UNITED STATES – COUNTERVAILING DUTY INVESTIGATION ON DYNAMIC RANDOM ACCESS MEMORY SEMICONDUCTORS (DRAMS) FROM KOREA
Document: Statement by Korea
Date: 28 July 2005
Document codes: WT/DS296/9; WT/DS296/AB/R; WT/DS296/R
Complainant: South Korea
Respondent: U.S.
Third parties: China, Taiwan, EU, Japan
Dispute stage: Appellate Body
Agreements cited: Art. 1, 2, 10, 12, 14, 15, 19, 22, 32  Subsidies and Countervailing Measures (SCM)Art. VI:3  GATT 1994

UNITED STATES – COUNTERVAILING DUTY INVESTIGATION ON
DYNAMIC RANDOM ACCESS MEMORY SEMICONDUCTORS (DRAMS)
FROM KOREA

Statement by Korea

 The following statement received from the delegation of Korea in relation to the adoption by
the Dispute Settlement Body, at its meeting on 20 July 2005, of the reports of the Appellate Body and
Panel in United States – Countervailing Duty Inves tigation on Dynamic Random Access Memory
Semiconductors (DRAMs) from Korea (, ), is circulated at the request
of that delegation.

Introduction

 Mr. Chairman, the DSB today considers the Reports in US – DRAMS (DS296). This dispute
arises from a countervailing duty order imposed by the Unites States on certain semiconductors
imported from Hynix of Korea. The US Departme nt of Commerce ("the DOC") claimed that the
Government of Korea subsidized Hynix through a se ries of financial contributions from September of
2000 through October 2001. The key issue in the DOC investigation was whether or not certain
private financial institutions had been entrusted or directed by the Government of Korea to make such
financial contributions. In a t horough and detailed review, the Pane l found that, with one exception,
an objective and unbiased investigating authority could not have reached the conclusions in the DOC's
determination. The legal and factual findings by th e Panel that led them to this conclusion were the
subject of appeal by the United States. Korea cros s-appealed on one issue where the Panel found that
there had been entrustment or direction with r espect to one Korean bank when that bank never
actually carried out the act it was supposedly directed to do.

 The US International Trade Commission ("the IT C") also found that the allegedly subsidized
imports had caused material injury. The Panel f ound that the ITC had not offered any explanation as
to how it had reached its conclusion that the impact of factors other than the allegedly subsidized
imports was not attributed to such imports. Therefor e, the United States is not in conformity with its
obligations under Article 15.5 of the SCM Agreement. There were no appeals on the injury issues.
Thus, the US measure was found to be inconsistent with its obligations under Article 15.5 of the
SCM Agreement and the United States should act imme diately to bring its measure into conformity.
As for the inconsistencies that th e Panel found with respect to the DOC 's subsidy determination, it is
important to note that, as the Appellate Body expressl y stated in its Report, its ruling reversing these
findings does not mean it actually upheld the US countervailing duty order as being in conformity
with the SCM Agreement.

 Mr. Chairman, first of all, Korea would like to offer its thanks to all involved for their hard
work. In Korea's view, with one relatively na rrow exception, the Panel Report was a thorough and

acceptable review of the facts and law, even though Korea certainly does not agree with a number of
the conclusions reached by the Panel. Howeve r, Mr. Chairman, Korea has grave reservations
regarding the Appellate Body Report. While there were some issues of legal review, this Appellate
Body Report is, unfortunately, not confined to su ch issues as required by the clear mandate of
Article 17.6 of the DSU which prescribes that an appeal should be limited to issues of law covered in
the panel report and legal interpreta tions developed by the panel. Instead, it is a clear example of
unwarranted fact-finding by the Appellate Body.

 Mr. Chairman, Korea asks the indulgence of this Body to take a few moments to discuss the
issues of the scope and nature of the Appellate Body's Report in greater depth. Obviously, Korea
cannot deal with each aspect of the Appellate Body's analysis even in extended remarks, but the most
salient examples need to be brought to Members' attention. Among the legal matters before the
Appellate Body, we will review the issues of the lega l interpretation of the term "entrusts or directs,"
Korea's cross-appeal on the question of whether a private body can be found to have been entrusted or
directed to carry out a governmental function when it actually never carries it out, the question of the
evidentiary standards applied by the Panel and the Appellate Body's extraordinary legal interpretation
of the reporting requirements of Article 22.5 of the SCM Agreement. Finally, we will look at some of
the most salient and unfortunate examples of de novo fact-finding engaged in by the Appellate Body
because Korea considers that this case represents a break-down in the process of appellate review that
raises serious concerns.

The Interpretation of "Entrusts or Directs"

 First, some legal issues must be noted in orde r for the overall dispute to be understood. There
were arguably three legal issues before the Appella te Body, although the parties differed on how to
characterize some of these matters. The first clearly legal issue was the question of the definition of
the terms "entrusts or directs" in Article 1.1(a)(1 )(iv) of the SCM Agreement. The United States had
argued that the Panel had imposed too stringent a sta ndard in interpreting this. The Panel had stated
that the term was based on the notion of "delega tion or command". The Appellate Body modified the
Panel's interpretation as being too strict to the ex tent it relied just on the terms "delegation" or
"command". In reality, and as the Appellate Body see med to agree, this was more of a clarification
than a modification of the Panel's rulings. In eith er case, Korea accepts this ruling of the Appellate
Body. It is clearly within the confines of Article 17.6 of the DSU.

Korea's Cross-Appeal

 The Appellate Body rejected Korea's cross-appeal on the issue of "entrustment or direction".
Korea noted to the Appellate Body that the Panel had actually upheld the DOC's findings with respect
to the alleged direction of Korea First Bank, or KF B. This finding by the Panel was based on a single
piece of hearsay, circumstantial evidence in a newspa per article relating to a single transaction among
the four alleged financial contri butions. However, KFB never undertook the transaction that was the
sole issue of this newspaper article. In Korea's view it was impossible that a private body could be
entrusted or directed "to carry out" a governmental financial contribution if, in fact, the private body
did not carry it out. Indeed, the United States agreed and considered this point "axiomatic." In a
startling departure from the whole rest of its argument against the Panel Report, the United States
argued that the Panel made this finding as part of a broader context, based on a totality of the
evidence. This argument that the Panel was actua lly not limiting its conclusions to the subject of the
newspaper article, but, instead, was taking it as ev idence of broader entrustment or direction was
directly contrary to the US arguments underlying the main portion of its own appeal to the effect that
the Panel had looked at each piece of evidence in isola tion. Indeed, highlighting this contradiction in
the US argument was one of the reasons Korea brought the cross-appeal. Even though this
contradiction did not seem to be an overly subtle point, the Appellate Body seems to have completely
missed it in its own analysis.

 But this issue of whether the Panel examined matters in a broader context will come up again
later; at the moment the point here is that the A ppellate Body did not agree with the parties and found
that there could be entrustment or direction when there was no action taken by the private body.
Apparently, the very next phrase in Article 1.1(a )(1)(iv) – "to carry out" – was not considered
sufficiently important context for the Appellate Body to take note of it. Moreover, to say that there
can be entrustment or direction in some sort of void where there is no financial contribution is an
academic exercise of the most sterile sort. The overa ll legal issue is whether Article 1.1(a)(1)(iv) has
been correctly applied, not just a small piece of it vi ewed in isolation. This part of the Appellate
Body's textual analysis can be characterized as dicta and would have been better left out of its
analysis.

The Evidentiary Standard Applied by the Panel

 The next legal issue was whether the Panel had imposed too strict an evidentiary standard on
the US by stating that the evidence proving entrustment or direction had to be "probative and
compelling". The Appellate Body upheld the Panel' s description of the evidentiary standard and the
manner in which it was applied. Importantly, the A ppellate Body rejected the US characterization of
the terms probative and compelling and found that the Panel had not actually applied such an
improper standard. The Appellate Body stated:

It appears to us, on balance, that the Panel did not apply the term "compelling" in the
manner suggested by the United States; had it done so, it would have erroneously
imposed a qualitative standard higher than that contemplated by the
SCM Agreement.
1
 This is an important point because, as Korea pointed out to the Appellate Body, this very
improper standard of "compelling evidence" was act ually imposed by the DOC against Korea during
the investigative process. At the preliminary dete rmination stage, the DOC created a presumption of
guilt against the Korean respondents based on histor ical findings involving other producers and other
banks. Then, in the final determination, the US DOC stated that Korea had failed to rebut this
presumption with "compelling evidence". Korea has to mention this point here because,
unbelievably, the Appellate Body Repor t is absolutely silent in this regard. It is as if Korea never
made the argument. And it will be of critical impor tance when we get to the issue of whether the
Appellate Body should have "completed the analysis" after reversing parts of the Panel's findings.

Article 22.5 of the SCM Agreement and Ex Post Facto Arguments

 The last of the legal issues was the interpre tation of Article 22.5 of the SCM Agreement.
Among other things, Article 22.5 requires that investigating authorities issue a public report that
contains " all relevant information on the matters of f act and law and reasons" for an affirmative
determination. On this and other bases, the Pane l rejected some evidence proffered by the US as
ex post facto rationalizations, because it was not contained or referenced in the report of the DOC's
determination and there was no indication that th e DOC had actually taken such information into
consideration.

 In Korea's view, the Panel was absolutely correct. It would be improper to subject
respondents to such double jeopardy. First, respond ents would have to make their arguments before
the investigating authority. Then, as a second step , they would have to address wholly new assertions

1 Appellate Body Report at para. 139 (emphasis added).

about factual issues concocted by the other side's lawy ers after the fact in front of the Panel. This
double jeopardy is inconsistent with the clear requirements of the SCM Agreement.

 As part of its arguments, Korea brought to the Appellate Body's attention the language from
the old GATT Subsidies Code. However, this is not mentioned in the Appellate Body Report; it is not
even referenced. This is puzzling indeed, give n the importance Korea placed on this issue. The
Appellate Body certainly may disagree with an im portant argument presented by a party; it is
improper to simply ignore it.

 Since the Appellate Body did not bother to re view the language, Korea will provide it here for
the DSB record. Article 2.15 of the GATT Subsidies Code reads as follows:

In the case of an affirmative finding each su ch notice shall set forth the findings and
conclusions reached on all issues of fact and law considered material by the
investigating authorities.
 As can be seen, the word "all" appears in a very different place in the SCM Agreement
compared to the GATT Subsidies Code. It is no l onger sufficient that a report merely set out "all
issues of fact and law". It is now required that "all relevant information" supporting the conclusions
of such matters of fact and law be presented. Article 22.5 of the SCM Agreement was a major step
forward in the requirements for transparency of the administrative processes, as well as a protection
against just the sort of ex post facto arguments that the Panel was confronted with in this dispute.

 Or, at least, that was the requirement before th is dispute. In an astounding case of legislation
by judicial decision, the Appellate Body has simp ly written the key element of Article 22.5 out of
existence. The Appellate Body seems to consider it too burdensome on investigating authorities to
require that they provide "all" of their relevant s upporting information in their reports. Note, it is not
"all information"; it is "all relevant information" that supports the ad ministrative determination. This
is not a great burden. It is simple transparency and fairness.

 Thus, as of today, "all" no longer means "all". So what does it mean? Does it mean "none" or
does it mean "some"? Korea presume s that the Appellate Body will ev entually rule that "all" will
mean "some," but we will not know the parameters of the new definition of Article 22.5 until there is
further litigation, and it is now certain that there will be further litigation on this issue.

 It is not up to the Appellate Body to throw out treaty terms simply because it considers them
inconvenient. And why should the Members be s itting here speculating on how the Appellate Body
will rule in the future? We already negotiated the st andard once. It was very clear. "All" relevant
information" was to be provided.

 The United States routinely demands that Member s agree to rules for mo re transparency in
dispute settlement. Yet, here we have an instance where there was a very clear rule already negotiated
regarding transparency in domestic trade remedies investigations. However, the United States has
petitioned to strip that requirement of all meaning, obtained its wishes and now celebrates this huge
step backwards in transparency. Mr. Chairman, actions have consequences. It is difficult to see how
the United States can have any expectation that Members will agree to new transparency requirements
when those already agreed to are summarily discarded in this fashion.

The Appellate Body's De Novo Fact-Finding

 Now, we must turn to the even more troub ling aspect of this Appellate Body Report; namely,
the Appellate Body's de novo review of the facts in a manner in consistent with Ar ticle 17.6 of the
DSU. As Members are aware, pursuant to Article 17.6 of the DSU, only issues of law are subject to

appeal. There is a spurious attempt to deal with this limitation by a passing comment in footnote 277
of the Appellate Body Report to the effect that the Panel was applying the law to the facts. This is
disingenuous at best and would strip DSU Article 17.6 of any meaning. That is precisely what panels
do and it is all that they do. There is no such thing as a weighing of facts in a vacuum. It must be
done in light of the law. By this standard, there is simply nothing at all that is not subject to appellate
review. This is not what the negotiators intended when they drafted the eminently clear language of
Article 17.6.

 The key to understanding the issue here is to first note the method of analysis pursued by the
investigating authority, the DOC. The DOC took two particularly important steps. It relied upon a
"totality-of-the-evidence" approach and linked sever al distinct transactions together in a "single
program" to support the approach.

 As noted earlier, the DOC created a presumption of entrustment or direction on the part of the
Government of Korea based on previous dete rminations by the DOC. But these previous
determinations had nothing to do with Hynix nor the large major ity of financial institutions involved
here. Moreover, even the DOC recognized that the s ituation arising out of th e Asian financial crisis
was qualitatively different. The IMF was closely i nvolved in the recapitalization of the financial
sector that was necessary to keep the Korean economy from collapsing. Due to illiquidity that
threatened to paralyze the whole country, the Government of Korea ended up with temporary
ownership stakes in a number of banks that it ha d never been affiliated with before. The IMF
confirmed on a number of occasions that Korea engaged in this process of working through
insolvencies based on market principles.

 It was these banks with some degree of govern ment ownership that the DOC focused on in its
findings and for which it created the presumption of guilt. Of course, it must first be noted that the
SCM Agreement does not provide for such presumptions. It requires that findings be made on
"positive evidence".

 Having created this presumption of guilt, the DOC stated that it was relying on the "totality of
the evidence" in finding that the Korean respondents had not sufficiently rebutted this presumption.
In its totality of the evidence approach, the DOC lumped together four distinct financial contributions.
It developed a supporting theory that this was all part of a so-called "single program" to subsidize
Hynix. However, as the DOC explicitly recognized, at least the fourth alleged financial contribution
had no factual nexus with the other three. The fi rst three arose out of the financial difficulties in
which Hynix found itself beginning in September of 2000 following the Asian financial crisis. The
fourth came about in the summer and autumn of 2001 and was specific to the semiconductor industry.
It arose from a dramatic and unexpected general downturn in the sector.

 The Panel looked at a number of critical pi eces of evidence upon whic h the DOC relied.
There were approximately 10 such pieces of evidence although the parties, the Panel and the
Appellate Body all examined and counted them in somewhat different ways.

 The Panel found that 9 of these 10 were impugned in various ways. Some were not probative
in that they went to prove a different point other than establishing that there was an affirmative action
taken by the Government of Korea to entrust or di rect the banks to make financial contributions.
Some were factually inaccurate. Some were incomp lete in that the DOC jumped to a conclusion
without reviewing all of the relevant facts regard ing such evidence. Some had combinations of these
flaws.

 The one piece of evidence that was left standing was the supposed entrustment or direction of
KFB by a single official. This was based on the contested evidence represented in a single newspaper
article, as noted previously. However, even with that one piece of affirmed evidence of entrustment

or direction, the Panel overturned the DOC's s ubsidy determination. Taken individually or
collectively, the Panel found the evidence was not compelling and that an objective and unbiased
investigating authority could not have reached an af firmative conclusion on that basis. Indeed, that
had to be the case. The DOC built an undifferentiate d affirmative determination based on ten legs.
When nine were knocked out, it was simply impossibl e to find that the DOC's determination could be
supported by the one remaining leg.

 The US appealed on this issue of whether the Panel had properly examined the facts on a
"totality of the evidence" basis or had improperly found that each and every individual piece of
evidence had to demonstrate entrustment or direction in and of itself. It was a most remarkable
appeal, because the Panel demonstrably did not do wh at the United States said it did. Indeed, a good
deal of Korea's very lengthy submission to the Appellate Body was juxtaposing the actual language of
the Panel Report with the chopped-up and twisted "quotations" submitted by the United States.

 Unfortunately, the Appellate Body also ignor ed the plain language of the Panel Report and
reversed the Panel's factual findings. Oddly, the Appellate Body seems to have implicitly recognized
that it was not examining all of the Panel Report. In paragraph 146 of the analytical section of the
Report, the Appellate Body refers to the Panel "o ften appearing" to examine whether each piece of
evidence resulted in entrustment or direction. Sim ilarly, in paragraph 158, the Appellate Body argues
that the Panel did this with "many" pieces of evid ence. Yet, in paragraph 209(b)(ii)(B) of its
Findings and Conclusions, it reaches a generalized conclusion about what it admitted was less than
the whole of the Panel's analysis.

 Of the ten legs holding up the DOC's totality -of-the-evidence determination, the Appellate
Body only examined four, not "many". Moreover, it only examined the four where the language of
the Panel was most tilted in the direction of the Appellate Body's conclusion.

 In Korea's view a fair reading of the Panel' s language even in the so-called examples did not
support the US arguments. One cannot simply lift language out of its context and then twist its
meaning in this fashion. Just as the Vienna Conve ntion requires that treaty language be read in its
proper context, so Report language must be read in context and not lifted out in convenient isolated
portions. This is simply a matter of logic, common sense and fairness.

 Ironically, as noted previously, the Appellate Bo dy upheld the Panel's finding with respect to
the entrustment or direction of KFB even though, in order to do so, it had to agree with the US that the
Panel had not limited itself to the alleged instance of coercion cited in the newspaper article. Instead,
the Appellate Body found that in this one conve nient instance the Panel had actually looked at the
evidence in a broader context. This was, indeed, a highly selective review of the Panel's decision

 The Appellate Body did not even bother to ex amine the other five instances of evidentiary
examination engaged in by the Panel. Since the Appellate Body did not c ite any language that was
inconvenient to its conclusions, Korea will offer an example so that at least the DSB record will be
more complete. For instance, with respect to th e implications of a meeting of Korea's Economic
Ministers, the Panel stated:

Thus, even if the US argument regarding signaling was correct, that alone was not
sufficient for the DOC to properly treat the circumstances surrounding the Economic
Ministers' meetings as evidence of government entrustment or direction.
 That is, because it was not probative of legally re levant points, it could not be considered as
part of the evidence of entrustment or direction, not that it alone had to prove entrustment or
direction. This was an important issue, indeed c onsidered one of the most important by the DOC in

its determination. It is difficult to understand how the Appellate Body could reach a generalized
conclusion without even mentioning it, much less addressing it.

 Korea would like to further recall the point re garding the so-called "single program" approach
of the DOC. That is, in making its totality of the evidence analysis, the DOC linked all of the
financial contributions together even though ther e was a qualitative difference between, at least, the
first three and the last one. That is, factual circumstances changed in the summer of 2001 in a manner
that no one could have contemplated previously. Th e Panel found this to be critically important and
Korea argued that it was a keystone upholding the whole edifice of the DOC determination.
However, the Appellate Body did not even bother to address this critical issue. It only mentioned it in
the breeziest of manners when it came to the post-conclusion stage of "completing the analysis", but
that is an overt fact-finding done to a different le gal standard than the primary review of the Panel's
determination pursuant to Article 11 of the DSU.

 Why was the Appellate Body analysis done this wa y? In its partial approach to the evidence,
the Appellate Body examined only a few instances – not "many" as it purported to do – and then only
focused on the weakest language of the Panel. If the Appellate Body is going to engage in this sort of
in-depth factual analysis it must do so in a comp rehensive manner. It cannot look at a few instances
and simply stop there and draw a generalized conclusion.

 What is striking, Mr. Chairman, is how clo sely this approach resembles the way litigation
briefs are often written. They stress the opponent 's weaknesses and extrapolate conclusions from
them while sidestepping the strongest counter-argum ents. But why is this Appellate Body Report
written like a litigant's submission?

 Mr. Chairman, Korea must also bring to this Body's attention some of the more remarkable
individual instances of de novo fact-finding contained in the Appellate Body's Report. In one
example, the Appellate Body discusses certain statem ents made by Kookmin Bank in its prospectus
filed with the US Securities and Exchange Commission. Rather than going through a full recitation of
the Appellate Body's troubling de novo review of the evidence on this issue, Korea would like to draw
Members' attention to a statement in paragraph 156 of the Appellate Body Report to the effect that
"Kookmin Bank ... acknowledged making loans in pursu it of government policy". This is a factually
inaccurate statement. This is not what the prosp ectus stated; it was not even what the DOC found,
nor what the United States argued before the Panel and Appellate Body. Rather, the prospectus made
conditional statements about what might happen in the future. There was no such acknowledgement
by Kookmin Bank with respect to past actions. This is raw fact-finding by the Appellate Body that
not only ignored the thrust of the Panel's factual weighing and analysis, but flatly misstates a critical
fact.

 It is possible that this statement by the Appellate Body was referring back to an earlier
analysis of Kookmin Bank's participation in the Syndicated Loan, although there is no footnote
indicating this. But even then, such a reference would highlight another problem with the Appellate
Body's analysis. In paragraph 148 of its Report, the Appellate Body quotes the Panel's reference to
Kookmin Bank acting in response to a "government policy request". The Appellate Body then
reverses the results of the explicit weighing of the facts done by the Panel and says this one factor out
of the nine listed in Kookmin Bank's statement is determinative regardless of the other eight
commercial reasons provided by the bank.

 Not only was this an improper reweighing of th e evidence by the Appellate Body, it reflects a
breakdown in basic practices of appellate review. This reference to "government policy" was a
contested translation. The proper translation was " public policy considerations". These are the very
sort of broad concerns that corporations often ta ke into consideration. For instance, BP, once known
as British Petroleum, has spent huge sums of mone y arguing that it should be thought of as "Beyond

Petroleum" based on its new environmentally friendl y focus. Virtually every large company takes
these sorts of public policy issues into account. Th is is very different from following "government
policy" directives.

 The Panel, however, used this term "govern ment policy" because it was construing the facts
in the manner most favourable to the United States be fore reaching a conclusion contrary to the US
argument. In contrast, the Appellate Body made this fact-finding in the manner most unfavourable to
Korea and then ruled for the United States on the facts. Mr. Chairman, this is simply improper. The
Appellate Body should not be in the business of fact-finding in the first place, but if it is going to do
so, it must follow the most basic principles of appe llate review and not construe disputed facts in
favour of the party it is ruling for rather than the party it is ruling against.

 The Appellate Body repeated this fundamen tal error in its discussion of the supposed
attendance of government officials at a meeting of Hynix's Creditors' Council. In paragraph 147 of its
Report, the Appellate Body makes a factual finding that the attendee was a Vice Chairman of the
Financial Supervisory Commission, or "FSC". The FSC is a government agency that participates in
financial regulatory policy. However, the actual attendee at the meeting was an official of the
Financial Supervisory Service, or "FSS". The FSS employees are not civil servants. They are
technical specialists whose main functions are ex amining and auditing financ ial institutions. This
distinction can make a substantial difference in wh at inferences one draws from the attendance of
such a person at a meeting of the Creditors' Council.

 The Panel, once again, did not actually make a fact-finding resolving this disputed fact;
instead, the Panel construed the facts in the manner most favourable to the US before ruling against
the US. Incredibly, the Appellate Body even acknowledged that this was a disputed fact, but then said
that it would continue with the assumption that it w as an FSC official "similarly" to what the Panel
had done. But this was not similar in any way. Indeed, it is exactly the opposite of what the Panel
did. Once again, the Appellate Body construed a di sputed fact against Korea and then proceeded to
rule for the United States. This is simply unaccept able for the Appellate Body to engage in such
unfair and improper fact-finding.

 Mr. Chairman, Korea would like to ask the i ndulgence of Members for the examination of
one further extreme example of improper fact-finding by the Appellate Body because it relates to a
critical issue. There was an important question as to whether some of the creditor banks actually took
part in the October 2001 restructuring that was co untervailed by the DOC. The focal point of the
DOC's determination with respect to the October 2001 restructuring was that creditors controlling
Hynix's Creditors' Council were able to set the te rms for all banks. However, despite the picture
painted by the DOC of a web of supposed coer cion, several of the banks, including wholly
government-owned banks, refused to participate in this restructuring. They exercised their appraisal
rights and, when they were offered a deal on their Hynix debt, disagreed with the terms of the deal
and asked for mediation. All parties, the Panel a nd the Appellate Body know at this point that there
is not at this time any dispute about the real situ ation. These banks did not participate. Thus, the
DOC countervailed transactions that did not occur. The only question was whether or not there was
evidence in the record that the DOC ignored in this regard.

 The Panel found that there was su ch evidence in the record. It was three-fold. First, there
was the overarching law, the CRPA, that provided fo r such mediation. Second, there was a clear
statement in the Hynix audit report that indicated that banks exercised their rights to mediation
pursuant to the relevant provisions of the CRPA. Th ird, this was further corroborated by statements
made by the DOC's own experts.

 The key section of the Hynix audit report was not the least bit ambiguous. It stated that
pursuant to "this clause" the banks exercised their ri ghts. And what was "this clause"? The previous

sentence referred to the CRPA and the "Mediation Co mmittee" set up pursuant to it. There was no
ambiguity. Korea even provided a dictionary definition of the word "this" to make clear the
grammatical construction of the paragraph in question.

 However, once again the Panel construed the dis puted fact in favour of the United States and
found that, even if it could be considered ambiguou s, it still put the DOC on notice that there were
further actions by the banks in this regard. Again, this was standard procedure in reviewing another
body's fact-finding.

 Korea is forced to take the time here to refer to the discussion about the meaning of "this
clause" because it was not even refe renced in the Appellate Body's analysis. Indeed, the Appellate
Body side-stepped it by referring to a discussion in the oral hearing about appraisal rights. However,
the discussion at the hearing, at least on Korea's part, was primar ily about the meaning of the phrase
"this clause." The only reason that there was talk about the appraisal issue at all was because the
Appellate Body skipped right over the Panel's analysis and directed its question at the record, not how
the Panel actually analyzed the reco rd. This can be seen by the next step of the Appellate Body's
analysis.

 The Appellate Body rests its conclusion on the fact that the Korean respondents did not
unambiguously state in their questionnaire responses that there had been mediation. Members should
review this discussion in paragraph 178 of the Appella te Body's Report. Members should also look at
footnotes 334 and 335. At no point in the Appellate Body's discussion is there even a citation to,
much less analysis of, the Panel's factual findings. Because the Appellate Body did not make any
mention of the manner in which th e Panel weighed the facts, Korea considers it only fair that the
following at least be reflected in th e record of this DSB meeting. In paragraph 7.87 of its Report, the
Panel states:

Although the GOK questionnaire response should perhaps have made a reference to
the request for mediation by three of the four option 3 creditors, we consider that
there was in any event sufficient informati on on the record to bring into question the
DOC's determination that creditors "contro lling" the Creditors' Council were able to
"set the terms for all banks". In these ci rcumstances, we do not consider that an
objective and impartial investigating aut hority could properly have found, on the
basis of the CRPA, that "the terms on wh ich these creditor banks terminated their
relationship with Hynix were dictated by th e banks that mattered in this case, namely
the large government-owned and controlled creditors".

 Thus, the panel explicitly took into considerati on that the questionnaire responses should have
been more complete, but found that, nonetheless, th e evidence was clear that the DOC determination
was fundamentally undermined.

 Korea would like to emphasize here that this was not a question of withholding information.
The information that could have been included in the questionnaire responses would have been
favourable to the Korean respondents. It was simply an error that resulted from a misunderstanding
of the focus of the inquiry which had been, up to th at time, on the issue of asking for appraisals, not
going the extra step to mediation. In any event, there could never be a clearer example of a Panel
taking an adverse fact into consideration, carefu lly weighing it and then coming to a conclusion in
light of the facts at hand.

 Mr. Chairman, it should not be the case that Korea is forced to take the time to bring to the
DSB's attention what the Panel said in evaluating this factual aspect of the dispute. Why was this
weighing of the evidence by the Panel not even acknowledged in the Appella te Body Report, much

less discussed? It is possible that one can disagree with the Panel's conclusion. The United States
certainly disagrees. But it cannot simply be ignored in a proper appellate review.

 At this point, Mr. Chairman, it is useful to r ecall the words of the Appellate Body with respect
to the interpretation of Article 11 of the DSU. In 1998, the Appellate Body stated in EC – Hormones:

"Disregard" and "distortion" and "misrepresentation" of the evidence, in their
ordinary signification in judicial and quasi -judicial processes, imply not simply an
error of judgment in the appreciation of ev idence but rather an egregious error that
calls into question the good faith of a panel.
2
 Where, Mr. Chairman, is the bad faith exhibited by this Panel? Clearly there is none. One
can disagree with the Panel's conclusions, but ther e was clearly a good faith effort to examine the
evidence in great detail and with objectivity. Obviously, in the years between this earlier
interpretation of the language of DSU Article 11 and today, there has been a drastic change in the
approach of the Appellate Body. This was hinted at in some other cases, but we have gone much
further today. Now we are in the situation wher e the Appellate Body has undertaken the explicit re-
examination of facts.

 As has been shown, the Appellate Body cons trued disputed facts in favour of the United
States and then ruled for the United States. Because it violates the basic principles of appellate review
to construe disputed facts in favour of the preva iling party, one can only conclude that the Appellate
Body engaged in its own de novo fact-finding. On critical issues such as the question of whether there
was evidence of mediation, the Appellate Body we nt directly into the case record and reversed the
Panel's conclusions without the merest mention that the Panel had actually looked at those same facts
and weighed them.

 This is a 180 degree change in direction. This Appellate Body Report cannot in any manner
be squared with the jurisprudence of seven years ago. Either the words of the treaty text mean the one
thing or the other. This dramatic change in the interpretation of Article 11 should not come about by
mere judicial fiat.

 Mr. Chairman, the WTO does not need a disput e settlement system where one panel reviews
the fact-findings of another panel, which is what e ffectively has happened here. It is a waste of time
and resources and inevitably leads to continuing di sputes about which fact-finder was correct. This
undermines the integrity of the system. The Appella te Body's Report is outside the parameters of
Article 17.6 of the DSU and should be rejected.

 So, what should Korea do at this point? As th e Appellate Body stated in paragraph 198 of its
Report, its reversal of the Pa nel's findings does not actually mean that it upheld the DOC's
determination. Should Korea start a new case? It might be interesting to let the Panel make even
more clear what it actually said in its findings, but that would be an expensive and time-consuming
effort that might involve another two fact-finding exercises given the current state of affairs. Korea
reserves all of its rights in this regard and will consider the matter further.

 Given the recognition by the Appellate Body that it was not actually upholding the DOC's
determination, the Appellate Body asked the parties about the issue of "completing the analysis". The
US declined to respond to this request except to st ate that Korea should resp ond. This was a very
curious answer given that the US was defending a totality-of-the-evidence analysis that was
dependent on maintaining all ten legs of the DOC's determination.

2 Appellate Body Report in EC – Hormones at para. 133.

 Bizarrely, the bulk of the Appellate Body's qu estioning on this issue which arose early in the
oral hearing was directed at Korea. Normally, one would not ask the Appellee in such a situation to
speculate on which one or several combinations of issues it might lose on and then propose solutions.
There were simply too many combinations of th e three legal issues and ten factual ones to be
addressed in detail.

 However, Korea did offer two suggestions for how the analysis could be completed by the
Appellate Body. The first relates to the DOC's "s ingle program" theory. As Korea pointed out, the
DOC's totality of the evidence determination relie d on this single program theory as a keystone.
Without the single program, there would be more than one set of totality of the evidence to examine
and the DOC clearly did not do that. The Appellate Body declined to follow this suggestion in a
breezy discussion which leaves it unclear if they read either the Panel's or the DOC's findings in this
regard.

 The second suggestion offered by Korea was the "compelling evidence" standard. As
discussed previously, the Appellate Body found th at the US definition of "compelling evidence"
would be inconsistent with the requirements of th e SCM Agreement. As Korea also pointed out, the
DOC determination was based on a rejection of th e Korean respondents' arguments to rebut the
presumption the DOC had built. The DOC stated that the Korean respondents had not rebutted the
presumption with "compelling evidence". As the US definition of this term was rejected by the
Appellate Body, it necessarily follows that the DOC's determination is inconsistent with the terms of
the SCM Agreement. But Members will find no refere nce to this issue whatever in the Appellate
Body Report

 Of course, assuming the legality of the ability of the Appellate Body to "complete the
analysis," Korea agrees that it is a discretionary matter. However, what is inexplicable is why, having
raised the issue at length, gotten two suggestions from Korea, the Appellate Body simply ignored one
of the suggestions. It is even more puzzling when the suggestion ignored did not require any fact-
finding at all. It was purely an issue of law and l ogic. If ever there was a time to exercise discretion
as a matter of fairness and complete the analysis, this was it.

Conclusion

 Mr. Chairman, Korea has concluded that it cannot support the flawed findings of the
Appellate Body. The Appellate Body's analysis was outside the bounds of Article 17.6 of the DSU
and, as such, was ultra vires. Korea commends the Panel Report to the Members for adoption.

 In any event, at the very least, the US c ountervailing duty order has been found inconsistent
with the US's obligations under Article 15.5 of the SCM Agreement and should be brought into
conformity without delay.