UNITED STATES – COUNTERVAILING DUTY INVESTIGATION ON DYNAMIC RANDOM ACCESS MEMORY SEMICONDUCTORS (DRAMS) FROM KOREA (DS 296)
Document: Report of the Panel
Date: 21 February 2005
Document codes: 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
(DS 296)

Report of the Panel

I. INTRODUCTION
A. COMPLAINT OF KOREA
1.1 On 30 June 2003, Korea requested consultations with the US pursuant to Article 4 of the
DSU, Article 30 of the SCM Agreement, and Article XXII of the GATT 1994, with regard to the DOC
Preliminary and Final subsidy determinations on Dynamic Random Access Memory Semiconductors
from Korea, published in the Federal Register on 7 April 2003 and 23 June 2003, respectively, the
ITC Preliminary injury determination published in the Federal Register on 27 December 2003, and
any subsequent determinat ions made during the ITC's injury investigation on DRAMS and DRAM
Modules from Korea.1
1.2 On 18 August 2003, Korea requested further cons ultations with the US pursuant to the same
provisions cited in its initial request, with regard to the ITC's Final determination of material injury,
and the DOC's Final countervailing duty order, both published in the Federal Register on
11 August 2003. According to Korea, both of these actions relate to the same underlying measures at
issue in Korea's initial request for consultations.2
1.3 Korea and the US held consultations on 20 August 2003 and 1 October 2003, but failed to
reach a mutually satisfactory resolution of the matt er. With respect to the ITC preliminary injury
determination and the DOC counterva iling duty order, the US mainta ined that Korea's consultation
requests did not conform with Article 4.4 of the DSU because Korea did not identify any provisions
with which the preliminary determination or order were inconsistent. The US asserted that, as a result,
it did not agree to consult on either the preliminary determination or the order.3
1.4 On 19 November 2003, Korea requested the establishment of a Panel to examine the matter.4
B. ESTABLISHMENT AND COMPOSITION OF THE PANEL
1.5 At its meeting on 23 January 2004, the DSB est ablished a Panel in accordance with Article 6
of the DSU and pursuant to the request made by Korea in document WT/DS296/2.
1.6 At that meeting, the parties to the dispute al so agreed that the Panel should have standard
terms of reference. The terms of reference are, therefore, the following:
[t]o examine, in the light of the relevant provisions of the covered agreements cited
by Korea in document WT/DS296/2, the matter referred by Korea to the DSB in that
document, and to make such finding s as will assist the DSB in making the
recommendations or in giving the rulings provided for in those agreements
1.7 On 23 February 2004, Korea requested the Dir ector-General to determine the composition of
the Panel, pursuant to paragraph 7 of Article 8 of the DSU. This paragraph provides:
If there is no agreement on the panelists within 20 days after the date of the
establishment of a panel, at the request of either party, the Director-General, in
consultation with the Chairman of the DSB and the Chairman of the relevant Council
or Committee, shall determine the com position of the panel by appointing the
panelists whom the Director-General consid ers most appropriate in accordance with

1 WT/DS/296/1.
2 WT/DS296/1/Add.1
3 The Panel notes that the ITC's Preliminary Determinatio n is not covered by Korea's request for
establishment of a panel.
4 WT/DS296/2.

any relevant special or additional rules or procedures of the covered agreement or
covered agreements which are at issue in th e dispute, after consulting with the parties
to the dispute. The Chairman of th e DSB shall inform the Members of the
composition of the panel thus formed no later than 10 days after the date the
Chairman receives such a request.
1.8 On 5 March 2004, the Director-General accordingly composed the Panel as follows:
5
Chairman: Mr. Hardeep Puri
Members: Mr. John Adank
 Mr. Michael Mulgrew
1.9 China, the European Communities, Japan and Chinese Taipei reserved their third-party rights.
C.
PANEL PROCEEDINGS
1.10 The Panel met with the parties on 23-24 June 2004 and on 21-22 July 2004. The Panel met
with third parties on 24 June 2004.
1.11 The Panel submitted its Interim Report to th e parties on 17 November 2004. The Panel
submitted its final report to the parties on 21 December 2004.
II. FACTUAL ASPECTS
2.1 This dispute arises out of a countervailing duty investigation by the US on imports of
DRAMS and Memory Modules containing DRAMS 6 from Korea. Korea alleges that both the
determination of existence of a countervailable subsidy by the DOC and the determination of material
injury by the ITC, which led to the US countervailing duty order against DRAMS from Korea, and the
order itself, are inconsistent with certain US obligations under the SCM Agreement and the
GATT 1994.
2.2 On 1 November 2002, Micron Technology, Inc. filed a petition with the investigating
authorities of the US (DOC and ITC) regarding impo rts of allegedly subsidised DRAMS from Korea.
On 8 November 2002, the ITC published a notice of initiation of an investigation of the injury
allegations.
7 The ITC's final injury determination covered the full years 2000, 2001 and 2002, as well
as the first quarters of 2002 and 2003. 8 On 27 November 2002, the DOC initiated an investigation of
the subsidy allegations. The DOC investigation covered the period of 1 January 2001 through
30 June 2002.9
2.3 The two products concerned by the investiga tions were (1) DRAMS, subheading 8542.21.80
of the Harmonized Tariff Schedule of the US (HTSUS); and (2) Memory modules containing
DRAMS, subheading 8473.30.10 of the HTSUS
10 as described more specifically in the DOC's
countervailing duty order.

5 WT/DS296/3.
6 These products will be referred hereinafter simply as DRAMS.
7 Exhibit GOK-1.
8 Exhibit GOK-10.
9 Exhibit GOK-2.
10 Exhibit GOK-1, p. 68176, Exhibit GOK-2, p. 70927.

2.4 Exporters concerned were Hynix Semiconductor, Inc. and Samsung Electronics Co., Ltd.11
2.5 The ITC published a Preliminary injury determination on 27 December 2002 12 and a Final
injury determination on 11 August 2003. 13 The DOC published a Preliminary Determination on
7 April 2003 with an affirmative finding for H ynix Semiconductors, Inc. (provisional duties of
57.37 per cent) and a negative finding for Samsung Electronics Co., Ltd. 14 The DOC published a
Final subsidy determination on 23 June 200315, amended on 28 July 2003, with an affirmative finding
for Hynix Semiconductors, Inc. (final countervaila ble subsidy of 44.29 per cent) and a negative
finding for Samsung Electronics Co., Ltd. ( de minimis countervailable subsidy of 0.04 per cent). 16
Because of the DOC's negative finding for Samsu ng Electronics Co., Ltd., the ITC's final injury
determination concerned subject DRAM S produced by Hynix Semiconductor Inc. 17 O n
11 August 2003, the DOC publishe d a final countervailing order 18, requiring at the same time as
importers would normally deposit estimated duties, a cash deposit equal to a net subsidy rate of
44.29 per cent, for all entries of DRAMS from Ko rea, except Samsung entries, as described more
specifically in the countervailing duty order.
III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS
A. KOREA
3.1 In its first submission 19, Korea requests the Panel to make findings that the US acted
inconsistently with its obligati ons under Articles 1, 2, 10, 12, 14, 15, 19, 22 and 32 of the SCM
Agreement, as well as Article VI:3 of the GATT 1994. Specifically, Korea requests the Panel to find
that the US acted inconsistently with:
(a) Article 15.1 because inter alia, the ITC injury determinations and causation were not
based on positive evidence and an objective as sessment of the effects of allegedly
subsidized imports;
(b) Article 15.2 because inter alia, the ITC injury determinations improperly assessed the
significance of the volume effects of subject imports;
(c) Article 15.2 because inter alia, the ITC injury determinations improperly assessed the
significance of the price effects of subject imports;
(d) Article 15.4 because inter alia, the ITC failed to consider all factors relevant to the
overall condition of the domestic industry;
(e) Article 15.5 because inter alia, the ITC failed to demonstrate the requisite causal link
between subject imports and injury;
(f) Article 15.5, because inter alia, the ITC improperly assessed the role of other factors,
and improperly attributed the effect of other factors to the allegedly subsidized
imports;

11 Exhibit GOK-4, p. 16782
12 Exhibit GOK-3.
13 Exhibit GOK-7.
14 Exhibit GOK-4, p. 16782.
15 Exhibit GOK-5.
16 Exhibit GOK-6, p. 44291.
17 Exhibit GOK-10.
18 Exhibit GOK-8.

(g) Article 15.2 and 15.4 because inter alia , the ITC improperly and inconsistently
defined the domestic industry;
(h) Article 22.3 because inter alia, the ITC’s injury determination did not set forth in
sufficient detail the ITC's findings and conclusions on all material issues of fact and
law;
(i) Article 1.1 because inter alia, the DOC failed to demonstrate the existence of a
financial contribution by the Government of Korea with respect to the October 2001
restructuring at issue in its subsidy investigation;
(j) Article 1.1 because inter alia , the DOC failed to demonstrate the existence of a
financial contribution with respect to the other discrete transactions at issue;
(k) Article 1.1 because inter alia, the DOC erroneously assumed that every Korean
private financial institution involved in its subsidy investigation was under the
direction or entrustment of the Government of Korea even without sufficient evidence
regarding that particular bank;
(l) Articles 1.1 and 14 because inter alia, the DOC failed to demonstrate that a benefit
was conferred on the respondent Hynix, gi ven available market benchmarks among
Hynix’s creditors;
(m) Articles 1.1 and 14 because inter alia, the DOC disregarded market benchmarks for
measuring benefit established by a foreign bank operating in the Korean market that
extended financing to Hynix during the period of investigation;
(n) Articles 1.1 and 14 because inter alia ¸ the DOC failed to utilize relevant Korean
market benchmarks in determining wh ether Hynix was "creditworthy" or
"equityworthy," and otherwise applied an improper "uncreditworthy" benchmark and
discount rate in calculating the benefit to Hynix in this case;
(o) Article 2 because inter alia, the DOC disregarded the fact that many Korean
companies underwent debt restructuring similar to that undergone by Hynix, and
therefore, the DOC did not establish that all of the alleged subsidies were specific on
the basis of positive evidence;
(p) Articles 1 and 2 because inter alia, the DOC imposed an improper burden of proof on
respondents, that is the Government of Ko rea and Hynix, and thereby failed to base
its decision on affirmative, objective, and verifiable evidence;
(q) Article 12.6 because inter alia, the DOC conducted various private verification
meetings in the territory of Korea, at which the Government of Korea had no
representatives, over the explicit objection of the Government of Korea;
(r) Article 19.4 of the SCM Agreement and Article VI:3 of the GATT 1994 because inter
alia, the DOC's failure to measure the benef it in accordance with the principles of
Article 14 of the SCM Agreement resulted in countervailing duties levied in excess of
the amount allowed under the SCM Agreement and the GATT 1994;
(s) Articles 10 and 32.1 because inter alia, the CVD order imposed by the US against
DRAMs from Korea was not in accordance w ith the relevant provisions of the SCM
Agreement or the relevant provisions of the GATT 1994.

3.2 Korea also requests the Panel to recommend that the US terminate the countervailing duty
order immediately.20
B. UNITED STATES
3.3 In its first submission, the United States requests that the Panel reject Korea's claims in their
entirety. With respect to Korea's request for a specific recommendation by the Panel, the US responds
that should the need for recommendations arise, the Panel should reject the recommendations
requested by Korea. 21
IV. ARGUMENTS OF THE PARTIES
4.1 The arguments of the parties as submitted, or as summarized in their executive summaries as
submitted to the Panel, are attached as Annexes (see Table of Annexes, page iv).
4.2 The parties' answers to questions from the Panel, their comments on each other's answers, and
other documents submitted at the request of each other are also attached as Annexes.
V. ARGUMENTS OF THE THIRD PARTIES
5.1 The arguments of those third parties which have made submissions to the Panel, as submitted
or as summarized in their executiv e summaries, are attached as Annexes (see Table of Annexes,
page iv).
VI. INTERIM REVIEW
6.1 On 17 November 2004, we submitted the Interim Report to the parties. Both parties submitted
written requests for the review of precise aspects of the Interim Report. Parties also submitted written
comments on the other party's comments. Neither party requested an interim review meeting.
6.2 We have briefly outlined our treatment of partie s' requests below. Where necessary, we have
also made certain technical revisions to our report.
A. US COMMENTS
6.3 The US made a number of comments regarding typographical and clerical errors contained in
our Interim Report. We are grateful for those comments, and have made the necessary corrections.
The US also made additional comments, to which we respond below.
DOC Preliminary Determination

6.4 The US objects to findings made by the Panel regarding the DOC's Preliminary
Determination. Since Korea states in its reacti on to the comments by the US on the Panel's Interim
Report that it "agrees that it has not made any separate claim against the DOC preliminary
determination, as such", we have deleted those findings from our Final Report.
GATT 1994

6.5 The US objects to the inclusion of a recommendation concerning the GATT 1994 in the
Interim Report. Since we have not found any vi olation of the GATT 1994, we have deleted that
reference.

21 US First Written Submission, paras. 497 and 498.

DOC reliance on record evidence
 (para 7.90 and note 101 of the Interim Report)
6.6 The US requests a revision to accurately reflect the fact that the DOC's reliance on certain
evidence did appear in the Decision Memorandum. In order to avoid any error in this regard, we have
deleted the relevant parts of the Interim Report.
Demand (para. 7.368 of the Interim Report)
6.7 The US argues that Korea's handling of th e "demand" issue prevented the Panel from
adequately exploring it. We disagree. As noted at para.7.368, we understand Korea's argument to be
based on a decrease in the rate of growth of demand for DRAMs, caused by a drop in demand for
products that use DRAMs, such as personal computers.
6.8 As noted at para. 7.367 infra, we consider that Korea established a prima facie case that the
ITC improperly evaluated the impact of slowing demand on price. Since the US failed to rebut
Korea's prima facie case, we uphe ld Korea's claim regarding this matter. We therefore make no
changes to our Interim Report in respect of this issue.
Section VII.F (para. 7.410 of the Interim Report)
6.9 The US claims that it addressed Korea's argu ment regarding burden of proof during the
DOC's investigation at para. 243 of its first written submission. Although we do not find any explicit
reference to this argument in that part of the US first written submission, we have decided to delete
para. 7.410 in order to avoid any error regarding the US response to Korea's argument.
B. KOREAN COMMENTS
6.10 Korea asks the Panel to make explicit that any financial contribution by a public body is not a
subsidy unless it provides a "benefit" within the meaning of the SCM Agreement. We do not consider
it necessary to amend our report. Since the element of "benefit" is part of the definition of "subsidy",
there is no need to list that element separately.
Paras 7.8 and 7.62 (of the Interim Report)
6.11 Korea suggests that the Panel should be very ci rcumspect in making any statements regarding
the possibility of a 100 per cent government-owned entity being treated as a public body. Korea
asserts that this issue was not discussed in either th e DOC determination, or the deliberations of this
Panel. Since we do not make any findings that 100 per cent government-owned entities will
necessarily constitute public bodies, we do not consider it necessary to amend the statements that we
have made regarding this matter.
6.12 Korea asks the Panel to clarify this paragraph. We have done so by deleting the words "and
affirmative".
6.13 Korea asks the Panel to amend the reference to the "three restructurings at issue in these
proceedings". According to Korea, the Pane l's language presupposes some common definition of

when a particular transaction arises to the level of a "restructuring". In a order to avoid any
uncertainty, we have referred to "financial contributions" instead.
Paras 7.88 and 7.90 (of the Interim Report)
6.14 Korea asks the Panel to clarify its judgment rega rding evidence that it did not consider. We
decline to do so, however, precisely because we have not considered the evidence at issue. In any
event, we note that we deleted para. 7.90 of our In terim Report in response to a comment made by the
US.
6.15 Korea asks the Panel to rule that the ITC's injury determination was inconsistent with
Article 15 of the SCM Agreement because it rested on a WTO inconsistent finding of subsidy. Since
this issue was not raised by Kor ea in the proceedings leading up to the preparation of our Interim
Report, we see no reason to amend our Interim Report in the manner suggested by Korea. The
interim review phase is not an opportunity for compla ining parties to introduce new issues for review
by the Panel.
VII. FINDINGS
A.
 STANDARD OF REVIEW
7.1 Article 11 of the DSU sets forth the appropriate standard of review for panels for all covered
agreements, including the SCM Agreement . Article 11 calls for panels to "make an objective
assessment of the matter before [them], including an objective assessment of the facts of the case and
the applicability of and conformity with the relevant covered agreements ... ."
7.2 The Appellate Body provided the following guidan ce regarding the application of Article 11
of the DSU in US – Lamb. The Appellate Body stated:
As regards the standard of review c ontained in Article 11 of the DSU…the
"applicable standard is neither de novo review as such, nor total deference, but rather
the objective assessment of the facts.22
Thus, an "objective assessment" of a claim under Article 4.2(a) of the Agreement on
Safeguards has, in principle, two elements. First, a panel must review whether
competent authorities have evaluated all relevant factors , and, second, a panel must
review whether the authorities have provided a reasoned and adequate explanation of
how the facts support their determination. Thus, the panel’s objective assessment
involves a formal aspect and a substantive aspect. The formal aspect is whether the
competent authorities have evaluated "all rele vant factors." The substantive aspect is
whether the competent authorities have gi ven a reasoned and adequate explanation
for their determination.23
We wish to emphasize that, althoug h panels are not entitled to conduct a de novo
review of the evidence, nor to substitute their own conclusions for those of the
competent authorities, this does not mean that panels must simply accept the
conclusions of the competent authorities. To the contrary, …, a panel can assess
whether the competent authorities’ explana tion for its determination is reasoned and

22 Appellate Body Report, US – Lamb at para. 101.
23 Id. at para. 103 (emphasis in original).

adequate only if the panel critically examines that explanation, in depth, and in the
light of the facts before the panel. Panels must, therefore, review whether the
competent authorities’ explanation fully addresses the nature, and, especially, the
complexities, of the data, and responds to othe r plausible interpretations of that data.
A panel must find, in particular, that an explanation is not reasoned, or is not
adequate, if some alternative explanation of the facts is plausible, and if the
competent authorities’ explanation does not seem adequate in the light of that
alternative explanation. Thus, in making an "objective assessment"…, panels must be
open to the possibility that the explanation given by the competent authorities is not
reasoned or adequate.
24
7.3 On the basis of Article 11 of the DSU, and the above guidance offered by the Appellate Body,
we consider that our standard of review is to determine whether the DOC and ITC evaluated all
relevant factors, and provided a reasoned and ad equate explanation of how the facts support their
determination. In doing so, we shall consider whether an objective and impartial assessment of all
relevant facts on the record could properly support the DOC and ITC's determinations of subsidization
and injury respectively. In other words, we shall determine whether an objective and impartial
investigating authority, looking at the same evid entiary record as the DOC and ITC, could properly
have reached the same conclusions as did those agenci es. In applying this standard of review, we are
conscious that we must not conduct a de novo review of the evidence on the record, nor substitute our
judgment for that of the DOC or ITC.
B. BURDEN OF PROOF
7.4 It is now well established in WTO dispute se ttlement proceedings that the party claiming a
violation of a provision of a WTO Agreement by an other Member must assert and prove its claim.
Thus, we note that the Appellate Body stated in US – Wool Shirts and Blouses that:
the burden of proof rests upon the party, whether complaining or defending, who
asserts the affirmative of a particular claim or defence. If that party adduces evidence
sufficient to raise a presumption that what is claimed is true, the burden then shifts to
the other party, who will fail unless it adduces sufficient evidence to rebut the
presumption.25
7.5 In this dispute Korea, which has challenged the consistency of certain US determinations and
measures, thus bears the burden of demonstrating that the measures are not consistent with the
relevant provisions of the SCM Agreement and GATT 1994.
C. DOC'S SUBSIDY DETERMINATIONS
7.6 The disciplines of the SCM Agreement apply to subsidies that are specific to an enterprise or
industry or groups of enterprises or industries. A subsidy arises when there is a "financial
contribution" by a government, public body or privat e body entrusted or directed by a government,
that confers a "benefit."
7.7 The DOC's subsidy determinations covered a number of individu al financial contributions by
Hynix's creditors, including an 800 billion won sy ndicated loan, the KDB Fast Track Programme, the
May 2001 restructuring package, and the October 2001 restructuring package. The DOC found that
"these actions are appropriately examined as part of a single programme that occurred over a short,

24 Id. at para. 106 (emphasis in original).
25 Appellate Body Report, US – Wool Shirts and Blouses, page 14.

ten-month period", 26 the objective of which "was the complete financial restructuring of Hynix in
order to maintain the company as an ongoing concern."27
7.8 The DOC found that these financial contributions were provided by four public bodies and a
larger number of private bodies entrusted or directed by the GOK. We shall refer to Hynix's public
body creditors as Group A creditors.
28 The DOC also found that these financial contributions were
provided by a number of GOK owned or controlled banks, which were not found by the DOC to be
public bodies. For all but one of these creditors , GOK was either the sole or largest single
shareholder. We shall refer to these creditors as Group B creditors.29 In addition, the DOC found that
the financial contributions were provided by ot her private entities, in which the GOK had much
smaller, or even non-existent, shareholdings. We shall refer to these as Group C creditors. We recall
that financial contributions by public bodies (i.e ., Group A creditors) necessarily fall within the scope
of the SCM Agreement (although they do not necessarily constitute specific subsidies), whereas
transactions by private bodies (i.e., Group B and C creditors) only fall within the scope of the SCM
Agreement to the extent that such private bodies were entrusted or directed by a government.
7.9 Korea does not challenge the DOC' s determination that particip ation in the four financial
contributions by public body, Group A, creditors falls within the scope of the SCM Agreement .
However, Korea claims that the DOC improperly found that Hynix's Group B and C creditors were
entrusted or directed by GOK to participate in the financial contributions, and argues that their
participation therefore falls outside the scope of the SCM Agreement. Korea also claims that the DOC
improperly found that the financial c ontributions conferred a benefit. Korea further claims that the
DOC improperly found that the alleged subsidies (i .e., financial contributions conferring a benefit)
were specific to an enterprise. We shall firs t consider Korea's claims regarding the alleged
entrustment or direction of Hynix's Group B and C creditors.
1. Entrustment or Direction
7.10 In the context of its complaints regard ing the DOC's determination of government
entrustment or direction, Korea claims that the US violated Article 1.1 of the SCM Agreement
because:
• the DOC failed to demonstrate the existence of a financial contribution by the GOK with respect
to the October 2001 restructuring;
• the DOC failed to demonstrate the existence of a financial contribution with respect to the other
discrete transactions at issue; and
• the DOC erroneously assumed that every Korean private financial institution involved in its
subsidy investigation was under the direction or entrustment of the GOK even without sufficient
evidence regarding that particular bank.
7.11 Korea's claims raise general issues regarding the interpretation of Article 1.1(a)(1)(iv) of the
SCM Agreement. In particular, Korea's claims raise the issue of whether, in order to find that a

26 Decision Memorandum, page 48 (Exhibit GOK-5).
27 Id.
28 See Figure US-4.
29 A number of Group B creditors were 100 per cent owned by GOK. Depending on the circumstances,
100 per cent government ownership might well have justified the treatment of such creditors as public bodies. If
they had been treated as public bodies, the DOC would not have needed to determine whether or not such
Group B creditors were entrusted or directed by GOK in order to find that their participation in the four financial
contributions at issue fell within the scope of the SCM Agreement. On the basis of the criteria provided for in
US law, however, the DOC treated these 100 per cent owned Group B creditors as private bodies.

private body is entrusted or directed by the govern ment, an investigating authority must demonstrate
an explicit and affirmative government action addressed to that particular private body, entrusting or
directing a particular task or duty. If we find that Article 1.1(a)(1)(iv) does not require an explicit act
addressed to a particular entity entrusting or directi ng a particular task or duty, Korea's claims also
require us to consider the more factual issue of whether the DOC properly found that there was
sufficient evidence to support a generalized finding of entrustment or direction of all Group B and C
creditors in respect of each of the four financial contributions identified by the DOC.
(a) Is an investigating authority required to de monstrate an explicit and affirmative government
action addressed to a particular entity, entrusting or directing a particular task or duty?
(i) Arguments of the parties
7.12 Korea asserts that, pursuant to Article 1.1(a)(1)(iv) of the SCM Agreement, the disciplines of
the SCM Agreement only cover the acts of private bodies when they have been "entrusted or directed"
by a government to take those acts. Korea asserts th at the plain meaning of "entrustment or direction"
required the DOC to demonstrate an explicit a nd affirmative government action addressed to a
particular party to perform a particular task or dut y. According to Korea, the use of the singular "a
financial contribution" in Article 1.1 implies that an authority must examine each distinct transaction
by source and measure. Korea submits that author ities cannot meet this sta ndard with generalized
findings of entrustment or direction. According to Korea, it is insufficient to conclude that if some
connection exists between government, certain events and certain actors, then financing by all lenders
to a particular party, no matter when or how it occurs, is the result of entrustment or direction.
7.13 Korea asserts that the words "entrust[] or direct[]" do not describe tepid or ambiguous
government action. According to Korea, the dictionary defines the term "entrust" as, inter alia , to
"give (a person, etc.) the responsibility for a task . . . Commit the . . . execution of (a task) to a
person."
30 Korea therefore submits that the government mu st already have something that is going to
be "entrusted" to the private body. Korea asserts that this meaning of "entrusts" is reinforced by the
later phrase "which would normally be vested in the government", such that what is being "entrusted"
is whatever would normally be a function vested in the government.
7.14 Korea submits that the word "direct" is defined as, inter alia , to "[g]ive authoritative
instructions to; order (a person) to do . . . orde r the performance of." Korea submits that the term
"direct," when followed by "to" plus an infinitive ( i.e., a verb), means to "give a formal order or
command to" 31 do a thing. Korea notes that both the French text "ordonnent" (from the verb
"ordonner") and the Spanish text "ordene" (from the verb "ordenar") most directly translate as "order."
According to Korea, if one looks for other French and Spanish words that correspond to "direct," one
finds many other words -- not used in the text of the SCM Agreement -- that convey softer meanings.
Korea therefore submits that, in light of the Fr ench and Spanish versions, the most appropriate
interpretation of the English word "directs" must be the meaning that conveys the idea of ordering the
private body to take some action, and not the looser idea of mere guidance or suggestions.
7.15 Korea asserts that the context of these terms supports its interpretation. Korea notes that all of
the four sub-provisions of Article 1.1(a) refer to "government" action, and concludes from this that the
proper interpretation of "entrusts or directs" therefore requires government action so clear and
unambiguous that the actions of private bodies can be imputed to the government itself. Korea asserts
that anything other than such a strict reading would not be consistent with the overall context of
Article 1.1(a). Korea submits that the additional phrase in Article 1.1(a)(1)(iv) reinforces this reading.

30 The New Shorter Oxford English Dictionary , Fourth Edition, Clarendon Press, Oxford (1993), at
831 (Exhibit GOK-38).
31 The Concise Oxford Dictionary, Ninth Edition, Clarendon Press, Oxford (1995) (Exhibit GOK-37).

In this regard, Korea notes that the provision goes on to clarify that the actions of the private body can
only be imputed to the government if "the practice, in no real sense, differs from practices normally
followed by governments." According to Korea, theref ore, the "entrusts or directs" needs to be so
specific and compelling that the private body is not really making the decision at all -- the private
body has become the instrument of the government. Korea submits that any discretion left to the
private body transforms the situation, and the action can no longer properly be imputed to the
government.
7.16 Korea asserts that its reading of the language and context of Article 1.1(a)(1)(iv) finds further
support in the underlying purpose of this provisi on. Korea considers that the language of
Article 1.1(a)(1)(iv) seeks to narrow the scope of indir ect subsidies, since it is not broad, but rather
very narrow. Korea argues that the provision does not speak of government suggestions, or other
passive acts, nor of private bodies trying to win the favor of a government, or trying to act on their
own concepts of the national interest.
7.17 Korea submits that its interpretation of Article 1.1(a)(1)(iv) is supported by the reasoning of
the US – Export Restraints panel, which found:
It follows from the ordinary meanings of the two words ‘entrust’ and ‘direct’ that the
action of the government must contain a notion of delegation (in the case of
entrustment) or command (in the case of direction). To our minds, both the act of
entrusting and that of directing therefore necessarily carry with them the following
three elements: (i) an explicit and affirm ative action, be it delegation or command;
(ii) addressed to a particular party; and (iii) the object of which action is a particular
task or duty. In other words, the ordinary meanings of the verbs ‘entrust’ and ‘direct’
comprise these elements – something is necessarily delegated, and it is necessarily
delegated to someone; and, by the same token, someone is necessarily commanded,
and he is necessarily commanded to do something . We therefore do not believe that
either entrustment or direction could be said to have occurred until all of these three
elements are present.
32
7.18 According to Korea, the findings of the panel in US – Export Restraints make clear that
generalized statements of government intent or desi re, or even general interventions in the market
itself, are insufficient to establish a financial cont ribution through a private body. Korea asserts that,
instead, each alleged government delegation or co mmand must be examined with respect to each
party, and with respect to each task or duty. Ko rea asserts that the use of the singular "a financial
contribution" in Article 1.1 implies that an authorit y must examine each distinct transaction by source
and measure. According to Korea, therefore, an authority must demonstrate an explicit and
affirmative government action addressed to a particular party to perform a particular task or duty.
Although Korea acknowledges that entrustment or direction can arise absent formal acts of
government, Korea does not believe that either entrus tment or direction can be implicit, in the sense
of a private party being left to wonder precisely what it is being entrusted or directed to do.
7.19 The US submits that there is no basi s in Article 1.1(a)(1)(iv) of the SCM Agreement for the
type of bank- and transaction-specific analysis advocated by Korea. The US submits that the word
"entrust" is defined in relevant part as "[i]nvest w ith a trust; give (a person, etc.) responsibility for a
task .... Commit the execution of (a task) to a person ... ."
33 According to the US, therefore, if a
government gives a "private body" responsibilit y to carry out what might otherwise be a
governmental subsidy function of the type listed in subparagraphs (i)-( iii) of Article 1.1(a)(1), there
would be a financial contribution within the meaning of Article 1.1(a)(1).

32 Panel Report, US – Export Restraints, para. 8.29 (emphasis in original).
33 The New Shorter Oxford English Dictionary (1993) (Exhibit US-89).

7.20 The US asserts that definitions of the word "direct" include "Cause to move in or take a
specified direction; turn towards a specified destination or target"; "Give authoritative instructions to;
to ordain, order (a person) to do (a thing) to be done; order the performance of"; "Regulate the course
of; guide with advice"; and "Inform or guide (a pers on) as to the way; show or tell (a person) the way
(to)"; and "govern the actions ... of."
34 According to the US, there is entrustment or direction by the
government when a government "gives responsibility to ", "orders", or "regulates the activities of" a
private body such that one or more of the type of functions referred to in su bparagraph (iv) is carried
out.
7.21 The US submits that, although Korea cites essen tially the same dictionary definitions, it does
not proffer an interpretation of the meaning of "ent rusts or directs" based on those definitions. The
US asserts that Korea instead advocates an evidentiary standard for "entrustment or direction", since it
argues that government action amounts to entrus tment or direction only where it is "clear and
unambiguous"35 or "specific and compelling."36 The US accepts that whether a particular government
action amounts to entrustment or direction always will present an evidentiary question, but denies that
there is a special evidentiary standard for entr ustment or direction distinct from the general
evidentiary standard that applies in any dispute governed by Article 11 of the DSU, which is whether
there is a "reasoned and adequate " explanation of how the facts support the investigating authority’s
determination.37
7.22 The US notes that Korea argues th at the evidence of entrustment or direction must be in a
particular form; i.e., an "explicit" government command. 38 The US understands Korea to argue that
the use of the term "explicit" suggests that gove rnment entrustment or direction may only be
evidenced by a formal or official command. Th e US considers that subparagraph (iv) cannot be
limited in the manner Korea suggests, since the plain meaning of entrustment or direction
encompasses, but is not limited to, an order or co mmand. According to the US, an interpretation of
subparagraph (iv) that would rule out automatica lly, and in all cases, any government direction not
expressed in writing would render Article 1.1(a)(1)(iv) virtually meaningless.
7.23 The US asserts that Korea misconstrues the app licable evidentiary standard when it argues
that the evidentiary standard of entrustment or direction requires a government command to an
explicitly named private body to take an explicitly id entified action at an explicit point in time. The
US submits that there is no obligation that the DOC have express proof of bank-by-bank, transaction-
by-transaction government direction since, as an ev identiary matter, any piece of evidence or fact can
be relevant, provided it demonstrat es, either individually or in conjunction with other evidence,
whether or not a government entrusted or directed private bodies to provide financial contributions.
The US considers that the relative importance of each piece of evidence or fact can only be
determined in the context of a particular case, and not on the basis of generalities. According to the
US, the evidentiary question in this dispute is whether a reasonable, objective decision-maker, looking
at all the evidence on the investigation record, c ould have concluded that the GOK’s actions in toto
evince entrustment or direction.
7.24 The US notes that Korea claims textual support for its bank-by-bank, transaction-by-
transaction standard by citing the use of the sing ular "a" financial contribution in the text of
Article 1.1(a)(1). According to the US, following th is logic through the text with respect to each of
the elements of a countervailable subsidy reveals a fatal flaw in this approach, since the text of
Articles 1 and 2 of the SCM Agreement also use the singular "a" where it refers to benefit, subsidy and

34 The New Shorter Oxford English Dictionary (1993) (Exhibit US-89).
37 The US refers in this regard to paras. 276-78 of the Appellate Body Report in US - Steel Safeguards.

specificity. The US therefore asserts that if "a" financial contribution were interpreted to mean
government direction to "a" particular bank, then specificity would be considered always in the
context of, for example, an individual bank’s loan to "a" beneficiary, with the result that the subsidy
would always be specific. The US submits that the Panel should reject Korea’s "a"/singular argument
because it would render Article 2 of the SCM Agreement a nullity. The US also asserts that Korea’s
"a"/singular argument overlooks the fact that use of the singular does not rule out a meaning that
encompasses the plural of that term. The US notes in particular that the definition of the term "body",
as used in "a private body" in subparagraph (iv), pr ovides that the term "body" may refer to a singular
entity or more than one entity.
39 According to the US, therefore, the plain meaning of the text of
Article 1.1(a)(1)(iv), does not rule out government en trustment or direction of a particular "group" of
private bodies.
7.25 The US submits that Korea’s reliance on US - Export Restraints for its bank-by-bank,
transaction-by-transaction evidentiary standard also is misplaced, since US - Export Restraints
addressed a very different issue; i.e., whether a hypothetical restriction on exports could constitute
entrustment or direction under Article 1. 1(a)(1)(iv). According to the US, the US - Export Restraints
report is therefore of limited (or no) relevance to the instant dispute, in which there is a voluminous
body of evidence that the GOK affirmatively caused, and gave responsibility, to private entities to
provide loans, equity infusions, and debt forgiveness to save Hynix from bankruptcy.
7.26 The US disagrees with Korea's argument that th e phrase in subparagraph (iv) – "in no real
sense, differs from practices normally followed by gove rnments" – means that the private body must,
in effect, become "the instrumentality of the governme nt" and that "any discretion" left to the private
body would mean that "the action can no longer be imputed to the government." 40 T h e U S
understands Korea to argue that one must gauge th e behaviour of private bodies to know whether
there was government entrustment or direction. Th e US submits that Korea’s focus on the motives of
Hynix’s creditors is incongruous with its recognition that the "perce ived" or "confirmed" reaction by
private entities "cannot be the basi s on which the Member’s compliance with its treaty obligations
under the WTO is established." 41 The US asserts that the exis tence of a government financial
contribution – whether direct or indirect – is de termined with reference to the actions of the
government.
(ii) Evaluation by the Panel
7.27 The parties disagree as to the circumstances unde r which an investigating authority could
properly determine that a government has entrusted or directed a private body to make a "financial
contribution" in the sense of Article 1.1(a)(1)(iv).42 Korea submits that an authority must demonstrate
an explicit and affirmative government action addressed to a particular party to perform a particular
task or duty. The US considers that there is no need to have express proof of private body-by-private
body, transaction-by-transaction, entrustment or dire ction, arguing that entrustment or direction can
be established on the basis of broader evidence.

39 See The New Shorter Oxford English Dictionary (1993). (The US notes that "body" may refer to the
singular, e.g.,"an individual, a person," or the plural, e.g., "an aggregate of individuals") (Exhibit US-89); see
also Appellate Body Report, United States – Countervailing Measures Concerning Certain Products from the
European Communities, WT/DS212/AB/R, adopted 8 January 2003, para. 108 [hereinafter "US – Countervailing
Measures on Certain EC Products "] (the US notes that, while discussing "a benefit" to "a recipient", the
Appellate Body stated that "a recipient" could mean more than one entity).
42 There is no disagreement between the parties concerning the DOC's determination that the relevant
acts that private bodies were allegedly entrusted or directed to undertake constitute "financial contributions."

7.28 We recall that Article 3.2 of the DSU recognizes that interpretative issues arising in WTO
dispute settlement are to be resolved through the a pplication of customary rules of interpretation of
public international law. It is well settled that the principles codified in Articles 31 and 32 of
the Vienna Convention on the Law of Treaties (the "Vienna Convention") are such customary rules.
43
Thus, we shall first examine the parties' arguments regarding the terms "entrusts or directs".
Thereafter, we shall examine their arguments regard ing the context, and object and purpose of those
terms.
The terms "entrusts or directs"

7.29 Article 1.1(a)(1) of the SCM Agreement provides:
there is a financial contribution by a gove rnment or any public body within the
territory of a Member (referred to in this Agreement as 'government'), i.e., where:
(i) a government practice involves a direct transfer of funds (e.g. grants, loans,
and equity infusion), potential direct transfers of funds or liabilities (e.g. loan
guarantees);
(ii) government revenue that is otherwi se due is foregone or not collected (e.g.
fiscal incentives such as tax credits) [footnote omitted];
(iii) a government provides goods or service s other than general infrastructure, or
purchases goods; (iv) a government makes payments to a funding mechanism, or
entrusts or directs a private body to carry out one or more of the type of functions
illustrated in (i) to (iii) above which woul d normally be vested in the government and
the practice, in no real sense, differs from practices normally followed by
governments.
7.30 We note that the terms "entrusts or directs" were interpreted by the US – Export Restraints
panel. That panel found:
The dictionary meaning of the word "entrust" is, inter alia, to "give (a person, etc.)
the responsibility for a task . . . Commit the . . . execution of (a task) to a person . . . ."
The word "direct" is defined, inter alia , as to "[g]ive authoritative instructions to;
order (a person) to do . . . order the performance of". In this regard, we consider
significant the fact that, for "direct" when fo llowed by "to" plus an infinitive (i.e., a
verb), the dictionary gives as a meaning to "give a formal order or command to", as
this is precisely the construction used in s ubparagraph (iv) (" . . entrusts or directs a
private body to carry out . . .").
8.29 It follows from the ordinary meanings of the two words "entrust" and "direct"
that the action of the government must contain a notion of delegation (in the case of
entrustment) or command (in the case of direction). To our minds, both the act of
entrusting and that of directing therefore necessarily carry with them the following
three elements: (i) an explicit and affirm ative action, be it delegation or command;
(ii) addressed to a particular party; and (iii) the object of which action is a particular
task or duty. In other words, the ordinary meanings of the verbs "entrust" and
"direct" comprise these elements – something is necessarily delegated, and it is

43 Article 31(1) of the Vienna Convention provides in relevant part that: "A treaty shall be interpreted in
good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in
the light of its object and purpose."

necessarily delegated to someone ; and, by the same token, someone is necessarily
commanded, and he is necessarily commanded to do something. We therefore do not
believe that either entrustment or direction could be said to have occurred until all of
these three elements are present.
8.30 Having said that, it is clearly the first element – an explicit and affirmative
action of delegation or command – that is determinative. The second and third
elements – addressed to a particular party and of a particular task – are aspects of the
first. Any assessment of whether delegation or command has occurred would
necessarily be in reference to that whic h has been delegated or commanded and in
reference to the one to whom it has been de legated or commanded. As aspects of and
flowing from the first element of the definition, the second and third elements provide
further support for our view that the action must be an explicit and affirmative act of
delegation or command. We note, in this regard, that the "entrusts or directs"
language in subparagraph (iv) is followed by the language "a private body to carry
out . . . ", which is similar to that which we have used to describe the second and third
elements of the definition of entrustment or direction. Thus, the subsequent language
in subparagraph (iv) confirms our view of the requirement of an explicit and
affirmative action.
44
7.31 As noted by the panel in US – Export Restraints, the dictionary meaning of the word "entrust"
is, inter alia, to "give (a person, etc.) the responsibility for a task . . . Commit the . . . execution of (a
task) to a person . . . ." 45 The word "direct" is defined, inter alia , as to "[g]ive authoritative
instructions to; order (a person) to do . . . order the performance of."46 We agree with the US – Export
Restraints panel that "[i]t follows from the ordinary mean ings of the two words "entrust" and "direct"
that the action of the government must contain a notion of delegation (in the case of entrustment) or
command (in the case of direction)."47
7.32 The US – Export Restraints panel also found that "both the act of entrusting and that of
directing therefore necessarily carry with them the following three elements: (i) an explicit and
affirmative action, be it delegation or command; (ii) addressed to a particular party; and (iii) the object
of which action is a particular task or duty." 48 The parties disagree on this aspect of the panel's
findings. Korea relies on this finding to argue that there can be no finding of entrustment or direction
in the absence of an explicit act whereby a particular task or duty is delegated to a specific person, or
whereby a specific person is commanded to perform a par ticular task or duty. The US denies that the
act of delegation or command need be explicit, or addressed to a specific person.
7.33 Regarding the first element identified by the US – Export Restraints panel, we agree that the
delegation or command inferred by the terms "entrust ment" and "direction" must take the form of an
affirmative act. The object of a Member's responsib ility should be its acts, as such, rather than the
reactions to or consequences of those acts, as th ese reactions and consequences may simply be the
result of happenstance or chance.49 That being said, we see nothing in the text of Article 1.1(a)(1)(iv)
that would require the act of delegation or command to be "explicit". Although the particular facts of
the US – Export Restraints case may have caused that panel to employ the term "explicit", no such

44 US – Export Restraints, paras 8.28-8.30, (footnotes omitted).
45 The New Shorter Oxford English Dictionary, Volume 1, 1993, Clarendon Press, Oxford.
46 Id.
47 US – Export Restraints, para. 8.29.
48 Ibid.
49 Like the US – Export Restraints panel, "we do not see how the reac tion of private entities to a given
governmental measure can be the basis on which the Memb er's compliance with its treaty obligations under the
WTO is established" (see US – Export Restraints, para. 8.34).

qualification is included in the terms of Article 1. 1(a)(1)(iv). In our view, the affirmative act of
delegation or command could be explicit or implicit, formal or informal.
 50
7.34 As to the issue of whether or not the act of delegation or command must be addressed to a
specific individual, we agree with the US – Export Restraints panel that, of the three elements it
identified in the extract cited above, the first element, i.e. the affirmative action of delegation or
command, is determinative. As the panel noted , the second and third elements – addressed to a
particular party and of a particular task – are aspects of the first, in the sense that assessment of
whether delegation or command has taken place woul d of necessity involve an examination of both
who allegedly has been entrusted or directed to act, and what the action or task in question is.
7.35 Since the second and third elements identified by the US – Export Restraints panel are aspects
of the first element, we consider that the manner, or degree of detail in which the addressee and object
of the act of delegation or command is specified w ill depend on the form that the act of delegation or
command may take. Thus, while a greater degree of specificity may be expected in respect of explicit
or formal acts of delegation or command,
51 this will not necessarily be the case in respect of implicit
or informal acts. In our view, the fact that the addressee and object of the act of delegation or
command is described in less detail does not preclude a finding of entrustment or direction, as a
matter of law. Rather, it raises evidentiary issu es. While the fact that an act of delegation or
command is specifically addressed to a particular private body may make it easier, in terms of
evidence, for a complainant or investigating author ity to establish the existence of entrustment or
direction, the fact that an act of delegation or command is not specifically addressed to a particular
private body does not necessarily mean that a finding of entrustment or direction in respect of that
private body is precluded. It simply means that, as an evidentiary matter, it will be more difficult for
a complainant or investigating authority to properly demonstrate that such private party was entrusted
or directed.
52 Similarly, the fact that an act of delegation or command does not specify in great detail
what must be done does not necessarily preclude a finding of entrustment or direction. It simply
makes it more difficult for a complainant or invest igating authority to properly demonstrate that a
transaction undertaken by a private body was the object of governmental entrustment or direction.
Thus, although the plain meaning of entrustment and direction requires that something must be
delegated to someone, or that someone must be commanded to do something, the plain meaning of
those terms does not require that such someone or something must necessarily be specified in great
detail.
53 That being said, the evidence of entrustment or direction must in all cases be probative and
compelling. Thus, whatever the nature or form of the affirmative acts of delegation or command at

50 Indeed, the utility of Article 1.1(a)(1)(iv) would be undermined if an "explicit and affirmative action
of delegation or command" were required. That provision operates as a catch-all, so that indirect government
action does not fall outside the scope of the SCM Agreement . We are not prepared to read into
Article 1.1(a)(1)(iv) terms that would allow such indirect government action to circumvent the WTO's subsidy
disciplines.
51 Of course, explicit and formal acts of delegation or command could also be drafted in very general
terms, and addressed to a broadly defined group.
52 Korea argues that, because Article 1.1(a)(1)(iv) refers to the entrus tment or direction of "a" private
body, the relevant act of delegation or command must be specifically and explicitly addressed to "a" particular
private body. We disagree, since there may be factual circumstances where it is po ssible for an investigating
authority to properly conclude that "a" particular private body has been entrusted or directed, even though the
relevant act of delegation or command was not specifically and explicitly addressed to that private body.
53 We note that Korea has argued that the French and Spanish versions of Article 1.1(a)(1)(iv) confirm
its view that "the English word 'dir ects' ... conveys the idea of ordering the private body to take some action"
(para. 21 of Korea's Second Written Submission, emphasis in original), and that the English word "entrust"
"conveys the idea of being definitely told something must be done" (para. 22, Korea's Second Written
Submission). While this may be correct, Korea has not made any argument on the basis of the plain meaning of
the text regarding the degree to which the "some action" or "something" must be specified in order to
entrustment or direction to arise.

issue, the evidence must demonstrate that each private entity allegedly providing, or participating in, a
financial contribution was entrusted or directed by the government to do so.54
The context of the terms "entrusts or directs"

7.36 Korea states that it has stressed the "who" that is being entrusted or directed because the
entrustment or direction must apply to "a private body". According to Korea, this contextual language
makes clear that some kinds of entrustment or di rection simply will not fall within the meaning of
Article 1.1(a)(1)(iv) because the government has not been targeting a "private body". Korea argues
that if the government orders a public body to take some action, that entrustment or direction of that
public body is legally irrelevant to the issue of whether a private body has been directed. We do not
agree with this broad statement, since it excludes th e possibility of indirect entrustment or direction of
a private body by a government via a public body.
55 Thus, if a government were to instruct a public
body to entrust or direct a private body, such entr ustment or direction would fall within the scope of
Article 1.1(a)(1)(iv). Korea also argues that if a government expresses a generalized wish that
something happens, that is not entrustment or direction of a private body, since there is no specific
private body that is the object of the action. As no ted above, we do not consider that the addressee of
the alleged entrustment or direction need be specifi ed in detail in order for Article 1.1(a)(1)(iv) to
apply. We would agree with Korea's argument th at an expression of a generalized wish does not
amount to entrustment or direction, however, but on different grounds, namely that the expression of a
generalized wish does not amount to an affirmative act of delegation or command.
7.37 Korea also notes that a private body must be entr usted or directed "to carry out" something.
Korea argues that "[t]he object of the verbs 'entrusts' or 'directs' must be something concrete that can
be carried out. A Korean bank can 'carry out' making a loan, but it cannot 'save' a company." 56
Article 1.1(a)(1)(iv) actually provides that a private body must be entrusted or directed "to carry out
one or more of the type of functions il lustrated in [sub-paragraphs] (i) to (iii)."
57 In our view, if a
private body were entrusted or directed to carry out one of those functions, or to carry out an act that
would necessarily entail the execution of one of thos e functions, then Article 1.1(a)(1)(iv) would in

54 Whatever the nature or form of the affirmative acts of delegation or command, and whatever the type
of evidence relied upon, there must always be a determin ation to the effect that each of the private entities at
issue was entrusted or directed by the government.
55 We note that, according to Article 1.1(a)(1), the word "government" in Ar ticle 1.1(a)(1(iv) would
cover both governments and public bodies.
56 Korea's Second Written Submission, para. 29.
57 Article 1.1(a)(1)(iv) further provides that the func tions covered by the entrustment or direction must
"normally be vested in the government and the practice [must], in no real sense, differ[] from practices normally
followed by governments." We note that the "in no real sense" language was addressed by the panel in US –
Export Restraints. That panel referred to the report of the Group of Experts on the Calculation of the Amount of
a Subsidy, which in turn referred to a 1960 panel report (see MTN.GNG/NG10/W/4, "Subsidies and
Countervailing Measures – Note by the Secretaria t", 28 April 1987, Section 4.1.A). Like the US – Export
Restraints panel, we too "find very significant the Group of Experts' interpretation that the 1960 Panel's
reference to 'practice . . . in no real sense different from those normally followed by governments' was a general
reference to the delegation to private parties of the par ticular government functions of taxation and expenditure
of revenue" (para. 8.72). We note that the reference to functions "normally vested in the government" textually
mirrors the reference to "practices normally followed by governments." Accordingly, we consider that the
reference to functions "normally vested in the government" should also be understood to mean functions of
taxation and revenue expenditure. Thus, a function may be said to be "normally vested in the government" if
that function involves the levy of taxation or the expenditure of revenue. We are therefore not persuaded by
Korea's argument (para. 24, Korea's Second Written Submission) that "con ventional" loans and restructuring
measures, i.e., those not made pursuant to some government programme, are not "normally vested in the
government", and therefore fall outside the scope of Article 1.1(a)(1)(iv). To the extent that loans and
restructuring measures involve taxation or revenue expenditure, they are capable of falling within the scope of
that provision.

principle apply. Since this issue would need to be resolved on the basis of the facts of a particular
case, we see no merit in discussing in the abstract whether or not a particular task might be
sufficiently "concrete" for the purpose of Article 1.1(a)(1)(iv).
7.38 Korea also argues that Article 1.1(a)(1)(iv) w ould not apply if a private body were merely
entrusted or directed to consider some action, or to assist some action, rather than "carry out" some
action. According to Korea, any discretion being left to the private body is fundamentally at odds
with this notion of "carry out". Korea asserts that any time private bodies have a choice, it is hard to
imagine how they can have been entrusted or directed to "carry out" an action. However, we do not
consider that leaving discretion to a private body is necessarily at odds with entrusting or directing
that private body. In particular, it is possible that a government could entrust or direct a private body
to make a loan, but leave the terms of that loan to the discretion of the private body. While there may
be cases where the breadth of discretion left to the private body is such that it becomes impossible to
properly conclude that that private body has been entr usted or directed (to carry out a particular task),
this is a factual/evidentiary matter to be addressed on a case-by-case basis.
The object and purpose of the terms "entrusts or directs"

7.39 Korea submits that its reading of the language and context of Article 1.1(a)(1)(iv) finds
further support in the underlying purpose of this prov ision. According to Korea, this language seeks
to narrow the scope of indirect subsidies by narr owing the scope of private actions that can be
imputed to the government.
7.40 The US asserts that Members did not intend that governments be able to evade the subsidy
disciplines by using less formal – but no less effective – forms of entrustment or direction over private
parties to grant subsidies.
7.41 Although Article 31(1) of the Vienna Convention provides that a treaty interpreter may have
regard to the object and purpose of the provisions at issue, in this case we note that the parties have
both identified plausible object and purpose arguments in support of their respective interpretations of
Article 1.1(a)(1)(iv). Thus, while it is important that Article 1.1(a)(1)(iv) should not be interpreted so
broadly that it covers the conduct of private bodi es acting independently of governmental delegation
or command, neither should that provision be interp reted so narrowly that it allows Members to
escape the disciplines of the SCM Agreement by acting indirectly through private bodies. Since there
is no compelling object and purpose argument requiring us to adopt either party's interpretation, we
shall focus our interpretation on the plain meaning of the text, as set out above.
7.42 As a matter of law, therefore, we do not consider that the plain meaning of
Article 1.1(a)(1)(iv) of the SCM Agreement requires an investigating authority to demonstrate an
explicit government action addressed to a particular entit y, entrusting or directing a particular task or
duty.
(b) Did the DOC properly find that there was suffi cient evidence to support a generalized finding
of entrustment or direction with respect to private bodies spanning multiple creditors and
multiple transactions over the period of investigation?
7.43 Korea submits that the only evidence relied upon by the DOC relates to narrow circumstances
that do not support the DOC's broad theory of entrustm ent or direction. Kor ea asserts that, at best,
DOC's case constitutes a finding of entrustment or direction by inference. Korea submits that
inference is not a substitute for establishing explic it and affirmative governme nt action of delegation
or command.

7.44 The US submits that the DOC’s determination of entrustment or direction was supported by
ample record evidence. According to the US, the evidence before th e DOC demonstrated (1) that the
GOK pursued a policy to support Hynix and prevent its failure; (2) that the GOK exercised the control
over Hynix’s creditors necessary to implement its policy; and (3) that, where necessary, the GOK
used its power and influence to coerce Hynix’s creditors to adhere to the GOK’s policy.
7.45 Each party's submissions regarding the sufficiency of the evidence of entrustment or direction
relied on by the DOC are structured differently. Fo r the most part, we shall follow the structure of
arguments adopted by the US, since that more closely follows the structure of the DOC's
determination on entrustment or direction. 58 We shall begin by addressing the parties' arguments
concerning GOK's alleged policy to support Hynix a nd prevent its failure. In doing so, we are
conscious that the DOC relied on the totality of the evidence before it, without attaching particular
importance to one or several evidentiary factors. We shall adopt the same approach in our review of
the DOC's determination. In order to do so, howe ver, we must consider the DOC's assessment of the
probative value of each evidentiary factor separately.
7.46 Before reviewing that evidence, we note that, for the most part, the DOC does not rely on any
explicit affirmative act of government delegation or command in respect of the financial contributions
at issue in these proceedings. In stead, its determination is largel y based on alleged implicit and
informal acts of delegation or command. For this reason, most of the evidence relied on by the DOC
is circumstantial in nature. There is no reason why a case of government entrustment or direction
should not be premised on circumstantial evidence, provided that such evidence is probative and
compelling, in the sense that it demonstrates that e ach of the private creditors participating in the
financial contributions was entrusted or directed to do so.
(i) Policy to Support Hynix and Prevent its Failure
7.47 The DOC found that:
the GOK had a policy to prevent Hynix' failure. The GOK attached such great
importance to Hynix' survival because it f eared that the company's collapse would
have serious repercussions for the ROK's corporate, labour and financial markets, and
because Hynix was part of an industry sect or considered to be of 'strategic'
importance to the GOK.
59
7.48 Korea objects to the DOC's reliance on policy co nsiderations. Korea submits that this
approach ignores all of the warnings of the panel decision in US-Export Restraints, since government
actions and interventions for various policy reas ons suddenly become actionable as entrustment or
direction, without any regard for the nature of those actions. Korea also asserts that, particularly with
regards to timing, the US theory has no limits, because once a governme nt has made clear its hope to
"save" a company, that original intention goes on forever.
7.49 The US submits that the GOK established a po licy to save Hynix because of the strategic
status of the Korean semiconductor industry. Th e US asserts that, in January 2001, a Blue House 60
official stated that, "Hyundai’s semiconductors and constructions are Korea’s backbone industries,
and these businesses are deeply-linked with other domestic companies. Thus, these firms should not

58 This does not mean that the Panel is placing the burden of proof on the US. It simply means that, for
the most part, the Panel is considering the parties' arguments on Korea's claims against the DOC's determination
of government entrustment or direction in the order set out in the US First Written Submission.
59 Decision Memorandum, page 49 (Exhibit GOK-5).
60 The Panel understands that this is a reference to the official residence of the President of ROK.

be sold off just to follow market principles."
61 The US asserts that in May 2001, a senior KEB official
stated that, "[i]f Hynix is placed under receivership, Korea’s exports will be severely battered
[because] Hynix accounts for 4 per cent of exports. As far as I know, the government is now working
out a series of powerful measures to ensure the survival of Hynix Semiconductor."
62 The US asserts
that a Chong Wa Dae 63 official stated that, "[w]e are doing what is deemed necessary to save
companies leading the countries [sic] strategic industries." 64 According to the US, the perception in
the Korean banking community was that Hynix was "too big to fail".65
7.50 The US submits that the DOC considered this and other evidence of the GOK’s policy to
prevent the failure of Hynix. The US asserts, for example, that the DOC noted that Economic
Ministers held several meetings in late 2000 and early 2001 where senior government officials
determined what measures could be taken by the gov ernment to assist Hynix. According to the US,
the evidence before the DOC indicated that as early as November 2000, the GOK began pursuing a
policy (and taking specific actions) to prevent the failure of Hynix.
7.51 We find that an objective and impartial investig ating authority could properly have found that
the GOK had a policy to save Hynix on the basis of the evidence described above. Although this
policy may well explain the participation of public body, Group A, creditors in the four financial
contributions at issue, it is not sufficient to attr ibute to GOK the participation of the private body,
Group B and C, creditors by virtue of Article 1.1(a)(1)(iv) of the SCM Agreement .
Article 1.1(a)(1)(iv) is not concerned with the estab lishment of government policy. It is concerned
with affirmative governmental acts of delegati on or command. Although the DOC may have relied
on the existence of a GOK policy to save Hynix as context for evaluating the alleged affirmative
government acts at issue, the existence of a GOK policy to save Hynix in and of itself could not
properly be treated as evidence of government entrustm ent or direction. Something more is required,
in the sense of evidence of implementation of that policy vis-à-vis private bodies through affirmative
government acts of delegation or command. We consider that the DOC was of the same view, since it
first examined whether or not there was a GOK po licy to support Hynix's restructuring, and then
considered whether there was a pattern of practices on the part of GOK to act upon that policy.66
(ii) GOK Control Over Hynix's Creditors
7.52 Korea submits that the DOC failed to estab lish that GOK exercised control over Hynix's
creditors. The US asserts that GOK did exercise such control, through its multiple roles as lender,
owner, legislator and regulator.
The GOK's role as lender/signalling
7.53 Korea notes that the DOC found that:
"[t]he Fast Track programme was [] vital to the success of Hynix' and other Hyundai
companies financial restructuring, and the KDB's involvement sent a clear signal that

61 The State Activism toward the Big Business in Korea, 1998-2000: Path Dependence and Institutional
Embeddedness, Jiho Jang, University of Missouri-Columbia (April 2001) (Exhibit US-17).
62 Creditors Deny Hynix Receivership Rumors, KOREA TIMES (4 May 2001) (Exhibit US-26).
63 The Panel understands that this is a reference to th e official residence of th e President of ROK, also
known as the Blue House.
64 Chong Wa Dae Defends Hyundai Rescue , K OREA TIMES (7 February 2001) (Exhibit US-27); see
also The State Activism toward the Big Business in Korea, 1998-2000: Path Dependence and Institutional
Embeddedness, Jiho Jang, University of Missouri-Columbia (April 2001) (Exhibit US-17).
65 Financial Experts Report, Meeting 2, at 7 (Exhibit GOK-30).
66 Decision Memorandum, page 49 (Exhibit GOK-5).

the government stood behind the programme and would take dramatic steps to ensure
the restructuring effort moved forward."67
7.54 Korea submits that evidence of government si gnalling (through the provision of KDB loans)
is legally irrelevant to the issue of entrustment or direction. According to Korea, the fact that a
government may desire and approve of a certain outcome does not and cannot establish entrustment or
direction.
7.55 The US submits that KDB is a public body, and that the KDB’s role as Hynix’s primary
lender significantly underscored the GOK’s support fo r the company. According to the US, the
KDB’s presence as a lender was a signal to Korean "private" banks that a particular investment
decision had the GOK’s blessing, and that a company was backed by the GOK. The US asserts that
the KDB also played a critical role in managing th e KDB Fast Track Programme. The US argues that
only six companies participated in the KDB Fast Track Programme, four of which were current or
former Hyundai affiliates.
68
7.56 In considering the DOC's analysis of the GOK's role as lender, we note the US statement that
"[t]he DOC never found that signalling in and of itsel f amounted to entrustment or direction. Rather,
the DOC considered the government’s creation of the KDB Fast Track Programme – which benefited
a limited pool of users – as a relevant piece of evidence." 69 In our view, the DOC properly found that
signalling in and of itself did not amount to entrustmen t or direction. We consider the fact that GOK
and/or public bodies made loans to Hynix to be of very limited probative value in an investigation of
alleged government entrustment or direction, since the provision of a loan to Hynix by GOK and/or
public bodies does not, in and of itself, entail any affirmative acts of delegation or command. Indeed,
it does not even entail any interaction between the GOK and/or public bodies and Hynix's private
creditors. Even when viewed in conjunction with other evidentiary factors, we consider that an
impartial and objective investigating authority woul d have refrained from attaching undue importance
to the lending practices of public bodies when considering evidence of alleged government
entrustment or direction of private bodies in the circumstances at issue.
The GOK's role as owner

Arguments of the parties

7.57 Korea asserts that the DOC relies extensively on the fact that the GOK held ownership
interests in certain banks involved in Hynix’s restructuring over the course of the period
investigated.
70 According to Korea, however, this fact does not constitute evidence of an explicit and
affirmative delegation or command by the GOK to entr ust or direct credit to Hynix. Korea asserts
that the GOK obviously has complete or majority ownership in some of the banks involved in the
Hynix restructuring. Korea argues that even if th is shareholding somehow constituted evidence of an
explicit and affirmative delegation or command by the GOK to the banks in which it held a
controlling stake, it is affirmatively not eviden ce of an explicit and affirmative delegation or
command to all banks.

67 Decision Memorandum, page 52 (Exhibit GOK-5). The KDB Fast Track Programme provided for
the repackaging and refinancing of maturing bonds. Eligible companies enrolled by their creditors in the
Programme were required to cover the immediate costs of 20 per cent of their maturing bonds. The remaining
80 per cent of the bonds were re-issued through KDB.
68 Decision Memorandum at 23 (Exhibit GOK-5).
69 US First Written Submission, Note 86.
70 Korea refers, for example, to pages 53-54 of the Decision Memorandum (Exhibit GOK-5).

7.58 Korea asserts that the standard set out in the US - Export Restraints case makes clear that a
government holding shares in a private body alone is not sufficient evidence to presume that a
measure adopted by the private body has been ‘directed" by the government-shareholder. Korea
submits that this is true even if the sharehol ding allows the government to exercise a decisive
influence over the private body’s operations. Acco rding to Korea, direction can be found to be
present only if it is positively established that the government has actually exercised its control to
direct the bank in some specific way as set forth in US - Export Restraints.
71
7.59 The US asserts that "the GOK's role as owner was crucial in its exercise of control over
Hynix's creditors."72 The US argues that the DOC found that the government-owned and controlled
banks played a "dominant role" 73 in the Hynix restructuring, particularly in the October 2001
restructuring.74 The US asserts that the DOC's views were consistent with the views of private
financial experts interviewed by the DOC.
Evaluation by the Panel

7.60 In its Decision Memorandum, the DOC stated that "[t]he GOK's ownership or control of these
banks, which held a majority th roughout all critical phases of the Hynix bailout, allowed the GOK to
entrust the financial aspects of the bailout to these GOK owned or controlled banks, operating through
the Hynix creditors council."
75 The DOC continued that "[t]hr ough its control and influence over
these banks, ... the government was able to establis h its dominant position over Hynix' Creditors'
Council, influence the outcome of the council meetings , and entrust the continuation of its policies to
the council."76
7.61 The DOC's findings on government ownership therefor e relate to two issues. First, it relates
to the alleged entrustment or direction of Group B (government owned or controlled) creditors.
Second, it relates to the GOK's alleged ability, thr ough ownership or control of the Group B creditors,
to control proceedings within the Creditors' C ouncils, and therefore dictate terms to the Group C
creditors. Since we address the s econd issue elsewhere in this report 77, we shall concentrate on the
first issue at this juncture.
7.62 We recall that the DOC found that GOK ownershi p or control of Group B creditors "allowed
the GOK to entrust the financial aspects of the bailout to these GOK owned or controlled banks." 78
Thus, the DOC did not find that government ownership or control in and of itself amounted to
entrustment or direction. We agree with this approach, because whereas government entrustment or
direction refers to affirmative acts of delegati on or command, government ownership is a state.
Although that state, depending on the degree of gov ernment ownership, might facilitate government
entrustment or direction, the existence of that state per se is not indicative of any affirmative acts on
delegation or command on the part of the government. That being said, we note that the DOC in its
Preliminary Determination stated that "banks that are owned, in whole or in part, by the GOK are
subject to the influence of their majority or minority shareholders."
79 We would emphasise that a

71 Korea also asserts that provisions of the Public Fund Oversight Act and various Memoranda of
Understanding ensured that GOK-owned banks took day-to-day decisions independently. These arguments are
addressed in the next section of our report.
72US First Written Submission, para. 62.
73 Decision Memorandum, page 53(Exhibit GOK-5) .
74 Id., page 54.
75 Id., page 53.
76 Id., page 54.
77 See paras. 7.82 to 7.87 infra.
78 Decision Memorandum, page 53 (Exhibit GOK-5).
79 This statement by the DOC is inconsistent with its statement in the Decision Memorandum (Exhibit
GOK-5) that "[t]he GOK's ownership ... allowed the GOK to entrust the financial aspects of the bailout to these

government's influence as a shareholder is not per se evidence of entrustment or direction, since
government influence does not necessarily entail affirmative acts of delegation or command. 80
Whereas all affirmative acts of delegation or comm and will result in influen ce, the converse is not
true. If it were, financial contributions by any private entity in which a government held shares would
fall within the scope of Article 1.1(a)(1)(iv) of the SCM Agreement.
7.63 Furthermore, in finding that the GOK was able to entrust or direct Group B creditors to
participate in the Hynix restructuring as a result of its shareholder influence, we consider that the
DOC overlooked record evidence 81 indicating that certain Group B creditors did not actually
participate in one of the financia l contributions at issue in these proceedings. In particular, the DOC
failed to explain how the KFB, a Group B creditor in which GOK had a 49 per cent shareholding, was
able to exercise appraisal rights and subsequent ly seek mediation in respect of the October 2001
restructuring.82 Faced with the same factual circumstances, we do not consider that an objective and
impartial investigating authority could properly have found, on the basis of the reasoning advanced by
the DOC, that government ownership, either in is olation or in conjunction with other factors,
constituted compelling evidence of government entrustment or direction of Group B creditors.
The GOK's role as legislator
Arguments of the parties

7.64 Korea submits that the DOC and US ignored the various procedural safeguards imposed by
GOK to ensure that GOK ownership in certain banks did not turn into de facto control of day-to-day
operations. Korea submits that the DOC mischaract erized the following legislative measures: Prime
Minister's Decree No. 408, the Public Funds Oversight Act, and the CRPA.
7.65 Korea submits that the US mischaracterizes Article 1 of the Prime Minister’s Decree No. 408,
which provides that the Decree seeks to "exclude unfair outside intervention in the management of
financial institutions."
83 Korea acknowledges that the Decree e nvisages the GOK exercising its rights
as a shareholder. Korea asserts that, much like othe r shareholders that do not intervene in the day-to-
day decisions, the GOK does not intervene in the day- to-day decisions of Korean banks. Korea states
that the US has never articulated the ways in wh ich exercising standard shareholder rights constitutes
-- either in general or this specific case -- any inte rvention in the particular decisions to grant loans to
certain customers. Korea accepts that those ba nks with substantial GOK shareholding might be
influenced by the Korean Governme nt, but argues that influence is not entrustment or direction. The
fact that banks with substantial GOK shareholding might be more likely to make loans, or might
consider a broader range of economic factors, does not represent entrustment or direction.

GOK owned ... banks," (emphasis supplied) since it imp lies that government ownership necessarily constitutes
entrustment or direction, rather than merely allowing (or facilitating) entrustment or direction.
80 We recall that, in our view, the DOC may well have been entitled under the SCM Agreement to treat
100 per cent GOK-owned Group B creditors as public bodies. In the absence of any such finding, the DOC was
required to demonstrate that they were entrusted or directed, through affirmative GOK acts of delegation or
command, to participate in the four financial contributions at issue.
81 Including the Financial Notes to the Hynix 2001 Audit Report set forth in Exhibit US-125, which
included the following statement:
According to [CRPA], any creditor financial institutions who is dissatisfied with the creditor banks
resolution is entitled to apply for mediation to Mediation Committee. Based on this clause, three
creditor banks, including Korea First Bank, raised objection to the terms of reimbursement of
remaining debts after debt to equity swap and debt exemption, five-year debentures with no interest.
Accordingly, [Hynix] recognized [won] 80,100 million of other payables as current liabilities."
82 The issue of mediation under the CRPA is addressed at para. 7.85 infra.
83Exhibit GOK-45.

7.66 Regarding the Public Funds Oversight Act, Kor ea submits that the US mischaracterizes the
role of the MOU. According to Korea, the MOUs were about improving transparency, and ensuring
some degree of prudential management over the ba nks that had to receive public funds. As the
DOC’s verification report makes clear, the purpose of the MOUs is to ensure that the banks are
operated in accordance with sound business principles. Korea submits that the GOK is acting to
ensure that the public funds that have been inject ed in the bank are put to good use and the bank is
placed on a sound financial footing. Korea asserts that, far from being an instrument of government
control, the MOUs are a means to limit and ultimately eliminate GOK involvement. Korea also
argues that the MOUs did not allow for intervention in the day-to-day decisions of the banks. Korea
also submits that many Korean banks simply did no t have any such MOU. In particular, Korea notes
that Kookmin did not have an MOU, despite the US argument to the contrary.
7.67 Korea submits that the US makes several seri ous mischaracterizations regarding the CRPA.
Korea asserts that the US argument that the Cr editors' Council gave only limited options ignores the
context of the restructuring. According to Korea, in the context of restructuring, the creditors either
hammer out an agreement that most can accept, or the company goes into bank ruptcy. Korea asserts
that this is the whole point of the restructur ing -- to preserve more value by hammering out
compromises rather than allowing the company to fa il. Korea understands the core US argument to
be that creditors did not have any real choices beca use in any event they had to forgive some debt.
Korea asserts that this US argument in fact represents a per se rule that distressed companies must
declare bankruptcy, and that restructuring is never allowed.
7.68 Korea submits that the definitive factual history of the Hynix creditors exercising appraisal
rights confirms the procedural fairness of the CRP A process. Korea asserts that, on 31 October 2001,
the Creditors Council passed a resolu tion for those creditors having c hosen to exercise their appraisal
rights under option 3. Korea states that, in respon se to this decision, dissenting creditors asked for
resolution of the matter by a mediation committee as provided under the CRPA. According to Korea,
the mediation committee decided that 100 per cent of these creditors’ secured debts and 25 per cent of
their unsecured debts are to be paid in cash by 31 May 2002. Korea asserts that where the creditor
agrees, the term of payment may be adjusted accord ingly, in which case 6 per cent interest shall be
paid on any payments after 1 June 2002. Korea states that both the Creditors Council and the option 3
creditors accepted the outcome of this mediati on without further recourse to court litigation as
provided under the CRPA. According to Korea, the Creditors Council therefore made respective
lump sum cash payments to Kwangju, Kyungnam a nd HSBC on 31 May 2002. Korea states that two
payments were made to KFB on 3 October 2002 and 3 December 2003, respectively, with 6 per cent
interest paid on the latter. Korea submits that this concrete history shows that the CRPA fully
guarantees the legal rights of creditors opting for appraisal rights thereunder.
7.69 The US submits that the legislative action ta ken by the GOK actually enhanced its ability and
the ability of Hynix’s creditors to effectuate the GOK’s policy to save Hynix.
7.70 Regarding Prime Minister Decree No. 408, the US disagrees that the measure was introduced
to diminish the GOK's authority to intervene in the decisions of Korean banks. The US refers to the
DOC's finding that the Decree contained "suffi cient ambiguities which would allow the GOK to
become involved in the banking system."
84 The US asserts that Article 5 of Prime Minister Decree
No. 408 permits supervisory agencies to request "cooperation" from financial institutions for the
purpose of the stability of the financial market, or to attain the "goals of financial policy." The US
asserts that Article 6 provides the government with th e flexibility to intervene on a company’s behalf,
stating that: "The Minister of MFE and KDIC shall, unless they exercise their rights as shareholders
of any of the Financial Institutions , procure that the Financial Institution which was invested by the
Government or KDIC, can be opera ted independently under the direc tion of the Board of Directors

84 Preliminary Determination, 68 Fed. Reg. at 16774 (Exhibit GOK-4).

thereof" (emphasis added). The US submits that the Decree legalized the GOK’s rights to intervene
under the guise of stabilizing financial markets or exercising its shareholder rights to elect and appoint
the banks’ decision makers and to make credit policy decisions.
7.71 The US asserts that the DOC also found that the GOK was able to leverage its control of the
financial sector to assist Hynix through enactment of the Public Fund Oversight Act. According to
the US, this law required Korean private banks to sign MOUs in exchange for the massive
recapitalizations they received from the government. The US submits that these MOUs provided the
government with a contractual right to intervene in the day-to-day business and credit decisions of
Korean banks. The US notes that the DOC concl uded that, by entering into MOUs, "[t]he GOK in
this manner can be directly involved in the fiscal operations of the bank." 85 The US asserts that, in
particular, MOUs allowed the GOK to "require that the bank management be changed or the bank be
restructured" such that "employees can be fired, th e bank can be restructured, or the KDIC can order
that the bank be merged with another healthier bank." 86 According to the US, many of Hynix’s
creditors, suffering from capital shortages and serious ly over-exposed with respect to Hynix, had no
choice but to accept the strict requirements of the MOUs. The US asserts that such legislatively-
mandated contractual agreements provided the GOK w ith substantial control in directing credit to
Hynix.
7.72 The US submits that another important step in furtherance of the GOK’s policy towards
Hynix was the enactment of the CRPA. The US asserts that the DOC concluded that this law
essentially permitted a handful of Hynix’s creditors, most of whom were majority owned by the GOK,
to dictate the terms of the October 2001 restructuri ng to other Hynix creditors. The US asserts that
the CRPA permits the creditors of a distressed Kore an company to form a council and jointly manage
the company through its restructuring. The US as serts that, according to Article 27(1) of the CRPA,
the "principal transactions bank" (i .e., the KEB in this case) is nomin ally head of the council, which
makes decisions "with a concurrent vote of the cred itor financial institutions retaining ¾ or more of
the gross amount of credit extension by the cred itor financial institutions (including the loans
converted into investments pursuant to the plans for management normalization)."87
7.73 The US accuses Korea of mischaracterizing the CRP A, since it implies that Hynix’s creditors
could "choose" their own path and "walk away " from Hynix restructuring and recapitalization
measures taken under the CRPA. According to the US, the CRPA gave Hynix’s largest creditors –
i.e., the specialized banks and those owned and c ontrolled by the GOK – the power to dictate
restructuring terms to all other Hynix creditors. The US asserts that Hynix’s Creditors’ Council,
dominated by specialized banks and government-own ed and -controlled banks , determined that: (1)
no creditor would have the option to call in its debt , (2) no creditor would have the option to walk
away without penalty, and (3) no creditor would have the option to remain an interest-earning creditor
without the extension of new loans or forgiving sign ificant debt on terms favourable to Hynix. The
US argues that the DOC found that these "choices" were extremely limited and highly favourable to
Hynix, essentially keeping Hynix from complete bankruptcy. According to the US, the terms of those
"choices" were dictated by Hynix’s government-owned and -controlled creditors.
7.74 The US submits that the three options presented to Hynix’s creditors as part of the October
restructuring and recapitalization measures were: (1) extend new loans, convert a majority of their
debt to equity, and extend maturities and lower in terest rates on the remainder of outstanding loans;
(2) decline to extend new loans, convert a still signi ficant portion of their debt to equity, and forgive
the remainder; or (3) decline to extend new loans or convert debt to equity, and exercise their
appraisal rights on small part of their debt. The US asserts that these three options do not offer much

85 Preliminary Determination, 68 Fed. Reg. at 16774 (Exhibit GOK-4).
86 Government of Korea Verification Report, at 4 (Exhibit US-12).
87 Exhibit US-51.

of a real choice, since each of the three was structured to maximize benefits to Hynix and to minimize
the creditors’ abilities to exercise basic creditor rights. The US argu es that even the third option was
highly favourable to Hynix because it required credito rs to forgive their debt on very unfavourable
terms. Specifically, creditors that exercised the third option could only exercise their appraisal rights
for 25 per cent of the unsecured deb t; they had to forgive the rest, i.e., they had to forgive 75 per cent
of that debt. The US asserts in addition that the few banks that selected the third option not only had
to write-off 75 per cent of Hynix’s debt, but also did not even actually receive the proceeds from
having exercised their appraisal rights on the remaining 25 per cent. According to the US, this is
because they were forced under th e terms of the Creditors’ Council agreement to convert this portion
into zero coupon (i.e., interest free) debentures w ith a five-year maturity, whereby option 3 banks will
not actually receive what they were able to salvage from their loans to Hynix until 2006, and will not
earn any interest on the money that is owed to them by Hynix.
Evaluation by the Panel

Prime Minister's Decree No. 408
7.75 The DOC's findings regarding the Prime Minist er's Decree No. 408 are set forth in the
Preliminary Determination. In this document, the DOC determined that:
the de jure measures contain sufficient ambiguities which would allow the GOK to
become involved in the banking system. For instance, the Prime Minister's Decree at
Article 5 states that the financial superv isory agencies can request cooperation from
financial institutions for the purpose of the stability of the financial market, or to
attain the goals of financial policies. As noted above, the financial system in the ROK
has been going through a crisis that could be the type of situation in which this
exception would be applied. A further ex ception that would allow GOK influence
over the banks is included in Article 6 of the Prime Minister's Decree. Article 6 states
that the Minister of MOFE and KDIC shall, unless they exercise their rights as
shareholders of any of the Financial Institutions , procure that the Financial
institution, which was invested by the {GOK} or KDIC, can be operated
independently under the direction of the Board of Directors thereof'' (emphasis
added). As noted above, because the GOK is part-owner in many commercial banks,
an exercise of its shareholder rights coul d allow the GOK an opportunity to become
involved in the operations of the banks.
88
7.76 The DOC therefore focused on Articles 5 and 6 of Prime Minister Decree No. 408. We are
not persuaded by the DOC's analysis of Article 5 of Prime Minister Decree No. 408. The DOC
determines that Article 5 allows financial supervisory agencies to "request cooperation" from financial
institutions. We do not consider that an objective and impartial investigating authority could properly
determine that a request for co-operation amounts to evidence of affirmative acts of delegation or
command. Requesting co-operation in a matter is not the same as delegating a task, or commanding
someone to do something. In addition, even if Ar ticle 5 did enable the GOK to entrust or direct
private bodies, the DOC has not provided any evidence that any such authority under Article 5 was
actually exercised in this way. Instead, the DOC me rely asserts that a financial crisis "could be the
type of situation in which [Artic le 5] would be applied." We do not consider that an objective and
impartial investigating authority could treat such a conditional statement as evidence that affirmative
acts of delegation or command were actually taken by the GOK pursuant to Article 5 of the CRPA.
7.77 Regarding Article 6 of Prime Minister Decree No. 408, the DOC's analysis merely establishes
the legal authority of the GOK to intervene in th e activities of government-owned banks through the

88 Preliminary Determination, 68 Fed. Reg. at 16774 (Exhibit GOK-4).

exercise of its shareholder rights. We do not cons ider that an objective and impartial investigating
authority could properly have determined that this amounts to evidence of affirmative acts of
delegation or command. The exercise of share holder rights does not necessarily entail affirmative
acts of delegation or command. In our view, a finding of entrustmen t or direction must be based on
affirmative acts going beyond the simple exercise of shareholder rights. Otherwise, the acts of any
companies with government shareholdings could be a ttributed to Members under Article 1.1(a)(1)(iv)
of the SCM Agreement.
Public Funds Oversight Act
7.78 The DOC found that the use of MOUs allo wed the GOK to "set financial soundness,
profitability, and asset quality targets"
89, and review implementation of such targets. 90 Although the
DOC may have been correct in determining th at MOUs therefore allowed the GOK to become
"directly involved in the fiscal operations of the bank", the DOC failed to establish that such
involvement would entail anything other than ensu ring compliance with the abovementioned targets.
Neither the DOC's evaluation (in the Preliminary Determination), nor the GOK Verification Report
(referred to by the US), suggest that GOK interven tion under the MOUs would have resulted, or in
fact did result, in government entrustment or directi on of banks to invest in (what the US considers to
be) an unsound company. We fail to see how an obj ective and impartial investigating authority could
properly have determined that there was evidence of government entrustment or direction on the basis
of the limited DOC analysis of the Public Funds Oversight Act set forth in the Preliminary
Determination.
CRPA
7.79 The DOC found that:
[d]ecisions made by the October Creditors' Council were subject to the newly enacted
CRPA. Under this Act, banks holding 75 per cent of a company's debt may set the
financial restructuring terms for all of a company's creditors. Hynix' government-
owned and controlled creditors accounted fo r a substantial majority of [Hynix's]
outstanding debt at that time, an amount sufficient to set the terms for all banks ....
91
7.80 We understand the DOC to have found that the GO K was able to control the participation of
Group C creditors in the October 2001 restructuring because, pursuant to the CRPA, Group C
creditors were constrained by decisions of the Cr editors' Council, which in turn was controlled by
Group A and B creditors (owned or controlled by the GOK). The parties' arguments regarding the
DOC's finding give rise to two issues. First, whether the DOC could properly have found that the
Creditors' Council was controlled by Group A and B creditors. Second, whether the DOC could
properly have found that Group C creditors were constrained by decisions of the Creditors' Council.

89 Preliminary Determination, 68 Fed. Reg. at 16774 (Exhibit GOK-4).
90 During the second substantive meeting with the par ties, a dispute arose as to whether a copy of an
MOU submitted by Korea regarding MOUs was admissible. The US asserted that it was not, because such
MOU was not on the DOC's record, even though the DOC had requested a copies of MOUs. Korea disputed
this, arguing that para. 83 of the US First Written Submi ssion shows that the DOC reviewed such documents.
We do not consider that para. 83 of the US First Written Submission shows that the DOC reviewed an MOU
during its investigation. In particular, the GOK Verifi cation Report (Exhibit US-12) referred to by the US does
not indicate that this was the case, since the discussion appears to have concerned MOUs in the abstract.
Accordingly, we do not have regard to the MOU submitted by Korea when reviewing this part of the DOC's
determination.
91 Decision Memorandum, page 54 (Exhibit GOK-5).

Control of the Creditors' Council by Group A and B Creditors?
7.81 The clear implication of the DOC's finding was that Group A and B creditors held at least 75
per cent of the voting rights. Korea queries whethe r the Group A and B creditors held 75 per cent of
the votes. Korea refers to Exhibit US-37, which co ntains a document prepared by the US Embassy in
Seoul, at the request of the DOC. That document indicates that those "institutions where [GOK] is the
first shareholder" held 63.3 per cent of the votin g rights. Furthermore, in Figure US-4, the US
reported that the share of the Creditors Council vote held by Group A and B creditors at the time of
the October 2001 restructuring was "above 65 [per cent]."
92 It would appear, therefore, that the Group
A and B creditors did not hold at least 75 per cent of the votes. This would mean that there is not a
proper factual basis for the DOC's finding that the Group A and B creditors had sufficient votes to "set
the terms for all banks."
93
Constraints on Group C Creditors?
7.82 Second, even if the Group A and B creditors did hold 75 per cent of the votes, we are not
persuaded that an objective and impa rtial investigating authority could properly have found that this
would have allowed them to "set the terms for all banks."
94 We note that creditors were presented
with three options 95, and that four creditors, including both Group B and C entities, exercised their
appraisal rights pursuant to the third option establishe d by the Creditors Council. In this regard, the
DOC found that "the terms on which these creditor ba nks terminated their relationship with Hynix
were dictated by the banks that mattered in this case, namely the large government-owned and
controlled creditors." 96 Although the terms of the payment and buyout price under option 3 were
crafted by the Creditors' Council, the DOC overlooke d the fact that, under the terms of the CRPA,
option 3 creditors exercising their appraisal rights we re entitled to decline those terms of payment and
buyout price proposed by the Creditors' Council if those conditions were deemed unreasonable or
otherwise unacceptable. In such circ umstances, Article 29.5 of the CRPA 97 provides that creditors
exercising appraisal rights may refer the matter fo r mediation, whereby those creditors and the
Creditors' Council appoint an accounting firm to calcula te a mutually agreeable buyout price. More
importantly, the DOC overlooked record evidence indicating that three of the four creditors exercising
appraisal rights under option 3 actually exercised th eir right to seek mediation in respect of the
October 2001 restructuring.

92 The shares of Group A and B creditors at the time of the May 2001 restructuring was reported as
"above 75%." The share was reported as "above 70%" at the time of the syndicated loan and KDB Fast Track
Programme. This would suggest that the US reported data in 5 per cent increments, such that the reference to
"above 65" per cent means something between 65 and 70 per cent, but in any event less than 75 per cent.
93 Decision Memorandum, page 54 (Exhibit GOK-5). Although the Group A and B creditors appear to
have had sufficient votes (i.e., more than 25 per cent) to block decisions within the Creditors Council, a
blocking minority does not have the same effect as a deciding majority.
94 Decision Memorandum, page 54 (Exhibit GOK-5).
95 The three options were: (1) extend new loans, convert some debt to equity, and extend maturities and
lower interest rates on the remainder of outstanding loans; (2) decline to extend new lo ans, convert a portion of
their debt to equity, and forgive the remainder; or (3) decline to extend new loans or convert debt to equity, and
exercise their appraisal rights on part of their debt.
96 Decision Memorandum, page 61 (Exhibit GOK-5).
97 Article 29(5) of the CRPA provides:
"[w]here the consultation under paragraph (4) is not attained, the mediation committee under
Article 31(1) shall make a decision on the price of purcha se or redemption of claims and conditions thereof. In
such case, the mediation committee shall take into consideration the price computed by an accounting specialist
selected under a consultation between the council and opposing creditors by evaluating the value of the relevant
enterprise with insolvency signs and the possibility for implementing the agreement, as well as the situation of
funds of purchase institutions."

7.83 The US asserts that neither Hynix nor the GOK informed the DOC that option 3 creditors
could, or indeed had, sought mediation under th e CRPA, despite a specific request for detailed
information on option 3. The US asserts that, in the underlying investigation, the GOK stated in its
questionnaire response that option 3 banks receive d a zero coupon debenture based on the value of
their secured debt and the liquidation value of their unsecured debt. The US submits that the Panel is
precluded from considering the fact that three of the four option 3 banks sought mediation, and from
reviewing the terms offered under that mediation. Th e US considers that this is new information that
was not on the record before the DOC.
7.84 We agree with the US that our review of the DOC's determination should be confined to facts
actually recorded on the DOC's record of investigation. Although there is no evidence to suggest that
the DOC record contained information regarding the terms ultimately agreed under the mediation
procedure, the record clearly did contain the CRPA, and the possibility of mediation is clearly set
forth in Article 29(5) of that statute. With Article 29(5) on the record, at the very least we would
expect an impartial and objective investigating au thority to take that provision into account, and
explain how, notwithstanding the possibility of Article 29(5) mediation, "controlling" creditors were
still able to "set the terms for all banks."
7.85 In addition to Article 29(5) of the CRPA indicating the possibility of mediation, there was
also evidence on the DOC's record indicating that the mediation provisions had actually been invoked
by three creditors in respect of the October 2001 rest ructuring. In particular, the last paragraph of
page 40 of the Notes to Financial Statements a ttached to Hynix's 2001 Audit Report, which was on
the DOC record (and submitted to the Panel by the US in Exhibit US-125), provides:
According to [CRPA], any creditor financial institutions who is dissatisfied with the
creditor banks resolution is entitled to appl y for mediation to Mediation Committee.
Based on this clause, three creditor banks , including Korea First Bank, raised
objection to the terms of reimbursement of re maining debts after debt to equity swap
and debt exemption, five-year debentures with no interest. Accordingly, [Hynix]
recognized [won] 80,100 million of other payables as current liabilities.
7.86 In our view, this statement should have put the DOC on notice that a request for mediation
had been filed, and that the terms offered to the three option 3 creditors might be changed. Again, this
evidence is inconsistent with the DOC's determin ation that creditors "controlling" the Creditors'
Council were able to "set the terms for all banks."
7.87 Although the GOK questionnaire response shoul d 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 information on the record to bring into question the DOC's determination that creditors
"controlling" the Creditors' Council were able to "set the terms for all banks." In these circumstances,
we do not consider that an objective and impartial i nvestigating authority could properly have found,
on the basis of the CRPA, that "the terms on whic h these creditor banks terminated their relationship
with Hynix were dictated by the banks that matter ed in this case, namely the large government-owned
and controlled creditors."
98

98 US First Written Submission, para. 88. Indeed, we note that such a conclusion is contradicted by
other record cited by the DOC in its Decision Memorandum (Exhibit GOK-5). Thus, at page 55 of the Decision
Memorandum, the DOC refers to expert testimony in the following terms: "At one point, however, a number of
commercial banks, including Kookmin, Hana, and Shinhan, were no longer willing to provide fresh capital to
Hynix and decided to take losses on their exposure instead. The expert stated that had this happened before the
financial crisis, the GOK would have forced all of Hynix's creditors to provide fresh capital to the company. In
this case, however, the GOK influenced only government-owned banks." According to that expert, therefore,

7.88 At para. 71 of its replies to the Second Set of Panel Questions, the US seeks to support its
arguments regarding the CRPA by referring to an article published in the Dong-A Daily. However,
the US has not referred to any part of either the Preliminary Determination, the Final Determination
or the Decision Memorandum where the DOC addresses this article. Nor have we been able to find
any reference to this provision in these documents. Accordingly, we consider that the US argument in
respect of this article constitutes ex post rationalization which, in accordance with our standard of
review, we decline to consider.
7.89 In addition, the US seeks to rely on two alle ged statements by GOK officials regarding the
purpose of the CRPA.
99 One statement was allegedly made by GOK officials at verification. The
other statement was allegedly reported in the Kor ea Times. We do not consider that statements
regarding the purpose of the CRPA should take pr ecedence over our interpretation of the provisions
thereof. Thus, even if statements were made to the effect that the purpose of the CRPA was to
prevent banks from being able to avoid participating in restructurings, this does not change the fact
that Article 29(5) of the CRPA provides a meditation mechanism that undermines the ability of
dominant creditors in the Creditors' Council to dictate the terms on which other creditors participate in
the restructuring. In this regard, we agree with the statement by the panel in Brazil – Aircraft
(Article 21.5 – Canada II

In our view, a conclusion that PROEX III could be applied in a manner which confers
a benefit, or even that it was intended to be and most likely would be applied in such a
manner, would not be a sufficient basis to conclude that PROEX III as such is
mandatory legislation susceptible of inc onsistency with Article 3.1(a) of the SCM
Agreement.100
7.90 The US also argues that, pursuant to Article 14 of the CRPA, the FSS prevented creditors
from placing Hynix into liquidation. However, we can find no reference to Article 14 of the CRPA in
any of the DOC documents under review in these pro ceedings. For this reason, we shall not take
Article 14 of the CRPA into account in making our findings.
7.91 In light of the above considerations, we find that the DOC could not properly have found that
Group A and B creditors controlled the Creditors' Council at the time of the October 2001
restructuring. Nor could the DOC properly have found that Group C creditors were constrained by
the decisions of the Creditors' Council.
The GOK's role as regulator

Arguments of the Parties

7.92 The parties have submitted arguments regardi ng two regulatory interventions by the GOK.
The first concerns events surrounding certain meet ings of the Economic Ministers in late 2000 and
early 2001. The second concerns the allegedly selective enforcement of bankruptcy principles by the
FSC in respect of the October 2001 restructuring. Korea submits that the DOC read too much into
these regulatory interventions, whereas the US refers to them as evidence of government entrustment
or direction.
Economic Ministers' meetings

certain creditors were able to act independently within the framework of the CRPA. At a minimum, the DOC
should have sought to reconcile this expert testimony with its conclusions regarding the CRPA.
99 See US reply to Question 2 after the second substantive meeting, para. 68.
100 Panel Report in Brazil – Aircraft (Article 21.5 – Canada II ), para. 5.43

7.93 The DOC found that meetings of the Economic Ministers resulted in communications to
KEIC and KEB, with an instruction that the results should be "carried out perfectly." 101 According to
the DOC, "[t]hese results included a 'resolution of special approval' by the FSC to increase certain
banks' ceiling limits for single borrowers, as request ed by the KEB on behalf of Hynix' creditors." 102
The DOC found that the FSC subsequently provided loan limit waivers. One loan limit waiver was
for KDB, KEB and KFB to participate in the Decemb er 2000 syndicated loan. Another was a blanket
waiver provided for any bank that participated in the KDB Fast track Programme. A third waiver was
for Woori Bank relating to its D/A financing to Hynix. The DOC concluded that, through these
meetings, the GOK "took early and affirma tive steps to secure Hynix’ survival." 103 The DOC also
concluded that "[t]hese meetings signalled the GOK’s determination that Hynix would not be allowed
to fail."104
7.94 Korea submits that the DOC read too much into the Ministers’ meetings and resulting actions
in reaching the conclusion that they reflected the beginning of a ten-month conspiracy by the GOK to
restructure Hynix. Korea asserts that, as the DOC acknowledges, the actions taken resulted in
communications only to: (1) KEIC to resume export insurance ( i.e., make available export insurance)
for Hynix; and (2) the KEB, that it proceed w ith an application to th e Financial Supervisory
Commission for a waiver of the applicable lending limits on KEB with respect to Hynix.105
7.95 According to Korea, the communication to KEIC constituted a command or delegation by one
government entity (the Economic Ministers) to a nother government entity (KEIC). As such, Korea
asserts that it cannot constitute evidence of entrus tment or direction, which concerns government
action vis-à-vis private bodies. The Ministers simply resolved a regulatory issue about the
permissibility of insuring certain kinds of transactions.
7.96 With regard to the communication to KEB, Ko rea asserts that the guidance offered by the
GOK was for KEB to seek a lending limit waiver in respect of KEB’s desire to participate in the
December 2000 syndicated loan. Korea asserts that the communication did not command KEB or any
other Hynix creditor to provide financing to Hynix. According to Korea, the syndicated loan had
already been fully contemplated by KEB and ot her Hynix creditors, with Citibank organizing the
effort from early November 2000, well before the date of the Economic Ministers’ documents. Korea
submits that, at most, DOC has identified evid ence of KDB, KEB and KFB being allowed to do
something. There is no evidence that these banks were being forced by the GOK to extend new credit
to Hynix.
7.97 The US asserts that in a November 2000 mee ting, the Economic Ministers concurred on a
"resolution of special approval" by the FSC to increase certain banks' ceiling limits for single
borrowers, as requested by the KEB on behalf of Hynix's creditors. 106 The US argues that the FSC
approved three credit limit increases for Hynix' creditors "in order to allow them to participate in the
Hynix restructuring process."107 The US argues that the first waiver was for the KDB, KEB and KFB,
thereby ensuring the existence of enough particip ants to raise the 800 billion won December 2000
syndicated loan. The US argues that the second was a blanket waiver provided for any bank that
participated in the KDB Fast Track Programme. The US asserts that the FSC granted this blanket
waiver without any regard to the commercial considerations pertaining to the individual banks. The

101Decision Memorandum at 50 (Exhibit GOK-5)
102 Id.
103 Id.
104 Id.
105 Id. at 50-51.
106 Results of Discussions at th e Economic Ministers’ Meeting , letter from Ministry of Finance and
Economy (28 November 2000) (translated version) (Exhibit US-28).
107 Decision Memorandum at 50-51 (Exhibit GOK-5); Government of Korea Verification Report at 16
(Exhibit US-12).

US asserts that the third waiver was a Marc h 2001 waiver for Woori Bank relating to its D/A
financing to Hynix.
7.98 The US further asserts that, in a November 2000 letter to the Presidents of the KEIC and the
KEB, the Minister of Finance relayed the "r esults on alleviating the cash crunch of Hyundai
Electronics" reached at a 28 November 2000 meeting of the Economic Ministers.
108 According to the
US, the measures, which were "initiated by" the Financial Supervisory Service (FSS), included an
instruction to seek a waiver of the ceiling on loan s extended to a single borrower (which otherwise
would prevent certain lenders from providing new lo ans to Hynix) and a command to the KEIC to
resume the insurance for the balance of the non-negotiated D/A transactions 109, valued at
$550 million. The US asserts that the letter instructs the Presidents of the KEIC and KEB to make
sure these results "are carried out perfectly." 110 The US submits that these events were reported in the
Korea Economic Daily.
Evaluation by the Panel

7.99 As a preliminary matter, we note that the instruction to the KEIC to resume export insurance
for Hynix, and the instruction to the FSC to gran t loan limit waivers, were addressed to government
entities (i.e., the KEIC and FSC). These instructions , therefore, could not properly be relied on as
evidence of government entrustment or direction of private
 bodies.
7.100 Regarding alleged instructions to private bodi es, we note the US argument that the FSC's
November 2000 letter "included an instruction to seek a waiver of the ceiling on loans extended to a
single borrower",111 namely the KEB. We understand the US to infer that KEB was thereby instructed
to seek a loan limit waiver. Upon examination of that letter 112, we note that it refers to the pursuit of
"a resolution of special approval by the [FSC] upo n the request of the [KEB] representing creditor
financial institutions." The DOC Decision Memorandum 113 also refers to such special resolution
being "requested by" the KEB. For this reason, we do not consider that the US is correct to argue that
the letter included an "instruction" to seek a loan lim it waiver. If there is no factual basis for the US
argument that the KEB was instructed to seek a loan limit waiver, we fail to see how the facts could
support a determination that the KEB was entrusted or directed to not only seek a loan limit waiver,
but to actually participate in the syndicated loan. We do not consider that the DOC determination
contains an adequate explanation of how an instruc tion to a government entity to respond to a request

108 Results of Discussions at th e Economic Ministers’ Meeting , letter from Ministry of Finance and
Economy (28 November 2000) (translated version) (Exhibit US-28).
109 The US asserts that D/As or "documents agai nst acceptance" are trade bills promising future
payments for delivered goods that exporters frequently negotiate with banks to obtain financing for the amount
of the D/A in advance of the scheduled maturity of the trade bill. According to the US, the D/As that Hynix
negotiated with its creditor banks related to export transactions between Hynix and its foreign subsidiaries. The
US asserts that, because Hynix was in a state of tec hnical insolvency, the KEIC had suspended guarantees of
D/A loans to Hynix. See Direct Intervention by the Government in Supporting Hynix , The Korea Economic
Daily (28 August 2001) (Exhibit US-29); Results of Discussions at the Economic Ministers’ Meeting, letter from
Ministry of Finance and Economy (28 November 2000) (translated version) (Exhibit US-28).
110 Results of Discussions at th e Economic Ministers’ Meeting , letter from Ministry of Finance and
Economy (28 November 2000) (translated version) (Exhibit US-28). In a subsequent letter from the Ministry of
Commerce, Industry, and Energy ("MOCIE") to the KEIC, MOCIE informed the KEIC that Economic Ministers
had decided to provide temporary support of export insu rance for the D/A transactions between the main office
and branch offices of Hyundai Electronics and requ ested that the KEIC "take actions accordingly." Regarding
the provision of Export Insurance for the Hyundai Electronics’ D/A transaction , letter from Ministry of
Commerce, Industry and Energy (November 30, 2000) (translated version) (Exhibit US-30).
112 Results of Discussions at the Economic Ministers’ Meeting , letter from Ministry of Finance and
Economy (28 November 2000) (translated version) (Exhibit US-28).
113 Decision Memorandum at 50 (Exhibit GOK-5).

for a loan limit waiver from the KEB could pr operly be treated as evidence of government
entrustment or direction of the KEB to participat e in the syndicated loan. The US submits that
commercial principles were not applied by the FSC in granting the loan limit waivers. While this may
have been the case, this concerns relations be tween the GOK and FSC, and could not properly be
treated as evidence that private bodies were somehow entrusted or directed to do something.
7.101 Even though the US may be correct in arguing that certain creditors would not have been able
to participate in the syndicated loan without the lo an limit waiver, we do not consider that the DOC
could properly have inferred from this that creditors were entrusted or directed to participate in the
syndicated loan. In order to properly draw such a conclusion, we consider that the DOC would have
had to demonstrate that the KEB was entrusted or dir ected to request a loan limit waiver in respect of
a loan that it would otherwise not wish to particip ate in. The DOC failed to show this. The US also
argues that entrustment or direction to the banks to assist Hynix would be meaningless if the banks
were legally precluded from complying with the GOK’ s directives. While this may be the case, this
does not mean that there is government entrustment or direction every time that a loan limit waiver is
provided.
7.102 The US has also sought to rely on reporting of the events surrounding the Economic
Ministers' meeting by an article in the Korea Economic Daily. We have not been able to find, and the
US has not pointed us to, any refere nce to this article in either the Preliminary or Final
Determinations, or the Decision Memorandum. Thus, even though that article may have been on the
DOC's record, we consider that US reliance on that article in these proceedings constitutes ex post
rationalization, which we will not consider.
7.103 Thus, even if the US is correct to argue th e loan limit waivers demonstrate that the GOK
"took early and affirmative steps to secure Hynix’s survival", there was no ev idence that such steps
included instructing creditors to seek loan limit wa ivers or participate in the syndicated loan.
Furthermore, while the DOC found that the Econo mics Ministers' meetings "signalled the GOK’s
determination that Hynix w ould not be allowed to fail"
114, we recall the US assertion in these
proceedings that "[t]he DOC never found that signa lling in and of itself amounted to entrustment or
direction."115 Thus, even if the US argument regarding signalling 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.
7.104 In light of the above, we consider that the DOC failed to properly demonstrate that the
circumstances surrounding the Ec onomic Ministers' meetings c onstituted evidence of government
entrustment or direction of private creditors to participate in the restructuring of Hynix.
Allegedly selective enforcement of bankruptcy principles

7.105 The parties also made arguments regarding Artic le 14 of the CRPA, and the fact that the FSS
requested creditors to refrain from exerci sing their liquidation rights. We recall
116 that the US has not
referred to any part of either the Final Determination or the Decision Memorandum where the DOC
addresses the existence or application of Article 14 of the CRPA, and that we therefore declined to
make findings in respect of this issue.
(iii) GOK Coercion

114 Id.
115 US First Written Submission, Footnote 86.
116 See para. 7.90 supra.

7.106 Korea challenges the DOC's reference to alleged GOK threats against KFB, KorAm and Hana
Bank. Korea also challenges the US allegation that GOK disciplined credit rating agencies, and
mandated attendance at creditor meetings.
Threats against creditors

KFB

7.107 The DOC found that "[t]here were also numerous statements on the record relating to the
GOK's pressure on KFB [] to participate in the Fast Track programme."117
7.108 Korea raises questions regarding the reliabilit y of the press accounts relied upon by the DOC
to make this finding. In particular, Korea submits that ultimately KFB declined to participate in the
Fast Track Programme, and in fact did not particip ate in the Fast Track Programme, and exercised its
appraisal rights in the October restructuring. Ko rea asserts that the behaviour of KFB undermines the
credibility of the US allegations. According to Kor ea, KFB's actions are hardly consistent with the
US theory of coercion from the Government of Korea.
7.109 The US asserts that the DOC considered "numer ous statements on the record relating to the
GOK's pressure on KFB (which was, at that time, 51 per cent owned by Newbridge Capital, a US
company) to participate in the Fast Track Programme." 118 The US argues that on 4 January 2001,
KFB had rejected a government call for participation in the Hynix ba ilout, reflecting its assessment
that increased credit to Hynix was not commercially warranted. The US asserts that Wilfred Horie,
Chief Executive Officer of KFB, observed at the ti me that KFB’s "opposition is the result of sticking
to strict principles for profit making. All told, [the KFB directors] said the purchase of the bonds of
insolvent firms would push the bank into further managerial hardship." 119 The US asserts that Horie
viewed the GOK’s request for participation in th e Hynix restructuring and recapitalization measures
as coercive, complaining that "[i]t is nonsense for th e government to force the banks to undertake the
corporate bond. Such issue should be left to the banks’ discretion." 120 According to the US, the FSS
bluntly responded that, "[a]t the moment, we will ask [KFB] to undertake Hyundai’s bond one more
time. But if the bank rejects again, leading to the collapse of related companies, we will hold the bank
responsible."121 The US asserted that Yong-hwa Chong, Information Director at the FSS, openly
threatened that "[s]evere sanctions will be imposed by adding the banks’ willingness to support public
policy as a category to the evaluation of bank management."122
7.110 The US submits that a BusinessWeek article indicated that "[t]he next day [after KFB rejected
the government demand], a government agency pu lled, then redeposited, $77 million from a Korea
First account."123 According to the US, this followed at least ten angry phone calls between the FSS
and the KFB. 124 The US argues that BusinessWeek reported that: "Word spread that all government

117 Decision Memorandum, page 59 (Exhibit GOK-5).
118 Decision Memorandum at 59-60 (Exhibit GOK-5).
119 KFB Changing Fast Under Profit-First Management, KOREA TIMES (29 January 2001) (Exhibit US-
56).
120 Government’s Compulsory Allotment of Corporate Bond Causes a Stir , KOREA ECONOMIC DAILY
(6 January 2001) (Exhibit US-57).
121 Id.
122 FSS-Korea First Bank Collide Head-on Over Corporate Debentures , T HE KOREA DAILY NEWS
(6 January 2001) (Exhibit US-58).
123 This Banker Breaks Rules: Wilfr ed Horie Riles the Establishment , B USINESSWEEK ONLINE
(9 April 2001) (Exhibit US-59).
124 American Boss Dispenses With Protocol at South Korean Bank , W ALL STREET JOURNAL
(29 January 2001) (Exhibit US-14).

agencies would cut ties with Korea First." 125 The US submits that, according to Bloomberg, the
government even threatened to demand that one of KFB’s main corporate customers (the SK Group)
cease doing business with the bank.126
7.111 According to the US, the press reported that Wil fred Horie later confirmed that "[t]here was
someone [at the FSS] who was very angry with the bank’s decision. And it’s true that someone
within the government was talking to our clients." 127 Horie further elaborated, explaining that "[a]t
some point he [the FSS official] can make our life very miserable. Their comment directly to me was:
‘We have no desire nor do we have the right to insist that you do things against your will, but this is
Korea and you should cooperate as much as you can’."128
7.112 The US asserts that, in its Final Determination , the DOC noted there were multiple press
reports on the record indicating that the KFB ha d resisted the purchase of the Hynix bonds because it
considered Hynix to be a high credit risk. For example, the US asserts that the DOC cited to a
29 January 2001 Wall Street Journal article, stating that Korean ba nks have "been more accustomed
to following government orders than making sound credit decisions."129
7.113 The US further asserts that the DOC also obser ved that the article explained that when KFB
refused to participate in the government progra mme at the request of the FSS, the FSS applied
pressure to KFB and "strongly urged" KFB to particip ate in the plan lest it risk losing some of its
clients.130 The US argues that the article was quite specific, identifying the FSS official as Lee Sung
No, a director at the FSS Credit-Supervision De partment, and the KFB official as Lee Soo Ho.
According to the US, the DOC also noted that th e article quoted an executiv e at a government-owned
bank as stating that the nationalized banks were "gre en with envy," as "nobody wants to increase their
exposure to these corporations that still have a long way to get their acts together." The US notes that
the article stated that the FSS asked creditor banks to participate in this programme, and only KFB
refused.131
7.114 The US asserts that, notwithsta nding the KFB’s initial resistance, it ultimately surrendered to
the GOK’s pressure by agreeing to participate in th e bailout. The US argues that Horie committed to
share about $38 million among $1.5 billion funding for Hynix’s D/As after a personal meeting with a
high-level FSS official. The US notes that, in fact, KFB ultimately participated in a number of the
Hynix restructuring and recapitalization measures. According to the US, such capitulation by a
foreign majority-owned bank simply underscores th e even more precarious position of Korean-owned
banks when it came to GOK pressure.
7.115 The US submits that not only did the GOK threaten to impose sanctions on KFB, it also,
through the FSC and FSS, threatened to terminate bank s’ relationships with either the government or
their existing customers. According to the US, the GOK threatened KFB with the loss of its
customers, interceding directly with them, and ra ised the possibility of losing tens of millions of
dollars in government business unless the bank compli ed with government demands. The US asserts
that the DOC specifically noted a 29 January 2001 Wall Street Journal article stating that when KFB

125 This Banker Breaks Rules: Wilfr ed Horie Riles the Establishment , B USINESSWEEK ONLINE
(9 April 2001) (Exhibit US-59.
126 Korea First Bank Shuts Government ‘Wallet’ Under New Management ," B LOOMBERG
(31 January 2001), at 2 (also issued as a news release by KFB on 5 February 2001) (Exhibit US-60).
127 Cooperate or be Damned, EUROMONEY (February 2001) (Exhibit US-61).
128 Korea First Bank Shuts Government ‘Wallet’ Under New Management , KFB NEWS RELEASE
(5 February 2001) (Exhibit US-60).
129 American Boss Dispenses With Protocol at South Korean Bank , W ALL STREET JOURNAL
(29 January 2001) (Exhibit US-14).
130 Id.
131 Id.

refused to participate in the GO K programme at the request of the FSS, the FSS applied pressure to
KFB and "strongly urged" KFB to participate in the plan lest it risk losing some of its clients.
132
According to the US, other Hynix creditors facing similar pressure from the GOK are likely to have
capitulated, as did KFB.
7.116 While the US has cited from a number of articles on the DOC record, we note that the DOC
only made express reference to a limited number of these articles. 133 We shall therefore focus on the
evidence that the DOC actually referred to in its Preliminary and Final Determinations, and Decision
Memorandum.
7.117 We note that the DOC referred to a newspaper article in which Mr. Lee, reportedly an
executive vice president and chief credit officer at the KFB, stated that the FSS had expressed
"extreme displeasure" towards the KFB's failure to participate in the Fast Track Programme. 134 That
same article quoted an FSS official as saying that he had "strongly urged" the KFB to participate, and
also warned the KFB that "by not complying, it may be putting itself at a risk of losing its clients."
135
There is nothing on the record to suggest that the FSS disputed the accuracy of these quotes. Nor
does Korea challenge their accuracy. In our view, these quotes, and in particular the implied threat
that there would be an adverse impact on KFB's rela tionship with its clients if it did not cede to the
wishes of the GOK, are sufficient for an objective and impartial investigating authority to properly
find government entrustment or direction in respect of KFB.136
KorAm

7.118 The DOC stated that a June 2001 Dow Jones article "reported that KorAm Bank, a bank
without substantial GOK ownership, reversed its d ecision not to participate in the Hynix June 2001
convertible bond offering that was part of the May restructuring programme after the FSS warned of a
possible sanction against KorAm if it did not participate."137
7.119 Korea submits that the press reports of alleged coercion of KorAm relied upon by the DOC
are inaccurate, and denied at the time by KorAm offi cials. Korea asserts that the mistaken press
reports and the KorAm denials were provided to the DOC, but were brushed aside.
7.120 The US submits that the DOC found that the GOK made threats against KorAm Bank when
the bank refused to participate in the May 2001 r estructuring. The US asserts that the bank had
refused, contending that Hynix had failed to deliver a written pledge to use its best effort to reduce its
debt. According to the US, the FSS severely rebuked KorAm, with one FSS official stating: "If
KorAm does not honour the agreement, we will not forgive the bank." 138 The US asserts that the
same FSS official further threatened stern m easures against the bank, such as disapproving new
financial instruments and subjecti ng the bank to a tighter audit. According to the US, another FSS

132 American Boss Dispenses With Protocol at South Korean Bank , Wall Street Journal
(29 January 2001) (Exhibit US-14).
133 For example, the DOC did not make express refe rence to the Euromoney articles referred to at
note 196 to the US First Written Submission.
134 Decision Memorandum, page 60 (Exhibit GOK-5).
135 See Exhibit US-14.
136 Korea notes that the KFB ultimately did not participate in the KDB Fast Track Programme, and that
it exercised appraisal rights under option 3 in the October 2001 restructuring. Our an alysis at this stage is
concerned first and foremost with the acts of the GOK, ra ther than private entities' reaction to those acts. The
issue of the evidentiary value of the co ercion of KFB in respect of the alleged entrustment or direction of other
private creditors is addressed in our concluding remarks at paras 7.175- 7.177 infra.
137 Decision Memorandum, page 59 (Exhibit GOK-5).
138 KorAm Reluctantly Continues Financial Support for Hynix , KOREA TIMES (21 June 2001) (Exhibit
US-64).

official predicted that the bank would extend credit to Hynix even without the Hynix memorandum
pledging to reduce its debt: "We don’t think KorAm will break the agreement. In particular, the bank
yesterday expressed its intention to extend fina ncial support to the semiconductor maker even if
Hynix fails to submit the memorandum." 139 The US submits that, as a result of the threats, KorAm
Bank capitulated and reversed its decision in a single day.
7.121 While the US has referred to a number of quot es in newspaper articles regarding the alleged
coercion of KorAm, only one of those articles was referred to by the DOC. 140 That was a June 2001
article published by Dow Jones. According to th e DOC, that article "reported that KorAm Bank, a
bank without substantial GOK ownership, reversed its decision not to participate in the Hynix
June 2001 convertible bond offering that was part of the May restructuring programme after the FSS
warned of a possible sanction against KorAm if it did not participate."141
7.122 Considered in isolation, such a report might well enable an objective and impartial
investigating authority to properly find government entrustment or direction. In the instant case,
however, we note that the DOC record contained an alternative explanation of KorAm's conduct, and
evidence from a KorAm official that KorAm had not refused to participate in the convertible bond
offering. In particular, the record contained a submission by Hynix142 to the effect that:
the issue was simply whether Hynix had provided KorAm with the necessary legal
documentation to complete the convertible bond transaction. At one point, Hynix
apparently had not provided the necessary paperwork and KorAm at that point
delayed its purchase of its portion of the c onvertible bonds that it had committed to
buy. But once Hynix provided the necessary legal paperwork, KorAm followed
through on its promise to buy a portion of the convertible bonds. In fact, the Korea
Times article that seems to have been th e original source for all the reports (sic) that a
KorAm official specifically denied
 the allegation that they refused to buy the
convertible bonds, and made clear the di spute was basically about the legal
paperwork requirement.137 (emphasis in original)
Denying allegations that the bank refused to provide financial support to Hynix, he
said, "We will not break the agreement reached among creditors."
7.124 Despite the existence of such evidence on the DOC record, the DOC failed to address, or even
mention, this alternative explanation of Kookmin's conduct. Nor did it refer to the denial by a KorAm
official referred to in the abovementioned Korea Times article, which was also on the DOC record. 144
In our view, an objective and impartial inv estigating authority woul d have acknowledged the

139 Id.
140 We therefore shall not have regard to the other articles relied on by the US.
141 Decision Memorandum, page 59 (Exhibit GOK-5).
142 See Exhibit GOK-49.
143 See Exhibit US-64.
144 This is evidenced by the reference to "Petitioner, at tab 52" in the abovementioned Hynix
submission.

existence of such conflicting evidence, and sou ght to explain how nevertheless its finding of
government entrustment or direction was warranted. The DOC failed to do this.
Hana Bank

7.125 Korea challenges the DOC's reliance on a press re port which, according to the DOC, "notes
that the FSS threatened to fine Hana Bank if it failed to provide emerge ncy liquidity to [Hyundai
Petrochemical]."
145 Korea submits that the allegations a bout Hana Bank's dealings with Hyundai
Petrochemical have nothing to do with Hynix, or any specific transactions involving Hynix.
7.126 The US asserts that the DOC noted an April 2001 Korea Herald report that the FSS
threatened to fine Hana Bank if it failed to provi de emergency liquidity to Hyundai Petrochemical,
which was a part of the Hyundai Group that w as going through the corporate workout process.
According to the US, while this report discussed Hyundai Petrochemical, the GOK’s policies during
this investigation period were aimed at the corporat e and financial restructuring of the entire Hyundai
Group.
7.127 Concerning the relevance of alleged coercion of Hana in respect of a company other than
Hynix, we note that the DOC relied on the fact that "the GOK's policies during this period were aimed
at the corporate and financial restructuring of the entire Hyundai Group, including Hynix's
predecessor, HEI, which was part of that group."
146 Irrespective of the alleged scope of GOK's
policies, however, we note that the financial contributions under review by the DOC related
exclusively to Hynix. Although we consider that evidence of entrustment or direction in respect of
one financial contribution concerning Hynix might al so serve as evidence of entrustment or direction
in respect of another financial contribution concer ning Hynix, alleged entrus tment or direction of
Hana Bank in respect of its dealings with compan ies other than Hynix would generally be of less
evidentiary value in the context of an investigation of Hana Bank's dealings with Hynix.
7.128 The value of such evidence beco mes further diminished when on e considers the form that the
evidence took. In this regard, the Korea Herald report relied on by the US does not appear to have
been on the DOC's record. We make this inferen ce from the fact that, in these proceedings, the US
merely submitted a paper in which the author h as inserted a footnote referring to the relevant Korea
Herald report. The US has not submitted the Korea Herald report itself. The relevant footnote refers
to "a report that the [FSS] had threatened to fi ne Hana Bank KRW 6 billion if it fails to provide a
promised KRW 11.9 billion of emergency liquidi ty to Hyundai petrochemical by 19 April 2001
(Korea Herald, 21 April 2001)."147
7.129 Since the Panel has no reason to believe that the DOC had the actual Korea Herald article
before it when making its determination, we pro ceed on the basis that the DOC relied on the footnote
contained in the abovementioned paper. If that is so, we note that the DOC had no means of gauging
the accuracy of the report, and was unaware of the c ontext in which the alleged threat was made. In
addition, we note that the footnote provided no details of the powers that the FSS could allegedly
exercise against renegade creditors. An objectiv e and impartial investiga ting authority would not
have treated a simple reference to a footnote in an article as sufficient proof of such a significant issue
as government entrustment or direction.
7.130 In light of the above, we consider that the DOC's analysis could not properly support a
finding of widespread coercion of Hynix's creditors . While the DOC could properly find coercion in

145 Decision Memorandum, page 60 (Exhibit GOK-5).
146 Id..
147 See footnote 5 in Corporate Structuring and Reform: Lessons from Korea , William P. Mako,
Exhibit US-70.

respect of the KFB, an objective and impartial inves tigating authority would have treated this isolated
incident of coercion regarding a single creditor as being of limited probative value in respect of the
alleged entrustment or direction of other private creditors.
Disciplining credit rating agencies

7.131 Korea denies US allegations that GOK disciplined credit rating agencies. Korea asserts that
the alleged pressure against the credit rating agenci es has nothing to do with decisions by banks to
lend or not lend to Hynix. Korea also submits that many of these allegations were denied at the time.
Korea also submits that the three credit rating agen cies mentioned by the US have been allied with
major international credit rating agencies in terms of management or capital investment.
7.132 The US submits that the GOK disciplined cred it rating agencies for giving Hynix a low credit
rating. The US asserts, for example, that on 22 Ja nuary 2001, the Korea Investors Service, one of
three local rating firms, downgraded Hyundai El ectronics’ corporate bonds to a speculation-grade
credit rating. The US argues that the FSC, concer ned that this lower rating might endanger Hynix’s
eligibility for the KDB Fast -Track programme, reacted swiftly. According to the US, on that very
day, at approximately 4:00 p.m., an FSS official called one of the credit rating agency officials
responsible for Hyundai Electronics (now Hynix) and was told to attend a meeting of the three credit
rating agencies and the FSS on 26 January 2001. The US asserts that the agency official commented
that "it was his first time to receive such a call in his more than 10 years of employment at a credit
agency."
148
7.133 The US also asserts that, on 26 January 2001, FSS officials met with eight representatives
from the three local credit rating agencies: Kor ea Investors Service, Korea Ratings, and National
Information and Credit Evaluation. According to th e US, the participants at the meeting who were
later interviewed reported that the FSS had stated that: "[I]t was caught off guard by the downgrading
of Hyundai Electronics’ credit without prior consulta tion when the company’s financial situation is
improving. [Credit agencies] should look at the ma rket as a whole rather than insisting upon the
earlier positions." 149 The US asserts that one report stated that the FSS had used the meeting to
express its strong dissatisfaction 150, while another report stated that the agency officials received a
"reprimand" and "lecture."151 According to the US, an exasperated agency official remarked: "Where
in the world does the government call in cr edit agency’s employees and apply pressure?" 152 The US
asserts that, as a result of the meeti ng, one agency reportedly cancelled its plans to follow the lead of
Korea Investor Service and downgrade the credit rating of Hyundai Electronics.
7.134 The US also alleges that on 7 January 2001, the National Information and Credit Evaluation
agency, "buckling under government pressure," upgr aded the credit rating for Hyundai Engineering
and Construction.153 The US submits that the upgrade was due to GOK pressure.
7.135 We note that the US arguments concern the alle ged coercion of credit rating agencies, rather
than creditors participating in the Hynix restructurin g. Such arguments are therefore not relevant to
the question of whether or not creditors were entrusted or directed by GOK to participate in the Hynix

148 Not an Outright Order of Do-this-Do-that, but a Subtle Pressure , DONG-A ILBO (6 March 2001)
(translated version) (Exhibit US-71).
149 Id.
150 Does the FSS Peddle Influence even on Credit Ratings? HANKYOREH SHINMUN (14 February 2001)
(translated version) (Exhibit US-74).
151 Corporate Credit Rating’ ‘Wobbles’ U nder the Sway of Government Influence , D ONG-A ILBO
(1 March 2001) (translated version) (Exhibit US-75).
152 Id.
153 ‘Corporate Credit Rating’ ‘Wobbles’ Under the Sway of Government Influence , D ONG-A ILBO
(1 March 2001) (translated version) (Exhibit US-75).

restructuring. Indeed, it is presumably for this reason that there is no reference to the alleged coercion
of credit rating agencies in the findings of the DOC set forth in the Preliminary Determination, the
Final Determination , or the Decision Memorandum .
154 Since considerations regarding the alleged
coercion of credit rating agencies were not relied u pon by the DOC in its determinations, they fall
outside the scope of these proceedings.
Mandating attendance at creditor meetings
7.136 Korea notes that the DOC found that an FSS 155 official attended a creditors' meeting "at the
request of the lead creditor bank 'to urge creditor banks to execute resolutions made by creditors'." 156
Korea challenges the accuracy of press reports relied on by the DOC in respect of this finding. Korea
asserts that the March 2001 meeting of Hynix creditors was convened by the creditors to reconfirm
past financial commitments and to establish a "credi tors’ council" to better manage their continuing
and mutual commercial interests in Hynix. Kor ea notes that the DOC found the presence of the FSS
official to be "support [for] the conclusion that ther e was a pattern of practices by the government to
direct banks' lending decisions with regard to Hynix." 157 Korea further notes that the DOC also cited
documents provided by the GOK at verification a nd generated for the Korean National Assembly
indicating that the reason for the FSS official’s attendance was to "urge creditor banks to execute
resolutions made by creditors." 158 Korea submits that this stat ement is hardly a smoking gun of
entrustment or direction, and is better understood in light of a pr ess release issued by the FSS three
days after the March meeting to respond to e rroneous press speculation that the FSS was exerting
undue pressure on the banks to extend new credit to Hynix.
7.137 According to Korea, the facts before the DOC reflected that there was hardly anything sinister
about the FSS’s presence at the March meeting. Korea asserts that a disagreement arose among the
banks concerning their commitments, and it was theref ore logical for the FSS to be present at the
meeting to witness discussion of the prior commitments of the banks involved.
7.138 The US asserts that another method used by the GOK to coerce Hynix’s creditors was
requiring attendance at meetings with government o fficials. The US asserts that in early 2001,
Hynix’s increasingly poor financial condition prompted several banks to retract their earlier promises
to increase purchase limits on Hynix’s export bills of exchange ("D/A loans"). The US argues that, on
2 February 2001, the FSS responded by inviting o fficials from two of these banks (Shinhan Bank and
Hanmi Bank) to a meeting with FSS offi cials to "request their cooperation." 159 The US asserts that
the FSS called a general meeting of the Hynix cr editor bank presidents on 10 March 2001, when the
banks continued to resist. According to the US, creditors at the meeting were pressured to:
- Sign a written agreement pledging to maintain the D/A export ceiling at
$1,450 million (overturning an earlier decision in January 2001 to reduce the ceiling
to $640 million by year’s end);

154 Although the alleged influence of Korean credit rating agencies was listed as an argument of the
Petitioner at page 105 of the Decision Memorandum (Exhibit GOK-5), we can find no reference to this issue in
the statements of the Department's Position.
155 Although the DOC referred to an FSC official, Korea asserts that the official actually worked for the
FSS. Korea asserts that FSS is not a governmental organization, but a special public corporation affiliated with
FSC functioning as an executive arm of the FSC. In light of our finding regarding the DOC's treatment of this
issue, we do not consider it necessary to resolve this particular disagreement between the parties.
156 Decision Memorandum, page 59 (Exhibit GOK-5).
157Id.
158 Id.
159 Creditor Group Conflicts With Government Over Supporting Hyundai Group , MAEIL ECONOMIC
DAILY (2 February 2001) (Exhibit US-68).

- Maintain the letter of credit-based export credit line at $530 million until the end of
2001;

- Agree to a one-year grace period for bank credits of 300 billion won, including bank
account based loans and general fund loans;

- Sign a written "covenant" that they would assist Hynix; 160 and

- Confirm their intention to aid the Hyundai firms. 161

7.139 The US notes that during verification the DOC confirmed that at least one FSC official was
present at the March 2001 meeting, and that the official was invited by the KEB "to urge creditor
banks to execute the resolutions made by creditors."
162 The US submits that the verification report
further explains that the FSC attended the meeting to exert pressure on the banks. It states:
The creditors felt that, if an FSS person was there, it might facilitate a resolution ....
According to the FSC/FSS, the creditors thought that, if there was a regulator there,
the other creditors who no longer wanted to participate in the restructuring plan might
change their minds and go along with the wishes of the rest of the creditors.
163

7.140 The US submits that the GOK itsel f stated that the FSC official attended the meeting to "act
as a witness" so that "creditors could no longer b ack out" of any prior commitments they had made.
164
According to the US, the evidence before the DO C therefore indicates that GOK officials from the
FSC were present at this meeting for the express pur pose of pressuring Hynix’s creditors to comply
with the GOK’s policy of assisting Hynix. The US also asserts that record evidence suggests that
there were at least three additional meetings where GOK officials met directly with one or more of
Hynix’s creditors to obtain their agreement on assisting Hynix.
7.141 We note that many of the arguments and eviden ce advanced by the US in these proceedings
were not referred to in any of the DOC documents be fore us. In particular, the DOC did not find that
creditors were required to sign written agreements, to agree to a one-year grace period, or to attend
meetings with the FSS. Such US arguments/evidence therefore constitute ex post rationalization
which we shall also exclude from our review. 165 I n i t s Decision Memorandum , the only reference
made by the DOC to the March 2001 meeting was a statement that the FSS 166 official attended the

160 The Grace Period Decision for Three Affiliates of Hyundai Group - Stories of Inside and Outside ,
KOREAN SEOUL ECONOMIC DAILY (11 March 2001) (translated version) ("The Financial Supervisory Service
(FSS) and Korea Exchange Bank talked to individual banks, but talks did not work. Hence the FSS told the
bank presidents to sign on the support plan to enforce it in the form of a covenant.") (Exhibit US-79).
161 See Never-ending Aid for Hyundai, KOREA TIMES (12 March 2001) ("A high-ranking official of the
Financial Supervisory Commission attended a meeting of creditor bank presidents on Saturday, an unusual
occurrence in itself, and confirmed one by one their intention to aid the Hyundai firms, proving the
government’s intention to help Hyundai.") (emphasis added) (Exhibit US-80).
162 Government of Korea Verification Report at 19 (Exhibit US-12).
163 Government of Korea Verification Report at 18 (Exhibit US-12).
164 Decision Memorandum at 41 (Exhibit GOK-5).
165 Similarly, we note that Korea has not disputed an argument by the US that the abovementioned
FSS press release relied upon by Korea (see para. 7.136 supra) was not on the record of the DOC. Nor has
Korea claimed that it was not on the DOC's record as a result of any oversight by the DOC. Accordingly, we
also exclude the contents of that press release from our review.
166 Although the DOC referred to an FSC official, Korea asserts that the official actually worked for the
FSS. Korea asserts that FSS is not a governmental organization, but a special public corporation affiliated with
FSC functioning as an executive arm of the FSC. In light of our finding regarding the DOC's treatment of this
issue, we do not consider it necessary to resolve this particular disagreement between the parties.

meeting "at the request of the lead creditor bank 't o urge creditor banks to execute resolutions made
by creditors'."
167 In our view, the fact that a regulatory au thority attends a meeting of creditors at the
request of the lead creditor in order to urge – and no t instruct – creditor banks to execute resolutions
made by creditors would not allow an investigating aut hority to properly conclude that such
attendance amounted to governmental entrustment or direction of creditors to participate in the
restructuring. The fact that the resolutions at issue in these proceedings had already been "made by
creditors" prior to the attendance of any FSS/FSC officials would indicate to an impartial and
objective investigating authority that the officials' attendance could not have caused those resolutions
to be adopted.
(iv) The DOC's single programme approach
7.142 The DOC found:
Rather than view each of the measures ta ken by the financial institutions that
participated in Hynix' restructuring as sepa rate events, these actions are appropriately
examined as part of a single programme that occurred over a short, ten-month period.
The objective of this programme was the complete financial restructuring of Hynix in
order to maintain the company as an ongoing concern. Each of the measures taken
over the period from December 2000 through Oc tober 2001 [] reflected a pattern of
GOK practices to ensure the continued viability of Hynix. Many of these events were
overlapping and had the effect of reinforcing each other with respect to the goal of
keeping Hynix operating. (footnote deleted)
168
7.143 The DOC's decision to treat all four financial c ontributions as part of a "single programme" is
important, as it effectively enabled the DOC to rely on evidence of alleged entrustment or direction of
a creditor in respect of one financial contribution as evidence of alleged entrustment or direction of
that creditor in respect of the three other financial contributions.
Arguments of the Parties

7.144 According to Korea, the timing of the different events contradicts the DOC theory of a single
programme. Korea asserts that the most significa nt aspect of Hynix’s restructuring -- Hynix’s
October 2001 restructuring -- occurred almost one ye ar after the initial financial transactions. Korea
submits that the October 2001 restructuring had no meaningful connection to the earlier transactions.
According to Korea, at the time of the May 2001 restructuring, Hynix advisors, industry experts, and
the global financial markets all expected the DRAM market to recover, as it had in prior cycles, rather
than develop as the worst year in DRAM market history. Korea asserts moreover that no one
expected the downturn to be reinforced and exacerba ted by the terrorist attack of 11 September 2001,
and what it refers to as the consequent economic tu rmoil in the US economy. Korea submits that the
DOC should have made discrete findings of financ ial contribution, and therefore entrustment or
direction of private creditors, in respect of the October 2001 restructuring.
7.145 The US submits that the DOC was entitled to c onclude that the abovementioned transactions,
including the October 2001 restructuring, formed pa rt of a "single subsidy programme" because early
in the countervailing duty investigation, both the GOK and Hynix conceded – in fact argued – that the
various bailout phases were part of a single overall restructuring programme for Hynix. During each
phase, the creditor banks rescheduled over and over again their existing loans with Hynix, while
providing additional liquidity whenev er Hynix needed more. Furthermore, each phase of the Hynix
bailout involved essentially the same banks. Eventually, the majority of the loans were converted into

167 Decision Memorandum, page 59 (Exhibit GOK-5).
168 Decision Memorandum at 48 (Exhibit GOK-5).

equity as part of the October restructuring packag e. The US asserts that the DOC gave a reasoned
explanation of how the various aspects of the bail out were part of an overall programme, since it
found that they were all driven by the same GOK policy to support Hynix; they occurred over a
relatively short period of time; they were overl apping and interrelated; and the GOK’s role was
evident at each stage.
Evaluation by the Panel

7.146 We recall that the DOC identified four alleged financial contributions. The first three of those
alleged financial contributions fo rmed part of a restructuring proposal prepared by Citibank and
Salomon Smith Barney (SSB) in September 2000. The fourth financial contribution, the October
2001, was not part of the Citibank/SSB proposal. Furthermore, the US has not contested Korea's
assertion that the October 2001 restructuring was not envisaged at the time that the Citibank/SSB
proposal was implemented. Indeed, the October 200 1 restructuring was effected some five months
after the third and final alleged financial contribution envisaged in the Citibank/SSB proposal (i.e., the
May 2001 restructuring).
7.147 The US asserts that support for the DOC's finding of a "single programme" lies in the fact that
the four alleged financial contribut ions were "overlapping and interre lated." In this regard, we note
that the DOC referred to the fact that "many
 of [the] events were overlapping and had the effect of
reinforcing each other."169 Thus, the DOC did not find that all of the relevant financial contributions
were overlapping and mutually-reinfo rcing. This would suggest that the DOC actually considered
that certain financial contributions were not overl apping or mutually-reinforcing. Accordingly, the
fact that many financial contribut ions overlapped and were mutua lly-reinforcing does not necessarily
provide a sufficient for concluding that all four of th e financial contributions formed part of a "single
programme."
7.148 The US also argues that both the GOK and Hyni x "conceded – in fact argued – that the
various bailout phases were part of a single overall restructuring programme for Hynix." 170 In this
regard, note 12 of the DOC's Decision Memorandum states that Hynix and the GOK stressed
throughout the course of the proceeding that Hynix was taking part in an overall "restructuring plan."
The DOC asserts that Hynix stated in its Ja nuary 2003 questionnaire response that, in
September 2000, "Citibank and SSB, Hynix' financia l advisors retained to devise a financial
restructuring plan, presented a fully integrated proposal to completely realign the financial structure of
Hynix . . .The important point, for purposes of th is submission, is that many of the financial
transactions that are separately identified in the [Department's] questionnair e (each with their own
sub-heading) were, in fact, all part of Citibank's and SSB's original integrated plan for a complete
financial restructuring of Hynix."
7.149 We note that Hynix's questionnaire response goes on to argue that "the proper framework for
examining the Hynix restructuring is to divide the financial transactions into two time periods: (I)
those financial transactions from the fourth quarter of 2000 through the first half of 2001, and which
were all part of the master SBS/Citibank plan; and (II) those financial transactions that were needed
later in 2001 when the unprecedented collapse of th e DRAM market required further restructuring
measures."
171 Thus, there was no basis for the DOC to state that Hynix "stressed ... that [it] was
taking part in an overall 'restructuring plan'." Ra ther, Hynix had clearly argued that the October 2001
restructuring should be distinguished from the earlier transactions. The DOC failed to account for this
important nuance in Hynix's position.

169 Decision Memorandum, page 48 (Exhibit GOK-5), emphasis supplied.
171 Exhibit GOK-21, page 15.

7.150 Regarding the GOK, the DOC notes that the GOK's February 2003 questionnaire response
referred to "a several stage financial plan de veloped and implemented by SSB over the 2000-2001
period."
172 However, since the October 2001 restructuring was not part of the SSB plan, any
reference by the GOK to the SSB plan should not have led to any inferences by the DOC regarding
the GOK's position vis-à-vis the October 2001 restructuring.
7.151 There is therefore no basis for the US argument that "GOK and Hynix conceded – in fact
argued – that the various bailout phases were part of a single overall restructuring programme for
Hynix." While the GOK and Hynix may have argued that three of the financial contributions were
part of an overall restructuring programme, the US has not produced evidence to the effect that the
GOK and Hynix argued that the October 2001 restru cturing was part of an overall restructuring
programme.
7.152 Furthermore, we note that a number of creditors that had participated in the initial
Citibank/SSB restructuring proposal did not participat e in the October 2001 restructuring, or at least
not in the same manner. We have already not ed that certain Group B and C creditors sought
mediation under option 3. Furthermore, certain creditors that had provided new funds under the initial
Citibank/SSB proposal declined to provide new funds under the Octobe r 2001 restructuring (by
choosing option 2). This indicates that at least certain creditors were operating under different
conditions in respect of the October 2001 restruct uring compared to the three earlier financial
contributions under the Citibank/SSB proposal. Th is would suggest that these creditors did not
consider themselves to be acting under a "single programme" in respect of all four financial
contributions.
7.153 In addition, we note that the DOC found that the objective of the "single programme" was the
complete financial restructuring of Hynix, and essentia lly included any act of restructuring within that
programme. However, it is not necessarily true that any act of restructuring will form part of the same
"programme" as other acts of restructuring, simp ly because they all pursue the same objective.
Indeed, the DOC's argument is circular, since it dete rmines that certain acts are part of a "single
programme" on the basis of the objective of that pr ogramme, even before the very existence of the
programme has been established.
7.154 Finally, we note the DOC's assertion that each of the financial contribut ions could be linked
by the fact that they "reflected a pattern of GOK practices to ensure the continued viability of
Hynix."173 On the basis of the Decision Memorandum , we understand such "pattern of GOK
practices" to be a reference to GOK entrustment or direction. 174 In light of the preceding analysis,
however, we consider that the DOC determination contained little evidence of GOK entrustment or
direction of private bodies to participate in the Hynix restructuring. This is therefore a further reason
for doubting the DOC's justification for treating the four financial contributions as being part of a
"single programme."175

172 Decision Memorandum, pages 48-49, note 12 (Exhibit GOK-5).
173 Decision Memorandum, page 48 (Exhibit GOK-5).
174 The DOC refers at page 49 of the Decision Memorandum (Exhibit GOK-5) to "a pattern of practices
on the part of the GOK to act upon that policy to entrust or direct lending decisions as part of the restructuring"
(emphasis supplied).
175 We also consider the DOC's reasoning to be self-serving. The DOC claimed widespread GOK
entrustment or direction as justification for identifying a "single programme", while the decision to identify a
"single programme" enabled the DOC (by using evidence of alleged GOK entrustment or direction in respect of
one financial contribution as evidence of GOK entrustment or direction in respect of other financial
contributions) to demonstrate the existence of alleged GOK entrustment or direction.

7.155 For the above reasons, we do not consider th at the evidence relied on by the DOC was
sufficient to permit an objective and impartial inves tigating authority to properly conclude that the
financial contributions at issue all formed part of a same "single programme."
(v) The Kookmin Prospectus
Arguments of the Parties

7.156 Korea challenges the DOC's reliance on a f iling made by Housing and Commercial Bank
(H&CB) and Kookmin banks in September 2001 to the US Securities and Exchange Commission
("SEC"). That filing contained the following statement:
The {GOK} has promoted, and, as a matter of policy may continue to attempt to
promote lending to certain types of borrowers. It generally has done this by
requesting banks to participate in remedial programmes for troubled corporate
borrowers and by identifying sectors of the economy it wishes to promote and making
low interest loans available to banks and financial institutions who lend to borrowers
in these sectors. The government has in th is manner promoted low-income mortgage
lending and lending to technology companie s. We expect that all loans made
pursuant to government policies will be re viewed in accordance with {Kookmin’s}
credit review policies. However, we ca nnot assure you that government policy will
not influence {Kookmin} to lend to certain sectors or in a manner in which
{Kookmin} otherwise would not in the absence of the government policy.
 176
7.157 Korea submits that the statement is speculativ e as regards future action by the GOK. Korea
also asserts that a generalized acknowledgement by Kookmin of GOK "promotion" hardly constitutes
an indictment of lending to Hynix by numerous comm ercial banks during the period of investigation.
According to Korea, nothing within the statement establishes an affirmative and explicit GOK action,
whether delegation or command, to direct commercia l bank lending to Hynix, whether generally or
specifically with respect to certain transactions tran spiring across the entire period of investigation in
this case. Korea also asserts that the DOC fail ed to address a detailed statement by the specific
lawyers who drafted the prospectus, which made cl ear that the language was in no way meant to
imply GOK control over Kookmin lending decisions.177
7.158 The US notes that the DOC actually referred to two filings by Kookmin Bank with the SEC.
The US asserts that the first filing, made in September 2001, contained a statement that:
The Korean government promotes lending to certain types of borrowers as a matter of
policy, which New Kookmin may feel compelled to follow ... . In addition, the
Korean Government has, and will continue to, as a matter of policy, attempt to
promote lending to certain types of borrowers. It generally has done this by
identifying qualifying borrowers and making low interest loans available to banks and
financial institutions who lend to those qua lifying borrowers. The government has in
this manner promoted low-income mortgage lending and lending to technology
companies. We expect that all loans ma de pursuant to government policies will be
reviewed in accordance with New Kookmin’s credit review policies. However, we
cannot assure you that government policy w ill not influence New Kookmin to lend to

176 See Decision Memorandum, at 57-58 (Exhibit GOK-5).
177 See DRAMs from Korea -- CVD Investigation: Documentation Supporting Papers on the Directed
Credit Issue and Independence of Korean Banks and Other Relevant Documents, 14 April 2003 (hereinafter
"Hynix Supporting Document"), at Vol. III, Tab 2 (Exhibit GOK-28-(a)).

certain sectors or in a manner in which New Kookmin otherwise would not in the
absence of the government policy.
178

7.159 The US submits that the second filing, made in June 2002, contained the following statement:
The Korean government promotes lending to certain types of borrowers as a matter of
policy, which we may feel compelled to follow. The Korean Government has
promoted, and, as a matter of policy, may c ontinue to attempt to promote lending to
certain types of borrowers. It generally has done this by requesting banks to
participate in remedial programmes for troubled corporate borrowers and by
identifying sectors of the economy it wishes to promote and making low interest
loans available to banks and financial in stitutions who lend to borrowers in these
sectors. The government has in this manner promoted low-income mortgage lending
and lending to high technology companies. We expect that all loans made pursuant to
government policies will be reviewed in accord ance with our credit review policies.
However, government policy may influence us to lend to certain sectors or in a
manner in which we would not in the absence of the government policy.
179

7.160 According to the US, the filing of these prosp ectuses in September 2001 and June 2002 link
the statements therein, concerning government in fluence over bank lending decisions, to the DOC’s
period of investigation. The US asserts that the DOC found that they were "very telling with regards
to GOK influence over bank lending decisions."
180
7.161 The US submits that the prospectuses cons titute direct evidence from one of the Hynix
creditors that, notwithstanding the protestations of the GOK and Hynix to the contrary, the GOK was
still in the business of directing the lending deci sions of banks. The US also submits that the
prospectuses refute arguments made by the GOK and Hynix during the investigation that the banks
with lower levels of government ownership, su ch as Kookmin, were not subject to government
direction.
7.162 The US notes Korea's arguments that, according to the lawyers that drafted the Kookmin
prospectus, the language "was in no way meant to imply government control over Kookmin lending
decisions",181 and that the DOC "did not even attempt to address this evidence." 182 The US submits
that Korea is wrong on both accounts. The US asser ts that the DOC explicitly addressed Hynix’s and
the GOK’s arguments that the language in Kookmin ’s US SEC prospectus was not meant to imply
government control over Kookmin’s lending decisions:
Hynix and the GOK attempt to discredit the meaning of the Kookmin US SEC
prospectus by arguing that the language was not meant to imply GOK control over
Kookmin’s lending decisions, that it relate s to potential future actions, and that
Kookmin’s statements are totally unrelated to the Hynix restructuring. The timing of
the September 2001 US SEC prospectus, howev er, clearly links the statements about
government influence over bank lending decisi ons to the POI. Moreover, the plain
reading of these documents, along with documen ts examined at verification, connect
the government’s influence over Kookmin and the government objective to rescue

178 Kookmin Bank Prospectus (10 September 2001) at 24 (Exhibit US-45).
179 Kookmin Bank Prospectus (18 June 2002) at 22 (Exhibit US-46).
180 Decision Memorandum at 58 (Exhibit GOK-5).

Hynix from financial collapse. Kookmin ’s reference to "troubled corporate
borrowers" and "technology companies" alone establish such a link.183

Evaluation by the Panel

7.163 The US asserts that the DOC based its review of the prospectuses on the basis of a "plain
reading" of the language used. The US asserts that when companies, whether foreign or domestic,
issue securities on US securities markets, they ar e required to warn prospective investors of all
material risks associated with th e proposed investment. According to the US, the SEC mandates the
use of "plain English" in that section and requ ires that risk factors be "clear, concise and
understandable."
184
7.164 We are not persuaded that a plain reading of the two Kookmin prospectuses indicates
government entrustment or direction. Rather, a pl ain reading of those documents indicates that the
GOK has sought to promote lending to certain types of borrowers, and that it has done so by
requesting banks to participate in remedial progra mmes, and making low interest loans available to
them for this purpose.
185 The plain language therefore indicates the pursuit of government policy
through requests to banks, and the making available of low interest loans. Such conduct is indicative
of a generalized government policy, rather than a ffirmative acts of delegation or command. We are
therefore not persuaded that an objective and impar tial investigating authority could properly have
found that the abovementioned subm issions in the two Kookmin pros pectuses constitute evidence of
GOK entrustment or direction.186
7.165 We also note that the DOC referred to docum ents concerning the approval of Kookmin's
participation in the December 2000 syndicated loan. According to the DOC, these documents
demonstrated "the nexus ... rega rding Kookmin's lending to Hynix and the government's policies to
ensure that banks 'participate in remedial programmes for troubled corporate borrowers'." 187 T h e
relevant documents were made available to the Pane l by Korea, in the form of Exhibit KOREA-64.
According to Korea, the summary of the rationale for making the loan includes nine different reasons
for making the loan. Korea argues th at this summary, when read in its entirety and in context, does
not support the DOC characterization of Kookmin as making this loan because they were told they
must. Korea asserts that the first eight items st ress the purely commercial reasons for the loan,
including the ongoing Hynix restructuring, the st rong cash flow, and the possibility of inducing new
foreign capital. Korea asserts that the fact th at one of the nine reasons acknowledges a broader
national policy to encourage debt restructuring of otherwise viable companies in no way undermines
the core commercial rationale for this loan.
7.166 The US has not disputed that the first eight st ated reasons for Kookmin's participation in the
December 2000 syndicate loan relate to commercial considerations. The US relies, however, on the
ninth reason as evidence of government entrustment or direction. The DOC's interpreter noted the
following translation of that ninth reason at the time of verification:

183 Decision Memorandum at 58 (Exhibit GOK-5).
184 See Letter from Hale & Dorr Corporate Department Partner (23 April 2003) (Exhibit US-92)
(discussing the use of "plain English" in the risk factor sections of prospectuses and responding to the statement
from the lawyers who drafted the Kookmin prospectus (attached by Korea as Exhibit GOK-28-(a)).
185 The fact that the prospectuses refer to action actually taken by GOK causes us to reject Korea's
argument that the statements are merely speculative as regards future action.
186 The US also argues that record evidence indicated that the GOK had a significant role in selecting
the president of Kookmin. First, we consider this issu e to be more relevant to the private/public status of
Kookmin, rather than the government entrustment/direction thereof, since appointing the president of Kookmin
could not properly be treated as an affirmative act of dele gation or control. Second, we consider this argument
to be ex post rationalization, since we can find no consideration of it by the DOC.
187 Decision Memorandum, page 59 (Exhibit GOK-5).

[BCI: Omitted from public version
188]
7.167 Korea contests the accuracy of the DOC's translat ion. This is not an issue that we need
resolve, however, since the above statement app ears to refer to an overarching government policy
relating to financial institutions pa rticipating in remedial restructuring, rather than affirmative
government acts of delegation or comma nd made pursuant to GOK's stated policy 189 to save Hynix.
Furthermore, we note that the DO C linked this statement to "the government's objectives cited in" 190
the Kookmin prospectuses. We have already foun d that such objectives, including "requests" to
banks to participate in remedial programmes for troubled corporate borrowers and the identification of
sectors of the economy the GOK wishes to promote, could not properly be treated as evidence of
affirmative government acts of delegation or command. 191 A determination of government
entrustment or direction requires more than finding th at private bodies act with regard to generalized
governmental policy requests.
7.168 In addition, we do not consider that an objec tive and impartial investigating authority could
properly have relied on the above reference to a ge neralized policy "request" from the government as
evidence of government entrustment or direction when confronted with a further eight reasons
explaining Kookmin's participation in the loan on the basis of commercial considerations. The US
argued during the second substantive meeting that such commercial considerations were not
legitimate given critical evaluation reports from brokera ge houses at that time. In our view, however,
an objective and impartial investigating authority could not properly have determined that conduct
with an ostensibly commercial rationale should be a ttributed to a government simply on the basis of a
reference to a generalized governmental policy request . As noted above, we do not consider that the
mere existence of a government policy is sufficient to establish government entrustment or direction.
Rather, there must be evidence that the governme nt has taken affirmative acts of delegation or
command to implement that policy. Furthermore, we note that at least two experts 192 indicated that
Kookmin had acted independent of the government during the Hynix restructuring. In our view,
given the alternative commercial rationale for Kookmin's participation in the December 2000
syndicated loan, and given expert opinion to the effect that Kookmin acted independently during the
Hynix restructuring, we do not consider that the ninth reason set forth above could properly be treated
as proof of any affirmative GOK act of delegation or control in respect of Kookmin.
(vi) Expert Opinion
Arguments of the Parties

7.169 Korea submits that the only evidence the DOC provides to link the motives of all the banks
involved in the October restructuring to its a lleged GOK action is the unverified assertions of an

188 [BCI: Omitted from public version]
189 See para. 7.51 supra.
190 Decision Memorandum, page 59 (Exhibit GOK-5).
191 See para. 7.163 supra.
192 See reports of Meetings 1, 4 and 5, Exhibit GOK-30. Regarding Meeting 1, the DOC reported "[a]t
one point, however, a number of commercial banks, in cluding Kookmin ..., were no longer willing to provide
fresh capital to Hynix and decided to take losses on thei r exposure instead. The expert stated that had this
happened before the financial crisis, the GOK would have forced all of Hyxnix's creditors to provide fresh
capital to the company. In this cas e, however, the GOK influenced only government-owned banks. According
to the official, the future fate of Hynix now rests with the state-owned banks, i.e., the KEB, KDB, Chohung, and
Woori." For Meeting 4, the DOC reported "[t]he official stated that the case of Hynix is different because some
of the company's creditors got out. When Kookmin ... pul led out, for example, there was no intervention by the
government." In respect of Meeting 5, the DOC reports that "[t]he expert stated that other creditors with foreign
ownership, such as Hana and Kookmin, are very different from the KEB and other government-owned banks."

anonymous "expert" the DOC interviewed in Seoul. In discussing the October restructuring package,
the DOC notes the following in its Decision Memorandum:
The independent experts interviewed by th e Department noted the important role
played by these [GOK owned or controlled] banks in Hynix’ restructuring and the
GOK’s influence in this process through them. According to one expert:
{T}he government was aware of the {Hynix} workout process and could influence
the government-owned banks and the {KDB}. In the creditors’ meetings, the other
state owned banks and the specialized ba nks persuaded other creditor banks to
participate in the various restructuring decisions. At one point, however, a number of
commercial banks, including Kookmin, Hana, and Shinhan, were no longer willing to
provide fresh capital to Hynix and decided to take losses on their exposure instead.
The expert stated that had this happened before the financial crisis, the GOK would
have forced all of Hynix’ creditors to provi de fresh capital to the company. In this
case, however, the GOK influenced only government-owned banks. According to the
official, the future fate of Hynix now rest s with the state-owned banks, i.e., the KEB,
KDB, Chohung, and Woori. He further noted that management level officers at the
KEB, Hynix’ lead bank, talk with government officials, so there is an indirect channel
through which the government can influence these creditors.
193
7.170 Korea submits that government "influence" does not amount to entrustment or direction in the
meaning of Article 1.1(a)(1)(iv) of the SCM Agreement . In addition, Korea asserts that the above
expert statement actually undercuts the DOC’s theory , since it provides further evidence that (even if
"influence" does amount to entrustment or direc tion) the GOK could not and did not "influence"
commercial banks such as Kookmin Bank, Hana Bank, and Shinhan Bank. Korea submits that, at the
very best, the DOC has perhaps established some link between alleged GOK action and the GOK-
owned and -controlled banks involved in the October restructuring, but it has established no link with
respect to the wholly private banks and those ba nks without controlling go vernment ownership.
Korea notes that the expert specifically said the "GOK influenced only government-owned banks,"
confirming the absence of influence over the other banks.
7.171 Korea further notes that one of the experts consulted by the DOC in fact identified the
complexity of the workout process in which Hynix was engaged as a barrier to GOK control: "In the
case of Hynix’s creditor council, the expert stated that because of the complex structure of these
groups it is difficult for the government to have any control over the decisions made by the
councils."194 According to Korea, therefore, the DOC's claim that the GOK dictated the terms of the
October restructuring, or the banks decisions, is immediately contradicted by one of its own experts.
Evaluation by the Panel

7.172 We understand that Korea does not contest the DOC's reliance on the experts' views to
determine that government-owned (Group B) credito rs "were very much subject to government
influence." Instead, we understand Korea to argue th at influence is not entrustment or direction, and
that the experts did not provide evidence of GOK influence over private, non government-owned
(Group C) creditors. We reject Korea's second argum ent, however, since we do not consider that the
DOC did rely on the experts' opinions to find th at GOK influenced non government-owned (Group C)

193 Decision Memorandum, page 55 (Exhibit GOK-5).
194 Exhibit GOK-30, page 16.

creditors. Indeed, the DOC acknowledged that the one expert it quoted in its Decision Memorandum
"did not state that bank (sic) not owned by government were subject to the GOK influence."
195
7.173 However, we agree with Korea's first argumen t that evidence of government "influence" does
not amount to evidence of government entrustment or direction. Government entrustment or direction
is a higher standard than government influence. A government may "influence" creditors in a number
of ways, without necessarily engaging in a ffirmative acts of delegation or command. 196 Furthermore,
at least one expert stated that GOK "does not control" government-owned banks. 197 In these
circumstances, we do not consider that an impa rtial and objective investigating authority could
properly have relied on expert evidence of nothi ng more than mere GOK "influence" over Group B
creditors as evidence of GOK entrustment or direction of Group B creditors.
7.174 In light of the above, we find that the DOC was not entitled to rely on the experts' opinions as
evidence of government entrustment or direction.
(vii) Conclusion
7.175 We recall that the DOC could properly have established that the GOK had a policy to save
Hynix. We recall that although this policy may well explain the participation of public body,
Group A, creditors in the four financial contributions at issue, it is not sufficient to establish GOK
entrustment or direction of Group B and C credit ors pursuant to Article 1.1(a)(1)(iv) of the SCM
Agreement.
7.176 In order to meet the requirements of that pr ovision, the DOC was required to gather evidence
of affirmative GOK acts of delega tion or command vis-à-vis the Group B and C private creditors. In
this regard, the DOC established that the GOK had the means to influence certain Group B creditors
through government shareholdings. The DOC al so established that the GOK had certain regulatory
authority over Group B and C creditors. However, the DOC has not properly established that the
GOK actually exercised such influence or regulatory au thority so as to entrust or direct Group B and
C creditors to participate in the four restructuri ng financial contributions. Furthermore, although the
DOC purported to demonstrate that the GOK could dictate the terms of the October 2001 restructuring
by virtue of the statutory framework of the CRPA, we consider that the DOC's analysis of the
operation of this legal instrument is flawed, a nd could not have been properly relied upon by an
objective and impartial investigating authority. In addition, we consider that the DOC improperly
found that Kookmin Bank was entrusted or directed by GOK, despite expert evidence to the contrary,
and despite an ostensibly commercial rationale for Kookmin's participation in the restructuring of
Hynix. The DOC also purported to demonstrate that a number of other Group C creditors had been
coerced by GOK to participate in the four financia l contributions. Ultimately, however, we consider
that the DOC only properly established that one such creditor had been coerced by GOK.
Furthermore, the DOC found that all four financ ial contributions should be treated as a "single
programme." This enabled the DOC to treat evidence of alleged entrustment or direction in respect of
one financial contribution as evidence of alleged entr ustment or direction in re spect of other financial
contributions. We consider that the DOC's justification for adopting such an approach is also flawed.

195 Decision Memorandum, page 55, note 22 (Exhibit GOK-5).
196 For example, the DOC's report of Meeting 6 indicates that "[t]he expert furt her stated that the 'too
big to fail' mentality no longer prevails. Since the cr isis, the policymakers and the banks are more keenly aware
of and affected by foreign interests. Any intervention on the part of the government is much more indirect, so
that it may state publicly that a company such as Hynix is important for the country and the economy in the
hope that creditors would go alone. But he stressed that the government no longer pressures banks directly the
way it did in the past (pages 2 and 7, Exhibit GOK-30).
197 See DOC report of Meeting 7, Exhibit GOK-30, page 15.

7.177 In sum, although the DOC established that the GOK had a policy to save Hynix, and that the
GOK had a certain capacity to influence Group B and C creditors, we consider – on the basis of a
thorough and global review of all the reasoning set forth by the DOC in light of the standard set forth
in Article 1.1(a)(1)(iv) of the SCM Agreement - that the DOC did not properly demonstrate that the
GOK availed itself of that capacity to entrust or dir ect all Group B and C creditors to participate in all
four of the financial contributions at issue. Fo r this reason, we consider that the DOC could not
properly have found that there was sufficient eviden ce to support a generalized finding of entrustment
or direction with respect to private bodies spa nning multiple creditors and multiple transactions over
the period of investigation. There are simply t oo many irregularities and shortcomings in the DOC's
reasoning to properly sustain such a broad determination.
7.178 For the above reasons, we conclude that th e DOC's determination of GOK entrustment or
direction of Hynix's Group B and C creditors is in consistent with Article 1.1(a)(1)(iv) of the SCM
Agreement.
2. Benefit
7.179 It is now well established that a financial contribution confers a "benefit" within the meaning
of Article 1.1(b) of the SCM Agreement when it is made available on terms that are more favourable
than the recipient could have obtained on the market. In order to determine the existence of "benefit",
therefore, one must identify an appropriate market benchmark against which to assess the terms of the
financial contribution at issue.
7.180 In considering potential market benchmarks fo r determining whether (a) the restructuring
loans and (b) the restructuring debt-for-equity swaps undertaken by the Group A, B and C (except
Citibank) creditors were made available on terms more favourable than Hynix could have obtained on
the market, the DOC determined that the particip ating Group B and C private creditors were not
suitable benchmarks. The DOC considered that th e Group B and C (except Citibank) creditors were
unsuitable market benchmarks because of its finding th at they were entrusted or directed by the GOK
to participate in the four fina ncial contributions. Citibank was rejected as a market benchmark
because, although it had not been found to have b een entrusted or directed by the GOK, the DOC
determined that it had acted on motivations not shared by the average, market lender. Instead of using
the private Group B and C creditors as market benc hmarks, the DOC treated Hynix as uncreditworthy
and unequityworthy, and constructed uncreditworthy and unequityworthy benchmarks.
7.181 Korea raises claims regarding the DOC's use uncreditworthy and unequityworthy
benchmarks. In particular, Korea submits that the DOC's determination of "b enefit" is inconsistent
with Articles 1.1 and 14 because inter alia:
• the DOC failed to demonstrate that a benef it was conferred on the respondent Hynix, given
available market benchmarks among Hynix’s creditors;
• the DOC disregarded market benchmarks for measuring benefit established by a foreign bank
(i.e., Citibank) operating in the Korean market th at extended financing to Hynix during the period
of investigation; and
• the DOC failed to utilize relevant Korean market benchmarks in determining whether Hynix was
"creditworthy" or "equityworthy," and othe rwise applied an improper "uncreditworthy"
benchmark and discount rate in calculating the benefit to Hynix in this case.
(i) Arguments of the parties

7.182 Concerning Hynix's creditworthiness, Korea notes that Hynix's creditors included Korean and
foreign private bodies. Korea asserts that the DO C incorrectly found that the Korean private bodies
were entrusted or directed by GOK to participate in the Hynix restructuring. Korea asserts that these
Korean private bodies should, therefore, have been used by the DOC as market benchmarks for the
purpose of assessing whether or not the "financial contributions" by public bodies conferred a
"benefit." Failing that, Korea argues that the DOC should at least have used Citibank, a foreign
creditor, as a market benchmark, since the DOC di d not find that Citibank had been entrusted or
directed by GOK to participate in the Hynix restructuring.
7.183 Regarding Hynix’s equityworthiness, Korea asser ts that the DOC dismissed as irrelevant the
fact that in June 2001 Hynix made a successful eq uity offering of $1.2 b illon. Korea acknowledges
that if market circumstances had changed between June 2001 and October 2001, such change might
provide some reason to reject the specific prices paid for equity at an earlier point in time. Korea
argues, however, that whatever one thinks about th e price level of the GDS issuance, the fact that
Hynix was able to raise $1.2 billion in equity from the international capital markets is a relevant fact
that the DOC should have considered.
7.184 Korea also complains that the DOC dismissed out of hand all of the third party studies
conducted by the Hynix creditors to assist them in deciding what to do.
198 According to Korea, the
DOC’s analysis ignores the single most critical f act: these studies were done for existing creditors,
not new outside investors. Korea argues that th e DOC’s analysis allows the existing creditor to
consider only one thing: the future prospects of th e investment. Korea asserts that this view is
fundamentally inconsistent with the concrete ev idence on the record of the underlying case. Korea
argues that the DOC ignored these studies because it did not want to confront the basic point of all the
studies: that further debt restructuring -- includi ng the debt-equity swap -- was the best chance to
ensure Hynix survival and to maximize the recovery of the existing investment. According to Korea,
this perspective is completely rational for an existing creditor, and is the only conclusion supported by
the evidence before the DOC when deciding these issues.
7.185 Korea asserts that the DOC improperly reject ed the common sense notion supported by the
facts of the underlying case that existing creditors consider their existing investment when making
new investments. Korea states that the DOC insisted that rational investors do not let the value of past
investments affect present or future investment decisions. 199 Korea submits that, as a matter of law
and fact, this approach is just wrong, since the text of Article 14(a) provides that an equity infusion
will normally be deemed to confer a "benefit" only if the investment decision is inconsistent with "the
usual investment practice. . . of private investors in the territory of that Member." Korea asserts that
Hynix’s creditors were acting, based on a substantial amount of evidence prepared both internally and
by outside consultants, in the manner most likel y to preserve the maximum return on their existing
capital in Hynix. Korea asserts that this behaviour is entirely consistent with the actions of normal
private investors.

7.186 The US submits that the DOC was entitled not to use Korean private creditors as market
benchmarks because they had been entrusted or directed by GOK to participate in the Hynix
restructuring. The US submits that Citibank w as excluded as a market benchmark because Citibank’s
involvement was small in absolute and percenta ge terms compared to the involvement of the
government-owned and controlled banks; Citibank it self acknowledged that its participation was only
a symbolic gesture; there was substantial record evidence that Citibank’s ri sk assessment of Hynix
was influenced by the GOK’s policy to support Hynix and prevent its failure; record evidence showed

198 Korea asserts that Hynix submitted to the DOC a wide range of third party reports commissioned by
creditors for various purposes, including a Monitor Group Report, SSB Discussion Documents, and an Arthur
Andersen Report.
199 Decision Memorandum, at 92 (Exhibit GOK-5).

that Citibank was influenced by the significant and continuing involvement of the GOK in propping
up Hynix, rather than by its belief that Hynix was a commercially worthy credit risk in its own right;
Citibank and SSB were the exclusive financial advi sors to Hynix, and reaped significant fees from
this engagement; and evidence showed that Citib ank’s involvement with Hynix was viewed by
Citibank as a stepping stone toward a larger and more lucrative role in helping the GOK to resolve
other structural problems in the Korean financia l market. The US submits that other "unusual
aspects" relevant to Citibank’s deci sion to participate in the syndicat ed loan include the fact that
despite its long involvement in the Korean financ ial market dating back to the 1960s, Citibank was
not a lender to Hyundai Electronics or Hynix prior to the December 2000 Syndicated Loan. The US
further asserts that Citibank did not extend any fina ncing to Hynix other than in GOK entrusted and
directed restructurings (and was not a participant in the KDB Fast Track Program). The US also
submits that Citibank’s participation in those restructurings was on the same terms as were applicable
to government entrusted and directed participants, and that Citibank also did not seek internal credit
approval for its portion of the syndicated loan until after Korean banks had committed to the
arrangement. The US further submits that Citiba nk did not base its lending decisions on independent
credit analyses that a commercial bank normally would consider, but rather upon the assessment of
Hynix that SSB prepared for purposes of advancing a plan to restructure Hynix’s debt.

7.187 The US asserts that the DOC properly determin ed that the June 2001 GDS issuance did not
demonstrate that Hynix was equityworthy at the tim e of the October 2001 restructuring, as a result of
the "extreme differences in the condition of the gl obal DRAMs market ... and Hynix's financial state
at the time of the two equity infusions."
200
7.188 Regarding Korea’s argument that Hynix should not be considered unequityworthy because its
creditors relied upon reports prepared by Salom on Smith Barney, the Monitor Group, and Arthur
Anderson, the US asserts that the DOC found that these studies, prepared at the request of Hynix or its
creditors, were not a reasonable basis for determini ng that Hynix was equityworthy. The US submits
that the DOC determined that the SSB and Monito r Group studies were not prepared to answer the
question of whether Hynix was equityworthy, but focused instead on presenting options for ensuring
Hynix’s survival, which is different than assessing whether Hynix would provide its investors with a
reasonable rate of return within a reasonable period of time. The US asserts that the DOC also found
that the SSB study was based upon assumptions regard ing the DRAM market that were inconsistent
with the consensus view held by neutral industry analysts, which viewed the DRAM industry as being
in a significant slump, with no recovery imminent. The US argues that, accordingly, the reports could
not reasonably be used as evidence of whether inv estment in Hynix was consistent with the usual
practice of private investors and could not have been reasonably relied upon by the government and
government-directed banks in deciding whether to convert debt into equity. The US also asserts that
Hynix’s creditors could not have relied on the Art hur Anderson report, as the report was not finished
until two months after the creditors agreed to the October 2001 restructuring package. The US also
argues that the Arthur Anderson report does not establish that the investment by Hynix’s creditors was
consistent with the usual practice of private inv estors, as the report was drafted from the perspective
of a creditor rather than an equity investor.
7.189 The US submits that the Expected Utility M odel of explaining commercial behaviour, which
is the basis for the DOC’s rational investor standa rd, holds that a private investor will look upon any
past investments, including its own, as sunk costs that are not relevant to its analysis of whether to
make additional investments. The US asserts that, in other words, a private investor will evaluate
whether to make additional investments based upon the expected rate of return on the additional
investment, regardless of the value of past invest ments. The US argues that the Prospect Theory
relied on by Korea, on the other hand, posits that i nvestors will continue to make investments in a
particular project or entity in hopes of minimizing p ast losses, even if the investment would not be

200 Decision Memorandum, pages 90-91(Exhibit GOK-5).

justified based only the potential for future return . The US asserts that the DOC has considered and
rejected on many occasions the argument that inside investors should be held to a different investment
standard than outside investors, since the prevailing economic theory for explaining normal
commercial behaviour holds that an investor make s its decision on the margin, seeking to maximize
the return on incremental outlays. The US argues that if the Prospect Theory were carried to its logical
conclusion, this would support the untenable notion that the more the banks invest in Hynix, the more
the additional investments are justified, such that a company could never be unequityworthy from the
perspective of an inside investor.
(ii) Evaluation by the Panel
7.190 In reviewing the DOC's benefit analysis (in respect of both creditworthiness and
equityworthiness), we note that it was predicated almost entirely upon the DOC's determination that
Group B and C (except Citibank) creditors were entr usted or directed by GOK to participate in the
four financial contributions at i ssue. In other words, these cred itors were rejected as market
benchmarks (for both the loans and debt-for-equity swaps) because the DOC found that they were
acting pursuant to government entrustment or dir ection, rather than market principles, when
participating in the Hynix restructuring.
201 Since we have found that the DOC could not properly
have found that these private creditors had been entrusted or directed by the GOK, government
entrustment or direction of these creditors could not have been a proper basis for the DOC to reject
them as market benchmarks.
202 As a result, we find that the DOC's benefit determination is
inconsistent with Article 1.1(b) of the SCM Agreement.
7.191 In light of the above finding, it is not necessar y for us to examine other issues raised by the
parties regarding market benchmarks. Even if we were to find, for example, that the DOC could
properly have rejected Citibank as a market benchm ark for assessing the restructuring loans, or the
GDS offering and/or expert reports as benchmar ks for determining whether or not Hynix was
equityworthy in October 2001, our finding that the DOC improperly rejected the Group B and C
(except Citibank) creditors as potential market be nchmarks would still remain, as would the issue of
whether or not Hynix might be found to be credit worthy or equityworthy on the basis of such
potential market benchmarks.203 For this reason, we shall not cons ider the additional issues raised by
the parties concerning the DOC's benefit analysis.
3. Specificity
7.192 According to Article 1.2 of the SCM Agreement, a subsidy is only subject to Part V of the
SCM Agreement , and therefore countervailable, if it is "spe cific" in the meaning of Article 2.1.
Article 2.1 provides that the following principles shall apply for determining whether a subsidy is
specific to an enterprise or industry or group of ente rprises or industries within the jurisdiction of the
granting authority:
(a) Where the granting authority, or the legislation pursuant to which the granting
authority operates, explicitly limits access to a subsidy to certain enterprises, such
subsidy shall be specific.

201 Decision Memorandum, pages 3-5 (Exhibit GOK-5).
202 We recall that certain Group B creditors might otherwise have been treated as public bodies in the
meaning of Article 1.1(a)(1) of the SCM Agreement. We are not finding that the DOC should have used those
Group B creditors as market benchmarks. (Indeed, we are precluded from engaging in such de novo review.)
We are simply finding that the DOC could not properly have rejected the Group B and C (except Citibank)
creditors as market benchmarks on the basis of the reasoning advanced by the DOC.
203 These are issues that we are precluded from examining de novo.

(b) Where the granting authority, or the legislation pursuant to which the granting
authority operates, establishes objective criteria or conditions governing the eligibility
for, and the amount of, a subsidy, specificity shall not exist, provided that the
eligibility is automatic and that such criteri a and conditions are strictly adhered to.
The criteria or conditions must be clearly spelled out in law, regulation, or other
official document, so as to be capable of verification.
(c) If, notwithstanding any appearance of non-specificity resulting from the
application of the principles laid down in s ubparagraphs (a) and (b), there are reasons
to believe that the subsidy may in fact be specific, other factors may be considered.
Such factors are: use of a subsidy pr ogramme by a limited number of certain
enterprises, predominant use by certain ente rprises, the granting of disproportionately
large amounts of subsidy to certain enterp rises, and the manner in which discretion
has been exercised by the granting authority in the decision to grant a subsidy. In
applying this subparagraph, acc ount shall be taken of the ex tent of diversification of
economic activities within the jurisdiction of the granting authority, as well as of the
length of time during which the subsidy programme has been in operation.
(i) Arguments of the parties
7.193 Korea submits that the DOC’s determination of sp ecificity is inconsistent with Article 2.
Korea asserts that the DOC supports its finding of specificity with respect to Hynix’s financial
restructuring over the period investigated on three fundamental grounds: The first ground relates to
largely secondary evidence of the GOK’s interaction, at various stages, with Hynix creditors and
Hynix’s financial restructuring. The second grou nd offered by the DOC relates to the level of
financial restructuring occurring at Hynix a nd other Hyundai Group companies under the CRPA,
relative to other CRPA companies. The third and fi nal ground relates to the level of lending to Hynix
and other Hyundai Group Companies by KDB and KEB, specifically. Korea argues that none of
these grounds withstand serious scrutiny.
7.194 Korea asserts that because the DOC’s analysis of entrustment or direction was flawed, it
cannot support a finding of specificity. Korea also argues that the DOC’s analysis attempts to
collapse two distinct requirements, whereas the obliga tion in Article 1.2 to find specificity is separate
and distinct from the obligation in Article 1.1(a )(1) to find a "financial contribution." Korea
acknowledges that the same facts might be relevant to both inquiries, but the decision by the
competent authorities must clearly and explicitl y discuss how the facts satisfy each of these
obligations. Korea argue that none of the four factors listed in Article 2.1(c) justifies the DOC
decision to turn a finding of "financial contribution" into a finding of specificity. According to Korea,
these factors relate to the extent to which the subsid y at issue has been utilized, and are irrelevant to
alleged government plans to "save" a company.
7.195 Korea also submits that the level of fina ncing received by Hynix under the CRA/CRPA
framework, by itself, is irrelevant to the issue of specificity. Korea notes the DOC's argument that the
debt restructuring data provided by GOK coveri ng CRPA workouts revealed that Hynix and Hyundai
Group companies accounted for "a disproportionately large share of the debt restructurings for all
companies" under the CRPA.
204 Korea asserts that the quantitative level of Hynix restructuring
(whether grouped with Hyundai Group companies or not) is, by itself, irrelevant to the issue of
specificity. Korea argues that, to avoid ridiculous outcomes, the term use in Article 2.1 of the SCM
Agreement must be read to have both a quantitative and qualitative component. In this regard, what is
being used under the CRPA is not the amount of debt restructuring specifically, but the framework
itself. Korea asserts that Hynix was just one co mpany out of over 100 different companies ushered

204 Decision Memorandum, at 18-19 (Exhibit GOK-5).

through the framework by its creditors. According to Korea, the differen ce between the companies
involved constitute the qualitative distinctions by which any quantitative measure of specificity must
be tempered. Korea submits that the DOC's one -dimensional quantitative exercise does not capture
any of the qualitative distinctions among the various restructurings under the CRPA. For example,
Korea notes that no effort was made by the DOC to examine the size or capital intensity of the CRPA
companies to determine if Hynix’s debt restructuring under the CRPA was truly disproportionate.
Korea also asserts that the DOC overlooked two te xtually explicit considerations provided for in
Article 2.1(c), namely the "extent of diversifica tion of economic activities," and "the length of time"
the programme has been in existence.
7.196 Korea also submits that the DOC’s focus on the level of lending by KEB and KDB over the
2000-2002 period as a measure of specificity is also without merit, as it merely identifies creditors
with whom Hynix had a long-standing business relati onship, and who therefore might naturally hold
more Hynix debt than other creditors. Korea argues that, in focusing on KEB’s and KDB’s lending,
DOC also neglected the fact that much of the new le nding and refinancing at issue in its investigation
was allocated among participating creditors on a pro rata basis, taking into account their existing debt
holdings. Korea argues that under such a system, both KDB and KEB would be expected to extend a
higher level of financing over the period investigated, since they were already among the larger Hynix
creditors.
7.197 The US submits that, because the subsidy progra mme is directed at a particular company –
Hynix – it is specific within the meaning of Article 2 of the SCM Agreement. The US asserts that, in
addition, the DOC confirmed the specificity of the Hynix bailout through an analysis of corporate
usage of the CRA/CRPA.
7.198 The US argues that, although the existence of a financial contribution and the existence of
specificity are two separate determinations that must be made, the nature of the financial contribution
can impact the specificity analysis under Article 2. The US refers, for example, the situation in which
the government provides a grant to a single, financia lly distressed manufacturer. The US asserts that
there is no law or regulation providing for such grants; this is sui generis government assistance to a
particular company. The US asserts that the subsidy is specific because there is a limited number of
users – one. The US argues that in the present ca se, as in the case of company-specific grants, the
nature of the subsidy – a government-directed bail out – impacts the specific ity analysis. The US
asserts that, as a result, much of the evidence establishing that th e GOK directed and entrusted the
banks to provide the bailout, is also relevant to th e specificity analysis. Thus, the US claims that
reliance on that evidence in its spec ificity analysis is therefore not an effort to "collapse" distinct
requirements to find financial benefit and specificity. Rather, it is a natural consequence of the nature
of the subsidy. The US further asserts that the DOC record of the investigation is replete with positive
evidence of a government-directed bailout of Hynix. According to the US, the evidence demonstrates
the GOK’s commitment and actions taken specifically to prevent the collapse of Hynix.
7.199 The US submits that the DOC’s analysis of the CRA/CRPA confirms the specificity
determination. The US asserts that record data , which was provided by the GOK, demonstrates that
the Hyundai Group companies received an extraordinar ily large percentage of financial restructuring
and recapitalization aid and that Hynix alone received a very high percentage of such aid. The US
argues that, although Korea states that its own object ive, credible data on use of the CRA/CRPA is
irrelevant to the specificity analysis, the rele vance of the data, however , should be beyond question
given that disproportionate use is expressly listed in Article 2 as a factor that may be considered in a
specificity analysis.
7.200 According to the US, nothing in the text of Article 2.1(c) requires the broader analysis
advocated by Korea;
i.e., one that looks beyond use of the subs idy at issue. The US asserts that
nothing in the SCM Agreement dictates a methodology for determ ining disproportionate use of a

subsidy, contrary to Korea's argument that the term "use" must be read to have both a "quantitative
and qualitative component." 205 The US argues that the ordinary meaning of the term "use" is,
however, the "act of using, fact of being used"206, and that nothing in the ordinary meaning of the term
"use" suggests either a quantitative or qualitative com ponent. The US also asse rts that, while there is
no reference to "qualitative" factors in examining u se, Article 2.1(c) contains explicit references to
"quantitative" factors related to use; i.e., the "number" of users, "predominant" use and
"disproportionate" use. The US argues that there is no requirement in Article 2.1(c) to "temper" those
quantitative factors based on "qualita tive distinctions," and there is no basis for Korea’s assumption
that a qualitative analysis is necessary to avoid "ridiculous outcomes."207
7.201 The US also notes there is no basis in the text of Article 2 to support Korea's argument that
what is being "used" is not the vast amount of debt restructuring aid, but rather the CRPA
"framework" itself, and that Hynix was only one of over 100 different companies "ushered through"
the CRPA. 208 The US asserts that, assuming arguendo that Korea is correct, the GOK’s own data
demonstrate that members of the Hyundai Group – and Hynix in particular – were granted
disproportionately large amounts of the restru cturing and recapitalization aid through those
frameworks. According to the US, therefore, even if one were to accept, for the sake of argument,
that 100 companies received restructuring aid and that 100 companies is not a "limited number," the
receipt by Hynix of a disproportionate amount of restructuring aid makes the subsidy specific.
7.202 The US also notes Korea's argument that th e DOC was required to examine the size and
capital of Hynix in relation to the size and capit al intensity of all companies undergoing debt
restructurings and to consider that debt restruct uring aid allocated among participating creditors on a
pro rata basis, taking into account their existing debt hol dings. The US asserts that Article 2.1(c)
does not contain any requirements regarding how a disproportiona te use analysis is to be conducted,
much less the specific analytical methods Korea asser ts are required. The US also argues that, carried
to its logical conclusion, the analytical approach Korea claims is required would imply the untenable
notion that the Members intended that the more inde bted a company is, the more additional subsidies
it may receive without being subject to the subsid y disciplines because the disproportionately large
subsidies could never be specific. The US asserts th at Korea’s proffered interpretation of Article 2 is
therefore directly at odds with the object and purpose of the SCM Agreement.
7.203 The US asserts that Korea's argument that the DOC’s specificity analysis failed to take into
account "the extent of diversifica tion of economic activities" and th e "length of time" the programme
has been in existence, as required under Article 2(c) of the SCM Agreement misapprehends the nature
and relevance of these two requirements. The US also asserts that these issues were considered in the
context of the DOC’s investigation.
(ii) Evaluation by the Panel
7.204 The US argues that "because the subsidy progra mme is directed at a particular company –
Hynix – it is specific within the meaning of Article 2 of the SCM Agreement."209
7.205 For its part, the DOC found that "record eviden ce in this proceeding indicates that the GOK
only directed or provided loans and other benefits to a specific company or group of companies." 210
The DOC also referred to the "substantial reco rd evidence demonstrating the GOK’s commitment,

206 The New Shorter Oxford English Dictionary (1993) (Exhibit US-89).
208 Id.
209 See para. 236 of the US First Written Submission.
210 Decision Memorandum, page 17 (Exhibit GOK-5).

and actions taken, to prevent the collapse of the Hyundai Group, and Hynix in particular",
211 and the
fact that it found "a number of indicators of ROK activity specifically focused on aiding Hynix and
the Hyundai Group of companies."
212
7.206 The DOC's finding of specificity related to th e alleged subsidies provided by Group A, B and
C creditors respectively. Whereas we understand the DOC's reference to GOK "direct[ion]" of loans
and other benefits to relate to the participation of Group B and C creditors, we consider that the
reference to GOK "provid[ing]" such loans and othe r benefits relates to th e participation of Group A
creditors. On this basis, we understand that th e DOC found that the alleged subsidies provided by
Group B and C creditors are specific because of the role allegedly played by the GOK in entrusting
and directing those creditors to sav e a specific entity, i.e., Hynix. In other words, the DOC's finding
of specificity in respect of Group B and C credito rs was based on its finding of GOK entrustment or
direction of private creditors to participate in the single programme of Hynix restructuring. We recall,
however, that we have found that the DOC’s determination of government entrustment or direction is
factually flawed, and inconsistent with Article 1 of the SCM Agreement. In the circumstances, the
DOC's finding of GOK entrustment cannot provide a proper basis for a determination of specificity in
respect of alleged subsidies provided by Group B and C creditors.213
7.207 To the extent that the DOC's finding of specifi city in respect of Group A creditors was based
on GOK "activity specifically focuse d on" Hynix, however, we cons ider that such finding of
specificity is consistent with Article 2 of the SCM Agreement. We recall in this regard that the DOC
properly found that Group A creditors provided fina ncial contributions to Hynix pursuant to a GOK
policy to save Hynix. We consider that such polic y meant that such financial contributions by Group
A creditors were necessarily specific to Hynix. The fact that such financial contributions were
provided pursuant to a restructuring package tailo r-made for Hynix confirms the specific nature
thereof. In these circumstances, we consider that an objective and impartial investigating authority
could properly have found that th e alleged subsidies provided by Group A creditors were specific
within the meaning of Article 2 of the SCM Agreement.
7.208 For these reasons, we find that the DOC’s finding of specificity is inconsistent with Article 2
of the SCM Agreement in so far as it relates to alleged s ubsidies by Group B and C creditors, but
consistent with Article 2 in so far as it relates to alleged subsidies provided by Group A creditors.
4. Conclusion
7.209 For the above reasons, we find that the DOC did not properly determine that the four financial
contributions at issue constitute specific subsidi es. Accordingly, we conclude that the DOC's Final
Subsidy Determination, and the Final Countervailing Duty Order based thereon, are inconsistent with
Articles 1 and 2 of the SCM Agreement, and that the US is therefore in violation of those provisions.

211 Decision Memorandum, page 18 (Exhibit GOK-5).
212 Id.
213 In finding specificity, the DOC also referred to "a list of the largest recipients of KDB and [KEB]
financing" (Decision Memorandum, page 18, Exhibit GOK-5). The DOC further referred to "the magnitude of
monies involved with corporate restructurings under corporate restructuring laws in the ROK" ( Decision
Memorandum, page 18). While the DOC referred to these additional elements, there is nothing in its Decision
Memorandum to suggest that the DOC considered that its specificity analysis could be upheld purely on the
basis of them. We are of course precluded from considering this issue de novo. There is, therefore, no basis for
upholding the DOC's specificity analysis (in respect of Group B and C creditors) on the basis of its
consideration of these additional elements. Accordingly, we need not address the parties' arguments concerning
this issue.

D. ITC INJURY INVESTIGATION
7.210 Korea claims that the US acted inconsistently with:
• Article 15.1 because inter alia, the ITC determinations on injury and causation were not
based on positive evidence and an objective assessment of the effects of allegedly
subsidized imports;

• Article 15.2 because inter alia, the ITC determinations improperly assessed the
significance of the volume effects of subject imports;

• Article 15.2 because inter alia , the ITC determinations improperly assessed the
significance of the price effects of subject imports;

• Article 15.4 because inter alia, the ITC failed to consider all factors relevant to the
overall condition of the domestic industry;

• Article 15.5 because inter alia, the ITC failed to demonstrate the requisite causal link
between subject imports and injury;

• Article 15.5, because inter alia , the ITC improperly assessed the role of other factors,
and improperly attributed the effect of other factors to the allegedly subsidized imports;
and

• Article 15.2 and 15.4 because inter alia, the ITC improperly and inconsistently defined
the domestic industry.

7.211 In light of our findings in respect of subsidization, it is not strictly necessary for us to consider
Korea's claims against the ITC's Final Injury Determination . We shall do so, however, in case our
findings on this issue might be of use to the Appellate Body, or in the context of the implementation
of any recommendation by the DSB.
7.212 In order to rule on Korea's claims, we must resolve the following issues:
• Did the ITC properly assess the volume of subject imports?
• Did the ITC properly assess the price effects of subject imports?
• Did the ITC properly consider all factors relevant to the overall condition of the domestic
industry?
• Did the ITC properly demonstrate the requis ite causal link between subject imports and
injury?
• Did the ITC properly comply with its obligation not to attribute to subject imports injury
caused by other factors?
• Did the ITC properly define domestic industry, subject imports and non-subject imports?
7.213 Before turning to the parties arguments concer ning the substantive issues raised by Korea’s
claims under sub-paragraphs 2, 4 and 5 of Article 15 of the SCM Agreement, we shall first consider
the application of Article 15.1.

7.214 Article 15.1 of the SCM Agreement provides:
A determination of injury for purposes of Article VI of GATT 1994 shall be based on
positive evidence and involve an objective examination of both (a) the volume of the
subsidized imports and the effect of the s ubsidized imports on prices in the domestic
market for like products and (b) the consequent impact of these imports on the
domestic producers of such products. (footnote omitted)
7.215 Accordingly, an investigating authority must ensu re that its determination of injury, and more
specifically, its findings under SCM Articles 15.2, 15 .4, and 15.5, are made on the basis of "positive
evidence" and involve an "objective examination." In this regard, we note that the Appellate Body
has interpreted "positive evidence" as follows:
The term ‘positive evidence’ relates, in our view, to the quality of the evidence that
authorities may rely upon in making a determin ation. The word ‘positive’ means, to
us, that the evidence must be of an affirma tive, objective and verifiable character, and
that it must be credible.
214

7.216 We also note that the Appellate Body has defined an "objective examination":
The term ‘objective examination’ aims at a different aspect of the investigating
authorities’ determination. While the te rm ‘positive evidence’ focuses on the facts
underpinning and justifying the injury determination, the term ‘objective
examination’ is concerned with the i nvestigative process itself. The word
‘examination’ relates, in our view, to th e way in which the evidence is gathered,
inquired into and, subsequently, evaluated; that is, it relates to the conduct of the
investigation generally. The word ‘objective,’ which qualifies the word
‘examination,’ indicates essentially that th e ‘examination’ process must conform to
the dictates of the basic principles of good faith and fundamental fairness.215

The Appellate Body summed up the requirement to conduct an "objective examination" as follows:

In short, an ‘objective examination’ re quires that the domestic industry, and the
effects of [subsidized] imports be investigated in an unbiased manner, without
favouring the interests of any interested part y, or group of interested parties, in the
investigation. The duty of the investig ating authorities to conduct an ‘objective
examination’ recognizes that the determination will be influenced by the objectivity,
or any lack thereof, of the investigative process.
216

7.217 We also note that the Appellate Body in Thailand – H-Beams confirmed the fundamental
nature of a provision analogous to Article 15.1 and its importance as a guiding principle underlying all
aspects of an injury determination. Thus, in respect of Article 3.1 of the AD Agreement, the Appellate
Body stated:
Article 3 as a whole deals with obligations of Members with respect to the
determination of injury. Article 3.1 is an overarching provision that sets forth a
Member’s fundamental, substantive obligation in this respect. Article 3.1 informs the
more detailed obligations in succeeding pa ragraphs. These obligations concern the

214 Appellate Body Report, United States –Hot-Rolled Steel, para. 193 (emphasis added); Appellate Body
215 US – Hot-Rolled Steel, para. 193 (footnote omitted).

determination of the volume of dumped imports, and their effect on prices
(Article 3.2), investigations of imports fro m more than one country (Article 3.3), the
impact of dumped imports on the domestic industry (Article 3.4), causality between
dumped imports and injury (Article 3.5) , the assessment of the domestic production
of the like product (Article 3.6), and the determ ination of the threat of material injury
(Articles 3.7 and 3.8). The focus of Article 3 is thus on substantive obligations that a
Member must fulfil in making an injury determination.217
7.218 The parties agree that our interpretation and a pplication of Article 15.1 should be guided by
the abovementioned Appellate Body rulings. The pa rties also agree that Article 15.1 informs the
more detailed obligations set forth in the remainde r of Article 15. We shall be guided by these
statements by the Appellate Body in determining wh ether or not the ITC’s injury determination is
consistent with paragraphs 2, 4 and 5 of Article 15 of the SCM Agreement.
1. Did the ITC properly assess the volume of subject imports?
7.219 Article 15.2 of the SCM Agreement provides in relevant part:
With regard to the volume of the subsid ized imports, the investigating authorities
shall consider whether there has been a significant increase in subsidized imports,
either in absolute terms or relative to production or consumption in the importing
Member.
(i) Arguments of the parties
7.220 Korea submits that the ITC's finding of a significant increase in subject imports was not based
on an objective examination of positive evidence, contrary to Articles 15.1 and 15.2 of the SCM
Agreement. Korea asserts that, pursuant to Article 15.2, the competent authorities must do more than
simply find an increase. Korea asserts that the competent authorities have a specific obligation to find
a "significant" increase, and to explain why they d eemed the increase to be significant. Korea argues
that there was no "significant" increase in imports, since the data shows that the 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 at HSMA.
7.221 Korea acknowledges that the ITC properly a dopted the industry practice of calculating
"billion bits" of DRAMs memory when assessing the volume of DRAMs sold. Korea asserts,
however, that the continual movement to highe r and higher densities (e.g., the 64MB chip was
replaced with the 128MB chip, which was replaced with the 256MB chip) has meant that total bits
supplied and total bits consumed have always been increasing. According to Korea, as measured in
billion bits of DRAMs memory, the total cons umption (and supply) of DRAMs has increased
dramatically every year over the previous year’s consumption. Korea asserts that, in the DRAMs
market, the simple fact that an actual increase in imports (on a billion bit basis) occurred from a
particular supplier is meaningless. According to Korea, what is important when analzying the volume
of DRAMs shipments is to examine the increased sh ipments relative to consumption and relative to
other suppliers. Korea submits that the best measure of any volume effects of the subsidized imports
is therefore to examine market share data. Kore a asserts that any methodology that does not focus on
market share bears a very high burden of persuasion to be considered "objective."
7.222 Korea states that the following chart was made available to the ITC concerning respective
DRAM market shares for each of the major suppliers in the Americas market:

217 Thailand – H-Beams at 160 (emphasis in original).

Figure 8 America’s Market Share by Supplier Brand

 1998 1999 2000 2001 2002 Change
’98-02
Micron 17.9% 21.0% 27.0% 26.2% 25.7% +7.8
Infineon 3.5% 6.7% 7.4% 11.5% 14.8% +11.3
Combined 21.4% 27.7% 34.4% 37.7% 40.5 +19.1
Samsung 22.7% 22.5% 23.7% 28.3% 34.4% +11.7
Hynix 15.8% 15.2% 13.6% 10.6% 10.4% -5.4
All Others 40.1% 35.7% 28.2% 23.3% 13.5%

7.223 Korea asserts that the data show that over the past few years the Hynix brand has been losing
market share in the Americas market . Korea also asserts that the ma rket share data show absolutely
no correlation between shipments from Hynix and any deterioration of Micron ’s and Infineon’s US
market positions, since Micron and Infineon gained significant market share, while Hynix lost market
share.
7.224 Korea also asserts that, even focusing on subj ect import data (as opposed to data concerning
the Hynix brand, which includes both Hynix's US domestic and imported shipments), the evidence
before the ITC establishes that the market share of subject imports remained small throughout the
investigation period, and actually declined at th e end of the period. Korea submitted the following
chart to the Panel. Korea asserts that the chart is based on the evidence before the ITC that presents
the respective market shares of US producers, Hyni x and non-subject suppliers. According to Korea,
the data in the chart consists of the public market share data contained in th e ITC’s determination (at
page C-3) for US production plus a Hynix market share calculated from the volume of Hynix’s
shipments to the US from Korea, which Hynix has agr eed to make public in order to assist the Panel’s
analysis. Korea states that the total market share of non-subject suppliers was simply derived by the
following calculation: 100 per cent minus US producers’ market share minus Hynix’s market share.
Figure 9. US Market Shares

 1999 2000 2001 2002 1Q 2003
US Shipments of
Domestic Producers
45.8% 43.4% 34.3% 30.7% 29.8%
US Shipments of Hynix
Subject Product
8.5% 6.7% 9.0% 8.9% 5.8%
US Shipments of Non-
Subject Products
45.7% 49.9% 56.7% 60.4% 64.4%

7.225 According to Korea, the above data demonstrat es the following facts about trends in market
share based on US shipments from these different sources:
• The market share of Hynix’s imported DRAMs was 6.7 per cent in 2000,
increased to 9.0 per cent in 2001, decreased to 8.9 per cent in 2002 and decreased
again to 5.8 per cent in 2003;
• The consistently small volume of Hynix’s imports was dwarfed by both domestic
production and non-subject imports. In 2002 domestic producers’ shipments

were more than three times larger than Hynix’s imported volume; and non-
subject imports were more than six-and-a half times larger than Hynix’s imports;
• Although the market share of Hynix’s imports did increase over the three year
(2000-2002) period, the increase was only two percentage points;
• All of the increase in Hynix import market share occurred from 2000 to 2001,
prior to Hynix receiving the bulk of the alleged subsidies in the 4 th quarter of
2001. In fact, the data demonstrate that after Hynix received the vast majority of
the alleged subsidies, the market share of Hynix’s imports actually decreased
from 2001 to 2002, and then decreased again from interim 2002 to interim 2003;
and
• The increase in market share by non-subject imports from 2000 - 2002 was nearly
five times larger than the increase in market share by Hynix’s imports.
7.226 Korea submits that it is not an objective assessment of subject import volume to focus on the
small nominal increase in market share and largely to ignore these other criti cal facts that put that
small change in market share in proper context. According to Korea, any objective assessment would
have found that in light of the fact that (1) Hynix import market share fell in both 2002 and the
beginning of 2003, (2) non-subject imports consiste ntly dwarfed subject imports, and that (3) the
increase in non-subject imports was almost five tim es larger than the increase of subject imports, the
small increase in subject imports could not be cons idered significant. Korea submits that the ITC did
not make an objective assessment of these facts.
7.227 Korea submits that, even focusing on the abso lute volume of subject imports, the evidence
before the ITC demonstrates that the increase in im ported Hynix DRAMs was solely the result of the
temporary closure of Hynix’s US manufacturin g facility, HSMA. Korea asserts that HSMA
temporarily suspended all production in July 2001 to hasten a planned upgrade of HSMA’s
production facility. Korea states that the upgrade was completed in January 2002, and that full-scale
commercial production began in September 2002. Kore a submits that the appa rent "increase" in
Hynix imports found by the ITC is really just a da ta aberration, and therefore has little significance.
According to Korea, the increased volume of imported Hynix DRAMs simply replaced the volume
previously produced by the Hynix US manufacturing facility, and therefore such volume did not
displace sales from Micron or Infineon.
7.228 The US submits that the ITC’s conclusions about the significance of the volume of subsidized
subject imports from Korea on an absolute basis, as well as the increase in that volume relative to
production and consumption, are ba sed on positive evidence and an objective examination. The US
asserts that the ITC’s analysis of the volume of subs idized imports is also otherwise consistent with
US obligations under Articles 15.1 and 15.2 of the SCM Agreement.
7.229 The US argues that the ITC relied on a single consistent set of data from questionnaire
responses for its examination of the volume of subsid ized subject imports, whereas Korea refers to a
varying set of data sources. In light of these alleged problems wi th the data, as presented by Korea,
the US calls attention at the outset to several tr ends in the data used by the ITC in its final
determination:
• The ITC discussed the volume of subsidized subject imports in terms of billions of bits, as a
ratio to domestic production, and as a share of apparent US consumption. It found the
absolute volume of subsidized subject imports was significant in and of itself;

• Subsidized subject import volume increased over the period of investigation;

• In terms of billions of bits, subsidized s ubject imports increased between 2000 and 2001 and
between 2001 and 2002;

• In terms of their market share, subsidized subject imports increased between 2000 and 2001,
then declined between 2001 and 2002 to a leve l that the ITC observed was still significantly
higher than in 2000;

• Compared to US production, the ratio of tota l subsidized subject imports increased between
2000 and 2001, and then declined between 2001 to 2002 to a le vel that was still significantly
higher than in 2000; and

• Thus, in addition to an increase in subsidized s ubject imports over the period of investigation
in absolute terms, the volume of subsidized s ubject imports relative to US consumption and
relative to US production also increased over the period of investigation.
218

7.230 The US submits that there are multiple ways under Article 15.2 of the SCM Agreement to
examine subsidized subject import volume. The US asserts that, based upon the clear text of
Article 15.2, which uses the disjunctive terms "either " and "or," analysis of the volume of subject
imports should include consideration of the abso lute volume of subsidized subject imports, a
significant increase in the volume of subsidized s ubject imports in absolute terms, a significant
increase in the volume of subsidized subject imports relative to production in the importing Member,
or a significant increase in the volume of subsidized subject imports relative to consumption in the
importing Member. The US argues that, in the DRAMs investigation, the ITC found that the volume
of subsidized subject imports was significant and that the increase in that volume absolutely and
relative to production and consumption in the US was significant. The US asserts that the ITC
therefore examined volume in each of the ways contemplated by Articles 15.1 and 15.2. The US
disagrees with Korea's argument that " the only objective means of assessing the volume impact of
subject imports is by examining relative changes in market share."
219 The US asserts that Korea’s
approach directly contravenes the last sentence of Article 15.2, which specifies that "no one or
several" of the Article 15.2 factors "can necessarily give decisive guidance." The US argues that the
ITC tied its volume analysis to the relevant conditions of competition in this industry and put the data
in context by explaining why subsidized s ubject import volume was significant in the DRAMs
investigation. The ITC stated that its “findings ab out the volume of subject imports are reinforced by
the substantial degree of substitutability between subject imports and domestic shipments,” and it
noted that “[t]he commodity-like nature of dom estic and subject imported DRAM products magnifies
the ability of a given volume of imports to impact the domestic market and industry.” 220 The US
submits that it was reasonable for an investigating authority to consider substitutability in its volume
analysis. Whether the product is fungible and pr ice sensitive, or whether the market is highly
differentiated, can be relevant in assessing the significance of a given import volume or a given
increase in import volume absolutely or relative to consumption or production.221
7.231 Regarding Korea's argument that subject impor ts increased market share because Hynix’s US
manufacturing facility, HSMA, was closed between Ju ly 2001 and January 2002, the US asserts that
Korea would have this Panel believe that, in la rge measure, the increased subject imports were
entering the US market to replace other Hynix-br and products while the HSMA facility was being
upgraded. The US submits that this argument is flaw ed for many reasons: first, because even if this

218 See, e.g., Final Injury Determination, at 20-22 (Exhibit GOK-10); see also, e.g., Hearing Transcript
at 243-245 (Exhibit US-94).
220 See, e.g., Final Injury Determination (USITC Pub. 3616) at 21 (Exhibit GOK-10).
221 See, e.g., US First Written Submission, paras. 311-314.

explanation of the circumstances were accurate, it does not detract from the fact that a domestic
producer was losing sales to subsidized subject imports; second, because the ITC in its final
determination explicitly identified a missing (confid ential) factual basis to Hynix’s argument; and
third, because Korea’s argument is premised on th e notion that the ITC should have examined the
impact of subsidized subject imports on a "bra nd-name" basis (i.e., excluding from subject import
volume those imports of subsidized subject DRAM products that it alleges "merely replaced" DRAM
products produced by Hynix’s Eugene facility). Th e US submits that Korea's brand-name approach
would not be consistent with the SCM Agreement, since it does not focus on the impact of subsidized
imports on the condition of the domestic industry (inc luding Hynix's Oregon facility). In contrast to
Korea’s suggested brand-name analysis, the US argues that the ITC analyzed the volume data
consistent with the requirements of SCM Articles 15.1, 15.2, and 15.4. First, the data used by the ITC
concerned “the volume of the subsidized imports from Korea.” Second, the ITC analyzed the
significance of the volume of subsidized subject imports and increases in that volume relative to
indicators for “the domestic industry.”
222
7.232 The US notes Korea's argument that "all of the increase in Hynix import market share
occurred from 2000 to 2001, prior to Hynix receiving the bulk of the alleged subsidies in the 4 th
quarter of 2001. In fact, the data demonstrate that after Hynix received the vast majority of the
alleged subsidies, the market share of Hynix’s imports actually decreased from 2001 to 2002, and then
decreased again from inte rim 2002 to interim 2003." 223 The US asserts that it is incorrect that "all of
the increase" in Hynix’s market share occurred between 2000 and 2001, because subsidized subject
imports’ market share in 2002 was significantly greate r than in 2000, as the ITC noted. The US also
asserts that some of the subsidies that the DOC found benefited Hynix predated the period for which
the DOC made its subsidy finding. The US submits that Korea’s argument therefore lacks both legal
and factual foundation.
(ii) Evaluation by the Panel
7.233 There are three ways in which an investigati ng authority may comply with the Article 15.2
requirement to "consider whether there has been a significant increase in subsidized imports." 224
First, the investigating authority may consider wh ether there has been a significant increase in the
volume of subsidized imports in absolute terms. Second, the investigating authority may consider
whether there has been a significan t increase in the volume of subsidized imports relative to domestic
production. Third, the investigating authority ma y consider whether there has been a significant
increase in the volume of subsidized imports relativ e to domestic consumption. Article 15.2 provides
that "[n]o one or several of these factors can necessarily give decisive guidance."
7.234 In the case at hand, the ITC determined that "t he absolute volume of subject imports and the
increase in that volume over the period of investig ation relative to production and consumption in the
US is significant." 225 Thus, the ITC undertook two of the three considerations envisaged by
Article 15.2 of the SCM Agreement. In particular, the ITC found that the increase in the volume of
subsidized imports was "significant" (1) relative to domestic production, and (2) relative to domestic
consumption. Although the ITC found that "the absolu te volume of subject imports ... is significant" ,

222 See, e.g., US First Written Submission, paras. 328-332.
224 Article 15.2 does not require a determination that there has been a significant increase in subsidized
imports. It simply requires investigating authorities to "consider" whether there has been such an increase.
Although this issue is not disputed by the parties in this case, we note that the language of Article 15.2 would
seem to suggest that an injury determinati on may be consistent with Article 15 of the SCM Agreement even in
the absence of a determination that (as opposed to consideration whether) there has been a significant increase in
the volume of subsidized imports.
225 Final Injury Determination, page 20, (Exhibit GOK-10).

it did not determine that the increase
 in the absolute volume of subsidized imports was significant. 226
Since Article 15.2 provides that "[n]o one or several of these factors can necessarily give decisive
guidance", the fact that the ITC did not find that there was a significant increase in the absolute
volume of subsidized imports is not per se inconsistent with Article 15.2 of the SCM Agreement.
7.235 Korea challenges the entirety of the ITC's determ ination regarding volume effects. However,
given the scope of Article 15.2, we shall focus on Korea's claims concerning the ITC's determination
that "the increase in th[e] volume [of subsidized imports] over the period of investigation relative to
production and consumption in the US is significant."
227 We shall not consider the ITC's
determination that the absolute volume (but not any increase therein) of subsidized imports was
significant.
7.236 Since Korea argues that "what is important wh en analyzing the volume of DRAMs shipments
is to examine the increased ship ments relative to consumption",
228 we shall begin by examining
Korea's claim against the ITC's determination that the volume of subsidized imports was "significant"
relative to domestic consumption.
The volume of subject imports relative to domestic consumption
7.237 The first point to be made in respect of Korea's arguments is that Article 15.2 of the SCM
Agreement is concerned with the volume of "the subs idized imports", or "subject imports" in ITC
parlance. This is because Part V of the SCM Agreement provides relief for injury caused by
subsidized imports. It does not provide relief for injury caused by non-subsidized imports. Nor does
it provide for relief from injury caused by goods that are not imported at all. In contrast, many of
Korea's arguments concerning market share relate to the volume of Hynix shipments by brand, i.e.,
including both Hynix subject imports and Hynix's US production. Since Korea's brand analysis does
not focus on the relative market share of "subsidi zed imports", as required by Article 15.2 of the SCM
Agreement, it provides no basis for finding that the ITC's determination that the volume of subject
imports was "significant" relative to domestic consumption is inconsistent with Article 15.2.
7.238 That being said, we acknowledge that, in addition to its brand analysis, Korea also argues that
the volume of subject imports (rather than subject brand) was not "significant" relative to domestic
consumption. Korea submits that Hynix's import ma rket share fell in both 2002 and the beginning of
2003, that non-subject imports consistently dwa rfed subject imports, and that the increase in non-
subject imports was almost five times larger than the increase of subject imports. The factual basis
for Korea's arguments is contained in Figure 9 of Korea's first written submission, set forth at para.
7.224 supra. The US disputes the reliability of the Fi gure 9 data, whereas Korea asserts that it
represents a reliable proxy given the US failure to provide the Panel with the confidential information
actually relied on by the ITC.
7.239 Before turning to the substantive issue at hand, we note that Korea has not raised any claims
under Article 12.4 of the SCM Agreement concerning the designation of the relevant information by
the ITC as confidential. We also note that, pursu ant to that provision, the US is precluded from
disclosing confidential information "without speci fic permission of the party submitting it." We
considered it would only be appropriate and necessary
229 to request the relevant confidential

226 The US argues at para. 303 of its First Written Submission that the ITC found that "the increase in
th[e] volume [of subsidized subject imports] absolutely ... was significant." We see no such finding in the ITC's
Final Injury Determination, however.
227 Final Injury Determination, page 20, (Exhibit GOK-10).
228 Korea's First Written Submission, para. 93.
229 We note that Article 13.1 of the DSU provides in relevant part that "[a] Member should respond
promptly and fully to any request by a panel for su ch information as the panel considers necessary and
appropriate."

information from the US if Korea had established a basis for its case using the "proxy" data set forth
in the abovementioned Figure 9. However, we consider that Korea failed to do so.230
7.240 We note that the data submitted by Korea in Figure 9 shows that the market share of US
shipments of Hynix subject imports ranged from 6.7 to 9.0 to 8.9 per cent from 2000 to 2001 to 2002,
falling to 5.8 per cent in the first quarter of 2003.
7.241 Korea asserts that the nominal increase in subject imports' market share (relative to apparent
domestic consumption) should not ha ve been determined by the ITC to be "significant" for three
reasons. First, because Hynix import market sh are fell in both 2002 and the beginning of 2003.
Second, because non-subject imports consistently dw arfed subject imports. Third, because the small
increase in subject imports could not be considered significant in light of the much larger increase in
non-subject imports.
7.242 Regarding the alleged decrease in the market share of subject imports from 2002 to the first
quarter of 2003, we note that Korea has not challeng ed the ITC's finding that the weight accorded to
the 2003 data should be reduced because it "is rela ted to the pendency of this investigation." 231 In
light of this finding, which undermines the relevance of the 2003 data, we consider that the ITC could
properly have reduced the weight it accorded to interim 2003 data. Accordingly, we shall not
consider Korea's interim 2003 data in our findings . Instead, we focus our findings on Korea's 2000 –
2002 data, which show an increase in subject imports' market share from 6.7 to 8.9 per cent.
7.243 Concerning Korea's argument that non-subject imports "dwarfed" subject imports, we recall
that Article 15.2 requires (in relevant part) a consid eration of whether there is a significant increase in
the volume of subsidized imports relative to dome stic consumption. Since non-subject imports are
only one part of total domestic c onsumption, the volume of subject imports relative to the volume of
non-subject imports is not determ inative of the relevant issue. 232 T h e s a m e i s t r u e i n r e s p e c t o f
Korea's argument concerning the rate of increase in s ubject imports compared to the rate of increase
in non-subject imports. Neither the volume of non-subject imports, nor the increase in the volume of
non-subject imports, detracts from the fact that ther e was an increase in the market share of subject
imports. Furthermore, we agree with the US th at, in emphasizing the increase in subject import
market share of 2.2 percentage points, Korea is focusing on the percentage-point increase, ignoring
that this was equivalent to an increase in market share of a certain percentage magnitude over the
period of investigation. Indeed, the 2000 – 2002 increase of 2.2 percentage points represents an
increase in subject import market share of 32.8 per cent.
233 We do not consider that Korea has
established that an increase in subject import market share of this magnitude could not properly be
considered significant.
7.244 Korea argues instead that the incr ease in market share of subject imports should be viewed in
the context of the closure of HSMA. In other word s, Korea considers that the ITC should have taken
into account the fact that the increase in market sh are of subject imports (by comparison to domestic
consumption) was largely accounted for by the fact that Hynix's subject imports were replacing sales

230 In assessing Korea's arguments co ncerning Figure 9, we do not ta ke into account the US arguments
that such data is unreliable. In the absence of confidential data being made available by the US, we consider
that Korea is entitled to build its case as best it may. It is unrealistic to expect Korea to use data of a quality
equivalent to that available to the ITC.
231 Final Injury Determination, page 21, (Exhibit GOK-10).
232 It would appear that Korea's arguments regardin g non-subject imports rea lly concern the issue of
whether the ITC improperly attributed injury caused by non-subject imports to subject imports. Our analysis of
Korea's non-attribution arguments is set forth at paras 7.350-7.371 infra.
233 In addition, Korea has not rebutted the US argument that subsidized subject imports maintained
their market share better than domestic producers. In the context of Article 15.2, which concerns the impact of
imports on the domestic industry, this is a relevant consideration.

made by Hynix's Eugene facility. We do not accep t this argument, however, because Article 15.2 of
the SCM Agreement is concerned with the volume of subsidized imports.
234 Furthermore, the Korean
argument is factually flawed, [BCI: Omitted from public version 235] It was not, therefore, a simple
case of swapping customers between Hynix's Korean and US facilities.
7.245 Korea also argues that all of the increase in subject imports' market share occurred from 2000
to 2001, prior to Hynix receiving the bulk of the a lleged subsidies in the fourth quarter of 2001.
However, Article 15.2 does not require an investigating authority to demonstrate that all of the subject
imports covered by the period of injury investiga tion are subsidized. As noted by the panel in
Argentina – Poultry Anti-Dumping Duties , "the period of review for injury need only 'include' the
entirety of the period of review for dumping." 236 It is not necessary that the period of review for
subsidization must mirror the period of review for injury.
7.246 In light of the above, we do not consider it n ecessary or appropriate to request confidential
information from the US. Even accepting the data set forth in Korea's Figure 9, Korea has failed to
persuade us that the ITC could not properly have found that the increase in the volume of allegedly
subsidized imports was "significant" relative to domestic consumption.
The volume of subject imports relative to domestic production
7.247 In support of its determination that the increas e in the volume of subject imports relative to
domestic consumption was significant, we note that the ITC found that:
[c]ompared to US production of uncased DRAMs, the ratio of total subject imports
increased from *** per cent in 2000 to *** per cen t in 2001, then declined to *** per
cent in 2002, a level that was still *** that of 2000, and was *** per cent in interim
2003 compared to *** in interim 2002.237
7.248 Korea has not challenged any of the underlying data relied on by the ITC. Nor has Korea
denied that there was an increase in subject imports relative to domestic production. In fact, Korea
only addressed the ITC's determination regarding th e volume of subject imports relative to domestic
production at the Panel's second substantive meeting with the parties. At para. 13 of its oral statement
at that meeting, Korea stated:
The US tries to shift focus away from th is small change in share of domestic
consumption by citing subject imports re lative to domestic production. But this
alternative approach has only limited usefuln ess in this particular case, and therefore
was not a focus of our earlier submissions. This measure actually says more about
changes in the denominator – the domestic production – than the numerator. As US
based companies become more global, it is quite natural that more of US
consumption comes from offshore sources. All four of the major DRAM companies
producing in the US also have major operations overseas. Moreover, domestic

 234 We note Korea's argument that the closure of HSME is relevant to the ITC's determination
regarding the causal link between the allegedly subsidized imports and injury suffered by the domestic industry
(see para. 236 of Korea's First Written Submission, and para. 194 of Korea' s Second Written Submission). In
certain circumstances, the closure of HSME (and therefor e the reason for the increas e in subject imports) may
well have had a bearing on causation. However, since the ITC determined that [BCI: Omitted from public
version], we consider that the ITC could properly have decided not to revert to this issue in its causation
analysis.
235 Korea has not rebutted the US argument, based on Exhibit GOK-41, that [BCI: Omitted from
public version].
236 Panel Report, Argentina – Poultry Anti-Dumping duties, para. 7.287.
237 Final Injury Determination, page 21 (footnotes omitted), (Exhibit GOK-10).

production in 2001 is understa ted because the Hynix Oregon facility shut down for
much of that year. Finally, under this approach of measuring imports relative to
domestic production, the non-subject imports also become much more important.
The non-subject imports surged from about 59 per cent of domestic production in
2000 to 102 per cent of domestic production in 2001. Even if by this measure subject
import share doubled from a much smaller initial level, the non-subject share in 2001
was still more than six times as large. (footnotes omitted)
7.249 Korea's statement was made in response to ass ertions made by the US at para. 117 of its
Second Written Submission. At no time did Korea initiate any discussion of the ITC's determination
regarding the volume of subject imports relativ e to domestic production. Indeed, Korea itself
acknowledged at our second substantive meeting with the parties that this issue "was not a focus of
[its] earlier submissions."
238 Considering that the burden is on Korea to establish a prima facie case in
support of its claim against the ITC's determination that the volume of subject imports relative to
domestic production is significant, we find this surprising. We also note that Korea has entirely failed
to substantiate its assertion that US production declined as a result of US production being moved
offshore. Nor has Korea argued that any such re location of production facilities, if true, was not
properly addressed by the ITC. Regarding Korea' s argument concerning the volume of non-subject
imports relative to domestic production, we recall that Article 15.2 only requires (in relevant part)
consideration of the volume of subsidized (as opposed to non-subsidized, or non-subject) imports
relative to domestic production. 239 For these reasons, we do not consider that Korea's arguments
provide sufficient basis for finding that the ITC coul d not properly have found that the increase in the
volume of subject imports relative to domestic production was significant.
2. Did the ITC properly assess the price effects of subject imports?
7.250 Article 15.2 of the SCM Agreement provides in relevant part that:
With regard to the effect of the subsid ized imports on prices, the investigating
authorities shall consider whether there has been a significant price undercutting by
the subsidized imports as compared with the price of a like product of the importing
Member, or whether the effect of such imports is otherwise to depress prices to a
significant degree or to prevent price increases, which otherwise would have
occurred, to a significant degree. No one or several of these factors can necessarily
give decisive guidance.
7.251 The ITC determined that there was significant price undercutting by the subsidized imports,
and that the effect of such imports was to depress prices to a significant degree. Korea challenges
both determinations by the ITC on the basis of Article 15.1 and 15.2 of the SCM Agreement.
(i) Arguments of the parties
7.252 Korea asserts that the central premise of th e ITC’s determination was that Hynix’s DRAMs
were sold in the US market at low prices, and that these low prices somehow injured the US domestic
industry. Korea argues that economic logic for the market-pricing dynamics of a commodity product
demonstrate that the ITC’s conclusion is not an objective examination.
7.253 First, Korea states that, at the height of the a lleged subsidization of Hynix in 2001, Hynix was
losing market share in the US market, not gaining share. According to Korea, this steady loss of

238 See para. 13 of Korea's oral statement at the second substantive meeting with the parties.
239 To the extent that the volume of non-subject imports may be relevant to the issue of causation, this
is addressed at paras 7.350-7.371 infra.

market share simply cannot be reconciled with the ITC’s conclusion that Hynix’s prices significantly
undersold US market prices, particularly at the e nd of the period being investigated. Korea argues
that, given that DRAMs are a commodity product, if that were true, Hynix would have increased its
market share significantly, which it did not.
7.254 Second, Korea argues that the IT C’s conclusion is also contrary to basic economic theory.
Korea asserts that because Hynix w as neither the highest cost producer nor the lowest cost producer,
simple economics dictates that Hynix could not have determined the market price. Korea argues that
this is confirmed by the fact that, when res ponding to the ITC questionnaire, not a single
purchaser/customer identified Hynix as the price leader in the DRAM market.
7.255 Regarding the ITC’s price-comparison analysis, Korea acknowledges that Article 15.2 does
not impose any specific methodology for analyzing prices. However, Korea argues that a lowest price
analysis is the most appropriate type methodology for commodity products such as DRAMs. Korea
asserts that a lowest price analysis shows that, ove rall, Hynix subject imports were the lowest price
source only a small per cent of the time and that, the overwhelming majority of time, other suppliers
were offering lower prices than Hynix. Korea asserts that the ITC disregarded a lowest price analysis,
and attached greater importance to a weighted-average subject import price to a weighted-average US
producer price comparison instead.
7.256 According to Korea, the ITC tries to dismiss th e role of non-subject import pricing by saying
that the frequency of underselling by such impor ts was smaller and growing more slowly than
underselling by subject imports. Korea asserts that this argument glosses over two fundamental flaws.
First, these patterns of underselling reflect aver age non-subject import prices, not individual non-
subject suppliers. According to Korea, that the average non-subject price may be higher than
domestic prices does not mean very much if there is an individual non-subject supplier that is
underselling and offering the lowest price. S econd, these patterns of underselling need to be
considered together with trends in market share. Korea argues that if non-subject imports were large
and significantly gaining market share as acknowledged by the ITC, the only objective conclusion is
that the non-subject imports are having a significantly greater impact on the market. Korea asks the
Panel to request the ITC's confidential price underselling analysis from the US.
7.257 Korea states that the ITC’s determination makes a half-hearted attempt to proclaim that even
the lowest-price analysis (what the ITC calls a "disa ggregated analysis") supports its conclusion that
subject imports had adverse price effects. The ITC states that the lowest-price analysis demonstrated
that Hynix’s price was the lowest-price some of the time, "or more often than" any other source.
According to Korea, the ITC’s st atement ignores the fact that the data distinguished import and
domestic supply sources for the other suppliers whereas, on a combined (import plus domestic supply)
brand basis, other suppliers had the lowest price more frequently. Korea also argues that the ITC’s
statement analyses each of the other suppliers individually, ignoring their combined effect.
7.258 Korea submits that the ITC’s price depression analysis is flawed because it defies common
sense to say that, for this commodity product, th e absence of subject imports would allow domestic
prices to be "substantially higher," even though the volume of non-subject imports in the market was
six to seven times the volume of subject Hynix imports.
7.259 The US submits that the ITC’s analysis of the price effects of subsidized subject imports is
based on an objective examination and positive evid ence and is otherwise consistent with the
requirements of Articles 15.1 and 15.2 of the SCM Agreement . The US asserts that, however
measured, there was significant underselling by subsidized subject imports from Korea.
7.260
The US argues that its weighted-average analys is was based on representative data that have
not been challenged by Korea. The US argues that, for the majority of possible comparisons,

subsidized subject imports undersold domestic like product at high margins (often over 20 per cent),
and at increasing frequencies (from 51 per cent of possible comparisons in 2000 to 56 per cent in
2001 and 70 per cent in 2002). The US asserts that the conclusions drawn from this analysis are
incontrovertible. The US argues that the ITC explai ned that in a commodity-type market that adjusts
quickly (even biweekly) to price changes, signifi cant price disparities between suppliers would not
usually be expected. According to the US, the IT C therefore found the patterns of frequent, sustained
high-margin underselling by subsidized subject imports was especially significant in this industry, and
could be expected to have particularly deleterious effects on domestic prices.
7.261 The US asserts that the ITC’s methodology for its underselling analysis was reasonable. The
US notes Korea's statement that the ITC’s weighted -average pricing analysis was "wrong for this
industry."240 According to the US, the fact that Kore a would have preferred the ITC to apply a
different methodology is simply irrelevant, since it is for the investigating authorities in the first
instance to select methodologies to analyze the price e ffects of subject imports. The US submits that
there is no requirement in the SCM Agreement to analyze price effects on a brand-name basis, nor
does Korea identify one.
7.262 The US submits that it was entirely reasonable fo r the ITC to analyze the pricing data using a
weighted-average pricing analysis that segregated pr icing on a country-specific basis, since the use of
the disaggregated analysis by brand name urged by Hynix would not reflect the source country of the
DRAM products and would be utterly inc onsistent with the requirement under the SCM Agreement to
examine the effect "of the subsidized imports" on the "like product," the product produced by the
domestic industry. According to the US, Korea’s disregard for distinctions between subsidized
imports and the domestic like pr oduct eliminates the single most b asic and fundamental distinction
underlying the injury framework of the SCM Agreement.
7.263 The US submits that Korea ignores that the ITC also examined the pricing data on a
disaggregated basis (broken down both by brand-name and by source). The US asserts that the ITC
found that even a disaggregated analysis showed th at subsidized subject imports were the lowest-
priced product "more often than DRAM products from any other source."
241
7.264 The US also argues that the ITC properly fo und that subsidized subject imports depressed
prices to a significant degree. The US asserts that product-specific data showed price declines of 70
to 90 per cent from late 2000 through 2001, a modest rebound in early 2002, then a further decline
over the course of 2002. The US argues that the IT C noted that the price decline in 2001 was the
most severe in history, and pricing continued to d ecline in 2002. The US asserts that the ITC pointed
to significant quantities of subsidized subject impor ts that competed in the same product types at
increasing frequencies of underselling, noted that the underselling corresponded with the substantial
price decline over this period, and found that domes tic prices would have been substantially higher
without such significant quantities of low-priced products. The US argues that confirmed lost
sales/lost revenue allegations reinforce the ITC’s findings concerning subject imports’ price effects.
(ii) Evaluation by the Panel
7.265 Article 15.1 provides that an injury determina tion must involve an objective examination of
"the effect of the subsidized imports on prices in the domestic market for like products." Article 15.2
provides that, "[w]ith regard to the effect of th e subsidized imports on prices, the investigating
authorities shall consider whether there has been a significant price undercutting by the subsidized
imports as compared with the price of a like product of the importing Member, or whether the effect
of such imports is otherwise to depress prices to a significant degree or to prevent price increases,

241 See, e.g., Final Injury Determination, at 24 (Exhibit GOK-10).

which otherwise would have occurred, to a signifi cant degree." Under Article 15.2, therefore,
competent authorities may choose whether to examine the price effects of subsidized imports on the
basis of price underselling, price depression, or price suppression.
7.266 In its determination, the ITC considered bot h price underselling and price depression. The
ITC determined that "there is significant price unders elling by subject imports, and that the effect of
such subject imports has depressed prices to a significant degree."
242
Price underselling
7.267 In respect of price underselling, the ITC employed two methodologies. First, it compared a
weighted average import price to a weighted averag e US producer price. Second, the ITC performed
a disaggregated lowest-price analysis.
7.268 Korea does not challenge the factual data used by the ITC in its price underselling analyses,
nor the ITC conduct of those analyses. Nor does Korea claim that Article 15.2 imposes any specific
methodology for analysing prices. Nor, indeed, doe s Korea claim that the ITC failed to examine the
price effects of subsidized imports. Instead , Korea challenges the ITC's weighted average
methodology because it ignored the price effects of non-subject imports, and the ITC's lowest-price
analysis because it was not done on a combined, a ggregated brand basis (i.e., all non-subject import
plus domestic sources combined together).
7.269 Article 15.2 of the SCM Agreement requires the competent authority to analyse "the effect of
the subsidized imports on [domestic] prices." In light of the plain meaning of this text, the competent
authority is only required to examine the price effects of subsidized imports. It is not required to also
examine the price effects of non-subsidized im ports, or pricing on a combined brand basis. 243 Such
examinations would extend beyond the price effect s of subsidized imports, and therefore are not
required by Article 15.2. 244 For this reason, Korea's arguments regarding the price effects of non-
subsidized imports, or pricing on a combined bra nd basis, provide no basis for finding that the ITC
could not properly have found that "there is significant price underselling by subject imports."245
Price depression
7.270 The ITC found:
prices for nearly every pricing product and channel of distribution declined
substantially over the period of investig ation. Prices for domestic products and
subject imports followed the same general tr ends and were generally similar for sales
to PC OEMs across all products. The produc t-specific data show price declines of 70
to 90 per cent from late 2000 through 2001, a modest rebound in early 2002, then a
further decline over the course of 2002. The parties agreed that the price decline in
2001 was the most severe in DRAMs history, and pricing continued to decline in

242 Final Injury Determination, page 25, (Exhibit GOK-10).
243 We note that the ITC did in fact analyse the pr ice effects of non-subject imports on a weighted
average basis, and that it also performed a disaggregated analysis (i.e., broken down both by brand-name and by
source). We further note that Korea conceded at our se cond substantive meeting with the parties that the ITC
performed a "better than usual analysis."
244 Of course, the price effects of non-subject imports could impact on causation / non-attribution. This
issue is addressed at paras 7.350-7.371 infra.
245 Final Injury Determination, page 25, (Exhibit GOK-10).

2002. ... The increasing frequency of unde rselling by subject imports from 2000 to
2002 corresponds with the substantial decline in US prices over these same years.246
7.271 Korea's arguments concerning the ITC's dete rmination on price depression are mainly
concerned with the role of non-subject imports. In other words, Korea argues that the reason prices
were depressed was not because of subject impor ts, but because of a much larger volume of non-
subject imports. However, Korea does not deny th at there may be multiple causes of injury suffered
by a domestic industry. Thus, the fact that non-s ubject imports may have had negative price effects
does not preclude a finding that subject imports also had negative effects on prices. Even if Korea's
arguments regarding the role of non-subject imports were correct, therefore, Korea's arguments do not
necessarily mean that the ITC could not properly ha ve found, nevertheless, that "the effect of []
subject imports [] depressed prices to a significant degree."247
7.272 Korea does focus on the price effects of subject imports when challenging the ITC's analysis
of price leadership. In this regard, the ITC determined:
Most purchasers did not identify a price l eader in the US market. This is not
surprising in a commodity industry characterized by frequent (even biweekly) price
changes such as the DRAM product market. Nevertheless, *** purchasers of DRAM
products contacted by staff regarding lost sales and lost revenue allegations identified
Hynix as a source of low-priced DRAM pr oducts, and confirmed that the domestic
industry lost sales and/or revenues due to competition from Hynix.248
7.273 The US argues that confirmed lost sales/lost re venue allegations reinforced the ITC's findings
concerning subject imports' price effects. In its arguments regarding price leadership, Korea
emphasises the fact that Hynix was not identified by purchasers as a price leader. This confirms the
ITC's finding to that effect.249 However, Korea overlooks the ITC's finding that purchasers "identified
Hynix as a source of low-priced DRAM products, and confirmed that the domestic industry lost sales
and/or revenues due to competition from Hynix."
250 Nor does Korea rebut the US argument that
confirmed lost sales/lost revenue allegations reinfo rced the ITC's findings concerning subject imports'
price effects.

246 Final Injury Determination, page 24, (footnotes omitted), (Exhibit GOK-10).
247 Final Injury Determination , page 25, (Exhibit GOK-10). In this regard, we note in particular the
ITC's determination that "[t]he increasing frequency of underselling by subject imports from 2000 to 2002
corresponds with the substantial decline in US prices over these same years." ( Final Injury Determination ,
page 25, (Exhibit GOK-10)). Other than its challenge against the ITC's price underselling analysis, which we
have already rejected, Korea does not dispute this important finding by the ITC.
248 Final Injury Determination, page 25, (footnotes omitted), (Exhibit GOK-10).
249 In this regard, we note the US argument that "Korea fails to identify any requirement under
Article 15 to find price leadership, because there is no such requirement" (US First Written Submission, para.
391). Since Korea failed to rebut this argument, we have no reason to disagree with the US that Article 15 does
not require a finding of subject import price leadership.
250 In response to Question 29 from the Panel after th e first substantive meeting with the parties, Korea
states that the ITC's questionnaire "asks only for an in dication of which firm[s] is having a 'significant impact'
on price. Thus, when customers responded to this questi on, and failed to identify Hyni x as the price leader, the
customers were basically indicating that the effects of Hynix imports were no t to depress prices to a significant
degree." This does not undermine the ITC's determination, however, since it was not based on Hynix being a
price leader. To the contrary, the ITC explicitly acknowl edged that Hynix was not iden tified as a price leader.
However, the ITC's determination that subject imports caused significant price depression was based on other
considerations that have not been ad dressed by Korea in respect of its cl aim against the ITC's finding on price
depression.

7.274 In short, Korea's arguments provide no basis on which to find that the ITC could not properly
have determined that "the effect of []subject imports []depressed prices to a significant degree."
251 As
a result, we reject Korea's arguments that the IT C failed to properly assess the price effects of subject
imports.
3. Did the ITC properly consider all factors relevant to the overall condition of the
domestic industry?
7.275 Korea submits that the ITC violated Articles 15.1 and 15.4 of the SCM Agreement because it
failed to address and assess all relevant economic factors having a bearing on the state of the domestic
industry.
7.276 Article 15.4 of the SCM Agreement provides:
The examination of the impact of the subsidized imports on the domestic industry
shall include an evaluation of all rele vant economic factors and indices having a
bearing on the state of the industry, including actual and potential decline in output,
sales, market share, profits, productivity, return on investments, or utilization of
capacity; factors affecting domestic prices; actual and potential negative effects on
cash flow, inventories, employment, wages, growth, ability to raise capital or
investments and, in the case of agricultu re, whether there has been an increased
burden on government support programmes. This list is not exhaustive, nor can one
or several of these factors necessarily give decisive guidance.
(i) Arguments of the parties
7.277 Korea asserts that the ITC did not adequately consider the "boom-bust" business cycle of the
DRAMs industry when analysing the condition of the domestic industry and the relative impact of
subject imports. Korea asserts that the business cycle is the single most important characteristic in the
DRAM market.
7.278 Korea acknowledges that the ITC recognized th e existence of the business cycle in the
DRAM industry, but argues that the ITC completely ignored the implication of this business cycle
when analyzing the causes of the deterioration of the domestic industry’s financial condition over the
period examined. Korea asserts that this omission is demonstrated by the fact that, except for a
quotation of the statutory language, there is not a single reference to term "business cycle" in the
section of the ITC Determination dealing with the "Impact of Subject Imports." Korea states that this
omission is particularly egregious because the evid ence before the ITC made clear that the DRAM
industry went from the top of the boom to the trough of the bust during the very period being
investigated.
7.279 Korea also submits that the ITC failed to take into account the domestic industry’s own
definition of success when analyzing the condition of the domestic industry. Korea asserts that the
ITC’s determination of material injury was base d primarily on an examination of the following
factors: capacity utilization, production, commercia l shipments and operating profit. Korea argues
that these factors ignore the criteria that US DR AM producers themselves use to measure success in
this industry in light of the severe boom/bust cycles, namely (1) ability to continue capital spending;
(2) ability to continue R&D efforts; (3) strong market share to spread out costs; (4) strong cash flow
to fund investments; and (5) access to capital market s to supplement cash flow. In this regard, Korea
asserts that the ITC record contains Micron’s 2001 year in review (issued in 2002) that provides
Micron’s own definition of "financial strength":

251 Final Injury Determination, page 25, (Exhibit GOK-10).

A strong cash position, coupled with our ability to access capital
markets, giving Micron operational flexibility. With minimal debt,
and a reputation as a leading edge manufacturer, Micron has the
resources to continue investing in technology and to meet our
customers’ growing demand for Micron products.
252
7.280 Korea asserts that the record also contains a later statement by Micron CEO Steve Appleton
in which many of these key themes for defining success were reiterated:
We have a good cash balance. We are able to keep investing in the
technology. We have enough market share to spread out our cost,
and we are able to focus on technology innovation. I think we’re in
as good a shape as anybody.
253
7.281 The US argues that Korea does not disput e the positive evidence supporting the ITC’s
conclusions, and that it makes only two limited argumen ts regarding the ITC’s impact analysis. First,
the US understands Korea to assert that the ITC did no t consider the business cycle in its analysis of
the impact of the subsidized subject imports on the domestic industry. Second, the US understands
Korea to argue that the ITC should have weighed the factors differently, and that in this industry there
are only five key indicia.
7.282 The US notes Korea's argument that the final determination did not meet the obligation under
SCM Agreement Article 15.4 to examine the business cycle distinctive to the DRAMs industry as an
"other" "relevant factor." 254 The US asserts that the panel in Thailand – H Beams , in a finding
subsequently explicitly endorsed by the Appellate Body 255, contrasted the requirement to examine the
enumerated factors with "other" relevant economic factors," in the context of the AD Agreement
provision that is substantively identical to Article 15.4 of the SCM Agreement, stating:
We thus read the Article 3.4 phrase "shall incl ude an evaluation of all relevant factors
and indices having a bearing on the state of the industry, including ..." as introducing
a mandatory list of relevant factors which must be evaluated in every case. We are of
the view that the change that occurred in the wording of the relevant provision during
the Uruguay Round (from "such as" to "includi ng") was made for a reason and that it
supports an interpretation of the current text of Article 3.4 as setting forth a list that is
not merely indicative or illustrative, but, ra ther, mandatory. Furthermore, we recall
that the second sentence of Article 3.4 states: "This list is not exhaustive, nor can one
or several of these factors necessarily give d ecisive guidance." Thus, in a given case,
certain factors may be more relevant than ot hers, and the weight to be attributed to
any given factor may vary from case to case. Moreover, there may be other relevant
economic factors in the circumstances of a particular case, consideration of which
would also be required.
256

7.283 The US notes that the industry’s "business cycle" is not an enumerated factor under
Article 15.4. The US asserts that, whether or not the Panel finds that the business cycle distinctive to

252 See Prehr. Br., at 24 citing Micron 2001 Year in Review, at 4, provided as Exhibit 8 in the same
submission (Exhibits GOK-18, 18-(f)).
253 See Prehr. Br., at Id. citing Electronic Engineering Times, 8 July 2002, at 1, provided as Exhibit 2 in
the same submission (Article No. 25 (Mike Clendenin, Don’t Count Out Korean DRAM Deal, Says Micron
CEO - Hynix Still Looks Good)) (Exhibit GOK-18-(a)).
254 Korea First Written Submission, paras. 32-48, 178-189.
255 Appellate Body Report, Thailand –H-Beams, para. 125.
256 Panel Report, Thailand – H Beams, para. 7.225.

the DRAMs industry is an "other" "economic factor" for purposes of Article 15.4, the ITC’s
examination of this factor in this investigati on is also consistent w ith US obligations under
Article 15.4. The US asserts that the ITC did an alyze the business cycle, ascertaining that because
growth in demand for DRAM products has been continuous, but supply increases are sporadic, supply
and demand in this industry tend to be chronica lly out of equilibrium, giving the market its
characteristic "boom" and "bust" business cycle. Acco rding to the US, the ITC also determined that
largely because of the perpetual improvements in production efficiencies experienced by this industry,
prices are usually declining. The US asserts that, based on its evaluation of the record evidence in this
investigation, the ITC determined that "[w]hile sl owing demand played some role, together with the
operation of the DRAMs business cycle and product life cycles, the unprecedented severity of the
price declines that occurred from 2000 to 2001 a nd persisted through 2002 indicated that supplier
competition was an important factor."
257 The US asserts that, although much of the ITC’s evaluation
of this issue appears in the "price effects" section of the final determination, the ITC expressly cross-
referenced this analysis in its evaluation of th e "impact" of the subsidized subject imports on the
domestic industry.258
7.284 The US asserts that Korea's argument regarding the five main criteria suffers from two major
defects. First, the US asserts that Article 15.4 co ntains a non-exhaustive list of enumerated factors for
evaluation, specifies that no one or several of these factors is determinative, and, as evident in the
reports of other panels and the A ppellate Body, it is the investigating authorities that are to weigh the
factors in any given investigation, not interested parties or other Members. 259 The US also asserts
that, while Korea focuses on a select set of criteri a, the ITC’s final injury determination reflects
evaluation of positive evidence concerning a variety of factors showing changes in the industry’s
condition, as illustrated above. According to the US, the ITC evaluated these factors based on the
time period from 2000 to 2002 and interim 2003, the same time period it used for its analysis of the
volume and price effects of subject imports, while Korea uses different time periods depending on the
point that it seeks to make.
7.285 Second, the US asserts that even the select cr iteria that Korea asserts are important in this
industry260 showed declines during at least part, if not the entire, period of investigation. The US
argues that even these criteria therefore do not s upport Korea’s assertion that the domestic industry
was in a strong condition. Furthermore, the US as serts that while Korea cites bits of data about
individual producers in its submission, the ITC examined the domestic industry, as well as the record,
as a whole, consistent with Article 15.4. The US relies on the panel reports in Mexico – Corn Syrup
261
and EC – Tube or Pipe Fittings 262 to support its argument regarding the need to examine the state of
the "domestic industry" as a whole.
7.286 The US also asserts that, in any event, Korea’s specific arguments about individual domestic
producers are also flawed. For example, the US argu es that some of the data that Korea cites in its
submission pertain to the global DRAMs market or the global operations of Micron or Infineon, not
just their US operations or their DRAMs operations , whereas the ITC’s impact analysis focused on
the domestic industry’s performance in the US market and on its operations concerning DRAM
products, as opposed to other products. The US also argues that, with resp ect to the excerpts from
public statements by Micron and Infineon to the financial community that were submitted by Hynix
during the ITC’s investigation, when read in cont ext, these statements support, rather than detract

257 Final Injury Determination, pages 24-25, (Exhibit GOK-10).
258 The US refers in this regard to pages 24 -25 and 27 of the ITC Final Injury Determination.
259 The US refers, for example, to the Appellate Body Report in EC – Tube or Pipe Fittings paras. 160-
166.
260 See Korea First Written Submission, paras. 190-218.
261 Panel Report, Mexico –Corn Syrup.
262 Panel Report, EC - Tube or Pipe Fittings.

from the ITC’s findings in this investigation. The US asserts that neither statement establishes, or was
intended to suggest, that the identified factors sh ow that Micron or the domestic industry did not
suffer injury. According to the US, they rather show that, because of good management practices,
Micron expected to survive, despite the significant injury it had suffered.
(ii) Evaluation by the Panel
7.287 Korea's Article 15.4 claim raises two issues. Fi rst, did the ITC properly consider the DRAM
industry business cycle when analysing the condition of the domestic industry? Second, should a
proper consideration of the five criteria that Ko rea alleges are key to measuring the success of the
domestic DRAM industry necessarily have resulted in a finding of no injury?
Did the ITC properly consider the DRAM industry business cycle when analysing the condition of the
domestic industry?
7.288 In addressing Korea's arguments263, we note that the US does not contest that the "boom-bust"
business cycle was a "relevant economic factor ... having a bearing on the state of the industry" in the
meaning of Article 15.4. We will therefore proceed on that basis.
7.289 The ITC assessed the business cycle in its discussion of the price effects of subsidized imports
on the domestic industry.
264 Having explained the nature of the business cycle earlier in the Final
Injury Determination, the ITC stated:
While slowing demand played some role, t ogether with the operation of the DRAMs
business cycle and product life cycles, the unprecedented severity of the price
declines that occurred from 2000 to 2001 and persisted through 2002 indicates that
supplier competition was an important factor.
265
7.290 Although Korea acknowledges that the ITC recogni zed the existence of the business cycle in
the DRAM industry, Korea claims that the ITC i gnored the implication of the business cycle when
analyzing the causes of the deterioration of the dom estic industry's financial condition. Korea claims
that this is evidenced by the fact that there is no reference to the business cycle in that part of the
Final Injury Determination entitled "Impact of Subject Imports." Korea does not challenge the ITC's
treatment of the business cycle as a potential cause of injury to the domestic industry. Korea argues
that the ITC's consideration of the business cycle as a potential cause of injury to the domestic injury
does not satisfy the requirement of Article 15.4, si nce the business cycle was also a critical part of
understanding the condition of the domestic industry. Korea argues that trends that might otherwise
seem negative in the abstract could in fact be signs of strength when viewed in the context of the
business cycle.

263 In its submissions, Korea referred to alleged inco nsistencies between the ITC's injury determination
in this investigation and its approach in another investig ation. Since we are concerned with the conformity of
the ITC's DRAM injury determination with the SCM Agreement, the ITC's practice in other investigations is not
relevant to our analysis.
264 We do not consider that the fact that this issue was addressed in that part of the ITC determination
dealing with price effects, as opposed to the impact of subject imports, in and of itself gives rise to a violation of
Article 15.4. In this regard, we agree fully with the statement of the panel in Panel Report, US - Softwood
Lumber VI, para. 7.136 that:
[it did] not mean to suggest that all aspects of the investigating authorities’ determination must
be entirely contained in the specific parts of the report dealing with particular issues.
Certainly, in dispute settlement, a Member may argue the consistency of an anti-dumping or
countervailing duty determination based on the entirety of that determination.
265 ITC Final Injury Determination, page 25, (Exhibit GOK-10).

7.291 It is by no means clear to us that the ITC faile d to review the state of the domestic industry in
the context of the business cycle. In particul ar, the above determination indicates that the ITC
acknowledged that poor performance by the domestic DRAM industry was not necessarily indicative
of injury, but could simply be attributed to a dow nturn in the DRAM business cycle. However, it is
clear from the determination that the ITC concluded that this was not the case in the present case,
since the principal indicator of injury, i.e., price declines, could not be attributed to the business cycle
(because "the price decline in 2001 was the most severe in the DRAMs history", and was therefore
greater than had been caused by the business cycle in the past).
266
7.292 Korea argues that "[u]nder [the ITC] an appro ach any industry in the ‘bust’ phase will always
be deemed ‘injured,’ which is not an objective examination" 267. Korea's argument would seem to be
premised on its view that the ITC should have c oncluded that negative tr ends resulted from the
operation of the business cycle. In other words, we understand Korea to argue that the ITC was only
able to find injury because it failed to view the stat e of the domestic industry in the context of the
business cycle. However, to the ex tent that the ITC demonstrated that negative trends – such as price
declines - were caused by factors unrelated to the business cycle, viewing those trends in the context
of the business cycle would not have precluded a finding of injury. Thus, the fact that the ITC found
injury does not necessarily mean that it failed to view the state of th e industry in the context of the
business cycle. Korea's argument ignores the possibility that, even during the "bust" phase of the
business cycle, a domestic industry could properly be found to be suffering injury caused by
subsidized imports.
7.293 We do not attach any relevance to the fact that the ITC's consideration of the business cycle is
set forth in a part of the report of the Final Injury Determination other than the "Impact of Subject
Imports" section.
268 Our analysis is based on the ITC's Final Injury Determination as a whole, rather
than particular sections thereof.
7.294 In light of the above, we reject Korea's argumen t that the ITC failed to properly consider the
DRAM industry business cycle when analysing the condition of the domestic industry.
Should a proper consideration of the five criteria that Korea alleges are key to measuring the success
of the domestic DRAM industry necessarily have resulted in a finding of no injury?
7.295 Korea claims that the ITC failed to properly cons ider the following five criteria: (1) ability to
continue capital spending; (2) ability to continue R& D efforts; (3) strong market share to spread out
costs; (4) strong cash flow to fund investments; and (5) access to capital markets to supplement cash
flow. Korea asserts that the ITC ignored these cr iteria, even though they are used by US DRAM
producers themselves to measure success. Korea su bmits that these criteria actually show a well-
positioned domestic industry.
7.296 The US does not deny that the five criteria identified by Korea are "relevant economic
factors" having a bearing on the state of the domest ic industry. The US argues that the ITC assessed
these factors appropriately. We shall examine the ITC's assessment of each of these factors in light of
Korea's arguments.
Capital spending

266 We note that the ITC also compared the state of the domestic industry in the 2001/2002 downturn to
the state of the domestic industry in the 1996-1998 downturn (see note 180 of the Final Injury Determination),
(Exhibit GOK-10).
267 See Korea's first oral Statement, para. 22.
268 See note 264 supra.

7.297 The ITC stated that "[b]oth fabbing operations and assembly operations warrant continuing ...
capital spending to keep up with the latest product and process developments."269 The ITC also found
that, although the domestic industry "continued to make substantial capital expenditures," such capital
expenditures were "at increasingly lower levels, with reported capital expenditures decreasing from
$1.8 billion in 2000 to $1.6 billion in 2001 and $*** in 2002; capita l expenditures in interim 2003
were $*** compared to $*** in interim 2002." 270 This finding demonstrates both that the ITC
assessed capital expenditures by the domestic indus try, and that such capital expenditures were
decreasing. Indeed, Korea has not disputed that the domestic industry's capita l expenditures were "at
increasingly lower levels." Although Korea submitted record evidence in support of an argument that
Micron and Infineon continued capital spending during th e downturn, this is not inconsistent with the
ITC's finding that the domestic industry as a whole reduced capital expenditures over the period of
investigation.
Research and development
7.298 The ITC examined the research and developmen t expenditures of specific companies and by
production process, and for the domestic industry as a whole. The ITC found that "R&D expenses
decreased from 2000 to 2001 and then increased in each subsequent comparative period."
271 During
part of the period of investigation, therefore, there was a downward trend in R&D expenditure.
Again, Korea refers to evidence regarding an increase in Micron's R&D spending, but does not
explain how this consideration alone means that the ITC could not properly have found (on the basis
of a downward trend in R&D expenditure by the domestic industry as a whole during part of the
period of investigation) that the domestic industry as a whole was suffering material injury.
Market share
7.299 The ITC found that the domestic industry’s market share "declined from 43.4 per cent in 2000
to 34.3 per cent in 2001 and 30.7 per cent in 2002, while its market share in interim 2003 was 29.8 per
cent compared to 30.4 per cent in interim 2002."272 Korea has not disputed the accuracy of the market
share data relied on by the ITC. Instead, Ko rea has submitted evidence concerning Micron and
Infineon's world market shares. However, since such global evidence is not an indicator of the
performance of the domestic industry, we see no reason why the ITC should have taken it into
account.
Cash flow
7.300 The US argues that, according to record evid ence, the domestic industry’s cash flow (net
operating profit plus depreciation) also declined ov er the period of investigation. Korea has not
rebutted this argument. Instead, Korea has submitt ed evidence regarding Micron's cash flow. This,
however, does not indicate the state of the domestic industry as a whole.
Access to capital markets
7.301 The US asserts that the domestic industry's cash flow problems were exacerbated when
domestic producers’ credit ratings were lowered. The US asserts that, for example, the ITC
emphasized that Micron’s credit rating was lowered in December 2002 by Standard and Poor’s, and in
January 2003 by Moody’s. Since the ITC only cons idered that the credit rating of one domestic

269 See Final Injury Determination at 9 (Exhibit GOK-10).
270 See Final Injury Determination at 27 (Exhibit GOK-10).
271 See, e.g. , Final Injury Determination at 9, 16 & n.40, Tables VI-4, C-1 (Exhibit GOK-10);
Exhibit GOK-44(a) at Question III-8.
272 Final Injury Determination, page 26 (Exhibit GOK-10).

producer had been downgraded, whereas Korea has point ed to record evidence to the effect that two
domestic producers apparently had ready access to capital markets at least in 2000 and 2001, there
may be some basis for reasonable disagreement regarding the ITC's analysis of the domestic industry's
access to capital markets. However, we do not consider that the fact that two domestic producers may
have had continued access to capital markets is suffi cient to overturn the ITC's determination, based
on a multitude of factors, that the domestic industry w as suffering material injury. This is especially
so as the last sentence of Article 15.4 makes it clear that no single economic factor having a bearing
on the state of the domestic industry necessarily gives decisive guidance, and Korea has not
established why domestic producers' access to capital should be considered decisive. Accordingly,
we are not persuaded that an objec tive and impartial investigating au thority could not properly have
found material injury in these circumstances.
7.302 Before concluding on the ITC's assessment of th e five criteria identified by Korea, we note
Korea's argument that the ITC's finding of material injury was at odds with the domestic industry's
own perception of its performance. Korea refers to two statements in this regard. First, Korea refers
to a statement in Micron’s 2001 year in review (issued in 2002) that:
A strong cash position, coupled with our ability to access capital markets, giving
Micron operational flexibility. With minimal debt, and a reputation as a leading edge
manufacturer, Micron has the resources to continue investing in technology and to
meet our customers’ growing demand for Micron products.
273
7.303 Second, Korea refers to a later statement by Micron CEO Steve Appleton:
We have a good cash balance. We are able to keep investing in the technology. We
have enough market share to spread out our cost, and we are able to focus on
technology innovation. I think we’re in as good a shape as anybody.274
7.304 We note, however, that the ITC record also c ontained statements by Micron officials to the
effect that Micron was encountering difficulties, and that these difficulties were not exclusively linked
to the particular stage of the DRAM business cycle. For example, Wilbur Stover, VP, Finance and
CFO, Micron Technology stated: "[a]s you appreciat e, the ongoing price pressure stems from the
continued supply of subsidized Korean parts in the market." 275 In addition, Michael Sadler, VP,
Worldwide Sales, Micron Technology Inc. commented , "[a] general over supply of DRAM attributed
primarily to the Korean government subsidization pr ogramme continues to supply the industry. The
resulting economics present obvious challenges. We are facing up to those challenges by advancing
the technology, browsing the entire product offering, and doing so with the focus on cost
reduction."
276 We consider that an objective and impartia l investigating authority could properly have
concluded from these comments that Micron was e xperiencing financial difficulties, and that those
difficulties did not result exclusively from factors other than the subject imports.
7.305 In light of the above, we are not prepared to accept Korea's argument that evidence it has
produced regarding the five alleged "key" criteria re flects a well positioned domestic industry. Much
of the evidence relied on by Korea relates to only a single domestic producer. 277 In addition, Korea

273 See Prehr. Br., at 24 citing Micron 2001 Year in Review, at 4 provided as Exhibit 8 in the same
submission (Exhibits GOK-18, 18-(f)).
274 See Prehr. Br., at Id. citing Electronic Engineering Times, 8 July 2002, at 1, provided as Exhibit 2 in
the same submission (Article No. 25 (Mike Clendenin, Don’t Count Out Korean DRAM Deal, Says Micron
CEO - Hynix Still Looks Good)) (Exhibit GOK-18-(a)).
275 Micron’s Posthearing Brief at Exhibits 5, 6 (Exhibit US-96).
276 Ibid.
277 In this regard, we agree with the statement by the panel in EC – Tube or Pipe Fittings that "an injury
assessment under Article 3.4 deals with the state of the domestic industry as a whole. The Anti-Dumping

does not challenge the accuracy of the domestic i ndustry data relied on by the ITC. Nor are we
prepared to accept Korea's argument that these five criteria were ignored by the ITC, since the ITC's
Final Injury Determination contains data and discussion concerning each of them. Furthermore,
although evidence adduced by Korea might suggest that the ITC's treatment of one factor identified
by Korea, i.e., access to capital, was not properly assessed by the ITC, we do not consider that Korea's
arguments regarding access to capital would have pr ecluded an impartial and objective investigating
authority from properly finding that the domestic industry suffered injury.
7.306 In light of the above, we do not consider that a proper consideration of the five criteria that
Korea alleges are key to measuring the success of the domestic DRAM industry should necessarily
have resulted in a finding of no injury.
4. Did the ITC properly demonstrate the requisite causal link between subject imports and
injury?
7.307 Korea submits that the ITC's final injury de termination did not comply with the causal
relationship requirement of Article 15.5 of the SCM Agreement. Article 15.5 provides:
It must be demonstrated that the subsid ized imports are, through the effects of
subsidies, causing injury w ithin the meaning of this Agreement. The demonstration
of a causal relationship between the subsidized imports and the injury to the domestic
industry shall be based on an examination of all relevant evidence before the
authorities. The authorities shall also ex amine any known factors other than the
subsidized imports which at the same time are injuring the domestic industry, and the
injuries caused by these other factors must not be attributed to the subsidized imports.
Factors which may be relevant in this respect include, inter alia , the volumes and
prices of non-subsidized imports of the produc t in question, contraction in demand or
changes in the patterns of consumption, tr ade restrictive practices of and competition
between the foreign and domestic producers, developments in technology and the
export performance and productivity of the domestic industry. (footnote omitted)
(i) Arguments of the parties
7.308 Korea asserts that the first and second sente nces of Article 15.5 serve to connect the
examinations required under Article 15.2 with resp ect to import trends, including volume and price
effects, and under Article 15.4, with respect to indicia of domestic industry performance. According
to Korea, a correlation should be established betw een import trends on the one hand, and industry
performance on the other, if a "causal relationship" is to be proved. Korea argues that this inter-
linkage has been explored more closely in the context of Articles 3.2, 3.4 and 3.5 of the AD
Agreement containing virtually identical language. Korea argues that the panel in Thailand – H-
Beams found that inconsistencies between the anal yses required under Article 3.2 concerning import
trends, and Article 3.4 concerning indicia of industry performance, render an analysis under
Article 3.5 with respect to establishing a causal relationship WTO inconsistent.
7.309 Korea asserts that the Appellate Body has al so offered useful guidance on what "causal
relationship" really means. Korea argues that in US – Line Pipe , a safeguards case, the Appellate
Body elaborated on the nearly identical term "causal link" found in the causation language of
Article 4.2(b) of the Agreement on Safeguards:

Agreement provides that "injury" means "material injury to a domestic industry, threat of material injury to a
domestic industry or material retardation of the establishment of such an industry" (para. 7.326).

… the causal link required by Article 4.2(b), first sentence, of the Agreement on
Safeguards is "a relationship of cause and effect such that increased imports
contribute to ‘bringing about’, ‘producing’ or ‘inducing’ the serious injury." More
specifically, we said there that "{t}he word ‘causal’ means ‘relating to a cause or
causes’, while the word ‘cause’, in turn, denotes a relationship between, at least, two
elements, whereby the first element has, in some way, ‘brought about’, ‘produced’ or
‘induced’ the existence of the second element. " We also explained that the word
"link" indicates "that increased imports have played a part in, or contributed to,
bringing about serious injury so that there is a causal ‘connection’ or ‘nexus’ between
these two elements."
278
7.310 Korea asserts that in US – Steel Safeguards, the panel set forth a useful framework for testing
the existence of a causal link. Korea argues that, first, the panel examined trends in import volumes,
charting those trends against various indicia of industry performance, incl uding those specifically
referenced under Article 4.2(a) of the Agreement on Safeguards (similar to those listed in Article 15.4
of the SCM Agreement), to discern any correlation. Second, where the correlation was not clear, the
panel looked to other evidence of a causal relatio nship, including any relationship based on import
pricing and other factors of competition. Korea believes this approach, well grounded in Appellate
Body jurisprudence on "causal link" for trade remedies, provides a useful framework for this case.
7.311 Korea submits that the ITC’s Final Injury Determination did not establish any correlation
between import volume and decline in domestic i ndustry performance. Korea argues that although
the presence of a correlation may not be dispositive, as there may be other more significant factors
that are causing material injury, the absence of a proper correlation between the subsidized imports
and material injury strongly sugg ests that the subsidized imports are not the cause of the material
injury.279 According to Korea, the evidence before the ITC demonstrated that there was no correlation
between the trends in subject impor ts and either the domestic industry’s market share or the domestic
industry’s financial performance. Korea argues that, to establish the requisite correlation, the data
would need to demonstrate that the market shares of subject imports and domestic producers moved in
opposite directions; that is, subject imports were ga ining market share while domestic producers were
losing. According to Korea, the evidence before the ITC, however, actually demonstrate just the
opposite: Hynix was losing market share (on a brand basis) while Micron and Infineon gained market
share. Korea argues that the ITC may have thought the domestic industry w as losing market share,
but only because Micron and Infineon were choosi ng to produce more outside the US, and were
winning more overall market share in the US by doing so. Similarly, Korea asserts that the ITC may
have thought Hynix was gaining market share, but only because the shutdown of the Oregon facility
forced Hynix to temporary increase imports from Korea.
7.312 The US submits that the ITC’s causation analys is is also based on positive evidence and an
objective examination and is otherwise in accordan ce with US obligations under Articles 15.1 and
15.5 of the SCM Agreement.
7.313 The US asserts that Korea’s arguments concer ning the ITC’s causation analysis in this
investigation are predicated largely on Appellate Body reports issued in the context of the Safeguards

278 Appellate Body Report, US – Line Pipe at para. 209, Appellate Body Report, US – Wheat Gluten at
para. 67.
279 Korea asserts that in Argentina–Footwear (EC), the Appellate Body ruled that that national trade
authorities are required to find a correlation between the increased imports and any deterioration in the
performance of the domestic industry before finding a causal link: "In practical terms, we believe therefore that
this provision means that if causation is present, an increase in imports normally should coincide with a decline
in the relevant injury factors. While such a coincidence by itself cannot prove causation…its absence would
create serious doubts as to the existenc e of a causal link, and would require a very compelling analysis of why
causation is still present." Appellate Body Report, Argentina – Footwear(EC) at paras. 144-145.

Agreement. The US argues that these are not useful in examining causation in a different type of
investigation governed by a different agreement with a different object and purpose, since the injury
inquiry in a countervailing (and antidumping) duty i nvestigation has many critical distinctions from
an inquiry in a safeguards investigation. The US asserts that in a countervailing duty investigation, an
affirmative determination of "material injury" is based on an examination of both (a) the volume of
the subsidized imports and the effect of the subsid ized imports on prices in the domestic market for
like products, and (b) the consequent impact of these imports on the domestic producers of such
products. In a safeguards investigation, the standard is whether the product is being imported into the
Member’s territory "in such increased quantities, absolute or relative to domestic production, and
under such conditions as to cause or threaten to cau se serious injury to the domestic industry that
produces the like or directly competitive products."
280 The US also notes that "serious injury" is
defined under Article 4.1(a) of the Safeguards Agreement as "a significant overall impairment in the
position of a domestic industry", and th at the Appellate Body stated in US – Lamb that "serious
injury" is a much higher standard than "material injury." 281 The US also argues that the "causal
relationship" of the SCM Agreement is thus different from the "causal link" requirement of the
Safeguards Agreement. According to the US, therefore, there is no basis for importing a causation
standard associated with a "serious" injury requirement into a countervailing duty investigation, which
is governed by a "material" injury requirement.
7.314 The US asserts that the ITC integrated the causation discussion and its discussion of how it
ensured that it did not attribute material injury from other factors to the subject imports into its
analysis of the volume, price effects and impact of subject imports. The US argues the ITC did not
analyze causation issues in a vacuum , but analyzed them in context to determine whether there was a
causal relationship between subject imports and the material injury experienced by the domestic
industry and to ensure that it did not attribute injury from other factors to the subject imports. The US
asserts that the ITC’s final material injury dete rmination demonstrated that there was a causal
relationship between the subject imports from Korea and the material injury to the domestic industry.
7.315 The US submits that Korea continues to ma ke many of the same discredited arguments
already addressed above. For example, the US notes that Korea argues that the volume of the
subsidized imports from Korea (or their market share) declined over the period of investigation, even
though that was not the case. The US further no tes that Korea repeats its arguments about the
methodology used by the ITC to analyze price effect s, and misstates or ignores the results of that
analysis, and ignores much of the ITC’s evaluation of the impact of subject imports, and seeks to have
this Panel reweigh other evidence. The US also asser ts that Korea cites an ever-varying set of data
sources and time periods.
7.316 The US submits that the ITC clearly analyzed trends in both injury factors and the volume
and price effects of the subsidized subject imports , and explored the relationship between the factors
indicative of the volume and price effects of the subj ect imports and the movements in injury factors.
The US asserts that the ITC demonstrated an "ove rall" temporal relationship or coincidence between
the subsidized subject imports and the material injury of the domestic industry, and in demonstrating a
causal link between the subsidized subject imports a nd the injury to the domestic industry, the ITC

 280 Safeguards Agreement Article 2.1.
281 The US notes that the Appellate Body stated: "We are fortified in our view that the standard of
‘serious injury’ in the Agreement on Safeguards is a very high one when we contrast this standard with the
standard of ‘material injury’ envisaged under the Anti-dumping Agreement, the Agreement on Subsidies and
Countervailing Measures (the ‘ SCM Agreement ’) and the GATT 1994 . We believe that the word ‘serious’
connotes a much higher standard of in jury than the word ‘material.’ Moreover, we submit th at it accords with
the object and purpose of the Agreement on Safeguards that the injury standard for the application of a
safeguard measure should be higher than the injury standard for anti-dumping or countervailing measures ... ."

evaluated the relevant factors in the context of the business cycle and conditions of competition
distinctive to this industry.
(ii) Evaluation by the Panel
7.317 The US asserts that the ITC complied with its Article 15.5 obligations by conducting a
"unitary" analysis, i.e., it did not separately analy ze "material injury" and "causation." Instead of
asking, in the abstract, whether a domestic industry was experiencing material injury and then, if the
answer was affirmative, proceeding to a second dete rmination of causation, the ITC asked whether a
domestic industry was being materia lly injured "by reason of" subject imports as a unified question,
and then issued a single determination that subs umed the causation question. Korea has not argued
that such a unitary approach is per se inconsistent with Article 15.5.
7.318 Instead, Korea argues that the ITC failed to establish a temporal correlation between an
increase in subject import market share and a decl ine in domestic industry performance. In this
regard, Korea relies on the finding by the Appellate Body in Argentina – Footwear (EC) that the
absence of a "coincidence" between an increase in imports and a decline in the state of the domestic
industry "would create serious doubts as to the existence of a causal link, and would require a very
compelling analysis of why causation is still present."
282 The US asserts that the ITC demonstrated an
overall temporal relationship or coincidence between the alleged subsidized imports and the material
injury of the domestic industry.
7.319 We note that the Argentina – Footwear (EC) case concerned the causation standard under
Article 4.2 of the Safeguards Agreement . While the parties have made additional arguments
concerning the relevance of findings by the Appellate Body in respect of safeguard cases to disputes
involving countervailing duties, we do not cons ider it necessary to resolve this issue. 283 This is
because, in any event, Ko rea has failed to establish that there was an absence of coincidence between
import volume and the injury to the domestic industry.
7.320 Korea argues that there was an absence of corre lation between an increase in the market share
of subject imports and a decline in the market sh are and profitability of domestic producers. Korea
asserts that the market share of subject imports was decreasing at the same time that the market share
and profitability of domestic producers was decrea sing. In making this argument, however, Korea
relies on the brand-based market share analysis set forth at para. 7.224 supra. Article 15.5, however,
does not require a brand-based analysis. Instead, it requires the investigating authority to determine
that "subsidized imports" – as opposed to any subs idized brand - are causing injury. The ITC found
that the market share of the alleged subsidized imports increased over the period of investigation.
Korea does not dispute the accuracy of this finding (oth er than to argue that the ITC should have also
undertaken a brand-based analysis). Since the ITC's analysis demonstrated that the market share of
the alleged subsidized imports was increasing, there is no factual basis to Korea's argument that the
market share of imports was declining at the same time as the market share and profitability of the
domestic industry.

282 Argentina – Footwear (EC) , at paras. 144-145 (emphasis in original) (quoting Panel Report,
283 We note, however, that a finding of increased imports is a necessary condition for the imposition of
a safeguard measure. This appears not to be the case for countervailing measures, since Article 15.2 of the SCM
Agreement provides that "[n]o one or several of these [vol ume and price effect] factors can necessarily give
decisive guidance." This provision suggests that a co untervailing measure may be imposed even in the absence
of a significant increase in the volume of subsidized impor ts, provided the requisite price effects exist. If there
is no need to demonstrate increased imports in all cases, one might conclude that there is no generalized
requirement to establish any temporal correlation betwee n increased imports and injury in the context of a
countervail investigation.

7.321 In light of the above, we reject Korea's argum ent that the ITC failed to properly demonstrate
the requisite causal link between subject imports and injury.
5. Did the ITC properly comply with its obligat ion not to attribute to subject imports
injury caused by other factors ?
7.322 Korea submits that the ITC improperly assessed th e role of other factors and therefore failed
to ensure that it did not attribute the effects of other causes to subject DRAM imports in violation of
Article 15.5 of the SCM Agreement. Article 15.5 provides:
It must be demonstrated that the subsid ized imports are, through the effects of
subsidies, causing injury w ithin the meaning of this Agreement. The demonstration
of a causal relationship between the subsidized imports and the injury to the domestic
industry shall be based on an examination of all relevant evidence before the
authorities. The authorities shall also ex amine any known factors other than the
subsidized imports which at the same time are injuring the domestic industry, and the
injuries caused by these other factors must not be attributed to the subsidized imports.
Factors which may be relevant in this respect include, inter alia , the volumes and
prices of non-subsidized imports of the produc t in question, contraction in demand or
changes in the patterns of consumption, tr ade restrictive practices of and competition
between the foreign and domestic producers, developments in technology and the
export performance and productivity of the domestic industry. (footnote omitted)
(i) Arguments of the parties
7.323 Korea asserts that, beyond the need to establish through positive evidence a causal link, the
competent authorities must also ensure that subject imports are not improperly blamed for problems
caused by other factors. According to Korea, this obligation of "non-attribut ion" stands as a bedrock
principle of WTO treaty text to avoid excessive trade remedies.
7.324 Korea notes that the non-attribution obligation is not unique to the SCM Agreement. Korea
notes that there is identical language contained in Article 3.5 of the AD Agreement and Article 4.2(b)
of the Safeguards Agreement concerning "dumped" imports and "i ncreased" imports, respectively.
Korea asserts that these provisions, and their treatme nt by the Appellate Body, provide an important
analog and guidance in this dispute. Korea notes that in US – Wheat Gluten , a dispute under the
Safeguards Agreement, the Appellate Body explained:
The need to ensure a proper attribution of "injury" under Article 4.2(b) indicates that
competent authorities must take account, in their determination, of the effects of
increased imports as distinguished from the effects of other factors.284
7.325 Korea also notes that in US – Lamb , also a safeguards case, the Appellate Body offered
further guidance:
The primary objective of the process we described in US – Wheat Gluten Safeguard
is, of course, to determine whether there is "a genuine and substa ntial relationship of
cause and effect" between increased imports and serious injury or threat thereof. As
part of that determination, Article 4.2(b) states expressly that injury caused to the
domestic industry by factors other than incr eased imports "shall not be attributed to
increased imports." In a situation where several factors are causing injury "at the
same time", a final determination a bout the injurious effects caused by increased

284 US – Wheat Gluten, at para. 70 (emphasis in original).

imports can only be made if the injurious effects caused by all the different causal
factors are distinguished and separated. Othe rwise, any conclusion based exclusively
on an assessment of only one of the causal factors – increased imports – rests on an
uncertain foundation, because it assumes that the other causal factors are not causing
the injury which has been ascribed to increased imports. The non-attribution language
in Article 4.2(b) precludes such an assumption and, instead, requires that the
competent authorities assess appropriately the injurious effects of the other factors, so
that those effects may be disentangled fro m the injurious effects of the increased
imports. In this way, the final determina tion rests, properly, on the genuine and
substantial relationship of cause and eff ect between increased imports and serious
injury.
285
7.326 Korea submits that, given the virtually identical language of Article 15.5 of the SCM
Agreement and Article 4.2(b) of the Agreement on Safeguards, it makes sense that the analytical
framework should be the same. Ko rea notes that Article 3.5 of the AD Agreement imposes an
identical non-attribution obligation before impos ing anti-dumping duties. Korea notes that the
Appellate Body explained in US – Hot-Rolled Steel:
In order that investigating authorities, applying Article 3.5, are able to ensure that the
injurious effects of the other known factors are not "attributed" to dumped imports,
they must appropriately assess the injurious effects of those other factors. Logically,
such an assessment must involve separating and distinguishing the injurious effects of
the other factors from the injurious effects of the dumped imports. If the injurious
effects of the dumped imports are not appropriately separated and distinguished from
the injurious effects of the other factors, the authorities will be unable to conclude
that the injury they ascribe to dumped im ports is actually caused by those imports,
rather than by the other factors. Thus , in the absence of such separation and
distinction of the different injurious effect s, the investigating authorities would have
no rational basis to conclude that the dumped imports are indeed causing the injury
which, under the Anti-Dumping Agreement, justifies the imposition of anti-dumping
duties.
286
7.327 Korea asserts that, given the plain meaning of Article 15.5 of the SCM Agreement , as well as
the unambiguous guidance of the Appellate Body, an unmistakable framework exists within which to
analyze an authority’s compliance with the non-attribution requirement of Article 15.5 of the SCM
Agreement. According to Korea, the competent author ity must "separate" and "distinguish" the
injurious effects of factors other than subsidized imports to ensure they are not attributed to the
subsidized imports. Korea asserts that, as the Appellate Body in US-Line Pipe stated, an authority
must also "establish explicitly, through a reasoned and adequate explanation, that injury caused by
factors other than increased imports is not attributed to increased imports." 287 Korea argues that
difficulty in performing the analysis is no excuse fo r omission, and that like all the provisions of
Article 15, the non-attribution analysis must al so be based on positive evidence and an objective
examination as required under Article 15.1.
7.328 Korea asserts that the ITC failed to comply with the non-attribution requirement, because it
provided either no analysis or insufficient analysis of the role of non-subject imports; the changes in
relative capacity; the drop in demand for 2001; and Micron’s own technical shortfallings.

285 US – Lamb, at para. 179 (emphasis in original).
286 US – Hot-Rolled Steel, at para. 223.
287 US – Line Pipe, para. 217.

The Role of Non-Subject Imports

7.329 Korea asserts that the ITC improperly dismissed the adverse effects of an increasing and
much larger volume of non-subject imports. Kore a asserts that DRAMs are a commodity product and
the volume of non-subject imports in the US market dwarfed the volume of subject imports.
7.330 Korea refers in this regard to the abovementi oned Figure 9 market share data (see para. 7.224
supra). Korea asserts that the ev idence before the ITC demonstrated that non-subject imports
accounted for a six to seven times greater share of the US market than subject imports from Hynix,
and therefore had six to seven times the competitive effect of subject imports. Korea argues that the
ITC effectively ignored these important facts about the non-subject imports when it stated:
We acknowledge that the increasing volume of non-subject imports played an
important role in the US market during th e period of investigation. Non-subject
imports were responsible for the bulk of market share lost by domestic producers
during the period of investigation. A portion of the non-subject imports are
RAMBUS and specialty DRAM products for which domestic producers had no
significant production during the period of investigation. These facts and the fact,
discussed above, that non-subject imports undersold domestic product at a lower
frequency than subject imports did, provide some support for finding that non-subject
imports had less impact than their absolute and relative volumes might otherwise
indicate. While non-subject import market share grew, the primary negative impact
on the domestic industry was due to lower pr ices, and on this point, subject imports,
themselves, were large enough and priced low enough to have a significant impact.
This is so regardless of the adverse effects caused by non-subject imports.
288
7.331 Korea asserts that the ITC’s attempt to imply that the non-subject imports compete less with
the domestic industry production than do subject im ports ("a portion of the non-subject imports are
Rambus products . . . products for which the domestic producers had no significant production") is
directly contrary to the undisputed evidence be fore the ITC. Korea notes that Micron’s Vice
President for Worldwide Sales, Mike Sadler, told the ITC that: "The vast majority of Micron’s
competitors, including specifically Samsung and H ynix from Korea, manufacture DRAMs that are
equivalent in performance to our own."289 Korea also asserts that Rambus DRAMs do not account for
a significant portion of Samsung’s overall DRAM pr oduction, and that Samsung's dramatic increase
in market share since 200l was not related to Sams ung’s Rambus production. Korea asserts that the
ITC did not address any of this contrary evidence, and simply dismissed it without any rationale.
7.332 Korea asserts that the ITC’s statement that "non-subject imports unde rsold domestic product
at a lower frequency than subject imports did" is a completely meaningless and misleading assertion
given the manner in which the ITC undertook its unde rselling analysis. Korea argues that a proper
lowest price analysis would have demonstrated that for an overwhelming per cent of the time
individual suppliers other than Hynix had the lowest price in the market. Korea argues that it is not
objective to dismiss contrary evidence without discussion, or to average and thus obscure the prices of
individual domestic and non-subject suppliers. Korea asserts that, in addition to methodological
flaws, the ITC finding had no sense of perspective, since the ITC stressed small differences between
the frequency of underselling for subject and non -subject imports, which averaged about seven
percentage points. Korea argues that these small differences could be random data fluctuations.
Korea asserts that, for a commodity market, non-su bject market share roughly seven times as large
would dwarf any price effects from a much smaller volume of subject imports.

288 Final Injury Determination, at 27 (Exhibit GOK-10).
289 Staff Conference Transcript, at 20 (emphasis added) (Exhibit GOK-12).

Capacity Increases

7.333 Korea asserts that the ITC completely ignored large increases in DRAM capacity undertaken
by suppliers other than Hynix. Korea asserts th at the ITC itself commented on the significance of
capacity to the DRAM industry in the "Conditions of Competition" section of its determination.
According to Korea, the ITC appropriately recognized that both the timing and quantity of capacity
increases can affect DRAM market pricing, and ther efore profitability. Korea argues, however, that
the ITC then either completely forgot or deliberatel y ignored this very fact when analyzing the effect
of other possible causes to the change in the dom estic industry’s financial condition. Korea asserts
that, although the ITC received substantial information and data that demonstrated that other suppliers
increased DRAM production capacity much more than did Hynix during the period examined, there is
zero discussion of this information in the ITC discussion of factors that had an adverse impact on the
domestic industry.
Micron's "Admitted" Technological and Production Difficulties
7.334 Korea asserts that the ITC completely ignored the "admitted" technological and production
difficulties of Micron during the claimed period of injury.
7.335 Korea asserts that the ITC had substantial in formation before it concerning the extreme
importance to DRAM manufacturers of handling the constant pressure to introduce DRAMs produced
with the newest technology. According to Korea, the evidence before the ITC demonstrated that
Micron gambled on future market positioning through an emphasis on 0.11 micron technology
development, missing a stronger market for Doub le Data Rate (DDR) products based on the 0.13
geometry in 2002. Korea argues that, by Micron ’s own account, this was a significant mistake.
According to Korea, the evidence on the record demonstrates that at its winter analyst meeting in late
January 2003, Micron CEO Stephen Appleton admitted that Micron’s most damaging misstep of 2002
was its failure to be positioned with 0.13 micr on production for a strengthening market for 256M
DDR products:
I think we were caught off guard . . . . It turned out that was the sweet spot of the
market . . . . At the time we made the d ecision to focus on 0.11 {Micron products}.
As a result that impacted us quite a bit. 290
7.336 Korea asserts that the ITC effectively ignored th is important information in its analysis of
other factors that affected the condition of the domestic industry during the period. Korea argues that,
notwithstanding that Micron was the largest US DRAM supplier and notwithstanding that the
evidence before the ITC contains admissions by Micron that its technological foibles harmed
Micron’s financial performance ("impacted us quite a bit"), the ITC only addresses the evidence in the
three sentences of footnote 177 of its determination:
Hynix argues that Micron was harmed by poor business decisions, noting in particular
its failure to position itself to be able to capitalize on a pocket of strong demand in a
particular market segment in 2002. {cite omitted} Whatever negative effect any
particular decisions may have had on Mi cron, they could not explain the harm

290 See Prehr. Br., at 124-28 and Exhibit 2 (Articles Nos. 1 (Anthony Cataldo, Full of Remorse, Micron
Pins Hopes on 0.11-Micron Tech, Electronic Engineering Times, 27 January 2003 (hereinafter " Full Remorse")
and 20 (Julie Howard, Micron Blames ’02 Losses on Product Misstep; Analysts Pose Tough Questions for Chip
Maker, Idaho Statesman, 25 January 2003 (hereinafter " Micron Blames ’02 Losses on Product Misstep ")
(Exhibit GOK-18-(a)).

experienced the DRAM products industry as a whole. This harm was not isolated to
Micron and was due mainly to lower prices.291
7.337 Korea submits that the complete absence of any serious analysis concerning Micron’s
"admitted" business mistakes demonstrates that the ITC did not comply with the requirement of
Article 15.5 that an investigating authority separate and distinguish injury caused by other factors so
as not to attribute that injury to the subsidized imports, or the Article 15.1 requirement of an objective
examination.
7.338 The US recognizes that the Appellate Body, wh en interpreting the language concerning the
investigating authorities’ obligation in antidumping du ty investigations not to attribute injury caused
by other factors to the subject imports, has referenced the Safeguards Agreement , as well as other
reports reviewing dete rminations of competent authorities under the Safeguards Agreement. The US
contends that in the DRAMs investigation, the IT C met the standards articulated by the Appellate
Body in those other reports.
Non-subject imports
7.339 The US asserts that, although Korea would have this Panel believe that the ITC completely
disregarded the absolute and relative increase of non-subject imports, the ITC evaluated the presence
of non-subject imports, determining that non-subject imports were in the US market throughout the
period of investigation and at absolute volumes that were higher than subsidized subject imports. The
ITC also recognized that some domestic producer s were responsible for some of the non-subject
imports. The US asserts that, although the ITC dete rmined that non-subject imports were responsible
for "the bulk of the market share lost by dom estic producers during the period of investigation", 292 it
identified two reasons why it did not find the vo lume of non-subject imports as significant as
otherwise would be suggested.
7.340 First, the US argues that the ITC determined , after examining the composition of non-subject
imports, that a significant portion of non-subject im ports were Rambus and specialty DRAM products
for which domestic producers had no significant produc tion during the period of investigation. The
US asserts that, contrary to Korea’s arguments, non-subject imports were not as substitutable with
subject or domestic DRAM products for product mix r easons. The US notes that Hynix itself, in a
joint submission filed with Korean producer Samsung, emphasized that Samsung, whose US
shipments of DRAM products were an important portion of US shipments of non-subject imports
during the period of investigation, offered products that "differ[ed] substantially" 293 from, were not
interchangeable with, and thus did not compete with products made by US producers.
7.341 Second, the US asserts that even those non-subject imports consisting of "standard" products
did not have the price effects that subsidized subj ect imports did during the period of investigation.
The US argues that, although there is no requirement in the SCM Agreement for the investigating
authority to collect such data, and, to US knowledge, most do not collect any pricing data on non-
subject imports, the ITC collected pricing data on non- subject imports in this investigation. The US
asserts that, according to that pricing data, wh ile the frequency with which non-subject imports
undersold domestic-produced DR AM products increased between 2000 and 2002, the underselling
frequency by non-subject imports was lower than, and increased less than, the underselling frequency
by subsidized subject imports be tween 2000 and 2002. The US argues in particular that non-subject
imports undersold the domestic i ndustry in 46.6 per cent of instan ces in 2000, 47.7 per cent in 2001,
and 60.7 per cent in 2002 whereas subsidized subj ect imports undersold the domestic industry in

291 Final Injury Determination, at 26, n. 177 (Exhibit GOK-10).
292 See, e.g., Final Injury Determination, at 27 (Exhibit GOK-10).
293 27 November 2002 Postconference Brief of Hynix and Samsung at 50-56 (Exhibit US-100).

51.0 per cent of instances in 2000, 56.0 per cent in 2001, and 69.8 per cent in 2002. The US asserts
that, consistent with these figures, the ITC conc luded that for these "standard" pricing products,
subsidized subject imports undersol d non-subject imports in a majority of instances. The US argues
further that, even based on a disaggregated analys is of the pricing data on these "standard" products
by brand name and source, subsidi zed subject imports were the lowest-priced source more often than
DRAM products from any other source, contrary to Korea’s assertions. The US argues that the ITC
also found that, while non-subject imports’ market share grew, the "primary negative impact" on the
domestic industry was due to lower prices,
294 and that subsidized subject imports, themselves, were
large enough in volume, and priced low enough, to have a significant impact, regardless of the
adverse effects caused by non-subject imports.
7.342 The US submits that the ITC also evaluated ot her reasons for the price declines. The US
asserts that Korea argues that the pr ice declines during the period of investigation were due to other
factors (such as product life cycles and business cy cle changes in demand and supply that led to
"boom" and "bust" periods characteristic of this industry). 295 The US submits that the ITC explicitly
evaluated these factors in its determination.
Product Life Cycle
7.343 The US asserts that the ITC examined price trends in the DRAM industry and determined that
they are generally correlated with the product life cy cle, whereby prices start high for new, state-of-
the-art products, decline rapidly as the product b ecomes a commodity, and continue to decline until
the product is replaced by the next generation of technology, unless the product becomes a "legacy"
product in short supply.
Demand
7.344 The US asserts that, contrary to Korea’s repeat ed characterization of a "collapse" in demand
(echoing Hynix’s argument in the agency proceedings),296 the ITC examined data received in response
to questionnaires tailored to this investigation, and determined that appa rent US consumption of
DRAM products in terms of billions of bits incr eased from 98.8 million in 2000 to 146.7 million in
2001 and to 186.9 million in 2002, and was 55.3 mil lion in interim 2003 compared to 42.8 million in
interim 2002. According to the US, the ITC concluded that the "slowing in the growth of apparent US
consumption" in the latter portion of the period of i nvestigation might be due in part to a decline in
the quantity of personal computers sold. 297 The US argues that the ITC identified 2001 as the first
year for which the number of personal computers so ld declined rather than increased, and it also
examined other possible reasons identified by questionnaire respondents, such as a slump in the
telecommunications and network industry and a general recession.298
Supply
7.345 The US asserts that, contrary to Korea’s contention 299, the ITC did not "completely forget"
or "deliberately ignore" supply increases or their contribution to prices in the DRAMs market. The
US argues that the ITC's Final Injury Determination contains much of the supply data relied on by
Korea in these proceedings. The US asserts that the ITC also evaluated data collected in
questionnaire responses and determined that "[a]lt hough the domestic industry’s wafer starts declined

294 See, e.g., Final Injury Determination, at 27 (Exhibit GOK-10).
295 Korea First Written Submission, paras. 264-296.
296 Korea First Written Submission, paras. 284-296.
297 See, e.g., Final Injury Determination, at 24 (Exhibit GOK-10).
298 See, e.g., Final Injury Determination, at 24, II-4 (Exhibit GOK-10).
299 Korea First Written Submission, paras. 264-283.

over the period of investigation, production quan tity in billions of bits increased as domestic
producers produced more bits per wafer."300
Business Cycle
7.346 The US submits that the ITC also analyzed the business cycle, ascertaining that because
growth in demand for DRAM products has been continuous, but supply increases are sporadic, supply
and demand in this industry tend to be chronica lly out of equilibrium, giving the market its
characteristic "boom" and "bust" business cycle. Th e US argues that the ITC also determined that
largely because of the perpetual improvements in production efficiencies experienced by this industry,
prices are usually declining.
7.347 The US asserts that, based on its evaluation of th e record evidence in this investigation, the
ITC determined that "[w]hile slowing demand played some role, together with the operation of the
DRAMs business cycle and product life cycles, the unprecedented severity of the price declines that
occurred from 2000 to 2001 and persisted through 2002 indicated that supplier competition was an
important factor."301 The US argues that the ITC determined that the pricing declines were far greater
than the 20 to 30 per cent that Micron or even th e 40 per cent declines that Hynix, itself, reported
would be expected on an annual basis.
Micron's Technological and Production Difficulties
7.348 The US rejects Korea's argument that the ITC never considered that the domestic industry
was responsible for the injury. The US argues that, contrary to Korea’s assertions, 302 the ITC
specifically evaluated what Korea (and Hynix) refer to as "mis-steps" by domestic producer Micron.
According to the US, the ITC collected pricing da ta on 256 Mb DDR266 SDRAMs (which are based
on 0.13 micron technology) that indicated that volume demand for these products did not develop
until the latter half of 2002, which was after Mi cron and the domestic industry had sustained their
most significant losses. The US also argues that, as the ITC analyzed the data, it determined that
whatever negative effect any particular decisions may have had on Micron, they "could not explain
the harm" experienced by the domestic industry as a whole. 303 The US notes the ITC determination
that this "harm was not isolated to Micron and was due mainly to lower prices."304
7.349 The US submits that the ITC therefore analyzed the nature and the extent of the injurious
effects of domestic producers’ actions, and evaluate d this factor in the factual context of this
investigation to ensure that it did not attribute in jury to subsidized subject imports. The US asserts
that, because the ITCs evaluation was also based on positive eviden ce and an objective examination,
its analysis of this factor is consistent with US obligations under Articles 15.1 and 15.5.
(ii) Evaluation by the Panel
7.350 Article 15.5 of the SCM Agreement contains the following non-attribution requirement:
The authorities shall also examine any k nown factors other than the subsidized
imports which at the same time are injuring the domestic industry, and the injuries
caused by these other factors must not be attributed to the subsidized imports.
Factors which may be relevant in this respect include, inter alia , the volumes and

300 See, e.g., Final Injury Determination, at 16 & n.97 (Exhibit GOK-10).
301 See, e.g., Final Injury Determination, at 24-25 (Exhibit GOK-10).
302 Korea First Written Submission, paras. 297-313.
303 See, e.g., Final Injury Determination, at 26 n.177 (Exhibit GOK-10).
304 See, e.g., Final Injury Determination, at 26 n.177 (Exhibit GOK-10).

prices of non-subsidized imports of the produc t in question, contraction in demand or
changes in the patterns of consumption, tr ade restrictive practices of and competition
between the foreign and domestic producers, developments in technology and the
export performance and productivity of the domestic industry.
7.351 The non-attribution requirement in anti-dumping investigations has been addressed by the
Appellate Body in several recent cases. Alt hough it has not been specifically considered in a
countervailing duty case, given that the relevant provi sions in the two Agreements are identical, and
in light of the "need for the consistent reso lution of disputes arising from anti-dumping and
countervailing duty measures" ( Ministerial Declaration on Dis pute Settlement Pursuant to the
Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 or
Part V of the Agreement on Subsidies and Countervailing Measures ), it is clear to us that the
requirement is the same in the context of both anti-dumping and countervailing duty investigations.
7.352 In its most recent statement on the non-attribution requirement in anti-dumping cases, the
Appellate Body explained that:
"This obligates investigating authorities in their causality determinations not to
attribute to dumped imports the injurious effects of other causal factors, so as to
ensure that dumped imports are, in fact, "causing injury" to the domestic industry. In
US – Hot-Rolled Steel we described the non-attribution obligation as follows:
… In order that investigating authorities, applying Article 3.5, are able
to ensure that the injurious effect s of the other known factors are not
"attributed" to dumped imports, they must appropriately assess the
injurious effects of those other factors. Logically, such an assessment
must involve separating and distinguishing the injurious effects of the
other factors from the injurious effects of the dumped imports . If the
injurious effects of the dumped imports are not appropriately
separated and distinguished from the injurious effects of the other
factors, the authorities will be unable to conclude that the injury they
ascribe to dumped imports is actually caused by those imports, rather
than by the other factors.
Non-attribution therefore requires separation and distinguishing of the effects of other
causal factors from those of the dumped imports so that injuries caused by the
dumped imports and those caused by other factors are not "lumped together" and
made "indistinguishable."
We underscored in US – Hot-Rolled Steel , however, that the Anti-Dumping
Agreement does not prescribe the methodology by which an investigating authority
must avoid attributing the injuries of other causal factors to dumped imports: . . .
Thus, provided that an investigating authority does not attribute the injuries of other
causal factors to dumped imports, it is free to choose the methodology it will use in
examining the "causal relationship" between dumped imports and injury."
305
7.353 Neither party has suggested that we shoul d not be guided by the Appellate Body's
interpretation of the non-attribution requirement set forth in Article 3.5 of the AD Agreement . We
shall therefore determine whether the ITC's Final Injury Determination complied with the
requirements of Article 15.5 of the SCM Agreement by examining whether the ITC properly separated

305 Appellate Body Report, European Communities – Tube or Pipe Fittings, paras. 188-189.

and distinguished the injurious effects of other kno wn factors from those of the alleged subsidized
imports. We note that the Appellate Body has clarified that the ITC was "free to choose the
methodology it [would] use" to separate and distinguish the injurious effects of other factors from
those of the alleged subsidized imports. We also note that Korea has acknowledged that the ITC was
not required to quantify the injury caused by other factors in order to separate and distinguish it from
the injurious effects of the alleged subsidized imports.
7.354 The US asserts that its analysis demonstrated th at subsidized imports had their own injurious
effects, independent from the injurious effects of ot her factors. Korea has not argued that such an
approach would not comply with the requirements of Article 15.5. Instead, Korea effectively argues
that, as a matter of fact, the ITC failed to dem onstrate alleged subsidized imports had such
independent injurious effects.
7.355 Korea asserts that the ITC attributed to subs idized imports injury caused by the following
other "known factors":
306 non-subject imports; capacity increases by other suppliers; decline in
demand; and technological and pr oduction difficulties admitted by Micron. We shall examine
whether the ITC properly separated and distinguished the injurious effects of each of these other
factors from the injury caused by alleged subsidized imports.307
Non-subject imports
7.356 Korea asserts that the ITC improperly dismisse d the injurious effects of the increasing and
much larger volume of non-subject/non-subsidized imports. Korea asserts that the relative market
shares of subsidized and non-subject imports means that non-subject imports had six to seven times
the competitive effect as did subject imports. The US asserts that the ITC took account of the
injurious effects of non-subject imports, since it fo und that "[n]on-subject imports were responsible
for the bulk of market share lost by domestic producers during the period of investigation."
308 The US
argues, however, that the ITC also separated and distinguished injury caused by non-subject imports
on the basis of product mix and price considerations.
7.357 Regarding product-mix, the ITC found that, becau se "[a] portion of the non-subject imports
are RAMBUS and specialty DRAM products fo r which domestic producers had no significant
production during the period of investigation", 309 "non-subject imports had less impact than their
absolute and relative volumes might otherwise indicate." 310 Although the exact proportion of
RAMBUS/specialty products is confidential, th e US indicated during the course of the Panel
proceedings that they account for approximately 20 per cent of non-subject imports. Korea has not
disputed the accuracy of this figure.
7.358 Korea argues that even a specialized DRAM is still a DRAM and competes at some level.
Korea relies on evidence before the ITC to the effe ct that Micron's Vice President for Worldwide
Sales told the ITC that "[t]he vast majority of Micron’s competitors, including specifically Samsung
and Hynix from Korea, manufacture DRAMs that are equivalent in performance to our own." 311

306 The US does not deny that the factors identified by Korea were "known" to the ITC. Indeed, at
para. 111 of its Second Written Submission, the US asserts that "[t]he ITC also examined other known factors
to ensure that it did not attribute injury from those factors to the subsidized subject imports" (emphasis
supplied).
307 In doing so, we note that the parties agree that, in law, subsidized imports need not be the sole cause
of injury in order for countervailing measures to be imposed.
308 Final Injury Determination, at 27, (Exhibit GOK-10). During the Panel proceedings, the US stated
that the volume of non-subject imports was at least five times the volume of alleged subsidized imports.
309 Final Injury Determination, page 27, (Exhibit GOK-10).
310 Ibid.
311 Staff Conference Transcript, at 20 (emphasis added) (Exhibit GOK-12).

Korea also relies on record evidence to argue that Samsung's RAMBUS DRAMs (which are non-
subject imports) do not account for a significan t proportion of its overall DRAM production.
However, the ITC record also contained evidence (US reply to Question 17 from the Panel after the
first substantive meeting) to the effect that H ynix and Samsung jointly submitted a brief to the ITC
stating that non-subject imports included products that "differ[ed] substantially from and were not
interchangeable with products made by US pr oducers", and that "[n]o domestic producer makes
Rambus chips."
312 In these circumstances, and especially on the basis of the joint submission by
Hynix and Samsung, we consider that an objectiv e and impartial investigating authority could
properly have determined that (1) 20 per cent of non-subject imports were not interchangeable with
either subject imports or domestic industry shipments, and (2) the effect of non-subject imports on the
domestic industry relative to that of subject imports was less than a simple volume-based comparison
of subject and non-subject imports would suggest.
7.359 Korea also argues that, even focusing on the remaining 80 per cent of non-subject imports, the
directly competitive portion of non-subject imports had about 45 per cent and 48 per cent market
share in 2000 and 2001 respectively. Korea asserts th at, compared to subject imports, with about nine
per cent market share in both years, non-subject imports are still five times larger, and gaining market
share much faster. We note, however, that Ko rea's argument regarding the relative volumes of
directly competitive subject and non-subject imports does not contradict the ITC's determination that,
because of product-mix, "non-subject imports had less impact than their absolute and relative volumes
might otherwise indicate." Korea's argument does, however, overlook the ITC's determination that
"subject imports undersold non-subject im ports in a majority of instances." 313 Korea has not disputed
this conclusion, other than to challenge the underselling methodology applied by the ITC.314 As noted
above, however, we consider that the ITC's price underselling methodology is not inconsistent with
the SCM Agreement.
7.360 Furthermore, we note that the ITC found that the "primary negative impact" on the domestic
industry resulted from lower prices.315 Korea has not disputed this ITC conclusion. In fact, Korea has
stated that "[t]he key issue in this case is not whether prices fell, but why." 316 By ascertaining that the
price underselling frequency by non-subject imports was lower than, and increased less than, the
underselling frequency of alleged s ubsidized imports between 2000 and 2002, and that the injurious
price effects of non-subject imports were less pr onounced than their absolute and relative volumes
might otherwise indicate, the ITC effectively separated and distinguished the injurious price effects of
alleged subsidized imports from the injurious pr ice effects of the larger volume of non-subject
imports. In other words, the ITC demonstrated th at alleged subsidized imports had injurious price
effects independent of those of the larger volume of non-subject imports. Given that there is no
obligation under Article 15.5 to quantify the amount of injury caused by alleged subsidized and non-
subject imports respectively, the ITC has done all that it was required to do.
Capacity increase
7.361 Korea complains that there was no explanation by the ITC of how inju ry caused by capacity
increases by suppliers other than Hynix was not attr ibuted to subject imports. However, the ITC did
explain that supply increases, resulting from capacity increases, were an important element of the

312 Furthermore, although Korea argues that Micron' s competitors make DRAMs that are equivalent in
performance to its own, this does not preclude the possi bility of Micron's competitors also making DRAMs that
are different in performance.
313 Final Injury Determination, note 164, (Exhibit GOK-10).
314 See para. 256 of Korea's First Written Submission: "As discussed above in the discussion on the
pricing evidence...."
315 Final Injury Determination, 27, (Exhibit GOK-10).
316 See para. 204 of Korea's Second Written Submission. In this regard, Korea argues that prices fell
because of factors other than the alleged subsidized imports.

boom/bust business cycle and product life cycle, and that these business and product life cycles could
not account for the totality of the price declines suffe red by the domestic industry. The ITC's analysis
of supply and capacity considerations, and their imp act on the business cycle, is set forth in a section
entitled "Supply Considerations." This analysis ha s not been challenged by Korea. Nor has Korea
alleged that the capacity increase it refers to occurred outside of the normal business cycle. 317 In a
later part of the report, entitled "Price Effects of the Subject Imports", the ITC determined that
"[w]hile slowing demand played some role, togeth er with the operation of the DRAMs business cycle
and product life cycles, the unprecedented severity of the price declines that occurred from 2000 to
2001 and persisted through 2002 indicated that s upplier competition was an important factor." 318 In
this way, the ITC explained that capacity increases, and the business cycle, could not account for the
totality of the injury suffered by the domestic indus try, because that injury was caused primarily by
price declines that were not caused by the business cycle. In par ticular, the ITC determined that
"product-specific data showed price declines of 70 to 90 per cent from late 2000 through 2001",319 and
noted that "[t]he parties agreed that the pri ce decline in 2001 was the most severe in DRAMs
history."320 Furthermore, there was record evidence to the effect that su ch declines were greater than
the 20 to 40 per cent average annual price declines reported by Hynix and Micron.321
7.362 In this way, we consider that the ITC prope rly separated and distinguished the injurious
effects of alleged subsidized imports from the in jurious effects of capacity increases by non-Hynix
suppliers, since it showed that such capacity increase s (inherent in the DRAM business cycle) did not
account for the totality of the injurious price declines suffered by the domestic industry.322
7.363 In light of the above, we reject Korea's argu ment that the ITC ignored changes in relative
capacity when analyzing other factors affecting the domestic industry.
Decline in demand
7.364 Korea argues that the domestic industry was a dversely affected by a drop in demand for
products that use DRAMs, such as personal computers, and that this drop in demand led to a decrease
in the rate of growth of demand for DRAMs. Kore a asserts that the injury suffered by the domestic
industry was caused by such decrease in demand, ra ther than alleged subsidized imports. Korea
argues that Hynix imports have virtually nothing to do with the level of demand. Korea submits that
the ITC ignored record information regarding declining demand for products that use DRAMs.
7.365 The ITC acknowledged that there was a declin e in the growth of US apparent DRAM
consumption, and that such decline "may be due in part to a decline in the quantity of personal

317 To the contrary, Korea's evidence of capacity increase is taken from findings made by the ITC
concerning the boom-bust nature of the DRAM busin ess cycle. See para. 264 of Korea's First Written
Submission.
318 See, e.g., Final Injury Determination, at 24-25 (Exhibit GOK-10).
319 See, e.g., Final Injury Determination, at 24-25, I-11 (Exhibit GOK-10).
320 Final Injury Determination, page 24, (Exhibit GOK-10). Korea has not challenged this statement.
321 Hearing Transcript (Mr. Tabrizi, Hynix witness) at 267-68 (Exhibit US-94). At the first substantive
meeting, Korea argued that Micron and Hynix had reported annual average declines, which could have included
individual instances of price declines up to 90 per cent. Korea did not present any ev idence in support of this
argument. In its reply to Question 23 from the Panel after the first substantive meeting, the US demonstrated,
with reference to Exhibit US-121, that none of the historical price data submitted by Hynix showed price
declines as high as 90 per cent. Acco rdingly, Korea has failed to demonstr ate that the ITC erred in finding that
price declines ranged as high as 90 per cent.
322 While Korea emphasises that other suppliers increas ed their capacity more than Hynix, we do not
consider that the relative capacity in creases of Hynix imports and non-subject imports are relevant to the extent
that the ITC has shown that increased capacity (no matter what source) does not account for the totality of the
injurious price effects suffered by the domestic industry.

computers sold."
323 The ITC also determined that "[w] hile slowing demand played some role,
together with the operation of the DRAMs busin ess cycle and product life cycles, the unprecedented
severity of the price declines that occurred from 2000 to 2001 and persisted through 2002 indicated
that supplier competition was an important factor."
324
7.366 Although the ITC clearly acknowledged the nega tive impact of slowing demand (in part
resulting from the decline in demand for PCs), we do not consider that the ITC properly explained
how it ensured that the injury cau sed by such decline in demand was not attributed to alleged
subsidized imports. In particular, although the IT C acknowledged that it played "some role" in the
state of the domestic industry, it did not explain what that "role" was, nor how that "role" differed
from the impact of subject imports. Similarly, wh ile the ITC's reference to supplier competition as
"an important factor",
325 rather than "the" most important f actor, does not preclude other factors –
including slowing demand – from also being important factors in the causation of injury, the ITC
failed to explain how slowing demand was a less important factor in terms of injurious impact on the
domestic industry.
7.367 In terms of possible explanation, we note the ITC’s assertion that "[h]istorically, there appears
to be no clear correlation between the growth of the DRAMs market and price movements."
326 Korea
argues that "the alleged lack of correlation is ju st wrong", and incorrectly based on trends in DRAM
output/supply, rather than demand. 327 Korea’s assertion is substantiated by reference to record
evidence that, according to Korea, shows that "DRA M prices do reflect ups and downs in the rate of
demand growth, and the decline in demand growth in 2001 played a major role in the price decline in
2001."328 Korea refers to parts of Exhibits KOREA – 18 and 19 in this regard. Korea also refers to
statements by representatives of domestic producers referring to "waning" demand, a "fundamental
shift" in the demand profile, and "substantially d ecreased demand ... resulting in substantial price and
volume declines".329 We consider that Korea thereby establishes prima facie that the ITC improperly
evaluated the impact of slowing demand on price. The US does not rebut Korea’s arguments, or deny
the existence of the record eviden ce relied on by Korea. In other words, the US does not rebut the
prima facie case established by Korea. In light of the prima facie case established by Korea, and the
absence of any rebuttal by the US, we find that th e DOC did not properly address the issue of slowing
demand on price, and could not properly have fo und that there was no clear correlation between
demand and price movements. Since there was record evidence to the effect that slowing demand
resulted in "substantial price … declines", and since the ITC emphasised the impact of decreasing
prices on the domestic industry, it was important for the ITC to properly address this issue.
7.368 We understand the US to argue that Korea's arguments regarding demand are addressed by
the ITC's determination concerning the injurious role of the business cycle, in the sense that the

323 Final Injury Determination, page 24 (Exhibit GOK-10).
324 See, e.g., Final Injury Determination, at 24-25 (Exhibit GOK-10). We note that the parties initially
appeared to disagree on whether or not demand for DRAMs was actually declining during the period of
investigation (as apparently argued by Korea), or merely increasing less rapidly than in the past (as argued by
the US). At para. 219 of its Second Written Submission, however, we note that Korea refers to a "slowing of
demand" for DRAMs. We understand that Korea theref ore acknowledges that, while there may have been a
decrease in demand for PCs, there was merely a slowin g of demand for DRAMs. We also note that the US
contests the data relied on by Korea (US First Written Su bmission, para. 455). However, our findings are based
on the ITC’s acknowledgement that there was "slowing demand" during the period of investigation.
325 Emphasis supplied.
326 Final Injury Determination, page 25, (Exhibit GOK-10).
327 Para. 291 of Korea’s First Written Submission.
328 Ibid.
329 Paras 293 and 294 of Korea's first written submission.

boom-bust nature of the business cycle is cau sed by discrepancies between supply and demand. 330
However, Korea's argument is different, in that it is addresses the injurious effects of a slowing of the
growth in demand unrelated to the business cycle, i.e., caused by the decline in demand for products
using DRAMs such as PCs. The fact that such slowing demand is distinct from the operation of the
business cycle is confirmed by the ITC referring separately to "slowing demand" and "the operation of
the DRAMs business cycle" in the sam e sentence. In the absence of any meaningful explanation of
the nature and extent of the injurious effects of th e slowing in demand, it is not apparent from the face
of the Final Injury Determination whether, or how, the ITC separated and distinguished the injury
caused by such slowing in the growth in demand fro m (a) the injury caused by the decline in demand
inherent in the business cycle and, more importantly, (b) the injury caused by subject imports. This is
a violation of the ITC's obligation under Article 15.5 of the SCM Agreement not to attribute to
subsidized imports the injury caused by other factors.
Technological and Production Difficulties

7.369 The ITC addressed Micron's alleged technological and production difficulties in note 177 of
its Final Injury Determination. In that note, the ITC asserted:
Whatever the negative effect any particular decisions may have had on Micron, they
could not explain the harm experienced by the DRAM products industry as a whole.
This harm was not isolated to Micron and was due mainly to lower prices.
7.370 In our view, Korea has failed to rebut the IT C's finding that the injury to the domestic
industry was "due mainly to lower prices." Nor has Korea established that Micron's alleged
technological and production difficulties would have r esulted in lower prices across the US industry.
Although the US has not disputed Korea's assertion that Micron's decision to focus on 0.11 Micron
products affected it "quite a bit", we consider that an objective and impartial investigating authority
could properly have separated and distinguished the injury caused by Micron's alleged technological
and production difficulties from the injury caused by ot her factors on the basis of price effects, in the
sense that injurious price declines occurred that could not be explained by Micron's alleged
technological and production difficulties.
7.371 In light of the above, we reject Korea's claim that the ITC failed to separate and distinguish
the injury caused by alleged subsidized imports from the injury caused by Micron's alleged
technological and production difficulties.

330 We base our understanding on the US response to Question 23 from the Panel after the first
substantive meeting, where the US argues: "[r]egardless of the label attach ed to these factors or if a particular
factor encompassed 'sub-factors,' it is clear from the f ace of the ITC’s determination that the ITC examined the
product life cycle and the DRAMs business cycle that is characterized by repeated 'boom' and 'bust' periods
(when supply/capacity, which increased during the period of investigation, outpaces demand, whose growth
slowed at the end of the period of investigation) as other possible reasons for the price declines" (emphasis in
original).

6. Did the ITC properly define domestic i ndustry, subject imports and non-subject
imports?
(i) Arguments of the parties
7.372 Korea claims that the ITC defi ned the subject imports and dom estic industry inconsistently,
preventing a proper examination of imports unde r Article 15.2, or the domestic industry under
Article 15.4, of the SCM Agreement.
7.373 Korea asserts that the evidence before the ITC demonstrated that for some DRAM producers,
the assembly/casing stage is often undertaken in a different country from where the design and wafer
fabrication are done. Korea asserts that an important question in the case, therefore, became what was
the appropriate country of origin of a DRAM for which production occurred in two countries; that is,
whether a particular DRAM shipment is to be considered a Hynix product from Korea, a product of
the US or a "non-subject" import from another country.
7.374 Korea notes that the DOC ruled that subject merchandise only includes those Hynix DRAMs
for which the wafer was fabricated in Korea. Th e DOC ruled that if a Hynix DRAM was "fabbed" in
Korea but underwent assembly/casing in another country, the finished DRAM would still be
considered "subject merchandise" -- allegedly subsidized imported DRAMs from Korea. Korea
notes that, with respect to US produced DRAMs, the ITC adopted the same "wafer fabrication
controls" approach that the DOC utilized for defi ning subject merchandise. The ITC ruled that a
DRAM would be considered "US produced" as long as the wafer was "fabbed" in the US, even if
assembly/casing was done in another country before returning to the US to be sold. Korea argues that
the ITC adopted a completely different approach for defining non-subject imports, relying on the
country of assembly/casing, rather than the country of fabrication.
7.375 For non-subject imports, the ITC abandoned th e "wafer fabrication controls" approach.
Specifically, the ITC ruled that if DRAMs were "fabbed" in a third country, e.g. Italy or Germany, but
then assembled/cased in the US before sale to a US customer, such DRAM sales would be considered
sales of US produced DRAMs.
7.376 Korea asserts that, although in its Preliminary Injury Determination the ITC specifically
admitted that "there is some in consistency to this position",
331 in its Final Injury Determination the
ITC adopted the same approach for defining and distinguishing between US produced and non-subject
imports. According to Korea, such approach mean t that the volume of US produced shipments were
overstated and the volume of non-subject imports were understated in the ITC’s causation analysis.
7.377 Korea submits that the ITC had an obligation to resolve this inconsistency, rather than to
ignore the inconsistency. Korea claims that th e ITC’s failure to do so distorted the relative
importance of subject imports, and thus violated Article 15.2. Korea also submits that the ITC’s
failure to do so distorted the assessment of the domestic industry, and violated Article 15.4.
7.378 The US submits that the ITC used consistent definitions of subject imports, domestic
shipments and non-subject imports. The US notes that Korea does not contest the definition of
subject imports used by the ITC in this investigation. The US asserts that, in light of the DOC’s scope
determination, the ITC defined subject import shipments as consisting of all DRAM products
regardless of density, including cased and uncased DRAMs as well as DRAMs packaged into memory
modules and including all DRAM product types, if the DRAMs or DRAM modules were made from
subject Korean-fabricated dice (by the Hynix comp anies), regardless of casing location. The US
argues that Hynix was pleased with this definition because it meant that DRAMs fabricated in the US

331 See Preliminary Injury Determination, at 11 (Exhibit GOK-9).

at HSME, but cased in Korea (since Hynix had no casing facilities in the US), were not in the scope of
the investigation or subject to any eventual countervailing duty order.
7.379 The US asserts that the ITC defined shipment s of "domestic" products to include "DRAMs
and DRAM modules made from (1) United States fabr icated dice, regardless of assembly location,
and (2) Samsung Korean-fabricated dice that were assembled in the United States (***), and (3) 3 rd-
source-fabricated dice that were assembled in the United States." 332 The US asserts that the ITC
defined shipments of "non-subject" imports to include "Samsung Korean-fabricated and 3 rd-source-
fabricated dice that were not cased in the United States."333
7.380 The US claims that Korea is asking the Panel to find that the ITC was required to use a
methodology that is not required by the SCM Agreement and that is internally inconsistent. The US
asserts that the methodology used by the ITC in this investigation was consistent with the SCM
Agreement, internally consistent, and avoi ded data errors. The US argues that the ITC, applying its
normal six-factor test, examined whether certain production-related activities, if conducted in the US,
were sufficient to warrant treating the companies engaging in those activities as domestic producers.
The US asserts that, as part of this inquiry, th e ITC considered whether assembly of uncased DRAMs
into cased DRAMs constituted sufficient production -related activities to include companies that
assembled uncased DRAMs into cased DRAMs in the domestic industry. The US asserts that the ITC
found that assembly operations involved sufficien t production-related activity to constitute domestic
production, and noted the absence of any dispute that the output of DRAM assembly operations –
cased DRAMs – were part of the domestic like product. The US submits that, in light of its finding
that assembly operations were sufficient pr oduction-related activities to constitute domestic
production, the ITC included companies that assembl ed DRAMs in the US in the domestic industry,
and treated the output of those operations – cased DRAMs – as shipments of the domestic industry.
7.381 The US notes that Korea does not dispute the IT C’s application of its six-factor test to
determine what activities were sufficient to wa rrant treating the companies engaging in those
activities in the US as domestic producers. The US also notes that Korea does not dispute the ITC’s
definition of the domestic industry as those producer s that fabricate DRAMs in the US and those
producers that assemble DRAMs in the US, but not module "packagers" or fabless design houses.
The US notes, therefore, that Korea does not challenge the ITC’s determination based on Article 16 of
the SCM Agreement . The US argues that, instead, Korea w ould have the ITC define the domestic
industry for certain purposes as "producers of th e domestic like product," but then abandon that
definition when it comes to calculating industry sh ipments. According to the US, however, having
found what constituted domestic production, having defined the domestic industry as producers of the
domestic like product engaged in those production ac tivities, and having found no basis to exclude
any producer from the domestic industry, it was objectiv e for the ITC to have applied the same, rather
than a different, definition of the domestic indus try for purposes of calculating the shipments of the
domestic industry. The US argues that including companies in the domestic industry and in turn
relying on their compiled financial information for one purpose while applying a different definition
of domestic production for purposes of assessing trade data ( i.e., US shipments, market share, etc.)
would be anomalous.
(ii) Evaluation by the Panel
7.382 The ITC defined the domestic industry as the producers of a domestic like product. As a
result, the question arose as to what activities constitute domestic production activities, i.e., when
could an entity be said to be producing a domest ic like product. The ITC determined that both
fabbing and assembly/casing constitute domestic production activities. Such determination meant that

332 See, e.g., Final Injury Determination, at 6-11, 17 n.103, Table IV-5 n.1 (Exhibit GOK-10).
333 See, e.g., Final Injury Determination, at 6-11, Table IV-5 n.2 (Exhibit GOK-10).

when either fabbing or assembly/casing were under taken by an entity in the US, that entity was
treated as part of the domestic industry (excl uding module packagers and fables design houses), and
its fabbing or assembly/casing activities were treated as domestic shipments.
334
7.383 Korea does not challenge the ITC's decision to treat assembly/casing as a domestic production
activity. Nor does Korea challenge the ITC's definition of the domestic industry. 335 In other words,
Korea does not contest that an entity fabbing or assembling/casing DRAMs in the US should be
treated as a domestic producer.
7.384 What Korea challenges is the treatment of assembly/casing in the ITC's definition of the
domestic industry, to the extent it results in differences in treatment of products depending on whether
they were assembled/cased in the US or in a foreign country. In particular, Korea complains that
assembly/casing activities by an entity in the US is sufficient for those activities to be treated as
domestic shipments, even if the DRAMs were fabb ed in a third country, whereas assembly of a US
fabbed DRAM by a third country entity does not change the origin of the DRAM, i.e., it remains a US
domestic product. Korea argues that if assembly /casing is sufficient to constitute a domestic
production activity when undertaken by a US producer , it should also be sufficient to change the
origin of the DRAM when undertaken by a foreign entity 336 (such that assembly/casing of a US
fabbed DRAM by a third country entity would be treated as a non-subject import, rather than a
domestic product). Korea alleges th at this inconsistency results in an artificially reduced volume of
non-subject imports, and an artificially increased volume of domestic production, thereby rendering
the ITC's consideration of the importance of subj ect imports (relative to non-subject imports and
domestic production) inconsiste nt with Article 15.2 of the SCM Agreement, and its consideration of
the domestic industry inconsistent with Article 15.4 thereof.
7.385 In our view, the inconsistency identified by Ko rea is a consequence of the ITC's definition of
the domestic industry as those producers that fabri cate DRAMs in the US an d those producers that
assembly/case DRAMs in the US (excluding module packagers and fables design houses). In order to
remedy this inconsistency, Kor ea would have to challenge the ITC's definition of the domestic
industry, and its treatment of assembly/casing as a domestic production operation, by filing a claim
under Article 16 of the SCM Agreement . However, Korea has not done so. There is therefore no
basis for us to consider that the ITC's definition of the domestic industry is inconsistent with that
provision.
7.386 We do not consider that an objective and impar tial investigating authority could not properly
have assessed the volume of subject imports or the state of the domestic industry on the basis of the
results of the application of a WTO-consistent
337 domestic industry definition. Although an
investigating authority might act inconsistently w ith these provisions in a number of ways, simply
collecting subject import, non-subject import and domestic production data on the basis of a WTO-
consistent domestic industry defin ition is not one of them. For this reason, we reject Korea's claim
that the US violated Articles 15.2 and 15.4 of the SCM Agreement because the ITC improperly and
inconsistently defined the domestic industry, subject imports, and non-subject imports. We recall that
Korea could have challenged the ITC’s definition of the domestic industry, but failed to do so.

334 Subject to adjustments made by the ITC to avoid double counting.
335 Nor does Korea challenge the DOC’s definition of subject merchandise.
336 We note that, according to the ITC, US Customs considers the country of origin of DRAMs to be
the country where the DRAMs were assembled, because Customs has determined that assembly operations
constitute a substantial transformation of the merchandise (see Decision Memorandum, page 8, Exhibit GOK-5).
337 In the absence of any legal clai m by Korea, and any consequential finding by the Panel, that the
ITC's domestic industry definiti on is inconsistent with the WTO Agreement, there is no basis for us to presume
that it is WTO-inconsistent.

7. Conclusion
7.387 In light of the above, we find that the ITC's Final Injury Determination did not properly
ensure that injury caused by one known factor other than the allegedly subsidized imports was not
attributed to the allegedly subsidized imports, contrary to Article 15.5 of the SCM Agreement. We
therefore conclude that the ITC's Final Injury Determination , and the Final Countervailing Duty
Order based thereon, are inconsiste nt with Article 15.5 of the SCM Agreement , and that the US is
therefore in violation of that provision.
7.388 We reject Korea's claims that the US violated:
• Article 15.2 because inter alia, the ITC determinations improperly assessed the
significance of the volume effects of subject imports;
• Article 15.2 because inter alia, the ITC determinations improperly assessed the
significance of the price effects of subject imports;
• Article 15.4 because inter alia, the ITC failed to consider all factors relevant to the
overall condition of the domestic industry;
• Article 15.5 because inter alia, the ITC failed to demonstrate the requisite causal link
between subject imports and injury; and
• Article 15.2 and 15.4 because inter alia, the ITC improperly and inconsistently
defined the domestic industry;
7.389 Korea has also claimed that the US violated Article 15.1 of the SCM Agreement. However,
Korea's Article 15.1 claim is entirely dependent on its claims under Article 15.2, 15.4 and 15.5. 338
Since there is no independent basis to Korea's Article 15.1 claim, we do not consider it necessary to
rule on that claim. We therefore decline to rule on Korea's claim that:
• Article 15.1 because inter alia, the ITC determinations on injury and causation were
not based on positive evidence and an objective assessment of the effects of allegedly
subsidized imports.
E. VERIFICATION MEETINGS
(i) Arguments of the Parties
7.390 Korea asserts that the DOC conducted secret verification meetings in its territory with
unnamed "experts" on the Korean financial markets. According to Korea, the DOC wanted such
meetings to be secret, apparently because it belie ved that anonymity would encourage candour from
such experts. Korea affirms that it did not object to the meetings themselves, but objected to the form
or the meetings, i.e. with the need for anonymity. Korea points out that, without knowing the identity
and background of the experts, it would not be in a position to comment on their degree of expertise
or to identify possible biases in the experts. Korea notes that, without having observers at the
meetings, it would have no way of knowing whether the DOC writte n report about the meetings was
complete and objective.

338 In this regard, we note Korea's assertion that "[e]ach of the specific inconsistencies (under
Articles 15.2, 15.4 and 15.5] identified is necessarily an inconsistency under Article 15.1 and will be noted as
such" (see para. 85 of Korea's First Written Submission). During its submission, Korea provides no other basis
for "not[ing]" a violation of Article 15.1 other than the alleged violations of Articles 15.2, 15.4 and 15.5.

7.391 Korea asserts that it sought a compromise with the DOC on the conduct of verifications,
whereby its counsel would be allowed to monitor th e meetings. Under the arrangement proposed by
Korea, counsel would only monitor the dialogue and would not interact with the experts or the DOC
team involved in the interviews. Korea affirms th at the DOC rejected this proposal and that, in
response, it expressed its specific objection to the me etings in several communications with the DOC
officials. Korea argues that the secret expert meetings were conducted in Korea over its specific
objections. Korea further argues that the DOC offere d it no alternative, since to affirmatively block
the meetings would have resulted in adverse findi ngs by the DOC to the detriment of the Korean
DRAMS producers involved in the investigation. Korea affirms that it was not objecting to the
substance of the verification, but that it had rath er a procedural objection. Korea affirms that,
otherwise, it was not consenting to that portion of the verification that involved secret meetings.
According to Korea, its request to the DOC was qu ite modest: it requested only that counsel – not
government officials, but counsel – be allowed to observe the meetings. Korea notes that the DOC
has allowed counsel to attend such meetings as witnesses in other cases. Korea recalls that, ironically,
the experts offered evidence largely at odds with the US theory in this case.
7.392 Korea submits that the DOC's action is inconsis tent with Article 12.6, which gives Members
the right to object to any verification meeting taki ng place within the territory of that Member. Korea
is of the opinion that the DOC should have found some mutually agreeable compromise that met the
needs of both parties, instead of simply insisti ng in doing the meetings its own way, without any
regard to Korea's objections.
7.393 The US observes that Article 12.6 foresees the po ssibility of investigations in the territory of
other Members, provided that they have been notified in good time and do not object to the
investigation. The US recalls that Article 12.6 al so provides for investigations on the premises of a
"firm" in the territory of a Member and that it requi res the explicit consent of firms to investigation in
their premises and requires that the Members must be notified and not object. The US observes that,
additionally, the investigating authorities are required to disclose or make available the results of its
verifications of firms.
7.394 The US notes that DOC officials travelled to Korea to make verifications. Prior to the
departure, according to the US, the DOC notified Korea of its intent to conduct such verification and
provided Korea with the schedule of verifications of the respondent firms. The US further notes that
the DOC also indicated in its schedule that concurre nt with its verifications, it planned to meet with
independent financial experts during its visit to Korea.
7.395 According to the US, Korea's only objection was related to the substance of the scheduled
verification, i.e. Korea objected to the schedul ed meetings between DOC officials and financial
experts without the presence of Korea's counsel. The US notes that Korea did not withhold consent to
investigations within its territory. Consequent ly, in order to gather information about the
investigation, the DOC officials proceeded to meet with the financial experts, without the presence of
Korea's counsel. The US asserts that the DOC disc losed and made publicly available its report of
such meetings.
7.396 The US disagrees with Korea's argument that the DOC's actions were inconsistent with
Article 12.6 because the DOC failed to accommodate Ko rea's request to allow its counsel to monitor
the meetings. The US notes that the DOC's meetings with financial experts were in the context of
gathering additional information to assist in its countervailing duty investigation and that transparency
was preserved by placing the summaries of the meetings in public record.
7.397 The US sees no requirement in Article 12.6 that government officials must permit counsel for
the government of the Member in question to be presen t at meetings with financial experts. The US
notes that Korea's assertion that its counsel would ensure reliability of the written record fails to

account for the fact that representatives of the US domestic industry are never permitted to attend any
part of the verification proceedings.
7.398 The US is of the view that, while Article 12.6 gives Korea the right to object to the
investigations conducted within its territory, the ri ght of denial cannot be extended to encompass the
right to dictate the specific procedures to be followe d in the conduct of verification proceedings. The
US asserts that the DOC was not required to negotiate with Korea over the details of its investigatory
proceedings. The US affirms that, if Korea wanted to , if could have chosen to withhold its consent to
the investigations within its territory, and that it did not.
(ii) Evaluation by the Panel
7.399 Korea claims that the US acted inconsistently with the terms of Article 12.6, which gives
Members the right to object to any verification m eeting taking place within the territory of that
Member. Korea insists that the DOC should have wo rked with it to find some mutually agreeable
compromise on this issue.
7.400 Article 12.6 provides that:
The investigating authorities may carry out investigations in the territory of other
Members as required, provided that they have notified in good time the Member in
question and unless that Member objects to the investigation. Further, the
investigating authorities may carry out investigations on the premises of a firm and
may examine the records of a firm if (a) the firm so agrees and (b) the Member in
question is notified and does not object. Th e procedures set forth in Annex VI shall
apply to investigations on the premises of a firm. Subject to the requirement to
protect confidential information, the author ities shall make the results of any such
investigations available, or shall provide disclosure thereof pursuant to paragraph 8,
to the firms to which they pertain and may make such results available to the
applicants.
7.401 We note that, in a letter dated 10 April 2003, the US notified Korea of the details of the
investigation the DOC intended to carry out in the territory of Korea and informed Korea of the names
of the firms and banks that had agreed to meet with DOC officials.
339 In the same letter, the US
informed Korea that the DOC officials were to meet with "non-government entities."
7.402 In a letter of response to the US dated 14 Ap ril 2003, Korea, through its Counsel, notes that
"there is one aspect of the verification sche dule, however, that causes concern for the GOK." 340 In
this letter, Korea notes that the DOC officials plan ned to conduct a series of private meetings with
various banks and other third-party experts. Ko rea then states that it "strongly objects to the
Commerce Department arranging meetings to gather information that will then be utilized as the
factual basis for the final determination in this case. " Korea further states that it "very much objects to
the Department of Commerce having secret meetings with private firms in Korea as part of its CVD
verification."
7.403 Nonetheless, in the same letter, Korea affirms that its objection is "very limited." It states that
"the GOK does not object to the Commerce Department having meetings with any private firm. Nor
does the GOK object to the Commerce Department having complete discretion in deciding with

339 Exhibit GOK-27-(a) and Exhibit US-111.
340 Exhibit GOK-27-(b) and Exhibit US-112.

whom it wants to meet. The Commerce Department can meet with whomever it wants. The only
objection that the GOK has is to the Commerce Department holding these meetings in secret."
341
7.404 In our view, Article 12.6 establishes two conditions for investigating authorities to carry out
investigations in the territory of other Members: (1 ) the intention to carry out the investigations is
notified in good time to the Member in question; and (2) that Member does not object to the
investigation.342 As far as the first condition is concerned, Korea does not question the fact that the
US notified Korea of its intention to carry out an inv estigation in the territory of Korea. The issue at
hand has to do with the second condition, i.e. whether Korea objected to the investigation – or
whether Korea had the right to object to the format of the investigation, not to the investigation in
itself.
7.405 We recall the assertion by the US that while Article 12.6 provides Korea with the right to
object to the investigations conducted within its terri tory, such right of denial cannot be extended to
encompass a right to dictate the specific proced ures to be followed during the investigation
proceedings.343 We agree with the US. Korea could have prevented the investigation in its territory
from taking place, but it chose not to do so. In its letter of response to the US, Korea does not object
to the meetings, nor to the discretion of the DOC to meet "with whomever it wants." 344 Since Korea
did not object to the DOC's on-site investigatio n, the DOC's decision to proceed with that
investigation is not inconsistent with Article 12.6 of the SCM Agreement.
7.406 We note Korea's argument that it had no choice but to accept the DOC's on-site investigation,
since to affirmatively block the meetings would ha ve resulted in adverse findings by the DOC to the
detriment of the Korean DRAMS producers involved in the investigation. We assume that Korea is
referring to the possibility of the DOC using th e "facts available" under Article 12.7 of the SCM
Agreement. We are not persuaded by Korea's argument, however, since investigating authorities do
not have carte blanche in their use of "the facts available." In particular, we agree with the panel in
Guatemala – Cement II that, "[a]lthough there are certain consequences (under Article 6.8) for
interested parties if they fail to cooperate with an investigating authority, [...] view such consequences
only arise if the investigating authority itself has acted in a reasonable, objective and impartial manner
(...)"345
7.407 Thus, we reject Korea's claim under Article 12.6.
F. BURDEN OF PROOF DURING THE DOC’S INVESTIGATION
7.408 Korea submits that the DOC’s investigation in this case began with an effective presumption,
based on past, unrelated investigations, that the GOK directed lending to "strategic" industries,
including the Korean semiconductor industry (a nd consequently, to Hynix, a semiconductor
company). Korea asserts that the use of such presu mptions by investigating authorities is inconsistent
with Articles 1 and 2 of the SCM Agreement, since these provisions require competent authorities to
have a factual basis to establish the various elements of a countervailable subsidy.

341 Ibid.
342 We note that the provisions in Annex VI of the SCM Agreement, which contains procedures for on-
the spot investigations pursuant to Article 12.6, were not referred to by either Korea or the US in this dispute.
344 Nowhere in its letter of response to the US does Korea object to the investigation in itself. Rather, it
only objects to the "arranging of secret meetings" or to the DOC "having secret meetings." See Exhibit GOK-
27-(b) and Exhibit US-112. As Korea asserts in para graph 247 of its Second Written Submission, it was not
objecting to the substance of the verification; Korea had a "procedural objection."
345 Panel Report, Guatemala – Cement II, para. 8.251.

7.409 Korea’s claims concern the propriety of the DOC ’s investigation, and the consistency of the
DOC’s determinations of GOK entrustment or direc tion and specificity with Articles 1 and 2 of the
SCM Agreement . Since we have already found that those determinations are in violation of those
provisions, we do not consider it necessary to examine Korea’s burden of proof claim.
G. ARTICLE 4.4 OF THE DSU
7.410 The US submits that the Panel should reject Korea’s claims regarding the DOC countervailing
duty order because Korea failed to comply with Article 4.4 of the DSU in respect to the inclusion of
the final DOC countervailing duty order referred to in Korea’s second request for consultations. The
US submits that, notwithstanding the requirements of Article 4.4 of the DSU, Korea’s second request
for consultations did not include any indication of th e legal basis of its complaint with respect to the
DOC countervailing duty order.
7.411 The second sentence of Article 4.4 provides as follows:
Any request for consultations shall be subm itted in writing and shall give the reasons
for the request, including identification of th e measures at issue and an indication of
the legal basis of the complaint.

7.412 Korea submits that its second consultation requ est explicitly identifies the countervailing duty
order at issue, and that the two consultation request together provide a fairly detailed explanation of
the legal defects with the DOC and ITC determin ations. Korea asserts that, since the DOC final
countervailing duty order rests on the legal and fact ual foundations of these two agency findings, the
two Korean consultation requests were in fact pr oviding a more than sufficient "indication" of the
legal basis for its claim against the DOC’s final countervailing duty order. Korea also argues that the
second consultation request specifically cited to Article VI:3 of GATT 1994, which sets forth the basic
legal rule also reflected in Article 19.4 that th e duties levied should not exceed the amount of the
subsidy.
7.413 Korea's original request for consultations w as set forth in document WT/DS296/1. That
request covered the DOC's affirmative preliminary and final countervailing duty determinations, but
did not refer to the DOC's final countervailing duty orde r. The request for consultations in respect of
the DOC's final countervailing duty order was set forth in document WT/DS296/1/Add.1.
7.414 We note that the first sentence of Korea's second request for consultations provides:
With reference to document WT/DS296/1 ... circulated on 8 July 2003, my authorities
have instructed me to request further consultations with the Government of the US ...
7.415 In our view, the reference in the first senten ce of Korea's second request for consultations to
Korea's first request for consultations (i.e., do cument WT/DS296/1) is sufficient for the second
request to be read in light of the first requ est. Thus, in addition to the provisions of the SCM
Agreement set forth (in a non-exhaustive manner) in Ko rea's second request for consultations, its
claims in that document should also be read in light of the provisions of the SCM Agreement and
GATT 1994 set out in document WT/DS296/1. In our view, the totality of these provisions provides
sufficient "indication of the legal basis for the comp laint" within the meaning of Article 4.4 of the
DSU.346

346 We note, in any event, that th e scope of these proceedings is no t necessarily restricted to the
measures and claims set forth in Korea's requests for consultations (see, for example, the Panel Report in
Canada – Aircraft, paras 9.5 – 9.14).

H.
THE LEVY OF COUNTERVAILING DUTIES – ARTICLE 19.4 OF THE SCM AGREEMENT AND
ARTICLE VI.3 OF THE GATT 1994
7.416 Korea claims that the US has levied counterva iling duties in excess of the value of alleged
subsidies, contrary to Article 19.4 of the SCM Agreement and Article VI.3 of the GATT 1994 .
Article 19.4 of the SCM Agreement provides:
No countervailing duty shall be levied 51 on any imported product in excess of the
amount of the subsidy found to exist, calcula ted in terms of subs idization per unit of
the subsidized and exported product.
51As used in this Agreement "levy" shall mean the definitive or final legal assessment or
collection of a duty or tax.

7.417 Article VI:3 of GATT 1994 provides in relevant part:
No countervailing duty shall be levied on any product of the territory of any
contracting party imported into the territory of another contracting party in excess of
an amount equal to the estimated bounty or s ubsidy determined to have been granted

7.418 We note that Korea's SCM Article 19.4 and GATT 1994 Article VI.3 claims are dependent on
its claims against the DOC subsidy determinations a nd the ITC's injury determinations. Thus, to the
extent that we reject those claims, there is no basis to find that the US violated SCM Article 19.4 and
GATT 1994 Article VI.3. To the extent that we uphol d those claims, we do not consider it necessary
to make a finding under those provisions.
I. ARTICLES 10 AND 32.1 OF THE SCM AGREEMENT
7.419 Korea submits that, in light of many alleged inconsistencies in the DOC action, the CVD
order against DRAMs from Korea is inconsistent with Articles 10 and 32.1 of the SCM Agreement.
7.420 Article 10 of the SCM Agreement provides:
Members shall take all necessary steps to ensure that the imposition of a
countervailing duty on any produc t of the territory of any Member imported into the
territory of another Member is in accord ance with the provisions of Article VI of
GATT 1994 and the terms of this Agreement. Countervailing duties may only be
imposed pursuant to investigations initiat ed and conducted in accordance with the
provisions of this Agreement and the Agreement on Agriculture. (footnotes omitted)
7.421 Article 32.1 of the SCM Agreement provides:
32.1 No specific action against a subsidy of another Member can be taken except
in accordance with the provisions of GATT 1994, as interpreted by this Agreement.
(footnote omitted)
7.422 Korea asserts that both Articles 10 and 32.1 of the SCM Agreement constitute overarching
provisions, establishing that no countervailing duty action specifically, and no action against a subsidy
generally, shall be taken by a Member unless in accordance with provisions of the SCM Agreement
and GATT 1994. Korea asserts that Article 19.2 gives Members the discretion to decide whether or
not to impose duties, "where all requirements fo r imposition have been fulfilled." According to
Korea, once the Member decides to impose the duty, the obligations of Article 10 and Article 32.1

come into play. Korea argues that the decision by the US to impose the countervailing duty order in
this case thus violates Article 10 and 32.1.
7.423 The US asserts that Korea’s clai ms under Articles 10 and 32.1 of the SCM Agreement are
dependent claims, in that they depend upon a finding of an inconsistency with an obligation contained
in some other provision of the SCM Agreement or GATT 1994. The US asserts that, because the US
has not acted inconsistently with any such ot her provisions, the countervailing duty order is, by
definition, not inconsistent with Articles 10 or 32.1.
7.424 We note that Korea's Article 10 and 32.1 claims are dependent on its claims against the DOC
subsidy determinations and the ITC's injury determinations. Thus, to the extent that we reject those
claims, there is no basis to find that the ITC's inju ry determinations are inconsistent with Articles 10
and 32.1. To the extent that we uphold those claims, we do not consider it necessary to make a
finding under Articles 10 and 32.1.
J. ARTICLE 22.3 OF THE SCM AGREEMENT
7.425 Korea submits that the ITC's Final Injury Determination failed to comply with Article 22.3 of
the SCM Agreement, which provides:
Each [public] notice shall set forth, or ot herwise make available through a separate
report, in sufficient detail the findings a nd conclusions reached on all issues of fact
and law considered material by the investigating authorities.
7.426 Korea asserts that the ITC's public determin ation failed to provide sufficient detail on
important issues regarding the volume and price eff ects of the alleged subsidized imports, and the
causal link between alleged subsidized imports and the injury to the domestic industry.
7.427 The US submits that the ITC's Final Injury Determination complied with Article 22.3.
7.428 We note that Korea's Article 22. 3 claim is dependent on its claims under Articles 15.1, 15.2
and 15.5 of the SCM Agreement. Thus, to the extent that we reje ct those claims, there is no basis to
find that the ITC's Final Injury Determination is inconsistent with Article 22.3. To the extent that we
uphold those claims , we do not consider it necessary to make a finding under Article 22.3. Since the
ITC's Final Injury Determination is inconsistent with Article 15.5 in respect of part of the ITC's non-
attribution analysis, the adequacy of the ITC's p ublic notice in respect of that part of its non-
attribution analysis is immaterial.347
VIII. CONCLUSIONS AND RECOMMENDATION
8.1 For the reasons set forth above, we conclude that the DOC's Final Subsidy Determination, the
ITC's Final Injury Determination , and the Final Countervailing Duty Order based thereon, are
inconsistent with Articles 1, 2 and 15.5 of the SCM Agreement. We therefore conclude that the US is
in violation of those provisions of the SCM Agreement.
8.2 For the above reasons, we reject Korea's claims that the US violated:
• Article 2 in so far as Korea's claim concerns the DOC's finding the alleged subsidies
provided by Group A creditors were specific;

347 We note that such an approach is consistent with that adopted by previous panels, including
Guatemala – Cement II (para. 8.291, note 48), Appellate Body Report, EC – Bedlinen (Article 21.5 – India)

• Article 15.2 because inter alia, the ITC determinations improperly assessed the
significance of the volume effects of subject imports;
• Article 15.2 because inter alia, the ITC determinations improperly assessed the
significance of the price effects of subject imports;
• Article 15.4 because inter alia, the ITC failed to consider all factors relevant to the
overall condition of the domestic industry;
• Article 15.5 because inter alia, the ITC failed to demonstrate the requisite causal link
between subject imports and injury;
• Article 15.2 and 15.4 because inter alia, the ITC improperly and inconsistently
defined the domestic industry;
• Article 12.6 because inter alia, the DOC conducted various private verification
meetings in the territory of Korea, at which the Government of Korea had no
representatives, over the explicit objection of the Government of Korea;
8.3 In light of the above conclusions, we do not consider it necessary to address Korea's claims
that the US violated:
• Articles 1 and 2 because inter alia, the DOC imposed an improper burden of proof on
respondents, that is the Government of Kor ea and Hynix, and thereby failed to base its
decision on affirmative, objective, and verifiable evidence;
• Articles 1.1 and 14 because inter alia, the DOC disregarded market benchmarks for
measuring benefit established by a foreign ba nk operating in the Korean market that
extended financing to Hynix during the period of investigation;
• Articles 1.1 and 14 because inter alia¸ the DOC failed to utilize relevant Korean market
benchmarks in determining wh ether Hynix was "creditworthy" or "equityworthy," and
otherwise applied an improper "uncreditw orthy" benchmark and discount rate in
calculating the benefit to Hynix in this case;
• Article 19.4 of the SCM Agreement and Article VI:3 of the GATT 1994 because inter alia,
the DOC’s failed to measure the benefit in accordance with the principles of Article 14 of
the SCM Agreement resulted in countervailing duties levied in excess of the amount
allowed under the SCM Agreement and the GATT 1994;
• Articles 10 and 32.1 because inter alia, the CVD order imposed by the US against
DRAMs from Korea was not in accordance w ith the relevant provisions of the SCM
Agreement
 or the relevant provisions of the GATT 1994;
• Article 15.1 because inter alia, the ITC determinations on injury and causation were not
based on positive evidence and an objective assessment of the effects of allegedly
subsidized imports; and
• Article 22.3 because inter alia, the ITC’s injury determination did not set forth in
sufficient detail the ITC's findings and conclusions on all material issues of fact and law.

8.4 We note that Korea requests the Panel to recommend that the US terminate the countervailing
duty order immediately.348 Any such recommendation is precluded by Article 19.1 of the DSU, which
restricts us to recommending that the US bring the relevant measures into conformity with the
relevant agreement. Accordingly, in light of th e conclusions above, we recommend that the US bring
the DOC’s Final Subsidy Determination , the ITC’s Final Injury Determination , and the DOC’s final
countervailing duty order, into conformity with the SCM Agreement.