, necessarily implied recourse to mediation 
by those creditors. 
174. Although the United States characterizes the error of the Panel as its reliance on non-record 
evidence, we note that the Panel explicitly agreed with the United  States that its "review of the 
[US]DOC's determination should be confined to f acts actually recorded on the [US]DOC's record of 
investigation."325  The Panel insisted that its finding was based exclusively on "evidence on the 
[US]DOC's record"326, namely the 2001 Hynix Audit Report.  The issue raised by the United States' 
appeal, therefore, is not whether the evidence was contained in the record, but rather, whether the 
evidence contained in the record should have "indi cate[d]" to the USDOC "that three of the four 
creditors exercising appraisal rights under option 3 act ually exercised their right to seek mediation in 
respect of the October 2001 restructuring."327 
175. The United States brings its challenge under Article 11 of the DSU, which requires that a 
panel "make an objective assessment of the matter  before it".  The Appellate Body has stated 
previously that, when assessing an investigating au thority's determination, a panel may not fault the 
agency for failing to take into account fact s that it could not reasonably have known.328  A panel must 
therefore limit its examination to the facts that the agency should have discerned from the evidence on 
record.  Where a panel reads evidence with the "b enefit of hindsight", it fails to consider how the 
evidence should have fairly been understood at the tim e of the investigation, and thereby fails to make 
an "objective assessment" in accord ance with Article 11 of the DSU.329 
                                                      
323Korea's appellee's submission, paras. 198-199 and 210. 
324Ibid., para. 203. 
325Panel Report, para. 7.84. 
326Ibid., para. 7.85. 
327Ibid., para. 7.82. 
328See Appellate Body Report, US – Cotton Yarn , para. 78. 
329Ibid. WT/DS296/AB/R 
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176. We turn now to the evidence relied upon by th e Panel.  The Panel pointed to a single 
paragraph in Hynix's 2001 Audit Report, which was on the record of the inves tigation, as the basis for 
finding that the USDOC should have been aware that three creditors had resorted to mediation after 
exercising their appraisal rights under Option 3.
330  That paragraph states:   
According to [the CRPA], any creditor financial institution who is 
dissatisfied with the creditor banks resolution is entitled to apply for mediation to Mediation Committee.  Based on this clause, three creditor banks, including Korea First Bank, raised objection to the 
terms of reimbursement of remaining debts after debt to equity swap 
and debt exemption, five-year debentures with no interest.  
Accordingly, [Hynix] recognized 80,100 million [won] of other payables as current liabilities.
331 
177. This excerpt does not indicate explicitly that thr ee creditors participated in a mediation.  Nor 
does it state that a mediation in fact occurred, or th at it was the mediation (rather than, for example, an 
agreement with the October 2001 Creditors' Council) that resulted in the payout of over 80 billion 
won.  All that one can glean from this paragraph is that three creditors raised objections to the terms 
of reimbursement and that 80 billion won was "recognized".  During the oral hearing, Korea insisted 
that this paragraph made clear that mediation had taken place, and explained that, under the CRPA, 
the "rais[ing]" of "objections" necessarily resulted in recourse to mediation.332  In our view, however, 
it is not evident from a reading of Article 29(5) of the CRPA333, the legal basis for the exercise of 
appraisal rights, that the raising of "objections" automatically results in mediation proceedings.  
Furthermore, at no point in its responses to questions during the oral hearing was Korea able to 
identify where in the record  such an explanation could be found.  Thus, we do not read the record 
evidence as supporting the Panel's conclusion that the USDOC should have understood the "rais[ing]" 
of "objections" to include the recourse to mediation by three Hynix creditors. 
178. Moreover, we note that, during the investigation, the USDOC asked Hynix about creditors 
exercising rights under Option 3—that is, those credito rs that "did not exchange their convertible 
                                                      
330Although the Panel also referred to Article 29(5) of the CRPA and the testimony of one of the 
USDOC's experts, the Panel did not fi nd that either of these pieces of  evidence could have informed the 
USDOC about the recourse to mediation—rather than  the "possibility" of such recourse—by three Hynix 
creditors. (Panel Report, para. 7.84 and footnote 98 to para. 7.87)   
331Hynix Audit Report (2001), p. 40 (Exhibit US-125  submitted by the United States to the Panel) 
(quoted in Panel Report, para. 7.85). 
332Korea's response to questioning at the oral hearing. 
333Supra , para. 168.  WT/DS296/AB/R 
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bonds for the new convertible bonds w ith an obligation of conversion".334  The USDOC also asked 
Hynix, in a supplemental questionnaire, more specif ically about how appraisal rights were exercised 
under Option 3.335  In neither response did Hynix indicate that mediation had even been requested, 
much less that it had taken place.336  Therefore, faced with no mention of mediation in response to 
questions, and given the wording of Article 29(5) of the CRPA, the USDOC, in our view, should not 
have been expected to read Hynix's 2001 Audit Report as indicating the recourse to mediation by 
three Hynix creditors.   
179. In our view, therefore, the Panel erroneously concluded that the USDOC should have made a 
factual inference from evidence on the record that  would not reasonably have suggested such an 
inference.  We therefore find that the Panel failed to "make an objective assessment of the matter 
before it", as required by Article 11 of the DSU, by  finding, in paragraph 7.85 of the Panel Report, 
that "the mediation provisions [of the CRPA] had actually been invoked by th ree creditors in respect 
of the October 2001 restructuring", in the absen ce of supporting evidence on the record of the 
underlying investigation.   
                                                      
334In its questionnaire, the USDOC had asked: 
For each creditor that did not exchange  their convertible bonds for the new 
convertible bonds with an obligation of  conversion, if applicable, provide 
the value of these convertible bond s as recorded in Hynix's capital 
adjustment account, if th ey were so recorded. 
(Hynix's response to the USDOC Questionnaire, 28 January 2003, p. 60 (Exhibit US-129 submitted by the 
United States to the Panel)) 
Hynix responded: 
Four banks refused to participate in the second financial restructuring .... 
This decision meant that they would not extend new loans to Hynix, nor 
would they agree to exchange their debt holdings for equity.  Instead, they 
exercised appraisal rights against th eir debt holdings.  This included 
conversion of their debt holdings (loans and bonds) into debentures, with no 
coupon interest rate and a five year maturity for 100% of their secured loans 
and 25.46% of their unsecured loans based on Hynix's liquidation value[.] 
(Ibid.) 
335In its supplemental questionnaire to Hynix, the USDOC had asked: 
Please explain in greater detail the final plan option which allowed creditors 
to exercise appraisal rights.  Explai n how that process worked and on what 
basis the appraisal rights were exercised[.] 
(USDOC Supplemental Questionnaire to Hynix, 11 February 2003 (Exhibit US-130 submitted by the United 
States to the Panel) Question 54, p. 10) 
336Korea's response to questioning at the oral hearing. WT/DS296/AB/R 
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G. Standard of Review  
180. We turn now to the United States' allegation that the Panel failed to examine the USDOC's 
subsidy determination consistently  with the applicable standard of review.  The Panel began its 
analysis by observing that Article 11 of the DSU sets forth the applicable standard of review.  On the 
basis of this provision and the Appellate Body 's discussion on standard of review in  US – Lamb , the 
Panel stated: 
[W]e consider that our standard of review is to determine whether the 
[US]DOC and [the US]ITC evaluated all relevant factors, and provided a reasoned and adequate explanation of how the facts 
support their determination.  In doi ng so, we shall consider whether 
an objective and impartial assessment of all relevant facts on the 
record could properly support the [US]DOC and [the US]ITC's determinations of subsidization an d injury respectively.  In other 
words, we shall determine whether an objective and impartial investigating authority, looking at  the same evidentiary record as the 
[US]DOC and [the US]ITC, could properly have reached the same 
conclusions as did those agencies.  In applying this standard of 
review, we are conscious that we must not conduct a  de novo  review 
of the evidence on the record, nor subs titute our judgment for that of 
the [US]DOC or [the US]ITC.
337 
181. The United States does not contest the Panel's artic ulation of the standard of review based on 
US – Lamb .  The United States contends, instead, that th e errors alleged in sub-sections C through F 
above, viewed collectively, amount to error in the Panel's application  of the proper standard of review 
prescribed by Article 11 of the DSU, and as clarified by the Appellate Body in US – Cotton Yarn  and 
US – Lamb .338  Korea contends that the Panel prope rly engaged in the "in-depth review"339 
contemplated by the Appellate Body decision in US – Lamb , and that, as is evident from a review of 
the challenged Panel findings in this case, the Un ited States' appeal is based on "partial or chopped 
and twisted quotations from the Panel Report".340 
                                                      
337Panel Report, para. 7.3. 
338United States' appellant's submission, para. 119;  United States' response to questioning at the oral 
hearing. 
339Korea's appellee's submission, para. 214. 
340Ibid.  WT/DS296/AB/R 
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182. Article 11 of the DSU sets out the proper standard  of review to be applied by panels when 
examining Members' subsidy determinations.341  That provision states, in relevant part: 
[A] panel should make an objective assessment of the matter before 
it, including an objective assessment of the facts of the case and the 
applicability of and conformity with  the relevant covered agreements. 
183. The Appellate Body has observed that, with r espect to a panel's review, in accordance with 
Article 11, of facts established by an investigating authority: 
... a panel may not conduct a  de novo   review of the evidence or 
substitute its judgement for that of the competent authorities.342  
184. The Panel and both participants343 have recognized that the Appellate Body has in the past 
elaborated on the standard of review mandated by Ar ticle 11 with respect to factual and legal issues in 
the context of claims under the Agreement on Safeguards .344  The standard of review articulated by 
the Appellate Body in the context of agency determ inations under that Agreement is instructive for 
cases under the SCM Agreement that also involve agency determinations.345  Nevertheless, we recall 
that an "objective assessment" under Article 11 of the DSU must be understood in the light of the 
obligations of the particular covered agreement at issue in order to derive the more specific contours 
of the appropriate standard of review.346  In this respect, we are especially mindful, in this appeal, of 
Articles 12, 19, and 22 of the  SCM Agreement . 
185. We have noted above that Article 12.2 requires th at an investigating authority's determination 
of entrustment or direction be "based on" evidence.347  We also note that, under Article 19.1, 
countervailing duties may be imposed only where th e investigating authority has "determin[ed]", inter 
alia, the "existence" of a subsidy.  The existence of a subsidy is "determined", in turn, by reference to 
                                                      
341Appellate Body Report, US – Lead and Bismuth II , para. 51. 
342Appellate Body Report, US – Steel Safeguards , para. 299 (referring to Appellate Body Report, 
Argentina – Footwear (EC) , para. 121). 
343Panel Report, paras. 7.2-7.3;  United States' appe llant's submission, footnote 181 to para. 123;  
Korea's appellee's submission, paras. 213-214. 
344See, for example, Appellate Body Report, US – Lamb , paras. 103 and 106. 
345In this respect, we note that disputes under the Agreement on Safeguards  as well as the SCM 
Agreement  are subject only to the standard of revi ew in Article 11 of the DSU, whereas the Anti-Dumping 
Agreement  contains a specific standard of review in Article 17.6, which must be applied in conjunction with 
Article 11 of the DSU for disputes arising under the Anti-Dumping Agreement . (Appellate Body Report, US – 
Hot-Rolled Steel , para. 55) 
346See, for example, Appellate Body Report, US – Lamb , para. 105;  and Appellate Body Report, US – 
Cotton Yarn , paras. 75-78. 
347Supra , para. 138. WT/DS296/AB/R 
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the definition of "subsidy" set out in Article 1.
348  Finally, Article 22.5 requires an investigating 
authority's affirmative determination to  include the "reasons" for the decision349 as well as "the basis  
on which the existence of a subsidy has been determined".350  
186. In the light of the above, we are of the view that the "objective assessment" to be made by a 
panel reviewing an investigating authority's s ubsidy determination will be informed by an 
examination of whether the agency  provided a reasoned and adequate explanation as to:  (i) how the 
evidence on the record supported its factual findings ;  and (ii) how those factual findings supported 
the overall subsidy determination.351  Such explanation should be discernible from the published 
determination itself.  The explanation provided by the investigating authority—with respect to its 
factual findings as well as its ultimate subsidy de termination—should also address alternative 
explanations that could reasonably be drawn from the evidence, as  well as the reasons why the agency 
chose to discount such alternatives in coming to its conclusions.352   
187. A panel may not reject an agency's conclusions  simply because the panel would have arrived 
at a different outcome if it were making the determ ination itself.  In addition, in the absence of an 
allegation that the agency failed to investigate sufficiently or to collect certain information353, a panel 
must limit its examination to the evidence that was before the agency during the course of the 
investigation, and must take into account all such evidence submitted by the parties to the dispute.  In 
other words, a panel may not conduct a  de novo  review of the evidence or substitute its judgement 
for that of the investigating authority.  A failure to apply the proper standard of review constitutes 
legal error under Article 11 of the DSU.354 
188. These general principles reflect the fact that  a panel examining a subsidy determination 
should bear in mind its role as reviewer  of agency action, rather than as initial trier of fact .  Thus, a 
panel examining the evidentiary basis for a subsidy determination should, on the basis of the record 
evidence before the panel, inquire whether the evid ence and explanation relied on by the investigating 
                                                      
348We understand the relevant definitions of the term "determine" to include "[c]onclude  from 
reasoning  or investigation, deduce" as well as "[s]ettle or decide (a dispute, controversy, etc., or a sentence, 
conclusion, issue, etc.) as a judge or  arbiter". (Appellate Body Report, US – Corrosion-Resistant Steel Sunset 
Review , para. 110 (quoting Shorter Oxford English Dictionary , 5th edn, W.R. Trumble, A. Stevenson (eds) 
(Oxford University Press, 2002), Vol. 1, p. 659). (emphasis added)) 
349Article 22.5 of the SCM Agreement .  
350Article 22.4(iii) of the SCM Agreement  (incorporated by reference into Article 22.5). (emphasis 
added)  
351Compare Appellate Body Report, US – Steel Safeguards , paras. 276-279;  and Appellate Body 
Report, US – Lamb , para. 103.  
352Compare Appellate Body Report, US – Lamb , para. 106. 
353Ibid., para. 114;  and Ap pellate Body Report, US – Wheat Gluten , paras. 55-56.   
354Appellate Body Report, US – Wheat Gluten , para. 162.  WT/DS296/AB/R 
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authority reasonably supports its conclusions.  In  the context of reviewing individual pieces of 
evidence, for example, a panel should focus on issu es such as the accuracy of a piece of evidence, or 
whether that piece of evidence may reasonably be relied on in support of th e particular inference 
drawn by the investigating aut hority.  As we observed above355, however, the Panel in this case 
examined whether certain pieces of evidence were sufficient to estab lish certain conclusions that the 
USDOC did not seek to draw, at least solely on th e basis of those pieces of evidence.  Moreover, it 
failed to examine the evidence in its totality .356  The Panel thus failed to assess the agency's 
determination.  Instead, the Panel's examination re flected its own view of whether entrustment or 
direction existed in this case;  the Pa nel thereby engaged, improperly, in a de novo  review of the 
evidence before the agency.357 
189. Furthermore, with respect to the Panel's refu sal to admit certain evidence submitted by the 
United States, we note that the Panel did not indicate that the evidence was not contained in the record 
of the underlying investigation.  Neverthe less, the Panel excluded such evidence from its 
consideration in the absence of any legal basis to do so.358  In addition, the Panel erred in concluding 
that the USDOC should have been aware of a fact that was not reasonably based on evidence in the 
agency record, namely, that three creditors exercised mediation rights under the CRPA.359  I n  s o  
doing, the Panel essentially "second-guessed" the inves tigating authority's analysis of the evidence 
and thus overstepped the bounds of its review. 
190. Taken together, these errors lead us to concl ude that the Panel went beyond its role as the 
reviewer of the investigating authority's decision and, instead, conducted its own assessment, relying 
on its own judgement, of much of the eviden ce before the USDOC.  Accordingly, we find that the 
Panel failed to apply the proper standard of revi ew and, therefore, failed to comply with its 
obligations under Artic le 11 of the DSU. 
                                                      
355Supra , paras. 149-152. 
356Supra , paras. 154-157. 
357We observe that the European Communities agrees that, by failing to consider the evidence in its 
totality, the Panel effectively conducted a de novo  review of the USDOC's finding of entrustment or direction.  
(European Communities' third participant's submission, para. 20) 
358Supra , para. 165. 
359Supra , para. 179. WT/DS296/AB/R 
Page 74  
 
H. The Panel's Conclusion under Article 1.1(a)(1)(iv) of the SCM Agreement  
191. Following its examination of the evidence in rela tion to the factual premises of the USDOC's 
finding of entrustment or dir ection, the Panel concluded: 
[A]lthough the [US]DOC established that the GOK had a policy to 
save Hynix, and that the GOK had a certain capacity to influence 
Group B and C creditors, we consider – on the basis of a thorough and global review of all the reas oning set forth by the [US]DOC in 
light of the standard set forth in Article 1.1(a)(1)(iv) of the SCM 
Agreement  - that the [US]DOC did not properly demonstrate that the 
GOK availed itself of that capacity to entrust or direct all Group B 
and C creditors to participate in all four of the financial contributions 
at issue.  For this reason, we consider that the [US]DOC could not properly have found that there was sufficient evidence to support a generalized finding of entrustment or direction with respect to private 
bodies spanning multiple creditors a nd multiple transactions over the 
period of investigation.
360   
192. Although the Panel may have intended to convey a broader meaning of the terms "entrusts" 
and "directs" than what might be understood from a strict reading of the terms "delegation" and 
"command", we have found it useful, nevertheless, to  modify the Panel's inte rpretation of "entrusts" 
and "directs" in order to clarify the meaning of these terms in accordance with the interpretation we 
set out above.361  We have also found multiple errors in the Panel's analysis of the USDOC's finding 
of entrustment or direction.  In particular, we  have found that the Panel erred in (i) applying 
Article 1.1(a)(1)(iv) so as to examine the USDOC's  evidence piecemeal rather than in its totality, 
notwithstanding the Panel's stated intention to follow the USDOC's approach362;  (ii) refusing to admit 
certain record evidence submitted by the United States;  and (iii) faulting the USDOC for its failure to 
address facts that were not on the record of the inv estigation.  On the basis of these errors, we have 
found that the Panel failed to apply the proper standard  of review in accordance with Article 11 of the 
DSU.  In our view, these errors, taken togeth er with the modification we found necessary to the 
Panel's interpretation of the terms "entrusts" an d "directs", invalidate the basis for the Panel's 
conclusion, quoted above, that there was not su fficient evidence to support the USDOC's finding of 
entrustment or direction.363   
                                                      
360Panel Report, para. 7.177. 
361Supra , para. 118. 
362Panel Report, para. 7.45. 
363We note that Korea agrees that a finding of error in this case under Article 11 of the DSU, with 
respect to the Panel's standard of review, would require a reversal of the Panel's finding that the USDOC's 
subsidy determination is inconsistent  with Article 1.1(a)(1)(iv) of the SCM Agreement . (Korea's response to 
questioning at the oral hearing)  WT/DS296/AB/R 
 Page 75 
 
 
193. Because this conclusion is the sole basis fo r the Panel's finding of inconsistency with 
Article 1.1(a)(1)(iv) of the SCM Agreement , we reverse  the Panel's findings, in paragraphs 
7.178, 7.209, and 8.1 of the Panel Report, that the USDOC's determination of GOK entrustment or 
direction of Hynix's Group B and C creditors is in consistent with Article 1.1(a)(1)(iv) of the SCM 
Agreement . 
194. We note that neither participant requested, in its written submissions, that we complete the 
analysis by undertaking our own review of the USDOC's finding of entrustment or direction if we 
were to reverse the Panel's finding of inconsiste ncy with Article 1.1(a)(1)(iv).  In response to 
questions posed at the oral heari ng, Korea stated that, although it had not made such a request in its 
written submissions, it did want the Appellate Body to complete the analysis and find the USDOC's 
subsidy determination in consistent with Article 1.1(a)(1)(iv) of the SCM Agreement .  Korea suggested 
that, because the USDOC's finding of entrustment or  direction rests on its finding that a "single 
[subsidy] program" exists, we could complete the analysis by reviewing only the evidentiary basis of 
the USDOC's finding of a "single program".364   
195. We might have been able to resolve this dispute solely by addressing the USDOC's finding of 
a "single program", as Korea suggests, only if  this were one of the indispensable bases for the 
USDOC's ultimate finding of entrustment or direction.   We are not persuaded, however, that this is 
the case.  In support of its "single program" findi ng, the USDOC pointed to conclusions it had drawn 
in the course of its entrustment and direction analysis.365  As we read the USDOC's determination, 
therefore, the characterization of the alleged subsidy as a "single program" appears to follow from the 
                                                      
364Issues and Decision Memorandum, supra , footnote 6, p. 48;  see also Panel Report, paras. 7.146-
7.155. 
365Ibid., pp. 48-49: 
Rather than view each of the measures taken by the financial institutions 
that participated in Hynix' restructurin g as separate events, these actions are 
appropriately examined as part of a single program that occurred over a 
short, ten-month period.  The objective of this program was the complete 
financial restructuring of Hynix in order to maintain the company as an ongoing concern.  Each of the m easures taken over the period from 
December 2000 through October 2001, whether by government entities such 
as the KDB, FSC, or the [Korea Deposit Insurance Corporation], or by the 
government-owned and controlled creditor banks, reflected a pattern of 
GOK practices to ensure the continued viability of Hynix.  Many of these 
events were overlapping and had the ef fect of reinforcing each other with 
respect to the goal of keeping Hynix operating.  As we will detail more fully 
below, the GOK's role was essential at  each stage in dir ectly supporting the 
restructuring process through its own actions and by directing, facilitating, 
and guiding the actions taken by the creditor banks.  The GOK's presence 
and policies throughout this restructuring process were clear, and Hynix' creditor banks, whether specialized GOK entities, majority government-
owned, or private, were guided by ... these governmental policies and 
objectives. (footnote omitted) WT/DS296/AB/R 
Page 76  
 
USDOC's analysis of entrustment or direction, rather than serve as a premise  of this analysis.  As a 
result, even if we were to determine that the US DOC's finding of a "single program" lacked sufficient 
evidentiary support, as Korea contends, that alone  would not undermine the USDOC's finding of 
entrustment or direction.  Examining the USDOC's finding of a "single program" would therefore not 
provide us with a basis to arrive at a definitive answer as to the consistency of the USDOC's subsidy 
determination with Article 1.1(a)(1)(iv). 
196. Moreover, in our view, the nature of the e rrors we have found in the Panel's decision, 
especially with respect to the approach taken by th e Panel to the admissibility and probative value of 
several individual pieces of evidence,  is such that completing the analysis would require us to 
examine anew the entire USDOC finding of entrustment or direction.  We have stated above that the 
determination of entrustment or direction will hi nge largely on the particular facts of the case.
366  
Thus, in completing the analysis—that is, in exam ining the legal question whether the USDOC could 
have arrived at a finding of entrustment or dir ection on the basis of the evidence and explanation 
provided—we would need to engage in a thorough examination of the evidence, particularly as the 
Panel improperly excluded certain evidence from its consideration.   
197. Furthermore, we do not consider that the par ticipants have addressed sufficiently, in their 
submissions, those issues that we might need to exam ine if we were to complete the analysis in this 
case, including, for example:  (i) whether the probativ e value of certain pieces of evidence is affected 
by our modification of the Panel's interpretation of  the terms "entrusts" and "directs";  (ii) the 
probative value of the United States evidence improperl y excluded by the Panel;  (iii) the relevance of 
certain factual disagreements that the Panel consider ed unnecessary to resolve in the light of its legal 
analysis367;  and (iv) the inferences that may reasonably be drawn from an analysis of the evidence in 
its totality.  In these circumstances, we believe it is  more appropriate to limit our examination to a 
review of the issues of law cove red in the Panel Report and the lega l interpretations developed by the 
Panel.  Therefore, we do not complete the analysis to arrive at our own conclusion on the consistency 
of the USDOC's subsidy determination with Article 1.1(a)(1)(iv) of the SCM Agreement .   
198. This does not mean that we are hereby expr essing any view as to whether the USDOC's 
determination of entrustment or direction—which is a necessary co mponent of its determination of 
financial contribution—is necessarily supported by su fficient evidence.  We conclude only that the 
Panel's finding of inconsistency, which resulted from its flawed approach to reviewing the evidence, 
is in error.  Of course, the inquiry into the existe nce of a subsidy does not end with a determination of 
a financial contribution.  Such an inquiry must proceed to exam ine whether the alleged financial 
                                                      
366Supra , para. 116.   
367See, for example, Panel Report, footnote 166 to para. 7.141 and  para. 7.167.  WT/DS296/AB/R 
 Page 77 
 
 
contribution confers a "benefit".368  In addition, the SCM Agreement  requires that a subsidy be 
"specific" in order for countervailing measures to be imposed.369  We turn to these issues in the 
following Section of our Report.   
VII. Benefit and Specificity 
199. The United States appeals the Panel's findings relating to the USDOC's determination of 
benefit and, in respect of Group B and C creditors, specificity.  
200. As to the determination of benefit, the Panel noted that the USDOC's benefit analysis "was 
predicated almost entirely upon the [US]DOC's dete rmination that Group B and C (except Citibank) 
creditors were entrusted or directed by GOK to pa rticipate in the four financial contributions at 
issue".370  "[T]hese creditors", the Panel explained, "w ere rejected as market benchmarks ... because 
the [US]DOC found that they were acting pursuant to  government entrustment or direction, rather 
than market principles, when participating in the Hynix restructuring".371  The Panel reasoned that, 
because the USDOC could not properly have found that  these private creditors had been entrusted or 
directed by the GOK, "government entrustment or direction of these creditors could not have been a 
proper basis for the [US]DOC to reject them as market benchmarks".372  Therefore, the Panel found 
that "the [US]DOC's benefit determination is  inconsistent with Article 1.1(b) of the SCM 
Agreement ".373 
201. The Panel made the following finding in respect of the USDOC's determination of specificity 
relating to Group B and C creditors: 
[W]e understand that the [US]DOC found that the alleged 
subsidies provided by Group B and C creditors are specific because of the role allegedly played by the GOK in entrusting and directing those creditors to save a specific entity, i.e., Hynix.  In other 
words, the [US]DOC's finding of specificity in respect of Group B 
and C creditors was based on its finding of GOK entrustment or direction of private creditors to participate in the single programme 
of Hynix restructuring.  We recall, however, that we have found that the [US]DOC's determination of gove rnment entrustment or direction 
is factually flawed, and inconsistent with Article 1 of the SCM 
Agreement .  In the circumstances, the [US]DOC's finding of GOK 
entrustment cannot provide a proper basis for a determination of 
                                                     
 
368Article 1.1(b) of the SCM Agreement . 
369Article 1.2 of the SCM Agreement . 
370Panel Report, para. 7.190. 
371Ibid. (footnote omitted) 
372Ibid. (footnote omitted) 
373Ibid. WT/DS296/AB/R 
Page 78  
 
specificity in respect of alleged subsidies provided by Group B and C 
creditors. 
... 
For these reasons, we find that the [US]DOC's finding of specificity 
is inconsistent with Article 2 of the SCM Agreement  in so far as it 
relates to alleged subsidies by Group B and C creditors[.]
374 
202. On appeal, the United States requests the Appella te Body to reverse these findings because 
"the Panel's conclusions are based solely on its erroneous finding that the [US]DOC's determination 
of GOK entrustment or direction of certain Hynix credit ors is inconsistent with Article 1.1(a)(1)(iv) of 
the SCM Agreement."375   
203. At the oral hearing, Korea disagreed with th e United States' assertion that the Panel's finding 
relating to benefit is premised exclusively on the Pa nel's finding on entrustment or direction.  Korea 
stated that the Panel also criticized the USDOC's rejection of Citibank as an appropriate benchmark 
for the determination of benefit.376   
204. We find no such "criticism" in the paragraph of the Panel Report referred to by Korea;  in that 
paragraph, the Panel is merely d escribing the approach taken by the USDOC, including its rejection of 
Citibank as a benchmark.  In para graph 7.191 of the Panel Report, the Panel expressly indicates that, 
in the light of its finding that the USDOC's de termination of benefit was inconsistent with 
Article 1.1(b) because it was premised on an improper finding of entrustment or  direction, "it is not 
necessary ... to examine other issues raised by the pa rties regarding market benchmarks".  Thus, we 
agree with the United States' assertion that the Pa nel's finding concerning the USDOC's determination 
of benefit is premised exclusively on the Panel' s finding relating to entrustment or direction. 
205. Having reversed the Panel's findings that th e USDOC's determination of entrustment or 
direction is inconsistent with Artic le 1.1(a)(1)(iv), there is no basis for us to uphold the Panel's finding 
on benefit.  Consequently, we also reverse  the Panel's finding, in paragr aphs 7.190, 7.209, and 8.1 of 
the Panel Report, that the USDOC's benefit determina tion is inconsistent with Article 1.1(b) of the 
SCM Agreement .377 
                                                      
374Panel Report, paras. 7.206 and 7.208. (footnote omitted)  The Panel found that the USDOC could 
have properly found specificity in respect of Group A creditors. ( Ibid., para. 7.207) 
375United States' appellant's submission, para. 131. (footnote omitted) 
376Korea's response to questioning at the oral hear ing (referring to Panel Report, para. 7.180). 
377Because we have reversed the Panel's findings of inconsistency with Article 1.1(a)(1)(iv) and 1.1(b), 
we do not address whether a Member may be found to be acting inconsistently with a definitional  provision, 
such as Article 1 of the SCM Agreement .  (Appellate Body Report, US – FSC (Article 21.5 – EC) , para. 85)  WT/DS296/AB/R 
 Page 79 
 
 
206. As to specificity, Korea agreed at  the oral hearing that the Panel's finding of inconsistency in 
respect of the USDOC's determination of specificity  relating to Group B and C creditors is premised 
exclusively on the Panel's finding on entrustment or  direction.  Korea acknowledged that a reversal of 
the Panel's finding relating to entr ustment or direction would necessarily  result in the reversal of the 
Panel's finding of inconsistency concerning the determ ination of specificity in respect of Group B and 
C creditors.  We agree.  In paragraph 7.206 of the Pa nel Report, the Panel explains its view that "the 
[US]DOC's finding of GOK entrustment cannot provi de a proper basis for a determination of 
specificity in respect of alleged subsidies provide d by Group B and C creditors".  The Panel provides 
no other basis for its finding. 
207. Accordingly, we reverse  the Panel's findings, in paragraphs 7.208, 7.209, and 8.1 of the Panel 
Report, that the USDOC's finding of specificity  is inconsistent with Article 2 of the SCM Agreement  
insofar as it relates to alleged subsidies by Group B and C creditors.  
208. The Panel did not examine these issues further.   Consequently, there are neither sufficient 
findings by the Panel nor undisputed facts contained in the record to allow us to conduct our own analysis of Korea's claims regarding benefit and specificity.
378  We recall that it is not sufficient to 
determine that there is a "financial contribution by  a government or any public body" in order to find 
that there is a "subsidy" under Article 1.1 of the SCM Agreement .  This provision also requires that "a 
benefit is thereby conferred".  Article 1.2 requires, in  addition, that the subsidy be "specific".  Because 
the Panel's findings on benefit and sp ecificity were premised exclusiv ely on its conclusion relating to 
entrustment or direction, there is insufficient basi s for us to examine the consistency of the USDOC's 
benefit and specificity determinations with the SCM Agreement .  Even though we reverse the Panel's 
findings, we offer no view as to the consistency of  the USDOC's underlying determinations of benefit 
and specificity.  
                                                      
378Appellate Body Report, US – Softwood Lumber IV , para. 113. WT/DS296/AB/R 
Page 80  
 
VIII.  Findings and Conclusions 
209. For the reasons set out in this Report, the Appellate Body: 
(a) upholds
 the Panel's finding, in paragraph 7.4 15 of the Panel Report, that Korea's 
request for consultations did not fail to i ndicate the legal basis for the complaint in 
relation to the USDOC's CVD order, as required by Article 4.4 of the DSU;   
(b) as regards the USDOC's finding of entrustment or direction: 
(i) with respect to the Panel's interpretation of Article 1.1(a)(1)(iv) of the SCM 
Agreement : 
(A) modifies  the Panel's interpretation of Article 1.1(a)(1)(iv), set out in 
paragraph 7.31 of the Panel Report, to the extent that it may be understood as limiting the terms "ent rusts" and "directs" to acts of 
"delegation" and "command";  and 
(B) upholds
 the Panel's finding, in paragr aph 7.117 of the Panel Report, 
that the evidence was "sufficien t for an objective and impartial 
investigating authority to properly find government entrustment or direction in respect of KFB";  
(ii) with respect to the Panel's review of  the USDOC's finding of entrustment or 
direction under Article 1.1(a)(1)(iv) of the SCM Agreement : 
(A) finds
 that the Panel did not err  in finding, in paragraphs 7.35 and 7.46 
of the Panel Report, that the evidence underlying the USDOC's finding of entrustment or direction must be "probative and 
compelling", to the extent the Panel understood these terms to require 
only that the evidence demonstrate entrustment or direction; 
(B) finds
 that the Panel erred  in failing to examine the USDOC's 
evidence in its totality, and requiring , instead, that individual pieces 
of evidence, in and of themselves, establish entrustment or direction 
by the GOK of Hynix's creditors;  WT/DS296/AB/R 
 Page 81 
 
 
(C) finds  that the Panel erred , in paragraphs 7.88, 7.102, 7.116, 7.121, 
and 7.141 of the Panel Report, in  declining to consider certain 
evidence on the record of the underlying investigation but not cited 
by the USDOC in its published determination; 
(D) finds  that the Panel failed to comply  with its obligations under 
Article 11 of the DSU by finding, in paragraph 7.85 of the Panel 
Report, that "the mediation provisions [of the CRPA] had actually 
been invoked by three creditors in respect of the October 2001 restructuring", in the absence of supporting evidence on the record of 
the underlying investigation;  and 
(E) finds
 that the Panel failed to apply th e proper standard of review and, 
therefore, failed to comply  with its obligations under Article 11 of 
the DSU;  and, consequently, 
(iii) reverses  the Panel's findings, in paragraphs  7.178, 7.209, and 8.1 of the Panel 
Report, that the USDOC's determination of GOK entrustment or direction of 
Hynix's Group B and C creditors is incons istent with Article 1.1(a)(1)(iv) of 
the SCM Agreement ; 
(c) reverses  the Panel's findings, in paragraphs 7.19 0, 7.209, and 8.1 of the Panel Report, 
that the USDOC's benefit determination is inconsistent with Article 1.1(b) of the SCM 
Agreement ;  and 
(d) reverses  the Panel's findings, in paragraphs 7.20 8-7.209, and 8.1 of the Panel Report, 
that the USDOC's finding of specificity, inso far as it relates to subsidies provided by 
virtue of GOK entrustment or direction of Hynix's Group B and C creditors, is inconsistent with Article 2 of the SCM Agreement . 
210. Based on these findings, the Appellate Body makes no recommendation to the Dispute 
Settlement Body pursuant to Article 19.1 of the  DSU. WT/DS296/AB/R 
Page 82  
 
 
Signed in the original in Geneva this 9th day of June 2005 by:  
 
 
 
  
_________________________ 
Georges Abi-Saab 
Presiding Member 
 
 
 
  
 _________________________ _________________________ 
 Merit E. Janow Yasuhei Taniguchi 
 Member Member 
 
  WT/DS296/AB/R 
 Page 83 
 
 
 Annex I  
 
 WORLD TRADE  
ORGANIZATION  WT/DS296/5 
1 April 2005 
 (05-1309) 
 Original:   English 
  
UNITED STATES – COUNTERVAILING DUTY INVESTIGATION ON 
DYNAMIC RANDOM ACCESS MEMORY SEMICONDUCTORS 
(DRAMS) FROM KOREA 
 
Notification of an Appeal by the United States
 
under Article 16.4 and Article 17 of the Understanding on Rules  
and Procedures Governing the Settlement of Disputes (DSU),  
and under Rule 20(1) of the Working Procedures for Appellate Review  
   The following notification, dated 29 March 200 5, from the Delegation of the United States, is 
being circulated to Members. 
 
_______________ 
 
 Pursuant to Article 16 of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes ("DSU") and Rule 20 of the Working Procedures for Appellate Review, the 
United States hereby notifies its decision to appeal  to the Appellate Body certain issues of law 
covered in the Report of the Panel on  United States – Countervailing Duty Investigation on Dynamic 
Random Access Memory Semiconductors (DRAMS) from Korea  (WT/DS296/R) ("Panel Report") and 
certain legal interpretations develope d by the Panel in this dispute. 
 1. The United States seeks review by the Appellate  Body of the Panel's legal conclusion that the 
determination by the U.S. Department of Commerce ("DOC") of Government of Korea ("GOK") 
entrustment or direction of Hynix's Group B and C cr editors is inconsistent with Article 1.1(a)(1)(iv) 
of the Agreement on Subsidies and Countervailing Measures  ("SCM Agreement").
1  This conclusion 
is in error and is based on erroneous findings on issu es of law and related legal interpretations.  These 
erroneous findings include, for exam ple, the findings described below. 
 
 (a) The Panel erroneously interprete d the phrase "entrusts or directs" in 
Article 1.1(a)(1)(iv) of the SCM Agreem ent and then applied that erroneous 
interpretation to the record evidence.2 
 
 (b) The Panel applied an erroneous "probative and compelling" evidentiary standard that 
is not found in Article 1.1(a)(1)(iv) or any other provision of the SCM Agreement (or 
any other covered agreement), and that, inter alia , effectively shifted the burden of 
                                                      
1Panel Report, paragraphs 7.175-7.178. 
2The Panel's erroneous interpretation is articulated in, inter alia , paragraphs 7.27-7.46 of the Panel 
Report, and is applied in subsequent paragraphs, including, inter alia , paragraphs 7.51, 7.56, 7.62-7.63, 
7.76-7.78, 7.82-7.91, 7.99-7.104, 7.129-7.130, 7.135,  7.141, 7.155, 7.163-7.168, 7.172-7.174, 7.175-7.178. WT/DS296/AB/R 
Page 84  
 
 proving a WTO-inconsistent action from Kor ea to the United States, caused the Panel 
to discount the circumstantial evidence re lied upon by the DOC, and resulted in the 
Panel disregarding certain evidence altogether.
3 
  (c) The Panel relied upon evidence that was not on the record of the DOC and that was 
contradicted by evidence that was on the DOC  record.  Such reliance was inconsistent 
with the Panel's obligation under Article  11 of the DSU to conduct an objective 
assessment of the matter before it.
4 
  (d) The Panel failed to consider certain reco rd evidence cited by the United States based 
on the Panel's erroneous findings that U.S. reliance on such record evidence 
constituted ex post facto  rationalizations.  These findings are erroneous because 
neither the SCM Agreement nor any ot her covered agreement requires an 
investigating authority to cite in its pub lished determinations to every piece of 
evidence on which the authority relies.  In addition, in most instances the DOC, in 
fact, had cited to the record evidence that the Panel disregarded.  In those instances 
where the DOC had not cited to the record  evidence disregarded by the Panel, the 
evidence was consistent with the record evidence that the DOC had cited.  The 
Panel's disregard of record evidence was inconsistent with the Panel's obligation 
under Article 11 of the DSU to conduct an obj ective assessment of the matter before 
it.
5 
 
 (e) The standard of review actually applied by the Panel amounted to an impermissible 
de novo  review of the DOC determination.  As noted above in subparagraphs (c) 
and (d), the Panel improperly considered non-record evidence and disregarded record 
evidence.  In addition, instead of looking at  the totality of the record evidence, as had 
the DOC, the Panel considered each piece of evidence in isolation, ignored and/or mischaracterized ev idence upon which the DOC relied, and substituted its own 
interpretation of the evidence for that of the DOC.  The Panel's conduct of a de novo  
review was inconsistent with the Panel' s obligation under Article 11 of the DSU to 
conduct an objective assessment of the matter before it.
6 
 
 (f) The Panel made an erroneous legal findi ng that the DOC finding of entrustment or 
direction under Article 1.1(a)(1)(iv) was not supported by sufficient evidence.7 
 
2. The United States seeks review by the Appellate  Body of the Panel's legal conclusion that the 
DOC's benefit determination is inconsistent with  Article 1.1(b) of the SCM Agreement.  This 
conclusion is in error and is based on the Panel's e rroneous legal conclusion, d escribed in paragraph 1, 
above, that the DOC's determination of GOK entr ustment or direction of Hynix's Group B and C 
creditors is inconsistent with Article  1.1(a)(1)(iv) of the SCM Agreement.8 
                                                      
3The Panel's erroneous standard of proof is set forth in, inter alia , paragraphs 7.35 and 7.46 of the 
Panel Report, and is applied in, inter alia , paragraphs 7.35, 7.45, 7.46, 7.51, 7.76-7.78, 7.99-7.103, 7.129-7.130, 
7.141, 7.164, 7.168, 7.173. 
4These errors are contained in, inter alia , paragraphs 7.63, 7.82-7.89, 7.91, 7.152 and 7.155 of the 
Panel Report. 
5These errors are contained in, inter alia , paragraphs 7.76, 7.88, 7.90, 7.102, 7.105, 7.116, 7.121, 
7.125-7.130 and 7.141 of the Panel Report. 
6These errors permeate section VII.C. 1 of the Panel Report, but examples of such errors are contained 
in, inter alia , paragraphs 7.45, 7.51, 7.56, 7.62-7.63, 7.77-7.7 8, 7.81-7.82, 7.85, 7.89, 7.91, 7.103-7.104, 7.130, 
7.146-7.155, 7.164, 7.168,  and 7.174 of the Panel Report. 
7This finding is set forth in, inter alia , paragraphs 7.175-7.177 of the Panel Report. 
8The Panel's findings are contained in paragraphs 7.190-7.191 of the Panel Report.  WT/DS296/AB/R 
 Page 85 
 
 
  
3. The United States seeks review by the Appellate  Body of the Panel's legal conclusion that the 
DOC's finding of specificity is inconsistent with Ar ticle 2 of the SCM Agreement insofar as it relates 
to subsidies by Group B and C creditors.  This co nclusion is in error and is based on the Panel's 
erroneous legal conclusion, described in paragra ph 1, above, that the DOC's determination of GOK 
entrustment or direction of Hynix's Group B and C cred itors is inconsistent with Article 1.1(a)(1)(iv) 
of the SCM Agreement.9 
 
4. The United States seeks review by the Appella te Body of the Panel's legal conclusion that, 
with respect to the DOC countervailing duty order, Korea's consultation request provides a sufficient 
indication of the legal basis of the complaint within  the meaning of Article 4.4 of the DSU.  This 
conclusion is in error and is based on erroneous  findings on issues of law and related legal 
interpretations.10 
__________ 
 
                                                      
9Panel Report, paragraphs 7.204-7.208. 
10Panel Report, paragraphs 7.414-7.415. WT/DS296/AB/R 
Page 86  
 
 Annex II
 
 
 WORLD TRADE  
ORGANIZATION  WT/DS296/6 
11 April 2005 
 (05-1531) 
 Original:   English 
 
 
 
UNITED STATES – COUNTERVAILING DUTY INVESTIGATION ON 
DYNAMIC RANDOM ACCESS MEMORY SEMICONDUCTORS 
(DRAMS) FROM KOREA 
 
Notification of an Other Appeal by Korea  
under Article 16.4 and Article 17 of the Understanding on Rules  
and Procedures Governing the Settlement of Disputes (DSU),  
and under Rule 23(1) of the Working Procedures for Appellate Review   
   The following notification, dated 11 April 20 05, from the Delegation of the Republic of 
Korea, is being circulated to Members. 
 
_______________ 
 
Pursuant to Article 16 of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes  ("DSU") and Rule 23 of the Working Procedures for Appellate Review, the 
Republic of Korea hereby notifies its decision to a ppeal to the Appellate Body certain issues of law 
and legal interpretations contai ned in the report of the Panel United States – Countervailing Duty 
Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea  
(WT/DS296/R) (the "Panel Report"). 
 
Specifically, Korea seeks review of the legal conclusion and interpretation by the Panel in 
upholding the finding of the U.S. Department of Co mmerce that a certain private Korean bank, Korea 
First Bank ("KFB"), was entrusted or directed to make a financial contribution to Hynix Corporation 
within the meaning of Article 1.1, (including Artic le 1.1(a)(1)(iv)) of the Agreement on Subsidies and 
Countervailing Measures ("SCM Agreement").
1   
 
  In particular, the Panel found that the governme nt of Korea had coerced KFB and that this 
constituted "entrustment or direction" despite th e fact that KFB ultimately did not undertake the 
action that was supposedly the purpose of the intended  coercion.  Korea considers this conclusion and 
legal interpretation to be a legal error.  Under the terms of Article  1.1 of the SCM Agreement there 
can be no legally cognizable entrustment or directio n to undertake a specified function if the private 
body never actually undertakes the function supposedly entrusted or directed.  
 
__________ 
                                                     
 
1 These findings of the Panel include paragraphs 7.107 to 7.117 and 7.176, including footnote 136, of 
the Panel Report.  WT/DS296/AB/R 
 Page 87 
 
 
 Annex III  
 WORLD TRADE  
ORGANIZATION  WT/DS296/1 
G/L/633 G/SCM/D55/1 
8 July 2003 
 
(03-3687) 
 Original:   English 
   
UNITED STATES – COUNTERVAILING DUTY INVESTIGATION 
ON DYNAMIC RANDOM ACCESS MEMORY SEMICONDUCTORS 
(DRAMS) FROM KOREA 
 
Request for Consultations by Korea
 
 
 
 The following communication, dated 30 June 2003, from the Permanent Mission of Korea to the Permanent Mission of the United States and to th e Chairman of the Dispute Settlement Body, is 
circulated in accordance with  Article 4.4 of the DSU. 
 
_______________ 
 
  My authorities have instructed me to request consultations with the Government of the United 
States pursuant to Article 4 of the Understandi ng of the Rules and Procedures Governing the 
Settlement of Disputes ("DSU"), Article 30 of  the Agreement on Subsidies and Countervailing 
Measures ("SCM Agreement"), and Article XXII of the General Agreement on Tariffs and Trade 
1994 ("GATT 1994"), with regard to US Department of Commerce's ("DOC") affirmative preliminary 
and final countervailing duty determinations, publ ished on 7 April 2003 at 68 Fed. Reg. 16766 and 
23 June 2003 at 68 Fed. Reg. 37122 in Dynamic Random Access Memory Semiconductors from the 
Republic of Korea  (case number C-580-851), US International Trade Commission's affirmative 
preliminary injury determina tion published on 27 December at 67 Fed. Reg. 79148 and any 
subsequent determinations that  may be made during the Commission's injury investigation in DRAMS 
and DRAM Modules from Korea (Inv. No. 701-TA-431), and the re lated laws a nd regulations 
including Section 771 of the Tariff Act of 1930 and 19 CFR 351 respectively.   The Government of Korea considers these determinations by the Government of the United 
States to be inconsistent with its obligations un der the relevant provisions of the GATT 1994 and the 
SCM Agreement, including, but not limited to:   1. Article 1 of the SCM Agreement because, inter alia , DOC failed to demonstrate the existence 
of a financial contribution by the Government of  Korea within the meaning of Article 1 of the 
SCM Agreement.  
 2. Article 1 of the SCM Agreement because, inter alia , DOC failed to examine each separate 
alleged government measure at issue in the investigation.   
 3. Articles 1 and 14 of the SCM Agreement because, inter alia , DOC failed to demonstrate that 
a benefit was conferred on the respondent Hynix Semiconductor In c., given available market 
benchmarks.   WT/DS296/AB/R 
Page 88  
 
  
4. Articles 1 and 14 of the SCM Agreement because, inter alia, the "creditworthy," 
"equityworthy," and other analysis required by  Section 771(5) of the Tariff Act of 1930 and 
19 CFR 351 are as such inconsistent with DOC 's obligations under the SCM Agreement. 
5. Articles 1 and 2 of the SCM Agreement because, inter alia , Section 771(5) and (5A) of the 
Tariff Act of 1930 and 19 CFR 351 impose and DOC applied an improper burden of proof on 
respondents and, in turn, DOC did not base its  decisions on affirmative, objective, and 
verifiable evidence.  
 6. Articles 11 of the SCM Agreement because, inter alia , DOC did not base its decision to 
initiate its countervailing duty inves tigation on sufficient evidence.   
 7. Article 12 of the SCM Agreement because, inter alia , DOC conducted various verification 
meetings over the explicit objection of the Government of Korea. 
 
8. Article 17 of the SCM Agreement because, inter alia , DOC imposed provisional measures 
based on flawed analysis of financial contributi on, benefit, and other factual and legal issues 
that were inconsistent with the US obl igations under the SCM Agreement.   
 9. Article 22 of the SCM Agreement because, inter alia , DOC failed to provide all relevant 
information on the matters of fact and law and reasons for its determinations. 
 
10. Articles 10 and 32.1 of the SCM Agreement and Articles VI:3 and X:3 of the GATT 1994 
because, inter alia , DOC failed to conduct its investiga tion and make determinations in 
accordance with fundamental substan tive and procedural requirements. 
 
 The Government of Korea reserves its rights to  raise additional factual and legal issues during 
the course of the consultations and in the re quest for the establishment of a panel.   
  We look forward to the response of the Governme nt of the United States to this request so 
that we can schedule a mutually conve nient date to begin consultations. 
 
__________ 
 
  WT/DS296/AB/R 
 Page 89 
 
 
 Annex IV  
 WORLD TRADE  
ORGANIZATION  WT/DS296/1/Add.1 
G/L/633/Add.1 G/SCM/D55/1/Add.1 
21 August 2003 
 
(03-4353) 
 Original:   English 
   
UNITED STATES – COUNTERVAILING DUTY INVESTIGATION 
ON DYNAMIC RANDOM ACCESS MEMORY SEMICONDUCTORS 
(DRAMS) FROM KOREA 
 
Request for Consultations by Korea
 
 
Addendum  
  
 The following communication, dated 18 August 2003, from the Permanent Mission of Korea 
to the Permanent Mission of the United States and to the Chairman of the Dispute Settlement Body, is 
circulated in accordance with  Article 4.4 of the DSU. 
 
_______________ 
 
 
With reference to document WT/DS296/1, G/L/633, G/SCM/D55/1 circulated on 8 July 2003, 
my authorities have instructed me to request furthe r consultations with the Government of the United 
States pursuant to Article 4 of the Understandi ng of the Rules and Procedures Governing the 
Settlement of Disputes ("DSU"), Article 30 of  the Agreement on Subsidies and Countervailing 
Measures ("SCM Agreement"), and Article XXII of the General Agreement on Tariffs and Trade 1994 ("GATT 1994"), with regard to the US Inte rnational Trade Commission's ("ITC") final 
determination of material injury, as repo rted on 4 August 2003 and as reflected in DRAMs and DRAM 
Modules from Korea , Inv No. 701-TA-431 (Final), USITC Pub 3617 (August 2003) and the US 
Department of Commerce's ("DOC") final counterva iling duty order, both published on 11 August 
2003 at 68 Fed. Reg. 47607 and 68 Fed. Reg. 47546, respec tively.  Both of these actions relate to the 
same underlying measures at issue in our  previous request for consultations. 
The Government of Korea considers these determinations by the Government of the United 
States to be inconsistent with its obligations un der the relevant provisions of the GATT 1994 and the 
SCM Agreement, including, but not limited to:  
 
 1. Article 15.1 of the SCM Agreement, becau se the ITC determination was not based on 
positive evidence and an objective assessment of  the effects of allegedly subsidized 
imports; 
  2. Article 15.2 of the SCM Agreement,  because the ITC determination improperly 
assessed the significance of the volume and price effects of subject imports; 
 
 3. Article 15.4 of the SCM Agreemen t, because the ITC improperly assessed the 
condition of the domestic industry;  WT/DS296/AB/R 
Page 90  
 
  
 4. Article 15.5 of the SCM Agreement, b ecause the ITC improperly assessed the role of 
other factors, and improperly attributed the effect of other factors to the allegedly 
subsidized imports. 
 
 The Government of Korea reserves the right to  raise additional factual and legal issues during 
the course of the consultations and in the request for the establishment of a panel. 
  We look forward to the response of the Govern ment of the United States to this request for 
further consultations on the countervailing duties imposed on DRAMs from Korea, so that we can 
schedule a mutually convenient date  to resume consultations following the first set of consultations 
scheduled for 20 August in Geneva.  
__________ 
   WT/DS296/AB/R 
 Page 91 
 
 
 Annex V  
 WORLD TRADE  
ORGANIZATION  WT/DS296/2 
21 November 2003 
 
 (03-6239) 
 Original:   English 
   
UNITED STATES – COUNTERVAILING DUTY INVESTIGATION 
ON DYNAMIC RANDOM ACCESS MEMORY SEMICONDUCTORS 
(DRAMS) FROM KOREA 
 
Request for the Establishment of a Panel by Korea
 
 
 
 The following communication, dated 19 November 2003, from the Delegation of Korea to the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 6.2 of the DSU.  
_______________ 
  
 On 11 August 2003, the United States publishe d a final countervailing duty order in the US 
Federal Register  in the matter of Dynamic Random Access Memory Semiconductors (DRAMS) from 
the Republic of Korea  (68 Fed. Reg. 47546), c onfirming under US law countervailing duties against 
DRAMS from Korea.  Provisional countervailing duti es had been in place since 7 April 2003, with 
publication in the Federal Register  of the DOC's preliminary affirmative countervailing duty 
determination (68 Fed. Reg.16766).  The final or der was the result of the US Department of 
Commerce's (DOC's) final countervailing dut y determination, published in the Federal Register  on 23 
June 2003 (68 Fed. Reg. 37122), as amended on 28 July 2003 (68 Fed. Reg. 44290), and as further 
explained in an unpublished Decision Memorandum.
1  It was also the result of the US International 
Trade Commission's (ITC's) final material injury determination, also published in the Federal 
Register  on 11 August 2003 (68 Fed. Reg. 47607), and as further elaborated in the ITC's report of its 
final DRAMS investigation.2   
  The Government of Korea considers these determ inations by the DOC and the ITC that led to 
the US countervailing duty ("CVD") order against DR AMS from Korea, and thereby the order itself, 
to be inconsistent with US obligations under the relevant provisions of the GATT 1994 and the 
Agreement on Subsidies and Countervailing Measur es ("SCM Agreement").  As a result, the 
Government of Korea requested consultations with  the Government of the United States regarding 
these determinations pursuant to Article 4 of the Understanding of the Rules and Procedures 
Governing the Settlement of Disputes ("DSU"), Arti cle 30 of the SCM Agreement, and Article XXII 
of the GATT 1994.  Consultations were re quested on 30 June 2003 concerning the DOC's 
determination,
3 and on 18 August 2003 concer ning the ITC's determination.4  The consultations were 
                                                      
1 The DOC makes the Decision Memorand um available on the internet at 
http://ia.ita.doc.gov/frn/summary/k orea-south/03-15793-1.pdf.   
2 DRAM Modules from Korea , Inv. No. 701-TA-431 (Final), USITC Pub. 3617 (August 2003). 
3 WT/DS296/1, G/L/633, G/SCM/D55/1. 
4 WT/DS296/1/Add.1, G/L/633/Add.1, G/SCM/D55/1/Add.1. WT/DS296/AB/R 
Page 92  
 
 held with the United States on 20  August 2003 and 1 October 2003, r espectively.  These consultations 
failed to resolve the dispute between the parties.   As a result of the failure to resolve the di spute, the Government of Korea requests the 
establishment of a panel pursuant to Article 6 of the DSU,  Article XXIII of the GATT 1994, and 
Article 30 of the SCM Agreement  regarding the DOC and ITC determ inations and the resulting CVD 
order imposed on DRAMS from Korea.  The Govern ment of Korea requests that the panel make 
findings that the United States has act ed inconsistently with its obliga tions under Articles 1, 2, 10, 12, 
14, 15, 19, 22 and 32 of the SCM Agreement, as well as Article VI:3 of GATT 1994.  Specifically, 
the Government of Korea mak es claims under the following: 
 
 1. Article 1.1 of the SCM Agreement because, inter alia , the DOC failed to demonstrate 
the existence of a financial contribution by the Government of Ko rea with respect to 
each distinct financial transaction at issue in its subsidy investigation; 
 
 2. Article 1.1 of the SCM Agreement because, inter alia , the DOC erroneously assumed 
that every Korean private financial institu tion involved in its subsidy investigation 
was under the direction or entrustment of the Government of Korea;  
  3. Articles 1.1 and 14 of the SCM Agreement because, inter alia , the DOC failed to 
demonstrate that a benefit was conferre d on the respondent Hynix Semiconductor, 
Inc., given available market be nchmarks among Hynix's creditors; 
  4. Articles 1.1 and 14 of the SCM Agreement because, inter alia , the DOC disregarded 
market benchmarks for measuring benefit established by a foreign bank operating in 
the Korean market that extended financi ng to the respondent Hynix Semiconductor, 
Inc. during the period of investigation;  
  5. Articles 1.1 and 14 of the SCM Agreement because, inter alia,  the DOC failed to 
utilize relevant market benchmarks in dete rmining whether Hynix was "creditworthy" 
or "equityworthy," and otherwise applied an improper "uncreditworthy" benchmark 
and discount rate in calculating the benefit to  Hynix Semiconductor, Inc., in this case; 
 
 6. Article 19.4 of the SCM Agreement a nd Article VI:3 of the GATT 1994 because, 
inter alia , the DOC's failure to measure the be nefit in accordance with the principles 
of Article 14 of the SCM Agreement resulte d in countervailing duties levied in excess 
of the amount allowed under the SCM Agreement and the GATT 1994; 
 
 7. Articles 1 and 2 of the SCM Agreement because, inter alia , the DOC imposed an 
improper burden of proof on respondents, that  is the Government of Korea and Hynix 
Semiconductor, Inc., and thereby failed to base its decision on affirmative, objective, 
and verifiable evidence; 
 
 8. Article 2 of the SCM Agreement because, inter alia , the DOC disregarded the fact 
that many Korean companies underwent debt restructuring similar to that undergone by Hynix Semiconductor, Inc.  Therefore, the DOC did not establish that all of the alleged subsidies were specific to the respondent Hynix Semiconductor, Inc., on the 
basis of positive evidence; 
 
 9. Article 12.6 of the SCM Agreement because, inter alia , the DOC conducted various 
private verification meetings in the territory of Korea, at which the Government of Korea had no representatives, over the explicit objection of the Government of Korea; 
  WT/DS296/AB/R 
 Page 93 
 
 
  10. Article 15.1 of the SCM Agreement because, inter alia , the ITC determinations on 
injury and causation were not based on pos itive evidence and an objective assessment 
of the effects of allegedly subsidized imports; 
  11. Article 15.2 of the SCM Agreement because, inter alia , the ITC determinations on 
injury and causation improperly assessed the significance of the volume and price 
effects of subject imports; 
  12. Article 15.4 of the SCM Agreement because, inter alia , the ITC improperly assessed 
the overall condition of the domestic industry; 
 
 13. Articles 15.2 and 15.4 of the SCM Agreement because, inter alia , the ITC improperly 
ignored the definition of domestic industry as set forth in Article 16 of the SCM Agreement, defined the domestic industry and imports inconsistently, and thus 
distorted the volume of imports and the effects thereof on the domestic industry; 
 
 14. Article 15.5 of the SCM Agreement, because , inter alia , the ITC failed to 
demonstrate the requisite causal link betw een subject imports and injury, improperly 
assessed the role of other factors, and improperly attributed the effect of other factors to the allegedly subsidized imports;  
 
 15. Article 22.3 of the SCM Agreement because, inter alia , the ITC's injury 
determination did not set forth in sufficien t detail the ITC's findi ngs and conclusions 
on all material issues of fact and law; and 
  16. Articles 10 and 32.1 of the SCM Agreement because, inter alia , the CVD order 
imposed by the United States against DR AMS from Korea was not in accordance 
with the relevant provisions of the SCM Agreement or the relevant provisions of the GATT 1994. 
  The Government of Korea requests that the pa nel be established with the standard terms of 
reference set forth in Article 7 of the DSU . 
 
 The Government of Korea further requests that  this request be placed on the agenda for the 
meeting of the Dispute Settlement Body on 1 December 2003.  
__________