WT/DS296/R 
 Page B-1 
 
 
 
 
ANNEX B 
 
 
ORAL STATEMENTS OF PARTIES AND THIRD PARTIES AT THE 
FIRST SESSION OF THE FIRST SUBSTANTIVE MEETING 
 
 
Contents Page 
Annex B-1 Executive Summary of the Opening Statement of Korea B-2 
Annex B-2 Closing Statement of Korea B-5 
Annex B-3 Executive Summary of the Open ing Statement of the United States B-7 
Annex B-4 Closing Statement of the United States B-12 
Annex B-5 Third Party Oral Statement of China B-14 
Annex B-6 Third Party Oral Statement of the European Communities B-17 
Annex B-7 Third Party Oral Statement of Japan B-20 
Annex B-8 Third Party Oral Statement of the Separate Customs Territory of 
Taiwan, Penghu, Kinmen and Matsu B-23 
 WT/DS296/R 
Page B-2 
 
 
ANNEX B-1 
 
 
EXECUTIVE SUMMARY OF THE ORAL STATEMENT 
BY THE GOVERNMENT OF KOREA AT THE 
FIRST SUBSTANTIVE MEETING 
 
2 July 2004 
 
 
I. ITC INJURY INVESTIGATION – CLAIMS OF ERROR 
 
A. ARTICLE 15.1 STANDARDS 
 1. As an overarching provision, Article 15.1 set s the basic framework for the injury portion of 
the current dispute.  Article 15.1 requires that all asp ects of the injury investigation must be based on 
positive evidence and an objective examination of the facts. 
 
2. In the case below, the ITC violated the re quirements of Article 15.1 by not providing 
sufficient explanations in support of  the various conclusions it drew.   
 
B. SIGNIFICANT INCREASE IN SUBJECT IMPORTS  
 
3. The data in the underlying case showed that th e Hynix brand lost market share over the period 
of investigation, and that subject  imports changed only slightly in reaction to the temporary shutdown 
of the Hynix US operations.  
 4. The ITC now tries to obscure these facts with detailed arguments about the data.  For 
example, the United States accuses Korea of erroneously mixing the shipment data of subject imports 
based on their value with other data based on volume .  However, the data provided by Korea to the 
ITC was based on volume.  
 
5. The ITC tries to look at import volume in a vacuum, mechanically checking off boxes.  But 
Article 15.2 requires more than such mechanical checking.  For the term “significant” to have 
meaning, the authorities must ensure whether th ere have been increases in various measures.  
 
6. Moreover, the ITC tries to address the s hutdown at the Hynix Oregon facility, but never 
credibly explains why substitution between factor ies by a single Korean company can represent a 
significant increase in volume or market share of subject imports.  
 
C. SIGNIFICANT PRICE EFFECTS BY SUBJECT IMPORTS 
 7. The ITC’s traditional underselling analysis was not an objective examination for the pricing 
analysis in this particular case because it ignored the prices of non-subject imports.  
8. As with the volume effects, any objective assessment of the pricing evidence taken as a whole 
would find that the price effects of allegedly subsid ized imports were not “significant”.  Accordingly, 
the ITC’s finding was inconsistent with Articles 15.1 and 15.2. 
 
D. CONDITION OF THE DOMESTIC INDUSTRY  
 9. Unlike the ITC assertion, the evidence before  the ITC demonstrated overall strength, not 
weakness, of the domestic industry.  Most egre giously, the ITC failed to even address the public  WT/DS296/R 
 Page B-3 
 
 statements that Micron and Infineon made to the financial community and their investors that they 
were doing quite fine.  Moreover, the ITC never put the condition of the domestic DRAM industry 
into the context of the overall business cycle.   
E. CAUSATION 
 
10. Pursuant to Article 15.5, Members must dem onstrate an explicit “causal relationship” between 
the subsidized imports and any material injury suff ered by the domestic industry.  In this case, the 
evidence before the ITC demonstrated that there was no correlation between the trends in subject 
imports and the condition of the do mestic industry.  Most importan tly, record evidence shows that 
there was an unprecedented drop in underlying dema nd for computer and telecom equipment and that 
2001 was the single worst year in  decades for these industries.  
 
11. The ITC defence is that it did  address these various arguments.  The United States seems to 
believe that any mention of a fact or argument is  somehow sufficient and meets WTO obligations.  
But such an approach does not satisfy obligations under Article 15.  
 II. DOC SUBSIDY INVESTIGATION – CLAIMS OF ERROR  
 
12. Much of the US financial cont ribution and benefit analysis is based on the predicate that the 
US style bankruptcy approach is the single norm  against which to measure all restructurings 
everywhere in the world.  Yet it is a fundamental aspect of any market ec onomy that there be some 
method of addressing financially distressed comp anies short of termination or bankruptcy.  
 
A. FINANCIAL CONTRIBUTION  
 13. In the underlying case, DOC brought together a patchwork of evidence and determined that 
all lending to Hynix by all Korean banks over a ten- month period was somehow being directed by the 
GOK.  This absence of evidence is particularly egre gious for the financing transactions later in the 
period of investigation.  With respect to the October restructuring, the only evidence the DOC 
provides regarding alleged GOK action is the unve rified assertions of a single anonymous “expert” 
interviewed by the DOC in Seoul.  
 14. The United States argues that the evidence i ndicates that the post-1997 reform measures did 
not guarantee complete bank independence or elimin ate government interference in lending decisions 
in Korea.  In so arguing, however, the United St ates largely ignores the extensive GOK discussion of 
various legal mechanisms effectively precluding  and prohibiting any form of inappropriate 
government intervention in the banking and financial sectors of Korea.  
 15. For instance, contrary to the erroneous US a llegation, the actual language of Article 1 of the 
Prime Minister Decree No. 408 makes amply clear that  this law had a very di fferent purpose than that 
attributed by the United States.   
16. The United States also makes much of the “C orporate Restructuring Promotion Act”.  Yet as 
Korea made clear, the CRPA is a law of general app lication.  Also, creditors still have choices under 
the CRPA as they could put the company in question into a court receivership, or exercise appraisal 
rights and can walk away.    
17. In the present case, the United States tries to read Article l.1(a) so broadly as to provide 
authorities with almost limitless discretion.  Yet as the panel in US -Export Restraints  articulated, the 
plain meaning of “entrusts or directs” poses the co re questions of “who” is being directed to do 
“what”. 
 WT/DS296/R 
Page B-4 
 
 
B. FINDING AND MEASUREMENT OF “BENEFIT” 
 
18. In this case, the DOC had a wide range of po ssible commercial benchmarks.  Yet rather than 
acknowledge the range of facts, and search for the best possible benchmark, the DOC instead 
searched for reasons to disregard all of the banks.  
19. The DOC approach in this case was to create a set of rules that would make it impossible for 
any company to engage in a debt workout rather than a bankruptcy.  The US approach seems to be 
that because Korea favours the “London Approach” of  debt workouts that avoid bankruptcy, rather 
than US style bankruptcy proceedings, any debt work out of Hynix must be condemned as a subsidy.   
 
C. SPECIFICITY 
 20. In its first submission, the United States argu es for unlimited discretion under Article 2.  But 
the fact that Article 2 does not enumerate speci fic tests or methodologies does not mean that 
authorities can draw conclusions in a vacuum.  The very idea of disproportionate use has imbedded in 
the term “disproportionate” the idea of some benchmark level of use that makes sense.   
 
D. SECRET MEETINGS 
 21. Finally, Korea believes that the United Stat es breached Article 12.6 when it conducted secret 
verification meetings in Korea over explicit objections by the Government of Korea. 
 
22. The US argument now interprets Article 12.6 as presenting an impossible choice.  The United States argues that a Member must consent either  to any and all procedures or to none at all.  
However, a “right” to guarantee itself adverse facts available is not a right at all.   WT/DS296/R 
 Page B-5 
 
 
  
 
ANNEX B-2 
  
FIRST SUBSTANTIVE MEETI NG - CLOSING STATEMENT 
OF THE GOVERNM ENT OF KOREA 
 
  Mr. Chairman and Members of the Panel, tha nk you for your time over the past two days.  I 
believe we have made progress in focusing the issues in this case.  We also believe that your written 
questions will further focus the issues.  We welcom e those questions.  I would like to close this 
meeting with several general observations. 
 
 First, the United States is correct that ther e is no real disagreement over the standard of 
review.  In paragraph 6 of its opening statement, the United States agreed the Panel should consider 
whether the agency decision is “well reasoned” and “adequately supported”.  We agree.  But with all 
due respect, we submit that the ITC and DOC deci sions in this case are neither well reasoned nor 
adequately supported.  That is what the Panel must decide. 
 
 Second, this case is not about bold and colour ful language used by politicians and political 
groups.  The United States has certainly collected ma ny examples of the most colourful language of 
Korean politicians.  But in many different contex ts, WTO jurisprudence has recognized the wisdom 
on focusing on what countries actually do, and not on what politicians in those countries might say.  
Consider the comment yesterday in the US opening st atement about the “bottomless pit”.  We checked 
last night, and it turns out this report was drafted and submitted by the opposition party in Korea on 
the eve of the Presidential election, and was never accepted by the Korean Co ngress.  Criticism of the 
government by its opposition party in such circumst ances must be viewed with a healthy scepticism.  
This example illustrates the danger of rely ing on such statements as “evidence”.   
 
 It was legal error for the United States to re ly on such statements as the keystone of its 
determination, and to spend so little time focusing ob jectively on what actually happened with respect 
to specific transactions.  We ar e confident this Panel will focus on the specific actions of the 
Government of Korea, and the Korean banks, and not on the rhetoric. 
  What were those actions?  Consider paragra ph 15 of the US opening statement that identifies 
three concrete actions.  But even if these actions le d to some loans, the Un ited States then goes much 
further and condemns all loans including those that  have nothing to do with these actions.  Loans by 
other banks that did not require any waiver of le nding limits.  Loans at distant points of time, far 
removed from the initial loans.  Loans that had not hing at all to do with rolling over maturing Hynix 
bonds. 
 
 This represents the overarchi ng legal flaw in the US appro ach.  The United States does not 
seem to mind when it has weak or no evidence of “entr ustment or direction” with respect to various 
loans or investment decisions.  Under the US approach, evidence for some transactions somehow 
becomes evidence for all transactions.  We believe this  is a flawed interpretation of Article 1.1(a) of 
the SCM Agreement.  Third, this case is not about  mere Korean disagreement with DOC findings.  
This case is about whether the DOC and ITC rati onales can survive factual and legal scrutiny.  
Consider for example, the DOC decision to reject Citibank as a possible benchmark.  DOC offered various reasons for rejecting Citibank, most of wh ich had nothing to do with the specific transactions 
at all.  Article 14(b) of the SCM Agreement requires only that a loan be “comparable” and “actually WT/DS296/R 
Page B-6 
 
 
 obtained on the market” for that loan to serve as a be nchmark.  The Citibank loans were both.  Even if 
the Citibank loan was not a perfect comparison, ther e is no credible factual basis to conclude that 
these loans were not at least “comparable”.  
 Or consider the numerous conclusions drawn by ITC.  The ITC should provide the factual 
underpinnings that justify its various conclusions.  Ob taining such data – in its actual form -- is the 
only way for the Panel to do its job.  We urge the Panel to view sceptically any summaries that 
obscure the real figures.  A range may be appropria te.  But an average can be seriously misleading, 
depending on how the average is done. 
 
 But even before receiving any additional data, th e flaws in the ITC analysis of causation stand 
out.  The ITC brushed aside the role of non-subject im ports with a vague statement that a “significant” 
portion of those imports did not compete.  But how  large were these specialized products, and why 
does attenuated competition for some portion of non-subj ect imports negate the effect of the still large 
remaining portion.  The ITC never explains. Or consider the role of capacity increases by other 
suppliers.  Just because the ITC may not have colle cted certain evidence does not mean that evidence 
can be ignored.  Even if it prefers its own data, that is no reason for the ITC to ignore without any 
explanation other credible data.  Yet that is  precisely what the ITC did in this case.   
 
 That concludes my closing remarks.  Thank you.  WT/DS296/R 
 Page B-7 
 
 
 ANNEX B-3 
 
 
EXECUTIVE SUMMARY OF THE OPENING STATEMENT 
OF THE UNITED STATES AT THE FIRST 
SUBSTANTIVE MEETING OF THE PANEL  
 
24 June 2004 
 
 
General Issue - Standard of Review 
 1.  While Korea says that it does not advocate  de novo  review, in fact, it does. Korea does not 
allege errors in the evidence on which the DOC and the ITC relied.  Rather, Korea argues that the US 
authorities should have discounted certain facts and relied on others, or analyzed the evidence in 
different ways.  In other words, Korea wants this Panel to reweigh the evidence to reach a different 
outcome.  That is de novo  review, and the Panel should reject Korea’s suggestions to the contrary. 
 
2.  This case is, in fact, a perfect example of why de novo  review is not the standard of review.  
The administrative records of th e DOC and the ITC are enormous, totalling tens of thousands of 
pages.  The authorities took many months to review  and evaluate all of the record evidence, and 
explained in considerable detail th e conclusions they drew from that record evidence.  The depth and 
complexity of this investigation demonstrates the wisdom of a standard unde r which the Panel’s task 
is not to step into the role of investigator and gather or reweigh evidence, but rather, in examining 
whether a Member met its agreement obligations re lating to fact-finding, to consider whether the 
investigating authority’s decision-making is well re asoned and adequately supported by the evidence 
before it. 
 Issues Concerning the Commerce Depa rtment’s Subsidy Determination 
 
3.  Financial Contribution  – "Injecting money into a bottomless pit" – that is how a 
November 2002 report by the Korean Congr ess – entitled "Public Fund Mismanagement 
Investigation" –  characterized the GOK’s policy in 2000-2001 to bail out the Hyundai Group companies, including Hynix.  By the end of 2000, Hynix had incurred staggering losses, totaling 
1.9 billion dollars, and the company’s debt was 186% of  its total equity.  Hynix, which employed over 
24,000 workers, was very important to the Korean economy, and singled it out for special treatment.  
The GOK established a policy to ensure that the de bt-ridden Hynix did not fa il.  The Hynix bailout 
totalled over 11 billion dollars, in less than 12 m onths, a figure nearly three times total sales of all 
Hynix products in 2001.  11 billion dollars equale d total sales of DRAMS, by all DRAM producers 
worldwide, in 2001, as indicat ed by the record evidence. 
 
4.  Korea asks the Panel to substitute its judgmen t for that of the DOC and find, despite all the 
record evidence to the contrary, that this enorm ous financial assistance for a company that was  
"technically insolvent" was simply the result of co mmercial banks doing as they saw fit.  The facts, 
however, paint a very different picture – a picture in which the GOK is directing and entrusting 
Hynix’s creditors to carry out the GOK’s d ecision that the company not go under. 
 5.  Korea insists that Hynix’s creditors were motivated purely by commercial considerations.  
However, while commercial considerations are relevant to the issue of whether a company received a 
benefit, they are not germane to the issue of a fina ncial contribution.  "Financial contribution" focuses 
on the action of the government in making the financia l contribution.  In particular, subparagraph (iv) WT/DS296/R 
Page B-8 
 
 
 focuses on whether the government has given responsi bility to, ordered, or regulated the activities of 
private bodies to make the financial contributions.   
 6. There is no support in the SCM Agreement for Korea’s suggestion that a formal mandate is 
required to find a financial contri bution.  While governments may act in such a formal manner, they 
frequently operate behind closed doors.  There is no textual basis for the assertion that the SCM 
Agreement somehow ceases to apply when the doors close. 
 7.  In this case, the GOK knew it would be  heavily criticized, both domestically and 
internationally, for bailing out Hyni x.  Thus, it is not surprising that the GOK operated behind closed 
doors.  Nevertheless, due in part to intensive public  interest in such an enormous bailout, there is 
ample compelling evidence that the GOK directed and entrusted Hynix’s creditors to rescue the 
failing company. 
 8.  For example, despite its much publicized re forms, the GOK announced that it had to alleviate 
Hynix’s liquidity crisis.  The government then wa ived the ceiling on the amount of debt banks could 
carry for a single debtor on three separate occasions  specifically for the purpose of additional loans to 
Hynix.  The government also ordered the KEIC to resume insuring Hynix’s exports for the purpose of 
increasing Hynix’s accounts receivable financing.  The GOK also instituted a programme to ensure 
that Hynix did not default on its maturing bonds.  
9.  The evidence also demonstrates that the GOK did not merely extend a helping hand to Hynix 
– it used its strong arm to protect the company as well.  For example, when KFB balked at 
participating in the bailout, government officials th reatened the bank with the loss of deposits and the 
loss of customers.  After the government arm-twisti ng, KFB got the message.  Likewise, KorAm Bank 
balked initially, but subsequently succumbed to government threats and intimidation and went along 
with the programme. 
 10.  The evidence also demonstrates that governme nt threats were not limited to creditors, but 
extended to anyone who might jeopardize the success  of the Hynix bailout.  In particular, the 
government reprimanded and threatened credit rati ng agencies that lowered (or attempted to lower) 
Hynix’s rating to reflect the reality of th e company’s dismal financial situation. 
 
11.  Even if we assume, for the purposes of argumen t, that the motivations of Hynix creditors are 
relevant to the question of a financial contribution,  the record evidence also demonstrates that Hynix 
creditors were acting to fulfil the government’s objec tive.  For example, the rationale given by KEB 
for participating in the May and October 2001 restruct urings was to be aligned with the "social and 
economic policy concerns of the GOK". 
 
12.  Could an investigating authority reasonably conclude, based on this evidence, that the GOK 
directed and entrusted Hynix’s creditors to ensure that the company did not fail?  Absolutely.  The 
government’s message was crystal clear.  As the De puty Prime Minister and Minister of Finance and 
Economics stated:  "If Hynix says it needs an additi onal one 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."  
13.  Benefit  – Hynix’s  financial picture was abysmal.  Given this, could an investigating authority 
reasonably conclude that in measuring the benefit to  Hynix from loans, the benchmark should include 
a risk premium?  Absolutely.  Could an investig ating authority also reasonably conclude that a 
reasonable investor would not have invested in Hynix?  Absolutely. 
 14.   Korea does not dispute the facts concerning Hynix’s poor financial condition.  Nevertheless, 
Korea challenges the DOC’s finding that Hynix w as not creditworthy or equityworthy during the  WT/DS296/R 
 Page B-9 
 
 
 period of investigation.  Korea’s argument echoes it s argument that the GOK did not direct or entrust 
private banks to rescue Hynix.  The evidence supports  the DOC’s determination that private banks in 
Korea were directed or entrusted by the GOK, and, therefore, could not provide an appropriate market 
benchmark for loans and equity infusions.  The so le exception was Citibank, and the United States 
explained in its first written submission why Citiba nk did not provide an appropriate benchmark. 
 
15.  The facts on the record of the investigati on support each of the DOC’s findings with respect 
to financial contribution, benefit, and specificity.  There is also a "reasoned and adequate" explanation 
of how the facts support those findings.  The DOC ’s determination that a countervailable subsidy 
exists is therefore consistent with the require ments of the SCM Agreement, and the Panel should 
reject Korea’s claims to the contrary.    Issues Concerning the International Tr ade Commission’s Injury Determination 
 
16.  The Many and Misleading Data Sources Cited by Korea  – The ITC used a single, consistent 
data source:  questionnaire responses covering the period 2000 to 2002 and the first three months of 
2002 and 2003.  Korea relies on an ever-varying set of  data sources and time periods depending on the 
point that it seeks to make.  Through its selective use of other data sources, Korea repeatedly makes 
statements in its submission that are completely in consistent with the data used by the ITC in its 
injury determination.   
17.  No Basis for Korea’ s Insistence that  Only Market Share Increases Matter  – There is no legal 
support for Korea’s assertion that increases in market share are the only indicator that matters for an 
affirmative material injury analysis.  The inv estigating authority has discretion to select the 
methodology to analyze the volume of subsidized subject imports.  The ITC found that the absolute 
volume of subsidized subject imports was significant.  It also found that the increase in that volume 
was significant both absolutely and relative to  both production and consumption.  Article 15.2 
specifies that no one or several of these factors is determinative.  
18.  Korea Disregards Important Conditions of Competition in this Industry  – Korea does not 
dispute that subsidized subject imports were hi ghly substitutable for domestic DRAM products.  They 
were used interchangeably, and there were no importa nt differences in product characteristics or sales 
conditions between them.  Throughout the period of i nvestigation, Hynix’s subject Korean operations 
produced many of the same product densities as dom estic producers.  Moreover, subject imports and 
domestic DRAM products were sold largely to the same customers and through the same channels of 
distribution. 
 19.  The commodity-like nature of domestic and subject imported DRAM products magnified the 
ability of a given volume of imports to impact the domestic market and industry.  These conditions of 
competition, as well as the importance of price in this particular industry, were also important to the 
ITC’s price effects findings.  In a commodity-type market which adjusts quickly (even biweekly) to 
price changes, significant price disparities between suppliers would not usuall y be expected.  Thus, 
the ITC found the patterns of frequent, sustained high-margin undercutting by subsidized subject 
imports (at margins often exceeding 20 per cent and at increasing frequencies) was especially 
significant in this industry, and could be expected to  have particularly deleterious effects on domestic 
prices.  
 
20.  Korea Seeks Alternate Methodologies without  Demonstrating Any Shortcoming in the 
Methodologies Used by the ITC  – Korea merely asserts that the ITC’s weighted-average pricing 
analysis was "wrong for this industry" and that the ITC should have examin ed pricing and volume on 
a brand-name basis.  These arguments ignore the fact  that it is for the investigating authorities in the 
first instance to select methodologi es for their analysis under Article 15.2 of the SCM Agreement.  
There is no requirement to conduct a brand-name anal ysis, and on the facts of this case, a brand-name WT/DS296/R 
Page B-10 
 
 
 analysis was not consistent with the relevant inquiry under the SCM Agreement.  Use of the 
brand-name analysis urged by Hynix would not re flect the source country of the DRAM products and 
would be utterly inconsistent with the requireme nt under the SCM Agreement to examine the effect 
"of the subsidized imports" on the "like product", the product produced by the domestic industry.  By 
comparing the weighted-average price of subsidized  subject imports with the weighted-average price 
of domestic shipments for each time period, the IT C’s methodology in this investigation addressed the 
inquiry posed by Article 15.2 – the assessment of th e price effects of the subsidized imports on the 
domestic industry.  
21.  In any event, the ITC also examined  the pricing data on a disaggregated basis (broken down 
by both brand-name and by source).  Even a disaggr egated analysis showed that subsidized subject 
imports were the lowest-priced product " more often than DRAM products from any other source ". 
 
22.  Korea Asks This Panel to Reweigh the Evidence and Factors Concerning the Impact of 
Subsidized Subject Imports, but the Result is the Same  – Based on an examination of trade, financial 
and other industry performance indicators, the ITC concluded that the domestic industry’s 
performance declined over the period of investig ation with respect to many indicators, and its 
financial performance worsened precipitously.  The ITC determined that declining prices were the 
primary reason for the industry’s large operating losses, and that subject imports "contributed 
materially to the steep price declines that occurre d over the period."  Korea argues that the ITC should 
have weighed the evidence differently, and it asserts  that in this industry there are only five key 
indicia. 
 23.  Korea ignores that it is the investigating author ities that are to evaluate the impact factors and 
weigh the evidence and that no one or several of the non-exhaustive list of enumerated SCM 
Agreement Article 15.4 factors is de terminative.  The ITC’s final determination reflects evaluation of 
positive evidence concerning each of the various Article 15.4 factors showing changes in the 
industry’s condition, but even the select criteria th at Korea asserts are important in this industry 
showed declines during at least part, if not the entire, period of investigation. 
 
24.  The ITC’ s Causation Analysis was Proper  – In ascertaining whether there is a "causal 
relationship", authorities must demonstrate a causal  relationship between the subsidized imports and 
the injury to the domestic industry based on an examination of all relevant evidence before the 
authorities.  The authorities also must examine an y known factors other than the subsidized imports 
which at the same time are injuring the domestic in dustry to ensure that th e injury caused by these 
other factors is not attributed to the subsidized imports.  The ITC clearly demonstrated such a causal 
relationship, and also provided a satisfactory explan ation of the nature and extent of the injurious 
effects of other factors.  Even in the context of  reviewing safeguards dete rminations, the Appellate 
Body has found that Article 4.2(b) of the Safe guards Agreement does not require that increased 
imports alone, in and of themselves, are causing serious  injury.  Nor is there any such requirement in 
Article 15 of the SCM Agreement. 
 
25.  Non-subject imports
:  The ITC found that subsidized im ports, by themselves, were large 
enough and priced low enough to have a significant im pact, regardless of the adverse effects caused 
by non-subject imports.  The ITC determined that there were two principal factors that reduced the 
significance of the volume of non-subject imports.  First, there was less competition between the 
domestic DRAM products and the non-subject imports than there was between the domestic DRAM 
products and the subject imports.  The ITC de termined after examining the composition of 
non-subject imports that a significant portion of n on-subject imports were Rambus and specialty 
DRAM products for which domestic producers ha d no significant production during the period of 
investigation.  Second, even those non-subject impor ts consisting of "standard " products did not have 
the price effects that subsidized subject imports di d during the period of investigation.  Price effects 
were what the ITC concluded caused the "prima ry negative impact" on the domestic industry.   WT/DS296/R 
 Page B-11 
 
 
  
26.  Other possible reasons for price declines :  The ITC also evaluated other possible reasons why 
prices declined in the US market (including pr oduct life cycles and business cycle changes in demand 
and supply that lead to "boom" and "bust" periods characteristic of this industry).  While slowing 
demand played some role, together with the ope ration of the DRAMs business cycle and product life 
cycles, the ITC found that the unprecedented severity of the price declines that occurred from 2000 to 
2001 and persisted through 2002 in dicated that supplier competition was an important factor.  It 
concluded that the increasing fre quency of underselling by subsidi zed subject imports from 2000 to 
2002 corresponded with the substantial decline in US prices over those same years and that in the 
absence of significant quantities of su bsidized subject imports competing in the same product types at 
relatively low prices, domestic prices wo uld have been substantially higher. WT/DS296/R 
Page B-12 
 
 
 ANNEX B-4 
 
 
CLOSING STATEMENT OF THE UNITED STATES 
AT THE FIRST SUBSTANTIVE MEETING OF THE PANEL  
 
24 June 2004 
  Subsidy Issues 
 1.  In closing, we would like to comment briefly on Korea’ s suggestion that the Commerce 
Department is an over-zealous agency run amok.   Korea characterizes the US position in alarming 
terms, portending unlimited discretion for investigati ng authorities and a world in which the financial 
community has no choice but to stand by and watch ailing companies go bankrupt.  The alarm Korea sounds is necessary to justify the fact that Korea is  asking the Panel to read into the "entrusts or 
directs" language of Article 1.1(a)(1)(iv) a special  evidentiary requirement that would immunize all 
informal government action from the disciplines of  that provision, by prohibiting reliance on 
circumstantial evidence, no matter how compelling, and by requiring explicit, concrete evidence of 
government entrustment or direction not only for a particular task, but also for each action necessary 
to accomplish that task.  Korea’s so lution, in short, is to make Article 1.1(a)(1)(iv) so easy for 
governments to circumvent that it would render the provision meaningless – an absurd result that 
Korea apparently does not find alarming.   
2.  As we discussed in our submission and over the past two days, the DOC provided a 
well-reasoned analysis of why the facts – and admitted ly the facts are very complex – when viewed as 
a whole, present a clear picture of a government bailout of Hynix. 
 
Injury Issues 
 
3.  In its written submission, Korea repeatedly  asserted that the volume of subsidized imports 
declined.  In its opening statement, Korea retreated fr om this assertion, arguing in paragraphs 7 and 9 
only that the Hynix brand declined.  Indeed, Kor ea even conceded in paragraph 11 that subject 
imports did increase. 
 4.  Even without an increase, subject imports ca n have price effects if, for example, they force 
other market players to lower their prices.  For the sales that the financially troubled Hynix did make, 
there was significant price undercutting, however measure d.  It does not take much to set the margin 
in a commodity market where prices are rapidly disseminated. 
 5.  Korea admitted that there was injury here.  The fact that other factors may have been causing 
injury at the same time as subsidized subject im ports does not, under the SCM Agreement, invalidate 
or prevent an investigating authority from finding that subsidized subject imports caused material 
injury to the domestic industry.  Standard and Scope of Review 
 6.  Over the course of the past two days, we and Korea have repeatedly referred to the fact that 
"we have a disagreement" or "we have a dispute".  It is important that we be clear about what the 
disagreement before the Panel is all about.  
  WT/DS296/R 
 Page B-13 
 
 
 7.  One possible disagreement is historical, involving the question of whether Hynix received 
subsidies and whether imports of s ubsidized merchandise caused injury to a US industry.  That issue 
was resolved by the Department of Commerce an d the International Trade Commission in their 
determinations, and is not  before the Panel.   
 
8.  The present disagreement –  the disagreement be fore the Panel – is different; it is whether a 
reasonable, unbiased person could  have reached the same conclusions as those agencies, based on the 
evidence before them.  
 
9.  Korea says that there is no disagreement c oncerning the standard of review, but there is.  
Korea said earlier that your job is to determine what a reasonable authority should  have found.  
However, your task is not to determine what a reasonable authority should  have found.  Rather, your 
task is to determine what a reasonable investigating authority could  have found based upon the 
evidence before it.  
10.  A related issue is the scope of the Panel’s review.  We can certainly understand the Panel’s 
desire to have as much information before it as pos sible.  However, once you stray into the area of 
non-record evidence, you risk running afoul of the provisions of Article 11 of the DSU.  We urge you 
to consider that if you are thinking of accepting non-record evidence.  The Panel cannot perform its 
assigned function if it is considering inform ation that was not before the agency.  
 
11.  Finally, it is Korea that bears the burden of  proving that a reasonable, unbiased person could 
not have reached the same conclusions as the DOC and the ITC.  So far, all Korea has done is to say 
that there are conflicting pieces of evidence in the record, but it has failed to prove – although it 
repeatedly suggests – that the agen cies’ consideration of such evidence was improper. In other words, 
Korea has failed to satisfy its burden of proof with respect to the disagreement that is before this 
Panel. 
 12.  Thank you again for agreeing to participate in the work of this Panel.  We look forward to 
continuing that work with you in the coming weeks. WT/DS296/R 
Page B-14 
 
 
 ANNEX B-5 
 
 
ORAL STATEMENT OF CHINA 
AT THE THIRD PARTY SESSION 
 
24 June 2004 
 
  Thank you, Mr. Chairman, and members of the Panel.  China appreciates the opportunity to 
present this oral statement as a third party.  Chin a wishes to highlight certain aspects of the issues 
contained in its written submission.    I. INDIRECT FINANCIAL CONTRIBUTION 
 
1. The first legal issue China would like to address is indirect financial contribution by a 
government.  In this respect, China holds the view that Article 1.1 (a)(1)(iv) of the SCM Agreement  
should be interpreted strictly.  
2. First, this view is supported by the reading of  the plain text of the provision.  The Panel in US 
– Export Restraint  concluded that the words of “entrust” and “direct” consist of three elements:  (i) an 
explicit and affirmative action, be it delegation or co mmand;  (ii) addressed to a particular party;  and 
(iii) the object of which action is a particular task  or duty”.  China thinks that these three elements 
must be proved by positive evidence in order to fi nd “entrustment” or “direction” by a government. 
 
3. Second, in the negotiating history of the SCM Agreement , the element of financial 
contribution was included in the definition of a subsid y to limit the kinds of government actions to be 
regarded as subsidies.  On the other hand, subpar agraph (iv) of Article 1.1(a)(1) was intended as an 
anti-circumvention provision, disciplining subsidies provided by a government through a funding mechanism or a private body.  Taking together, a strict reading of the subparagraph (iv) not only 
serves the purpose of limiting the applicable scope of the SCM Agreement , but also ensures the 
effective operating of the anti-circumvention provision.    
4. In the context of reviewing a countervailing dut y determination by a panel, it is crucial to 
assess whether the facts before th e investigating authority at th at time supported its finding of 
financial contributions, and whether the investig ation reports set forth “the basis on which the 
existence of a subsidy has been determined ” as provided by Articles 22.4 and 22.5 of the SCM 
Agreement .  In China’s view, although the SCM Agreement  does not provide for any special 
evidentiary standard for the finding of indirect financial contribution, the facts accepted by the 
investigating authority must support the finding of the above-mentioned three elements of entrustment 
or direction.   
 
II. BENEFIT 
 5. Now China would like to turn to the second legal issue, the selection of a market benchmark 
for the determination and calculation of  benefits.  On this issue, China submits that the current dispute 
involves a set of questions similar to those in US – Lumber CVDs Final .   
 
6. First, China thinks that the investment d ecision of Citibank may constitute a primary market 
benchmark in the course of determining and calcula ting benefits conferred by the alleged subsidy 
programmes.    WT/DS296/R 
 Page B-15 
 
 
  
7. Second, by analogy to the Appellate Body report in US – Lumber CVDs Final , China is of the 
view that the threshold for abandoning a primary benchmar k is very high.  It is preferable to adjust the 
benchmark for some elements of incomparability.  Th erefore, in the cases of equity infusion and loans 
provision, if there are investment activities conducte d by a private entity to the same company under 
investigation, it is desirable to u se such activities as the primary market benchmark instead of to reject 
this readily available and actual benchmark and to  construct an additional set of “market terms”. 
 8. Third, even if a readily available market  benchmark is properly rejected with good cause, 
Article 14 of the SCM Agreement  requires that any alternative met hod used shall be consistent with 
the guidelines.  In China’s view, the specific require ments set out in Article 14(a) and (b) have the 
function of ensuring that only the advantage of a subsidy is calculated thro ugh the application of 
guidelines contained therein.  This understanding is  supported both by the Appellate Body report in 
US – Lumber CVDs Final (AB) and by the well accepted interpretation of the term “benefit” in 
Article 1.1 by the Appellate Body in Canada – Aircraf t.  Therefore, China believes that Article 14(a) 
and (b) impose an obligation of excluding any factor that affects comparability of the terms that are 
being constructed by an authority.    III. SPECIFICITY 
 
9. The third key legal issue on which China woul d like to comment is the determination of 
specificity.   
 10. First, in China’s understanding, Article 2.1(c) of the SCM Agreement  provides for a three-
layer requirement in the determination of de facto  specificity:  (i) there shall be facts indicating the 
possible existence of de facto  specificity;  (ii) consideration may th en be turned to any or all of the 
four factors;  (iii) when looking at factual factors, one shall  take into account two circumstantial 
factors, i.e. the extent of diversification of  economic activities and the length of time of the 
application of the subsidy programme.  
 
11. China notes that DOC in its Decision Memorandum  adopted various evidence to show the 
intention of the GOK to rescue Hynix.   In China’s view, such intenti on, even if established, at best 
only shows the “reason to believe” that there may be de facto  specificity.  It should be pointed out that 
Article 2.1(c) of the SCM Agreement  does not include the intention of a granting authority as one of 
the four factors.   
 
12. Second, in China’s opinion, while deciding on the issue of granting disproportionately large amounts of subsidy to certain enterprises, the mere fact that a company accounted for a large share in 
the debt restructuring provided by the government does not conclusively prove that the amount of 
granted subsidy is “disproportionately large”.  In  China’s opinion, the disproportionate largeness 
should be determined on the basis of comparison with other participants in the restructuring 
programme, not only from the perspective of the absolute amount of debt, but also, more importantly , 
from the perspective of the scales and needs of fina ncing of all participants in the same programme. 
 
13. China also is of the view that Article 2.1(c) of the SCM Agreement  clearly provides that two 
circumstantial factors have to be considered in the determination of specificity, namely, the “extent of 
diversification of economic activitie s” and the “length of time”.  
 14. Furthermore, in China’s view, though Article 2.1(c) does not require an authority to consider 
each and every factual factor listed therein, when ta king into account of the particular settings of the 
debt restructuring, the consideration of the third f actor, amount of subsidy, should be combined with 
the fourth factor, the manner of exercising discreti on.  The authority should have looked into whether 
there were other applications for debt restructuri ng by other companies of scale similar to Hynix and WT/DS296/R 
Page B-16 
 
 
 in similar needs of financing, and whether such app lications were refused despite situations similar to 
those of Hynix.  Such an inquiry would clarify whether the subsidy is of limited availability.   
 15. Therefore, China thinks that the DOC’s approach to finding disproportionately large amount 
of subsidies does not seem well founded pursuant to Article 2.1(c) of the SCM Agreement . 
 
16. Third, China would like to express its view that Article 2 of the SCM Agreement  requires that 
specificity of subsidy programmes be determined with  respect to each separate subsidy programme.  It 
is not consistent with Article 2 for an in vestigating authority to take a particular financial contribution  
out of the subsidy programme and consider it in isolation.  Neither is permissible to combine various 
separate subsidy programmes  as a whole and review them as a single programme.   
 
17. In this dispute, the responding party seems to introduce a so-called “inherent specificity” 
theory.  It is argued by this party that in the situation where the government provides a grant to a 
single, financially distressed manufacturer, the nature of the subsidy is inherently specific.  Contrary 
to such point of view, China believes that specificity should be examined on the basis of a subsidy 
programme, rather than an individual financial c ontribution granted under the same programme.  If 
specificity is to be determined on the basis of an y particular financial c ontribution under the subsidy 
programme, there would be no subsidy programme that is not specific. 
 18. On the other hand, DOC also appears to have put together some seemingly separated 
programmes under a big “programme” named “Directi on of Credit and Other Financial Assistance” 
and examine their specificity as a single programme.  Such a practice seems inconsistent with the 
SCM Agreement .  China believes that specificity should be  examined in relation to each separate and 
distinct subsidy programme.  Under the SCM Agreement , a subsidy becomes countervailable only 
after its specificity is confirmed.  A finding of  the specificity of a subsidy programme does not 
necessarily extend to other subsidy programmes.  Article 2.4 of the SCM Agreement  also specifically 
requires that any determination of specificity sha ll be clearly substantiated on the basis of positive 
evidence.  China thinks this provision obliges an i nvestigating authority to clearly inquire into and 
demonstrate the specificity of each separate subsidy programme.   
 
IV . CONCLUSION 
 
19. This concludes the oral statement of China.   Thank you again for this opportunity to express 
our views.    WT/DS296/R 
 Page B-17 
 
 
 ANNEX B-6 
 
 
EXECUTIVE SUMMARY OF THE ORAL STATEMENT 
BY THE EUROPEAN COMMUNITIES 
 
8 July 2004 
 
 1. The EC generally refers to its written submis sion in this case, and only wishes to make very 
few further observations mainly, triggered by submi ssions made by other third parties, which the EC 
submits have to be nuanced.  I. THE APPELLATE BODY REPORT IN US – SOFTWOOD LUMBER IS NO 
SUPPORT FOR KOREA’S PRIMARY BENCHMARK TEST 
 2. According to Korea, supported by Chin a, the US-Softwood Lumber case established 
principles that, in respect of the calculation of th e amount of the benefit of the subsidy in accordance 
with Article 14 of the Agreement on Subsidi es and Countervailing Measures (“SCM Agreement”) 
apply across each of the paragraphs of Article  14. In particular and again based on the US-Softwood 
Lumbe r case, Korea argues that if a benchmark ex ists in the market of the Member under 
investigation, this primary benchmark must be u sed unless the investigating authority demonstrates 
that this benchmark is distorted.  The EC does not  agree that there is any primary benchmark included 
in Article 14 (b) of the SCM Agreement  and submits, for the reasons that will follow, that alternative 
benchmarks may be used. 
 3. China also argues that, based on the finding of the Appellate Body in US- Softwood Lumber , 
the threshold for abandoning a primary benchmark is very high. 
 4. The EC does not agree with this view.  The EC would first of all recall that Article 14 of the 
SCM Agreement  leaves the methodology for determining the amount of a benefit to Members, 
referring in its chapeau to “any” method used.  The word “any” indicates that more than one method 
may be acceptable and, the principles in Article 14 subparagraphs (a) to (d) of the SCM Agreement  
contain “guidelines”.  Secondly, Article 14 sub-paragraphs (b ) and (c) of the SCM Agreement  bear no 
limitation in respect of the market which could provide a comparative benchmark for establishing the benefit. Sub-paragraphs (b) and (c ) refer in general terms to a “ comparable commercial loan ” and to 
“the market ”.  This wording does not support an interpre tation according to which, in the application 
of Articles 14 sub-paragraphs (b) and (c) of the SCM Agreement,  regard must be had first to any 
benchmark on the market of the Member under investigation.  
 5. In that context, the EC supports the US view according to which the US- Softwood Lumber  
case is not a relevant authority for this case.  From the report it is very clear that the Appellate Body 
ruled on the specific facts of the case and that it was concerned only about the interpretation of 
Article 14 sub-paragraph (d) of the SCM Agreement  which concerns the provision of goods and not as 
in the present case the provision of loans and equity .  Accordingly the EC submits that China’s 
argument concerning the threshold for abandoning a prim ary benchmark would be, if at all, applicable 
only to the case of Article 14 sub-paragraph (d) of the SCM Agreement , which is, however, not at 
issue in this case.  Furthermore, it is submitted that  all parties do not dispute that the Appellate Body’s 
holdings in the US- Softwood Lumber Case were lim ited to the interpretation of Article 14(d).  For 
these reasons, the EC submits that the US- Softwood Lumber  case should be disregarded as authority 
in this case. WT/DS296/R 
Page B-18 
 
 
  II. DISTORTION OF MARKET BENCHMARKS  
 
6. The EC also wishes to comment on China’s argum ent that it is not reasonable require that the 
investment decision of a private entity should be fr ee of any government involve ment in order for it to 
be used as benchmark.  
 
7. The EC submits that this argument needs to  be nuanced, especially in the case of financial 
investments.  It is submitted that, if there was also  an investment by the government, this can be an 
important factor in assessing whether the decisions by private entities to invest as well were tainted by 
the government’s action.  Indeed any perception that a government invests in a company will give the signal that the government it committed to the comp any receiving the investment.  That in turn 
suggests that the company invested in , because the government is behind it, is unlikely to fail.  In the 
case of an otherwise highly risky investment opportu nity, such government backing may well tilt the 
private operators’ risk assessment in favour of the de cision to actually invest.  It is therefore, the EC 
submits, reasonable to assume a distorting effect by such government commitment, at least in the 
absence of convincing factors pointing to another finding.  
8. Therefore, the EC disagrees with the argument put forward by China that the mere perception 
that the GOKs policy commitment to Hynix’s surviv al continued to be significant should not have 
influenced Citibank’s decision in su ch a substantial way as to invest in a company that, according to 
DOC, should have failed.  Purely from a logical poi nt of view, it is perfectly conceivable for the 
reasons just explained that because of the percep tion of a GOK policy commitment to Hynix, Citibank 
may have assessed the risk of failure as small.  This could have tilted the decision by Citibank in 
favour of investing. 
 
9. However, the US dismissed Citibank as a reli able benchmark also because of its role as 
financial adviser.  China argues that all commercia l entities operate in a complex commercial reality.  
A decision in a particular transaction may be influe nced by that in another transaction and suggests 
that even if such an influence exists, it may not necessarily constitute a justification for denying the 
commercial nature of the first decision.  The EC act ually agrees that transactions can be influenced by 
decisions in other transactions.  However, the issue is: can it be assumed that the investments made be 
the other participating banks were based on comm ercial grounds just because Citibank, as private 
sector bank, invested too?  
10. It is submitted that for a benchmark to make  any sense in this context, the comparison to it 
must be made on an equal footing.  In other wo rds: it is not appropriate to compare the lending 
decision of a bank which is engaged vis-à-vis the r ecipient of the loan only by its lending business to 
the motivation of  a bank whose main role is that  of financial advisor.  Indeed precisely because 
decisions in one transaction influence those in othe rs, the interest a bank has as financial advisor is 
bound to taint the decision such bank takes in respect  of lending to its advisory client, especially if 
this lending is comparatively small. 
 
11. Hence, the EC submits that the Panel s hould bear in mind the very specific position of 
Citibank in assessing Korea’s and China’s arguments in respect of Citibank as a possible benchmark.   
 III. EVIDENTIARY STANDARDS TO REVIEW THE EXISTENCE OF ENTRUSTMENT 
OR DIRECTION BY THE GOVERNMENT OF KOREA IN THIS CASE 
 12. The EC would like to take this opportunity to underline that Japan seems to be of the same 
opinion as the EC in respect of the degree of evid entiary standard required for showing government 
direction for proving a financial contri bution under Article 1.1.(a)(1)(iv) of the SCM Agreement .  The 
EC, as further set out in its written submission, comes to that conclusion as well.  WT/DS296/R 
 Page B-19 
 
 
  
13. The EC also fully agrees with th e interpretation by Japan that the Export Restraints  panel did 
not set forth the type of evidence required for finding entrustment or di rection, and that these elements 
may also be shown by circumstantial or secondary evidence .  The EC agrees that  it would be 
sufficient for the authorities to find a financial contri bution, if the evidence is such that the authorities 
can reasonably conclude that the government dele gated a privately-controlled bank to provide 
financial support to a specific company.  
 14. Hence, the EC would suggest the Panel shoul d find that the US finding of direction was 
consistent with WTO rules in so far as an obj ective assessment of the evidence would reasonably 
allow the Panel to reach the conclusion the authorities did.   IV . CONCLUSION 
 
15. In conclusion, the EC respectfully submits 
 
• That the US- Softwood Lumber  case should be disregarded as authority in this case;   
 
• That Citibank’s specific situation in this  case should be borne in mind when assessing 
whether it was a proper benchmark for the purposes of Article 14 SCM Agreement;  and 
 
• That government entrustment or direction can  properly be established on the basis of 
circumstantial evidence. WT/DS296/R 
Page B-20 
 
 
 ANNEX B-7 
 
 
ORAL STATEMENT OF JAPAN AT THE 
FIRST SUBSTANTIVE MEETING, THIRD PARTY SESSION 
 
24 June 2004 
 
 
I. INTRODUCTION 
 1. Mr. Chairman and distinguished Members of the panel, on behalf of the Government of 
Japan, I thank you for giving us this opportunity to express our views on this important matter.  This 
morning, we will focus on certain arguments presente d by the parties, which involve systemic issues, 
and should be addressed further.    II. ARGUMENT  
A. ENTRUSTMENT OR DIRECTION BY THE GOVERNMENT UNDER 
ARTICLE 1.1(A)(1)(IV) 
 
2. The United States argues that the words “entrusts  or directs” in Article 1.1(a)(1)(iv) of the 
SCM Agreement dictate that “[t]he focus in de termining entrustment or  direction is on the 
government’s action”.
1  We agree.  As the panel in US – Export Restraints  explained, the word 
“entrust” means to “give (a person, etc.) the responsib ility for a task . . . Commit the . . . execution of 
(a task) to a person . . ”.2  The word “direct” means to “[g]ive authoritative instructions to; order (a 
person) to do . . . order the performance of”.3  The ordinary meaning of these words, as analyzed by 
the US – Export Restraints  panel, clarifies that Article 1.1(a)(1)(iv) is concerned with the action taken 
by the government.  The reactions of private banks are not the primary concern of this Article.  Some 
private banks may accept the responsibility wholly or part ly for a task entrusted or directed to them by 
the government.  Other private banks may decline to  take the responsibility.  The reaction of such 
private banks, however, does not affect the evaluati on for the existence of entrustment or direction 
under Article 1.1(a)(1)(iv). 
 
3. We also agree with the United States that instru ctions by a government do not have to be in a 
particular form or on a transaction-specific basis.4  The panel in US – Export Restraints  interpreted the 
government’s entrustment or direction to be an e xplicit and affirmative action prompting a particular 
party to perform a particular task or duty.5  Article 1.1(a)(1)(iv), however, does not specify any 
particular methodology for evaluating the government’s  action relating to the entrustment or direction 
to private banks.  The government’s entrustment or direction, thus, does not have to be a publicly 
announced command, or a command instructing a privat e bank, in every detail, to provide financial 
support to a specific company.  It is sufficient under Article 1.1(a)(1)(iv) if the government’s action 
were such that a private bank were able to unde rstand what the government delegated or commanded. 
                                            
1 The First Written Submission of the United States (the “ US First Written Submission ”), dated 
21 May 2004, para. 175. 
2 Panel Report, United States - Measures Treating Export Restraints as Subsidies (“US – Export 
Restraints”),  WT/DS194/R, adopted 23 August 2001, para. 8.28. 
3 Id. 
4 See US First Written Submission , paras. 162-170. 
5 Panel Report, US – Export Restraints,  para. 8.29.  WT/DS296/R 
 Page B-21 
 
 
  
4. Consequently, the major question under Article  1.1(a)(1)(iv) is the evidence on which the 
investigating authority may base its finding on whet her the government’s instruction constituted an 
entrustment or direction under this Article.  As we discussed in our third party submission, the 
instruction may be shown through circumstantial evid ence.  The evidentiary st andard applicable to 
this Article is found in Article 11 of the DSU.  Ar ticle 11 requires that the Panel review whether an 
investigating authority’s determination was based on “an objective assessment of the matter before it, 
including an objective assessment of the facts of the case”.  Article 11 directs panels to make an objective assessment of the facts. However, we woul d consider that this obligation of an objective 
assessment applies equally to the investigating authorities’ assessment, because panels are required to 
review the investigating authorities' evaluation of f acts in accordance with that standard.  Article 11 
thus requires, in this case, that an investigating au thority must base its determination on the evidence 
sufficient to allow the authority to reasonably c onclude that the government delegated or commanded 
a private bank to provide certain financial support to a specific company.  There are no further 
requirements of the evidentiary standards appli cable to Article 1.1 of the SCM Agreement. 
 
B. NON-ATTRIBUTION RULE UNDER ARTICLE 15.5 OF THE SCM AGREEMENT  
5. The United States argues that “there is no requirement to collect detailed information 
concerning ‘other factors,’ including non-subject imports”
6 to comply with the non-attribution rule 
under Article 15.5 of the SCM Agreement.  This argu ment should be carefully examined.  Article 15.5 
requires that the authorities “examine  any known factors other than the subsidized imports” and that 
“injuries caused by these other factors must not  be attributed to the subsidized imports”.7  This 
language clarifies that if any other factors are known by the investigating authority, the investigating 
authority must undertake positive actions to collect a nd evaluate the evidence so  that the investigating 
authority can separate and distinguish the possibl e injurious effects of the other known factors. 
 
6. The Appellate Body has repeatedly explaine d that the investigating authority must take 
positive actions to collect and assess informa tion regarding the known factors.  In US – Hot-Rolled 
Steel , the Appellate Body clarified the meaning of  the word “examination”.  According to the 
Appellate Body, an examination “relates . . . to th e way in which the eviden ce is gathered, enquired 
into and, subsequently, evaluated;  that is, it relates to the conduc t of the investigation generally”.8  
Regarding the authorities’ conduct of the “inv estigation”, the Appellate Body explained: 
 
The ordinary meaning of the word "inv estigation" suggests that the competent 
authorities should carry out a "systematic enquiry " or a "careful study" into the matter 
before them.45 The word, therefore, suggests a proper degree of activity on the part of 
the competent authorities because authorities charged with conducting an enquiry or a 
study – to use the treaty language, an "i nvestigation" – must actively seek out 
pertinent information.9 
--------------------------------------------------------------------- 
 45 The New Shorter Oxford English Dictionary,  supra , footnote 43, V ol. I, p. 1410. 
 
 
                                            
6 The “US First Written Submission” , para. 422. 
7 Article 15.5 of the SCM Agreement (emphasis added). 
8 Appellate Body Report, United States - Anti-Dumping Measures on Certain Hot-Rolled Steel Products 
from Japan  (“US - Hot-Rolled Steel ”), WT/DS184/AB/R, adopted 23 August 2001, para. 193.  
9 The Appellate Body Report,  United States - Definitive Safeguard Measures on Imports of Wheat 
Gluten from the European Communities (“US – Wheat Gluten”) WT/DS166/AB/R, adopted 19 January 2001, 
para. 53. WT/DS296/R 
Page B-22 
 
 
 The examination to separate and distinguish other known factors under Article 15.5 is a part of the 
authorities’ conduct of the investigation under Part V of the SCM Agreement.10  As the Appellate 
Body explained in the above reports in US-Hot-Rolled Steel  and in US-Wheat Gluten , therefore, the 
investigating authorities are required to take positive actions to “gather” and “evaluate” the evidence 
related to other known factors.   
 
7. The phrase “must not be attributed”, in Article  15.5, further clarifies that the investigating 
authorities are required to take positive actions to separate and distinguish injury caused by other 
known factors from injury caused by the subsidized  imports.  The Appellate Body has clarified 
Article 3.5 of the AD Agreement, which is equi valent to Article 15.5 of the SCM Agreement: 
 
We recognize, therefore, that it may not be easy, as a practical matter, to separate and 
distinguish the injurious effects of different causal factors.  However, although this 
process may not be easy, this is precisely what is envisaged by the non-attribution language.  If the injurious effects of the dumped imports and the other known factors 
remain lumped together and indistinguishab le, there is simply no means of knowing 
whether injury ascribed to dumped imports was, in reality, caused by other factors.  Article 3.5, therefore, requires investiga ting authorities to undertake the process of 
assessing appropriately, and separating and distinguishing, the injurious effects of 
dumped imports from those of other known causal factors .11 
8. In sum, WTO jurisprudence has clarified that the investigating authorities are required to take 
positive actions to collect and evaluate other known factors to separate and distinguish injury caused 
by factors other than the subsidized imports.    III. CONCLUSION 
 9. For the reasons discussed above and in our thir d party submission, Japan respectfully requests 
that this Panel carefully review the consistenc y of the injury determination and the subsidy 
determination by the United States. 
                                            
10 See Article 10, which provides “Countervailing duties may only be imposed pursuant to 
investigations  initiated and conducted  in accordance with the provisions of  this Agreement and the Agreement 
on Agriculture.”  (footnote omitted, emphasis added.) 
11 Appellate Body Report, US – Hot-Rolled Steel , para. 228 (emphasis added).  WT/DS296/R 
 Page B-23 
 
 
 ANNEX B-8 
 
 
THIRD PARTY ORAL STATEMENT 
SEPARATE CUSTOMS TERRITORY OF TAIWAN, 
PENGHU, KINMEN  AND MATSU 
 
24 June 2004 
 
 
Introduction 
 
1. Based on trade and systemic concerns, the Gove rnment of the Separate Customs Territory of 
Taiwan, Penghu, Kinmen and Matsu wishes to take  this opportunity to express its positions with 
regard to the interpretation of the Agreemen t on Subsidies and Countervailing Measures (ASCM) 
concerning the dispute between the United States and Korea.  We will address, in particular, two issues: the interpretation of ASCM Article 1.1(a)(1)(iv) “entrust or direct”, and the selection of a 
suitable benchmark in the calculation of benefit pursuant to ASCM Articles 14(b). 
 
ASCM Article 1.1(a)(1)(iv) “Entrust or Direct” 
 
2. With regard to the interpretation of the terms “entrust or direct” in Article 1.1(a)(1)(iv) of the 
ASCM, we believe that the interpretation of the Panel in US - Export Restraints  is applicable to the 
present case. The Panel directly examined the mean ing of the words “entrust” and “direct” in the 
context of ASCM Article 1.1(a)(1)(iv) in a general manner.
1  The Panel held that  
 
the act of entrusting and that of directing…necessarily carry with them the following 
three elements:  (i) there must be an explicit and affirmative  action, be it delegation or 
command;  (ii) addressed to a particular party;  and (iii) the object of which is a 
particular task or duty…We therefore do not believe that either entrustment or 
direction could be said to have occurred un til all of these three elements are present.”2 
[emphasis added] 
 3. It follows from the Panel’s stringent standards that mere influence or control by the 
government is, in itself, insufficient to prove entr ustment or direction.  The investigating authorities 
must determine whether the government influence w as the result of an explicit and affirmative act 
addressed to a particular party for a specific task .  Drawing inference from circumstantial evidence 
does not discharge a competent author ity’s evidentiary burden in this regard.  It is our view that the 
competent authority should make an examination of all evidence in order to decide whether the above 
three elements of entrustment or direction have been met. 
 
Benchmark Pursuant to Articles 14(b) of the ASCM 
 4. Article 14 of the ASCM deals with the calc ulation of benefit based on four guidelines, in 
which Article 14 (b) addresses the issue of loans and loan guarantees. The paragraph emphasizes the 
difference in capital costs by comparing the interest payments the firm would make on government 
loan with the amount it would otherwise pay on “ comparable commercial loan  which the firm could 
                                            
1 United States – Measures Treating Exports Restraints as Subsidies (US – Export Restraint) , Panel 
Report, WT/DS194/R, paras. 8.25-8.32. 
2 US – Export Restraint , para. 8.29. WT/DS296/R 
Page B-24 
 
 
 actually obtain on the market”, or the benchmark.  
 
5. In selecting a benchmark, we believe that Ar ticle 14(b) should be inte rpreted along with other 
paragraphs of Article 14 in a consistent manner. In our view, the appropriate benchmark for 
comparable commercial loans should be the marketplace in the Member’s territory in question.  If the 
firm under investigation received its funding from local sources, the use of a non-domestic benchmark 
would be incongruous.  It is only when all possibl e domestic benchmarks have  been determined by 
the investigating authorities to be indeed  distorted should other benchmar ks be considered.  In doing 
so, the investigating authorities should also establish that the other benchmark of their choice relates 
to the prevailing market conditions of the market at issue. 
 
Conclusion 
 
6. The Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu respectfully submits 
the above positions for consideration by the Panel.  We thank you again for the opportunity to offer 
our comments.