WT/DS296/R 
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ANNEX E 
  
PANEL'S QUESTIONS, ANSWERS AND COMMENTS OF PARTIES  
 
 
Contents Page 
Annex E-1 Questions to the Parties following the First Substantive Meeting E-2 
Annex E-2 Questions to the Parties follo wing the Second Substantive Meeting E-7 
Annex E-3 Answers of Korea to Panel Questions, First Meeting E-10 
Annex E-4 Answers of the United States to Panel Questions, First Meeting E-33 
Annex E-5 Answers of Korea to Pa nel Questions, Second Meeting E-64 
Annex E-6 Answers of the United States to Panel Questions, Second Meeting E-76 
Annex E-7 Comments of Korea on Answers of the United States to Panel  
  Questions, Second Meeting E-115 
Annex E-8 Comments of the United States on New Factual Information 
  provided in Korea's answers to Panel Questions, Second Meeting E-121 
 WT/DS296/R 
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ANNEX E-1 
 
 
QUESTIONS TO THE PARTIES FOLLOWING  
THE FIRST SUBSTANTIVE MEETING OF THE PANEL 
 
Each party may address/comment on ques tions addressed to the other party. 
 
A. QUESTIONS TO THE UNITED STATES 
 
1. Alleged subsidization 
 1. At paras 235 and 236 of its first written submi ssion, the US refers to "the Hynix bailout" as 
the "the subsidy program".  What are the rele vant constituent parts of  that alleged subsidy 
programme? 
 
2. For each alleged financial cont ribution forming part of the "Hynix bailout" "program", please 
specify which private entities participated in that  financial contribution, and what evidence of 
entrustment and/or direction the ITC relied on in respect of each of those private entities. 
 3. With regard to paras 139 and 146 of the US first written submission, please list which Hynix 
creditors the DOC considered to be "government -owned and controlled", which were treated as 
"government-owned", which were designated as "m ajority-owned by the government", and which 
were treated as public bodies.  Please explain how the US defines each of these terms for the purpose 
of these proceedings, and the consequential rationa le for the designation made by the DOC with 
respect to each of the relevant entities. 
 
4. Did the DOC find that "government-owned and controlled" banks were entrusted/directed by 
GOK, or did it find that they were the instruments through which GOK entrusted/directed other entities?  
5. Did the DOC find that "majority-owned by th e government" banks were entrusted/directed by 
GOK, or did it find that they were the instruments through which GOK entrusted/directed other entities?  6. Did the DOC find that "government-owned" banks  were entrusted/directed by GOK, or did it 
find that they were the instruments throu gh which GOK entrusted/directed other entities? 
 
7. Assume a government announces publicly that it is going to restructure a bankrupt industry 
and that, although it would prefer to do so with the assistance of private investors, it would do so on its own if necessary.  Assume that private investors decide to participate in that restructuring, purely 
on the basis of the government's statement that it is going to keep that industry afloat.  Leaving aside 
issues of benefit concerning the terms of the restruct uring, should an investigating authority find that 
those private investors had been entrusted or directed  by the government to participate?  Why, or why 
not?   WT/DS296/R 
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 8. Please comment on Korea's assertion (para. 51 of  its oral statement) that many creditors 
"walked away" from the October 2001 restructuring.  Doesn't this suggest that  those creditors were 
able to act independently of any GOK desire to restructure Hynix?  Please explain.  9. The US argued at the first substantive meeti ng that KFB was "brought into line" after initially 
resisting GOK efforts to require it to participate in  the Hynix restructuring.  Korea denies this, arguing 
that KFB ultimately did not participate in th e October 2001 restructuring.  Please comment. 
 10. The US asserted at the first substantive meeti ng that creditors were required to participate in 
the October 2001 restructuring by virtue of the CRPA.  Was such alleged mandatory participation 
relied on by the DOC as evidence of entrustment and/ or direction?  If yes, please indicate where this 
issue is addressed in the DOC's determination.  If not, why not?  11. With regard to the May and October 2001 restru cturings, the parties have referred to option 3 
as the exercise of "appraisal rights".  Please commen t.  Was the exercise of appraisal rights any 
different from liquidation?  Please explain.  
 12. The US asserted at the first substantive mee ting that this case is not about a comparison of 
different WTO Members' restructuring frameworks.  At para. 21 of its oral statement, however, the 
US seems to have argued that an investigati ng authority could reasonably have found that a 
reasonable investor would not have invested in Hy nix because it was "technically insolvent".  Doesn't 
this suggest a per se  rule that all "technically insolvent" companies should be liquidated?  Please 
explain.  13. At para. 17 of its oral statement, the US refe rs to alleged pressure on credit rating agencies.  Is 
this evidence of entrustment / direction of private creditors?  If not, what is the relevance of this 
evidence to the DOC's determination of subsidization?  Please explain. 
 14. At para. 18 of its oral statement, the US refe rs to KEB's rationale for participating in the May 
and October 2001 restructurings.  Is it surprising th at a public body would act on the basis of social 
and economic policy considerations?  Why does the fact that a public body creditor acted on non-commercial principles necessarily mean that other private body creditors also did so? 
 
2. Alleged injury  15. At para. 316 of its first written submission, th e US states that the ITC explained that although 
it opined that "the use of bits as a unit of measureme nt [could] present difficulties for [its] analysis", it 
nevertheless found that the absolute volume of s ubsidized subject imports and the increase in that 
volume relative to US production an d consumption was "significant". 
  (i) What were the reasons why
 the ITC nevertheless found that the absolute volume of 
subsidized subject imports and the increase in  that volume relative to US production 
and consumption was "significant"?  
 
 (ii) Where were those reasons set forth in its Determination and Views (Exhibit GOK-10) 
(or any other relevant document)? 
  (iii) The last paragraph of page 21 of the ITC's Determination and Views states that the 
ITC's "findings about the volume of subject imports are reinforced  by the substantial 
degree of substitutability between subject imports and domestic shipments".  If the finding that the absolute volume of subsidized subject imports is significant is "reinforced" by considerations of substituta bility, what is the initial basis for that WT/DS296/R 
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 finding?  In other words, what is the initial basis that is then "reinforced" by 
considerations of substitutability? 
  (iv) Was the ITC's determination of material injury and/or causation based on its finding 
that the absolute volume of subsidized s ubject imports was "significant"?  Was this 
finding relevant to its determination?  Woul d the ITC not have made its determination 
of material injury and/or causation but for its finding that the absolute volume of subsidized subject imports was "significant"? 
 16. Please comment on Korea's statement that ther e was no displacement of US workers resulting 
from Hynix's Eugene facility "swapping customers" with Hynix's Korean facility. 
 17. At para. 40 of its oral statement, the US ass erts that the ITC determined that "a significant 
portion of non-subject imports were Rambus and spec iality DRAM products".  On the basis of a non-
confidential presentation/summary of the underlying  proprietary information, please indicate what 
percentage of non-subject imports we re Rambus and speciality products? 
 18. On the basis of a non-confidential presen tation/summary of the underlying proprietary 
information, please set out the basis for the ITC' s finding that the volume of subsidized subject 
imports was "significant".  
19. The US argued at para. 424 of its first wr itten submission that the causal analysis for 
countervail was different than the causal analysis fo r safeguards.  The US based its argument on the 
different injury thresholds set forth in the SCM and Safeguards Agreements respectively.  How does 
the injury threshold determine the requisite degree of  causal nexus?  In other words, what is it about 
the need to find serious injury in  the case of safeguards that makes the causation standard different 
than in countervail, where material  injury need to be established? 
 20. The US noted at the first substantive meeti ng that Article 15.5 of the SCM Agreement refers 
to a "causal relationship" between the subsidized imports and the material injury to the domestic 
industry, whereas Article 4.2(b) refers to a "causal  link" between increased imports and the serious 
injury to the domestic industry.  Does this explai n the alleged difference in the applicable causation 
standards?  Please explain. 
 21. The US asserts at para. 424 of its first written submission that "the 'causal relationship' of the 
SCM Agreement is ... different from the 'causal link'  requirement of the safe guards Agreement".  At 
para. 443 of its first written submission, the US re fers to the ITC "demonstrating a causal link".  At 
para. 419, the US refers to the need to establish a "causal relationship".  How credible is the US 
assertion that the term "causal link" differs from the term "causal relationship" if the US fails to distinguish between those two con cepts in its written submission? 
 22. At para. 424 of its first written submission, th e US appears to argue that the ITC applied the 
"causal relationship" standard.  Is this a correct  understanding of the US argument?  Please explain. 
 
23. Please explain how the ITC complied with the causation standard described at para. 427 of 
the US first written submission.  In particular, how did the US "separate and distinguish" the injurious effects of non-subject imports?  
24. How do the causation standards of "causal link" (Article 4.2(b) of the Safeguards Agreement) 
and "causal relationship" (Article 15.5 of  the SCM Agreement) differ in practice? 
 25. Korea noted at the first substantive meeting that  the Argentina-Footwear panel, in respect of a 
safeguards dispute, stated (para. 8.238) that an ab sence of coincidence, or correlation, "would create  WT/DS296/R 
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 serious doubts as to the existence of a causal link, and would require a very compelling analysis of 
why causation still is present" (italics in original).  Does the US consider that such panel ruling is not 
relevant to the present proceedings because it concer ns causation in the context of safeguards, and not 
countervail?  Please explain.  
B. QUESTIONS TO KOREA 
 1. Alleged subsidization 
 
26. Korea stated at the first substantive meeting that the more concrete the designated task, the 
more specific the target entity, the more confident one could be of the existence of entrustment/direction.  Does the fact that concre te tasks and specific addresses increases confidence in 
a finding mean that the finding is precluded in circumstances where the designated task is less concrete and the addressee is not  clearly specified?  Isn't it simply more difficult – but not necessarily 
impossible - to establish entrustment / direction in  such circumstances?  Isn't the discussion about 
formal/explicit as opposed to informal/implicit entrustm ent / direction really an issue of evidence, 
rather than law?  Please explain / comment.  27. Korea asserts at para. 59 of its oral statement that "the plain meaning of 'entrusts or directs' poses the core questions of 'who' is being directed to  do 'what'".  How does the plain meaning of that 
text (leaving aside the ruling of the US - Export Rest raints panel) mean that such core questions can 
only be answered by reference to exp licit and formal acts of government? 
 28. Is Korea challenging the DOC's determination that the KDB Fast Track Program constitutes a 
subsidy?  If so, please refer to the relevant part(s) of Korea's first written submission. 
 
29. How were the Creditors' Councils composed dur ing the period of the DOC's investigation?  
How did the composition of those Credito rs' Councils change over that period? 
 30. Korea indicated at the first substantive m eeting that participation in the October 2001 
Creditors' Council was mandatory, by virtue of the CRPA. 
 
 (i) Why did the CRPA make participa tion in Creditors' Councils mandatory? 
  (ii) What, if any, sanctions applied to cred itors that (a) refuse to participate in the 
Creditors' Council, and / or (b) refuse to abid e by the terms of the restructuring agreed 
on within the Creditors' Council? 
  (iii) If participation in the Hynix Creditor's Council was mandatory, didn't that mean that 
participation in the Hynix restructuring was mandatory?  Please explain. 
  (iv) Was there a statutory option available to creditors, other than the three options 
designated by the Creditors' Council? 
  (v) How were the terms of the three options determined?   (vi) Was there any difference between the value of appraisal rights under option 3 and 
liquidation value?  Please explain. 
 31. At para. 45 of its oral statement, Korea asserts that DOC "reversed its prior finding" that all commercial banks in Korea were controlled by GOK.   When was any such "prior finding" made by 
the DOC, and what is the relevance of that case to the Hynix restructuring? 
 WT/DS296/R 
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 32. Korea stated during the First Substantive mee ting with the Panel that Korean investors were 
entitled to rely on the prospect theory.  Is this case really about which economic theory the Korean 
investors were entitled to rely on?  Isn't it rather  about which economic theory the DOC was required 
to apply under the terms of the SCM Agreement? 
 
2. Alleged injury 
 33. What is the relevance of note 47 to Article  15.5 of the SCM Agreement for the purpose of 
establishing the requisite "causal relationship"?   
34. Does Korea claim that the ITC's finding of significant price depression is inconsistent with 
the SCM Agreement?  If so, please specify where this claim is addressed in Korea's first written 
submission.  35. Regarding para. 14 of Korea's oral statemen t, did subject Hynix imports and DRAMs from 
Hynix's Oregon facility compete with other US pr oduced DRAMs on the same terms / under the same 
conditions of competition?  Would th is be relevant to the issue of whether or not the ITC should have 
treated subject Hynix imports as merely re placing production at Hynix's Oregon facility? 
 36. Korea argues that Hynix's subject imports were merely replacing sales by Hynix's Eugene facility.  Korea refers in this regard to "custo mer swapping".  Leaving the present case to one side, 
imagine a case in which the volume of imports in creases during the period of investigation because a 
domestic company ceased manufacturing operations in order to "re-tool" up at the very beginning of that period, and sourced its product (for resale) fro m unrelated subject exporters instead.  If the 
resultant absolute increase in imports during the pe riod of investigation was significant, would an 
investigating authority be entitled to rely  on that in its injury determination? 
 
37. Is Korea arguing – as alleged by the US at para . 39 of its oral statement – that subject imports 
must be the sole cause of injury in order for th e requisite causal link to be established between the 
subsidized imports and injury?  If so, please comment on the finding of the Hot-Rolled Steel panel (DS184) that the USITC was not required to demons trate that dumped imports alone caused material 
injury (para. 7.260 of that report). 
 
38. Please comment on para. 431 of the US first wr itten submission.  Does Korea argue that the 
ITC should have "'isolate[d]' subject imports or the effects of the subject imports and other known 
factors on the domestic industry"?  Please explain.  
39. Please comment on the US remarks regarding Korea's use of volume / market share data 
sources set forth at paras 292-294 of the US first written submission.  40. Please comment on the US argument (para. 32 of its  oral statement) that there is no obligation 
under the SCM Agreement for a brand-name analys is of price undercutting.  If Korea disagrees, 
please indicate which provisions of the SCM Agreement provide for this obligation.  WT/DS296/R 
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ANNEX E-2 
  
QUESTIONS TO THE PARTIES FOLLOWING 
THE SECOND SUBSTANTIVE MEETING OF THE PANEL 
 
Each party may address/comment on ques tions addressed to the other party. 
 
 
A. QUESTIONS TO US 
 
1. Please comment on the following paragraphs of  Korea's Opening Statement at the Second 
Substantive Meeting of the Panel:  
 §  20 : the hypothetical of Hynix being the lo west price twice, but 98 other suppliers being 
each the lowest price once; 
  § 22 : the ITC's focus on relatively small ch anges in the frequency of underselling, while 
ignoring dramatically different volumes of non-subject imports; 
 
 §  26 : the issue of correlation, in the context of causal nexus: what changed from 2000, when 
the domestic DRAMS industry had record performance, and 2001, when price fell and industry profits plunged; 
  §  33 : the selection of data on record about product substitutability; 
 
 § 34 : the portion of subject imports underselli ng in 2001 was 5% of the market, whereas the 
portion of non-subject imports underselling was 27% of the market; 
  § 37 : the ITC does not explain why the effect of supplier competition was attributed to the 
small change in subject import market share, ra ther than the much larger market share of non-
subject imports and the rate at which non-s ubject imports were gaining market share; 
  §  39 : the key missing point – non-attribution re quired the ITC to separate and distinguish the 
role of subject import supply sources from dom estic and non-subject import supply sources; 
 
 § 49 : appearance of control where none exists, nothing suggests that the GOK would 
intervene in day-to-day credit decisions of various banks; 
   § 76 : the argument regarding the size of Citibank's loan.  
2. With regard to para. 32 of the Second Writte n Submission of the US, are the "actions that 
directly evinced entrustment and direction" those set forth in section 1(a) – (c) of that submission?  Is 
the US arguing that there is both direct and indirect evidence of entrustment / direction?  Why is mandatory participation under the CRPA included as an  "action [...] that directly evinced entrustment 
and direction", when at para. 33 of its replies to th e Panel's questions, the US asserts that "[t]he DOC 
did not find that mandatory participation under the CRP A constituted, in and of itself, entrustment or 
direction"? 
 WT/DS296/R 
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 3. Please comment on Korea's argument (para. 128 of Korea's Second Written Submission) that 
"there is simply no evidence indicating that Shinha n, Hana, or KorAm bank were  entrusted or directed 
by the GOK to extend their portion of the syndicated lo an".  What evidence of entrustment / direction 
did the US rely on in respect of the participation of these banks in the syndicated loan?  Even if one does not accept Korea's argument on th e need for specific banks to be  directed to perform specific 
tasks, is it not necessary for an investigating author ity to point to evidence showing that creditors 
included in the finding of entrustment/direc tion were actually entrusted / directed ? 
 4. At para. 18 of its Answers to the Panel's questions, the US asserts that "The DOC did not find 
specifically that government-owned and controlled private entities  'were instruments through which 
the GOK entrusted/directed other entities'.  Rath er, the DOC found, for example, that the GOK 
exercised control over Hynix’s creditors generally  through government-owned and controlled banks, 
because those banks played a dominant role in the Creditors Councils."  Does the US response mean 
that control over creditors through government-owned and controlled private entities is not relevant to 
the issue of entrustment / direction of those cred itors?  How does the concept of the exercise of 
control over creditors differ from the notion of entrustment / direction of those creditors?  
 5. At para. 20 of the US Answers to Panel questions, the US asserts that "the motives of private investors are not germane" to the issue of entrus tment / direction.  At para. 24, however, the US 
argument of entrustment/direction relies on privat e creditors knowing what was good for them.  If 
entrustment/direction is based on creditors knowing what is good for them, doesn't that imply an 
analysis of their motives? 
 6. At para. 33 of its Answers to the Panel's qu estions, the US asserts that "[t]he DOC did not 
find that mandatory participation under the CRPA constituted, in and of itself, entrustment or 
direction.  Rather, the DOC found that the GOK us ed the CRPA as a vehicle to effectuate the GOK’s 
Hynix policy".  Does this mean that the alleged mand atory nature of the CRPA is not relevant to the 
issue of entrustment/direction?  How does the notion of entrusting / directing someone to carry out an 
objective differ from using something as a vehicle to have someone effectuate that objective?  If the 
October 2001 restructuring had occurred in isola tion, would the CRPA in and of itself have been 
sufficient evidence of entrustment/direction?  
7. What was the evidence of entrustm ent / direction in respect of Pusan? 
 8. Regarding Figure US-4, the different proportio ns of council vote held by group A, B and C 
creditors in respect of the October 2001 restruct uring do not add up to 100%.  Please explain. 
 
9. What was the basis for the DOC's finding that Citibank was not entrusted/directed? 
 10. In its Second Written Submission to the Panel, the US refers to the Kookmin Prospectus in a 
section entitled "GOK Ownership and Control of Hynix's creditors".  Does the US argue that GOK's 15.1% shareholding resulted in GOK control over Kookmin?  
11. In reply to question 1 from the Panel, the US stated that "the constituent parts of the subsidy 
programme ... included the 800 billion won syndicated loan, th e KDB Fast Track bond program, the 
May 2001 restructuring package, the October 2001 r estructuring package, and the benefits conferred 
by these and other financial contri butions, such as D/A loans, made as part of the Hynix bailout."  
Please specify an exhaustive list of the constitu ent parts of the alleged subsidy programme. 
 
12. Please comment on para. 182 of Korea's Second Written Submission.  In particular, does the US accept that the Hynix-only import figures are a reasonable proxy for the total import figures ?   WT/DS296/R 
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 13. Please comment on Korea's argument regardi ng the difference between the US submission 
and the ITC report regarding the extent of the "portion" speciality products (para. 211 of Korea's Second Written Submission).  Please comment on Korea's argument regarding the ITC's use of "value estimates" in respect of those speciality products  (para. 212 of Korea's Second Written Submission). 
 
14. In response to Question 23 from the Panel, the US asserts that although the ITC determined 
that non-subject imports were res ponsible for “the bulk of the market share lost by domestic producers 
during the period of investigation”, it identified tw o reasons why it did not find the volume of non-
subject imports as significant as otherwise would be suggested.  First, the ITC referred to the 
composition of non-subject imports.  Second, the ITC referred to the price effects of non-subject 
imports.  How do these two factors qualify the loss of  market share ? Wouldn't any impact resulting 
from the composition and price effects of non-subject imports already be reflected in the market share 
data?  For example, wouldn't the fact that non-s ubject imports include speciality products mean that 
they would have taken less market share from domest ic producers, and that this consideration is 
therefore already reflected in the market share data? 
 
15. Did the DOC conclude that the KEB was entr usted or directed to (a) participate in the 
Syndicated Loan and/or (b) seek a loan limit waiver ?  16. To what extent was the USD 1.35 billion GDS offering taken into account by the DOC with respect to its finding of entrustment / direction of Hynix's creditors ? 
 
17. Was the participation by "small" creditors accounting for approximately 20% of the debt in the October Restructuring countervailed ?  
B. QUESTIONS TO KOREA 
 
18. Please comment on the following paragraphs of  the Opening Statement of the US at the 
Second Substantive Meeting of the Panel:   § 24 : Korea's concession that the transactions  made under the KFB Fast Track Programme 
constitute financial contribution, but could s till serve as benchmarks for determining benefit; 
   § 45 : no requirement in the SCM Agreement that the period examined for the subsidies 
enquiry cover the entire period examined for the injury determination. 
 
19. With reference to Figure US-1, does Korea contest the DOC's conclusion that each of the 
Group B creditors were controlled by GOK? Please explain.  20. With reference to Figure US-1, does Korea contest the DOC's conclusion that each of the 
Group B creditors were entrusted or directed by GOK ?  Please explain.  WT/DS296/R 
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ANNEX E-3 
  
REPUBLIC OF KOREA’S ANSWERS 
TO THE PANEL QUESTIONS 
 
9 July 2004 
 
 
A. QUESTIONS TO THE UNITED STATES 
 
 We only set forth below only those questions  (for the United States) to which the GOK also 
provides an answer. 
 
1. Alleged subsidization 
 
1. At paras. 235 and 236 of its first written submission, the US refers to “the Hynix 
bailout” as the “the subsidy program”.  What ar e the relevant constituent parts of that alleged 
subsidy programme?  
GOK ANSWER
: Korea simply notes that the four elements set forth at paragraphs 129 through 
151 identify the same four elements that the Unite d States discussed in the first meeting with the 
Panel:  the December 2000 syndicated loan; the KDB Fast Track Programme, the May 2001 
restructuring, and the October 2001 restructuring.  
 
* * * * 
 
2. For each alleged financial contributio n forming part of the “Hynix bailout” 
“programme”, please specify which private entities participated in that financial contribution, 
and what evidence of entrustment and/or direction the ITC relied on in respect of each of those 
private entities. 
 
GOK ANSWER : This question is primarily for the United States to answer.  Korea simply 
notes that any evidence identified by the United St ates must be carefully reviewed to determine 
whether and to what extent that evidence in fact relates to that specific constituent element of the 
alleged subsidy programme.  
* * * * 
 
3. With regard to paras. 139 and 146 of the US  first written submission, please list which 
Hynix creditors the DOC considered to be “go vernment-owned and controlled”, which were 
treated as “government-owned”, which were designated as “majority-owned by the government”, and which were treated as public bodi es.  Please explain how the US defines each 
of these terms for the purpose of these proceeding s, and the consequential rationale for the 
designation made by the DOC with resp ect to each of the relevant entities. 
 GOK ANSWER
: This question is for the United States.   Korea will review the answer provided 
by the United States, and confirm for the Panel th e factual accuracy of the statements being made 
about the various Korean banks.   WT/DS296/R 
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 * * * * 
 
4. Did the DOC find that “government-owned and controlled” banks were entrusted/directed by GOK, or did it find that they were the instruments through which GOK entrusted/directed other entities? 
 GOK ANSWER
: Korea looks forward to this clarification of the US position on this issue.  We 
note the text of Article 1.1(a)(1)(iv) requires that the government  be the party taking the action to 
entrust or direct.  Korea believes that this provisi on does not allow actions by private parties to serve 
as the factual or legal basis for a finding of entrustment or direction. 
 
* * * * 
 
5. Did the DOC find that “majority-owned by the government” banks were entrusted/directed by GOK, or did it find that they were the instruments through which GOK 
entrusted/directed other entities?  
 
GOK ANSWER
: See answer to Q4 above. 
 
* * * * 
 
6. Did the DOC find that “government-owned” ba nks were entrusted/directed by GOK, or 
did it find that they were the instruments thro ugh which GOK entrusted/directed other entities? 
 
GOK ANSWER : See answer to Q5 above. 
 
* * * * 
 
7. Assume a government announces publicly that it is going to restructure a bankrupt 
industry and that, although it would prefer to do so with the assistance of  private investors, it 
would do so on its own if necessary.  Assume that  private investors decide to participate in that 
restructuring, purely on the basis of the government’s statement that it is going to keep that 
industry afloat.  Leaving aside issues of benefi t concerning the terms of the restructuring, 
should an investigating authority find that those private investors had been entrusted or directed by the government to part icipate?  Why, or why not?  
 
GOK ANSWER
: No, this hypothetical would not justify a finding of entrustment or direction.  
Article 1.1(a)(1)(iv) involves government actions that require private actors to take some action.  Both 
“entrusts” and “directs” convey the core meaning of  a private party being told what to do.   
  Article 1.1(a)(1)(iv) is not about government ac tions that may or may not have some effect on 
the incentives of private parties to take actions.  As the panel in US–Export Restraints  recognized, 
governments intervene in markets in many different ways.
1  For example, central banks set interests 
rates that have enormous influence on whether and how financial transactions take place, and the risk 
associated with those transactions.  The key issue under Article 1.1(a)(1)(iv) is not about whether the 
government is affecting the incentives, but whether th e government is requiring certain actions to be 
taken through private intermediaries.  
* * * * 
 
                                                     
 
1 United States -- Measures Treating Export Restraints as Subsidies , Report of the Panel, 
WT/DS194/R, 29 June 2001 (“ US - Export Restraints ”), para. 8.31. WT/DS296/R 
Page E-12  
 
 8. Please comment on Korea’s assertion (para. 51 of its oral statement) that many creditors 
“walked away” from the October 2001 restructuring.  Doesn’t this suggest that those creditors were able to act independently of any GOK desire to restructure Hynix?  Please explain. 
 
GOK ANSWER
: At the first meeting with the Panel,  the United States stressed that these 
creditors still had to take substantia l write-offs of their Hynix debt, and suggested that such a situation 
is not “walking away.”     Korea would like to note two points.  First, su ch write-offs were inevitable -- after all, the 
situation involved a heavily indebted company in a restructuring.  Write-offs are a very common part 
of such restructuring.  The United States has not indicated -- and indeed, cannot indicate -- any 
scenario in which the creditors c ould have avoided such write-offs. 
  Second, the key issue at play in the Oct ober 2001 restructuring was which creditors would 
provide any new funds to facilitate the overall restructuring.  Creditors were given an incentive to do 
so -- they could convert a higher portion of their de bt to equity, lower the amount of the write-offs, 
and see whether and to what extent the equity would allow the banks to recover a higher percentage of 
their investment in Hynix.  But ultimately, it was fo r each creditor to decide what to do.  In Korea’s 
view, any creditor that did not extend new loans wa s essentially “walking away,” particularly those 
creditors who chose Option 3 and declined bot h new loans and any debt for equity swap. 
 
* * * * 
 
9. The US argued at the first substantive me eting that KFB was “brought into line” after 
initially resisting GOK efforts to require it to pa rticipate in the Hynix restructuring.  Korea 
denies this, arguing that KFB ultimately did not participate in the October 2001 restructuring.  
Please comment. 
 
GOK ANSWER
: To clarify for the Panel, KFB participated in the December 2000 syndicated 
loan, and the May 2001 restructuring.  KFB did not  participate in the KD B Fast Track Programme, 
and did not participate in the October 2001 restruct uring by refusing any new funds, by declining any 
debt-equity swap, and by exercising its appraisal righ ts.  KFB may have been part of the restructuring 
at the outset -- under the CRPA, all creditors are pa rt of the overall process -- but KFB eventually 
exercised its statutory rights under the CRPA to walk away with basically the same amount it could have received in liquidation.  
* * * * 
 
10. The US asserted at the first substantive meeting that creditors were required to participate in the October 2001 restructuring by  virtue of the CRPA.  Was such alleged 
mandatory participation relied on by the DOC as evidence of entrustment and/or direction?  If 
yes, please indicate where this issue is addressed in  the DOC’s determination.  If not, why not?  
 
GOK ANSWER
: Korea addresses a similar issue in its response to Question #30 below. 
 
* * * * 
 
11. With regard to the May and October 2001 restructurings, the parties have referred to 
option 3 as the exercise of “appraisal rights”.  Please comment.  Was the exercise of appraisal 
rights any different from liquidation?  Please explain.   
GOK ANSWER
: Korea addresses a similar issue in its response to Question #30 below. 
  WT/DS296/R 
 Page E-13 
 
 
 * * * * 
 
12. The US asserted at the first substantive meeting that this case is not about a comparison of different WTO Members’ restructuring frameworks.  At para. 21 of its oral statement, however, the US seems to have argued that an  investigating authority could reasonably have 
found that a reasonable investor would not have invested in Hynix because it was “technically 
insolvent”.  Doesn’t this suggest a per se  rule that all “technically insolvent” companies should 
be liquidated?  Please explain.  
GOK ANSWER
: Although the United States denied that its position was a per se  rule, the logic 
of the US position is in fact a per se  rule.  The US view is that a reasonable investor only looks at 
narrow financial indicators.  The US view preclude s a reasonable investor from considering broader 
economic factors.  The US view also precludes a reasonable investor from having a different perspective as an “inside investor”.  For example, under the US view, a bank that has a large amount of outstanding debt is not allowed to consider the effect of a new loan on the probability of recovering 
the existing loan.  Given the narro w focus of the US-style “reasonabl e investor,” that investor is 
applying a per se  rule.   
 
* * * * 
 
13. At para. 17 of its oral statement, the US refers to alleged pressure on credit rating 
agencies.  Is this evidence of entrustment / directi on of private creditors?  If not, what is the 
relevance of this evidence to the DOC’s determ ination of subsidization?  Please explain. 
 
GOK ANSWER
: In Korea’s view, this argument about  credit agencies is an example of US 
arguments that have nothing to do with the entrus tment or direction of specific Hynix creditors to 
make specific transactions. 
  We also note that the evidence of this alleged pressure is based on press reports that were subsequently denied by the relevant Korean Government agencies.
2   
 
* * * * 
 
14. At para. 18 of its oral statement, the US  refers to KEB’s rationale for participating in 
the May and October 2001 restructurings.  Is it surprising that a public body would act on the basis of social and economic policy considerati ons?  Why does the fact that a public body 
creditor acted on non-commercial principles nece ssarily mean that other private body creditors 
also did so? 
 
GOK ANSWER
: At the outset, we would like to clarify that KEB is a private commercial bank 
in Korea, and is not a “public body ”.  This appears to be a typogra phical error, and refers instead to 
KDB.  
 Korea would like to clarify one aspect of this qu estion.  In Korea’s view, it is more accurate 
to think of “commercial principles” as being a full consideration of all aspects of a proposed transaction.  Of course, a major focus will be on then  profitability of the transaction.  But it is also 
appropriate for an institution to consider the broader economic and social context of proposed 
transaction.  For example, a loan that avoids bankruptcy for a major company might well prevent 
bankruptcies of that company’s suppliers.  Or a bank with a substantial presence in one national 
market might well view loans that help deve lop the overall economy and a positive longer-term 
                                                     
 
2 See GOK Exhibit 58. WT/DS296/R 
Page E-14  
 
 development for the bank.  These factors are indeed “co mmercial” even if they do not all relate to the 
short-term profitability of a particular loan.    
* * * * 
 
2. Alleged injury  
15. At para. 316 of its first written submission, the US states that the ITC explained that 
although it opined that “the use of bits as a unit of measurement [could] present difficulties for [its] analysis”, it nevertheless found that the absolute volume of subsidized subject imports and 
the increase in that volume relative to US pr oduction and consumption was “significant”. 
  (i) What were the reasons why
 the ITC nevertheless found that the absolute volume 
of subsidized subject imports and the increase in that volume relative to US production and consumption was “significant”?  
 GOK ANSWER
: Since the ITC determination does not state any reasons, and the US First 
Submission is also quite unclear on this point, Korea also wonders what rationale and what 
framework the ITC used fo r assessing the “significance”. 
 
* * * * 
 
 (ii) Where were those reasons set forth in its Determination and Views (Exhibit 
GOK-10) (or any other relevant document)?  
 
GOK ANSWER : Korea believes that the ITC determination does not answer this key question.  
The ITC determination stated these c onclusions without any explanation. 
 
* * * * 
 
 (iv) Was the ITC’s determination of material injury and/or causation based on its 
finding that the absolute volume of subsidized subject imports was 
“significant”?  Was this finding relevan t to its determination?  Would the ITC 
not have made its determination of materi al injury and/or causation but for its 
finding that the absolute volume of subsidized subject imports was “significant”?  
  WT/DS296/R 
 Page E-15 
 
 
 GOK ANSWER : We note that the ITC determination strongly suggests the outcome would 
have been different.  We note that at page 27 of the ITC Final Determination3, the ITC states that 
“subject imports, themselves, were large enough and priced low enough to have a significant impact”.  
The ITC then goes on:  “Given our findings about the significant volume of subject imports….”  Thus, the determination as written makes clear that  the ITC determination rested very much on the 
fact in this case that the ITC considered import volume to be significant.   
 
* * * * 
 
16. At para. 40 of its oral statement, the US asserts that the ITC determined that “a 
significant portion of non-subject imports were Rambus and speciality DRAM products”.  On 
the basis of a non-confidential presentation/summary of the underlying proprietary information, please indicate what percentage  of non-subject imports were Rambus and 
speciality products?  
GOK ANSWER
: We address this issue in our Second Submission, and provi de concrete public 
evidence about the lack of importance of Rambus DRAMs.  Rambus DRAMs accounted for less than 
10 per cent of total DRAM sales by Samsung, the major supplier of Rambus DRAMs.  See also GOK 
Exhibit 63.  Given that Samsung was the predomin ate Rambus supplier, this fact means that at least 
90 per cent of non-subject imports were standard DR AMs that competed directly with US production. 
 
* * * * 
 
17. The US argued at para. 424 of its first written submission that the causal analysis for countervail was different than the causal analysis for safeguards.  The US based its argument on 
the different injury thresholds set forth in the SCM and Safeguards Agreements respectively.  
How does the injury threshold determine the requisi te degree of causal nexus?  In other words, 
what is it about the need to find serious injury in the case of safeguards that makes the causation standard different than in countervail, where material injury need to be established? 
 
GOK ANSWER
: Korea believes that the injury sta ndards and the causation standards are 
distinct, and the higher injury standard in the safeguards context does not require a higher causation 
standard.  The causation standards in the SC M and Safeguards Agreements each speak for 
themselves, as discussed below.  
* * * * 
 
18. The US noted at the first substantive meeting that Article 15.5 of the SCM Agreement 
refers to a “causal relationship” between the subs idized imports and the material injury to the 
domestic industry, whereas Article 4.2(b) ref ers to a “causal link” between increased imports 
and the serious injury to the domestic industry.  Does this explain the alleged difference in the 
applicable causation standards?  Please explain.  
GOK ANSWER
: Although the terms are different, in fact  a careful review of the plain meaning 
of both terms shows that there are for this purpos e interchangeable terms.  If we start with the 
dictionary definitions of both terms,  we find that “link” is defined as a verb to mean “connect or join”, 
connect causally”, to be joined or connected, and is defined as a noun as “a connecting part”, or “to establish or maintain a connection”.  Relationship is defined as “a connection, an association”, and 
“related” is defined as “having relation”, or “connected”.
4    The common thread in all of these 
                                                      
3 GOK Exhibit 10. 
4 See GOK Exhibit 46. WT/DS296/R 
Page E-16  
 
 definitions is the core idea of some connection -- in other words, finding some causal connection 
between the imports and the alleged injury (eithe r serious or material) to the domestic industry. 
   Moreover, the French and Spanish texts conf irm this reading.  In the French versions, 
Article 15.5 of the SCM Agreement uses the term “lien” where the English version uses the word 
“relationship” and Article 4.2(b) of the Safeguard s Agreement uses the iden tical word “lien” where 
the English version used the word “link”.  This Fr ench word translates as “connection” or “link” or 
“tie”.
5    The same pattern occurs in Spanish, wh ich uses the word “relacion” in both places.  This 
Spanish word translates as “connection”.6   
 
 Thus, as a matter of the plain meaning of the En glish terms and the use of identical terms in 
the French and Spanish versions, Korea submits th at the terms “relationship” and “link” have 
essentially the same meaning -- ha ving some causal “connection”. 
 
* * * * 
 
19. Please explain how the ITC complied with th e causation standard described at para. 427 
of the US first written submission.  In particular, how did the US “separate and distinguish” the injurious effects of non-subject imports?  
GOK ANSWER
: For the reasons we set forth at some length in our Second Submission, Korea 
believes ITC did not separate and distinguish these other causes. 
 
* * * * 
 
20. How do the causation standards of “causa l link” (Article 4.2(b) of the Safeguards 
Agreement) and “causal relationship” (Article 15.5 of the SCM Agreement) differ in practice? 
 
GOK ANSWER : They do not.  As we discuss in answ er to Question #20 above, the two terms 
actually mean the same thing.  Moreover, even if th ere were some very subtle difference in the nuance 
of meaning, that nuance would not have any practical  relevance.  Korea believes that in both phrases 
the key word is “causal,” the idea of the imports un der investigation bringing about the injury to the 
domestic industry.  The word “causal” conveys all of  the substantive content in these phrases, and that 
word is identical.  The difference between “li nk” and “relationship” is not significant.  
 
* * * * 
 
                                                      
5 See GOK Exhibit 47. 
6 See GOK Exhibit 48.  WT/DS296/R 
 Page E-17 
 
 
  
B. QUESTIONS TO KOREA 
 
1. Alleged subsidization 
 
21. Korea stated at the first substantive meetin g that the more concrete the designated task, 
the more specific the target en tity, the more confident one could be of the existence of 
entrustment/direction.  Does the fact that concrete tasks and speci fic addresses increases 
confidence in a finding mean that the findi ng is precluded in circumstances where the 
designated task is less concrete and the addressee is not clearly specified?  Isn’t it simply more 
difficult – but not necessarily impossible - to  establish entrustment / direction in such 
circumstances?  Isn’t the discussion about form al/explicit as opposed to informal/implicit 
entrustment/direction really an issue of evidence,  rather than law?  Please explain / comment. 
 
GOK ANSWER : Korea believes there are both legal and evidentiary aspects to this issue.  
From a factual perspective, there must be sufficient evidence of “entrusts or directs”.  By referring to 
concrete tasks and specific entities,  Korea’s comments at the first substantive meeting sought to 
address this factual aspect of the issue.   Korea also believes, however, there is an important  legal dimension to this issue.  “Entrusts or 
directs”, when read in light of the plain meaning of these words, the context of these words, and their 
object and purpose, imposes a legal minimum necessary to establish “entrusts or directs”.  In other 
words, there are some government objectives that are so vague and so loosely directed to no one in 
particular that the legal standard for “entrustment or direction” simply cannot be said to have been 
met. 
 
 Put differently, there are some government ac tions that have so little connection to the 
specific actions set forth in Article 1.1(a) or to specific entities that an authority simply cannot label 
those actions as “entrustment or direction” of a private entity to do anything.  
* * * * 
 
22. Korea asserts at para. 59 of its oral statem ent that “the plain meaning of ‘entrusts or 
directs’ poses the core questions of ‘who’ is be ing directed to do ‘what’“.  How does the plain 
meaning of that text (leaving aside the ruling of the US - Export Restraints panel) mean that such core questions can only be answered by reference to explicit and formal acts of 
government? 
 
GOK ANSWER
: The meaning of treaty text must be discerned by reference to the plain 
meaning, when read in context and in light of th e object and purpose of the language.  Korea believes 
that all of these interpretative elements are im portant to understanding the proper meaning of  
“entrusts or directs”.  Moreover, Korea does not ar gue that the government actions must be formal 
acts of government.  Any such formal acts would probably fall more properly under one of the 
specific government actions enumerated elsewhere unde r Article 1.1(a)(1).  With these clarifications 
in mind, we would like to address the specific ques tion.  We discuss these interpretative issues at 
more length in our second submission,  but we would like to emphasize the main points in response to 
this question. 
 
 Both the word “entrusts” and the word “directs” convey the basic meaning of carrying out 
some specific action.  That is why Korea has stres sed the importance of “what” is being entrusted or 
directed.  The definitions cited by the Unite d States themselves underscore this point.  In 
paragraph 157 of its First Submission, the United St ates highlights that “entrust” means give a person WT/DS296/R 
Page E-18  
 
 responsibility for a task
, or to commit the execution of a task  to a person.  Similarly, in paragraph 158 
of its first submission, the United States hi ghlights that “directs” means to do a thing. 
  But both of these words are verbs, and to understand better the object of these verbs one must turn to the context in which these words are being used. Article 1.1(a)(1)(iv) has important textual 
guidance about the object of these two verbs, and what that object must be.  There are several 
elements worth noting.   First, the entrustment or direction must apply to “a private body”.  That is why Korea has stressed the “who” that is being entrusted or directed .  The text of Article 1.1(a)(1)(iv) requires such a 
focus.   
  This language makes clear that some kinds of entrustment or direction will not fall within the 
meaning of Article 1.1(a)(1)(iv) because the government  has not been targeting a “private body”.  In 
other words, if the government orders a public body to  take some action, that entrustment or direction 
of a public body is legally irrelevant to the issue of whether a private
 body has been directed.  The text 
is quite explicit in focusing on the government action toward a private body, and simply does not 
allow authorities to string together a series of indirect and increasingly remote entrustment or direction through one or more public bodies.  Unless the government itself is entrusting or direction, 
the requirement of the text has not been met.  
 Similarly, the public body cannot be the source of entrustment or direction.  The text of 
Article 1.1(a)(1(iv) is quite explicit that the government
 must be the one entrusting or directing.  Thus, 
although a public body can make a loan that constitutes a “financial contribution”, a public body cannot be the source of any entrustment or direction.   Second, that private body must be entrusted or 
directed “to carry out” something.  This additi onal phrase reinforces the importance of “what” is 
being entrusted or directed.  There must be someth ing concrete that can be carried out.  A Korean 
bank can make a loan, but it cannot “save” a company.     But at the same time, this language also sheds light on the proper interpre tation of “entrusts or 
directs”.  The private body is not being entrusted or di rected to consider some action, or to assist some 
action, but to “carry out” some action.  Any discreti on being left to the private body is fundamentally 
at odds with this notion of “carry out”. Thus, any ti me banks have a choice, it is hard to imagine how 
they can have been entrusted or dir ected to “carry out” a certain action. 
  In this particular case, the Korean banks cons idered various loans to Hynix, but were never 
entrusted or directed to “carry out” these specific loans.   In fact, at no point of the various parts of the 
Hynix restructuring did every bank participate.  This poses a logical dilemma for the US argument in 
this case.  If the US theory is that all
 Korean banks were being entruste d or directed to save Hynix, 
why were many banks able to ignore this entrustment or direction?  The only logical answer is that the 
individual banks were making their own decisions, and thus were not being entrusted or directed to 
“carry out” anything.   
 Third, the action to be carried out is “one or mo re of the type of functions illustrated in (i) to 
(iii)”.  In other words, the action being entrusted or  directed is not some generalized policy or wish, 
but rather one of the concrete actions specified earlier in Article 1.1(a)(1).  The action must be a grant, 
a loan, an equity transfer, or some other specific action, not some generalized act of  “saving” a 
company or of preventing bankruptcy.  This specifi c language reinforces the importance of the “what” 
that is being entrusted or directed.  
  Finally, the text imposes an additional require ment.  The private body must be entrusted or 
directed to carry out some specific action, and that action must meet the additional requirement that it, 
“in no real sense, differs from prac tices normally followed by governme nt”.  This idea of not differing  WT/DS296/R 
 Page E-19 
 
 
 from normal government practices takes on particular importance in this dispute.  A number of 
aspects of the Hynix restructuring belie the notion th at banks were acting as mere extensions of the 
government.  Consider the May 2001 restructuring.  This restructuring transaction was contingent on 
the success of the new GDR equity offering, a feat ure hardly common on typical government loans.  
If the Korean Government had truly wanted banks to “carry out” loans that they would otherwise not 
make, there would have been no explicit contingency.    
 
* * * * 
 
23. Is Korea challenging the DOC’s determin ation that the KDB Fast Track Programme 
constitutes a subsidy?  If so, please refer to the relevant part(s) of Korea’s first written 
submission.  
GOK ANSWER
: Yes.  Korea does not challenge the conclusion that the KDB Fast Track 
Programme constituted a “financial contribution”.  Our argument at paragr aphs 481 and 482 of 
Korea’s First Submission meant to clarify and respond to US efforts to infer from the KDB Fast Track 
Programme entrustment or direc tion of other Hynix creditors.7 
  A “subsidy” finding, however, has two other elem ents.  Korea challenges the existence of any 
benefit from the KDB Fast Track Programme.  Ou r arguments in paragra phs 517 through 520 apply 
generally to all aspects of the Hynix restructuring:   private Korean banks and the average interests 
being paid by Korean banks in general serve as a benchmark to establish that  any refinancing obtained 
under the KDB Fast Track Programme did not constitute a benefit.   Our first submission addressed at some length the arguments about foreign private bodies (paragraphs 521 through 546), because this aspect of  the DOC decision was particularly egregious.  
Citibank participated in the December 2000 syndi cated loan, the May 2001 restructuring, and the 
October 2001 restructuring.  Citibank did not par ticipate in the KDB Fast  Track Programme, because 
Citibank did not hold any maturing Hynix bonds at th at time.  Citibank was a new lender to Hynix.  
The failure specifically to mention the KDB Fast Track Programme in Section D.2(a)(2), however, 
does not mean we did not intend the argument under Section D.2(a)(1) to apply to the KDB Fast Track Programme.  We apologize for any confusion on this point. 
 
 In particular, Korea notes the following key points:   First, the real i ssue about the KDB Fast 
Track Programme related only to the portion of the bonds held by the KDB and by the other Korean banks. The DOC did not countervail the 70 per cent of  the refinanced bonds that were subsequently 
repackaged as CBOs.
8  Thus, only 30 per cent of the total being refinanced is at issue. 
 
 Second, the various private Korean banks th at refinanced Hynix bonds did so on the same 
terms as those accepted by the KDB – in particular, at the same interest rates.  Thus although the DOC found KDB to be a public body, an y financial contribution associated with that public body did not 
constitute a benefit.  
 Third, the information before the DOC showed that the effect interest rates being paid on 
refinanced Hynix bonds ranged from 10.99 per cent to 12.56 per cent, which was much higher than 
the average interest rates prevaili ng in Korea at that time for third year loans -- 9.3 per cent in 2000 
and 7.1 per cent in 2001.
9    For all of these reasons, the bonds refinanced through the KDB Fast 
Track Programme did not constitute a benefit.  
 
                                                      
7 See also paragraphs 425-428 of the GOK First Submission.   
8 See Decision Memorandum, at 82 provided in GOK Exhibit 5. 
9 See GOK Exhibit 60. WT/DS296/R 
Page E-20  
 
  In addition, Korea challenges the specific ity of the KDB Fast Track Programme.  The 
arguments in Section E of our first submission, paragraphs 557 through 577 apply generally to the 
various parts of the Hynix restructuring.     As the United States acknowledges in paragra ph 57 of its first submission, the KDB Fast 
Track Programme was designed to address systemic problems in the Korean capital markets.
10  The 
United States then tries to argue that the Progra mme was designed for Hynix, and cites the fact the 
announcement occurred before the recommendation even occurred.11    The problem with this theory, 
however, is that the United States has its facts wrong.  As the DOC itself acknowledged at page 15 of the Government of Korea verification report, there were two meetings of the creditors:  one on 28 
December and another on 4 January.
12  In fact, the creditors recommended Hynix for the KDB Fast 
Track Programme at the 28 December meeting.  T hus a key part of the US logic for finding the 
Programme to be specific to Hynix rests on a factual misunderstanding.  
* * * * 
 
24. How were the Creditors’ Councils composed during the period of the DOC’s investigation?  How did the composition of tho se Creditors’ Councils change over that period? 
 
GOK ANSWER
: On 10 March 2001, the first Creditors’ Council was formed for Hynix 
restructuring based on a private agreement between Hynix's creditors.  The council consisted of the 
following 17 banks:  KEB, KDB, Woori, Chohung, Kookmin, H&CB, Shinhan, Hana, Koram, Seoul, 
KFB, NACF, Peace, Busan, Kyungnam, Kwangju, a nd IBK.  In August 2001, Citibank joined the 
Council increasing the number of member banks to 18.   The first Hynix Creditors’ Council consisted 
of 17 banks with debt exposure to Hynix as of 30 November 2000.  Since Citibank had no claims 
against Hynix as of this date, which was befo re the December 2000 syndicated loan had been 
finalized, it was excluded from the initial Creditors’ Council.   
  On 4 October 2001, a new Creditors' Council was formed under the CRPA consisting of 104 
financial institutions with debt exposure to Hynix.  The breakdown  of these 104 institutions was as 
follows:  Banks (21), investment trust companies (14), and others (69).    
 On 10 October 2001, 3 banks (Kwangju, Kyu ngnam and HSBC) exercised appraisal rights 
thereby severing their ties with the council.   
 On 30 October 2001, the number of particip ating institutions increased to 115.  The 
breakdown was as follows:  Banks (18), investme nt trust companies (15), and others (82). 
 
 On 7 November 2001, the KFB walked away from the Council through  its exercise of 
appraisal rights.  
* * * * 
 
25. Korea indicated at the first substantive m eeting that participation in the October 2001 
Creditors’ Council was mandatory, by virtue of the CRPA. 
 
 (i) Why did the CRPA make participatio n in Creditors’ Councils mandatory? 
 
                                                     
 
10 See also Decision Memorandum , at 22-23, provided at GOK Exhibit 5 (DOC discussion of Fast 
Track Programme). 
11 US First Submission, at para. 59. 
12 See GOK Exhibit 61.  WT/DS296/R 
 Page E-21 
 
 
 GOK ANSWER : The CRPA was designed to facilitate rest ructuring indebted companies.  The 
broader the participation in such restructuring effo rts, the more effective the restructuring.  Under 
prior restructuring regimes, some creditors had tr ied to “free ride”, by leaving the burden of 
restructuring on the larger creditors, but then insis ting on complete payment of their smaller debts.   
 
 Since this “free riding” made it more difficult to achieve fair restructuring arrangements, the 
Korean legislature decided that all creditor must participate in restructuri ng under the framework of 
the CRPA.  Under Article 24.1 of the CRPA, a Credit ors’ Council consists of all financial institutions 
with debt exposure to a potentially insolvent company.13   
 
 Under this provision, however, participation in the Creditors’ Council lasts only for a minimal 
period of time (usually until the first Creditors’ Council meeting) during which each creditor can 
decide on its own whether to take part in the rest ructuring measure being c ontemplated by the council 
or not.   
 When a certain financial institution decides not to participate in the underlying restructuring 
process, it can either choose not to attend the first c ouncil meeting, or participate at the first meeting, 
and then subsequently exercise appraisal rights as provided under Article 29.1 of the CRPA.  Thus 
although the CRPA is mandatory in the sense that ev ery creditor is essentially deemed part of the 
Creditors’ Council, and has the rights to participate,  the CRPA does not require creditors to remain or 
to participate against their wishes. 
 
* * * * 
 
 (ii) What, if any, sanctions applied to creditors that (a) refuse to participate in the 
Creditors’ Council, and / or (b) refuse to abide by the terms of the restructuring 
agreed on within the Creditors’ Council?  
 
GOK ANSWER
: Where a creditor institution refuses to participate in the Creditors’ Council, 
that institution will be entitled to  exercise appraisal rights.  On ce these rights are exercised, that 
creditor will no longer belong to  the Creditors’ Council.  According to Article 24.1 of the CRPA, a 
Creditors’ Council consists of creditor financial ins titutions.  Under Article 2.1, the term ‘creditor 
financial institution’ means a legal or natural pers on who extends credits to the business enterprise 
concerned.   When a financial institution exercises it s appraisal rights, its claims against the distressed 
company all extinguish, and  as such, it no  longer qualifies as a ‘credito r financial institution’ under 
the CRPA.  Accordingly, it can no longer belong to the council.  There are no statutory limits or 
restrictions imposed on exercise of appraisal rights.  
 On the other hand, where a creditor does not exerci se its appraisal rights, it is deemed to have 
agreed to the restructuring and is thus required to  carry out applicable measures put forward by the 
Creditors’ Council, subject to the constraint that an y measure must win the support of those creditors 
representing at least 75 per cent of the outstanding debt. 
  Where a creditor incurs damages to other cred itors by failing to keep the council resolution, 
the aggrieved party(ies) can seek damages pursuant to Article 30 of the CRPA.  We note that the 
financial supervisory authorities or the government mo re generally do not have any legal rights to take 
any measures against the breaching creditor.  
 
* * * * 
 
                                                     
 
13 See GOK Exhibit 22-(c). WT/DS296/R 
Page E-22  
 
  (iii) If participation in the Hynix C reditor’s Council was mandatory, didn’t that 
mean that participation in the Hyni x restructuring was mandatory?  Please 
explain.  
 
GOK ANSWER
: No.  All creditors had to come to the table.  Whether and how they 
participated in the deliberations in the Creditors ’ Council was up to the individual creditor.  In 
addition, once the deliberations had hammered out a set of options, the individual creditors could 
make their choice among those options, or exercise their other rights under the statute as described 
below.  Almost immediately after the Cred itors’ Council formed, two banks (Kwangju and 
Kyungnam) with 100 per cent GOK ownership, and a foreign bank (HSBC) exercised their appraisal 
rights and walked away.  Any other bank could have exercised the same rights, and one other -- KFB -
- eventually did.  So, no bank was forced to partic ipate in the Hynix restructuring against its will. 
 
* * * * 
 
 (iv) Was there a statutory option available to creditors, other th an the three options 
designated by the Creditors’ Council?  
 GOK ANSWER
: At the outset, it is useful to distinguish Option 3 in the Hynix October 2001 
restructuring and appraisal rights more generally.  In  the context of the October restructuring, Option 
3 specifically referred to the buyout price (“BOP” ) and terms of payment for dissenting creditors as 
crafted by the Hynix Creditors’ Council.  As di scussed above, the terms and conditions of this 
particular option were negotiable as the dissenting creditors group was entitle d to exercise appraisal 
rights.   
  Both in the context of the Hynix October 2001 restructuring and the CRPA framework more in general, appraisal rights refer to the statut ory right bestowed on dissenting creditors under the 
CRPA to decline such terms of payment and buyout price as may be proposed by the Creditor 
Council, if these conditions are deemed unreasonabl e or otherwise unacceptable.  Appraisal rights 
thus reflect procedural rights for the dissenting creditors, including multiple layers of dispute 
settlement mechanism as follows:    
1) first, bilateral consultation phase unde r Article 29.4 during which the council 
proposes a BOP and terms of payment for dissenting creditors;  2) if 1) fails, then 
mediation phase under Article 29.5 begins where the mediation committee requests 
the council and opposing creditors to jointly select an accounting firm to compute a mutually agreeable BOP; and 3) lastly, court action pursuant to Article 33.2  
The primary purpose of mandating appraisal rights is to ensure maximum procedural fairness and 
transparency for opposing creditors as a group.  
 
 It is to be noted that at the time of the October 2001 restructuring, the proposal for Option 3 by the Creditors’ Council prompted a negotiation be tween the Council and dissenting creditors about 
the terms of payment for the latter as initially set out in Option 3.  Unhappy with the outcome of this 
bilateral consultation, the dissenting creditors gr oup went on to invoke  the dispute settlement 
apparatus under the CRPA as a means of reifying and protecting their appraisal rights. 
  The CRPA does not limit or restrict the range of options that can be made available to creditor institutions.  The range and particulars of these opt ions are determined by the Creditors’ Council on 
its own accord.  In addition, the Creditors’ Counc il can amend the details of the existing options, as 
well as add new options to the menu of choices that are already on the table by passing a resolution.  
* * * *  WT/DS296/R 
 Page E-23 
 
 
  
 (v) How were the terms of the three options determined?  
 
GOK ANSWER : KEB, which is the principal creditor bank of the Hynix Creditors’ Council, 
proposed Option 1 (including debt-to-equity swaps an d extension of new lines of credit) on the basis 
of several market studies prepared by outside c onsultants for review by the creditor group. 
 
 For those banks that opposed to the extension of new loans under Option 1, Option 2 was 
proposed (debt to equity conversion & forgiveness of the remaining debt), which was finalized after a 
Council resolution.  
 
 In the meanwhile, the banks that balked at both of the options above were automatically 
entitled to exercise appraisal rights under the CRPA.  Under the CRPA, the buyout price ("BOP") and 
terms of payment for dissenting creditors are decide d by a mutual agreement between the Creditors’ 
Council and the dissenting creditors.  The Creditors ’ Council proposes the BOP and terms of payment 
for the dissenting creditors group in accord with the CRPA, and the parties then negotiate to resolve 
this issue  
  In the case of Hynix, the Option 3 banks objected to the Creditors’ Council proposal and 
subsequently asked for mediation with the media tion committee as provided under Article 31 of the 
CRPA. 
 
* * * * 
 
 (vi) Was there any difference between the value of appraisal rights under option 3 
and liquidation value?  Please explain.  
 
GOK ANSWER
: Under the CRPA, the buyout price (“BOP”) for opposing creditors is 
determined by a consultation between the counc il and each opposing creditor.  Upon mutual 
agreement, the BOP can be something other than the liquidation value of th e company at stake.  
 
 On the other hand, where the Creditors’ C ouncil and the dissenting creditors fail to reach 
agreement, a mutually appointed outside acc ounting firm will compute the BOP based on the 
appraisal value of the company. 
 
 In general, the BOP of secured debts is dete rmined by the value of the underlying collateral, 
while that of unsecured debts largely by the liquidation value of the distressed company. 
  In Hynix's case, the Option 3 creditors reje cted the initial BOP and terms of payment put 
forward by the Creditors’ Council, asking for medi ation under the CRP.  After mediation processes, 
100 per cent of these creditors' secured debts and 25 .46 per cent of their unsecured debts were paid 
out in cash.  We note that the mediation process ended up using the same liquidation value that had 
been determined by Arthur Andersen in its study of the liquidation value of Hynix. 
 WT/DS296/R 
Page E-24  
 
  To put this 25.46 per cent in broader context fo r the Panel, Korea reviewed the other instances 
in which creditors exercised appraisal rights in CRPA restructuring proceedings.  Other than the 
Hynix restructuring, creditors in various cases re ceived the following amounts as exercise of their 
appraisal rights:  6.17%, 15.4%, 19.5%, 20.8%, 29.4%, 29.43%, 27.26%, 32.3%, and 35.56%.  The 
appraisal rights in the Hynix case were based on a ne utral third party study by  Arthur Andersen, and 
were well within the range of the value for apprai sal rights found in other cases.   We can provide 
whatever other details the Panel might consider useful .  But the basic point is that the amount of the 
appraisal rights in the Hynix case was quite typical.  
 
* * * * 
 
26. At para. 45 of its oral statement, Korea asserts that DOC “reversed its prior finding” 
that all commercial banks in Korea were cont rolled by GOK.  When was any such “prior 
finding” made by the DOC, and what is the relevance of that case to the Hynix restructuring? 
 
GOK ANSWER
: This finding was made through a number of DOC determinations.  They are 
all cited in the DOC determination in this particular case.14   
 
 These prior findings are not relevant in this case for two reasons. First, the DOC itself 
reversed those prior finding based on the particular  facts presented in this  case about the post 1997 
financial reforms and restructuring in Korea.15  Second, those prior cases c overed different periods of 
time and different factual circumstances.  
* * * * 
 
27. Korea stated during the First Substantive me eting with the Panel that Korean investors 
were entitled to rely on the prospect theory.  Is this case really about which economic theory the 
Korean investors were entitled to rely on?  Isn ’t it rather about which economic theory the 
DOC was required to apply under the terms of the SCM Agreement? 
 GOK ANSWER
: This case is not about any economic theory.  Rather, this case is about 
whether the DOC properly applied the standard set forth in Article 14(a) of the SCM Agreement.  
That standard required the DOC to focus on the “usual  investment practice” of private investors in the 
“territory of that member”.  In other words, th e standard required DOC to focus on the usual practice  
of Korean  investors. 
  The evidence in this case demonstrated two key factual points.  First, many of the Korean 
investors in Hynix equity were inside investors.   Second, these inside investors were very much 
concerned about their existing investments, as we ll as the possible future return on any additional 
investment.   
 
 The legal error by DOC was to find that these concerns about existing investments were irrelevant.  This concern about ex isting investments was very much pa rt of the usual practice of Korea 
investors.  Yet DOC simply deemed this factor to be  irrelevant.  The concerns of inside investors may 
or may not be relevant under US law.  But such co ncerns are very much relevant under the applicable 
standard in Article 14(a). 
  Moreover, the focus on investors in the “terr itory of that member” is critical.  If Korean 
investors feel a nationalist need to help save importa nt companies, that consideration can affect the 
                                                     
 
14 See Decision Memorandum, at 12-15, provided as GOK Exhibit 5. 
15 See id. at 47-48 (not appropriate to follow past approach), at 70 (no direction of credit to 
semiconductor industry generally).  WT/DS296/R 
 Page E-25 
 
 
 usual investment “practice” in Korea.  The focus on investors in a particular country ensures that any 
such country specific preferences can and should be captured.   In this case, the DOC imposed the standard of  a hyper rationale outside investor.  The DOC 
investment standard was not the “usual investment practice” of a Korean investor.  The DOC required 
its “investor” to care only about the profitability of the new investment.   
  We presented the discussion of prospect theory for two reasons.  First, this theory helps 
explain the actual practice of the Korean banks that were investing in Hynix, as well as the practice of 
all inside investors around the world.  Indeed, the gen esis of prospect theory was the effort by scholars 
to understand the fundamental disc onnect between the actual practice
 of inside investors compared to 
what economic theory  relied upon by an investigating authority such as the DOC would have 
predicted.     Second, this more modern theory of invest ment decision making helps provide context for 
why the language of Article l4(a) focuses on “prac tice” rather than posin g a particular rational 
investor standard.  Put differently, if the usual i nvestment practice is something other than narrowly 
defined profit maximization, then the government  may make equity investments using the same 
standard.  The government is not held to any higher  standard than the “usu al investment practice.” 
 
* * * * 
 
2. Alleged injury   28. What is the relevance of note 47 to Arti cle 15.5 of the SCM Agreement for the purpose 
of establishing the requisite "causal relationship"?  
 
GOK ANSWER
:  Note 47 identifies at Paragraphs 15.2 and 15.4 of the SCM Agreement a non-
exhaustive list of indicia of domestic industry performance ( e.g., prices, output, sales, market share, 
profits, productivity, return on investments, capacity utilization, etc.), trends in which must bear a 
relationship to the presence of subsidized impor ts.  Specifically, a causal relationship between 
subsidized imports and “decline[s]”16 in these indicia must be established before a CVD order may be 
imposed.  At the most fundamental level, it is a temporal analysis; there should normally be a 
coincidence of, or correlation between, import and pe rformance trends.  As noted in our brief, this 
inter-linkage has been explored more closely in the context of Articles 3.2, 3.4 and 3.5 of the AD 
Agreement and under Article 4.2 of the Agreement on Safeguards17, but it is no less relevant in the 
context of the SCM Agreement. 
 
 We would further add that there are two levels  to this aspect of the causation analysis when 
considering the effect of subsidized imports (or dumped imports for that matter), as distinguished 
from the analysis required under the Agreement on Safeguards.  Whereas an analysis under the 
Agreement on Safeguards is focused solely on the e ffects of “increased imports,” the United States 
correctly notes in its first submission that the SCM Agreement requires an assessment of the volume  
of the subsidized  imports.18  Thus, both import trends and subsidy trends are important.  If imports are 
declining, it is difficult to show any correlation or relationship between those imports and declines in 
domestic industry performance.  If the domestic i ndustry’s performance begins declining well in 
advance of alleged conferral of s ubsidies on the imports in question,  the relationship between the two 
is also suspect.  In this case, both factual circumstances were present.  
* * * * 
                                                      
16 Art. 15.4 of the SCM Agreement. 
17 GOK First Submission, at paras. 220-225. 
18 US First Submission, at paras. 424. WT/DS296/R 
Page E-26  
 
  
29. Does Korea claim that the ITC's finding of significant price depression is inconsistent 
with the SCM Agreement?  If so, please specify where this claim is addressed in Korea's first 
written submission.  
GOK ANSWER
: Yes.  In it first submission, Korea addressed the US arguments about price 
effects generally, and also addressed specific aspects of the underselling analysis in more detail.  In 
particular, our argument that price effects were not “significant” applies to both  the price undercutting 
and price depression arguments.19  
 
 Article 15.2 does not talk about price depression in the abstract.  Low prices alone are not 
enough.  Rather the textual requirement is to find wh ether the “effect of such [subsidized] imports is 
otherwise to depress prices to a significant degree”.  No one in this case disputed that DRAM prices 
fell in 2001 and 2002.  The relevant issue under bot h Article 15.2 and Article 15.5, however, is why 
did the prices fall. 
 
 In particular, three of the arguments from Korea’s First Submission about pricing related 
specifically to price depression.  First, the ar gument at paragraphs 142 through 144 about price 
leadership relates to price depression.  The ITC de finition of price leadership has nothing to do with 
whether subject import prices are higher or lower th an other prices -- the question asks only for an 
indication of which firm[s] is having a “significan t impact” on price.  Thus, when the customers 
responded to this question, and failed to identif y Hynix as the price leader, the customers were 
basically indicating that the effects of Hynix im ports were not to depress prices to a significant 
degree.   Second, the argument about substitutability at pa ragraphs 164 through 170 also applies to the 
analysis of price depression.  The core ITC argum ent was that prices would have been higher -- an 
argument about price depression or suppression, not about  price undercutting.  The ITC tried to rebut 
certain Hynix arguments about the role of non-subjec t imports by comparing the relative rates of price 
undercutting, but the argument itself was about why DRAM prices were so low.   Third, the argument about other causes summa rized at paragraphs 171 through 174 also 
applies to price depression.  As noted above, Artic le 15.2 requires that price depression consider the 
role of subject imports in bringing about the pr ice depression.  Thus, arguments about alternative 
causes are legally relevant under both  Article 15.2 and Article 15.5.  
 
* * * * 
 
30. Regarding para. 14 of Korea's oral stat ement, did subject Hynix imports and DRAMs 
from Hynix's Oregon facility compete with ot her US produced DRAMs on the same terms / 
under the same conditions of competition?  Would th is be relevant to the issue of whether or not 
the ITC should have treated subject Hynix impo rts as merely replacing production at Hynix's 
Oregon facility? 
 GOK ANSWER
: The answer to the first question is yes.  Subject Hynix imports and DRAMs 
from Hynix’s Oregon facility were the same DRAM commodity product.  And as a commodity 
product , there is no question that both subject Hynix imports and DRAMs from Hynix’s Oregon 
facility competed with all other DRAM suppliers on the same terms and under the same conditions of 
competition. 
 
                                                      
19 See GOK First Submission, at para. 131.  WT/DS296/R 
 Page E-27 
 
 
  The answer to the second question is also yes.   Given the complete substitutability between 
Hynix Korea and Hynix Eugene DRAMs, the ITC should have treated subject Hynix imports as 
merely replacing production at Hynix’s Oregon facility.  One of the most significant errors in the ITC’s determination is the refusal of the ITC to examine the volume of imports in context .  Korea 
submits that the evidence establishes that ALL of the increase in DRAMs imported in 2001 and 2002 
was to replace, not an addition to, the Hyni x-Oregon produced DRAMs.  The chart below 
demonstrates this fact:  
Hynix’s Market Share by Country of Production
20 
 
 2000 2001 2002 
DRAMs produced by Hynix 
Oregon   6.3% 1.1% 0.2% 
DRAMs produced by Hynix 
Korea  6.7% 9.0% 8.9% 
Total Hynix US Shipments 
 13.0% 10.1% 9.1% 
 
 The above chart demonstrates that, effectively,  the ITC “had blinders on” when it examined 
whether import volume had increased over the period examined.  The ITC focused myopically on the 
fact that Hynix’s subject imports had increased from 6.7% per cent of the market to 9.0% of the 
market, but effectively ignored why there was increase in imports.  Korea submits that an “objective 
examination” required that the ITC consider whet her the reason for the increase should change the 
usual assumptions that exist about the adverse ef fect of increased market share held by subject 
imports; that is, that an increase in imports steals  volume that otherwise would have gone to domestic 
producers.  
 An increase in the market share held by subject  imports is possible direct evidence of subject 
imports having an adverse volume effect on the domestic industry only when it can be shown that the 
subject imports took away sales th at otherwise would have been cap tured by the domestic industry.  
Such evidence does not exist in th is case.  As the above evidence demonstrates, in the real world, 
Hynix did not win business from the domestic indus try during the period 2000-2001 or during the 
period 2001-2002.  Hynix’s total share of the US market actually decreased during these periods.  
Accordingly, the evidence demonstrates that the subject imports were simply a replacement of volume that Hynix had already been supplying from its US production facility.    
* * * * 
 
31. Korea argues that Hynix's subject import s were merely replacing sales by Hynix's 
Eugene facility.  Korea refers in this regard to "customer swapping".  Le aving the present case 
to one side, imagine a case in which the volum e of imports increases during the period of 
investigation because a domestic company cease d manufacturing operations in order to "re-
tool" up at the very beginning of that peri od, and sourced its product (for resale) from 
unrelated subject exporters instead.  If the resu ltant absolute increase in imports during the 
period of investigation was significant, would an  investigating authority be entitled to rely on 
that in its injury determination?  
                                                     
 
20 See GOK Exhibit 41 (Hynix’s US Importer’s  Questionnaire Response to the ITC). WT/DS296/R 
Page E-28  
 
 GOK ANSWER
: If the domestic company that ceased its manufacturing operations for re-
tooling was the only or predominate domestic pro ducer, then we submit the answer is no; the 
investigating authority would not be  permitted to rely on the increase in subject imports to justify an 
affirmative injury determination.  In such a situ ation, the imports helped, not harmed, the domestic 
industry.   
 
 A somewhat harder question arises if there were other domestic producers from which the 
domestic (re-tooling) company could have sour ced product during its te mporary shut-down of 
manufacturing.  On the one hand, if such other domestic producers existed, it would be correct to conclude that subject imports prevented other domestic producers from having a temporary increase 
in their sales during the re-tooling by the domestic company. 
  On the other hand, it far from certain that this fact alone could properly justify an affirmative 
finding of “significant” volume effects.  In Korea’s vi ew, if the increase is simply to allow the same 
company to maintain its existing customer re lationships, such an increase cannot be deemed 
significant. 
  The key is context .  In most trade cases a significant in crease in subject imports is evidence 
that the foreign exporters have taken away busi ness from domestic producers.  In the normal case, 
imports occur precisely because the particular company does not have a domestic manufacturing base, and must import.  When the exporting company has a domestic manufacturing base, the analysis must 
be different.  That is why Article 15.2 does not impose a numerical threshold.  Some increases that 
might appear large at first impression, may well prove not to be “significant” when objectively 
considered in context. 
* * * * 
 
32. Is Korea arguing – as alleged by the US at para. 39 of its oral statement – that subject 
imports must be the sole cause of injury in or der for the requisite causal link to be established 
between the subsidized imports and injury?  If  so, please comment on the finding of the Hot-
Rolled Steel panel (DS184) that the USITC wa s not required to demonstrate that dumped 
imports alone caused material injury (para. 7.260 of that report). 
 GOK ANSWER
:   Nowhere has Korea argued that subject imports must be the sole cause of 
injury for the requisite causal relationship to be est ablished between the subsidiz ed imports and injury.  
Korea has argued, however, that causation must be established between subsid ized imports and injury 
to the domestic industry.  Causation is not clearly  established where a competent authority has failed 
to undertake the appropriate analyses prescribed by the SCM Agreement.  We believe the US 
allegation largely reflects its inability to accept th e non-attribution requirement under Article 15.5 of 
the SCM Agreement; the same requirement under Ar ticle 3.5 of the Antidumping Agreement, and 
Article 4.2(b) of the Agreement on Safeguards that have been the subject of several Appellate Body 
determinations.21  It misconstrues the obligation to separate and distinguish the effects of subsidized 
imports as a an argument by Korea that imports be the sole cause of injury.  In sum, there can be cases 
where multiple causes are present and an affirmative injury finding is warra nted.  In other cases, 
                                                      
21 See United States -- Anti-Dumping Measures on  Certain Hot-Rolled Steel Products From Japan , 
Report of the Appellate Body, WT/DS184/AB/R, 24 July 2001 (“ US - Hot-Rolled Steel ”), at para. 223; United 
States -- Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea , 
Report of the Appellate Body, WT/DS202/AB/R, 15 February 2002, at para. 217; United States -- Definitive 
Safeguard Measures on Imports of Wheat Gluten from the European Communities , Report of the Appellate 
Body, WT/DS166/AB/R, 19 January 2001, at para. 70 ; United States -- Safeguard Measures on Imports of 
Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia , Report of the Appellate Body, 
WT/DS177/AB/R, WT/DS178/AB/R,1 May 2001, at para. 179.  WT/DS296/R 
 Page E-29 
 
 
 however, where a proper causation analysis is completed, including inter alia , a proper non-
attribution analysis, it is possible to discern that imports are not a cause of material injury.  
* * * * 
 
33. Please comment on para. 431 of the US first  written submission.  Does Korea argue that 
the ITC should have "'isolate[d]' subject imports or the effects of the subject imports and other 
known factors on the domestic industry"?  Please explain. 
 
GOK ANSWER : At the outset we note the Korea never u sed the term “isolate” in the context 
of causation in its first submission.  In addition to incorrectly stating Korea’s position, the US is 
simply confusing the issue.  Article 15.5 of the SCM Agreement states “authorities shall also examine 
any known factors other than the subsidized imports which at the same time are injuring the domestic 
industry . . . ”.  More importantly, Article 15.5 states that “injuries caused by these other factors must not be attributed to the subsidized imports”.  Th is is the crux of the non-a ttribution requirement; the 
same requirement found in the Agreement on Safeguar ds at Article 4.2(b) and the AD Agreement at 
Article 3.5.  In interpreting the identical language in Article 3.5 of the AD Agreement, the Appellate 
Body stated:  
In order that investigating authorities, applying  Article 3.5, are able to ensure that the 
injurious effects of the other known factors are not “attributed” to dumped imports, they must appropriately assess the injurious effects of those other factors.  Logically, 
such an assessment must involve separating and distinguishing the injurious effects of 
the other factors from the injurious effects of the dumped imports. If the injurious 
effects of the dumped imports are not appropr iately separated and distinguished from 
the injurious effects of the other factor s, the authorities will be unable to conclude 
that the injury they ascribe to dumped imports  is actually caused by those imports, 
rather than by the other factors. Thus, in the absence of such separation and 
distinction of the different injurious effect s, the investigating authorities would have 
no rational basis to conclude that the dumped imports are indeed causing the injury which, under the Anti-Dumping Agreement , justifies the imposition of anti-dumping 
duties.
22 
 In short, it is unclear what the US even implies by the word “isolate”, nor is the issue relevant.  
Ultimately, an authority must ensure that injury cau sed by other factors is not attributed to imports.  
This may only be accomplished by separating causes,  including imports, and distinguishing them.  
Offering assumptions about the effects of imports and other causes is insufficient.  There must be an 
objective assessment and adequate explanation.  Ag ain, Korea is not advancing an argument that 
imports be a sole cause of  material injury; but the effects of imports must be understood.  As the 
Appellate Body clearly stated, “in the absence of such separation and distinction of the different 
injurious effects, the investigating authorities w ould have no rational basis to conclude that the 
dumped imports are indeed causing the injury . . . ”.23 
 
* * * * 
 
34. Please comment on the US remarks regardi ng Korea's use of volume / market share 
data sources set forth at paras. 292-294 of the US first written submission. 
 
GOK ANSWER : The US criticisms of the market shar e data relied upon by Korea are both 
wrong and disingenuous. 
 
                                                      
22 US – Hot-Rolled Steel,  at para. 223 (emphasis added). 
23 Id. WT/DS296/R 
Page E-30  
 
  The United States is wrong to allege that Ko rea compared a quantity-based market share 
figure for domestic shipments with a value-based ma rket share figure for Hynix.  A quantity measure 
--  billions of bits  --  was used to derive the market share figures for subject imports, non-subject imports and domestic indus try provided in Figure 9 of Korea’s First Written Submission.  In GOK 
Exhibit 62 we provide a “map” detailing how the market share figures were derived.  
 
 The USG is disingenuous when it states that Ko rea’s estimate of non-Hynix subject imports is 
“troubling” because Korea did not take into account the fact that the record  evidence demonstrated 
that there were 12 companies that had imported subject merchandise from Korea.
24  In fact, it is this 
argument by the USG that is troubling.  Korea very  much wanted to utilize the actual subject import 
volume in its arguments, but could not do so because the ITC made virtually the entire factual record 
confidential.  The estimates that Korea provided we re the best possible estimates given the constraints 
imposed by the United States.   The ITC’s decision to make the entire record  confidential, however, was not only not 
necessary to protect confidentiality but also was at tension with the ITC’s own past practice.  In 
virtually all other cases the ITC has followed a “three  or more” rule.  If three or more companies in a 
particular category ( i.e., importers) provided data, in all other cases the ITC has made the total of that 
category ( i.e., subject imports) public.  The United States itself admits that there were 12 importers of 
the subject merchandise
25, yet the United States refuses to make available to the Panel and to Korea 
the actual quantity/market share of subject imports , arguing the need to preserve confidentiality. 
 
 In its first submission and at the first meeti ng with the Panel, the United States argued that 
under its “one company with 75% or two companies with 90% rule,” it could not provide this data 
publicly.26  We have two comments.  First, nothing pr events the United States from providing this 
information to the Panel with a request for conf identiality.  With the passage of time, the market 
sensitivity of volume, market share, and other information fades. 
  Second, under the US rule itself, the Panel can have a high degree of confidence that the portion omitted -- subject imports by the 12 importers other than Hynix itself -- is not material.  Hynix is quite confident that during this period of time it was the largest importer of Hynix brand DRAMs.  
Hynix is not aware of -- nor was there any argument about -- large volumes of gray market imports by 
importers other than Hynix itself.  If the Panel is willing to make this assumption -- or ask the 
United States for confirmation -- then the Panel can know with confidence that the Hynix-only figures 
are a reasonable proxy for the total figures th at the United States has not yet disclosed. 
  Korea submits that there is no reason for there to  be any data issues or disagreements in this 
case.  There is no reason why the United States ca nnot provide the actual volume data so that both 
sides can argue about -- and the Panel can itself de cide -- what the actual figures mean, rather than 
pointless criticisms of each other’s estimates.  
* * * * 
 
35. Please comment on the US argument (para. 32 of its oral statement) that there is no 
obligation under the SCM Agreement for a brand- name analysis of price undercutting.  If 
Korea disagrees, please indicate which provisi ons of the SCM Agreement provide for this 
obligation. 
 
                                                     
 
24 US First Submission, at para. 293.   
25 Id. 
26 Id. at para. 297.  WT/DS296/R 
 Page E-31 
 
 
 GOK ANSWER :   Korea respectfully disagrees.  Article 15.1 of the SCM Agreement requires a 
determination of injury to be based on positive evidence and involve an objective examination.   
  Article 15.2 requires a determination that pr ice undercutting be “significant”, and that the 
allegedly subsidized imports must have an “effect” on domestic prices.  Korea submits that when the 
facts of a particular industry render a particular approach to price undercutting meaningless, that 
approach is no longer permissible under Article 15.2 .  Unless the particular approach allows an 
meaningful examination of “effect” and “signifi cant”, that approach can and should be found 
inconsistent with Article 15.2, read in li ght of Article 15.1 and Articles 15.4 and 15.5. 
 
 Article 15.4 requires that the examination of  the impact of subsidized imports “shall
 include 
an evaluation of all  relevant economic factors and indices having a bearing on the state of the industry 
(emphasis added)”, and specifically refers to “factors affecting domestic prices.”  Likewise, 
Article 15.5 requires “the demonstration of a causal  relationship between the subsidized imports and 
the injury to the domestic industry shall  be based on an examination of all  relevant evidence before 
the authorities (emphasis added),” and footnote 47 links the price effects from Article 15.2 to the 
causation analysis under Article 15.5.   In this case, the ITC specifically recognized a number of key features of the global DRAM industry that were highly relevant to the issue of pr icing, such that it was obliged to consider a brand-
name analysis of pricing.  Specifically, the ITC recognized: 
 
• “The parties agreed that the increasingly gl obal nature of the DRAMs market, both in 
terms of producers as well as purchasers, is an important consideration.”
27 
 
• US producers own fabrication facilities in multiple other countries; major purchasers 
are “multinational computer equipmen t manufactures that source DRAMs and 
DRAM modules globally.”28 
 
• “The commodity nature of standard DRAM s and low transportation costs mean that 
DRAMs and DRAM modules can, and are, easily shifted from one customer location to another, or purchases shifted from one source to another  . . . .  The major DRAM producers can and do shift DRAMs and DRAM production to and from alternative markets.”
29 
 
• Major PC OEMs (i.e., the largest cons umer of DRAMs), “purchase products under 
contracts from multiple sources, including most if not all the major producers of DRAM products.”
30 
 
• “Many responding purchasers reported differences between DRAMs and DRAM 
modules from different firms, but were unable to determine the country of 
fabrication.”31 
  The ITC’s public record further reveals that two of the four major producers were also US 
importers -- Infineon and Samsung.
32  The public record further reveals that Micron (also one of the 
                                                      
27 ITC Final Determination, at 18, provided at GOK Exhibit 10. 
28 Id. 
29 Id. 
30 Id. at 22. 
31 Id. at II-8. 
32 Id. at 24. WT/DS296/R 
Page E-32  
 
 big four producers) operated facilities in Italy, Japan, and Singapore.
33  Moreover, the ITC recognized 
that “non-subject imports increased market share by a substantially larger amount than subject 
imports”34, and that the domestic industry exported a large and growing share of DRAM products 
production.  
 What these findings and information reveal is th at: (1) a global industry exists dominated by 
four major producers, including Samsung, Micron, Infineon and Hynix; (2) DRAM products and production shift freely from location to location and s ource to source; and (3) brand is more important 
and certainly more recognizable than origin.  Th ese are relevant economic factors having a bearing on 
the US domestic industry and are relevant to the issue of causation and injury.  Articles 15.2, 15.4, 
and 15.5 of the SCM Agreement require
 that they be examined, and that the examination be objective, 
consistent with Article 15.1 of the SCM Agreement.   Korea submits that the only objective examination of these factors as they relate to pricing, 
causation and injury in this particular case is to undertake a brand-name analysis of price 
undercutting.  Not only is this the only objective m eans to explore price undercutting, but the fact 
remains that such an analysis w as before the ITC.  By the ITC’s own admission, these factors and 
information were known; they could not be summarily dismissed. 
                                                     
 
33 Id. at 18. 
34 Id. at 21.  WT/DS296/R 
 Page E-33 
 
 
  
 
ANNEX E-4 
  
ANSWERS OF THE UNITE D STATES TO THE 
PANEL’S QUESTIONS TO THE PARTIES FOLLOWING 
THE FIRST SUBSTANTIVE MEETING OF THE PANEL 
 
9 July 2004 
 
 
TREATMENT OF BUSINESS PROPRIETARY INFORMATION 
 
 
 The United States notes that, with one excepti on, the entire text of these answers and the 
accompanying exhibits is public information.  Th e one exception is the US answer to Question 16 
from the Panel, which contains business proprieta ry information (“BPI”) derived from the BPI 
exhibits attached to Korea’s first written submission.   The BPI information in the answer to Question 
16 is noted with double brackets and a bold font.  
 Consistent with the request made by Korea in its first written submission, the Secretariat and 
the Panel should treat the bracketed information in the answer to Question 16 as confidential. 
 WT/DS296/R 
Page E-34  
 
 Table of Reports Cited in These Answers 
 
 
EC – Tube and Pipe Fittings   
European Communities – Anti-Dumping Duties on Malleable Cast Iron 
Tube or Pipe Fittings from Brazil,  WT/DS219/R, Report of the Panel, as 
modified by the Appellate Body, adopted 18 August 2003 
 
EC – Tube and Pipe Fittings (AB)   
European Communities – Anti-Dumping Duties on Malleable Cast Iron 
Tube or Pipe Fittings from Brazil,  WT/DS219/R, Report of the Appellate 
Body adopted 18 August 2003 
 Thailand – H-Beams   
Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland , WT/DS122/R, Report of the 
Panel, as modified by the Appellate Body, adopted 5 April 2001 
 
US – Hot-Rolled Steel   
United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan , WT/DS184/AB/R, Report of the Panel, as modified 
by the Appellate Body, adopted 23 August 2001 
 
US – Hot-Rolled Steel (AB)   
United States – Anti-dumping Measures on Certain Hot-Rolled Steel 
Products from Japan , WT/DS184/AB/R, Report of the Appellate Body 
adopted 23 August 2001 
 
US – Lamb   
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, Report of the Appellate Body adopted 16 May 2001 
 
US – Steel Safeguards   
United States – Definitive Safeguard Measures on Imports of Certain Steel 
Products , WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, 
WT/DS253/R, WT/DS254/R, WT/DS258/ R, WT/DS259/R, Report of the 
Panel, as modified by the Ap pellate Body, 10 December 2003 
 
US – Steel Safeguards (AB)   
United States – Definitive Safeguard Measures on Imports of Certain Steel 
Products , WT/DS248/AB/R, WT/DS249/AB/R, WT/DS251/AB/R, 
WT/DS252/AB/R, WT/DS253 /AB/R, WT/DS254/AB/R, 
WT/DS/258/AB/R, WT/DS259/AB/R, Report of the Appellate Body, 
adopted 10 December 2003 
 
US – Wheat Gluten   
United States – Definitive Safeguard Measures on Imports of Wheat Gluten 
from the European Communities , WT/DS166/AB/R, Report of the Appellate 
Body adopted 19 January 2001 
  WT/DS296/R 
 Page E-35 
 
 
 QUESTIONS TO THE UNITED STATES  
 Alleged Subsidization
 
 
1.  At paras 235 and 236 of its first written submission, the US refers to “the Hynix bailout” 
as the “the subsidy program”.  What are the rel evant constituent parts of that alleged subsidy 
programme? 
 
1. The US Department of Commerce (DOC) found that the series of measures taken by the 
Government of Korea (GOK) – and the financial in stitutions that the GOK entrusted or directed – 
constituted a “single {subsidy} programme,” the obj ective of which was “the complete financial 
restructuring of Hynix in order to maintain the company as an ongoing concern”.1  As such, the 
DOC’s reference to the “single {subsidy} program ” encompassed the GOK’s policy and the resulting 
series of actions taken to support Hynix and prev ent its failure from 1999 through the end of the 
DOC’s period of investigation.2  Specifically, the constituent parts of the subsidy program identified 
by the DOC included the 800 billion won syndicated loan, the KDB Fast Track bond program, the 
May 2001 restructuring package, the October 2001 r estructuring package, and the benefits conferred 
by these and other financial contributions, such as D/A loans, made as part of the Hynix bailout.3  
 
2.  For each alleged financial contribution form ing part of the “Hynix bailout” “program”, 
please specify which private entities participated  in that financial contribution, and what 
evidence of entrustment and/or direction the [DOC] relied on in respect of each of those private 
entities. 
 
2. Figure US-4 contains a chart that lists the banks that participated in the four government-
directed financial restructuring and recapitalization measures that made up the Hynix bailout.  For the 
sake of completeness, it includes both public and private bodies that were government-owned and 
controlled, as well as other private bodies.  3. With respect to the evidence relied on in respect  of each of the “private entities”, the DOC did 
not engage in the type of bank- and transaction-speci fic analysis advocated by Korea.  As previously 
explained, there is no basis in subparagr aph (iv) of Article 1.1(a)(1) of the Agreement on Subsidies 
and Countervailing Measures  (SCM Agreement) for such an analysis.
4  Approximately 10-18 banks 
participated in each of the four bailout measures5, and there were hundreds of individual financial 
contributions ( e.g., loans) made by each of these banks under the auspices of the four measures.  An 
interpretation of subparagraph (iv) that would require explicit and/or formal evidence of government 
entrustment or direction to each bank with respect to each contribution would render the 
circumvention of subparagraph (iv) a simple matter. 
 4. The US first submission sets out in great de tail the evidentiary basis for the DOC’s finding of 
government entrustment and direction.  The evidence  showed that the GOK adopted an explicit policy 
to keep Hynix from failing.  The evidence also showed that the GOK took affirmative actions to 
entrust and direct Hynix’s creditors to provide fi nancial contributions to Hynix during the period of 
                                                     
 
1 Issues and Decision Memorandum  at 48 (Exhibit GOK-5); see also First Written Submission of the 
United States of America  (May 21, 2004), para. 35, note 31 [hereinafter “US First Submission”]. 
2 Issues and Decision Memorandum  at 19-24 (Exhibit GOK-5).  
3 See US First Submission, paras. 127-151. 
4 See US First Submission, paras. 164-170. 
5 Because of the mandatory nature of the Corpor ate Restructuring Promotion Act and the options 
devised by the Creditors’ Council, all of Hynix’s cr editors were required to participate in the October 
restructuring and refinancing of Hynix.  This included the 18 banks listed in Figure US-4, as well as other small 
creditors, many of which were owned by one of the 18 major creditors. WT/DS296/R 
Page E-36  
 
 investigation.  The GOK did so by exercising cont rol over Hynix’s creditors in its multiple roles as 
lender, owner, legislator and regulator.  When necessary, the GOK used coercion as a means of effectuating its Hynix policy.  In some instances, th e evidence is bank-specific; in other instances, the 
evidence is event-specific.  In other instances, the evidence of government entrustment and direction 
is relevant on a program-wide basis or with respect to all Hynix creditors. 
 
5. For example, some important evidence – such  as a number of the quoted statements by GOK 
officials – was not linked either to specific events  or banks.  Nevertheless, such evidence established 
the GOK’s role in entrustment or direction generall y during the bailout period.  Consider one such 
quoted statement by Deputy Prime Minister Jin Nyum, who stated, “[i]f Hynix says it needs an 
additional 1 trillion won, and if the creditor group ca nnot make a decision whether or not to provide 
additional support, the financial authorities [ i.e., the FSS, FSC and MOFE] should decide.  We cannot 
simply leave it blindly to the creditor group”.
6  This sort of key evidence was not particular to any one 
bank, but was directed more generally to all Hynix creditors.  
6. On another occasion, an official from the Offi ce of the President of Korea stated, “Hyundai is 
different from Daewoo.  Its semiconductor and cons tructions are Korea’s backbone industries. These 
firms hold large market shares of their industries, and these businesses are deeply-linked with other domestic companies.  Thus, these firms should not be  sold off just to follow market principles.”
7 
 7. The evidence before the DOC included offici al GOK documentation of high-level meetings 
and directives; GOK laws; the investigative report of  Korea’s Grand National Party investigation of 
the GOK’s preferential policies for Hynix and other Hyundai Group chaebol ; reports of direct 
meetings between GOK officials and Hyni x/Hyundai creditors, confirmed by supporting 
documentation; sworn submissions to US and Kor ean regulatory agencies, and reports and website 
materials of Korean banks; numerous direct quot es from GOK officials in interviews and press 
conferences; public statements of Hynix’s creditors ; US Government reports; IMF and OECD reports; 
public statements of Hynix; book excerpts; newspape r reports; and the reports of scholars, analysts 
and experts on the GOK’s control of the banks, dir ection of credit practices and Hynix’s financial 
condition.  8. From this body of evidence, a reasonabl e, unbiased person could have reached the same 
conclusion as did the DOC; namely, that the GOK entrus ted and directed Hynix’s creditors to bail out 
the company.  
3.  With regard to paras 139 and 146 of the US first written submission, please list which 
Hynix creditors the DOC considered to be “go vernment-owned and controlled”, which were 
treated as “government-owned”, which were designated as “majority-owned by the 
government”, and which were treated as public bodi es.  Please explain how the US defines each 
of these terms for the purpose of these proceeding s, and the consequential rationale for the 
designation made by the DOC with resp ect to each of the relevant entities. 
 
9. Paragraphs 139 and 146 discuss the dominant role played by the government-owned and 
controlled banks in both the May and October restructurings.  The “government-owned and 
controlled” designation refers to:  (A) credito rs that the DOC found to be “public” bodies, and (B) to 
“private” creditors in which the GOK had 100 per cent ownership or was the single largest 
                                                     
 
6 Deputy Prime Minister Chin, “Government will Take Actions to Turn Around Hynix,”  KOREA 
ECONOMIC DAILY  (4 August 2001) (translated version) (Exhibit US-118).  Apparently realizing his excessive 
candor, Jin quickly added:  “This should not be viewed as if the government is running the financial sector.  It is 
not.”  Id. 
7 The State Activism toward the Big Business in Korea, 1998-2000: Path Dependence and Institutional 
Embeddedness , Jiho Jang, University of Missouri-Columbia (April 2001) (Exhibit US-17).  WT/DS296/R 
 Page E-37 
 
 
 shareholder, and KFB (the GOK was not the larges t single shareholder in KFB, but did own 49 per 
cent).  Figure US-4, provided in response to Question 2, above, describes the basis for such 
classification ( i.e., the percentage of GOK ownership). 
 10. Through its administrative practice, the DOC has developed criteria to assess whether an 
entity should be considered a public body for pur poses of a countervailing duty investigation.  The 
relevant factors considered by the DOC are:  (1 ) government ownership;  (2) government presence on 
the entity’s board of directors;  (3) government c ontrol over the entity’s activities;  (4) the entity’s 
pursuit of governmental policies or interests;  and (5) whether the entity is created by statute.
8  In the 
DRAMs investigation, the DOC evaluated these factors in light of the evidence, and determined that 
the Korea Development Bank (KDB), the Industria l Bank of Korea (IBK) and other “specialized” 
banks in Korea were “government authorities”; i.e., public bodies.9  Consistent with Article 1.1(a)(1) 
of the SCM Agreement, the DOC treated financial contributions made by these government authorities as direct financial contributions by the GOK.  
11. The designation “majority owned by the governme nt” refers to those fi nancial institutions in 
which the GOK was the majority shareholder at the tim e of the Hynix bailout, that is those banks in 
which the GOK had greater than 50 per cent ownership.   In other words, it is a subset of “private” 
entities “owned and controlled” by the GOK ( i.e., in Figure US-4, every bank in Group B except the 
KEB and the KFB).   Under its general practice, th e DOC does not automatically treat an entity as a 
“government authority” merely because the governme nt has an ownership stake in the entity (even a 
significant ownership stake).
10   In this case, the DOC found that  the GOK majority-owned financial 
institutions did not meet the criteria for a “govern ment authority.”  Therefore, the DOC had to 
determine whether the GOK entrusted or directed these entities to make financial contributions to 
Hynix.   
12. Government ownership in an entity does, of course, have significance beyond the mere 
technical issue of how to treat financial cont ributions by the entity in a countervailing duty 
investigation.  The mere fact that an entity is  not treated as a public body does not mean that a 
government cannot or does not exercise control or  substantial influence over it through its voting 
rights as a shareholder.  In the DRAMs investig ation, the DOC found that the GOK’s ownership 
rights and privileges were in no way limited, and th at as the single largest shareholder (or significant 
shareholder in the case of KFB) it was able to entrust and direct these banks.  
 
4.  Did the DOC find that “government-owned and controlled” banks were 
entrusted/directed by GOK, or did it find that they were the instruments through which GOK entrusted/directed other entities? 
 
5.  Did the DOC find that “majority-owned by the government” banks were entrusted/directed by GOK, or did it find that they were the instruments through which GOK entrusted/directed other entities?  6.  Did the DOC find that “government-owned” banks were entrusted/di rected by GOK, or 
did it find that they were the instruments thro ugh which GOK entrusted/directed other entities?  
                                                     
 
8 See US First Submission, para. 55, note 75; Issues and Decision Memorandum  at 16 (Exhibit 
GOK-5).  
9 For purposes of domestic law, the DOC uses th e term “government author ity” instead of “public 
body.” 
10 Korea has not challenged the DOC’s designations of financial institutions as either public or private 
bodies.  We note, however, that the approach taken by the DOC was conservative.  Under Article 1.1(a)(1) of the SCM Agreement, the DOC reasonably could have considered as “public bodies” those Hynix creditors that 
were wholly-owned or majority-owned by the GOK. WT/DS296/R 
Page E-38  
 
  
13. The United States is answering Questions 4-6 together.  14. As discussed in response to Question 3 above, The “government-owned and controlled” 
designation refers to:  (A) creditors that the DOC found to be “public” bodies, and (B) to “private” 
creditors in which the GOK had 100 per cent ownershi p or was the single largest shareholder, and 
KFB.  15. For purposes of Article 1.1(a)(1), a “public  body” is treated in the same manner as a 
“government”.  Nevertheless, depending upon the fact s of a particular case, one may accurately refer 
to such public bodies as being owned and controlled by the government.  In its Final Determination , 
the DOC found that financial contributions provi ded by public bodies – such as the KDB – were 
direct.
11  In other words, the DOC did not find, nor did it need to find, government entrustment or 
direction of the entities it found to be “public”.  However, the DOC did find that “public” Hynix creditors – the KDB in particular – played a signifi cant role in the GOK’s direction of the “private” 
Hynix creditors.
12 
 16. The DOC found that all Hynix’s “private” credito rs were entrusted and directed by the GOK.  
These “private” entities included both the “government -owned and controlled” private entities (Group 
B in Figure US-4) and other private entities (Group C in Figure US-4).    
17. The designation “government  owned and controlled private entities” encompasses entities 
that are 100 per cent GOK-owned, majority GOK-owned ( i.e., GOK ownership greater than 50 per 
cent), those in which the GOK was the single larg est shareholder, and KFB in which the GOK 
ownership was significant ( i.e., 49 per cent) .  
 
18. The DOC did not find specifically that government-owned and controlled private entities  
“were instruments through which the GOK entrusted/ directed other entities”.  Rather, the DOC found, 
for example, that the GOK exercised control over Hynix’s creditors genera lly through government-
owned and controlled banks, because those banks play ed a dominant role in the Creditors Councils.  
The voting rights in the Councils were based on the to tal credit exposure to Hynix.  In both the May 
and October restructurings, the credit exposure of  the government-owned and controlled banks far 
exceeded that of all other banks.
13 
 19. The GOK has not disputed that government-o wned and controlled banks had a significant 
presence in Hynix’s Creditors Councils.  These banks  could and did set the terms of the financial 
restructurings in May and October.  The May Cr editor’s Council consiste d of only 17 banks.  The 
government-owned and controlled banks accounted for over 70 per cent of the voting rights in that 
council.  While their voting rights were somewhat lowe r at the October restructuring, the terms of the 
restructuring were set by the same 17 banks, with the addition of Citibank, before the full Creditors’ 
Council met to vote on the final package.
14  Even if other private banks ( i.e., those private entities not 
owned and controlled by the GOK (Group C in Figure  US-4)) had desired an alternative outcome or 
financing based on different terms, they woul d have been incapable of bringing it about. 
 
7.  Assume a government announces publicly that it is going to restructure a bankrupt 
industry and that, although it would prefer to do so with the assistance of  private investors, it 
would do so on its own if necessary.  Assume that  private investors decide to participate in that 
restructuring, purely on the basis of the government’s statement that it is going to keep that 
                                                      
11  US First Submission, para. 55; Issues and Decision Memorandum at 15-16 (Exhibit GOK-5). 
12  See US First Submission, paras. 55-78. 
13 Issues and Decision Memorandum at 53 and notes 18-20 (Exhibit GOK-5). 
14  Hynix Verification Report at 16 (Exhibit US-43).  WT/DS296/R 
 Page E-39 
 
 
 industry afloat.  Leaving aside issues of benefi t concerning the terms of the restructuring, 
should an investigating authority find that those private investors had been entrusted or directed by the government to participate?  Why, or why not? 
 
20. As both Korea and the United States have pr eviously stated, the focus of the financial 
contribution element in the definition of “subsidy” under Article 1.1 of the SCM Agreement is on the 
action of the government in making the financial c ontribution.  The Panel’s question posits that 
private investors decide to participate in a restru cturing on the basis of the government’s statement 
that it is going to keep a particular industry aflo at.  In determining whether there is a financial 
contribution – and more specifically under subpar agraph (iv) of Article 1.1(a), whether the 
government entrusted or directed private actors to  carry out a financial contribution function – the 
motives of private investors are not germane.  21. Whether a particular government action amounts to  entrustment or direction is an evidentiary 
question.  The Panel’s hypothetical posits merely  that a government announces that it is going to 
restructure a bankrupt industry and it would prefer to do so with the assistance of private investors.  
The general government pronouncement posited by the Panel would not appear to evince government 
entrustment or direction under subparagraph (iv) , which requires consideration of whether a 
government “gave responsibility to”, “ordered”, or  “regulated the activities of” private bodies to 
“carry out” financial contribution functions, such as the transfer of funds.  
22. Needless to say, the facts in this case do not  involve general governme nt pronouncements.  As 
set forth in detail in our first submission, the reco rd evidence shows that the GOK adopted an explicit 
policy to keep Hynix from failing.  The evidence al so shows that the GOK took affirmative actions to 
entrust and direct Hynix’s creditors to provide fi nancial contributions to Hynix during the period of 
review.  The GOK did so by exercising control over Hynix’s creditors in its multiple roles as lender, 
owner, legislator and regulator.  The evidence al so showed that, where necessary, the GOK engaged 
in coercion as a means of effectuating its Hynix policy.  23. The DOC’s record consists of thousands of pages of evidence, including official GOK 
documents of the GOK’s formal decision to assist H ynix in Economic Ministerial level meetings; the 
meeting minutes of the FSC; known GOK planning and meetings on the Hynix case; known reported 
meetings between the GOK, Hynix and its creditors; public statements by GOK officials; sworn 
statements by Hynix creditor banks admitting GOK entr ustment or direction to the US Securities and 
Exchange Commission; memoranda of understa nding (MOUs) between the government and the 
government-invested banks that permitted the GOK to fire bank officials; other statements or 
documents  by Hynix creditors corroborating GOK en trustment or direction; multiple examples of 
GOK threats and coercive tactics; many observati ons by third party observers; the GOK’s pervasive 
ownership and control of the banks; direct lending by the GOK through the KDB; and the 
coordination of the bailout by the KEB, th e GOK’s officially designated lead bank.  
 24. The record in this case thus paints a very different picture from the hypothetical posed by the 
Panel.  This was not a situation where the GOK sai d to the banks:  “We, the GOK, are going to bail 
out Hynix and we do hope you join us.”  Instead, this was a situat ion where the GOK effectively told 
the banks: “If you know what’s good for you, you are going to help us bail out Hynix”.   
 25. Moreover, to resolve this dispute, it is not n ecessary for the Panel to articulate, in the abstract, 
the precise quantum or type of evidence necessar y to support a finding of government entrustment or 
direction.  Instead, the Panel’s task is much more  straightforward.  The Panel need only consider 
whether the DOC’s conclusion – that the GOK entruste d and directed Hynix’s creditors to bail out the 
financially distraught Hynix – was reasoned and ade quate in light of the totality of the evidence 
before it.  The United States submits that the DOC’s conclusion meets this standard. 
 WT/DS296/R 
Page E-40  
 
 8.  Please comment on Korea’s assertion (para. 51 of its oral statement) that many creditors 
“walked away” from the October 2001 restructuring.  Doesn’t this suggest that those creditors were able to act independently of any GOK desire to restructure Hynix?  Please explain. 
 
26. The statement that certain creditors “walke d away” from the October restructuring implies 
that Hynix’s creditors had real choices in determining to what extent, if any, they would participate in 
the financial restructuring.  The United States disa grees with the GOK’s characterization of the three 
options available to Hynix’s creditors.
15 
 27. The three options available to Hynix creditors were: 
 
(1)  extend new loans to Hynix, convert a portio n of their unsecured Hynix debt to equity, and 
extend maturities on the remainder; 
 (2)  withhold new loans, convert 100 per cent of secured loans and 28.46 per cent of unsecured 
loans to equity, and forgive the remainder;  or 
 (3) choose not to provide new loans or to convert loans into equity shares, and instead agree to 
convert a portion of their loan balances into fi ve-year debentures at zero per cent interest.  
The portion converted into debentures was cal culated based on 100 per cent of the secured 
loans and 25.46 per cent of the unsecured lo ans, based on the liquidation value of the 
company.   
 28. First, due to the requirements of the Cor porate Restructuring Promotion Act (CRPA) under 
which the October bailout was conducted, no cred itors were permitted to “walk away” from the 
October 2001 restructuring.
16  The CRPA applied to all conceivable forms of creditors and made 
participation in the Creditor Council mandatory.17  Thus, as a result of the CRPA, all of Hynix 
creditors were forced to participate in the October restructuring.  Hynix creditor banks had to select 
one of the three options listed above, and had to ab ide by the terms of the decision dictated by the 
banks that accounted for 75 per cent of Hynix’s debt.  As the United States noted in its first submission, “the CRPA gave Hynix’s largest creditors – i.e., the specialized banks and those owned 
and controlled by the GOK – the power to dictate restructuring terms to all other Hynix creditors.”
18  
In other words, no bank was free to make an independe nt deal with Hynix, nor was any bank able to 
force Hynix into liquidation.  There was no “fourth way.”  29. Second, it is misleading for the GOK to charact erize “Option 3” as a “walk-away” provision.  
The GOK states that Option 3 was to “exercise appraisal rights against their outstanding debt based on 
the liquidation value of the company, as determin ed by an independent auditor, and walk away”.
19  
Contrary to the GOK’s assertions, however, the ba nks that elected Option 3 did not, and could not, 
just “walk away”.  30. The ongoing relationship between the Opti on 3 banks and Hynix was not a matter of 
liquidating and walking away.  Nor did creditors  obtain “what they could have obtained in 
                                                     
 
15  See US First Submission, paras. 88-93. 
16  It is important to note that the CRPA was enacted just prior to the October restructuring measures, 
with Hynix and other Hyundai Group companies as the most visible pending bankruptcies.  US First Submission, para. 84.  The CRPA was meant to improve on the voluntary Credit Restructuring Agreement 
(CRA) system, which had been roundly criticized by GOK officials because it permitted creditors to refuse to 
participate in corporate restructurings.  GOK Verification Report  at 7-8 (Exhibit US-12).  
17  Corporate Restructuring Promotion Act, Article 2.1 (Exhibit US-51). 
18  US First Submission, para. 88. 
19  Korea First Submission, para. 353.  WT/DS296/R 
 Page E-41 
 
 
 liquidation”.20  Instead, the relationship between the Op tion 3 banks and Hynix consisted of five 
elements that distinguished this situation from a typical liquidation process:  
• First, as part of the CRPA processes described a bove, these banks had no independent rights 
to seek or establish the value of their outstanding  credit to Hynix.  Rather, their rights were 
dictated to them by the government-owned banks  and the rest of the blocking majority on the 
Creditor Council.
21 
 
• Second, the banks were foreclosed from even seeking liquidation.  Under the terms of the 
CRPA, at the request of the lead creditor ba nk, the Financial Supervisory Service (FSS), a 
government agency, could stop creditors that wanted to seek liquidation from exercising their rights to call loans and to move companies into  receivership.  In the case of Hynix, the FSS 
did request that banks refrain from exercising their creditor rights.
22 
 
• Third, two of the Option 3 banks, Kyongnam and Kwangju, were 100 per cent government-
owned banks and were merged  with another 100 per cent gove rnment- owned bank, Hanvit, 
in April 2001, to form Woori Financial Holdings.23  As a result, there was no need for the 
GOK to funnel new money through these two banks  (which had ceased to have separate legal 
identities, in any event), because Woori had already committed to assist Hynix by selecting 
Option 1. 
 
• Fourth, as part of the recapitalization process, ba nks were subject to intense pressure from the 
GOK.  Among other things, MOUs associated with the recapitalization of banks permitted 
GOK control over the hiring and firing of bank officials. 
 
• Fifth, and most important, Korea implies that the banks were paid the liquidation value of 
their loans and that was the end of their relationship with Hynix.  Not true.   These banks were 
forced to accept an IOU in the form of an in terest-free Hynix debenture that would not mature 
for another five years; i.e., in 2006.  In other words, the four banks selecting Option 3 (which, 
in any event, represented only a sma ll fraction of total Hynix loans) are still waiting to be 
paid.   
 
In sum, the choices available to the creditors at the October 2001 restructuring were clearly designed 
to ensure the continued survival of Hyni x, at the expense of Hynix’s creditors.24 
 
9.  The US argued at the first substantive me eting that KFB was “brought into line” after 
initially resisting GOK efforts to require it to pa rticipate in the Hynix restructuring.  Korea 
denies this, arguing that KFB ultimately did not participate in the October 2001 restructuring.  Please comment. 
 
31. First, it should be clarified that KFB did participate in the October 2001 restructuring.  
Indeed, under the terms of the CRPA, KFB did not have the legal right to refuse to participate in the 
October restructuring.  (See Answer to Panel Qu estion 8, above.)  KFB c hose Option 3 which meant 
that it received a zero coupon bond amounting to 100 per cent of its secured loans and 25.46 per cent 
of its unsecured loans based on the estimated liquidati on value of Hynix.  KFB was forced to write off 
                                                     
 
20  Korea Oral Statement, para. 51. 
21  US First Submission, para. 88. 
22  GOK Verification Report  at 19 (Exhibit US-12). 
23  GOK Verification Report  at 6 (Exhibit US-12). 
24  US First Submission, para . 90 (“This means that the option 3 banks will not actually receive what 
they were able to salvage from their loans to Hynix until 2006 and will not earn any interest on the money that is 
owed to them by Hynix, hardly a real choice.”) WT/DS296/R 
Page E-42  
 
 the remainder of its loans under the terms of the CRP A.  Three other banks also selected Option 3.  In 
total, these banks forgave 234,000 million won, and took 81,000 million won in the form of the zero 
coupon bonds.  This provided a considerable benef it to Hynix.  Moreover, the KFB participated in 
other key parts of the subsidy program, including the Syndicated Loan, and the May restructuring.    
32. Second, there was ample evidence in the DOC  record demonstrating that the GOK applied 
considerable pressure both publicly and privately on KFB to ensure that KFB continued to participate 
in assisting Hynix.
25  Among other things, the GOK pulled $77 million in deposits out of KFB after 
KFB balked at participating in the KDB Bond Progr am for Hynix; threatened to have government 
agencies cease all business with KFB; and threat ened to have KFB’s clients terminate their 
relationship with KFB. 
 
10.  The US asserted at the first substantive meeting that creditors were required to 
participate in the October 2001 restructuring by  virtue of the CRPA.  Was such alleged 
mandatory participation relied on by the DOC as evidence of entrustment and/or direction?  If 
yes, please indicate where this issue is addressed in the DOC’s determination.  If not, why not? 
 
33. The DOC did not find that mandatory partic ipation under the CRPA constituted, in and of 
itself, entrustment or direction.  Rather, the DO C found that the GOK used the CRPA as a vehicle to 
effectuate the GOK’s Hynix policy.  
34. As explained in our first submission, the CRPA gave Hynix’s largest creditors – i.e., the 
specialized banks and those ba nks owned and controlled by the GOK – the power to dictate 
restructuring terms to all other Hynix creditors.  Hynix’s Creditors’ Council, dominated by specialized 
banks and government-owned and c ontrolled banks, determined that:  (1) no creditor would have the 
option to call in its debt, (2) no creditor would have the option to walk away without penalty, and (3) 
no creditor would have the option to remain an interest-earning creditor without extending new loans 
or forgiving significant debt on terms favorable to Hynix.  The DOC found that these “choices” were extremely limited and highly favorable to Hy nix, essentially keeping Hynix from complete 
bankruptcy.  Furthermore, the terms of those “choi ces” were dictated by Hynix’s government-owned 
and controlled creditors.
26   
 
35. During the investigation, the GOK conceded  that the CRPA was introduced by the National 
Assembly “to make sure that the banks could not avoid participating in workouts”.27  Under the 
CRPA, all creditor banks were obligated to participate in the workout system.28  The DOC found that 
this “provided the dominant GOK-owned and cont rolled [banks] with the ability to establish the 
financial restructuring terms over many more creditors”.29  
 
36. Thus, the evidence before the DOC showed  that enactment of the CRPA considerably 
leveraged the GOK’s already considerable power ov er Hynix’s creditor banks.  First, by naming 
Hynix’s principal transactions bank as head of the council, the GOK positioned itself to take full 
advantage of the KEB’s longtime role as agent a nd facilitator of government credit and management 
                                                      
25 For a description of the GOK’s coercive tactics with respect to KFB, see US First Submission, 
paras. 105-113.   
26 Preliminary Determination , 68 Fed. Reg. at 16776 (Exhibit GOK-4); Issues and Decision 
Memorandum  at 55 (Exhibit GOK-5). 
27 Issues and Decision Memorandum , at 53, n.19 (Exhibit GOK-5); Government of Korea Verification 
Report  at 8 (Exhibit US-12). 
28  Issues and Decision Memorandum  at 53, n.19 (Exhibit GOK-5). 
29  Issues and Decision Memorandum  at 53, n.19 (Exhibit GOK-5).  WT/DS296/R 
 Page E-43 
 
 
 decisions.30  Second, the law made all creditors of an ailing firm subject to the Council’s authority.31  
This requirement left KFB and other banks with non-GOK ownership little option but to participate in 
any restructuring and recapitalization measures.  
11.  With regard to the May and October 2001 restructurings, the parties have referred to 
option 3 as the exercise of “appraisal rights”.  Please comment.  Was the exercise of appraisal 
rights any different from liquidation?  Please explain.  
 
37. First, we note that an exercise of “appraisal rights” only applied to the October bailout, because the May bailout involved only new lending and the restructuring of the payment terms on 
existing debt.   
 38. With respect to the October bailout, the four  banks that selected Option 3 converted a portion 
of their loan balances into five-year debentures at zero per cent interest.  The portion converted into 
debentures was calculated based on 100 per cent of  the secured loans and 25.46 per cent of the 
unsecured loans, based on the liquidation value of  the company.  This conversion amounted to 
81 million won.  These banks wrote off all of the remaining loans to Hynix amounting to 234,000 million won.     39. The GOK has characterized this option as an ex ercise of appraisal rights, presumably because 
the amounts that were converted to five year zero coupon debentures (and consequently the amounts 
written off) were determined by reference to some  estimated liquidation value of the company.  
However, Option 3 was not the same thing as a true exercise of appraisal rights as would be contemplated in a liquidation.  Under a true exercise of appraisal rights, creditors would receive payment for some negotiated portion of their outstanding credit to the liquidated company.  In this case, the Option 3 banks had no control over the amount  of the liquidation value, nor what portion of 
that value they would recover.  All of this was under the control of the GOK-owned and controlled 
banks, which dominated the Creditors Council.  Mo reover,  the GOK, through the FSS, could prevent 
a creditor from exercising its creditor rights to call loans and to seek liquidation value.  Most 
importantly, the Option 3 banks were never paid  the liquidation value.  Instead, they were given an 
IOU in the form of zero interest debentures that will not even come due un til 2006.  As explained in 
the answer to Question 8, above, in no way can Op tion 3 be considered the same as a liquidation. 
 
12.  The US asserted at the first substantive meeting that this case is not about a comparison 
of different WTO Members’ restructuring frameworks.  At para. 21 of its oral statement, however, the US seems to have argued that an  investigating authority could reasonably have 
found that a reasonable investor would not have invested in Hynix because it was “technically 
insolvent”.  Doesn’t this suggest a per se rule th at all “technically insolvent” companies should 
be liquidated?  Please explain. 
 
40. In paragraph 21, the United States was discu ssing the issue of “benefit” and how Hynix’s 
abysmal financial picture affected the calculation of  the benefit.  In its investigation, the DOC 
examined whether Hynix was equityworthy as a mean s to determine whether GOK-directed financial 
contributions, in the form of equity infusions, provided  a benefit.  This test is specifically foreseen in 
                                                     
 
30 Issues and Decision Memorandum  at 56-57 (Exhibit GOK-5); Hynix Verification Report  at 13-14 
(Exhibit US-43).  
31  See CRPA, Article 2 (Exhibit US-51); Hynix Verification Report  at 16 (Exhibit US-43); and Foreign 
Banks Required to Attend Cr editor Meetings for Ailing Firms , Korea Times (July 22, 2001) (Exhibit US-52).  A 
Ministry of Finance official stated that: “[w]e’ve decided to force all creditor financial institutions to take part in 
the meetings in order to prevent some of them from refusing to attend and pursuing their own interests by taking advantage of bailout programmes.” Id.  Thus, this law was not intended to modify the behaviour of domestic 
banks, which already felt compelled to attend all such meetings. WT/DS296/R 
Page E-44  
 
 paragraph (a) of Article 14 of the SCM Agreemen t.  The DOC concluded that such financial 
contributions provided a benefit to Hynix given th at no “reasonable private investor” would have 
purchased equity from Hynix as Hynix was unequitywort hy.  As mentioned in paragraph 21, Hynix’s 
technical insolvency was one factor, along with its staggering losses and the worsening conditions in 
the DRAMs industry, supported this conclusion.  However, the DOC did not inquire into whether 
“technical insolvency” warranted liquidation, as this was not a relevant issue in the DRAMs 
investigation.   
13.  At para. 17 of its oral statement, th e US refers to alleged pressure on credit rating 
agencies.  Is this evidence of entrustment / directi on of private creditors?  If not, what is the 
relevance of this evidence to the DOC’s determ ination of subsidization?  Please explain. 
 
41. Credit rating agencies obviously are not Hynix cr editors.  Nevertheless, the pressure put on 
the credit rating agencies to refrain from lowering Hy nix’s credit ratings was illustrative of the extent 
to which the GOK was willing to inte rvene in the normal workings of the market to effectuate its 
policy of keeping Hynix afloat.  This evidence also  enhanced the credibility of the evidence indicating 
that the GOK engaged in coercion with respect to Hynix’s creditor banks.  
14.  At para. 18 of its oral statement, the US refers to KEB’s rationale for participating in 
the May and October 2001 restructurings.  Is it surprising that a public body would act on the basis of social and economic policy considerati ons?  Why does the fact that a public body 
creditor acted on non-commercial principles nece ssarily mean that other private body creditors 
also did so?  
42. No, it is not surprising that a public body would act on the basis of social and economic 
policy considerations, although that, of course, does not alter the disciplines that WTO Members have 
accepted in the SCM Agreement.  However, the DOC did not find that the KEB – the Korea 
Exchange Bank – was a public body.  Instead, the DOC found that KD
B, the IBK, and other 
specialized banks were public bodies.32 
 43. The United States understands how  confusion might arise as to whether the KEB was a public 
body.  The KEB was the GOK’s designated lead bank and the head of Hynix’s creditor council, the 
GOK was its single largest shareholder, the GOK regul arly intervened in its management, and the 
GOK heavily capitalized the bank.  The fact remains, however, that the KEB was a private entity, and, 
as such, would normally not be expected to articul ate the government’s national economic and social 
policy concerns in deciding to assist Hynix.  Th at it did, and that th e GOK expressly ordered it to 
carry out its Hynix policy “perfectly” and required it  to coordinate the actions of Hynix’s creditors, 
was simply further evidence that the GOK entrusted or directed the KEB and the other private Hynix 
creditors to assist Hynix.  
Alleged Injury
 
 
15.  At para. 316 of its first written submission, the US states that the ITC explained that 
although it opined that “the use of bits as a unit of measurement [could] present difficulties for 
[its] analysis”, it nevertheless found that the absolute volume of subsidized subject imports and the increase in that volume relative to US pr oduction and consumption was “significant”. 
  (i) What were the reasons why
 the ITC nevertheless found that the absolute volume 
of subsidized subject imports and the increase in that volume relative to US 
production and consumption was “significant”?  
 
                                                      
32  See US First Submission, paras. 55-56 and note 77.  WT/DS296/R 
 Page E-45 
 
 
  (ii) Where were those reasons set forth in its Determination and Views (Exhibit 
GOK-10) (or any other relevant document)? 
  (iii) The last paragraph of page 21 of th e ITC’s Determination and Views states that 
the ITC’s “findings about the volume of subject imports are reinforced by the 
substantial degree of substitutability between subject imports and domestic 
shipments”.  If the finding that the absolute volume of subsidized subject imports is significant is “reinforced” by considerations of substitutability, what 
is the initial basis for that finding?  In ot her words, what is the initial basis that 
is then “reinforced” by considerations of substitutability? 
 44. The ITC based its volume analysis on data  from confidential questionnaire responses that 
were reported in terms of billions of bits.
33  As the question indicates, th e ITC recognized that use of 
bits as a unit of measurement could present difficulties,  given that total bits are a function of chip 
density and product mix.34  It is true that one would expect volume increases in the DRAMs industry 
if volume is measured in terms of bits, to the extent  that total bits are a function of chip density and 
product mix, both of which changed over the period of investigation as demand for DRAM products 
continued to increase and as producers conti nued to move to higher density products.35  T h e  I T C  
explicitly recognized this reality.36 
 45. Nevertheless, bits were clearly the best po ssible unit of quantity in the DRAMs market.  The 
ITC has consistently relied on bits as a unit of meas urement in prior investigations involving DRAMs 
and synchronous random access memory semiconductors (“SRAMs”).  As the ITC stated, “total bits 
are a uniform measure of the quantity of DRAM products.”
37  Given the constant development of new 
product types in the DRAM market, measuring volume in terms of units rather than bits would yield a 
meaningless comparison.  For example, were the ITC to compare the number of units of 64 Mb chips 
produced in 2000 with the number of 128 Mb chips produced in 2002, it would be comparing apples 
with oranges.  Reliance on bits, as the ITC stated , was the only means of ensuring consistency across 
time periods.38  Indeed, when asked at the Commission’s hearing about the use of bits as the unit of 
measurement for volume in this industry, Hynix’s witness (Mr. Tabrizi) agreed that bits was an 
appropriate measure.39 
 
(1) The ITC found that the volume of subject im ports absolutely and the increase in that volume 
over the period of investigation absolutely an d relative to production and consumption in the 
United States was “significant”.40  Thus, the ITC used both absolute and relative measures of import 
volume.  By their very nature, the relative compar isons addressed the concerns inherent in the use of 
absolute data associated with ever-increasing product densities over time.  Under both types of 
measures, subject import volume increased between 2000 and 2002, as set forth in the ITC’s final 
determination.  The absolute volume of subsidi zed subject imports increased between 2000 and 2001 
and between 2001 and 2002.41  The ratio of subsidized subject imports to US production increased 
between 2000 and 2001.42  While this ratio declined between  2001 and 2002, it was still higher than 
                                                      
33 See, e.g. , USITC Pub. 3616 at 20 (Exhibit GOK-10). 
34  See, e.g. , USITC Pub.  3616 at 20 (Exhibit GOK-10). 
35  See, e.g. , USITC Pub.  3616 at 15 & n.92, 20 (Exhibit GOK-10). 
36  See, e.g. , USITC Pub.  3616 at 20 (Exhibit GOK-10). 
37  See, e.g. , USITC Pub.  3616 at 20 (Exhibit GOK-10). 
38  See, e.g. , USITC Pub.  3616 at 20 (Exhibit GOK-10). 
39  See, e.g. , Hearing Transcript at 250 (Exhibit US-122).  Ko rea also agrees that this is an appropriate 
unit of measurement.  See Korea First Submission, para. 91. 
40  See, e.g. , USITC Pub.  3616 at 20 (Exhibit GOK-10). 
41 See, e.g. , USITC Pub. 3616 at 20, Tables IV-4, C-1 (Exhibit GOK-10). 
42 See, e.g. , USITC Pub. 3616 at 21, IV-3 (Exhibit GOK-10). WT/DS296/R 
Page E-46  
 
 the ratio in 2000.
43  The ratio of subsidized subject imports to US shipments of DRAM products 
increased between 2000 and 2001, and al so increased between 2001 and 2002.44 
 46. In terms of their share of apparent domes tic consumption, subsidized subject imports 
increased their market share between 2000 and 2001  while the domestic industry was losing market 
share.
45  Both subsidized subject imports and the do mestic industry lost market share between 2001 
and 2002.46  Although subsidized subject imports’ market  share declined between 2001 and 2002, the 
ITC ascertained that subsidized subject imports’ market share in 2002 was still significantly higher 
than in 2000.47  Moreover, subsidized subject imports’ main tained their market share better than the 
domestic like product between 2001 and 2002 at a time when growth in demand was slowing.48 
 
47. The ITC also considered the weight to acco rd interim 2003 data.  Based on an examination of 
monthly shipment data reported by Hynix for the period January 2002 to March 2003, the ITC 
determined that the change in the volume of subsid ized subject imports since the filing of the petition 
in November 2002 was related to the pendency of th e investigation.  Theref ore, the ITC reduced the 
weight accorded to the data for the period af ter the filing of the countervailing duty petition ( i.e., the 
interim 2003 data).  It noted that this finding was not  inconsistent with record information showing an 
increase in the volume of subsidized subject imports from Korea between 2000 and 2001, after the 
October 5, 2000, revocation of the previous antidumping duty order on DRAMs from Korea and the 
restraining effects that it may have had on subject imports from the Hynix companies.49 
 
(2) In its final determination, the ITC did not simply list these volume figures and trends.  As the 
panel recognized in Thailand – H-Beams , it is important for investigating authorities to go an 
additional step.  The panel in that report observed that “the authorities went beyond a mere recitation 
of trends in the abstract and put the import figures into context”.50 
 
(3) There is no abstract way to determine whether a given volume or a given increase in that 
volume absolutely or relative to domestic productio n or consumption is “significant”.  The answer to 
this inquiry will vary depending on the characteristi cs of a particular industry and the conditions of 
competition.  Thus, it is logical that the SCM Agre ement does not specify any absolute volume or any 
increase in volume absolutely or relative to domestic production or consumption that by definition is 
“significant”.51 
                                                      
43 See, e.g. , USITC Pub. 3616 at 21, IV-3 (Exhibit GOK-10). 
44 See, e.g. , USITC Pub. 3616 at 21 n.138, Table IV-5 (Exhibit GOK-10). 
45  See, e.g. , USITC Pub.  3616 at 20, 26, Table C-1 (Exhibit GOK-10). 
46  See, e.g. , USITC Pub.  3616 at 20, 26, Table C-1 (Exhibit GOK-10). 
47 See, e.g. , USITC Pub. 3616 at 20, Table C-1 (Exhibit GOK-10). 
48  See, e.g. , USITC Pub.  3616 at 20, 21, 24, 26 & n. 174, Tables IV-4, IV-5, C-1 (Exhibit GOK-10). 
49  See, e.g. , USITC Pub. 3616 at 21 & nn.140-41, Table IV-3 (Exhibit GOK-10). 
50  Thailand – H-Beams , para.  7.170. 
51 Indeed, the only purely quantitative measure in the SCM Agreement that has anything to do with 
volume is the reference in SCM Agreement Article 11.9 and SCM Agreement Article 15.3 to the volume of 
imports that is “not negligible”.  Unlike in the counterpart provision of Article 5.8 of the Agreement on 
Implementation of Article VI of the Gene ral Agreement on Tariffs and Trade 1994  (“AD Agreement”), 
“negligible” is not more specifically defined in either of these SCM Agreement provisions.  Even in the context 
of the AD Agreement, “negligible” is not defined by reference to domestic market share or production.  See AD 
Agreement Article 5.8. 
Negligibility was never an issue raised by any of th e parties in the underlying agency proceeding.  As 
the ITC determined, “[n]egligibility is  not an issue in this investigatio n because subject imports from Korea 
constituted *** per cent of total imports of DRAMs in the most recent twelve months prior to the filing of the 
petition for which data are available, and are thus not negligible.”  See, e.g. , USITC Pub.  3616 at 14 n.79 
(Exhibit GOK-10).  Korea does not ma ke any argument that the volume at issue in this case is “negligible” 
under either Article 11.9 or 15.3 of the SCM Agreement.  WT/DS296/R 
 Page E-47 
 
 
  
(4) Consistent with the approach endorsed by the panel in Thailand – H-Beams , the ITC took the 
additional step and put the import figures and trends  into the factual context of the DRAMs industry 
and the facts of this particular investigation.  Specifically, the ITC explained why the absolute volume 
of subsidized subject imports and the increases in  that volume both absolutely and relative to 
production and consumption in the United States were “significant” in this investigation.  The ITC 
stated that “[o]ur findings about the volume of subj ect imports are reinforced by the substantial degree 
of substitutability between subject imports and domestic shipments ...”.52 
 48. Korea does not contest the high degree of subs titutability between subsidized subject imports 
and domestic shipments.
53  DRAMs of similar density, access speed, and variety (standard DRAM, 
VRAM, SGRAM, etc.) were generally interchangeable  regardless of country of fabrication, and 
substitutability also existed between similarly confi gured DRAMs of different density, but to a more 
limited degree.  Interchangeability existed among di fferent varieties of DRAMs and among those with 
different addressing modes/access speeds, but often only if substitution occurred during the design of 
the electronic system.54 
 (5) It was appropriate for the ITC to consider s ubstitutability in its volume analysis.  Whether a 
product is fungible and price sensitive, or whether th e market is highly differentiated can be relevant 
in assessing the significance of a given import volume or of a given increase of import volume absolutely or relative to domestic production or consumption.  In the instant investigation, involving a 
completely fungible commodity, a given volume or a given increase of import volume absolutely or 
relative to domestic production or consumption is more harmful than in other cases involving highly 
differentiated products, because it is more likely to ha ve a direct impact on the market particularly in 
terms of purchasers’ willingness to switch to or increase their purchasing of subsidized subject 
imports, and/or use the low price of subsidized s ubject imports as leverage to extract lower prices.
55  
This is a factual determination properly made by th e investigating authorities.  As the ITC determined, 
“[t]he commodity-like nature of domestic and subject imported DRAM products magnifies the ability 
of a given volume of imports to imp act the domestic market and industry”.56 
 49. Therefore, the ITC concluded that it was the high degree of substitutability between the 
subsidized subject imports and the domestic DRAM products that made the subsidized subject import 
volume and the increases in that volume both absolu tely and relative to domestic production and 
consumption “significant” in this investigation,  even in an industry where increases in volume 
measured in billions of bits might be expected. 
                                                     
 
52  See, e.g. , USITC Pub. 3616 at 21 (Exhibit GOK-10). 
53  With respect to the degree of interchangeability  between subsidized subject imports and domestic 
DRAMs products, 19 of 21 responding producers and importers reported that subject and domestic DRAMs products were generally used interchangeably, and 22 of 23 reported no important differences in product 
characteristics or sales conditions between them.  The ITC found that throughout the period of investigation, 
Hynix produced many of the same product densities as domestic producers.  Moreover, subject imports and domestic DRAM products were sold largely to the same customers and through the same channels of 
distribution.   See, e.g. , USITC Pub. 3616 at 22-23 & nn.145-147, II-1 to II-3 & n.3, II-4 to II-7, Tables II-1 to II-
3, V-3 (Exhibit GOK-10). 
54  See, e.g. , USITC Pub. 3616 at 22, I-8 to I-10 (Exhibit GOK-10); Hearing Transcript at 36-37, 53, 70-
75, 168-175, 181-182 (Exhibit US-94).  
55  See, e.g. , Hearing Transcript at 23 (So how do you co mpete?  How are we supposed to compete 
against subsidies at that level?  At least one answer is the following:  You have to lower your prices through the 
floor to keep up with the subsidized prices of Hyni x.”); 50 (“Competition against subsidized imports from 
Hynix has forced Micron to cut prices in order to win orders and defend our business with US customers.”); 72-
75 (“Artificially low prices that can be offered by some one who doesn’t have to pay his own bills are capable of 
having a harmful impact well beyond actual sales volume or market share.”) (Exhibit US-94). 
56  See, e.g. , USITC Pub.  3616 at 21 (Exhibit GOK-10). WT/DS296/R 
Page E-48  
 
  
 (iv) Was the ITC’s determination of material injury and/or causation based on its 
finding that the absolute volume of subsidized subject imports was “significant”?  Was this finding relevan t to its determination?  Would the ITC 
not have made its determination of materi al injury and/or causation but for its 
finding that the absolute volume of subsidized subject imports was 
“significant”? 
 
50. In its volume analysis, the ITC found a “signifi cant” absolute volume of subsidized subject 
imports as well as “significant” increases in that volume both absolutely and relative to both domestic 
production and consumption, as noted above.
57  In other words, it found that the volume of subsidized 
subject imports was “significant” based on each of th e possible bases identified in Article 15.2 of the 
SCM Agreement.  In its analysis of the price e ffects of subsidized subject imports, the ITC found 
significant undercutting and significant price depression by the subsidized subject imports.58  Under 
Articles 15.1 and 15.2 of the SCM Agreement, no one or several of these factors can necessarily give 
decisive guidance.  Given its findings concerning th e volume and price effects of subsidized subject 
imports and declines in nearly all of the domes tic industry’s performance indicators, the ITC 
concluded that subject imports were having a si gnificant adverse impact on the domestic industry 
producing DRAM products.59  The ITC also examined other known factors to ensure that it did not 
attribute injury from those factors to the subsidi zed subject imports, and concluded that the domestic 
industry producing DRAM products was materially injured by reason of subject imports from Korea 
that Commerce found to be subsidized.60 
 (6) In other words, the ITC’s finding that the ab solute volume of subsidized subject imports was 
“significant” was only one aspect of its volume analysis , and, in turn, only one aspect of its material 
injury determination.  To the extent that ther e are a number of ways of examining the volume and 
price effects of subsidized subject imports unde r SCM Agreement Articles 15.1 and 15.2, and no one 
or several of these factors can necessarily give d ecisive guidance, then the viability of the ITC’s 
material injury determination does not turn on any individual volume findings.
61  Moreover, the ITC’s 
affirmative injury determination relied not only on the multiple findings on volume but also its 
analysis of other factors concerning the price effects and impact of the subsidized subject imports on the domestic industry.  Consequently, the ITC’s fi nding of a significant absolute volume of imports 
cannot by itself be characterized as “dispositive” of  the ITC’s ultimate determination of material 
injury by reason of subject imports.  (7) Furthermore, in its final determination in this  investigation, the ITC did not separately analyze 
“material injury” and “causation”, as the question a ppears to suggest.  The ITC conducted what has 
been referred to by the agency’s US reviewing courts  as a “unitary” analysis.  In its “unitary” analysis 
in this investigation, the ITC did not ask, in  the abstract, whether a domestic industry was 
experiencing material injury and then, if th e answer was affirmative, proceed to a second 
determination of causation.  Instead, the ITC asked whether a domestic industry was being materially 
                                                     
 
57  See, e.g. , USITC Pub. 3616 at 20-21 (Exhibit GOK-10); see also, e.g. , Hearing Transcript at pages 
229 to 235 (Exhibit US-94) (containing dialogues between Commissioners Hillman and Koplan and Hynix’s 
counsel confirming that the confidential data showed increases in the volume of subsidized subject imports). 
58  See, e.g. , USITC Pub. 3616 at 22-25 (Exhibit GOK-10). 
59  See, e.g. , USITC Pub. 3616 at 25-27 (Exhibit GOK-10). 
60  See, e.g. , USITC Pub. 3616 at 20-27 (Exhibit GOK-10). 
61  Thus, Korea is mistaken in its in sistence that only increases in mark et share by subsidized subject 
imports matter.  The text of Article 15.2 does not contai n any requirement that the volume of subsidized subject 
imports increase, let alone that there be a “significant” incr ease in terms of market share.   It is certainly possible 
to have significant adverse price effects without any increase in subsidized subject imports, if, for example, the 
domestic industry is forced by lower priced subsidized subject imports to lower its price in order to retain its 
market share.  WT/DS296/R 
 Page E-49 
 
 
 injured “by reason of” subject imports as a unified question and then issued a single determination 
that subsumed the causation question, as evidenced  by the ITC’s explicit findings:  “Based on the 
record in this investigation, we determine that an industry in the United States is materially injured by 
reason of imports of {subsidized DRAMs from Korea}.”62 
 
(8) The SCM Agreement does not require any particular methodology or methodologies to 
analyze material injury or causation.  The unitary an alysis applied by the ITC in this investigation is 
consistent with SCM Agreement Articles 15.1, 15. 2, 15.4, and 15.5 because the material injury 
determination was based on a comprehensive analysis of all of the factors set forth in these provisions 
concerning the volume, price effects, and impact of  subject imports on the domestic industry.  No one 
or several of these factors was decisive.  Rather, th e material injury determination and thus the ITC’s 
causation analysis was based on an anal ysis of these factors collectively. 
 
16.  Please comment on Korea’s statement th at there was no displacement of US workers 
resulting from Hynix’s Eugene facility “swapping  customers” with Hynix’s Korean facility. 
 
51. First, Korea is incorrect that there was a mere “swapping” of customers between Hynix’s 
Korean and Eugene facilities while Hynix upgr aded the Eugene facility between July 2001 and 
January 2002.  As we explained in Confidential US-Figure 1,63 there is a missing factual predicate to 
Korea’s argument – that [BCI: Omitted from public version] . 
 
(9) Second, even if Korea’s factual premise were correct, to the extent that Hynix used Korean 
workers and production facilities to produce DRAM produc ts for the US market, its actions displaced 
US production, US productive capacity, and US workers.   During the proceedings before the ITC, the 
agency included Hynix Semiconductor Manufacturi ng America in the domestic industry consistent 
with the position advocated by Hynix.64  Thus, even if subsidized subject imports were replacing sales 
of the Eugene facility, that meant that they we re replacing sales of a domestic producer and, inter alia , 
displacing US production facilities and employees.65 
 
17.  At para. 40 of its oral statement, the US asserts that the ITC determined that “a 
significant portion of non-subject imports were Rambus and speciality DRAM products”.  On the basis of a non-confidential presentation/summary of the underlying proprietary 
information, please indicate what percentage  of non-subject imports were Rambus and 
speciality products? 
 
52. In a postconference brief that Hynix and Samsung submitted jointly during the preliminary 
phase of the ITC’s investigation, they emphasized that Samsung, whose US shipments of DRAM 
                                                     
 
62 USITC Pub. 3616 at 3 (Exhibit GOK-10); see also id . at 28 (“For the reasons stated above, we 
determine that the domestic industry producing DRAM products is materially injured by reason of subject 
imports of DRAM products from Korea that Commerce found to be subsidized.”) 
63 See also, e.g. , USITC Pub. 3616 at 21 n.139 (Exhibit GOK-10) (confidential discussion of the 
missing factual predicate is omitted from the public version of the last paragraph of the footnote, as indicated by 
the asterisks). 
64  See, e.g. , USITC Pub. 3616 at 12-14 (Exhibit GOK-10). 
65 The factual data on the public record of this investigation indicate declines in employment and 
employment-related indicia.  Over the period 2000 to 2002, the number of hours worked in DRAM fab 
operations, hourly wages, and aggregate wages all fell.  Af ter two years of extraordin ary losses (a 79.2 per cent 
operating loss in 2001, followed by a 50.8 per cent operating loss in 2002), the domestic industry was forced to lay off workers.  US fab operations lost 2,378 production and related workers by the first quarter 2003.  In sum, 
employment in fab operations by the end of the period of investigation was down 21 per cent from 2002, 18 per 
cent from 2001, 17 per cent from 2000, and 6 per cent from interim 2002.  See, e.g. , USITC Pub. 3616 at 26-27, 
Table III-8 (Exhibit GOK-10).  Employment-related information concerning assembly and module packaging 
operations is confidential. WT/DS296/R 
Page E-50  
 
 products were an important portion of US shipme nts of non-subject imports during the period of 
investigation, offered products that “differ[ed] substantially  from and were not interchangeable with 
products made by US producers”.
66  Thus, by Hynix’s own admission, Samsung’s imports were less 
likely to compete with US-produced products than Hynix’s imports.   
 
53. Hynix and Samsung further asserted that “[n] o domestic producer makes Rambus chips, to 
the best of our knowledge, and Micron’s witness Mr . Sadler acknowledged ... that, ‘there’s only one 
significant supplier of RAM Bus {sic} DRAM; that would be Samsung from Korea.’”67  They noted 
“the incontrovertible fact is that Rambus now accounts for a significant  percentage of Samsung’s US 
sales, ***, as shown in SSI’s questionnaire response.”68  Hynix and Samsung also emphasized that 
“irrefutable evidence exists that a very significant  proportion of Samsung’s US sales had no 
competition from” Micron, Infineon, and Hynix.69   
 54. As another example, they noted that another “significant market segment” where Samsung had not materially injured the domestic industry was in double data rate (“DDR”) DRAM products, 
which are technically not specialized products, but leading edge SDRAM products.  They pointed to 
evidence that Samsung was clearly out in front of  other suppliers in terms of DDR penetration.
70  For 
all of these reasons, they argued, imports of Sa msung’s Rambus, specialty, and leading edge DRAM 
products could not have materia lly injured the domestic industry.71 
 55. There was also extensive testimony by witnesses at the Commission’s hearing about the 
extent to which non-subject imports consiste d of Rambus and specialty DRAM products.
72 
 (10) The ITC confirmed the validity of these arguments through its data collection efforts.
73  The 
responses indicated that a significant percentage of non-subject DRAM products were non-standard 
DRAM products, such as Rambus or  specialty DRAM products.  The exact  percentage is confidential.  
Korea does not challenge the ITC’s treatment of this information as confidential under either 
Article 12.4 or 22.5 of the SCM Agreement.  Because the Panel requested a non-confidential 
summary of the underlying confidential percentage, we  can confirm that of all US shipments of non-
subject imports in 2001, approxima tely one-fifth were Rambus or  specialty DRAM products.  The 
corresponding percentage in 2002 was somewhat higher than in 2001.  
(11) Based on this positive evidence, it was appropr iate for both the ITC and Hynix to characterize 
the portion of non-subject imports that consisted of Rambus a nd specialty DRAM products as 
“significant”. 
                                                     
 
66 See, e.g. , 27 November 2002 Postconference Brief of Hynix and Samsung at 52 (Exhibit US-100) 
(emphasis added). 
67 See, e.g. , 27 November 2002 Postconference Brief of Hynix and Samsung at 50-56 (Exhibit US-100). 
68 See, e.g. , 27 November 2002 Postconference Brief of Hynix and Samsung at 50 n.69 (Exhibit US-
100) (emphasis added). 
69 See, e.g. , 27 November 2002 Postconference Brief of Hynix and Samsung at 53 (Exhibit US-100) 
(emphasis added). 
70 See, e.g. , 27 November 2002 Postconference Brief of Hynix and Samsung at 55-56 (Exhibit US-100). 
71 See, e.g. , 27 November 2002 Postconference Brief of Hynix and Samsung at 50-56 (Exhibit US-100). 
72  See, e.g. , Hearing Transcript at 168-175, 258-260 (Exhibit US-94). 
73  In the questionnaires issued in this investigation, the ITC collected information from importers on 
the percentage of imported products and US shipments of DRAM products in 2001 and 2002 that were 
“standard” DRAM products, Rambus DRAM products, and other “specialty” DRAM products.  Importers were asked to differentiate the reported information for Rambus DRAM products containing dice fabricated in Korea 
by “Samsung” and the portion containing dice fabricated in Korea by “Others” and to differentiate the reported 
information for specialty DRAM products containing dice fabricated in Korea by “Samsung” and the portion containing dice fabricated in Korea by “Others.”   See, e.g. , Importer’s Questionnaire at question II-10(a) 
(Exhibit GOK-44(b)).  WT/DS296/R 
 Page E-51 
 
 
  
18.  On the basis of a non-confidential presen tation/summary of the underlying proprietary 
information, please set out the basis for the ITC’ s finding that the volume of subsidized subject 
imports was “significant”. 
 56. In the global DRAMs market, there are only a handful of producers of DRAM products.  As 
the ITC explained in its final determination, pub licly available information about the DRAM industry 
did not provide usable, probative data with respec t to the factors specified in US law (which 
correspond to factors under the SCM Agreement).
74  For that reason, the ITC relied on data from 
questionnaire responses consistent with its regular practice.75  Because there are so few players in the 
market, there were several inst ances where even aggregated information from three or more 
companies was treated as confidential, consistent w ith the ITC’s practice, because one or two of the 
companies represented such a large share of the aggr egated information that revealing the aggregated 
data would reveal confidential info rmation about individual concerns.76 
 
(12) In the ITC’s final determination in this i nvestigation, the domestic industry’s shipments,  
production, and market share data as well as the da ta concerning total appare nt US consumption of 
DRAM products is not confidential.77 
 57. The volume of subject imports and the exact in crease in subject imports both absolutely and 
relative to domestic production and c onsumption is not revealed, however, because this information is 
confidential.
78  Because the DOC found that Korean producer Samsung received only de minimis  
subsidies, for purposes of the ITC’s final determin ation, there was only one foreign producer of 
subject merchandise, Hynix Semiconductor Inc. of Korea.  Moreover, during the entire period of 
investigation, one importer accounted for at least 75 per cent of all s ubsidized subject imports and/or 
two importers combined accounted for at least 90 pe r cent of all subsidized subject imports.  Thus, 
consistent with ITC practice, the aggregated data we re considered to be conf idential.  The trends in 
the data concerning subject imports, however, are no t confidential and they were discussed in the 
public version of the ITC’s final determination.79 
 (13) The volume of non-subject imports and their ma rket share also is not revealed in the public 
version of the ITC’s final determination, because revealing this information would permit the 
derivation of the confidential data concerning subject  imports.  The trends in the data concerning non-
subject imports and the fact that non-subject imports increased by “a substantially larger amount than 
subject imports”, however, are not confidential and are discussed in the public version of the ITC’s 
final determination.
80 
 
58. Thus, notwithstanding the constraints of the lim ited number of players in this market, the ITC 
endeavored to provide as much information as possible in  the public version of its  final determination.  
As evidenced by the extensive argumentation prov ided by Korea in this  proceeding and Korea’s 
failure to challenge the ITC’s treat ment of the information as confidential under either Article 12.4 or 
22.5, we submit that the ITC provided a summar y in sufficient detail to permit a reasonable 
understanding of the data. 
 
                                                      
74  See, e.g. , USITC Pub. 3616 at 20 n.134 (Exhibit GOK-10). 
75  See, e.g. , USITC Pub. 3616 at 20 n.134 (Exhibit GOK-10). 
76  See, e.g. , US First Submission, paras. 297-298. 
77  See, e.g. , USITC Pub. 3616 at Table C-1 (Exhibit GOK-10). 
78  See, e.g. , USITC Pub. 3616 at ii, 20-21, Table C-1 (Exhibit GOK-10). 
79  See, e.g. , USITC Pub. 3616 at 20-21 (Exhibit GOK-10). 
80  See, e.g. , USITC Pub. 3616 at 20-21 (Exhibit GOK-10). WT/DS296/R 
Page E-52  
 
 (14) The United States appreciates that the Pane l has not asked it to pr ovide any confidential 
information in these proceedings.  With respect to th e Panel’s request that the ITC set out the basis for 
the ITC’s finding that the volume of subsidized s ubject imports was “significant” on the basis of a 
non-confidential presentation/summary of the underlying proprietary information, unfortunately, there 
is not much beyond the response to question 15 above that can be provided without compromising the 
obligations of the United States under Article 12 to treat the underlying information as confidential.  
We refer the Panel to our response to question 15 above and also observe that throughout the period 
of investigation, the level of non-s ubject imports was at least five tim es the level of subject imports.  
Given the amount and type of information that wa s already discussed in the public version of the 
ITC’s final determination and the US first written submission and the fact that Hynix has provided 
certain of its own confidential information to the Pa nel, we are unable to provide any further summary 
without compromising the confidential information re ported by individual importers other than Hynix 
during the ITC’s investigation.  These importers vol untarily provided their conf idential information at 
the ITC’s request, notwithstanding the fact that th e overwhelming majority of them were not even 
participants in the ITC’s investigation. 
 
19.  The US argued at para. 424 of its first written submission that the causal analysis for 
countervail was different than the causal analysis for safeguards.  The US based its argument on 
the different injury thresholds set forth in the SCM and Safeguards Agreements respectively.  How does the injury threshold determine the requisi te degree of causal nexus?  In other words, 
what is it about the need to find serious injury in the case of safeguards that makes the 
causation standard different than in countervail, where material injury need to be established? 
 
59. Before addressing the differences between saf eguards and countervail, it is first necessary to 
describe the analysis conducted by the ITC.  As explained above in response to Question 15(iv), in its 
final determination in the DRAMs investigation, th e ITC did not separately analyze “material injury” 
and “causation”, but instead conducted a “unitary” an alysis.  The ITC did not ask, in the abstract, 
whether a domestic industry was experiencing material injury and then, if the answer was affirmative, 
proceed to a second determination of causation.  Instead, the ITC asked whether a domestic industry 
was being materially injured “by reason of” subject imports as a unified question, and then issued a single determination that subsumed the causation ques tion.  This is evidenced  by the ITC’s explicit 
findings:  “Based on the record in this investig ation, we determine that an industry in the 
United States is materially injured by reason of imports of {subsidized DRAMs from Korea}.”
81  We 
further explained above why this unitary analysis is consistent with US obligations under the SCM 
Agreement.  (15) In ascertaining whether there is a causal nexus between subsidized imports and material 
injury to the domestic industry in countervailing dut y investigations, investigating authorities must 
examine several factors.  Article 15.1 of the SCM Agreement specifies that a final determination shall 
be based on “positive evidence” and an “objective ex amination” of the volume of the subsidized 
subject imports, their price effects, and their im pact on the domestic industry.  The investigating 
authority’s obligation to examine these factors is further specified in Articles 15.2 and 15.4 (which 
provide further details concerning the investigati ng authority’s examination of the volume, price 
effects, and impact of subsidized subject imports on the domestic industry).  In addition, Article 15.5 
provides that:  
                                                     
 
81 USITC Pub. 3616 at 3 (Exhibit GOK-10); see also id . at 28 (“For the reasons stated above, we 
determine that the domestic industry producing DRAM products is materially injured by reason of subject 
imports of DRAM products from Korea that Commerce found to be subsidized.”)  In conducting this analysis, the ITC also examined other known fact ors to ensure that it did not attribute injury from such factors to the 
subsidized subject imports.  WT/DS296/R 
 Page E-53 
 
 
 It must be demonstrated that the subs idized imports are, through the effects47 of the 
subsidies, causing injury within the meani ng of this Agreement.  The demonstration 
of a causal relationship between the subsidized  imports and the injury to the domestic 
industry shall be based on an examination of all relevant evidence before the authorities.  The authorities shall also ex amine any known factors other than the 
subsidized imports which at the same time  are injuring the domestic industry, and the 
injuries caused by these other factors must not be attributed to the subsidized imports 
... . 
Footnote 47 to the SCM Agreement indicates that  the “effects” to which the first sentence of 
Article 15.5 refers are those set forth in Articles 15.2 and 15.4 ( i.e., the volume, price effects, and 
impact of the subsidized subject imports on the domestic industry). 
 (16) The unitary analysis applied by the ITC in th is investigation integrates the questions of injury 
and causation in order to ascertain whether an indust ry has suffered material  injury by reason of 
subsidized (or dumped) subject imports (in this case the imports from Korea found to be subsidized).  
This ensures that the ITC finds that those impact fact ors that demonstrate injury are in fact attributable 
to the imports under investigation.  (17) Turning to the differences between safeguard s and countervail, there are several differences 
between the causation analysis specified in th e SCM Agreement and that specified under the 
Agreement on Safeguards  (Safeguards Agreement). 
 
(18) The first, as previously discussed, is that  under Article 15.5 of the SCM Agreement, the 
causation analysis in a countervailing duty investiga tion calls for consideration of the “effects” of the 
subsidies, and this in turn is related to the anal ysis of the volume, price effects, and impact of 
subsidized subject imports.  There is no counterpart to this requireme nt in the Safeguards Agreement.  
This is because the Safeguards Agreement, in cont rast to the SCM Agreement and the AD Agreement, 
does not involve unfairly traded  imports and their effects. 
 60. Instead, a different inquiry is specified in th e Safeguards Agreement.  Article 4.2(a) of the 
Safeguards Agreement provides that   
to determine whether increased imports have  caused ... serious injury to a domestic 
industry under the terms of th is Agreement, the competent authorities shall evaluate 
all relevant factors of an objective and quantifiable nature having a bearing on the 
situation of that industry, in particular, th e rate and amount of the increase in imports 
of the product concerned in absolute and relative terms, the share of the domestic 
market taken by increased imports, changes in the level of sales, production, 
productivity, capacity utilization, profits and losses, and employment.  
Article 4.2(b) further provides that an affirmativ e safeguards determination “shall not be made unless 
this investigation demonstrates, on the basis of objective evidence, the exis tence of the causal link 
between increased imports of the product concer ned and serious injury or threat thereof”. 
 
61. Thus, under the Safeguards Agreement, there is an explicit reference to volume as there is 
under the SCM Agreement, but the nexus between the imports and the injury to the domestic industry 
under the Safeguards Agreement is explicitly depend ent on the existence of the causal link between 
increased  imports and the serious injury to the domestic  industry.  Under Article s 15.1 and 15.2 of the 
SCM Agreement, volume is a consideration, but no one or several of the factors mentioned can 
necessarily give decisive guidance.  Moreover, un like the “serious” injury standard set forth in 
Articles 2 and 4 of the Safeguards Agreement, the “m aterial injury” standard of Article 15.5 of the 
SCM Agreement contains no requirement that the volu me of subsidized subject imports be increasing WT/DS296/R 
Page E-54  
 
 in order for relief to be provided.  Under Article  15.5, the volume considerations also include 
examination of the absolute and relative volume le vels, as well as increases either absolutely or 
relative to either production or  consumption in the importing Member.  These differences in the 
manner of analyzing volume between the Safe guards Agreement and the SCM Agreement are 
important, because the analysis of volume is a factor relevant to causation, i.e., whether an industry 
has suffered injury by reason of imports, and not simply to the question of injury in the abstract. 
 62. Another difference is that there is no expr ess requirement under the Safeguards Agreement to 
consider the price effects of imports (although compet ent authorities are free to do so).  In contrast, 
Articles 15.1 and 15.2 of the SCM Ag reement provide that in a count ervailing duty investigation, an 
investigating authority “shall consider” the effect of  the subsidized imports on prices, although, again, 
no one or several of the identified  factor s can necessarily give decisive guidance.
82 
 63. Furthermore, although there is an express refe rence in the Safeguards Agreement to some of 
the same impact factors that are listed in the SC M Agreement, there are se veral additional factors 
listed in the SCM Agreement that have no explic it parallel in the Safeguards Agreement (although 
competent authorities are free to consider them).  In addition, there is no language in the SCM Agreement parallel to the Safeguard s Agreement concerning the evaluation of factors of an “objective 
and quantifiable nature”.  64. Also significant is the fact that the Safe guards Agreement involves a more rigorous injury 
standard.  Under the Safeguards Agreement, the co mpetent authority examines whether a “product is 
being imported into its territory in such incr eased quantities, absolute or relative to domestic 
production, and under such conditions as to cause or threaten to cause serious  injury to the domestic 
industry that produces like or directly competitive products.”
83 
 
65. As defined by Article 4.1(a) of the Sa feguards Agreement, “serious injury” means a 
significant overall impairment in the position of a domestic industry.  As the Appellate Body 
emphasized in US – Lamb Meat , “serious injury” is a much highe r standard than “material injury”.84  
It stated:   
We are fortified in our view that the standa rd of ‘serious injury’ in the Agreement on 
Safeguards is a very high one when we contr ast this standard with the standard of 
‘material injury’ envisaged under the Anti-dumping Agreement, the Agreement on Subsidies and Countervailing Measures (the  ‘SCM Agreement’) and the GATT 1994.  
We believe that the word ‘serious’ connotes a much higher standard of injury than the 
word ‘material.’  Moreover, we submit that  it accords with the object and purpose of 
the Agreement on Safeguards that the inju ry standard for the application of a 
safeguard measure should be higher than the injury standard for anti-dumping or 
countervailing measures ... .
85 
                                                      
82  Korea’s insistence that this pro ceeding is about the relative in crease in the market share of 
subsidized subject imports (while largely ignoring the IT C’s findings concerning other factors, especially the 
adverse price effects of the subsidized subject imports) may explain the prominence of reports reviewing safeguards determinations in its arguments to the extent  that volume considerations are more prominent in the 
text of the Safeguards Agreement. 
83  Safeguards Agreement, Article 2.1 (emphasis added). 
84  US – Lamb Meat , para. 124.  Even in the context of reviewing safeguards determinations, however, 
the Appellate Body has stated that Article 4.2(b) of th e Safeguards Agreement does not require that increased 
imports alone, in and of themselves, are causing serious injury.  See, e.g. , US – Wheat Gluten , paras. 70, 79.  
The same is true in the context of countervailing and antidumping duty investigations.  See, e.g. , US – Hot-
Rolled Steel (Panel) , para. 7.260 (reviewing an antidumping duty determination). 
85  US – Lamb Meat , para. 124.   WT/DS296/R 
 Page E-55 
 
 
 (19) Given the Safeguards Agreement’s more rigorous  injury standard and the fact that it does not 
provide the same level of detail as does the SC M Agreement as to how to ascertain the causal 
connection between the imports that are the subjec t of the investigation and the level of injury 
sustained by the domestic industry, one would e xpect that examination of causation would be 
different in an investigation under the Safe guards Agreement than in a countervailing duty 
investigation under the SCM Agreement. 
 66. Moreover, because the injury thresholds and relevant inquiries in safeguards and 
countervailing duty investigations are so different , there is no basis to assume the required nexus 
between the imports and the injury to the domestic industry in a safeguards investigation is the same 
as the required nexus between the imports and the in jury to the domestic i ndustry in a countervailing 
duty investigation.   
20.  The US noted at the first substantive meeting that Article 15.5 of the SCM Agreement 
refers to a “causal relationship” between the subs idized imports and the material injury to the 
domestic industry, whereas Article 4.2(b) ref ers to a “causal link” between increased imports 
and the serious injury to the domestic industry.  Does this explain the alleged difference in the 
applicable causation standards?  Please explain. 
 
67. As explained in response to Question 19
86, the United States believes that the differences in 
the applicable causation standards are due to diffe rences in the relevant inquiries in terms of the 
factors expressly identified in the two Agreements.  At the Panel’s request, we have considered the 
use of the term “a causal relationship” in Article  15.5 of the SCM Agreement as opposed to the term 
“the causal link” in Article 4.2(b) of the Safe guards Agreement.  Although there may be some 
semantic differences between the two terms87, upon further examination of the Agreements, we do not 
believe that the use of the different terms captures the difference in the applicable causation standards. 
 
21.  The US asserts at para. 424 of its first written submission that “the ‘causal relationship’ 
of the SCM Agreement is ... different from the ‘causal link’ requirement of the safeguards 
Agreement”.  At para. 443 of its first writ ten submission, the US refers to the ITC 
“demonstrating a causal link”.  At para. 419, the US refers to the need to establish a “causal 
relationship”.  How credible is the US assertion that the term “causal link” differs from the 
term “causal relationship” if the US fails to dist inguish between those two concepts in its written 
submission? 
 
68. As explained in response to Questions 19 a nd 20, above, the causation standard of the SCM 
Agreement is different from the causation standard of the Safeguards Agreement. 
 
(20) Although the questions of what nexus between  the imports and the material injury to the 
domestic industry is required in a countervailing duty investigation, and whether this nexus is lower 
than that required in the context of a safeguards investigation, are important conceptually, their 
resolution is not pivotal to this proceeding.  As  is evident from the responses to these questions and 
the US first written submission (which refers in para. 419 to the need to establish a “causal 
relationship” and in para. 443 to the ITC as “demonstrating a causal link”), this was not a case where 
                                                      
86  See also,  US First Submission, para. 424. 
87  “Link” is defined as being “[a] connecting part; esp. a thing or person serving to establish or 
maintain a connection; a means of connection or communication.”  New Shorter Oxford English Dictionary  (5th 
ed. 2002) at 1604.  In contrast, “relationship” is defined as “the state or fact of being related”.  Id. at 2520.  
“Related” is defined as  “[h]aving relation.”  Id.  “Relation”, in turn, is defined as “the existence or effect of a 
connection, correspondence, or contrast  between things; that particular way in which one thing stands in 
connection with one another; any connection or association conceivable as naturally existing between things ”.  
Id. (emphasis added). WT/DS296/R 
Page E-56  
 
 only a low-level nexus existed between the subsidized  subject imports and the material injury suffered 
by the domestic industry.  The strength of the nexus  between the subsidized subject imports and the 
material injury suffered by the domestic industry is further demonstrated by the ITC’s reference to the 
“link” between the subsidized s ubject imports and the material injury suffered by the domestic 
industry in its final determination in this investiga tion.  For example, in its discussion of the domestic 
industry’s exporting activities, the ITC concluded that “while the industry’s export performance 
played a role in the injury it experienced, it [did] not sever the causal link  between subsidized subject 
imports and material injury  to the domestic industry”.
88 
 (21) The United States wishes to make clear that the final sentence in paragraph 424 of its first 
written submission was not intended to suggest that the respective use of the terms “causal 
relationship” and “causal link” in the SCM and Sa feguards Agreements indicated that a different 
standard applied.  (Other text ual differences between the two Agreements, however, do support such a 
construction, as noted above).  T hose terms were instead merely used as shorthand for the identified 
differences in the language of the two Agreements. 
 
22.  At para. 424 of its first written submission, the US appears to argue that the ITC 
applied the “causal relationship” standard.  Is this a correct understanding of the US 
argument?  Please explain. 
 
69. The US argument is simply that the ITC’s cau sation analysis in the DRAMs investigation was 
consistent with the requirements of the SCM Agreement. 
 (22) The ITC found that the domestic industry pr oducing DRAM products was materially injured 
by reason of the subsidized subject imports of DR AM products from Korea.  The ITC demonstrated a 
causal nexus between the subsidized subject imports  of DRAM products from Korea and the material 
injury suffered by the domestic industry through it s examination of the volume, price effects, and 
impact of the subsidized subject imports on the domestic industry.  
23.  Please explain how the ITC complied with the causation standard described at para. 427 
of the US first written submission.  In particular, how did the US “separate and distinguish” the injurious effects of non-subject imports? 
 
70. Article 15.5 of the SCM Agreement provides that  an investigating authority must demonstrate 
that subsidized imports are causing material injury  based on an examination of all relevant evidence 
before the authority.  It also provides in relevant part that:  
The authorities shall also examine any k nown factors other than the subsidized 
imports which at the same time are injuring the domestic industry, and the injuries caused by these other factors must not be attributed to the subsidized imports.    Factors which may be relevant  in this respect include , inter alia
, the volumes and 
prices of non-subsidized imports of the produc t in question, contraction in demand or 
changes in the patterns of consumption, tr ade restrictive practices of and competition 
between the foreign and domestic producers,  developments in technology and the 
export performance and productivity of the domestic industry.  (emphasis added). 
 
71. The Appellate Body, based  upon language in the Safeguard s Agreement and in its own 
reports reviewing safeguards determ inations,  has stated that “in order to comply with the non-
attribution language[,] investigating authorities must  make an appropriate assessment of the injury 
caused to the domestic industry by the other known fact ors, and they must separate and distinguish the 
                                                      
88  See, e.g. , USITC Pub. 3616 at 27 n.182 (Exhibit GOK-10) (emphasis added).  WT/DS296/R 
 Page E-57 
 
 
 injurious effects of the [unfair] imports from the injurious effects of those other factors”.89  Although 
the Appellate Body concluded in US – Hot-Rolled Steel  that an investigating authority must “identify” 
the injury caused by other known factors, neither in that report nor in subsequent ones has the Appellate Body ever required the investigating au thorities to “isolate” and “precisely quantify” the 
injurious effects of the unfair imports, for ex ample, by means of econometrics or modelling. 
 
72. Instead, with respect to the question of wh at it means to “separate and distinguish” the 
injurious effects of the unfair imports from the injuri ous effects of other known factors, the Appellate 
Body has stated that “[t]his requires a satisfactory e xplanation of the nature and extent of the injurious 
effects of the other factors, as distinguished from the injurious effects of the [unfair] imports”.
90 
 
(23) The Appellate Body has consistently stated  that the particular methods and approaches by 
which WTO Members choose to carry out the process of separating and distinguishing the injurious 
effects of unfair imports from the injurious effects of the other known causal factors are not prescribed by the WTO agreements.  Thus, “provi ded that the investigating authority does not 
attribute the injuries of other causal factors to [ unfair] imports, it is free to choose the methodology it 
will use in examining the ‘causal relationship’ between [unfair] imports and injury”.
91 
 (24) In this regard, there is no requirement to ev aluate each or any of the factors referenced in the 
last sentence of SCM Agreement Article 15.5 in ever y countervailing duty investig ation.  As the panel 
found in Thailand – H-Beams  regarding the parallel provision of th e AD Agreement, “[t]he text of 
Article 3.5 indicates that the list of other possible causal factors enumerated in that provision is 
illustrative”.  In order for the “known factors” oblig ation to be triggered, the Appellate Body has 
explained that the factor at issue must:  “(a) be ‘ known’ to the investigating authority; (b) be a factor 
‘other than [subsidized] imports’; and (c) be inju ring the domestic industry at  the same time as the 
dumped imports”.
92  Regarding whether a factor is “known” to  the investigating authority, the panel in 
Thailand – H-Beams  found that other “known factors” would include factors “clearly raised before 
the investigating authorities by interested parties in the course of an AD investigation”. 93  It explained 
that investigating authorities are not required to seek out such factors on their own initiative.94 
 73. Whether or not the Panel agrees with Korea th at they qualify as “other known factors”, it is 
clear from the ITC’s final determination that th e ITC properly examined non-subject imports; other 
reasons for the price declines during the period of investigation; and the domestic industry’s actions. 
 (25) Non-subject imports :  The ITC determined that non-subject imports were in the US market 
throughout the period of investigation and at abso lute volumes that were higher than subsidized 
subject imports.
95  The ITC also recognized that some domes tic producers were responsible for some 
of the non-subject imports.96  Non-subject imports increased ma rket share between 2000 and 2001 and 
between 2001 and 2002, an increase the ITC evaluated as a “substantially larger amount than subject 
imports”.97  Although the ITC determined that non-subject  imports were responsible for “the bulk of 
the market share lost by domestic producers during the period of investigation”, it identified two 
                                                      
89  EC – Tube (AB) , para. 188 quoting US – Hot-Rolled Steel (AB) , para. 226. 
90  US – Hot-Rolled Steel (AB) , para. 226. 
91  EC – Tube (AB) , para. 189, relying on US – Hot-Rolled Steel (AB) . 
92  EC – Tube (AB) , para. 175. 
93  Thailand – H-Beams (Panel) , para. 7.273. 
94  Id. 
95  See, e.g. , USITC Pub. 3616 at 21, 25, 27, Tabl es IV-4, IV-5, C-1 (Exhibit GOK-10). 
96  See, e.g. , USITC Pub. 3616 at 6, 10-11, 17, 18 (Exhibit GOK-10). 
97  See, e.g. , USITC Pub. 3616 at 21, Tables IV-4, IV-5, C-1 (Exhibit GOK-10). WT/DS296/R 
Page E-58  
 
 reasons why it did not find the volume of non-subj ect imports as significant as otherwise would be 
suggested.
98 
 74. First, after examining the composition of non-subject imports, the ITC determined that a 
significant portion of non-subject imports were Rambus and specialty DRAM products for which 
domestic producers had no significant productio n during the period of investigation,
99 as discussed in 
more detail above in response to question 17.  Contrary to Korea’s repeated (and erroneous) 
characterization of “near complete intercha ngeability among domestic, non-subject, and subject 
imports” or “high substitutability” between  subject and non-subject DRAM products,100 non-subject 
imports were not as substitutable with subject or domestic DRAM products because their product mix 
was different. 
 75. Second, even those non-subject imports consis ting of “standard” products did not have the 
price effects that subsidized subject imports did durin g the period of investigation.  Although there is 
no requirement in the SCM Agreement for the investig ating authority to collect such data – and, to 
our knowledge, most Members do not collect any pricing data on non-subject imports – the ITC 
collected pricing data on non-subject imports in this  investigation.  Accordin g to that pricing data, 
while the frequency with which non-subject impor ts undersold domestically produced DRAM 
products increased between 2000 and 2002, the under selling frequency by non-subject imports was 
lower than, and increased less than, the underselling frequency of subsidized subject imports between 
2000 and 2002.
101  Thus, the ITC reasonably found that because non-subject imports were less 
substitutable for domestic DRAM products than we re subsidized subject imports, and because non-
subject imports undersold domestic DRAM products l ess frequently than subsidized subject imports 
did, non-subject imports had less of an impact than their absolute and relative volumes might 
otherwise have indicated.  
76. Moreover, the ITC also found that, while non-subject imports’ market share grew, the 
“primary negative impact” on the domes tic industry was due to lower prices.
102  On this point, the ITC 
found that subsidized subject imports, themselves, we re large enough and priced low enough to have a 
significant impact, regardless of the adverse effects caused by non-subject imports.103 
 77. Thus, it is clear that in its final determina tion, the ITC provided a satisfactory explanation of 
the nature and extent of the injurious effects of  non-subject imports (incl uding the volume and prices 
of non-subject imports) as distinguished from the inju rious effects of the subsidized subject imports. 
 78. Other possible reasons for the price declines :  Based on its analysis of the pricing data, the 
Commission ascertained that prices for nearly every pricing product and channel of distribution 
declined substantially over the period of investiga tion.  It observed that prices for domestic products 
and subsidized subject imports followed the same ge neral trends and were ge nerally similar for sales 
                                                     
 
98  See, e.g. , USITC Pub. 3616 at 27 (Exhibit GOK-10). 
99  See, e.g. , USITC Pub. 3616 at 27 (Exhibit GOK-10). 
100  See, e.g. , Korea First Submission, para. 166. 
101  In particular, non-subject imports undersold the domestic industry in 46.6 per cent of instances in 
2000, 47.7 per cent in 2001, and 60.7 per cent in 2002 whereas subsidized subject imports undersold the 
domestic industry in 51.0 per cent of instances in 2000, 56.0 per cent in 2001, and 69.8 per cent in 2002.  
Consistent with these figures, the ITC concluded that for these “standard” pricing products, subsidized subject 
imports undersold non-subject imports in a majority of instances.  See, e.g. , USITC Pub. 3616 at 25 & n.164 
(Exhibit GOK-10).  Moreover, even based on a disaggregated analysis of the pricing data on these “standard” 
products by brand name and source, subsidized subject imports were the lowest-priced source more often than DRAM products from any other source, contrary to Korea’s assertions.  See, e.g. , USITC Pub. 3616 at 24 
(Exhibit GOK-10). 
102  See, e.g. , USITC Pub. 3616 at 27 (Exhibit GOK-10). 
103  See, e.g. , USITC Pub. 3616 at 27 (Exhibit GOK-10).  WT/DS296/R 
 Page E-59 
 
 
 to PC OEMs across all products.  More particularly , the product-specific data showed price declines 
of 70 to 90 per cent from late 2000 through 2001, a modest rebound in early 2002, then a further decline over the course of 2002.  The ITC identified record evidence indicating that the price decline 
in 2001 was the “most severe in history”.
104 
 
79. The ITC examined other possible reasons for these price declines.  Regardless of the label 
attached to these factors or if a particular factor encompassed “sub-factors”, it is clear from the face of 
the ITC’s determination that the ITC examined the product life cycle  and the DRAMs business cycle  
that is characterized by repeated  “boom” and “bust”  periods (when supply/capacity , which increased 
during the period of investigation, outpaces demand , whose growth slowed at the end of the period of 
investigation) as other possible reasons for the price declines.105 
 80. Based on its evaluation of the record evidence in  this investigation, the ITC determined that 
“[w]hile slowing demand played some role, togeth er with the operation of the DRAMs business cycle 
and product life cycles, the unprecedented severity of the price declines that occurred from 2000 to 
2001 and persisted through 2002 indicated that s upplier competition was an important factor”.
106  The 
ITC determined that these pricing declines were far greater than the 20 to 30 per cent that Micron or 
even the 40 per cent declines that Hynix itself  reported would be expected on an annual basis.107 
 81. The ITC concluded that the increasing freque ncy of underselling by subsidized subject 
imports from 2000 to 2002 corresponded with the s ubstantial decline in US prices over those same 
years and that in the absence of significant quantities of subsidized subject imports competing in the 
same product types at relatively low prices, domes tic prices would have been substantially higher.
108 
 82. At the first Panel meeting, Korea suggested  that Hynix may have misunderstood the ITC’s 
question and that Hynix may not have meant that the average annual price decline was 40 per cent.  
Positive evidence from the ITC’s record, however, suppor ts the ITC’s finding th at the price declines 
experienced between 2000 and 2001 were far greater th an even Hynix asserted would be the norm.  In 
addition to the testimony of Hynix’s witness (Mr.  Tabrizi) at the ITC’s hearing that has been 
previously cited
109, in its brief filed after the ITC’s hearing, Hynix took another opportunity to 
respond to the same question that was posed by th e ITC during the hearing.  Hynix argued that the 
average annual price decline had increased in recent years, and once again estimated that the average 
annual decline was approximately 43 per cent.  Hynix included historical data on average sales prices, 
but even these data did not include any year in wh ich the price declines ranged as high as 90 per cent, 
as was the case between 2000 and 2001 acco rding to the ITC’s pricing data.110  In other words, it was 
reasonable for the ITC to have drawn the conclusi ons it did based on the ev idence before it, such 
evidence including testimony and responses made by Hynix itself. 
 
83. As this discussion shows, the ITC analyzed the nature and the extent of the injurious effects 
of other known factors that were affecting prices, and examined those factors in the factual context of the record in this investigation to ensure that it di d not attribute injury from those factors to subsidized 
subject imports.  The ITC provided a satisfactory explan ation of the nature and extent of the injurious 
                                                     
 
104  See, e.g. , USITC Pub. 3616 at 24 (Exhibit GOK-10). 
105  See US First Submission, paras. 454-457, which identify in more detail where in the ITC’s final 
determination the examination of these factors took place. 
106  See, e.g. , USITC Pub. 3616 at 24-25 (Exhibit GOK-10). 
107  See, e.g. , USITC Pub. 3616 at 24-25, I-11 (Exhibit GOK-10); Hearing Transcript at 157-161, 267-
68 (Exhibit US-94). 
108  See, e.g. , USITC Pub. 3616 at 24-25 (Exhibit GOK-10). 
109  See, e.g. , Hearing Transcript at  267-68 (Exhibit US-94). 
110  See, e.g. , Hynix’s July 2, 2003, Posthearing Brief at Exhibit 1 at 39-41 & Exhibit 19 (Exhibit US-
121). WT/DS296/R 
Page E-60  
 
 effects of other factors affecting prices (which could not explain the unprecedented price declines that 
took place in the US market) as distinguished from the injurious effects of the subsidized subject 
imports (which undersold the domestic industry at high margins and in increasing frequencies).  Thus, 
the ITC satisfied any requirement to “separate and distinguish” those factors.  
84. The domestic industry’s actions :  The ITC also examined the domestic industry’s actions.  
Korea argues that because Micron focused more on moving from 0.15 micron to 0.11 micron technology than on moving from 0.15 micron to 0.13 technology, Micron was unable to supply the market with certain DDR products (256 Mb DDR pr oducts) based on the 0.13 technology and instead 
had to supply the market with those products made from 0.15 micron technology (which was more 
costly).  In fact, the ITC collected pricing data on 256 Mb DDR266 SDRAMs.
111  The record 
indicated that volume demand for 256 Mb DDR DRAM s did not develop until the latter half of 2002, 
which was after  Micron and the domestic industry had sustained their most significant losses.112  
Moreover, as the ITC analyzed the data, it determined  that whatever negative effect any particular 
decisions may have had on Micron, they “could not  explain the harm” experienced by the domestic 
industry as a whole.113  This “harm was not isolated to Micron and was due mainly to lower prices”.114 
 85. Second, even though Hynix never even argued that  exports might be another causal factor, the 
ITC nonetheless evaluated the domestic industry’s exporting activities.
115  The ITC identified the 
“increasingly global nature of the DRAMs market, both in terms of producers as well as purchasers.”
116  Analyzing the data, the ITC determined that the domestic industry exported “a large 
and growing share of its DRAM products production,  although it [sold] a substantial portion (the 
majority in each of the full years 2000 through 2002) in the US market”.117  The ITC determined that 
“[i]ncreasing export shipments offset to some de gree the slower growth of  the industry’s domestic 
sales and thereby allowed the industry to utilize mo re capacity than it would otherwise have done.  
However, falling unit sales values on export sales ha d a negative impact on the domestic industry’s 
profitability.  The unit value of the industry’s expor t shipments fell substantially, although somewhat 
less than the unit value of th e industry’s domestic sales.”118  Based on this evaluation of the data, the 
ITC concluded that “while the industry’s export performance played a role in the injury it 
experienced, it [did] not sever the causal link betwee n subsidized subject impor ts and material injury 
to the domestic industry”.119 
 
86. Thus, the ITC analyzed the nature and the extent of the injurious effects of domestic 
producers’ actions, and evaluated this factor in the fact ual context of this investigation to ensure that it 
did not attribute injury to subsidized subject imports.  Because its evaluation was also based on 
positive evidence and an objective examination, its anal ysis of this factor is consistent with US 
obligations under Articles 15.1 and 15.5. 
 
(26) It is clear that in its examination of other known factors, the ITC went well beyond what has been found to be sufficient by other WTO panels.  For example, in EC – Tube and Pipe Fittings , the 
panel examined Brazil’s claim that the EC did not adequately examine non-subject imports from 
Poland.  The EC found that Brazil’s claim was no t substantiated, apparently based on data from 
                                                     
 
111  See, e.g. , USITC Pub. 3616 at V-3, Table V-10 (pricing product 5) (Exhibit GOK-10). 
112  See, e.g. , Micron’s Posthearing Brief at Exhibit 3 at 19-21 (Exhibit US-96). 
113  See, e.g. , USITC Pub. 3616 at 26 n.177 (Exhibit GOK-10). 
114  See, e.g. , USITC Pub. 3616 at 26 n.177 (Exhibit GOK-10). 
115  See, e.g. , USITC Pub. 3616 at 27 n.182 (Exhibit GOK-10).  The ITC noted in its determination that 
Hynix had not argued that exports were another causal factor. 
116  See, e.g. , USITC Pub. 3616 at 18 (Exhibit GOK-10). 
117  See, e.g. , USITC Pub. 3616 at 27 n.182 (Exhibit GOK-10). 
118  See, e.g. , USITC Pub. 3616 at 27 n.182 (Exhibit GOK-10). 
119  See, e.g. , USITC Pub. 3616 at 27 n.182 (Exhibit GOK-10).  WT/DS296/R 
 Page E-61 
 
 
 Eurostat that was not susceptible to verification beca use it was not available at such a level of detail.  
The panel reiterated that Poland “was not under inv estigation for selling the product at dumped prices 
in the EC market”.  The panel found that although the investigating authority was required during the course of the investigation to satisfy itself as to the accuracy of the information supplied by interested 
parties upon which its findings were based, the EC ’s consideration of Brazil’s argument was enough, 
and there was no inconsistency with Articl es 3.1, 3.5 or 6.6 of the AD Agreement.
120  The fact that the 
ITC’s collection and evaluation of data concerning other known factors in this investigation exceeded 
the level considered adequate by the pa nel reviewing the EC’s determination in EC – Tube and Pipe 
Fittings  provides yet another reason for this Panel to find that the ITC’s analysis of “other known 
factors” was consistent with the SCM Agreement. 
 
24.  How do the causation standards of “causa l link” (Article 4.2(b) of the Safeguards 
Agreement) and “causal relationship” (Article 15.5 of the SCM Agreement) differ in practice? 
 
87. As explained in the answers to Questions 19 and 20, above, the injury threshold and the 
relevant inquiry in a safeguards investigation differ from those involved in a countervailing duty 
investigation.    (27) These differences in the injury thresholds and relevant inquiries may have practical effects on 
the findings in those investigations.  Or, depending on  the factual circumstances of the investigations, 
the causation findings may not be so divergent.  For example, there is no explicit requirement to 
consider price effects in a safeguards investigation,  but there may be safeguards investigations where 
adverse price effects are relevant to the causal inquiry.  
25.  Korea noted at the first substantive meet ing that the Argentina-Footwear panel, in 
respect of a safeguards dispute, stated (para.  8.238) that an absence of coincidence, or 
correlation, “would create serious doubts as to th e existence of a causal link, and would require 
a very compelling analysis of why causation still is  present” (italics in original).  Does the US 
consider that such panel ruling is not relevant to the present proceedings because it concerns 
causation in the context of safeguards, and not countervail?  Please explain. 
 
88. Korea relies heavily in its first written submission on the Argentina – Footwear  panel report, 
in which the panel stated in the context of revi ewing a safeguards determination that an absence of 
coincidence or correlation “would create serious doubts as to the existence of a causal link, and would 
require a very compelling analysis of why causation still is present”.  In a coincidence analysis, an 
authority examines trends in imports and overall tre nds in factors specified in the agreement, as well 
as their absolute levels; it ascertains whether, for exam ple, movements or trends in factors concerning 
the imports correspond temporally with overall movement s or trends in factors showing injury to the 
domestic industry.  89. In the answers to Questions 19 and 20, above, we set forth our concerns with the use of the 
Safeguards Agreement and reports reviewing safeguards determinations as tools for interpreting the 
provisions of the SCM Agreement concerning counte rvailing duty measures.  Nevertheless, whether 
this Panel reviews the ITC’s material injury determ ination through the lens of a correlation analysis, 
the lens of a conditions-of-competition analysis, or so me other lens, it is clear that the ITC’s causation 
analysis in the DRAMs investigation was consistent with US obligations under the SCM Agreement.   
 (28) For example, as discussed in more detail in our first written submission, there was a 
correlation between the volume (and the increases both absolutely and relative to both domestic 
production and consumption) of the subsidized subject imports and the adverse impact on the 
domestic industry.  There was a correlation betwee n the significant underselling by the subsidized 
                                                     
 
120  EC – Tube (Panel) , para. 7.389. WT/DS296/R 
Page E-62  
 
 subject imports and the significant price declines experienced during the period of investigation.  
There was also a correlation between these price declines and the adverse impact on the domestic 
industry.  (29) In its causation analysis, the ITC also t ook into account several conditions of competition, 
including, for example:  the importance of price in  this industry; the high degree of substitutability 
between subsidized subject impor ts and domestically produced DRAM  products; and the existence of 
a commodity-type market that reacts quickly to underselling through the rapid dissemination of 
pricing information to a limited number of purchas ers including through such mechanisms as most-
favoured-customer, best-price clauses,  and other informal arrangements. 
 
(30) Thus, unlike the situation described in the Argentina – Footwear  case, in the DRAMs 
investigation there was a very clear nexus between the injury suffered by the domestic industry and 
the volume, price effects, and impact of the subs idized subject imports.  The DRAMs investigation 
was not a case in which the subsidized subject imports were priced higher than the domestic 
industry’s prices such that any depression in US pr ices could not be correlated to the subsidized 
subject imports.  Nor is this a case in which the vol ume, market share, or ratio to domestic production 
of the subsidized subject imports was in decline.  The contrasting volume and price trends of subject 
imports and the condition of the domestic DRAM i ndustry over the period of investigation provided 
compelling evidence of the material injury caused by the subsidized subject imports from Korea. 
 
(31) We also note that Korea’s reliance on Argentina – Footwear  ignores the more recent report in 
US – Steel Safeguards , in which the panel upheld certain as pects of the US safeguard measures 
concerning steel products, notwithstanding that for some  of these measures, as the panel in that case 
noted, the United States “did not perform a coincidence analysis”.
121  
 
(32) The panel in US – Steel Safeguards  recognized that previous reports reviewing safeguards 
determinations had found that a coincidence findi ng was “central” to a causation analysis under the 
Safeguards Agreement.122  At the same time, that panel r ecognized that Safeguards Agreement 
Article 4.2(b) does not prescribe the use of any particular methods or analytical tools for demonstrating causation, leaving it up to the compet ent authority to decide the method it considers 
most appropriate to determine causation.
123  In that report, the panel recognized that “there may be 
cases, for instance, where a compet ent authority does not undertake a coincidence analysis or does so, 
but the facts do not support a finding of causal  link on the basis of such an analysis”.124  The panel 
found that in such situations, “reference could be  made to the conditions of competition as between 
imports and domestic products  with a view to providing a compelling explanation, in the absence of 
coincidence, as to why a causal link nevertheless exists”.125  Notably the panel continued that in its 
view, “consideration of the conditions of competiti on of the market in which the relevant imported 
and domestic products are being sold  may generally prove insightful in respect of the issue of the 
causal relationship between increased imports and serious injury”.126  As the panel further explained, 
“the more complicated the factual situation, the mo re important it is for a number of factors to be 
taken into consideration”.127  The panel then upheld, subject to its  review of the ITC’s non-attribution 
                                                      
121  US – Steel Safeguards (Panel) , para. 10.295. 
122  US – Steel Safeguards (Panel) , para. 10.296. 
123  US – Steel Safeguards (Panel) , para. 10.294. 
124  US – Steel Safeguards (Panel) , para. 10.314. 
125  US – Steel Safeguards (Panel) , para. 10.314. 
126  US – Steel Safeguards (Panel) , para. 10.314. 
127  US – Steel Safeguards (Panel) , para. 10.323.  WT/DS296/R 
 Page E-63 
 
 
 analysis, the ITC’s causation analysis concerning hot -rolled bar and rebar that the panel ascertained 
was not based on a coincidence analysis but on a conditions of competition analysis.128 
 (33) Thus, while a correlation analysis may be one tool that an authority may employ to demonstrate causation, it is not the only such tool.  A conditions of competition analysis is another 
tool that has been found to be adequate to de monstrate causation by a panel reviewing a safeguards 
determination. 
                                                     
 
128  US – Steel Safeguards (Panel) , paras. 10.424 to 10.430, 10.470 to 10.477.  The Appellate Body 
explicitly declined to make findings on the issue of causation, and thus neither reversed nor upheld these findings.  US – Steel Safeguards (AB) , para. 483. WT/DS296/R 
Page E-64  
 
  
 
ANNEX E-5 
  
THE REPUBLIC OF KOREA’S ANSWE RS TO THE PANEL QUESTIONS 
FOLLOWING THE SECOND SUBSTANTIVE MEETING 
 
6 August 2004 
 
 
Each party may address/comment on ques tions addressed to the other party 
  
A. QUESTIONS TO US 
 
1. Please comment on the following paragra phs of Korea's Opening Statement at the 
Second Substantive Meeting of the Panel: 
 
 §  20:  the hypothetical of Hynix being the lowest price twice, but 98 other suppliers 
being each the lowest price once; 
 Comment
:   
 1. During the second meeting with the Panel, the United States expressed frustration with not 
being able to respond directly to this hypothetical.  Korea would like to note three points.  First, any frustration is entirely within the control of the Unite d States:  it has the information that it is unwilling 
to disclose.  
2. Second, the main point of this hypothetical  is in fact a public fact:  the United States 
methodology focused on the individual
 effect of each supplier, and never assessed the collective  
effective of all of these other suppliers.  In our view , such an explanation is inherently defective and 
insufficient.  It is simply not possible to asses s the reasonableness of the US explanation without 
knowing the magnitude of the collective effect of  these other suppliers charging lower prices than 
subject imports. 
 3. Third, there is strong support for the propos ition that panels may draw adverse inferences 
against those parties that possess but withhold ke y information.  The WTO Appellate Body has 
previously found that panels have “the legal authority and the discretion to draw inferences from the 
facts before it,” including facts a party chooses not to release.
1 
 
4. The ITC in the first instance, and the United States now before this Panel, has decided to 
ignore or withhold the necessary information on the collective magnitude and effect of these others 
sources.  This Panel may presume the informati on has been withheld because it is not favourable. 
 
* * * 
 
 § 22 : the ITC's focus on relatively small chan ges in the frequency of underselling, while 
ignoring dramatically different volumes of non-subject imports; 
                                                      
1 Canada – Aircraft (AB) , para. 203; see also  US – Wheat Gluten (AB) , paras. 171-172.  WT/DS296/R 
 Page E-65 
 
 
  
Comment : 
 
5. See discussion below in response to Question 14. 
 
* * * 
 
 §  26 : the issue of correlation, in the context of causal nexus: what changed from 2000, 
when the domestic DRAMS industry had record performance, and 2001, when price fell and industry profits plunged; 
 
Comment
: 
 
6.  No comment.  
* * * 
 
 §  33 : the selection of data on record about product substitutability; 
 Comment
: 
 
7.  No comment. 
 
* * * 
 
 § 34 : the portion of subject imports underselling in 2001 was 5% of the market, 
whereas the portion of non-subject impo rts underselling was 27% of the market; 
 Comment
: 
 
8. See discussion in answer to Question 14 below.  
* * * 
 
 § 37 : the ITC does not explain why the effect of supplier competition was attributed to 
the small change in subject import market share, rather than the much larger market 
share of non-subject imports and the rate at which non-subject imports were gaining 
market share; 
 Comment
: 
 
9.  No comment. 
 
* * * 
 
 §  39 : the key missing point – non-attribution required the ITC to separate and 
distinguish the role of subject import s upply sources from domestic and non-subject 
import supply sources; 
 WT/DS296/R 
Page E-66  
 
 Comment
: 
 
10.  No comment. 
 
* * * 
 
 § 49 : appearance of control where none exists, nothing suggests that the GOK would 
intervene in day-to-day credit decisions of various banks; 
 Comment
: 
 11. No comment. 
 
* * * 
 
 § 76 : the argument regarding the size of Citibank's loan. 
 Comment
: 
 
12. No comment. 
 
* * * 
 
2. With regard to para. 32 of the Second Wri tten Submission of the US, are the "actions 
that directly evinced entrustment and direction" those set forth in section 1(a) – (c) of that 
submission?  Is the US arguing that there is both direct and indirect evidence of entrustment / 
direction? Why is mandatory participation under the CRPA included as an "action [...] that 
directly evinced entrustment and direction", when  at para. 33 of its replies to the Panel's 
questions, the US asserts that "[t]he DOC did not find that mandatory participation under the CRPA constituted, in and of itself, entrustment or direction"?  Comment
: 
 13. No comment. 
 
* * * 
 
3. Please comment on Korea's argument (para. 128 of Korea's Second Written Submission) that "there is simply no evidence i ndicating that Shinhan, Hana, or KorAm bank 
were entrusted or directed by the GOK to extend th eir portion of the syndicated loan".  What 
evidence of entrustment / direction did the US rely  on in respect of the participation of these 
banks in the syndicated loan?  Even if one does not accept Korea's argument on the need for specific banks to be directed to perform specific tasks, is it not necessary for an investigating 
authority to point to evidence showing that creditors included in the finding of 
entrustment/direction were actually entrusted / directed ?  Comment
: 
 
14. No comment. 
 
* * * 
  WT/DS296/R 
 Page E-67 
 
 
 4. At para. 18 of its Answers to the Panel's questions, the US asserts that "The DOC did 
not find specifically that government-owned a nd controlled private entities  'were instruments 
through which the GOK entrusted/directed other entities'.  Rather, the DOC found, for example, that the GOK exercised control over Hynix’s creditors generally through government-
owned and controlled banks, because those banks  played a dominant role in the Creditors 
Councils."  Does the US response mean that co ntrol over creditors through government-owned 
and controlled private entities is not relevant to  the issue of entrustment / direction of those 
creditors?  How does the concept of the exercise of control over creditors differ from the notion 
of entrustment / direction of those creditors?   
Comment
: 
 
15. No comment. 
 
5. At para. 20 of the US Answers to Panel questions, the US asserts that "the motives of 
private investors are not germane" to the issue of  entrustment/direction.  At para. 24, however, 
the US argument of entrustment/direction reli es on private creditors knowing what was good 
for them.  If entrustment/direction is based on creditors knowing what is good for them, doesn't 
that imply an analysis of their motives?  Comment
: 
 16. No comment. 
 
* * * 
 
6. At para. 33 of its Answers to the Panel's questions, the US asserts that "[t]he DOC did not find that mandatory participation under the CRPA  constituted, in and of itself, entrustment 
or direction.  Rather, the DOC found that the GOK used the CRPA as a vehicle to effectuate the 
GOK’s Hynix policy."  Does this mean that the alleged mandatory nature of the CRPA is not 
relevant to the issue of entrustment / direction?  How does the notion of entrusting / directing 
someone to carry out an objective differ from using something as a vehicle to have someone 
effectuate that objective?  If the October 2001 restructuring had occurred in isolation, would 
the CRPA in and of itself have been sufficient evidence of entrustment /direction?  Comment
: 
 
17.  No comment. 
 
* * * 
 
7. What was the evidence of entrustment / direction in respect of Pusan? 
 
Comment : 
 
18.  In over 140 pages of the DOC’s unpub lished Decision Memorandum, Pusan Bank is 
mentioned once , and only in reference to Hynix’s argument that: 
 
it is clear that the privately-controlled banks (including Citibank, Koram Bank, 
Shinhan Bank, Hana Bank, Pusan Bank , Kookmin Bank, Hous ing and Commercial 
Bank (“H&CB”), Korea First Bank (“KFB”), and KEB) acted independently of GOK 
influence when participating in the Hynix loans and restructurings. Hynix contends that the record evidence relating to these banks (if any was provided at all) either 1) WT/DS296/R 
Page E-68  
 
 does not provide substantial evidence of GOK influence or control over the banks; 2) 
had nothing to do with Hynix; 3) did not refer specifically to the May or October 
restructuring, or the syndicated bank loan; 4) was based only on speculation; or 5) 
actually confirms the independe nce of certain banks. Thus, Hynix argues that loans or 
other funds from these banks cannot be deem ed a financial contribution, and that 
these banks’ should be used as benchmarks.
2 
* * * 
 
8. Regarding Figure US-4, the different proporti ons of council vote held by group A, B and 
C creditors in respect of the October 2001 restructur ing do not add up to 100%.  Please explain. 
 
Comment : 
 
19. No comment. 
 
* * * 
 
9. What was the basis for the DOC's findin g that Citibank was not entrusted / directed? 
 Comment
: 
 
20. At the second meeting with the Panel, the United States responded that since Citibank was a 
foreign bank, it did not find it to be entrusted or di rected.  This approach to Citibank, however, is at 
odds with the treatment of other Korean banks.  21. First, several of the other Korean banks were  essentially controlled by foreign investors.  The 
evidence before the DOC showed, for example, th at KFB had 51 per cent foreign ownership as of 
1999, Kookmin had 64.5 per cent foreign owners hip as of June 2001, H&CB had 65.4 per cent 
foreign ownership by June 2001, KorAm had 59.5 per cent foreign ownership by 2000 (JP Morgan 
holding over 40 per cent by itself), KEB had 58. 8 per cent foreign ownership as of June 2001, 
Shinhan had 52.1 per cent foreign ownership by 2000 , and Hana had 52 per cent foreign ownership by 
the end of 2001.
3  If the control by foreign interests disti nguished Citibank, this foreign control should 
have distinguished other Korean banks as well.   
 22. Second, the DOC disregarded Citibank as a benchmark by citing alle ged influence by the 
GOK, and Citibank’s desire to build its  business in Korea.  This rationale is in fact quite similar to the 
DOC argument for why other Korean banks were deem ed entrusted or directed.  The DOC rationale is 
internally inconsistent. 
 
* * * 
 
10. In its Second Written Submission to the Pa nel, the US refers to the Kookmin Prospectus 
in a section entitled "GOK Ownership and Contro l of Hynix's creditors".  Does the US argue 
that GOK's 15.1% shareholding result ed in GOK control over Kookmin? 
 
                                                     
 
2 DOC Decision Memorandum at 40 (emphasis added). 
3 See Hynix’s Initial Arguments on: The Independence of Korean Banks Hynix Paper on the 
Independence of Korean Banks , pp. 10-28, GOK Exhibit 25.  WT/DS296/R 
 Page E-69 
 
 
 Comment : 
 
23.  We note that foreign investors owned 64.5 per cent of Kookmin Bank as of 
June 20014, and this substantial forei gn ownership is part of the Kookmin’s independence.  No 
reasonable and objective authority would put such  stress on the 15% GOK ownership, and so little 
attention on the 64.5 per cent foreign investor ownership.   
  We also note that the Kookmin prospectus refe rs to the possibility of influence, and never 
refers to any GOK control over lending decisions.   Indeed, the Kookmin prospectus must be 
contrasted to the actual behavior of Kookmin in the October 2001 restructuring, where Kookmin 
refused to make any new loans to Hynix.  A r easonable authority would not have concluded that 
Kookmin was “controlled” or even entrus ted or directed based on these facts. 
 
* * * 
 
11. In reply to question 1 from the Panel, the US stated that "the constituent parts of the 
subsidy programme ... included the 800 billion wo n syndicated loan, the KDB Fast Track bond 
program, the May 2001 restructuring package, the October 2001 restructuring package, and the 
benefits conferred by these and other financial cont ributions, such as D/A loans, made as part of 
the Hynix bailout."  Please specify an exhaustive  list of the constituent parts of the alleged 
subsidy programme. 
 
Comment
: 
 
24. No comment. 
 
* * * 
 
12. Please comment on para. 182 of Korea's Second Written Submission.  In particular, 
does the US accept that the Hynix-only impo rt figures are a reasonable proxy for the total 
import figures ?  
Comment
: 
 
25. We note that that the Hynix figures are a reasonable proxy.  The Panel can use either the 
Korean presentation of these figures, or the US presentation of these figures, since they are both 
basically the same.  The problem with the US figures is that the United States did not bother to extend 
the analysis to quantify the amount of non-subject im ports, which is a critical part of the analysis. 
 26. We also note given the US choice not to provi de either the actual information or some other 
non-confidential version, the Panel has both the le gal authority and discretion to draw adverse 
inferences.
5  In this case, the Panel can simply draw the inference that the Hynix figures are in fact a 
reasonable proxy. 
 
* * * 
 
13. Please comment on Korea's argument regarding the difference between the US 
submission and the ITC report regarding the exte nt of the "portion" speciality products (para. 
211 of Korea's Second Written Submission).  Pl ease comment on Korea's argument regarding 
                                                      
4 Id. at 19. 
5 See response to panel question 1 above. WT/DS296/R 
Page E-70  
 
 the ITC's use of "value estimates" in respect of those speciality products (para. 212 of Korea's 
Second Written Submission).  Comment
: 
 
27. No comment. 
 
* * * 
 
14. In response to Question 23 from the Pane l, the US asserts that although the ITC 
determined that non-subject imports were responsi ble for “the bulk of the market share lost by 
domestic producers during the period of investigat ion,” it identified two reasons why it did not 
find the volume of non-subject imports as signif icant as otherwise would be suggested.  First, 
the ITC referred to the composition of non-subject  imports.  Second, the ITC referred to the 
price effects of non-subject imports.  How do th ese two factors qualify the loss of market share ? 
Wouldn't any impact resulting from the composit ion and price effects of non-subject imports 
already be reflected in the market share data?  For example, wouldn't the fact that non-subject 
imports include speciality products mean that they would have taken less market share from 
domestic producers, and that this consideration  is therefore already reflected in the market 
share data?  
Comment
: 
 
28. We do not believe the ITC r easons adequately address the significance of the volume of non-
subject imports.  At the second meeting with the Pa nel, the United States argued that it did address the 
volume and increase in non-subject imports.  But acknowledging a fact is not the same thing as 
analyzing that fact in an objective way.  Even if we completely exclude the 20 per cent of the non-
subject imports that the US contends do not compet e (a characterization and argument with which we 
disagree), the remaining 80 per cent still dwarf the si ze and trends of the subject imports.  It is not 
reasonable or logical to stress modest differences in the frequency of underselling while not taking 
into account the relative volumes of th e subject versus non-subject imports. 
 
29. Moreover, this logical defect is even more  egregious given the ITC reason for stressing the 
small volume of subject imports.  All of the ITC statements about commodity products and 
substitutability apply with equal force to that portion of the non-subject imports than are not 
RAMBUS or speciality products.  If the small volume of subject import could have a more significant 
effect, that logic applies with even greater force to  the much larger volume of non-subject imports that 
were growing faster than the subject imports.   
 30. Consider the following summary of the data before the ITC:  
 2000
 2001  2002  
Market Share6 – Subject 
Market Share – Non-Subject 
 6.7 
49.9 9.0 
56.7 8.9 
60.4 
Frequency in Underselling7 – Subject 
Frequency in Underselling – Non-Subject  51.0 
46.6 56.0 
47.7 69.8 
60.7 
                                                      
6 See GOK First Submission, at para 250.  The same analysis would apply if instead of the Hynix 
figures, we were to use the figures from US Figu re 1, as summarized in the US Second Submission. 
7 See GOK Exhibit 5, ITC Determination at page 25, fn. 164.  WT/DS296/R 
 Page E-71 
 
 
  
31. The ITC stressed two points:  the frequency  of underselling was “lower”, and “increased 
less”, and therefore the trends in non-subject imports  could be ignored.  For each of these two points, 
the price data alone and then the price data viewed in light of the disparate volumes present interesting 
contrasts.  We submit that the conclusions drawn fr om this data, although technically correct, are in 
fact fundamentally misleading, biased, and unsatisfactory.  
 32. At the outset, we note the basic point about ma rket share.  The growing market share of non-
subject imports confirms the extent to which pr ice competition by non-subject imports was having a 
dramatic effect in the market place.  But objectively viewed, the data shows even more. 
 
33. The ITC stressed the somewhat “lower” freque ncy of underselling:  4.4 per cent points in 
2000, 8.3 percentage points in 2001, and 9.1 per cent points in 2002.  But this focus on the difference 
obscures the fact that both subject and non-subject imports had a high frequency of underselling.  
Moreover, since this still high frequency of non-s ubject underselling applied to much greater volume 
of non-subject imports, the overall impact of non-subj ect imports would be much greater.  Consider 
the relative volumes of imports that were underselli ng the domestic prices (in other words, the market 
share multiplied by the frequency of underselling
8): 
  
 2000  2001  2002  
Market Share9 – Subject 
Market Share – Non-Subject 3.4 
23.3 5.0 
27.0 6.2 
36.7 
 
34. Thus, although the subject im ports might have been underselling with a slightly greater 
frequency, that small difference in  frequency is dwarfed by the much higher volume of non-subject 
imports.  The volume of non-subject  imports that were underselli ng was consistently five times  larger 
than subject imports.  The subject imports underse lling the domestic price gained only 2.8 percentage 
points of market share, while the non-subject imports underselling the domestic price gained 
13.4 percentage points.   Thus the absolute magnit ude and the change in magnitude were much greater 
for non-subject imports. 
 35. The ITC also stressed the so mewhat lower rate of increase in  underselling:  subject imports 
underselling increased 18.8 per cent points, but n on-subject imports increased only 14.1 percentage 
points over the 2000 to 2002 period.  This difference is actually quite modest, since both subject and 
non-subjects increased their frequency of underselling.  Relative to the fact that both subject and non-
subject imports were underse lling more than 60 per cent of the time,  this change in the rate of increase 
of only 4.7 percentage points is small.  36. But once again, the ITC focus on this small change is oblivious to the much larger absolute 
volume (60% for non-subject in 2002, versus only 9%  for subject) and increas e in market share (a 
gain of 10.5 percentage points ve rsus 2.2%) by non-subject imports. 
 37. The ITC’s superficial conclusions simply do not do justice to the underlying data.  Rather 
than analyse the data carefully, the ITC drew c onclusions designed to confirm an outcome.  This 
approach is not sufficient to satis fy the obligations of Article 15. 
 
* * * 
 
                                                     
 
8 Note that these percentages come from the ITC data on pricing, they focus on the commodity 
products, not the speciality products. 
9 Market share multiplied by the frequency of underselling. WT/DS296/R 
Page E-72  
 
 15. Did the DOC conclude that the KEB was entrusted or directed to (a) participate in the 
Syndicated Loan and/or (b) seek a loan limit waiver?  Comment
: 
 
38. The DOC did not make any distinction between these two different steps in its 
determination.10  Indeed, it is not really clear that the DOC ever attempted to accomplish the first step.  
The DOC evidence related only to the loan limit waiv er, not the decision to participate in the loan 
itself.11 
 
* * * 
 
16. To what extent was the USD 1.35 billion GD S offering taken into account by the DOC 
with respect to its finding of entrustment / direction of Hynix's creditors?  
Comment
: 
 
39. The DOC did not consider the $ 1.25 billion GDS  offering in the context of entrustment or 
direction.  Rather, the DOC discussed this issue only in the context of “benefit”, in determining 
whether the May 2001 GDS could serve as an equi ty benchmark for the October 2001 debt-equity 
swap.12  Remarkably, the DOC did acknowledge that a successful GDS did represent a contingency 
upon which other actions under the Ma y restructuring were dependent,13 but the implication was 
simply ignored. 
 
* * * 
 
17. Was the participation by "small" credito rs accounting for approximately 20% of the 
debt in the October Restructuring countervailed?  Comment
: 
 
40. Yes.  DOC countervailed the entire amount of  the October restructuring not represented by 
Citibank, including all debt forgiveness, debt-for-equ ity swaps, and maturity extensions effected by 
all participants in the process.  
* * * 
 
B. QUESTIONS TO KOREA 
 
18. Please comment on the following paragraphs of the Opening Statement of the US at the 
Second Substantive Meeting of the Panel: 
 
 § 24 : Korea's concession that the tran sactions made under the KFB Fast Track 
Programme constitute financial contributio n, but could still serve as benchmarks for 
determining benefit; 
 
                                                      
10 DOC Decision Memorandum at 50. 
11 Id. at 51-52. 
12 Id. at 90-91. 
13 Id. at 20.  WT/DS296/R 
 Page E-73 
 
 
 Answer : 
 
41. The United States is mischaracterizing the Ko rean argument about the KDB Programme.  The 
United States is blurring the distinction between th e bonds held by the KDB itself, and the bonds that 
were held by the other Korean private banks.  Un der this programme, banks that already held the 
Hynix bonds had to buy back and refinance some portion of those bonds.  Most of the bonds were 
then repackaged and sold to i nvestors as “investments trusts” (like mutual funds).  The KDB itself 
held only a portion of the bonds.   42. Our point at page 15 of the Korean answer to Panel Question #23 was simple:  even if the 
KDB is deemed to be a public body and thus the bonds held by the KDB coul d constitute a financial 
contribution, there are other
 banks holding identical bonds on identical terms.  We do not agree with 
the US premise that the other private Korean banks were entrusted or directed, an argument developed 
extensively in the Korean submissions in this proceed ing.  Thus if any of the private Korean banks are 
found not to have been entrusted or directed, tho se banks could and should ser ve as benchmarks for 
that small portion of the bonds held by the KDB. 
 43. Moreover, for both the bonds held by the KDB  and the bonds held by private Korean banks, 
the comparison of interest rates to market interest rat es confirms the lack of any benefit.  If the market 
price for three-year debt in Korea is about 7 per cent in 2001, then it is hard to see how refinancing 
bonds at interest rates ranging from 10.99 to  12.56 per cent can constitute a benefit. 
 
* * * 
 
 § 45 : no requirement in the SCM Agreement that the period examined for the subsidies 
inquiry cover the entire period examined for the injury determination. 
 
Answer
: 
 
44. Although we agree there is no such specific requirement in the SCM Agreement, this US 
argument mischaracterizes the Korean argument.  We never attack the DOC finding for investigating 
a period shorter than the ITC period, or attack the ITC for examining a period longer than the DOC 
period.   
 45. Our point is simply that proper causation analysis takes into account the existence or non-existence of temporal correlation.  In this case, we do not believe any temporal correlation exists, and 
this absence of correlation calls into serious ques tion any ITC conclusion about the existence of a 
causal link. 
 
* * * 
 
19. With reference to Figure US-1, does Korea contest the DOC's conclusion that each of 
the Group B creditors were contro lled by GOK? Please explain. 
 
Answer
: 
 
46. Yes. We disagree with several aspects of this conclusion. 
 
47. First, we disagree with the US premise that  ownership alone constitutes control for purposes 
of any analysis under Article 1.l(a).  As Korea has argued, the Public Fund Oversight Act and the 
Memoranda of Understanding ensured that those banks in which the GOK had to take ownership 
would continue to make day-to-day decisions independently.  WT/DS296/R 
Page E-74  
 
 48. Second, we further disagree with the assumpti on that the capacity to control implies the same 
meaning as entrustment or direction.  In the ca se of a private body (such as a bank) in which the 
government has a shareholding (minority or majority ) allowing it to exercise a decisive influence over 
the private body's operations, the mere fact that the private body is under government control is not 
sufficient to presume that a measure  adopted by that body has been "directed" by the government.  It 
must be established that the government has actua lly exercised its control to direct the bank to 
participate in the measure.  The other interpretation w ould  --  in plain contradiction with the text of 
Article 1.1(a)(1)(iv) of SCM Agreement  --  repla ce a more explicit standard of "direction" with a 
looser “control” standard.  
49. Third, the KEB was not controlled by th e GOK.  Two different GOK entities each held a 
portion smaller than the largest shareholder,  Commerzbank.  When Commerzbank made its 
substantial investment in KEB, it asserted significant managerial control, including assigning a Commerzbank official to chair the loan committ ee.  Given the relative shareholding and the 
operational control by Commerzbank officials, it makes no sense to conclude the KEB was being 
controlled by the GOK. 
 50. Fourth, the KFB was not controlled by the GOK.   Newbridge Capital, a US financial firm, 
held 51% of the shares.  Like Commerzbank, once Newbridge made this investment it assumed 
significant managerial control over day-to-day operations.  Indeed, the US argument itself 
demonstrates the degree of KFB independence, even in the face of alleged pressures from others to 
take certain actions. 
 51. Fifth, we note that the investment trusts a nd financing companies are not owned or controlled 
by the GOK.  This is a new aspect of the US argument, not part of the original DOC rationale.   
52. Finally, the US assertion of “control” is at odds with the actual experience of many of these 
banks to decide not to participate in various parts of the Hynix restructuring.  With respect to the 
December 2000 syndicated loan, since Hynix was tryi ng to obtain 1000 billion won, but could only 
arrange 800 billion in loans, why did not Seoul  Bank, Peace Bank, Kwangju Bank, or Kyongnam 
Bank make up some or all of the shortfall, if th ey were being controlled by the GOK?  These banks, 
like the others, were making their own decisions.  Si milarly, the United States characterized all banks 
as participating in the October 2001 restructuring, even  those that refused to provide any new funds or 
even agree to debt-equity swaps (Kwangju Ba nk, Kyongnam Bank, and KFB).  If these banks were 
“controlled”, why did they not provide the new loans that Hynix needed?  
* * * 
 
20. With reference to Figure US-1, does Korea contest the DOC's conclusion that each of 
the Group B creditors were entrusted or directed by GOK ? Please explain.  Answer
: 
 53. Yes, we disagree with this conclusion as well.  The discussion in answer to Question 19 
above applies here as well.  We woul d note the following additional points. 
 54. First, the conclusion of entrustment or direction makes absolutely no sense for the 
October 2001 restructuring.  KFB and several othe rs refused any new loans, and instead exercised 
Option No. 3 and then mediation to obtain the li quidation value of their outstanding debt, in 
accordance with the value set by the Arthur Anders on valuation report.  That such banks would be 
deemed entrusted or directed is not support ed by any plausible review of the facts. 
  WT/DS296/R 
 Page E-75 
 
 
 55. Even for the other banks, the DOC drew conc lusions based on extremely limited evidence.  
Notwithstanding its claim not to be relying upon ge neral pronouncements, that is precisely what the 
United States uses as “evidence” for the October rest ructuring.  Against this evidence, the DOC never 
analyzed or acknowledged the strong self-interest these banks had in trying to make restructuring work.  Those banks with the largest stakes had the most to lose from bankruptcy and the most to gain 
from debt restructuring.  This self-interest is a cruc ial part of the overall context and evidence that any 
reasonable authority would have considered.  The prob lem in this case is that the DOC analysis put on 
blinders, and deemed any considerati on of existing debt to be irrationa l and therefore irrelevant.  This 
approach makes no sense as an effort to understand th e decisions of Korean investors operating in a 
Korean market context.  
 
56. Second, the conclusion of entrustment or direction also does not make any sense for the May 2001 restructuring.  The May 2001 restructur ing involved primarily rolling over existing debt at 
basically the same interest rates.  By doing so, th e banks allowed Hynix to obtain $1.25 billion in new 
equity capital, which was conditioned on the banks agreeing to roll over existing debt rather than 
absorbing the new equity capital to pay off existing debt.  The foreign investors wanted new money to 
be used for capital spending and R& D spending, not just allowing ex isting Korean creditors to cash 
out.  Against this context, the US “evidence” of entrustment or direction simply does not allow a 
reasonable and objective authority to draw the c onclusions that the DOC drew in this case.  
 57. We have addressed the failings in the US evid ence of entrustment or di rection at length, and 
we need not repeat those arguments  here.  Those arguments apply to the entities listed in Group B, as 
well as the others in Group C.  The US approach pa ys too little attention to the legal standard of 
Article 1.1(a)(1)(iv), too little atte ntion to the compelling reasons th e banks had for participating in 
the Hynix restructuring, and too much attenti on to sensational remarks by Korean politicians. WT/DS296/R 
Page E-76  
 
  
 
ANNEX E-6 
  
ANSWERS OF THE UNITED STATES 
TO THE PANEL’S QUESTIONS TO THE PARTIES FOLLOWING 
THE SECOND SUBSTANTIVE MEETING OF THE PANEL 
 
6 August 2004 
 
 
Table of Reports Cited in These Answers  
  
EC – Tube or Pipe Fittings   
European Communities – Anti-Dumping Duties on Malleable Cast 
Iron Tube or Pipe Fittings from Brazil,  WT/DS219/R, Report of the 
Panel, as modified by the Appellate Body, adopted 18 August 2003 
 
US – Wheat Gluten   
United States – Definitive Safeguard Measures on Imports of Wheat 
Gluten from the European Communities , WT/DS166/AB/R, Report 
of the Appellate Body adopted 19 January 2001 
 
Brazil – Aircraft   
Brazil – Export Financing Programme for Aircraft , Panel Report, 
WT/DS46/R, Report of the Panel, as modified by the Appellate Body 
Report on other grounds, adopted 20 August 1999 
 
US – Softwood Lumber   
United States – Final Countervailing Duty Determination with 
respect to Certain Softwood Lumber from Canada , 
WT/DS257/AB/R, Report of the Appellate Body adopted 
14 February, 2004  
 
US – Oil Country Tubular 
Goods Sunset Reviews   
United States – Sunset Reviews of Anti-Dumping Measures on Oil 
Country Tubular Goods from Argentina , WT/DS268/R, Report of the 
Panel circulated 16 July 2004 (unadopted) 
 
Argentina – Hides and 
Leather   
Argentina – Measures Affecting th e Export of Bovine Hides and the 
Import of Finished Leather , WT/DS155/R, Report of the Panel 
adopted 16 February 2001 
 
US – DRAMS   
United States – Anti-Dumping Duty on Dynamic Random Access 
Memory Semiconductors (DRAMS) of One Megabit or Above from Korea , WT/DS99/R, Report of the Panel adopted 19 March 1999 
  WT/DS296/R 
 Page E-77 
 
 
 A.  QUESTIONS TO THE UNITED STATES  
 
1.  Please comment on the following paragr aphs of Korea’s Opening Statement at the 
Second Substantive Meeting of the Panel:  
 § 20:  the hypothetical of Hynix being the lowest price twice, but 98 other suppliers 
being each the lowest price once; 
 
1. Korea’s hypothetical is not informative with resp ect to the issues raised in this dispute.  To 
appreciate why this is so, it is first necessary to put  the ITC’s price undercutting analysis in context. 
 
2. The ITC compared the weighted-average pr ice of subsidized subject imports with the 
weighted-average price of the domestic industry’s US shipments for eight specific standard DRAM 
products over a monthly time series spanning th e period from January 2000 to March 2003.  These 
comparisons comported with the relevant e nquiry under Articles 15.1 and 15.2 of the Agreement on 
Subsidies and Countervailing Measures  (SCM Agreement) concerning the price effects of the 
subsidized subject imports on the domestic indus try.  Based on these comparisons, the ITC found 
increasing undercutting at high margins (often greater th an 20 per cent) in the majority of instances by 
subsidized subject imports.  It also found consis tent and substantial underc utting for particular high-
revenue products to particular channels of distribution at specific points during the period of 
investigation.
1 
 
3. Although there is no requirement in the SCM Agreement to do so given the facts of the DRAMs investigation, in response to Hynix’s argumen t, the ITC also examined the pricing data on a 
disaggregated basis by both brand name and by  source.  The ITC determined that even a 
disaggregated analysis showed that subject DRAM  products from Hynix’s Korean facilities were the 
lowest-priced product “more often than DRAM products from any other source”.
2  In other words, the 
disaggregated analysis of the pricing data confirmed the ITC’s finding of significant price undercutting by subsidized subject imports.  4. Korea seeks to divert the Panel’s atte ntion from the significance of these findings by 
introducing hypotheticals concerning the ITC’s disaggreg ated pricing analysis that have no bearing on 
the facts of the DRAMs investigation.
3  In its initial hypothetical, Korea assumed that there were 10 
sales for which different suppliers were competing, that Hynix was the lowest priced source 2 times, 
and that eight other suppliers were the lo west priced source on at least one occasion.4  Korea has now 
modified the hypothetical such that Hynix was the lowest priced source twice, but 98 other suppliers 
were each the lowest priced source once.5 
 
5. These hypotheticals are meaningless for several r easons.  First, Korea overlooks the fact that 
subsidized imports from Korea were the lowest-pri ced source in a disaggregated analysis of the 
                                                      
1 See, e.g. , USITC Pub. 3616 at 23-24, V-3 to V-9 & Tables V-1 to V-18 (Exhibit GOK-10). 
2 See, e.g. , USITC Pub. 3616 at 24 (Exhibit GOK-10). 
3 Korea also calls attention to the fact that the ITC di d not reveal in the public version of its opinion the 
percentage of times that Hynix was the lowest-priced so urce under the disaggregated analysis of the pricing 
data.  As we have pointed out in our previous s ubmissions, however, Korea has not challenged the ITC’s 
treatment of this information as confidential, nor has Korea challenged the ITC’s su mmary of this confidential 
information as inadequate under Articles 12.4 or 22.5 of  the SCM Agreement.  This information is confidential 
because it identifies the percentage of  times that a single subject foreig n producer, Hynix of Korea, was the 
lowest-priced supplier in the US market based on a disaggregated analysis of the pricing data. 
4 First Written Submission by the Republic of Korea , 19 April 2004, para. 161 [hereinafter “Korea First 
Submission”]. 
5 Second Substantive Meeting; Oral Statement of the Government of Korea , 21 July 2004, para. 20 
[hereinafter “Korea Second Oral Statement”]. WT/DS296/R 
Page E-78  
 
 pricing data.  This was so notwithstanding the fact  that the DRAMs investigation involved an industry 
where there were thousands  of transactions (and not only one hundred transactions, as Korea posits) 
over a 39-month investigation period and where the pr oducts for which the pricing data were gathered 
were highly substitutable for one another.  
6. Second, the ITC’s disaggregated pricing analys is was based on the data of only those few key 
suppliers to the US market.  By contrast, Korea’s second hypothetical is predicated on the existence of 
99 suppliers, a scenario which even Korea admits is “extreme”.
6  In the view of the United States, it is 
more than extreme; it is completely divorced from the factual record of the DRAMs investigation. 
 
7. The ITC’s disaggregated analysis of the pric ing data was based on an examination of reported 
pricing information concerning eight  sources of DRAM products from the four major players in the 
US market:  (1) subsidized subject imports produced  by Hynix in Korea;  (2) Hynix-brand products 
produced in the United States;  (3) Micron-brand products produced in non-subject countries;  (4) Micron-brand products produced in the United St ates;  (5) Infineon-brand products produced in 
non-subject countries;  (6) Infineon-brand products  produced in the United States;  (7) non-subject 
Samsung-brand products produced in  Korea;  and (8) Samsung-brand products produced in the United 
States.
7  Subsidized subject imports were the lowest-p riced product more often than any of these other 
sources, and at a magnitude that was greater than wo uld be expected if each source were the lowest-
priced product one-eighth of the time, as might be  expected in an industry like this involving a 
fungible product and the rapid dissem ination of pricing information.8  The disaggregated analysis 
showed that subsidized subject imports were the lowest-priced DRAM products more often than any 
of the major US sources of DRAM products.  Hyni x’s subsidized subject imports were the lowest 
priced more often than Micron’s US DRAM products ; Hynix’s subsidized subject imports were the 
lowest priced more often than Infineon’s US DRAM products; Hynix’s subsidized subject imports 
were the lowest priced more often than Sa msung’s US DRAM products; and finally, Hynix’s 
subsidized subject imports were the lowest pric ed more often than DRAM products from Hynix’s 
own Eugene, Oregon facility.  8. Thus, based on both the weighted-average comparison of prices for subsidized subject 
imports and US shipments of DRAM products by the domestic industry and the disaggregated 
analysis of the pricing data, the ITC reasonabl y concluded that subsidized subject imports 
significantly undercut the domestic industry’s DRAM prices. 
 9. To the extent that Korea is also arguing in  the above-referenced paragraph 20 that the prices 
of non-subject imports are somehow relevant to the ITC’s analysis of price undercutting by subsidized 
subject imports, Korea fails to identify any requireme nt in Article 15.2 of the SCM Agreement for an 
investigating authority to examine non-subject imports in that context.  An investigating authority’s 
analysis of price undercutting pursuant to the plain text of Article 15.2 is limited to a comparison of 
the subsidized subject imports and the like  product produced by the domestic industry. 
 
                                                     
 
6 Korea Second Oral Statement, para. 20. 
7 See First Written Submission of the United States of America , May 21, 2004, para. 375 [hereinafter 
“US First Submission”].  Hynix conced ed early in the DRAMs investigation that there were only four major 
players globally and in the US market (Samsung, Micron, Hynix, and Infineon, in decreasing order of 
magnitude).  See, e.g. , Conference Transcript at 117-118 (Exhibit US-95). 
8 Indeed, the ITC’s disaggregated analysis was co nservative.  There were instances where certain 
products were the only source in the market ( e.g., because other firms were not yet capable of selling those 
products) and yet they were consider ed the lowest-priced source.  Had th e ITC only considered instances where 
there were sales from more than one brand-name source in a particular month, the undercutting frequency for subsidized subject imports based on a disaggregated analysis by both brand name and by source would have 
been even higher.  WT/DS296/R 
 Page E-79 
 
 
 10. Nevertheless, the ITC did examine the weighted average price of non-subject imports.  It 
determined that the undercutting frequency by non- subject imports was lower than, and increased less 
than, the undercutting frequency of  subsidized subject imports during the period of investigation.9  
The ITC found that “subject imports undersold non-subject imports in a majority of instances”.10  
Moreover, notwithstanding Korea’s focus throughou t this dispute on Samsung’s non-subject imports, 
the ITC’s disaggregated analysis of the pricing data  revealed that subsidized subject imports produced 
by Hynix in Korea were more often priced lo wer than Samsung’s non-subject imports.  Similar 
statements can also be made with respect to the other two major non-subject import suppliers (Micron 
and Infineon).  Hynix’s subsidized subject imports were the lowest priced more often than Micron’s 
non-subject DRAM products, and Hynix’s subsidized subject imports were the lowest priced more 
often than Infineon’s non-subject DRAM products. 
 
 § 22:  the ITC’s focus on relatively small ch anges in the frequency of underselling, while 
ignoring dramatically different volumes of non-subject imports; 
 11. There are a number of flaws with Korea’s ar guments in the referen ced paragraph 22.  Once 
again, Korea attempts to challenge  the adequacy of the ITC’s pri ce undercutting analysis by shifting 
the discussion to non-subject imports.  However, as noted above, the focus of Article 15.2 of the SCM 
Agreement is on the significance of the price underc utting by subsidized subject imports, not non-
subject imports.  
12. There is simply no way that a reasonable i nvestigating authority c ould have dismissed the 
significance of the undercutting by su bsidized subject imports in the DRAMs investigation, regardless 
of the price undercutting by non-subject imports.  Subsidized subject imports undercut the domestic 
like product in the majority of comparisons examined  at high margins (often over 20 per cent), and at 
increasing frequencies.  Undercutting occurred with  respect to each of the major channels of 
distribution (PC OEMs, non-PC OEMs, and non-OEMs ).  Undercutting was also consistent and 
substantial for particular high-reve nue products to particular channels of distribution at specific points 
during the period of investigation.  For example, by the end of the period examined, undercutting to 
PC OEMs – the most significant sales channel – reached 100 per cent  of all price comparisons.
11  As 
the ITC explained, such significant price dispariti es would not normally be expected in a commodity-
type market, and these high margins could be expect ed to have “particularly deleterious effects on 
domestic prices”.12 
 13. Furthermore, this is one of many instan ces where Korea discusses th e record evidence in a 
vacuum.  Korea appears to argue in favour of th e adoption of some abstract notion of what is 
“substantial” or “significant”, while eschewing the rela tionship of facts to the particular circumstances 
in which they arise.  For exam ple, Korea speaks of “relatively small changes in the frequency of 
underselling” and “dramatically different volumes of  non-subject imports”.  Nowhere, however, does 
the SCM Agreement identify any “change” in unde rcutting or in volume as by definition “small”, 
“dramatically different”, or any other such term.  This is entirely logical, because in the abstract, no 
such change can automatically be regard ed as “significant” or “insignificant”.  
 
14. As we have emphasized in our submissi ons to the Panel, and as the ITC emphasized 
throughout its final determination, it is only when the factual data are examined in terms of the 
conditions of competition in the particular industry that an otherwise abstract figure or change has 
meaning.  The ITC’s determination evinced how the agency put the facts of the DRAMs investigation 
                                                     
 
9 See, e.g. , USITC Pub. 3616 at 25 & n.164 (Exhibit GOK-10). 
10 See, e.g. , USITC Pub. 3616 at 25 n.164 (Exhibit GOK-10). 
11 See, e.g. , USITC Pub. 3616 at 23-24 & nn.155, 165 (Exhibit GOK-10). 
12 See, e.g. , USITC Pub. 3616 at 24 (Exhibit GOK-10). WT/DS296/R 
Page E-80  
 
 in context.
13  By contrast, in its submissions to the Pane l, Korea has opted to examine the evidence in 
a vacuum and to characterize trends concerning su bsidized subject imports as “small” and trends 
concerning non-subject imports as “dramatic”.  15. Korea ignores the following key facts about the DRAMs industry:  (1) subsidized subject 
imports were highly substitutable for domestic ally produced DRAMs products;  (2) demand was 
inelastic so that lower prices were unlikely to generate additional purchases;  and (3) information 
about the prices that a handful of suppliers we re offering was transmitted extremely quickly to 
purchasers, including through mechanisms such as mo st favoured customer and best price clauses and 
other such mechanisms.
14  Thus, a given volume or a given volume increase of DRAM product 
imports – absolutely or relative to domestic production or consumpti on – has a greater effect on the 
domestic industry than it would for a highly differentiated product.   
 16. In the DRAMs investigation, the prici ng data showed extreme price undercutting by 
subsidized subject imports.  In addition, other r ecord evidence reinforced these findings, showing that 
even purchasers that may have been reluctant to  commit large portions of their purchases to the 
financially troubled Hynix freely used Hynix’s low-pr iced offers as a bargaining tool to ratchet down 
prices from other potential suppliers.
15  Articles 15.1 and 15.2 of the SCM Agreement, which employ 
disjunctive language, plainly contemplate that ther e may be cases where there are significant adverse 
price effects without any increase in subject import volume, such as where the domestic industry lowers its prices in order to retain market share.
16 
 
17. In the referenced paragraph, Korea also re peats its mistaken assertion that the ITC “ignored” 
non-subject import volume.  The ITC’s determinati on demonstrates otherwise.  The ITC explicitly 
recognized that non-subject imports “increased mark et share by a substantially larger amount than 
subject imports”.  At the same time, however, th e ITC found that “subject import volume and pricing 
were themselves sufficient to have a signifi cant negative impact on the domestic industry”.17   
 18. The ITC considered the possible effects of the increasing volumes of non-subject imports on 
domestic prices.  Whereas it is our  understanding that most other Memb ers do not even collect pricing 
information on non-subject imports, the ITC collected such data in the DRAMs investigation.  The 
ITC examined the pricing data concerning non-subj ect imports by means of a weighted-comparison 
and by means of a disaggregated analysis by brand-name and by source.  It recognized that there were 
instances where non-subject imports undersold the domestic industry.
18  The ITC also looked at the 
timing, magnitude, and frequency of the underc utting by non-subject imports.  The undercutting 
frequency by non-subject imports was lower than, and increased less than, the undercutting frequency 
of subject imports during the period of investiga tion.  In particular, while subject imports were 
increasing their undercutting frequency between 2000 a nd 2001 from 51 per cent of all observations 
to 56 per cent of all observations, the frequency of undercutting by non-subject imports was fairly 
steady at 46.6 per cent of instances in 2000, and 47.7  per cent in 2001.  Undercutting by subsidized 
                                                      
13 See, e.g. , Answers of the United States of America to the Panel’s Questions to the Parties Following 
the First Substantive Meeting of the Panel , 9 July 2004 (Answer to Question 20) [hereinafter “US Answers to 
Panel Questions”], regarding how the ITC examined the volume data in context; Second Written Submission of 
the United States , 9 July 2004, paras. 73 to 91 [hereinafter “US Second Submission”], regarding how the ITC 
examined the price effects of the subs idized subject imports in context. 
14 See, e.g. , USITC Pub. 3616 at 22-23 (Exhibit GOK-10). 
15 See, e.g. , Hearing Transcript at 23, 50, 72-75 (Exhibit US-94). 
16 Of course, the ITC found, based upon record evid ence, that there were signi ficant increases in the 
volume of subsidized subject imports during the time period covered by the DRAMs investigation. 
17 See, e.g. , USITC Pub. 3616 at 21 (Exhibit GOK-10). 
18 See, e.g. , USITC Pub. 3616 at 25 (Exhibit GOK-10).  WT/DS296/R 
 Page E-81 
 
 
 subject imports increased to 69.8 per cent of a ll observations in 2002, about 10 percentage points 
higher than the percentage for non-subject imports in that year (60.7 per cent).19 
 19. In other words, between 2000 and 2001, when DRAMs prices experienced historically unprecedented severe declines
20, it was subsidized subject impor ts whose undercutting frequency was 
increasing, not non-subject imports.  Moreover, the frequency and magnitude of undercutting by 
subject imports continued to increase in to 2002, as prices continued to decline.21  The ITC determined 
that “[w]hile non-subject import market share gr ew, the primary negative impact on the domestic 
industry was due to lower prices, and on this point , subject imports, themselves, were large enough 
and priced low enough to have a significant impact.  This is so regardless of the adverse effects 
caused by non-subject imports”.22  The ITC evaluated the growing market share of non-subject 
imports and concluded that while non-subject impor ts were having “adverse effects” on the domestic 
industry, subsidized subject imports themselves were having a significant negative impact on the 
domestic industry.23 
 
20. There is nothing in the SCM Agreement that  prevents an investigating authority from 
determining that subsidized subj ect imports materially injure th e domestic industry, even if non-
subject imports are larger, or increase by a larger amount, than subject imports.  Nor is there any language in the SCM Agreement that prevents an investigating authority from making an affirmative 
determination if the volume or price effects of non- subject imports are also having an adverse impact 
on the domestic industry. 
 
21. Indeed, the plain text of Article 15.5 cont emplates that a domestic industry may be being 
injured by one or more other known factors at the same time that subject imports are materially 
injuring the domestic industry.  It specifies that “The authorities shall also examine any known factors 
other than the subsidized imports which at the same time are injuring  the domestic industry ... .”  
(emphasis added).  The key is simply that the inves tigating authority is to take care not to attribute 
injury caused by the other factors to the subsidized subject imports.
24 
 22. Even though Korea purports to agree with the United States that the SCM Agreement does 
not require that subject imports be the “sole cause” of the material injury experienced by the domestic 
industry
25, the reality is otherwise.  Korea’s argume nts related to the referenced paragraph 22 do 
amount to an assertion that subject imports must be  the sole cause in orde r for an investigating 
authority to make an affirmative injury determin ation.  In order to obscure the harm caused by 
subsidized subject imports, Korea insists on comparing the relative size of the volume of subject imports and non-subject imports and their relative volume increases, as well as the level of undercutting attributable to each. 
 
23. The discussion above demonstrates how the ITC carefully examined non-subject imports to 
identify the nature and extent of any injurious e ffects that non-subject imports were having on the 
domestic industry in order to ensure that it did not a ttribute injury from other factors to the subsidized 
subject imports.  Korea simply has failed to dem onstrate that a reasonable investigating authority 
could not have come to the same conclusion based on the record ev idence as did the ITC. 
 
                                                     
 
19 See, e.g. , USITC Pub. 3616 at 25 & n.164 (Exhibit GOK-10). 
20 See, e.g. , USITC Pub. 3616 at 24 (Exhibit GOK-10). 
21 See, e.g. , USITC Pub. 3616 at 24, 25 & n.164 (Exhibit GOK-10). 
22 See, e.g. , USITC Pub. 3616 at 27 (Exhibit GOK-10). 
23 See, e.g. , USITC Pub. 3616 at 27 (Exhibit GOK-10). 
24 SCM Agreement, Article 15.5. 
25 See, e.g. , Korea Second Oral Statement, para. 28. WT/DS296/R 
Page E-82  
 
  § 26:  the issue of correlation, in the context of causal nexus: what changed from 2000, 
when the domestic DRAMS industry had record performance, and 2001, when price fell and industry profits plunged; 
 
24. As we have explained in previous submi ssions, Korea’s assertions concerning the lack of 
correlation between subsidized subject imports and the material injury suffered by the domestic 
industry are predicated largely on Korea’s err oneous assumption that “volume” does not mean the 
volume of subsidized subject imports, but instead  means the volume of all Hynix-brand products 
being sold in the US market, including those produced at Hynix’s Eugene, Oregon plant.  Korea does so because it is only by reference to brand-name volum e that Korea is able to make the assertion that 
the volume of Hynix brand products was “declining”  during the period of investigation.  However, 
Hynix products produced in Oregon were not subsid ized subject imports; instead, they were the 
production of the US domestic industry.    25. Korea has failed to demonstrate that a br and-name analysis was required under the SCM 
Agreement given the facts of the DRAMs investigatio n.  Once the focus is sh ifted from Korea’s faulty 
“brand” enquiry to the relevant enquiry under the SCM Agreement, the causal nexus between the 
subsidized subject imports and the material injury  experienced by the domestic industry is readily 
apparent.  26. In the referenced paragraph 26, Korea focu ses on changes between 2000 and 2001.  However, 
as is evident from the final determination, the ITC examined all of the factors described in Articles 
15.1, 15.2, and 15.4 of the SCM Agreement based  on the thirty-nine months between January 2000 
and March 2003.  The ITC also discussed the intervening changes be tween 2000 and 2001 and 
between 2001 and 2002, and it also examined the data  for the first quarter of (“interim”) 2002 and 
interim 2003.
26 
 
27. Drawn from Figure US-5 is a summary of the data pertaining to the period between January 2000 and March 2003, as well as a summary of the data for the period between 2000 and 2001:  
During the Period of Investigation
27 
 Subsidized subject imports  
 
 Volume significant in absolute terms, increased  significantly absolutely and relative to both 
US. production and consumption (20-21, 24). 
 Significant price undercutting at increasing frequencies and at increasingly higher margins, 
reaching 100 per cent for key produc ts by 2002 (22-24 & n.164). 
 Significant price depression, and other factors c ould not explain the price depression (24-25). 
 Hynix is uncreditworthy (1/1/2000 to 6/30/20 02); unequityworthy at 10/2001 debt-to-equity 
swap; DOC determined Hynix total net counterva ilable subsidy for 1/1/2001 to 6/30/2002 of 
approximately $2 billion, or a s ubsidy rate of 44.71 per cent ad valorem  (19). 
 Domestic industry  
 
 Increasing US shipments in terms of bits, but d eclining unit values;  declining market share.  
 Small and relatively stable end-of-period inventories. 
 Overall decline in average production capacity and wafer starts.  
 Increase in capacity utilization, but capacity utilization is expected to be high in this industry. 
                                                      
26 See, e.g. , USITC Pub. 3616 at 20 to 28, Table C-1 (Exhibit GOK-10). 
27 References in parentheses are to the corresponding pages of the report of the ITC’s final 
determination, USITC Pub. 3616 (Exhibit GOK-10).  WT/DS296/R 
 Page E-83 
 
 
  Idling of certain production capacity and defe rral of upgrades and expansions of production 
facilities and equipment. 
 Four US producers ceased DRAM production in the United States. 
 Increasing production quantities in terms of bits, but increases were smaller than increases in 
apparent US consumption. 
 General declines in employment and wa ges over the period of investigation. 
 Due to a large decline in unit sales value, ope rating income declined from a $2.7 billion profit 
in 2000 to a loss in excess of $2 billion in  2001, and losses continued into 2002. 
 As a ratio to net sales, operating income wa s 32.2 per cent in 2000 then became a loss of 
79.2 per cent in 2001 and a loss of 50.8 per cen t in 2002; declines in capital expenditures (26-
27, Tables III-1, III-5, IV-4, C-1). 
 
Between 2000 and 2001  
 
Subsidized subject imports  
 
 Volume significant in absolute terms, signi ficant increases (absolutely, relative to US 
production/consumption) (20-21). 
 Significant undercutting, no matter how data  viewed, frequency increasing from 51 to 56 % 
(22-24 & n.164). 
 Precipitous price declines across all products, most severe price decline in DRAMs history 
(24). 
 Anti-Dumping order on DRAM products fro m Hynix/predecessors revoked 10/5/2000 (19 & 
n.141). 
 Hynix is uncreditworthy (1/1/2000 to 6/30/2002), unequityworthy at 10/2001 debt-to-equity 
swap (19). 
 
Domestic industry  
 
 Increased US shipments. 
 Declining unit values. 
 Declining market shares. 
 Small and relatively stable end-of-period inventories. 
 Declining average production capacity. 
 Declining wafer starts. 
 Slight increase in capacity utilization, but capac ity utilization is expected to be high in this 
industry. 
 Certain production capacity idled. 
 Upgrades and expansions of producti on facilities and equipment deferred. 
 Declines in production quantities measured in bits. 
 General declines in employment and wages.  
 Due to a large decline in unit sales value, ope rating income declined from a $2.7 billion profit 
in 2000 to a loss in excess of $2 billion in 2001. 
 As a ratio to net sales, operating income was 32.2 per cent in 2000 then became a loss of 79.2 
per cent in 2001. 
 Declines in capital expenditures (26-27, Table C-1). 
 28. As these summaries and the additional data summaries provided in Figure US-5 illustrate, 
there was a very strong correlation between the vol ume (and the increases both absolutely and relative 
to both domestic production and cons umption) of the subsidized s ubject imports and the adverse 
impact on the domestic industry.  There was a strong correlation between the significant price 
undercutting by the subsidized subject imports a nd the significant price declines experienced during 
the period of investigation.  There was a str ong correlation between these price declines and the WT/DS296/R 
Page E-84  
 
 adverse impact on the domestic industry.  There was also a strong correlation between the timing of 
the subsidies and the adverse impact on the domestic industry.  29. Indeed, to provide a further example of the changes occurring between 2000 and 2001 using even more detailed data, we refer the Panel to the pricing data summaries in the ITC’s report.  As the 
ITC recognized, PC manufacturers accounted for the v ast majority of the revenues on sales of DRAM 
modules.
28  In 2000, Hynix’s subsidized subject impor ts in this sales channel were priced above  the 
domestic industry in fully 75 per cent of all observed price comparisons.29  In 2001, this pattern 
reversed itself profoundly when Hynix undercut  the domestic industry’s module prices to this 
important segment in 68 per cent of all price comparisons.30  Price undercutting for modules to PC 
OEMs remained at 68 per cent of observations in 2002.31 
 
 § 33:  the selection of data on record about product substitutability; 
 
30. Contrary to Korea’s suggestion, the ITC was not  selective in its use of record data concerning 
product substitutability.  The ITC found that w ithin the DRAM product family, DRAM products of 
similar density, access speed, and variety (regular DRAM, VRAM, SGRAM, etc.) were generally interchangeable “regardless of the country of fabrication”.
32  Thus, standard products of a similar 
density, access speed, and variety were substitutable with one another regardless of country source.  
However, as explained by the ITC, a more limited degree of interchangeability existed among 
different varieties of DRAMs, as well as am ong those with different addressing modes/access 
speeds.33  Thus, substitutability was more limited and had to occur at the design phase for DRAM 
products of different varieties or different addressing modes.  31. Whereas the record indicated, and the ITC found,  that nearly all of the subject imports and 
domestically produced DRAM products  were standard DRAM products
34, such was not the case with 
non-subject imports.  The ITC collected data on the percentage of imported products and US 
shipments of DRAM products in 2001 and 2002 that were “standard” DRAM products, Rambus 
DRAM products, and other “specialty” DRAM produc ts.  Questionnaire respondents were asked to 
differentiate the reported information for Rambus  DRAM products containing dice fabricated in 
Korea by “Samsung” and the portion containing di ce fabricated in Korea by “others”, and to 
differentiate the reported information for specia lty DRAM products containing dice fabricated in 
Korea by “Samsung” and the portion containing dice fabricated in Korea by “Others”.35  As the 
United States previously explained36, Rambus or specialty DRAM products accounted for 
approximately one-fifth of all US shipments of  non-subject imports in 2001.  The corresponding 
percentage in 2002 was somewhat higher than in 2001.  
                                                     
 
28 See, e.g. , USITC Pub. 3616 at 15, 23 n.152 (Exhibit GOK-10). 
29 See, e.g. , USITC Pub. 3616 at Table V-18 (Exhibit GOK-10). 
30 See, e.g. , USITC Pub. 3616 at Table V-18 (Exhibit GOK-10). 
31 See, e.g. , USITC Pub. 3616 at Table V-18 (Exhibit GOK-10). 
32 See, e.g. , USITC Pub. 3616 at 17 (Exhibit GOK-10).  As  an example, the ITC’s report explained that 
a 64 Mb SDRAM manufactured by the subject Korean producer should be fully interchangeable with a similarly 
configured domestically produced device, as well as with a non-subject import.  Id. at I-10. 
33 This substitution often must occur during the design phase of the electronic system.  For example, 
according to numerous questionnaire re sponses, after an electronic system ha s been designed to  operate using a 
specific type of DRAM, the system would likely not function optimally using a different type.  Similarly, with 
regard to the different addressing modes, once a memory controller has been designed  for an electronic system, 
a specific addressing mode such as EDO or SDRAM has also been designed in.  See, e.g. , USITC Pub. 3616 at 
17, I-10 (Exhibit GOK-10). 
34 See, e.g. , USITC Pub. 3616 at 22, 23 n.151, I-10, II-6, Table II-2 (Exhibit GOK-10). 
35 See, e.g. , Importers’ Questionnaire at question II-10(a) (Exhibit GOK-44(b)). 
36 US Answers to Panel Questions (Answer to Question 17).  WT/DS296/R 
 Page E-85 
 
 
 32. Thus, some of the non-subject imports sold in the US market during the period of 
investigation consisted of standa rd DRAM products that were in terchangeable with the corresponding 
standard DRAM products produced by Hynix in its  subject Korean facilities and by the domestic 
industry.  However, a significant portion of non-su bject imports were non-standard products.  The 
ITC appropriately took into account these factual differences. 
 
33. In this regard, we reiterate that the eight pr oducts for which pricing data was collected in the 
DRAMs investigation were a ll “standard” DRAM products.37  No pricing information was collected 
on RAMBUS or specialty DRAM products.  Thus, when  the ITC determined that subsidized subject 
imports were undercutting the domestic industry at greater frequencies and at larger margins than 
non-subject imports, this conclusion was based on  the pricing behaviour for standard DRAM 
products.38 
 
 § 34:  the portion of subject imports underselling in 2001 was 5% of the market, 
whereas the portion of non-subject impo rts underselling was 27% of the market; 
 
34. There are several flaws with the arguments set fo rth in paragraph 34.  First, Korea insists that 
a comparison of the undercutting by subsidized subj ect imports with a comparison of the undercutting 
by non-subject imports is somehow required.  Ho wever, such a comparison has no foundation in the 
text of the SCM Agreement or in reports reviewing countervailing or antidumping duty 
determinations.  
 
35. The ITC separately examined the volume and price effects of subsidized subject imports and their impact on the domestic industry, and it separat ely examined the volume and price effects of non-
subject imports on the domestic industry, but there was no requirement that it compare and contrast 
the two.  So long as subsidized subject imports th emselves materially injured the domestic industry, 
and so long as the ITC provided a satisfactory explan ation of the nature and extent of the injurious 
effects non-subject imports were ha ving on the domestic industry to show that it did not attribute the 
injury from other factors to the subsidized subject imports, then the ITC complied with the requirement to separate and distinguish other factor s, as articulated by the Appellate Body.  As 
explained above in the response to the question concerning paragraph 22, the ITC satisfied these 
requirements in the DRAMs investigation. 
 
36. The second flaw in Korea’s arguments relates to the figures cited by Korea.  As we have 
explained in prior submissions, Korea’s calculation of Hynix’s market share is skewed.
39  I n  
paragraph 34, Korea compounds the problem by netting its flawed market share figure for Hynix and the market share for the domestic industry from 100 per cent and calling the remainder the market 
share for non-subject imports (even though it is at best the market share for non-subject imports plus 
the market share for importers of subsid ized subject imports other than Hynix). 
 37. Korea then multiplies these su spect market share figures by the frequency with which those 
imports undersold the domestic industry’s DRAM products and pronounces that in 2001 the portion 
of undercutting by subject imports was about 5 per cent of the market, but the portion of undercutting 
by non-subject imports was about 27 per cent of the market.  Leaving aside the problems with the 
underlying market share figures, Korea’s calculati on attempts to use the undercutting data for a 
purpose for which it is not suited.  The undercuttin g data shows the number of monthly comparisons 
in which the weighted average subject import pri ce was below the weighted average price of the 
                                                     
 
37 See, e.g. , USITC Pub. 3616 at 23 (Exhibit GOK-10). 
38 See, e.g. , USITC Pub. 3616 at 25 n.164 (Exhibit GOK-10). 
39 See, e.g. , US Second Submission, paras. 114 to 118; Opening Statement of the United States of 
America at the Second Substantive Meeting of the Panel , 21 July 2004, paras. 34-36 [hereinafter “US Second 
Oral Statement”]. WT/DS296/R 
Page E-86  
 
 domestic like product.  The undercutting comparisons are for specific products and do not even 
cumulatively account for all of the sales of either subject imports or of the domestic like product 
during the period of investigation.  Consequently, th ere is no basis whatsoever to take the percentage 
of months where there was undercutting by the subject imports and then to multiply that by the market 
share of subject imports to derive a figure that purpor ts to reflect what percentage of shipments in the 
US market were undersold by subject imports.  For exactly the same reason, th e data collected by the 
ITC cannot be used to posit a percentage of the market which was undersol d by non-subject imports, 
as Korea presents to the Panel, for a specific product type.  Contrary to Korea’s implication, the 
frequency of undercutting, while significant in and of  itself, says nothing about the quantity of imports 
in the observed months that were undercutting the do mestic like product.  Instead, this figure reflects 
that the weighted-average price of the imports in question for each of those months was lower than the 
weighted-average price of the domestic industry’s DRAM products. 
 38. Moreover, the proxies that Korea uses also do not take into consideration the magnitude of 
undercutting involved or the effects that a compa ny engaging primarily in undercutting has on the 
market.  A company that consistently undercuts pr ices as Hynix did has a disproportionate effect on 
prices in the market as opposed to a company that does not consistently undercut prices. 
 
 § 37:  the ITC does not explain why the effect of supplier competition was attributed to 
the small change in subject import market share, rather than the much larger market 
share of non-subject imports and the rate at which non-subject imports were gaining 
market share; 
 
39. We addressed the major flaws in this argumen t in our responses above to paragraphs 20, 22, 
and 34 of Korea’s Second Oral Statement.  We re fer the Panel to those responses, including the 
discussions of the problems with Korea’s characteriza tion of data in the abstract without any factual 
context and Korea’s dependence on an assumption that subsidized subject imports must be the “sole 
cause” of material injury to the domestic indus try.  Simply because Korea does not like the 
explanation that the ITC provided does not detract from the fact that the ITC’s explanation is at least as thorough and comprehensive as those explanations  provided by other investigating authorities in 
cases where their analyses have been found to be WTO-consistent by WTO reviewing bodies.
40 
  §  39:  the key missing point – non-attribution required the ITC to separate and 
distinguish the role of subject import s upply sources from domestic and non-subject 
import supply sources; 
 
40. The cited statement from paragraph 39 was ma de in connection with Korea’s argument that 
the ITC “completely ignored” increases in supply/ capacity by DRAMs producers that occurred during 
the period of investigation.  As we pointed out in previous submissions, however, the ITC agreed  with 
Hynix that there were capacity increases during the period of investigation, and it expressly relied on 
the same exhibits that Hynix did to support this finding.   41. Moreover, the ITC took account of these capacity increases (whether they are called capacity 
increases or supply increases)
41 as part of its consideration of the DRAMs business cycle and the 
manner in which the DRAMs business cycle and ot her factors (such as the product life cycle and a 
slowing in demand growth) affected DRAM pr ices during the period of investigation. 
 
                                                      
40 See US Second Submission, paras. 109-113. 
41 See, e.g. , Hearing Transcript at 205 (Exhibit US-122) (in which Hynix’s counsel concurs that in this 
industry where producers need to operate at high capacity utilization levels in light of the high fixed costs 
associated with DRAMs productio n, capacity equals supply).  WT/DS296/R 
 Page E-87 
 
 
 42. Based on its analysis of the pricing data, th e ITC ascertained that prices for nearly every 
pricing product and channel of distribution declined substantially over the period of investigation.  It 
observed that prices for domestic products and subsid ized subject imports followed the same general 
trends and were generally  similar for sales to PC OEMs across all products.  More particularly, the 
product-specific data showed price declines of 70 to 90 per cent from late 2000 through 2001, a 
modest rebound in early 2002, then a further decline over the course of 2002.  The ITC identified 
record evidence indicating that the price dec line in 2001 was the “most severe in history”.42 
 43. The ITC examined other possible reasons for these price declines.  Regardless of the label 
attached to these factors – or whether a particular factor encompassed “sub-factors” – it is clear from 
the face of the ITC’s determina tion that the ITC examined the product life cycle  and the DRAMs 
business cycle  that is characterized by repeated “boom” and “bust” periods as other possible reasons 
for the price declines.
43 
 44. Based on its evaluation of the record evidence in  this investigation, the ITC determined that 
“[w]hile slowing demand played some role, togeth er with the operation of the DRAMs business cycle 
and product life cycles, the unprecedented severity of the price declines that occurred from 2000 to 
2001 and persisted through 2002 indicated that s upplier competition was an important factor”.
44  The 
ITC determined that these price declines were far greater than the 20 to 30 per cent that Micron – or 
even the 40 per cent that Hynix itself  – reported would be expected on an annual basis.45 
 
45. The ITC concluded that the increasing freque ncy of undercutting by subsidized subject 
imports from 2000 to 2002 corresponded with the s ubstantial decline in US prices over those same 
years.  The ITC further concluded that in the ab sence of significant quantities of subsidized subject 
imports competing in the same product types at re latively low prices, domestic prices would have 
been substantially higher.46 
 
46. In the referenced paragraph 39, Korea asserts that a “lone footnote” is not enough, and that 
“to look at capacity in the aggregate simply does not allow the necessary analysis” because this 
“factor is not one that can be subsumed within another and required indepe ndent analysis to be 
analyzed at all.” (Citation omitted).  
47. The ITC’s evaluation of supply/capacity, descr ibed above, can hardly be characterized as a 
“lone footnote”, nor does Korea provide any support for its assertion that an investigating authority’s 
examination must take place in the text.  Nor is th ere any support for Korea’s assertion that analysis of 
supply/capacity is “not one that can be subsumed wi thin another and required independent analysis to 
be analyzed at all”.  Korea’s argument conflicts with the findings of panels in disputes reviewing 
antidumping determinations wherein investigating authorities’ analyses have been found to be WTO-
consistent in situations where the authorities anal yzed factors that were subsumed within other 
factors.
47 
 48. The ITC clearly separated and distinguished  the role of subject import supply sources from 
domestic and non-subject import supply sources.  Th e ITC’s examination and explanation is more 
fully described above in response to questions con cerning paragraphs 20, 22, 34, and 37.  Moreover, it 
                                                     
 
42 See, e.g. , USITC Pub. 3616 at 24 (Exhibit GOK-10). 
43 See US First Submission, paras. 454-457, which identify in more detail where in the ITC’s final 
determination the examination of these factors took place. 
44 See, e.g. , USITC Pub. 3616 at 24-25 (Exhibit GOK-10). 
45 See, e.g. , USITC Pub. 3616 at 24-25, I-11 (Exhibit GOK-10); Hearing Transcript at 157-161, 267-68 
(Exhibit US-94). 
46 See, e.g. , USITC Pub. 3616 at 24-25 (Exhibit GOK-10). 
47 See, e.g. , US Second Submission,  paras. 109 to 112 (citing, inter alia , EC – Tube (Panel) ). WT/DS296/R 
Page E-88  
 
 is important to bear in mind that the ITC’s analysis of subject and non-subject imports was not based 
only on a macro-economic analysis of trends a nd projected causes.  The ITC also contacted 
purchasers of DRAM products, and those purchasers identified Hynix as a source of low-priced DRAM products and confirmed that the domestic  industry lost sales and/or revenues due to 
competition from Hynix.
48  This anecdotal evidence is a furthe r indication that the ITC did “separate 
and distinguish” the subsidized subject imports  from non-subject imports, and that it did find 
independent evidence that low prices of the subsidi zed subject imports were injuring the US industry. 
 
 § 49:  appearance of control where none exists, nothing suggests that the GOK would 
intervene in day-to-day credit decisions of various banks; 
 
49. In the referenced paragraph 49, Korea asserts th at there is “nothing” in the Prime Minister’s 
Decree, the Public Fund Oversight Act, or any specific MOU, “to suggest that the GOK would  
intervene in the day-to-day  credit decisions of the various bank s”.  (Emphasis added.)  There are 
several problems with this statement. 
 
50. First, the DOC did not find that the c ited measures suggested that the GOK necessarily would  
intervene in banks’ credit decisions.  Instead, th e DOC reasonably found, based upon their plain text, 
that these measures gave the GOK the ability  to intervene in banks’ credit decisions should it choose 
to do so.  
51. For example, Prime Minister Decree No. 408, on its face, gave the GOK legal authority to 
intervene in the lending decisions of a bank in  the exercise of the GOK’s shareholder rights.
49  The 
Decree also permitted supervisory agencies to request  “cooperation” from financial institutions for the 
purpose of stabilizing financial markets or a ttaining the “goals of financial policy”.50  Another 
legislative action considered by the DOC was the Public Fund Oversight Act.  This law required 
Korean private banks to sign contractual commitme nts with the government – MOUs – in exchange 
for the massive recapitalizations received from th e GOK.  The MOUs provided for GOK intervention 
in a bank’s fiscal operations.51 
 
                                                      
48 See, e.g. , USITC Pub. 3616 at 25 (Exhibit GOK-10). 
49 The decree was issued in November 2000, precisely when the GOK began pursuing its Hynix bailout 
policy.   
50 Preliminary Determination , 68 Fed. Reg. at 16774 (Exhibit GOK-4); Prime Minister Decree No. 
408, Articles 5 and 6 (Exhibit GOK-45).  The investigati on record reflects that on mo re than one occasion, the 
GOK did, in fact, request “cooperation” from various creditors to assist Hynix.  For example, an FSS official 
stated:  “It is unsound that both Hyundai Electronics and the creditor group, the banks which agreed to resolve the liquidity of Hyundai Electronics, are refusing to provide support even resorting to expedient measures.  Now 
that we have requested for cooperation  using multiple channels, we are expecting support to be provided sooner 
or later.”  Financial Community’s Support for Hyundai Electronics—A US Subsidiary Facing Insolvency Risk , 
M
AEIL ECONOMIC DAILY , March 7, 2001 (emphasis added) (transla ted version) (Exhibit US-69).  The FSS also 
invited officials from Shinhan Bank and Hanmi Bank to a meeting to “ request their cooperation ” when  several 
banks retracted their earlier promises to increase purc hase limits on Hynix’s export bills of exchange (“D/A 
loans”).  Creditor Group Conflicts With Govern ment Over Supporting Hyundai Group , M AEIL ECONOMIC 
DAILY , 2 February 2001 (emphasis added) (translated version) (Exhibit US-68).  A 7 March 2001 Maeil 
Economic Daily article further commented that, “[a]s th ings are going awry, the Financial Supervisory Service 
is desperately ‘making every effort’, as the highly-placed official of F SS calls the presidents of the banks 
concerned, urging that the limit be extended following the convening of people from the appropriate banks to 
make an earnest request for cooperation .” Financial Community’s Support for Hyundai Electronics – A US 
Subsidiary Facing Insolvency Risk ,” M AEIL ECONOMIC DAILY , 7 March 2001 (emphasis added) (translated 
version) (Exhibit US-69). 
51 Preliminary Determination , 68 Fed. Reg. at 16774 (Exhibit GOK-4); Government of Korea 
Verification Report  at 4 (referencing Exhibits 1-2 through 1-6) (Exhibit US-12).  During the investigation, the 
DOC requested the GOK to produce an MOU, but it declined to do so.  See US Second Oral Statement, para. 8.  WT/DS296/R 
 Page E-89 
 
 
 52. An additional legislative action considered by the DOC was the Corporate Restructuring 
Promotion Act (CRPA), which was enacted immediat ely prior to Hynix’s October restructuring and 
refinancing.  The DOC found that the CRPA permitte d a handful of Hynix’s creditors to dictate 
restructuring terms to other Hynix creditors,52 and provided the Financial Supervisory Service (FSS), 
a government entity, with formal power to request cr editors’ assistance, and to instruct creditors not to 
press payment claims, with respect to Hynix’s restructuring.53  As discussed in response to Questions 
2 and 6, below, the DOC did not rely upon the mandatory nature of the CRPA, in and of itself, or in the abstract, as evidence of entrustment or direc tion.  Rather, the DOC found that the mandatory 
nature of the CRPA, coupled with the specific factual circumstances presen t in this case , provided an 
effective tool through which the GOK was able to effectuate its Hynix policy. 
 
53. Another problem with the referenced paragr aph 49 is that the DRAMs investigation simply 
was not about the “day-to-day” credit decisions  of banks.  Instead, it involved extraordinary 
government action aimed at ensuring that billions of  dollars were funnelled to a company that the 
GOK regarded as so important that it would not be left to the mercies of the marketplace and allowed 
to fail. 
 54. Finally, the United States has never cont ended – nor did the DOC find – that the GOK needed  
to intervene on a daily basis with the banks in order to entrust or direct them to assist Hynix.  The 
GOK only needed to intervene as n ecessary to ensure that the banks stayed in line.  The DOC 
reasonably found that the aforementioned measur es gave the GOK the ability to intervene as it 
considered necessary.  Furthermore, the DOC f ound that record evidence made clear that the GOK did 
intervene in banks’ credit decisions.    
 § 76:  the argument regarding the size of Citibank’s loan. 
 55. As explained in prior US submissions, the DOC  rejected loans from Hynix’s private creditors 
for use as a benchmark because it found those loans to be government financial contributions (with 
the exception of loans from Citibank).  After consider ation of record evidence, the DOC also rejected 
loans from Citibank for use as a benchmark.  Th e reasons why the DOC rejected Citibank as a 
suitable benchmark can be summarized as follows:
54 
 
 –  Citibank’s involvement was small in abso lute and percentage terms compared to the 
involvement of the government-owned and controlled banks. 
  –  Citibank itself acknowledged that its pa rticipation was only a symbolic gesture.
55 
 
 –  There was substantial record evidence th at Citibank’s risk assessment of Hynix was 
influenced by the GOK’s policy to support Hynix and prevent its failure.  For example, a Citibank official stated that  Citibank needed a clear signal from the 
Korean banks that they were willing to support Hynix before they would commit funds. 
 
 – Record evidence showed that Citiba nk was influenced by the significant and 
continuing involvement of the GOK in proppi ng up Hynix, rather than by its belief 
that Hynix was a commercially worthy credit risk in its own right.
56  
                                                      
52 Issues and Decision Memorandum at 54-55 (Exhibit GOK-5). 
53 Government of Korea Verification Report  at 19 (Exhibit US-12).   
54 For a more extensive discussion of the DOC’s rejection of Citibank as a benchmark, see US First 
Submission, paras. 197-204. 
55 See Hynix Verification Report  at 19 (Exhibit US-43). 
56 US First Submission, paras. 200-201. WT/DS296/R 
Page E-90  
 
  
 – Citibank and SSB were the exclusive fi nancial advisors to Hynix, and reaped 
significant fees from this engagement – fees th at would justify the token participation 
on the restructuring packages. 
 
 – Evidence showed that Citib ank’s involvement with Hynix was viewed by Citibank as 
a stepping stone toward a larger and more  lucrative role in helping the GOK to 
resolve other structural problems in the Korean financial market. 
 56. Other “unusual aspects” relevant  to Citibank’s decision to participate in the syndicated loan 
include the fact that despite its long involvement in  the Korean financial market dating back to the 
1960s, Citibank was not a lender to Hyundai El ectronics or Hynix prior to the December 2000 
Syndicated Loan.  Furthermore, Citibank did not ex tend any financing to Hynix other than in GOK 
entrusted and directed restructurings (and was not a participant in the KDB Fast Track Program).  In addition, Citibank’s participation in those restructurings was on the same terms as were applicable to 
government entrusted and directed participants.  C itibank also did not seek internal credit approval for 
its portion of the syndicated loan until after Korean  banks had committed to the arrangement.  Finally, 
Citibank did not base its lending decisions on inde pendent credit analyses that a commercial bank 
normally would consider, but rather upon the assessm ent of Hynix that SSB prepared for purposes of 
advancing a plan to restructure Hynix’s debt.  
57. Thus, contrary to Korea’s assertions in the re ferenced paragraph 76, the DOC did not reject 
Citibank’s lending to Hynix based solely on the re lative size of that lending.  Instead, the DOC 
properly rejected Citibank loans as a benchmark on multiple grounds , one of which was the size of 
such loans.   
58. Under Article 14(b) of the SCM Agreement,  a “benefit” is measured as the difference 
between “the amount that the firm receiving the lo an pays on the government loan and the amount the 
firm would pay on a comparable commercial lo an which the firm could actually obtain on the 
market”.
57  Thus, under Article 14(b), one must compar e what Hynix actually paid on the government 
loans with what it would have paid  had it been forced to obtain all of that financing on the market.  
For example, to measure the benefits of the KRW 700 billion portion of the syndicated loan directed 
to Hynix by the GOK, Article 14(b) requires an examination of what Hynix would have paid if it had 
been obligated to obtain the full KRW 700 billion on the market.  The relevant question under Article 
14(b), therefore, is whether Citibank (or another lender) would have extended to Hynix the full KRW 
800 billion credit (without any participation fro m the GOK-directed banks, and without any 
governmental interference) on the same favourable terms as the KRW 100 billion loan.  The answer is 
an unequivocal “no”. 
 59. The record demonstrated that Citibank’s decision to participate in the syndicated loan, even in 
its very limited capacity, was conditioned on the be haviour of the GOK-directed banks.  As the DOC 
found in its investigation,   
For example, in regard to the syndicated lo an, Citibank officials stated that Citibank 
wanted to show its commitment, but did not want to be the “lender of last resort” and “needed a clear signal from the ROK banks” th at they were willing to support Hynix 
                                                     
 
57 The Panel in Brazil – Aircraft , para. 7.24, found that a determination of the existence of benefit 
should be based upon “objective benchmarks … reflecting the terms under which the beneficiary of the financial 
contribution would be operating in the absence of the government financial contribution.”  In addition, in US – 
Softwood Lumber , para. 103, the Appellate Body found that, for purposes of establishing the existence of 
benefit, an investigating authority may reject proposed benchmarks shown to have been distorted by government 
involvement in the market.  WT/DS296/R 
 Page E-91 
 
 
 as well, and that Citibank did not seek inte rnal credit approval for its portion of the 
syndicated bank loan until after the ROK banks had committed to the arrangement ... 
.  In a similar vein, Citibank officials indi cated that Citibank had decided to “ride” 
with the ROK banks to see if Hynix coul d make it as an ongoing concern, and that 
Citibank made a bet that the ROK banks would protect their exposure.58 
These statements by Citibank officials indicate th at Citibank would not have extended credit on 
comparable terms (or perhaps not at all) absent the participation of the government entrusted and 
directed banks.  60. As noted, the loans provided by Citibank repr esented a small fraction of the full amount of the 
syndicated loan.  If Citibank had provided the entire amount, the financial risk (and hence the interest 
rate) would have been greater.  The increased risk stems from three factors:   – Citibank’s overall exposure (based simply on the size of the loan) would have been 
much higher;  
 
 – Citibank would have had no assurance that  the GOK-directed banks would have been 
willing to support Hynix; and  
  – While the advisory fees earned by Citibank provided meaningful protection against 
potential losses on a small loan, they would have provided no me aningful protection 
were Citibank to have financed the full syndicated loan.   
 61. Given the record evidence, the DOC reasonably concluded th at Citibank loans to Hynix, 
including its portion of the syndicated loan, were unsuitable as benchmarks.  2. With regard to para. 32 of the Second Written Submission of the US, are the “actions that directly evinced entrustment and direction” th ose set forth in section 1(a) – (c) of that 
submission?  Is the US arguing that there is both direct and indirect evidence of entrustment / direction?
59  
 
62. Yes, it is the US position that there is both direct and indirect (also referred to as 
“circumstantial”) evidence of government entrus tment or direction.  Reliance on both types of 
evidence is entirely consistent with the SCM Agreement.60  In fact, circumstantial evidence, 
secondary sources, and reasonable inferences are often essential analytical tools, as prior panels have 
acknowledged.61 
 
63. As we have noted previously , recognition of the importance of both types of evidence and the 
reasonable inferences to be drawn from the evidence as  a whole is particularly important in the case of 
indirect subsidies.  This is because, given the very  nature of such subsidies, there may often be little, 
                                                      
58 Issues and Decision Memorandum  at 9-10 (Exhibit GOK-5), citing Hynix Verification Report at 19, 
20 (Exhibit US-43). 
59 In order to better address the Panel’s questions, we have broken our answer to Question 2 into two 
parts. 
60 See, e.g., US - OCTG Sunset , para. 7.296, in which the panel noted that “there are no rules in the 
Anti-Dumping Agreement as to the type of evidence that can support an investigating authority’s findings”.  The same holds for the SCM Agreement. 
61 See, e.g., Argentina – Bovine Hides , para. 11.28 (complainant clearly may establish the existence of 
an export restriction on the basis of circumstantial evidence); US - Wheat Gluten,  para. 174 (a panel must draw 
inferences on the basis of all the f acts of record relevant to the particular determination to be made); and US - 
DRAMS , para. 6.79 (panel found that investigating au thority properly relied on secondary sources). WT/DS296/R 
Page E-92  
 
 if any, direct evidence of the government’s role.  Thus, reliance on these analytical tools is essential if 
Article 1.1(a)(1)(iv) of the SCM Ag reement is to have any meaning. 
 64. As noted above, there was both direct and i ndirect evidence of government entrustment and 
direction in the DRAMs investigation.  For example,  there was direct evidence that the GOK decreed 
publicly, on numerous occasions, that Hynix would not  be allowed to fail and that the GOK gave 
explicit instructions aimed at fulfilling that goal.  There is also direct evidence in the form of the 
Kookmin prospectus that the GOK directed the le nding decisions of banks in which the GOK had a 
relatively small proportion of voting shares.  Mo reover, there is a host of secondary sources that 
document the GOK’s adoption and implementation of its Hynix bailout policy. 
 
65. With respect to the phrase “[i]n addition to ta king actions that directly evince entrustment and 
direction”, the United States was distinguishing between the government actions described in 
paragraphs 32-36 that enabled Hynix’s creditors to fulfill their assigned task of resolving the Hynix 
financial crisis ( i.e., credit limit waivers and coercion of credit rating agencies) and evidence that 
more directly supported the conclusion that the GOK, in fact, entrusted or directed them to undertake 
that task.  The United States did not mean to sugge st that all of the evid ence discussed in sections 
1(a)-(c) was “direct” – as opposed to “indirect” – ev idence of entrustment or direction.  Moreover, 
regardless of whether a particular piece of evidence is labelled “direct”, “indirect” or “circumstantial”, 
it is all relevant.  The real issue is whether, based  upon all of that evidence, the DOC could reasonably 
conclude that the GOK entrusted or directed Hyni x’s creditors to resolve the company’s financial 
crisis. 
 
Why is mandatory participation under the CRPA  included as an “action [...] that directly 
evinced entrustment and direction”, when at para. 33 of its replies to the Panel’s questions, the 
US asserts that “[t]he DOC did not find that mandatory participation under the CRPA 
constituted, in and of itself, entrustment or direction”?  
66. As discussed above, the United States did not  mean to suggest that all of the evidence 
discussed in section 1(a)-(c) was “direct” evidence of entrustment and direction.  Moreover, with 
respect to the CRPA, classification is not stra ightforward, because the CRPA did not represent a 
single piece of evidence, but rather a host of facts specific to Hynix. 
 
67. With respect to the CRPA itself, as a law viewed in the abstract , the DOC did not find that 
mandatory participation under the CRPA, in and of itself, constituted entrustment or direction.  The 
CRPA did not, however, operate in a vacuum.  As detailed in the previous US submissions, the 
structure of the CRPA enables a handful of the larg est creditors to dominate the restructuring process 
and to dictate the results to every other creditor.  
 68. The CRPA mandated that all Hynix creditors participate in the Creditors Council.  As 
previously noted, the GOK enacted the CRPA in August 2001, precisely at the time when Hynix and 
other Hyundai Group companies were on the brink of  bankruptcy and required significant financial 
assistance to avoid financial failure.
62  As GOK officials noted at verification, “the National Assembly 
passed the Corporate Restructuring Promotion Act (‘CRPA’) to make sure that the banks could  not 
avoid  participating in workouts ”.63  A Ministry of Finance official stated that: “[w]e’ve decided to 
force all creditor financial institutions to take part in the meetings in order to prevent some of them 
                                                      
62 US First Submission, para.  84. 
63 Issues and Decision Memorandum at 54 (Exhibit GOK-5), citing Government of Korea Verification 
Report  at 8 (Exhibit US-12).  WT/DS296/R 
 Page E-93 
 
 
 from refusing to attend and pursuing their ow n interests by taking advantage of bailout 
programmes”.64 
 69. Further, the CRPA provides the GOK with a ve ry valuable tool to prevent creditors from 
seeking to liquidate a troubled company.  Pursuant to  Article 14, at the request of the lead creditor 
bank, the FSS can prevent creditors from placing a compan y in liquidation.  This is precisely what the 
FSS did in the Hynix bailout.
65  While Korea has attempted to mini mize the impact of this provision66, 
this provision effectively forecloses any and all creditors from seeking liquidation unless and until the 
GOK’s objectives are achieved through the CRPA procedures.   
70. With respect to the DRAMs investigation, the Creditors’ Council was dominated by creditors 
that were owned and controlled by the GOK.  In turn, the GOK had a stated, public policy that it 
would not allow Hynix to fail, and had taken, and continued to take, actions aimed at ensuring that 
Hynix did not fail.  Under these specific, factual circumstances , the DOC reasonably concluded that 
the GOK was able to use the CRPA as a mechanism to ensure that all Hynix’s creditors participated in 
the restructuring and recapitalization measures benefiting Hynix.  For example, by naming the KEB, 
the GOK’s lead bank for Hynix, as head of the Council, the GOK positioned itself to take full 
advantage of the KEB’s longtime role as agent and facilitator of the GOK’s credit and management 
decisions.
67  In short, the GOK knew that it could entrust or direct the banks to carry out the task of 
saving Hynix.  
71. The following excerpt from a news report, entitled ‘Gangster-Style’ Solution for Hynix ,  
underscores the significance of the CRPA when, as in the DRAMs investigation, the Creditors’ 
Council is dominated by governme nt-owned and controlled banks: 
 
Bank executives are about to have a meeting of the “Financial Institution Council” to 
pass a resolution of the support plan for Hynix Semiconductor.  The executives of the 
main creditor banks, Korea Exchange Bank and other banks such as Hanvit, Korea 
Development Bank, and Chohung Bank, have smiles on their faces.  In contrast, the 
executives of Shinhan, KorAm, Hana, Korea First, and Kookmin Bank stepped glumly into the meeting room.  They were supposed to cast “aye” votes that would 
                                                     
 
64 Preliminary Determination , 68 Fed. Reg. at 16774 (Exhibit GOK-4), citing Foreign Banks Required 
to Attend Creditor Meetings for Ailing Firms , KOREA TIMES , July 22, 2001; Issues and Decision Memorandum  
at 60 (Exhibit GOK-5). 
65 Government of Korea Verification Report  at 19 (Exhibit US-12). 
66 Korea Second Oral Statement, para. 39.   
67 Issues and Decision Memorandum  at 56-57 (Exhibit GOK-5); Hynix Verification Report at 13-14 
(Exhibit US-43).  At verification, KEB officials confir med that GOK had traditionally followed the main bank 
principle, and that the KEB had a long history of being the main bank for the Hyundai Group.  Hynix 
Verification Report  at 12 (Exhibit US-43).  Also, record evidence reflected the following:  “Main banks were 
designated by the government on the ba sis of the bank’s exposure to chae bols; for each chaebol, the government 
designated a bank, who has the largest exposure to that  chaebol, as the main bank of the chaebol.  Once 
designated, however, the main bank was not changed even if the main bank lost its status as the principal source 
of credit to the chaebol.”  Corporate Governance in Korea , Il Chong Nam et al. , KOREA DEVELOPMENT 
INSTITUTE  (from Organisation for Economic Co-operation and Development conference on Corporate 
Governance in Asia: A Comparative Perspective) (Seoul, March 3-5, 1999) (“In short, main banks acted as de 
facto government agents in terms of regulation and monitoring.”) at 2 (copy attached as Exhibit US-131).   In 
effect, “[T]he principal transaction banks have been larg ely the agent of the GOK in their supervisory role.  As 
such, PTBs were more concerned about whether corp orate clients’ behaviors were conforming to the 
government rules and regulations rather than trying to help them with their investment and financing plans.”  
Korea’s Economic Crisis and Corporate Governance , Sang-Woo Nam, S CHOOL OF PUBLIC POLICY AND 
MANAGEMENT , KOREA DEVELOPMENT INSTITUTE  (undated) at 47 (copy att ached as Exhibit US-132). 
The United States notes here that all of the new exhi bits attached to these answers were part of the 
administrative record before the DOC. WT/DS296/R 
Page E-94  
 
 bring themselves losses on the order of several  tens of billions of won, up to 100 
billion won.  It is no wonder they could not be light-hearted. 
On that day, the “ayes” carried the day on the Hynix support proposal.  However, 
practically no one thought that the proposal passed due to merit, or that the proposal 
was convincing and reasonable. 
On 30 October, Korea Exchange Bank sent a unilateral notice to commercial banks, 
“As for the banks which do not agree to the support proposal, their debts will be paid off based on liquidation value.” In other word s, those banks will have to give up some 
85% of their receivables.  This picture has another angle that is difficult to understand.  They say they intend to keep Hynix alive.  But then, why would they use 
the value of a liquidated concern as opposed to the value of a continuing concern? 
Korea Exchange Bank went on to attach another condition: As for the remaining 
receivables of 15% or so after the payoff, th ey will not be paid in cash.  Instead, they 
will be paid in 5-year term Hynix debentures. 
The message was loud and clear:  “Do not even think of opposing this plan.”   
Banks initially went ballistic: “It doesn’t make  any sense, its just plain ridiculous.” 
However, they ended up giving their consent, “swallowing the mustard while crying in tears,” as the old Korean saying goes.  There simply wasn’t any room for any other choice.  The result in support was all set in  advance....  Another aspect was that the 
state-affiliated banks were coercing commercial banks in the private sector.  The government and the creditor group may breathe a sigh of relief after keeping Hynix 
alive in this way.
68 
72. Thus, given the facts of the DRAMs investig ation, it is easy to see why and how the GOK 
could entrust and direct Hynix’s creditors to sav e the company.  The GOK was able to use the CRPA 
to determine the outcome of Council deliberations so as to assist Hynix.  3. Please comment on Korea’s argument (para. 128 of Korea’s Second Written Submission) that “there is simply no evidence indicating that Shinhan, Hana, or KorAm bank 
were entrusted or directed by the GOK to extend their portion of the syndicated loan”.  What evidence of entrustment / direction did the US rely  on in respect of the participation of these 
banks in the syndicated loan?  Even if one do es not accept Korea’s argument on the need for 
specific banks to be directed to perform specific tasks, is it not necessary for an investigating 
authority to point to evidence showing that creditors included in the finding of 
entrustment/direction were actually entrusted / directed ? 
 
73. With respect to the second part of the questi on, the United States agrees that there must be 
evidentiary support warranting the inclusion of cred itors in a finding of entrustment/direction.  If, 
however, by use of the words “evid ence showing that creditors  ... were actually entrusted/directed” 
(emphasis added), the Panel is suggesting th at it is necessary for authorities to have direct  evidence 
for every bank and every event, th e United States would not agree. 
 74. As the United States has noted previously, gove rnments typically have a wide range of tools 
at their disposal to deliver a financial contribution indirectly, and these tools may vary greatly in terms 
of their transparency.  Where governments have politi cal reasons for wanting to obscure their role in 
                                                     
 
68  ‘Gangster-Style’ Solution for Hynix , DONG-A DAILY  (1 November 2001) (copy attached as  Exhibit 
US-133).  WT/DS296/R 
 Page E-95 
 
 
 providing assistance to a particular company or indus try, they may choose to employ less transparent 
methods of delivering assistance.  Thus, cases involving indirect subsidies can present particular challenges for an investigating authority attempti ng to gather facts and figure out what really 
happened.  As the European Communities noted, in  practice, evidence of entrustment/direction is 
more likely to be circumstantial than direct.
69 
 
75. In light of these considerations, if Article 1. 1(a)(1)(iv) of the SCM Agreement is to have any 
meaning, it is essential to recognize the importance of examining, on a case-by-case basis, all of the 
evidence, including direct and circumstantial evid ence, surrounding possible government entrustment 
or direction.  In other words, an investigating aut hority must be able to assess the evidence in light of 
the totality of circumstances.  These circumstanc es would include not only the specific actions taken 
by a government, but also the greater context for those actions, including any governmental interest in, and control over, the private parties it is alleged to be entrusting or directing; any inducements of 
the private bodies allegedly taking action at th e government’s behest; any governmental policies 
concerning the company or industry that allegedly be nefits from government entrustment or direction; 
and the views of objective third party observers  and scholars who are knowledgeable about a 
government’s policies and practices regarding intervention in the decision-making of firms.  76. Turning to the first part of the Panel’s qu estion concerning the three banks – Shinhan, KorAm 
and Hana – the DOC properly found that the Hynix bailout constituted one c ohesive programme with 
several interrelated phases, one of which was the syndicated loan.  The programme took place over a 
relatively short period of time, was undertaken by  the same GOK officials at each stage, was 
coordinated by the same lead bank at each stage, and reflected the same types of tactics at each stage 
(the enactment of laws, waivers from those laws, th reats and coercion).  Figure US-3 illustrates how, 
at each stage, the bailout continuously rolled over debt from one stage to the next.  Moreover, while 
they avoid use of the term “bailout”, the GOK and Hynix have conceded that there was a single 
programme.
70  
 77. Second, there was evidence that these three particular banks – Shi nhan, KorAm and Hana – 
were among the banks the GOK had successfully threaten ed into participation at other stages of this 
single program.  For example, the FSC called Shinhan and KorAm to a meeting at FSC offices on 2 February 2001 to request their “cooperation” when they expressed reluctance to maintain the D/A 
financing.
71  In addition, the GOK threatened KorAm into participating in the May restructuring when 
the bank refused to take over its share of the May 2001 1.0 trillion won convertible bond package (34.7 billion won worth) due to Hynix’s failure to de liver a written pledge to use its best effort to 
reduce its debt.
72  The FSS severely rebuked KorAm, with one  FSS official stating: “If KorAm does 
not honor the agreement, we will not forgive the bank.”73  The same FSS official  further threatened 
                                                      
69 Third Party Submission by the European Communities, 26 May 2004, para. 8. 
70 For example, Hynix stated that, in September 20 00, “Citibank and SSB, Hynix’ financial advisors 
retained to devise a financial restructuring plan, presented a fully integrated proposal to completely realign the 
financial structure of Hynix ... .  The important point, for purposes of this submission, is that many of the 
financial transactions that are separately identified in  the [Department’s] questionn aire (each with their own 
sub-heading) were, in fact, all part of Citibank and SS B’s original integrated plan for a complete financial 
restructuring of Hynix.”   Hynix Questionnaire Response  (27 January 2003) at 14 and 15 (Exhibit US-119).  In a 
later submission, the GOK stated that the December 2000 syndicated loan “was  the first step in a several stage 
financial plan developed and implemented by SSB over the 2000-2001 period.”  GOK Questionnaire Response  
(February 4, 2003) at A-1 (copy attached as Exhibit US-134). 
71 Creditor Group Conflicts With Government Over Supporting Hyundai Group , M AEIL ECONOMIC 
DAILY , 2 February 2001 (Exhibit US-68).   
72 Issues and Decision Memorandum  at 60 (Exhibit GOK-5); Preliminary Determination , 68 Fed. Reg. 
at 16774 (Exhibit GOK-4). 
73 KorAm Reluctantly Continues Financial Support for Hynix , KOREA TIMES , 21 June 2001 (Exhibit 
US-64). WT/DS296/R 
Page E-96  
 
 stern measures against the bank, such as disapprovi ng new financial instruments and subjecting the 
bank to a tighter audit.
74  In addition, in April 2001, the FSS thr eatened to fine Hana Bank if it failed 
to provide emergency liquidity to Hyundai Petroc hemical, which was a part of the Hyundai Group 
that was going through the corporate workout process.75  
 
78. Third, there was the other evidence of entr ustment/direction that was not specific to these 
three banks.  This evidence is discussed elsewhere in these answers and in prior US submissions, and 
the United States will not repeat those discussions here.  79. Finally, all of this evidence had to be cons idered in the context of Hynix’s dismal financial 
condition.  This, too, has been discussed elsewhe re, and the United States will not repeat the 
discussion here other than to note that none of th e three banks in question produced any sort of 
legitimate credit analysis in connection with the sy ndicated loan, or, for that matter, any other phase 
of the bailout.  
80. In sum, there was evidence that the GOK ha d a policy to bailout Hynix; there was evidence 
that this policy consisted of a single programme;  there was evidence that at various points the GOK 
applied pressure on the three banks; and for every ph ase of the bailout programme there was evidence 
of GOK entrustment/direction, albeit not always speci fic to these three banks.  In light of this 
evidence, it was reasonable for the DOC to infer th at the GOK entrusted/directed Shinhan, KorAm 
and Hana to participate in the syndicated loan.  Ind eed, in light of the evidence, the inference that the 
GOK did not entrust/direct these banks to participat e in the syndicated loan seems implausible. 
 
4. At para. 18 of its Answers to the Panel’s questions, the US asserts that “The DOC did 
not find specifically that government-owned and controlled private entities  ‘were instruments 
through which the GOK entrusted/directed ot her entities’.  Rather, the DOC found, for 
example, that the GOK exercised control over Hynix’s creditors generally through government-
owned and controlled banks, because those banks  played a dominant role in the Creditors 
Councils.”  Does the US response mean that control over creditors th rough government-owned 
and controlled private entities is not relevant to  the issue of entrustment / direction of those 
creditors?  How does the concept of the exercise of control over creditors differ from the notion 
of entrustment / direction of those creditors?  
 
81. The Panel is correct that the DOC did not fi nd that the government-owned and controlled 
banks were “instrumentalities” through which the GOK en trusted or directed other creditors.  To the 
contrary, the DOC found that it was the GOK that entr usted or directed Hynix’s creditors.  However, 
the DOC also found that the GOK’s task was facilitate d by its ownership and control over banks that 
dominated the Hynix Creditors’ Council. 
 82. The US response at paragraph 18 does not mean that control over creditors is irrelevant to the 
issue of entrustment/direction of those creditors.  While government control over a private party may 
not be essential to a finding of entrustment/direction, the presence of control may provide direct or circumstantial evidence of entrustment/direction. 
 
83. With respect to the Panel’s question con cerning the difference between the concept of 
“control” over creditors and the notion of “entrustmen t/direction” of those creditors, in the abstract, a 
government could have control over a private entity, but never entrust or direct the private entity to do 
                                                     
 
74 KorAm Reluctantly Continues Financial Support for Hynix , KOREA TIMES , 21 June 2001 (Exhibit 
US-64). 
75 Corporate Restructuring and Reform: Lessons from Korea, W. Mako, K OREAN CRISIS AND 
RECOVERY , David T. Coe & Se-jik Kim,  eds., 2002, at 213-14 (Exhibit US-20).  WT/DS296/R 
 Page E-97 
 
 
 anything.  Conversely, a government could entrust or direct a private entity which it did not control, at 
least in the sense of ownership control.  84. In assessing the variety of ways a government wi elds power such that it may entrust or direct 
a private body, the political, cultural and socio-ec onomic context for its actions is particularly 
germane.  This is particularly true in the case of  Korea, where the government’s clout over the banks 
is widely acknowledged, and rooted in decades of close collaboration between the government and the 
financial sector and Korea’s strategic industries.  85. In this regard, the example of Kookmin  Bank – a Group C bank in Figure US-4 – is 
instructive.  The GOK had a relatively low ownershi p interest in Kookmin as compared to the Group 
B banks – a mere 15.1%.
76  However, in a sworn statement to the US Securities and Exchange 
Commission, Kookmin admitted that the GOK could direct its credit practices.77  In addition, the 
GOK hand-picked Kookmin’s CEO, Kim Sang-Hoo, former Vice Chairman of the FSC, “to speak for the government in the second-stage restructuring plan with Kookmin and other banks.”
78  As with the 
other creditors, the GOK also blocked Kookmin from finding Hynix in default.79  
 86. Thus, there was more than ample evidence on the DOC record that, even though the Group C 
banks were not controlled by the GOK purely on the basis of GOK ownership, the GOK nonetheless 
had the ability to direct their behaviour.  5. At para. 20 of the US Answers to Panel questions, the US asserts that “the motives of private investors are not germane” to the issue of entrustment / direction.  At para. 24, however, 
the US argument of entrustment / direction relies on private creditors knowing what was good for them.  If entrustment / direction is based  on creditors knowing what is good for them, 
doesn’t that imply an analysis of their motives? 
 
87. By the statement at paragraph 24 of our writte n answers that “this was a situation where the 
GOK said to the banks:  ‘If you know what’s good for you, you are going to help us bail out Hynix,’” 
the United States was not intending to suggest that the issue of entrustment or direction requires an 
analysis of the bank’s motives.  The United Stat es did, however, wish to convey the GOK’s ability to 
obtain the banks’ cooperation through punitive measures and threats thereof.  
 
6. At para. 33 of its Answers to the Panel’s questions, the US asserts that “[t]he DOC did 
not find that mandatory participation under the CRPA  constituted, in and of itself, entrustment 
or direction.  Rather, the DOC found that the GOK used the CRPA as a vehicle to effectuate the 
GOK’s Hynix policy”.  Does this mean that th e alleged mandatory nature of the CRPA is not 
relevant to the issue of entrustment / direction?
80   
                                                      
76 Bank for International Settlements, “The Banking Industry in the Emerging Market Economies: 
Competition, Consolidation and Systemic Stability,” BIS Papers No. 4 at 95 (August 2001) (Exhibit US-13).  
The 15.1% figure includ ed preferred stock. 
77  Issues and Decision Memorandum at 58-59 (Exhibit GOK-5); Kookmin Bank Prospectus (18 June 
2002) at 22 (Exhibit US-46); Kookmin Bank Prospectus (September 10, 2001) (Exhibit US-45); see also 
Government Control of Banks Diehard, K OREA TIMES  (13 March 2000) (Exhibit US-127); Kookmin Urges 
Seoul to Sell off its Stake , FINANCIAL TIMES  (10 November 2001) (copy attached as Exhibit US-137). 
78 Government Control of Banks Diehard , K OREA TIMES (13 March 2000) (Exhibit US-127); 
Highhanded Companies Sued for Unilateral Shareholders Meeting , K OREA TIMES (April 5, 2000) (copy 
attached as Ex hibit US-138); Seoul Pushes for a New ‘Big Bang’ in Banking , ASIA TIMES (18 March  2000) 
(copy attached as Exhibit US-139); Soundness of Financial Sector Still Remains Remote , KOREA TIMES (2 
September 2002) (copy attached as  Exhibit US-140). 
79  GOK Verification Report  at 19 (Exhibit US-12). 
80  In order to better address the Panel’s questions, we have broken up our answer to Question 6 into 
three parts. WT/DS296/R 
Page E-98  
 
  
88. As stated above in response to Question 2,  the DOC’s finding that the GOK used the CRPA 
as a “vehicle” to effectuate the GOK’s Hynix policy does not mean that the mandatory nature of the 
CRPA was not relevant to the issue of entrustment or direction.  Rather, it was the mandatory nature of CRPA, coupled with  the specific factual circumstances pre sent in the DRAMs investigation and the 
application of the CRPA to the Hynix bailout , that constituted evidence of  GOK entrustment/direction.  
 
How does the notion of entrusting / directing so meone to carry out an objective differ from 
using something as a vehicle to have someone effectuate that objective?   
 89. If the United States understands the questi on correctly, the differe nce is perhaps best 
described as the difference between ends and means.  In abstract, the “ends” is entrustment/direction 
and the “means” is the method used to entrust/direct.  In the context of the DRAMs investigation, the 
ends was the entrustment/direction of Hynix’s credito rs to provide assistance to Hynix, and the CRPA 
was a means by which the GOK entrusted/directed tho se creditors to provide such assistance.  As an 
evidentiary matter, the means used can be informative in ascertaining the ends. 
 
If the October 2001 restructuring had occurred in isolation, would the CRPA in and of itself 
have been sufficient evidence of entrustment /direction? 
 
90. The United States is not in a position to state definitively what the relevant DOC 
decisionmaker would find if faced with the situa tion hypothesized by the Panel.  However, it seems 
quite unlikely that entrustment/direction would be found if the CRPA was the only piece of evidence. 
 91. Of course, in the DRAMs investigation, th e CRPA was not the only evidence of entrustment 
or direction pertaining to the October bailout.  There was other evidence, and the extent of the 
additional evidence of entrustment or direction in Oc tober must be put in its proper perspective.   
 92. With the enactment of the CRPA, Hynix’s Cr editors’ Council was formalized.  As previously 
discussed, Hynix’s Creditors’ Council was dominate d by government-owned and controlled banks.  
Furthermore, even before the October restructur ing, the KEB had been hand-picked by the GOK as 
the lead bank, and was in charge of the Credito r Group and acted as a liaison between the banks and 
the GOK.  The implications of this structure in te rms of the evidence necessary to support a finding of 
entrustment or direction should not be underestimated.  That is, the advantage of the Council structure 
and having the KEB as lead bank was that the GO K could utilize one bank as point person and avoid 
having to dictate terms to each Council member individually.  
93. In addition, by the time of the October ba ilout, the GOK was aware that its Hynix bailout 
policy was coming under increased international scrutin y.  In particular, the United States had begun 
to raise its concerns regarding the subsidization of Hynix directly with Korea.
81  Press reports 
reflected that due to rising trade tensions, th e GOK could no longer afford to openly discuss 
supporting Hynix.  As one commentator stated, “Whenever the creditor group attempts to shy away from providing support, the government has talked to  them, or even twisted their arms, to bring 
support for Hynix.  The government has to avoid trade disputes while trying to keep Hynix alive.  
Hence the government is not in a position to openly talk about support.”
82  Another commentator 
                                                      
81 See, e.g. , GDS Offering Memorandum  at 90 (copy attached as Exhibit US-151) (acknowledging that 
the “United States Trade Represen tative has challenged the KDB Fast  Track Debenture Programme ... as 
constituting a preferential governmental subsidy in cont ravention of subsidy regulations of the World Trade 
Organization.  A draft resolution disputing the programme was submitted to the United States Congress in 
February 2001 and remains under review.”). 
82 Hynix, Will it Really Survive? , NEWSMAKER , NO. 439  (August 30, 2001) (copy attached as  Exhibit 
US-141).  WT/DS296/R 
 Page E-99 
 
 
 observed that with the increasing pressure from abro ad, the GOK could soon be grappling with a full-
fledged WTO dispute, stating:  “Of course the governme nt is very aware of this, and is likely to tread 
very carefully.”83  Yet another commentator stated in August:  “Our government is squirming and 
cringing over these viewpoints from overseas.  If the government goes all out to keep Hynix alive, it 
will surely be on a collision course with trade friction overseas.”84 
 
94. Under these circumstances, one would expect the GOK to be more circumspect in its implementation of its Hynix bailout policy.  Nonetheless, there was evidence of the GOK’s entrustment/direction, albeit evidence of a more circumstantial nature.  
95. In July 2001, DRAMs prices fell drastically a nd Hynix still faced a liquidity crisis.  The GOK 
reiterated its commitment to keeping Hynix aflo at, and, during the planning of the October 
restructuring, continued its practice of public co mmentary aimed at ensuring the banks’ cooperation. 
 96. For instance, on 3 August 2001, the GOK gave a clear indication to Hynix’s creditors that 
they had no choice but to capitulate to GOK de mands when Deputy Prime Minister Jin Nyum 
reaffirmed the GOK’s strong and unwavering commitmen t to Hynix:  “In the event that the creditor 
group is unable to resolve the Hynix Semiconducto r issue, the government will come forward and 
make a quick decision ... .  If Hynix says it needs an additional 1 trillion won, and if the creditor group cannot make a decision whether or not to provide additional support, the financial authorities should 
decide.  We cannot simply leave it blindly to the creditor group.”
85  Apparently realizing his excessive 
candor, Jin quickly added: “This should not be viewed  as if the government is running the financial 
sector.  It is not.”86 
 97. There is no doubt that Minister Jin’s remarks impacted the actions of the banks.  The article 
states:  “Accordingly, Korea Exchange Bank, th e main creditor bank, and Salomon Smith Barney 
(SSB), the financial manager, are talking about  possible additional support from the creditor group, 
including debt restructuring.”
87  A separate report stated: “Jin also urged the creditor financial 
institutions of Hynix Semiconductors to speedily resolv e the troubled firm’s liquidity crisis by forcing 
more drastic restructuring of the memory ch ip maker in return for financial support.”88 
 98. In connection with these statements, in Augus t 2001, one report noted that “[w]henever the 
creditor group attempts to shy away from providing support, the government has talked to them, or 
even twisted their arms, to bring support for Hynix”.
89  It also observed: “For years Hynix has been 
                                                      
83 An Expensive Decision , ASIAMONEY  (September 2001) (copy attached as  Exhibit US-142). 
84 Hynix Practically in Default, What’s the Problem ?, C HOSUN DAILY  (29 August 2001) (translated 
version) (Exhibit US-25). 
85 Deputy Prime Minister Chin, ‘Government will Take Actions to Turn Around Hynix’ ,  K OREA 
ECONOMIC DAILY  (4 August 2001) (translated version) (copy attached as Exhibit US-143). 
86 Deputy Prime Minister Chin, ‘Government will Take Actions to Turn Around Hynix’ ,  K OREA 
ECONOMIC DAILY  (4 August 2001) (translated version) (Exhibit US-143); see also Jin Vows to Eliminate 
Uncertainties Thru Furthe ring Restructuring Efforts , KOREA TIMES  (4 August 2001) (copy attached as Exhibit 
US-144).  The New York Times, reporting on former Deputy Prime Minister and Minster of Finance Jin 
Nyum’s views in this regard, stated: “His preference for a hands-off stance by the government did not 
necessarily extend to some of the giant corporate invalid s that the country is trying to deal with, like Daewoo 
Motor and Hynix Semiconductor.”  Korean Official Defends Seoul’s Efforts on Economy , THE NEW YORK 
TIMES , (23 February 2002) (copy attached as  Exhibit US-145). 
87 Deputy Prime Minister Chin, ‘Government will Take Actions to Turn Around Hynix’ ,  K OREA 
ECONOMIC DAILY  (4 August 2001) (translated version) (Exhibit US-143). 
88 Jin Vows to Eliminate Uncertainties Thru Furthering Restructuring Efforts , K OREA TIMES  
(4 August 2001) (Exhibit US-144). 
89 Hynix, Will it Really Survive? , NEWSMAKER , NO. 439  (30 August 2001) (copy attached as Exhibit 
US-141). WT/DS296/R 
Page E-100  
 
 considered a “second Daewoo” by various market voi ces.  The government and the creditor group are 
scrambling to turn it around and keep it alive, but th e market is not convinced of the possibility of its 
success ... .  The government and the creditor group have absolutely decided to keep it alive.”
90  
 99. Another August report stated that “[A]s for the government, it is difficult for them to give up 
on Hynix because the ruin of Hynix would symbo lize the demise of the DJ [Kim Dae Jung] 
Administration’s “Big Deal” policy (the artificial merger of Hyundai Electronics and LG Semiconductor.)”
91  A short time later, Deputy Prime Minister Jin publicly criticized delays by Hynix 
creditor banks in putting together the upcoming ba ilout as further jeopardizing Hynix’s financial 
situation.92 
 
100. In September 2001, Keun-Yung Lee, Chairman  of the Financial Supervisory Commission 
stated in a news conference:  “Of three problemat ic companies, the government will determine how to 
handle Daewoo Motor and Hynix Semiconducto r Inc. by the end of September.”93  Several days 
before a meeting of Hynix’s creditors in mid-Septem ber 2001, he said that when they met, they would 
strike a compromise on the bailout plan for Hynix, and disclosed knowingly that:  “All the related 
parties are committed to resolving the Hynix matter as soon as possible.”94  
 101. In addition, in connection with the Oc tober bailout, the GOK rewarded certain Hynix 
creditors by allowing them to utilize preferential ta x provisions available only to lenders of companies 
involved in formal court reorgani zation.  Under Korean law, banks  could qualify for tax deductions 
for bad debt when the debtor was in a court-supe rvised reorganization, composition, or mandatory 
composition under Article 44 of the Special Law on Tax Reduction and Exemption.  Although Hynix 
was not in bankruptcy status under Article 44, the Korean Office of Tax Administration issued a 
special exception authorizing loans of 1.5 to 1.6 tr illion won held by five Hynix creditor banks to be 
considered as tax deductible expenses.
95  Absent this favour from the Office of Tax Administration, 
those creditors would not have qualified for th is preferential and significant tax treatment.96  
 102. The DOC properly considered this evidence in the context of Hynix’s utterly dismal financial 
condition at the time of the October bailout.  Over the course of the summer of 2001, Hynix’s 
financial situation had deteriorated to near inso lvency.  Standard and Poor’s had lowered Hynix’s 
credit rating to selective default
97, and Hynix had overdue payments of US$202.1 million owed to its 
US subsidiary.98  As Standard and Poor’s noted in an 16 August 2001 revision to Hynix’s rating, “the 
outlook revision reflects the worsening prospects for Hynix’s profitability and cash flow protection 
measures amid a severe market downturn in the co mpany’s mainstay dynamic random access memory 
(DRAM) business”.  The notification went on to  note that “in the second quarter of 2001, the 
                                                      
90 Hynix, Will it Really Survive? , NEWSMAKER , NO. 439  (30 August 2001) (Exhibit US-141). 
91 Hynix Practically in Default, What’s the Problem ?, C HOSUN DAILY  (29 August 2001) (translated 
version) (Exhibit US-25). 
92 See Banks Open Talks on Hynix Lifeline , BBC  NEWS (September 3, 2001) (copy attached as Exhibit 
US-147). 
93 FSC Chairman Promises Sale of Daewoo Motor This Month , KOREA HERALD  (10 September 2001) 
(copy attached as Exhibit US-148). 
94 FSC Chairman Promises Sale of Daewoo Motor This Month , KOREA HERALD  (10 September 2001) 
(Exhibit US-148). 
95 The Office of National Tax Administration’s Decree to Recognize the Creditors’  Write-Off of the 
Hynix Loan as a Tax Deductible Expense … May Give Rise to an Issue of Preferential Treatment , KOREA 
ECONOMIC DAILY  (6 November 2001) (translated version) (copy attached as Exhibit US-149). 
96 The Office of National Tax Administration’s Decree to Recognize the Creditors’  Write-Off of the 
Hynix Loan as a Tax Deductible Expense … May Give Rise to an Issue of Preferential Treatment , KOREA 
ECONOMIC DAILY  (6 November 2001) (translated version) (Exhibit US-149). 
97 See Standard and Poor’s Press Release  (5 October 2001) (copy attached as Exhibit US-150). 
98 See GDS Offering Memorandum  at 57 (Exhibit US-151).  WT/DS296/R 
 Page E-101 
 
 
 company posted an operating loss of Korean won (W) 266 billion, compared with an operating profit 
of W69 billion in the first quarter of the year.  EB ITDA net interest coverage for the second quarter of 
the year is estimated at 1.0-1.5 times, an extremel y low level”.  The notification also reflected the 
commonly held belief that Hynix would require another bailout, noting “current harsh market 
conditions are once again tightening Hynix’s liquidity  position, making it difficult for the company to 
undertake enough capital spending to improve, or even maintain, its technological and cost 
competitiveness.  The company is likely to require additional financial support from its creditors to 
maintain its competitive position in the global DRAM market while meeting its debt obligations in 
2001 and 2002”.99 
 
103. Clearly, the May bailout had simply not been enough to put Hynix back on its feet, and the 
GOK and the banks it owned and contro lled would once again have to step  in to provide another, even 
larger, bailout in October.  Yet, notwithstanding this, none of Hynix’s cred itors produced a legitimate 
commercial risk analysis.  Hynix’s dismal financia l condition and the absence of such analyses served 
to reinforce the DOC’s conclusion that Hyni x was being kept alive by virtue of GOK 
entrustment/direction of Hynix’s creditors. 
 104. Finally, the United States believes that it is not possible to view the October bailout in isolation.  In this regard, Korea has attempted to characterize the October bailout as disconnected 
from the events of November 2000, when the Economic Ministers first met to launch the Hynix bailout.  This is simply untrue.  A brief chronology  of events should suffice to demonstrate the link 
between the GOK’s actions in Novemb er 2000 and the October 2001 bailout: 
  November 2000 –  The GOK’s top Ministry officials meet and order the KEB and the 
KEIC to execute their plan for Hynix “perfectly,”  and the FSC meets to grant the credit limit waiver.  
 
 December 2000  – The GOK Ministers plan the KDB Programme and decide to 
designate the lions share of it for Hynix and other Hyundai companies; Ministers meet with Citibank officials to plan the 800 billion won syndicated loan; and the KEIC guarantees the loans made 
in connection with the syndicated loan. 
 
 January 2001  – Economic Ministers meet again to hammer out the D/A financing 
plan for Hynix, forcing cooperation from the KEB and KEIC. 
  February 2001  – Economic Ministers meet again to follow up on the D/A financing, 
and the FSC calls Shinhan and KorAm to a mandatory meeting to 
request their “cooperation”. 
  March 2001  – The FSC orders all Hynix creditors to a meeting at FSC offices to 
secure their commitments on the D/A financing “in the form of a covenant” and requires the formation of the Hynix Creditor Council. 
 
 April 2001  – The Economic Ministers meet yet again to follow up on the D/A 
financing, and the GOK meets again with Citibank. 
  May 2001  – The May restructuring o ccurs and a KEB official echoes the GOK’s 
continuing support for Hynix on the basis of the economic and 
strategic consequences of its surviv al, stating “[i]f Hynix is placed 
under receivership, [the ROK’s] exports will be severely battered 
                                                     
 
99 See Standard and Poor’s Press Release  (5 October 2001) (Exhibit US-150). WT/DS296/R 
Page E-102  
 
 [because] Hynix accounts for 4 per ce nt of exports.  As far as I know, 
the government is now working out a series of powerful measures to ensure the survival of [Hynix].”
100 
  June 2001  – The GOK threatens to  sanction KorAm Bank – a bank without 
substantial GOK ownership – and Ko rAm then reverses its decision 
not to participate in the Hynix June 2001 convertible bond offering (part of the May restructuring programme).  
  August 2001  – Deputy Prime Minister Jin Nyum announces in a breakfast meeting 
with businessmen at the Korea Press Ce nter that, “[i]n the event that 
the [Hynix] creditor group is unable to resolve the Hynix Semiconductor issue, the government will come forward to make a quick decision.”   He then stat ed, “[i]f Hynix says it needs an 
additional 1 trillion won, and if the creditor group cannot make a 
decision whether or not to provide additional support, the financial 
authorities [i.e. the FSS, FSC and MOFE] should decide.  We cannot 
simply leave it blindly to the creditor group.” He added:  “This should not be viewed as if the government is running the financial sector.  It is not.”
101  
 
 September 2001  – The Chairman of the FSC states in a news conference:  “Of three 
problematic companies, the government will determine how to handle Daewoo Motor and Hynix Semiconductor Inc. by the end of September.”
102   In that same month, in a prospectus filed with the US 
Securities and Exchange Commission, Kookmin admits that the GOK 
can direct its lending decisions.  
  October 2001  – The GOK leads the Oc tober 2001 bailout, engineering the 
restructuring under the CRPA.   
 105. As this brief chronology shows, from the pe riod November 2000 to October 2001, the record 
before the DOC contained evidence of GOK activity in  virtually every month.  Thus, the notion that 
the October bailout was somehow disconnected from the other major events that made up the overall 
Hynix bailout simply cannot be supported on the basis of the evidence before the DOC.  To the 
contrary, the GOK never wavered in its Hynix policy.  The October bailout was merely the last in a 
series of interrelated, overlapping actions undertak en by the GOK to assist Hynix during the DOC’s 
period of investigation. 
 
7. What was the evidence of entrustment / direction in respect of Pusan? 
 
106. Regarding evidence pertaining specifically to  Pusan, Pusan, along with other Hynix creditors, 
reportedly met on multiple occasions directly with GOK officials to discuss assisting Hynix.
103  Pusan 
                                                      
100 Creditors Deny Hynix Receivership Rumors , KOREA TIMES  (4 May 2001) (Exhibit US-26). 
101 Deputy Prime Minister Chin, “Government will Take Actions to Turn Around Hynix,”  KOREA 
ECONOMIC DAILY  (4 August 2001) (translated version) (Exhibit US-118). 
102 FSC Chairman Promises Sale of Daewoo Motor This Month , KOREA HERALD  (10 September 2001) 
(Exhibit US-148). 
103 Meetings on 12/20/00:  Self-Rescue Before Asking for Help , THE KOREA ECONOMIC DAILY  
(11 January 2001) (translated version) (Exhibit US-81); 1/9/01: Government and Creditor Group ‘Bewildered’ 
by Hyundai Electronics ‘Dogged Clamoring’ , KOOKMIN DAILY  (January 11, 2001) (translated version) (Exhibit 
US-82); Self-Rescue Before Asking for Help , THE KOREA ECONOMIC DAILY  (11 January 2001) (translated  WT/DS296/R 
 Page E-103 
 
 
 was subject to the KEB’s authority as Hynix’s lead bank, and regularly attended KEB-convened 
Hynix creditor meetings.104  In addition, the GOK waived the st atutory credit limits so that Pusan 
could participate in the KDB bond programme105, and the GOK compelled its participation in Hynix’s 
bailout through the CRPA.106  Furthermore, like the other creditors , the GOK forced it to participate in 
the 10 March 2001 meeting between Hynix’s creditors and the FSC.107  Like the other creditors, the 
GOK also blocked it from finding Hynix in default.108   
 107. Other relevant evidence is the fact that th e GOK’s Hynix bailout policy consisted of a single 
programme, and the evidence of entrustment/directi on that does not pertain specifically to Pusan.  
Finally, there is the context in which the DOC had to consider this evidence, which included the facts 
relating to Hynix’s dismal financial situation and th e fact that Pusan offered no legitimate credit risk 
analysis for assisting Hynix.  These factors are discu ssed in more detail in the response to Question 3, 
above.  
8. Regarding Figure US-4, the different proporti ons of council vote held by group A, B and 
C creditors in respect of the October 2001 restructur ing do not add up to 100%.  Please explain. 
 
108. The percentages set forth in Figure US-4 ar e approximate, because the precise percentages are 
business proprietary.  Thus, the exact percentages ha ve been ranged, and the discrepancy noted by the 
Panel reflects this ranging.    
109. According to Figure US-4, Group A creditors  accounted for over 15% of the Council vote, 
Group B creditors accounted for over 50% of the Council vote, and Group C creditors accounted for 
over 18% of the Council vote for the October 2001 restructuring.  The remaining portion of the 
Council vote for the October 2001 restructuring – approximately 17% – was held by over 90 separate entities, such as investment trus t companies, leasing, financing companies, and other financial 
institutions.  Many of these other financial entities were wholly owned subsidiaries of, or majority 
owned by, one of Hynix’s Group A or Group B creditors.  
                                                                                                                                                                    
 
version) (Exhibit US-81); 3/10/01:  The Grace Period Decision for Three Affiliates of Hyundai Group – Stories 
of Inside and Outside , KOREAN SEOUL ECONOMIC DAILY  (11 March 2001) (translated version) (Exhibit US-79); 
Grace Period Discussion on Hyundai Electronics , M AEIL ECONOMIC DAILY  (March 10, 2001) (translated 
version)  (copy attached as  Exhibit US-136); The Creditor Group Finalizes Financing Package for 3 Hyundai 
Affiliates , NAEOE ECONOMIC DAILY  (10 March 2001) (translated version) (Exhibit US-78); GOK Verification 
Report at 18-19 (Exhibit US-12). 
104  Hynix Verification Report at 13, 14, 16 (Exhibit US-43). 
105  Issues and Decision Memorandum  at 51-52 (Exhibit GOK-5); GOK Verification Report at 16-17 
(KDB Fast Track Programme blanket waiver) (Exhibit US-12). 
106  CRPA, Art. 2 (Exhibit US-51). 
107  3/10/01 Meeting with FSC: Bank Should be Allowed to Make Decision on the Matter of Support for 
Specific Companies , M AEIL ECONOMIC DAILY  (March 11, 2001) (copy attached as Exhibit US-146); Grace 
Period Discussion on Hyundai Electronics , M AEIL ECONOMIC DAILY  (10 March 2001) (translated version)  
(Exhibit US-136);  Hynix, Will it Really Survive? , NEWSMAKER , No. 439 (August 30, 2001)  (Exhibit US-141); 
Never-ending Aid for Hyundai , KOREA TIMES  (12 March 2001) (Exhibit US-80); Seoul’s Continuing Support 
Spawns Fresh Debate Over HEI’s Viability , KOREA HERALD  (14 March 2001) (copy attached as Exhibit US-
157); The Creditor Group Finalizes Financing Package for 3 Hyundai Affiliates , NAEOE ECONOMIC DAILY  (10 
March 2001) (translated version) (Exhibit US-78);  The Grace Period Decision for Three Affiliates of Hyundai 
Group – Stories of Inside and Outside , KOREAN SEOUL ECONOMIC DAILY  (11 March 2001) (translated version) 
(Exhibit US-79); GOK Verification Re port at 18-19 (Exhibit US-12). 
108 GOK Verification Report at 19 (Exhibit US-12). WT/DS296/R 
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 9. What was the basis for the DOC’s findin g that Citibank was not entrusted/directed? 
 
110. During the investigation, Micron argued in  its petition that DOC should treat lending from 
Citibank as having been “entrust ed and directed” by the GOK.
109  Micron argued that, in light of the 
long-standing relationship between Citibank and th e Government of Korea reaching back to the 
1960s, the evidence suggested that “Citibank was aske d, if not directed, by the GOK to provide the 
loan to Hynix on concessionary terms.  Such GOK encouragement is tantamount to government 
directed credit of a debt-restructuring pack age that was achieved on non-commercial terms.”110   
 111. The DOC, however, determined that there w as no government direction or entrustment of 
Citibank.  The DOC’s determination was based prin cipally on its findings that Korean branches of 
foreign banks were not subject to GOK direction, a nd that loans by Citibank in particular were not 
directed by GOK.  As stated in the DOC’s Final Determination : 
 
[W]e note that, in past cases, we have found that loans from ROK branches of foreign 
banks are not subject to the direction of th e GOK....  As part of this finding, we found 
in past cases that loans from Citibank we re not directed by the GOK....  Based on 
these past findings, we have determined that the lending and credit practices of Citibank are not directed by the GOK.  However, as discussed in Comments 1 and 5, below, while we find that Citibank’s loan s from prior periods are acceptable for use 
as a benchmark, we find that Citibank’s loan s relating to the Hynix restructuring are 
not appropriate for use as benchmarks.
111 
112. One of the past cases cite d by the DOC, in which it addressed whether foreign banks were 
subject to government direction is Stainless Steel Plate in Coils From the Republic of Korea .  In that 
case, the DOC explained the basis for its finding of no government control or direction over foreign banks (and Korean branches of foreign banks) as follows: 
 
Petitioners’ contention that record evidence establishes that the Korean branches of 
foreign banks were subject to the same GO K controls and direction that applied to 
domestic commercial banks is not  supported by the record.  The record evidence cited 
by petitioners does not amount to GOK control and direction of these institutions’ operations and lending practices. 
First, the 1996 and 1998 OECD reports do not support petitioners’ ar guments.   While 
the 1996 OECD report discusses funding levels by foreign banks in Korea, nowhere does that report state that these banks were subject to the GOK’s control or direction.  Moreover, the 1998 OECD Report, in discu ssing the weakness of the Korean banking 
system, and in attributing responsibility for that weakness partly to the government’s 
direct and indirect intervention in the oper ations of commercial banks, mentions only 
domestic commercial banks, not foreign banks....   
Petitioner’s reliance on the reports issued  by the Presidential Commission for 
Financial Reform, quoted by the Depart ment in the Credit Memo, is equally 
                                                     
 
109 Countervailing Duty Petition  (1 November 2002) at 57 (copy attached as Exhibit US-135) 
110 Micron’s 14 March 2003 Comments to the US Department of Commerce  at 77 (copy attached as 
Exhibit US-152); see also Micron Case Brief  (22 May 2003), at 73 n.213 (“Citibank’s close and long-standing 
relationship with the GOK suggests th at Hynix’s Citibank loans were eith er directed by the GOK or made by 
Citibank to curry favour with the GOK) (copy attached as Exhibit US-153); and Financial Experts Report at 8 
(“As for the participation of foreign banks, such as Citibank, the expert stated that these banks understand the political system in Korea and work it in their favour.”) (Exhibit GOK-30). 
111 Issues and Decision Memorandum  at 17 (Exhibit GOK-5).    WT/DS296/R 
 Page E-105 
 
 
 misplaced.  The section of the Presidential Report titled “Deregulation of Access to 
Foreign Capital Markets,” cited by petitione rs refers to regulations governing access 
to foreign capital markets, not regulations  governing foreign currency-denominated 
loans from domestic branches of foreign bank s in Korea.[]    Regulations governing 
access to foreign capital markets are quite  separate from those governing domestic 
branches of foreign banks in Korea....  This  has nothing to do with any GOK controls 
over the operations of domestic br anches of foreign banks....   
...  Their [foreign banks’] source of funds was from their head offices and, as 
respondents correctly illustrate, the appointment of their senior officials was not subject to influence by the GOK.  Petitione rs proffer no evidence that foreign banks 
in Korea were “inescapably influenced by  the controls on every other sector of the 
banking industry.”  Rather, they specu late that these banks would be no less 
influenced than their Korean counterparts by the lead of the Korean Development 
Bank and the Bank of Korea to extend credit to certain government-favoured projects.  
This is not a conclusion reached by any of the commercial bankers at verification, and 
petitioners do not point to any evidence that would support this contention.
112 
113. The DOC’s conclusions regarding the lack of entrustment and direction of Korean branches 
of foreign banks applied only to that category of banks, and not to Korean banks that may have had 
some level of foreign ownership.  Such banks we re Korean commercial banks, subject to all Korean 
banking laws, regulations and oversight.  Moreover, most of these Korean commercial banks, 
including Shinhan, KorAm, Kookmin, Hana, and H& CB, had some level of government ownership, 
even when there was also some foreign ownershi p.  Moreover, for each of these banks, the GOK was 
the single largest shareholder based on both common and preferred shares. These banks were thus a distinct category from wholly foreign banks that operated branches within Korea.  
 
10. In its Second Written Submission to the Pa nel, the US refers to the Kookmin Prospectus 
in a section entitled “GOK Ownership and Contro l of Hynix’s creditors”.  Does the US argue 
that GOK’s 15.1% shareholding result ed in GOK control over Kookmin? 
 
114. Although government ownership is  a relevant factor to be considered in an analysis of 
entrustment or direction, the United States is not arguing that the GOK’s ownership interest in 
Kookmin per se  allowed it to control the bank.  In the section of our submission referred to in the 
Panel’s question, the United States was refuting Korea’s claim that the GOK was legally precluded 
from intervening in the banking sector.
113  In doing so, we did not limit our analysis to government 
control by virtue of ownership.  Rather, we discussed the issue of the GOK’s legal rights as a 
shareholder, plus the evidence related to Kookmin.  We sp ecifically cited Kookmin’s SEC prospectus 
as evidence of government control or influence over banking decisions, even in a situation where the 
GOK had only a 10 per cent voting interest.  The key point made by the Kookmin prospectus is that it 
represents a formal acknowledgment by the bank that, at the behest of the GOK, it made loans to troubled high-technology borrowers that it would not  otherwise make.  Moreover, Kookmin’s annual 
report expressly listed Hynix, a high-technology compan y, as its top troubled borrower.  In addition, 
Kookmin’s rationale for assisting Hynix echoed the government’s objectives referenced in Kookmin’s 
                                                     
 
112 Stainless Steel Plate in Coils From the Republic of Korea, Final Negative Countervailing Duty 
Determination ,  64 Fed. Reg. 15530, 15542 (31 March 1999) (copy attached as Exhibit US-154).  The DOC’s 
analysis of direction of credit in the Stainless Steel Plate in Coils From the Republic of Korea  investigation 
forms part of the record in the instant investigation.  See Direction of Credit Memorandum , Attachment 4 at 17 
(Exhibit US-8). 
113 The United States recognizes that this may not ha ve been clear from the heading of the section. WT/DS296/R 
Page E-106  
 
 SEC prospectus.
114  The DOC reasonably found this to be compelling evidence of government 
entrustment or direction of Hynix’s creditors, whic h, when considered in light of all the other 
evidence, provided a sound basis for its determin ation that the Hynix bailout was a government 
financial contribution.  11. In reply to question 1 from the Panel, the US stated that “the constituent parts of the 
subsidy programme ... included the 800 billion wo n syndicated loan, the KDB Fast Track bond 
programme, the May 2001 restructuring package , the October 2001 restructuring package, and 
the benefits conferred by these and other financia l contributions, such as D/A loans, made as 
part of the Hynix bailout.”  Please specify an exhaustive list of the constituent parts of the 
alleged subsidy programme.  
115. The constituent parts of the subsidy programme  were the 800 billion won syndicated loan, the 
KDB Fast Track bond programme, the May 2001 restructuring package, and the October 2001 restructuring package.  Benefits conferred under the subsidy programme during the period of 
investigation were attributable to all types of ne w and restructured loans (including bonds), as well as 
debt forgiveness, debt-to-equity swap, and retroactiv e interest rate reduction prior to the swap.  The 
following is a list of the specific types of fina ncial instruments that the DOC countervailed:  
syndicated loan; KDB bonds; convertible bonds; ne w loan (in lieu of convertible bonds) from the 
Industrial Bank of Korea, a government entity; fore ign currency loans (new and/or restructured);  
KDB Industry Facility loans (new and/or restructured);  short-term loans (new and/or restructured);  
usance loans (new and/or restructured); overdraft lo ans (new and/or restructured); general loans (new 
and/or restructured);  D/A loans (new and/or re structured);  five-year, zero-interest debentures; 
retroactive interest rate reduction prior to debt-t o-equity swap; debt held by investment trust 
companies; operating and capital leases;  vari ous other loans (new and/or restructured).
115  
 12. Please comment on para. 182 of Korea’s Second Written Submission.  In particular, does the US accept that the Hynix-only impo rt figures are a reasonable proxy for the total 
import figures? 
 
116. No, the United States does not accept that the Hynix-only import figures are a reasonable proxy for the total import figures.  The United St ates has discussed in detail subject import volume 
and the increasing trends in subject import vol ume both absolutely and relative to domestic 
production and consumption during the period of investigation.
116  Notwithstanding the constraints 
imposed on the United States by virtue of the conf identiality of the underlying data, the United States 
provided as much information as possible within th e confines of its obligations to protect the 
confidentiality of the underlying information.  We refer the Panel to prior US submissions for an 
explanation of why the Hynix-only import figures ar e an unacceptable proxy, an explanation of why 
Korea’s compilation of Hynix’s data is flawed co mpared to the US compilation in Confidential US 
Figure 1, and some observations based on the Hynix-only data.117 
 117. Indeed, given Korea’s failure to challenge the ITC’s treatment of this data as confidential and 
its failure to challenge as inadequate the ITC’s su mmary of the confidential information in the public 
version of its report, Korea’s continuing attempt to assign values to the confidential data is 
unwarranted.  Under the terms of Article 12 of the SCM Agreement, the United States is obligated to 
protect the confidentiality of data submitted during the ITC’s investigations.  However, all 
                                                     
 
114  See US Second Submission, para. 18 , and the materials cited therein; see also  Issues and Decision 
Memorandum  at 59 (Exhibit GOK-5). 
115  See Hynix 2001 Audited Financial Statements  at 38-41 (Exhibit US-125), and October 
Restructuring Package (Exhibit GOK-23(e)). 
116  See US Answers to Panel Questions (A nswers to Questions 15 and 18). 
117  US Second Submission, paras. 114 to 118; and US Second Oral Statement, paras. 34-36.  WT/DS296/R 
 Page E-107 
 
 
 confidential information collected by, submitted to, and relied upon by the ITC was made available to 
counsel for interested parties, including Hynix’ s counsel, under the terms of an administrative 
protective order.  
13. Please comment on Korea’s argument regarding the difference between the US 
submission and the ITC report regarding the extent  of the “portion” speciality products (para. 
211 of Korea’s Second Written Submission).  Pl ease comment on Korea’s argument regarding 
the ITC’s use of “value estimates” in respect of th ose speciality products (para. 212 of Korea’s 
Second Written Submission). 
 118. In its written submissions, the United States has characterized the amount of non-subject 
imports consisting of Rambus a nd specialty DRAM products as “significant”.  This was the same 
term that Hynix used during the ITC’s investigation.  119. In a postconference brief that Hynix and Samsung submitted jointly during the preliminary 
phase of the ITC’s investigation, they emphasized that Samsung, whose US shipments of DRAM 
products were an important portion of US shipme nts of non-subject imports during the period of 
investigation, offered products that “differ[ed] substantially  from and were not interchangeable with 
products made by US producers.”
118  Thus, by Hynix’s own admission, Samsung’s imports were less 
likely to compete with US-produced products than Hynix’s imports.   
 
120. Hynix and Samsung further asserted that “[n] o domestic producer makes Rambus chips, to 
the best of our knowledge, and Micron’s witness Mr . Sadler acknowledged ... that, ‘there’s only one 
significant supplier of RAM Bus {sic} DRAM; that would be Samsung from Korea.’”119  They noted 
“the incontrovertible fact is that Rambus now accounts for a significant  percentage of Samsung’s US 
sales, ***, as shown in SSI’s questionnaire response”.120  Hynix and Samsung also emphasized that 
“irrefutable evidence exists that a very significant  proportion of Samsung’s US sales had no 
competition from” Micron, Infineon, and Hynix.121   
 121. As another example, they noted that another “significant market segment” where Samsung had not materially injured the domestic industry was in double data rate (“DDR”) DRAM products, 
which are technically not specialized products, but leading edge SDRAM products.  They pointed to 
evidence that Samsung was clearly out in front of  other suppliers in terms of DDR penetration.
122  For 
all of these reasons, they argued, imports of Sa msung’s Rambus, specialty, and leading edge DRAM 
products could not have materia lly injured the domestic industry.123 
 122. There was also extensive testimony by witnesses at the Commission’s hearing about the 
extent to which non-subject imports consiste d of Rambus and specialty DRAM products.
124 
 
                                                      
118  See, e.g. , 27 November 2002 Postconference Brief of Hynix and Samsung at 52 (Exhibit US-100) 
(emphasis added). 
119  See, e.g. , 27 November 2002 Postconference Brief of Hynix and Samsung at 50-56 (Exhibit US-
100). 
120 See, e.g. , 27 November 2002 Postconference Brief of Hynix and Samsung at 50 n.69 (Exhibit US-
100) (emphasis added). 
121 See, e.g. , 27 November 2002 Postconference Brief of  Hynix and Samsung at 53 (Exhibit US-100) 
(emphasis added). 
122 See, e.g. , 27 November 2002 Postconference Brief of Hynix and Samsung at 55-56 (Exhibit US-
100). 
123 See, e.g. , 27 November 2002 Postconference Brief of Hynix and Samsung at 50-56 (Exhibit US-
100). 
124 See, e.g. , Hearing Transcript at 168-175, 258-260 (Exhibit US-94). WT/DS296/R 
Page E-108  
 
 123. The ITC confirmed the validity of these argume nts through its data collection efforts.  The 
ITC collected information from importers on the pe rcentage of imported products and US shipments 
of DRAM products in 2001 and 2002 that were  “standard” DRAM products, Rambus DRAM 
products, and other “specialty” DRAM products.  Impor ters were asked to differentiate the reported 
information for Rambus DRAM products containing dice fabricated in Korea by “Samsung” and the 
portion containing dice fabricated in Korea by “Other s” and to differentiate the reported information 
for specialty DRAM products containing dice fabr icated in Korea by “Samsung” and the portion 
containing dice fabricated in Korea by “Others”.
125  The responses indicated that a significant 
percentage of non-subject DRAM products were no n-standard DRAM products, such as Rambus or 
specialty DRAM products.126  Korea does not challenge the ITC’s treatment of this information as 
confidential under either Article 12.4 or Article 22.5 of the SCM Agreement.  Because the Panel 
requested a non-confidential summary of the underl ying confidential percentage, we confirmed in 
response to question 17 of the Panel’s Questions Following the First Substantive Panel Meeting that 
of all US shipments of non-subject imports in 2001, approximately one-fifth were Rambus or 
specialty DRAM products.  The corresponding percen tage in 2002 was somewhat higher than in 
2001.   
 124. The information collected by the ITC concerni ng the share of imports that were “standard”, 
“specialty”, “Rambus”, and “other” DRAM pr oducts was based on the value share of the 
questionnaire respondents’ total US shipments.  Th e ITC provided draft questionnaires to the parties 
during the final phase of its investigation in which it proposed collecting this data on a value-basis.  In 
Hynix’s comments on the questionnaire responses, Hyni x never asked the ITC to collect the data on a 
quantity basis as well.  125. In its answer to question 16 of the Panel’s Questions Following the First Substantive Panel 
meeting, Korea asserts based on “public evidence” that Rambus DRAM products accounted for less 
than 10 per cent of total DRAM sales by Samsung, wh ich Korea characterizes as the major supplier of 
Rambus DRAMs.  There are a number of problems with this assertion.  First, Korea’s estimate is based solely on Rambus DRAMs and does not even purport to consider specialty DRAM products.  
Second, the information cited by Korea is b ased on data for the global market gathered by 
Gartner/Dataquest, not the US market, whereas the da ta collected by the ITC was tailored to the US 
market.  Finally, the percentage submitted by Korea conflicts with the percentage that Korea offered 
to the Panel during the First Substantive Panel Meeting.   It is the recollection of the United States that 
in response to a question from the Panel, Korea’ s counsel estimated that Rambus and specialty 
DRAM products accounted for approximately 20 per cent of all non-subject import shipments to the 
US market.  When the United States enquired as to the source of this estimate in the ITC record, 
Korea’s counsel responded that he had asked Hyni x the previous night and that 20 per cent was 
Hynix’s estimate based on its knowledge of the market. 
 
14. In response to Question 23 from the Pane l, the US asserts that although the ITC 
determined that non-subject imports were responsi ble for “the bulk of the market share lost by 
domestic producers during the period of investigat ion,” it identified two reasons why it did not 
find the volume of non-subject imports as signif icant as otherwise would be suggested.  First, 
the ITC referred to the composition of non-subject  imports.  Second, the ITC referred to the 
price effects of non-subject imports.  How do th ese two factors qualify the loss of market share?  
Wouldn’t any impact resulting from the composit ion and price effects of non-subject imports 
already be reflected in the market share data?  For example, wouldn’t the fact that non-subject 
imports include speciality products mean that they would have taken less market share from 
domestic producers, and that this consideration  is therefore already reflected in the market 
share data? 
                                                     
 
125 See, e.g. , Importer’s Questionnaire at question II-10(a) (Exhibit GOK-44(b)). 
126 The exact percentage is confidential.    WT/DS296/R 
 Page E-109 
 
 
  
126. The scope of the DRAMs investigation included standard DRAM products as well as specialty and Rambus DRAM products.
127  As we confirmed during the Second Substantive Panel 
meeting, no party ever argued that Rambus or sp ecialty DRAM products should have been excluded 
from the scope of the investigation, and no part y ever argued that Rambus or specialty DRAM 
products were a separate domestic like product(s).  Hynix affirmatively argued that there was a single 
domestic like product consisting of DRAM produc ts that corresponded to the scope of the 
investigation.128 
 (1) As a result, the figures for apparent domestic consumption and the market share data 
discussed in the ITC’s final determ ination and, for example, in Table C-1 of the accompanying data 
tabulations includes Rambus and specialty DRAM  products as well as standard DRAM products. 
 (2) Because domestic producers’ and Hynix’s su bject DRAM production facilities in Korea did 
not produce Rambus or specialty DRAM products,  their market shares reflected exclusively 
shipments of their standard products.  The mark et share for non-subject imports, however, includes 
US shipments of standard, Rambus, and speci alty DRAM products from non-subject sources. 
 (3) Thus, the relative losses in market share of th e domestic industry vis à vis subsidized subject 
imports from Korea (as manifested for example in an increasing ratio of subsidized subject imports to domestic industry production) cannot be due to specialty products. 
 
(4) Korea has provided data to this Panel i ndicating that demand for Rambus DRAMs in 
particular peaked during the period of investigation.
129  This period also corresponded with an 
increase in the volume and market share of non-subject imports.  
(5) In addition, we wish to reiterate that the pric ing data collected by the ITC pertained solely to 
“standard” DRAM products.  No pricing data was co llected on Rambus or specialty DRAM products.  
With respect to the standard DRAM products, non-subject import s were underselling the domestic 
industry at lower margins and at lower frequenc ies than subsidized subject imports.  Even a 
disaggregated analysis of the pricing data by br and name and by source revealed that subsidized 
subject imports produced by Hynix in Korea were th e lowest priced source more often than any other 
source, including more often than any of the suppliers of non-subject imports to the US market. 
 (6) With respect to price effects, the ITC did not  state that the market share gains of non-subject 
imports were qualified by the prices of non-subject imports, but that the “impact” of non-subject imports on the domestic industry was qualified by thei r lesser price effects.  As the ITC explained, 
non-subject imports undercut the dom estic industry at a lower freque ncy than subject imports did, 
providing some support for finding that non-subject im ports had “less impact” than their absolute and 
relative volumes might otherwise indicate.
130  The ITC further emphasized that the “primary negative 
impact” on the domestic industry was due to lower prices and, on this point, subject imports were large enough and priced low enough to have a sign ificant impact “regardless of the adverse effects 
caused by non-subject imports”.
131  Thus, the ITC qualified the “impact” of non-subject imports 
which, despite their larger volume, had less of a price effect on the industry and caused less of the 
injury suffered by the industry (lost profits in particular) due to import undercutting and price 
depression. 
                                                      
127 See, e.g. , USITC Pub. 3616 at 4 (Exhibit GOK-10). 
128 See, e.g. , USITC Pub. 3616 at 5 (Exhibit GOK-10). 
129 See, e.g. , Korea’s Second Written Submission para. 21 3; Korea’s First Written Submission paras. 
253 to 254; Exhibit GOK 19(c). 
130 See, e.g. , USITC Pub. 3616 at 27 (Exhibit GOK-10). 
131 See, e.g. , USITC Pub. 3616 at 27 (Exhibit GOK-10). WT/DS296/R 
Page E-110  
 
  
(7) Finally, we would like to reiterate that pr ice undercutting does not necessarily lead to market 
share changes.  It can cause a loss of profits or revenues to the domestic industry when it drives prices 
down, even when purchasers are not willing to commit a large, or any, portion of their purchases to 
subsidized imports. 
 
15. Did the DOC conclude that the KEB was entrusted or directed to (a) participate in the 
Syndicated Loan and/or (b) seek a loan limit waiver? 
 
127. The DOC found that the GOK entrusted and dir ected all Hynix creditors (except Citibank) to 
participate in all phases of the Hynix bailout during the period of investigatio n.  This finding, based 
on the evidence as described in the previous US s ubmissions, included the KEB’s participation in the 
syndicated loan.    128. With respect to the loan limit waiver, the GOK’s entrustment/direction of KEB to participate 
in the syndicated loan required th e KEB to take whatever actions we re necessary to render it eligible 
to participate.  As previously noted, the Nove mber 2000 letter from the Economic Ministers to the 
Presidents of the KEIC and the KEB, included an  instruction to seek a waiver of the ceiling on 
loans.
132 
 129. With respect to loan limit waivers, the DOC did find that the GOK’s actions enabled Hynix’s 
creditors, including the KEB, to participate in the restructuring and recapitalization of Hynix in 
situations where they would have been prohibite d by law because they were already above legal 
lending limits.
133  Specifically, in a November 2000 meeti ng, the Economic Ministers concurred on a 
“resolution of special approval” by the FSC to  increase certain banks’ ceiling limits for single 
borrowers, as requested by the KEB on behalf of Hynix’s creditors.134  The FSC subsequently 
approved credit limit increases for Hynix’ creditors “in or der to allow them to participate in the Hynix 
restructuring process”.135  Without the GOK’s special intervention, there would not have been enough 
participants to raise the 800 billio n won December 2000 syndicated loan.136  The DOC found that the 
GOK waivers “ensured the successful kickoff of Hynix’ restructuring”.137  
 
16. To what extent was the USD 1.35 billion GD S offering taken into account by the DOC 
with respect to its finding of entrustment / direction of Hynix’s creditors?  
130. Contrary to Korea’s assertions,
138 the DOC did, in fact, consid er Korea’s contention that the 
creditor banks’ participation in the May restructur ing was contingent upon the success of the June 
2001 GDS offering.139  However, the DOC did not find Korea’s contention persuasive. 
 
                                                      
132 See US First Submission, para. 48, and materials cited therein. 
133 Government of Korea Questionnaire Response  (3 February 2003), Exhibit 8 (Banking Act, Article 
35) (Exhibit US-53). 
134 Results of Discussions at the Economic Ministers’ Meeting , letter from Ministry of Finance and 
Economy (28 November 2000) (translated version) (Exhibit US-28). 
135 Issues and Decision Memorandum  at 50-51 (Exhibit GOK-5); Government of Korea Verification 
Report  at 16 (Exhibit US-12). 
136 See, e.g., Hyundai Electronics May Seek Loans Beyond Borrowing Limit , AFX  NEWS LIMITED , 
AFX-A SIA (1 December 2000) (Exhibit US-54); Panel to Approve Excess Credit Provision to Hyundai 
Electronics , KOREA HERALD  (2 December 2000) (translated version) (Exhibit US-55); see also Government of 
Korea Verification Report  at 16 (Exhibit US-12). 
137 Issues and Decision Memorandum  at 52 (Exhibit GOK-5). 
138 Korea Second Submission, paras. 68-69 
139 Issues and Decision Memorandum  at 39 (Exhibit GOK-5).  WT/DS296/R 
 Page E-111 
 
 
 131. As a practical matter, the massive  May 2001 restructuring package came before  the June GDS 
offering.  Hynix creditors met and voted to provide such a package on 7 May 2001.  The new loans and debt restructuring included in the May package were a focal point of the GDS Offering Memorandum, which was provided to potential share purchasers.
140  In the Offering Memorandum, 
the May restructuring was labelled “Concurrent Fi nancing Transactions”, and was characterized as a 
central portion of the overall recapitalization plan for Hynix.  Along with the KDB Fast Track 
Program, it was presented as the cornerstone for restoring Hynix’s liquidity.141  The Offering 
Memorandum also noted that the May restructuring w ould close “substantially concurrently”, with the 
closing of the GDS142, thus highlighting the automaticity of th e assistance agreed to in May.  Finally, 
the “Risk Factors” section of the Offering Memorandum did not even mention the “contingency” 
related to the May bailout – something that sure ly would have, and should have, been featured 
prominently, if in fact, such a risk existed.143  Overall, the characterization of the May restructuring in 
the Offering Memorandum clearly gave the impressi on that the funds and restructuring would be 
forthcoming, and immediate.  
132. In addition, Korea’s assertion also was contradicted by the Offering Memorandum’s 
discussion of the GOK’s direct support of Hynix thro ugh the KDB fast track program.  The KDB fast 
track programme was in operation before the May restructuring package and was never conditioned 
upon the result of the GDS offering.  In fact, the Offering Memorandum expressly specified in 
numerous places how the GOK stood behind Hynix.  In order to demonstrate GOK’s continuing 
support to Hynix, the Offering Memorandum specifically stated that, “as a supplement to the May 
restructuring package, approximately 2.0 trillion won in additional financing was expected to continue 
to be available to Hynix from 31 May 2001 thro ugh the remainder of 2001 under the debenture 
rollover programme sponsored by KDB”.
144  Thus, Hynix was clearly relying on the support of the 
GOK in selling its GDS shares and the alleged contingency – assuming arguendo  that it actually 
existed – was largely inconsequential. 
 
133. It also was noteworthy that the GOK pushed Korea’s investment trus t companies to purchase 
Hynix corporate debentures in May as a way to support the GDS offering.145  According to press 
reports, the FSS called on the investment trust comp anies to buy Hynix convertible bonds as part of 
the May restructuring, saying that attracting fo reign capital for Hynix could not be done without 
cooperation of the investment trust companies.146 
 
134. Finally, even after the May announcement was made, but before the GDS offering closed, 
Hynix creditor banks entered into an agreement on 12  June 2001, setting the terms of the underwriting 
agreement for the issuance of the KRW 1,000 billion of convertible bonds.147  If it was truly the case 
that the banks were waiting until the successful conc lusion of the GDS to decide whether to proceed 
with the May bailout, why would they meet again befo re the GDS even closed to work out the details 
and then sign an agreement with resp ect to the terms of the underwriting? 
                                                      
140 Hynix GDS Offering Memorandum  at 4-5 (Exhibit US-151). 
141 Hynix GDS Offering Memorandum  at 4 (Exhibit US-151). 
142 Hynix GDS Offering Memorandum  at 4 (Exhibit US-151). 
143 Hynix GDS Offering Memorandum  at 18-32 (Exhibit US-151). 
144 Hynix GDS Offering Memorandum  at 4 (Exhibit US-151). 
145 Hynix GDS Offering Memorandum  at 6 (Exhibit US-151).  The Offering Memorandum described 
under the title of “Proposed Investment Trust Refinancin g Transaction,” that certain Korean investment trust 
companies were contemplating a potential investment of approximately 680 billion won in aggregate principal 
amount of Hynix debentures. 
146 Creditor Group ... Asks Investment Trust Compan ies to Take Over 750 Billion Won of Hynix 
Corporate Debentures , THE KOREA ECONOMIC DAILY  (May 30, 2001) (translated version) (copy attached as 
Exhibit US-155); see also  Finance/Conflict Between Banks and Investment Trust {Companies} Over Support for 
Hynix , DONG-A DAILY  (May 4, 2001) (translated version) (copy attached as Exhibit US-156). 
147 Hynix GDS Offering Memorandum  at 5 (Exhibit US-151). WT/DS296/R 
Page E-112  
 
  
135. Thus, the DOC reasonably declined to accept the argument that the May restructuring package was conditioned upon the GDS offering.  If anything, the “condition” to the May 
restructuring was nothing more than a “symbolic gesture” designed to disguise the true nature of the May restructuring.  
 
17. Was the participation by “small” credito rs accounting for approximately 20% of the 
debt in the October Restructuring countervailed? 
 
136. We understand the Panel’s use of the term “s mall creditors” as referring to those members of 
the Hynix Creditor’s Council other than those listed by name in Figure US-4 ( i.e., those grouped 
under “investment trust companies and other fina ncing companies”).  These creditors accounted for 
approximately 17 per cent of the council vote at the time of the October 2001 restructuring.  The DOC 
countervailed all of the debt held by the “small  creditors” that was affected by the October 
restructuring. 
 
137. As discussed in response to Question 8, above, many of these financial entities were 
subsidiaries of, or majority owned by, one of Hy nix’s Group A or Group B creditors.  Further, we 
note that Hynix itself attributed 100% of the debt affected by the October restructuring to the 18 creditors included in Figure US-4, plus HSBC.
148  
 
                                                      
148 See Exhibit GOK-23(e).  HSBC was a bank that was not  included in Figure US-4 because it was not 
part of the Creditors’ Council and, thus, did not vote on the October restructuring package.  WT/DS296/R 
 Page E-113 
 
 
 TABLE OF EXHIBITS  
 
 
Exhibit US-   
 Title of Exhibit  
 
131  
Corporate Governance in Korea , Il Chong Nam et al. , KOREA DEVELOPMENT 
INSTITUTE  (from Organization for Economic Co-operation and Development 
conference on Corporate Governance in Asia: A Comparative Perspective) (Seoul, 3-5 March 1999) 
 132  
Korea’s Economic Crisis  and Corporate Governance , Sang-Woo Nam, S
CHOOL OF 
PUBLIC POLICY AND MANAGEMENT , KOREA DEVELOPMENT INSTITUTE  (undated) 
 
133  
‘Gangster-Style’ Solution for Hynix , DONG-A DAILY  (1 November 2001)  
 
134  
GOK Questionnaire Response  (4 February 2003) 
 
135  
Countervailing Duty Petition  (1 November 2002) 
 
136  
Grace Period Discussion on Hyundai Electronics , M AEIL ECONOMIC DAILY 
(10 March 2001) (tra nslated version) 
 
137  
Kookmin Urges Seoul to Sell off its Stake , FINANCIAL TIMES  (10 November 2001) 
 
138  
Highhanded Companies Sued for Unilateral Shareholders Meeting , KOREA TIMES (5 
April 2000) 
 139  
Seoul Pushes for a New ‘Big Bang’ in Banking , A
SIA TIMES (18 March 2000) 
 
140  
Soundness of Financial Sect or Still Remains Remote , K OREA TIMES 
(2 September 2002) 
 
141  
Hynix, Will it Really Survive? , NEWSMAKER , NO. 439 (30 August 2001) 
 
142  
An Expensive Decision , ASIAMONEY  (September 2001) 
 
143  
Deputy Prime Minister Chin, ‘Government  will Take Actions to Turn Around Hynix’ ,  
KOREA ECONOMIC DAILY  (4 August 2001) (t ranslated version) 
 
144  
Jin Vows to Eliminate Uncertainties Thru Furthering Restructuring Efforts , KOREA 
TIMES  (4 August 2001) 
 
145  
Korean Official Defends Seoul’s Efforts on Economy , THE NEW YORK TIMES , 
(23 February 2002) 
 146  
Bank Should be Allowed to Make Decision on the Matter of Support for Specific 
Companies , M
AEIL ECONOMIC DAILY  (11 March 2001) 
 
147  
Banks Open Talks on Hynix Lifeline , BBC  NEWS (3 September 2001) WT/DS296/R 
Page E-114  
 
  
 
148  
FSC Chairman Promises Sale of Daewoo Motor This Month , K
OREA HERALD  
(10 September 2001) 
 149  
The Office of National Tax Administration’ s Decree to Recognize the Creditors’  
Write-Off of the Hynix Loan as a Tax Deductible Expense 
… May Give Rise to an 
Issue of Preferential Treatment , KOREA ECONOMIC DAILY  (5 November 2001) 
(translated version) 
 150  
Standard and Poor’s Press Release (5 October 2001)  
 
151  
Hynix GDS Offering Memorandum  
 
152  
Micron’s 14 March 2003 Comments to the US Department of Commerce  
 
153  
Micron Case Brief  (22 May 2003) 
 
154  
Stainless Steel Plate in Coils From the Republic of Korea, Final Negative 
Countervailing Duty Determination ,  64 Fed. Reg. 15530 (31 March 1999) 
 
155  
Creditor Group ... Asks Investment Trust Companies to Take Over 750 Billion Won 
of Hynix Corporate Debentures , THE KOREA ECONOMIC DAILY  (3 May 2001) 
(translated version) 
 156  
Finance/Conflict Between Banks and Invest ment Trust {Companies} Over Support 
for Hynix , D
ONG-A DAILY  (4 May 2001) (translated version) 
 
157  
Seoul’s Continuing Suppo rt Spawns Fresh Debate Over HEI’s Viability , KOREA 
HERALD  (14 March 2001) 
  WT/DS296/R 
 Page E-115 
 
 
  
 
ANNEX E-7 
  
COMMENTS OF THE RE PUBLIC OF KOREA ON 
ANSWERS OF THE UNITE D STATES TO THE 
PANEL’S QUESTIONS FOLLOWING 
THE SECOND SUBSTANTIVE MEETING  
 
13 August 2004 
 
 
1. The Government of Korea (“GOK”) appreciat es this opportunity to comment upon several 
items of new evidence introduced by the United Stat es in its response to the questions posed by the 
Panel after the second substantive meeting.  Below, we cite the relevant paragraph and/or note to 
which the comments refer, and then follow with the specific comments. 
 Para. 70, fn. 67
 
 
2. At para 70, the United States introduces tw o studies undertaken by the Korea Development 
Institute (Exhibits US-131 an d US-132), not cited in the DOC Decision Memorandum and not 
previously provided to the panel, to support the argument that the KEB acted as a vehicle of the 
GOK’s financial policy decisions.  The problem with these studies is that they primarily pertain to the 
pre-1997 period.  As the GOK extensively noted in its  first submission, Korea’s financial crisis in 
1997 spawned several reform initiatives.  These reform s render the KDI studies dated.  Moreover, as 
the GOK has discussed elsewhere, it was foreign-b ased Commerzbank, not the GOK, that controlled 
the day-to-day management of KEB. 
 
Para. 76, fn. 70  
 
3. The United States has introduced new evidence to bolster an old point:  it has now cited 
excerpts from a GOK questionnaire response to the DOC  as further evidence that the Korean side 
somehow conceded that all Hynix restructuring was part of a single, overarching “programme” to 
bailout Hynix.1 
 4. The Korean side never made any such c oncession.  Although the early stages of the Hynix 
restructuring may have been interrelated as parts of  a Citibank and SSB led restructuring effort, Korea 
has consistently argued that the October 2001 rest ructuring was fundamentally different.  Although 
Korea has already addressed this point with respect to the statements of Hynix, the United States now 
cites a statement made by the Government of Kor ea in its 13 February 2003 questionnaire response in 
an effort to buttress its argument.  We request th at the panel review the cited page from the GOK’s 
response.  That review will definitively resolv e the issue – the GOK made no such assertion and none 
can be reasonably implied from the statements it did make.  
5. The United States argues for a “single programme” because it realizes that its case otherwise 
has major factual gaps that cannot be filled with  the evidence.  Paragraph 76 argues for a single 
program, because the remainder of this answer provides no evidence directly responding to the 
specific question:  what evidence did the United States rely upon to conclude that the GOK entrusted 
                                                     
 
1 See Exhibit US-134. WT/DS296/R 
Page E-116  
 
 or directed Shinhan, Koram, or Hana to participat e in the syndicated loan?  The United States cites to 
no evidence on this point, and can only cite to eviden ce related to other transac tions and other banks.  
The GOK believes such efforts to extrapolate from ot her evidence does not meet the legal standard of 
Article 1.1(a)(1)(iv).  Para. 79
 
 
6. The United States asserts that neither Shin han, Koram, nor Hana produced any “sort of 
legitimate credit analysis” to support their decision to extend the syndicated loan.2  This new factual 
assertion has several problems. 
 
7. First, the United States cites to no eviden ce for this factual assertion.  As the DOC 
verification reports indicate, the DOC spent most of its time at verification meeting with KEB, 
Kookmin, and Citibank.  The DOC had a very brief me eting with Shinhan, and no meeting at all with 
Koram and Hana.3  
 
8. Second, this assertion is at odds with the ev idence on the record.  Citibank made a loan of 
100 billion won as part of the syndicated loan.  Rega rdless of when the loan approval was obtained, 
Citibank did obtain approval to make this large loan .  It is simply not credible for the DOC to assert 
that Citibank made a loan of about US$ 80 million w ithout going through appropriate credit approval.  
Since Citibank was leading the syndicated loan e ffort, and was committing to provide 100 billion won 
itself, it is quite reasonable for other banks to commit to much less than the 100 billion.  Shinhan 
committed to only 50 billion won; Koram committed  to 20 billion won; and Hana committed to 
30 billion won.  Regardless of what other internal loan approval that each bank undertook, this fact 
alone provides very strong eviden ce that these Korean banks had a reasonable basis to make this 
particular loan. 
 
9. The United States tries to impugn the Citibank loan assessment process.4  But this argument is 
also inconsistent with the evidence.  Specifically, this undocumented factual assertion is at odds with 
two Affidavits submitted by Tom Fallows, the senio r Citibank official that had day-to-day 
responsibility for Citibank’s participation in the H ynix restructuring.  In a March 2003 Affidavit,5 
Mr. Fallows affirmed the following facts: 
 
• “After extensive analysis of Hynix’s fi nancial situation, and Hynix’s competitive 
position in the DRAM market, SSB a nd Citibank designed a comprehensive 
restructuring and recapitalization plan for Hynix.”6 
 
• “Our decision to become a new Hynix lender [in December 2000] was made on the 
basis of Citibank’s standard credit policies and procedures.  Given the size of the 
transaction and the non-investment grade standing of Hynix, the credit process 
required much more senior approval than would be the normal case for ordinary 
Korean deals.  The Citibank credit proc ess functions separately and apart from SSB, 
which provided the financial advisor services to Hynix described above.7 
 
                                                      
2 US Answers to Questions, para. 79. 
3 See Exhibit GOK-31, pp. 11-24. 
4 See US Answers to Questions, para. 56. 
5 Exhibit GOK-26. 
6 Id., para. 6. 
7 Id. at para. 12.  WT/DS296/R 
 Page E-117 
 
 
 10. Thus, a senior Citibank official specifically to ld the DOC that it had used a heightened credit 
evaluation process, and that process was separa te from any SSB evaluations.  In a May 2003 
Affidavit, Mr. Fallows affirmed the following facts:  
• “We also explained to the Commerc e Department [during the Commerce 
Department’s visit] that Citibank’s decision to participate in the Hynix restructuring 
was based on thorough and deta iled assessment of Hynix’s long-term viability at that 
time from one of the best analysts in the industry, Jonathan Joseph.  At the time, 
Mr. Joseph was the premier analyst covering Micron and the industry.  We explained to the Commerce Department that Mr. Joseph’ s report in reply to our request  was 
that (1) Hynix had very good technology, (2) was a lower cost producer compared to 
competitors, and (3) because of its sheer si ze (following the merger of LG) would be 
able to handle the costs associated with  ever changing technology.  Mr. Joseph’s 
basic conclusion was that Hynix should be seen as a “long-term survivor”.
8 
 11. We, again, respectfully urge the Panel to re view the two Citibank affidavits for the most 
accurate description of how and why Citibank participated in the Hynix restructuring. 
 12. In this connection, we note that the new Exhibit US-154, quoted by the United States in paragraph 112, reinforces this point.  In th is prior case, the DOC specifically relied upon the 
testimony of commercial bankers th at foreign banks would make their own decisions.  Yet in this 
case, the DOC decided that Citibank was someho w being influenced by the very same vague 
“pressures” that the DOC had specifically reject ed in prior cases as being insufficient.  This 
conclusion to reject Citibank is not su pported by the evidence in this case. 
 13. The syndicated loan in fact made perfect co mmercial sense, as the first step in an effort to 
restructure the outstanding Hynix debt, and made it possible for the company to refinance and service 
that debt.  The ultimate success at raising $1.25 billion of new equity capital from foreign investors 
confirmed the validity of this initial restructuri ng effort.  That the DRAM market continued to 
deteriorate in the summer of 2001  does not undermine the reasonableness of the restructuring efforts 
earlier in the year.  
Para. 85
 
 14. The United States seeks to buttress its argument  that the GOK could direct the actions of 
Kookmin Bank.  Yet, in so doing, the United States provides more articles as exhibits that were never 
addressed in the DOC Decision Memorandum.  Exhibit US-137 is offered to illustrate GOK influence 
over Kookmin, when all the article identifies is K ookmin’s concern over “reput ation” related to the 
minority GOK stake in the bank.  The same article goes on to note that Kookmin refused to issue 
fresh loans to Hynix, while others extended new fi nancing, and that the Deputy Prime Minister Jin 
Nyum denied putting pressure on domestic banks.  15. Other new articles offered but never cited in  the DOC Decision Memorandum are used by the 
United States to support the assertion that the GOK  “handpicked” Kookmin’s CEO.  This includes 
Exhibits US-138 through US-140.  While the United States offers this statement as fact, its own 
Exhibits do no such thing.  Exhibit US-138 plainly identifies the statement as an allegation.  Exhibit US-139 addresses the accusations of bank unionists, not any affirmation that the GOK directed the placement of Kookmin’s CEO.  Finally, it is unclear  how Exhibit US-140 in any way supports the US  
assertion. 
 
                                                     
 
8 Exhibit GOK-29, para. 17. WT/DS296/R 
Page E-118  
 
 16. As a general matter, what these and other artic les illustrate is that you have to read the US 
factual assertions very carefully, line-by-line with  the articles used to support them.  The disconnects 
are frequent.  
Para. 96
 
 17. The US offers a new article at Exhibit US-144,  not previously provided the panel, to support 
its assertion that the Deputy Prime Minister forced banks to finance Hynix.  Yet, all the article states is that the Deputy Prime Minister “urged the cred itor financial institutions of Hynix Semiconductors 
to speedily resolve the troubled firm’s liquidity cris is by forcing more drastic restructuring of the 
memory chip maker in return for financial support”.   
 
Para. 100, fn. 93
 
 
18. The United States has found and cited anot her general pronouncement by a government 
official.9  The United States uses this alleged comment to bolster its argument that the GOK was 
somehow behind the October 2001 restructuring.   19. There are several points worth noting about this particular piece of “evidence”.  First, this 
article is nowhere cited in the DOC Decision Memo randum.  This article was one of the hundreds of 
articles mentioning Hynix that Micron placed on the record before the DOC. 
 
20. Second, this article relate s primarily to Daewoo, not to Hynix.  The FSC Chairman was 
quoted as saying “Of three problematic companies,  the government will determine how to handle 
Daewoo Motor and Hynix Semiconductor Inc. by the end of September.”  The only other statement 
related to Hynix included the Chairman’s explanation that: 
 
[O]nce creditors of Hynix Semiconductor meet this week, they would strike a compromise on the bailout plan for the troubl ed memory chipmaker.  “All the related 
parties are committed to resolving the Hynix matter as soon as possible”, he said. 
In addition, the top financial supervisor sai d that despite some confusion, the sell-off 
of the three Hyundai financial units to Amer ican International Group (AIG) is making 
progress and that tangible results are ex pected before the end of October. 
21. The general comment about “how to handle” th e Hynix restructuring must be read in the 
context of this more detailed statement later in  the story.  The FSC official was acknowledging the 
divergent views among the creditors, and the need to  work out some compromi se in accordance with 
the CRPA framework.  This is hardly compelling or  even persuasive evidence of GOK interference in 
the October restructuring.  Indeed, that is probably why the DOC did not even bother to cite the article 
in the first instance.  22. But at this stage, the United States appears to be searching for any additional evidence to 
somehow bolster its claim that the GOK was entrus ting or directing the October 2001 restructuring.  
This new piece of  “evidence” adds very little to  what the United States has already argued. 
 
Para. 101, fn. 95-96
 
 
23. The United States presents two new articles, not  previously provided to the panel, to argue 
that Hynix creditors received preferential tax treatment  related to the October restructuring package.  
Yet the articles cited in support of the US claim are factually incorrect.  First, the tax deduction for 
                                                      
9 See Exhibit US-148.  WT/DS296/R 
 Page E-119 
 
 
 bad debt in connection with th e October restructuring was not  made pursuant to Article 44, as 
suggested by the United States, but rather pursuant to the Enforcement Decree of the Corporate Tax 
Act.  Article 62 1.2 of that Act provides for tax deduc tions for bad debt if they meet the standards of 
bad debt specified in the Bank Cont rol Regulations of the FSS.  The Hynix debt met the standard set 
forth in the FSS regulations.  Since these regulations apply to all  corporate debt, Hynix’s creditor 
banks did not  obtain any preferential treatment.  They met the same standard that applies to bad debt 
for any other creditor. 
 Para. 113
 
 
24. At para 113, the United States seems to be drawing a dichotomy between Korean branches of 
foreign banks and Korean banks with  foreign ownership in that only the latter are subject to Korean 
banking laws and regulations.  This is an assertion never advanced in the DOC’s determination.  
Moreover, this new US implication is wrong.  Purs uant to Article 59 of the Banking Act, all Korean 
branches of foreign banks, including Citibank, ar e subject to all applicable Korean laws and 
regulations.  Paras. 137-142
 
 
25. The United States has now offered excerpts  from the GDS Offering Memorandum to support 
its argument that the May 2001 restructuring was not conditioned on the success of the GDS 
offering.10  But these excerpts prove just the opposite. 
 
26. The United States simply misstates the conditions  that applied to the GDS in an attempt at 
post hoc  rationalization.  Although the US focuses on the term “concurrent financing” within the GDS 
Offering Memorandum, a simple review of that Of fering Memorandum reveals that the “concurrent 
financing” obligations made by the banks were subject to a “principal condition”, and namely 
“completion of sales of equity and/or debt secur ities generating aggregate gross proceeds of W1,300 
billion”.11  The “concurrent financing” obligations linked to that “principal condition” were listed just 
after this statement and included all th e elements of the May 2001 package.12  Indeed, this “principal 
condition” was spelled out in the very same pa ges cited by the United States in its answer. 
 27. The United States also asserts that the “Risk Factors” section of the Offering Memorandum did not even mention the contingency related to the May package.
13  Once again, the United States is 
incorrect.  Under the sub-heading “If we are unabl e to carry out our recapitalization plans, our 
financial condition may be adversely affected” in the “Risk Factors” section, the Offering 
Memorandum plainly states that:  
The success of our recapitalization in itiatives, as summarized in “Offering 
Memorandum Summary – Recapitalization Initia tives and Business Restructuring” is 
critical for our business .
14 
                                                      
10 Exhibit US-151. 
11 Exhibit US-151 at 4. 
12 Id. at 4-5. 
13 US Answers to Questions, para. 131. 
14 Exhibit US-151 at 19 (emphasis added). WT/DS296/R 
Page E-120  
 
 28. The summary to which the statement refers is the same summary that sets forth the “principal 
condition” attached to the financing.  This is th e same summary that the Un ited States has cited as not 
discussing the condition, but which plainly states the condition.   WT/DS296/R 
 Page E-121 
 
 
  
 
ANNEX E-8 
 
 
COMMENTS OF THE UNITED STATES ON NEW 
FACTUAL INFORMATION PROVIDED IN THE 
REPUBLIC OF KOREA’S ANSWER S TO THE PANEL QUESTIONS 
FOLLOWING THE SECOND SUBSTANTIVE MEETING 
 
13 August 2004 
  Question 14  
 
1. In its August 6 answers, Korea provides for th e first time its estimates of the relative volumes 
of subject imports and non-subject imports th at were undercutting domes tic prices in 2000 and 2002.
1  
These figures were computed in the same manner as the estimates of the relative volumes of subject 
imports and non-subject imports that were underc utting prices in 2001 that Korea previously 
submitted to the Panel2, and suffer from the same defects.3  Additionally, the new data are based upon 
selective portions of confidential import data that the United States has previously shown are not an 
appropriate proxy for the actual subject import data.4 
 
2. The United States wishes to reiterate that th ere is no basis for substituting Korea’s own, less 
accurate data – including the new data provided in the Korea Second Answers – for that used by the 
ITC.  Korea has not challenged the ITC’s treatment of  the data in question as confidential.  Indeed, at 
the second meeting with the Panel, Korea highli ghted the sensitivity surrounding the treatment of 
confidential information when it justified its own fa ilure to provide certain information to the DOC – 
even on a confidential basis under the terms of a pr otective order – by invoking Korean bank secrecy 
laws.  Moreover, Korea has not challenged as inad equate the ITC’s summary of the confidential 
information in the public version of its report.  U nder the terms of Article 12 of the SCM Agreement, 
the United States is obligated to protect the c onfidentiality of data submitted during the ITC’s 
investigation.  The United States has provided as mu ch information as possible within the confines of 
its obligations.  Moreover, all confidential inform ation collected by, submitted to, and relied upon by 
the ITC was made available to counsel for interest ed parties, including Hynix’s counsel, under the 
terms of an administrative protective order. 
 
Question 16  
 
3. In paragraph 39 of the Korea Second Answers,  Korea makes the factual assertion that the 
DOC did not consider the GDS offering in the cont ext of entrustment/direction.  As indicated in 
paragraph 137 of the US Second Answers, however , the DOC did consider Hynix’s GDS arguments 
in the context of entrustment/direction.5  What Korea fails to explain is  that Hynix’s sole reference to 
                                                      
1 The Republic of Korea’s Answers to the Panel Questions Following the Second Substantive Meeting , 
6 August 2004, para. 33 [hereina fter “Korea Second Answers”]. 
2 Second Substantive Meeting – Oral Statement of the Government of Korea , 21 July 2004, para. 34. 
3 Answers of the United States of America to the Pa nel’s Questions to the Parties Following the Second 
Substantive Meeting of the Panel , August 6, 2004, paras. 34-38 [hereinafter “US Second Answers”]. 
4 US Second Answers, para. 116. 
5 In its response to Question 16, the United States mi stakenly ascribed the argu ment to Korea, rather 
than Hynix. WT/DS296/R 
Page E-122  
 
 the GDS in the context of entrustment/direction w as to cite it as evidence in support of its argument 
that the banks were acting based on the company’s financial condition.
6  The DOC did not consider 
this GDS argument to be relevant to the issue of entrustment/direction.  As the DOC stated, 
“[w]hether the terms are sufficiently affected by  government action so as to make the provision 
actionable is a factual element that is relevant to the measurement of ‘benefit,’ not ‘financial 
contribution.’”7  Accordingly, the DOC properly addressed the facts surrounding the GDS in the 
context of “benefit”, as Korea acknowledges.8  Neither Hynix, nor any other party, ever argued in the 
underlying investigation that the very existence of  any contingency related to the May restructuring 
evinced a lack of government entrustment/direction.  
4. Korea’s new argument that the very existence of any contingency in connection with the May 
restructuring evinces a lack of entrustment/direction is fundamentally flawed and, as discussed in our 
response to Question 16, is not su pported by the record evidence.
9  As the United States discussed 
with the Panel, it is entirely consistent with the concept of entrustment/direction – i.e., giving 
someone responsibility for a task – to leave the details to the discretion of the entity 
entrusted/directed.  The concern of the government  is that the task be performed, not necessarily how 
it is performed.   Those entrusted/directed to perfo rm the task may have various options for fulfilling 
that objective, some of which may be contingent on ot her events or factors.  The fact that the precise 
method the private entities ultimately used to perform the task may have been contingent on certain 
events does not in any way suggest that the govern ment did not entrust/direct the entity to carry out 
the task in the first instance.  Thus, the GDS c ontingency does not obviate the evidence that the GOK 
entrusted/directed Hynix’s creditors to solve the company’s financial crisis – one way or another.  In 
this particular case, the irrelevance of the allege d “contingency” is underscored by the timing of, and 
the facts surrounding, the GDS offering relative to  the May restructuring, as evidenced by the 
Offering Memorandum itself, as discussed in  our response to the Panel’s question. 
 Question 17  
 
5. In paragraph 49 of the Korea Second Answers,  Korea makes the factual assertion –  without 
citation to record evidence – that Commerzbank wa s “the largest shareholder” and had “operational 
control” of the KEB.  In fact, the GOK was the larg est single shareholder of the KEB.  The fact that 
the GOK’s 43.17% interest was held by two GOK entities is immaterial – KEB’s own ownership 
structure chart lists total GOK ownership  (43.17%) as compared to Commerzbank (32.55%) and 
public shares (24.28%).
10  KEB was properly included in Group B (private entities owned/controlled 
by the GOK) of Figure US-4.  6. In paragraph 51 of the Korea Second Answer s, Korea makes the factual assertion – again 
without citation to record evidence – that the invest ment trusts and financing companies referenced in 
Figure US-4 “are not owned or controlled by the GOK” .  In fact, record evidence substantiated that 
many of these financial entities were wholly owned subsidiaries of, or majority owned by, public 
entities and private entities owned/controlled by the GOK.
11 
 
                                                      
6 Issues and Decision Memorandum  at 39 (Comment 1) (Exhibit GOK-5) (summary of Hynix’s 
arguments). 
7 Issues and Decision Memorandum at 47 (Exhibit GOK-5). 
8 See, e.g., Preliminary Determination , 68 Fed. Reg. at 16777 (Exhibit GOK-4); Issues and Decision 
Memorandum at 87 and 90-91 (Comment 7) (Exhibit GOK-5). 
9 US Second Answers, paras. 137-142. 
10 See KEB Ownership Structure Chart  (2001) (copy attached as Exhibit US-158).  The KEB 
ownership figures represent vo ting shares as of Ma rch 2001, as all preferred shares  were accorded voting rights 
at that time.  See Figure US-4 (“**” notation and source document GOK Supplemental Questionnaire Response  
(March 11, 2003)) at 29 (Exhibit US-36). 
11 See Chart of Hynix Creditors  (June 16, 2003) (Exhibit US-37).