EUROPEAN COMMUNITIES – COUNTERVAILING MEASURES ON DYNAMIC RANDOM ACCESS MEMORY CHIPS FROM KOREA
Document: Communication from the European Communities
Date: 20 April 2006
Document codes: WT/DS299/9
Complainant: South Korea
Respondent: EU
Third parties: China, Taiwan, Japan, U.S.
Dispute stage: Panel
Agreements cited: Art. 1, 2, 10, 12, 14, 15, 19, 22, 32  Subsidies and Countervailing Measures (SCM)Art. VI:3  GATT 1994

French/
 Spanish

EUROPEAN COMMUNITIES – COUNTERVAILING MEASURES ON
DYNAMIC RANDOM ACCESS MEMORY CHIPS FROM KOREA

Communication from the European Communities

 The following communication, dated 12 April 2006, from the delegation of the European
Communities to the Chairman of the Dispute Settleme nt Body is circulated at the request of the
European Communities.

 On 10 April 2006, the European Communities in formed the Dispute Settlement Body (DSB)
that the Council of the European Union adopted on 10 April 2006 a regulation implementing the DSB
ruling and recommendations in European Communities – Counterva iling Measures on Dynamic
Random Access Memory Chips from Korea.

 This Council Regulation has now been published in the Official Journal of the European
Union of 12 April 2006 and will enter into force on 13 April 2006.

 With the publication and entry into force of this Council Regulation, the European
Communities considers that it fully implements th e recommendations and rulings of the DSB in the
aforementioned dispute.

COUNCIL REGULATION (EC) No 584/2006
of 10 April 2006
amending Regulation (EC) No 1480/2003 imposing a definitive countervailing duty
and collecting definitely the provisional duty imposed on imports of certain
electronic microcircuits known as DRAMs (dynamic random access memories)
originating in the Republic of Korea

THE COUNCIL OF THE EUROPEAN UNION

Having regard to the Treaty establishing the European Community,

Having regard to Council Regula tion (EC) No 1515/2001 of 23 July 2001 on the measures that may
be taken by the Community following a report adopted by the WTO Dispute Settlement Body
concerning anti-dumping and anti-subsidy matters
1,

Having regard to Council Regulation (EC) No 2026/97 of 6 October 1997 on protection against
subsidised imports from countries not members of the European Community2 (the basic Regulation),

Having regard to the proposal submitted by the Commission after consulting the Advisory
Committee,

Whereas:

A. PROCEDURE

 1. Existing measures

(1) By Regulation (EC) No 1480/2003
3 (the definitive Regulation), the Council imposed a
definitive countervailing duty of 34,8 % on im ports of certain electronic microcircuits known
as dynamic random access memories (DRAMs) orig inating in the Republic of Korea and
manufactured by all companies other than Samsung Electronics Co., Ltd (Samsung), for
which a 0 % duty rate was established. The definitive Regulation was preceded by
Commission Regulation (EC) No 708/2003 of 23 April 2003 imposing a provisional
countervailing duty on imports of certain electronic microcircuits known as DRAMs
(dynamic random access memories) originating in the Republic of Korea
4 (provisional
Regulation).

(2) Two exporting producers located in the Repub lic of Korea cooperated in the investigation
which led to the imposition of the existing measu res (the original investigation): Samsung,
which was not found receiving subsidies, a nd Hynix Semiconductor Inc. (Hynix). The
European Community (EC) industry in the orig inal investigation consisted of two producers
which accounted for the major proportion of the total Community production of DRAMs,
Infineon Technologies AG, Munich, Germany (Infineon) and Micron Europe Ltd,
Crowthorne, United Kingdom (Micron).

1 OJ L 201, 26.7.2001, p. 10.
2 OJ L 288, 21.10.1997, p. 1. Regulation as last amended by Regulation (EC) No 461/2004 (OJ L 77,
13.3.2004, p. 12).
3 OJ L 212, 22.8.2003, p. 1. Regulation as amended by Regulation (EC) No 2116/2005 (OJ L 340,
23.12.2005, p. 7).
4 OJ L 102, 24.4.2003, p. 7.

(3) The investigation of subsidisation and inju ry covered the period from 1 January 2001 to
31 December 2001 (IP). The examination of tr ends relevant for the assessment of injury
covered the period from 1 January 1998 to the end of the IP (the period under consideration).

 2. Report adopted by the Dispute Settlement Body of the WTO

(4) On 3 August 2005, the Dispute Settlement Body (DSB) of the World Trade Organisation
(WTOmm) adopted a Panel report in 'Europ ean Communities – Countervailing measures on
dynamic random access memory chips from Korea'.5

(5) According to the Panel report, the EC act ed in a manner inconsistent with its WTO
obligations under:

 (a) Article 1.1(a) of the Agreemen t on Subsidies and Countervailing Measures
6 (the
SCM Agreement) in determining that the May 2001 restructuring programme
constituted a financial contribution by the government;

 (b) Article 1.1(b) of the SCM Agreement in its determination of the existence of a benefit
in the case of the syndicated loan;

 (c) Articles 1.1(b) and 14 of the SCM Agreem ent in directly applying, for the purposes
of the calculation of the amount of benef it, its grant methodology to all programmes
found to constitute a subsidy;

 (d) Article 15.4 of the SCM Agreement by not evaluating the factor 'wages' as a relevant
factor affecting the state of the domestic industry; and

 (e) Article 15.5 of the SCM Agreement by fa iling to make sure that the injury caused by
certain other factors (in particular, declin e in demand, overcapacity, and other (non-
subsidised) imports) was not attributed to the subsidised imports.

(6) On the other hand, the EC was found to have acted consistently with its WTO obligations
under:

 (a) Article 1.1(a) of the SCM Agreement in determining that the syndicated loan, the
KEIC guarantee, the KDB debenture progr amme and the October 2001 restructuring
programme constituted a financial contribution by the Government of Korea (GOK);

 (b) Article 1.1(b) of the SCM Agreement in determining that a benefit was conferred on
Hynix by the KEIC guarantee, the KDB debenture programme, the May 2001
restructuring programme and the October 2001 restructuring programme;

 (c) Articles 1.2 and 2 of the SCM Agreement in finding de facto specificity (two Korean
claims);

 (d) Article 15.2 of the SCM Agreement in assessing the significance of the volume and
price effects of the subsidised imports (2 Korean claims);

 (e) Article 15.4 of the SCM Agreement in c onsidering all factors relevant to the overall
condition of the domestic industry, except for the factor 'wages';

5 WT/DS299/R.
6 OJ L 336, 23.12.1994, p. 156.

 (f) Article 15.5 of the SCM Agreement in demonstrating the requisite causal link
between the subsidised imports and injury; and

 (g) Article 12.7 of the SCM Agreement in appl ying 'facts available' with respect to the
subsidy investigation.

 3. Reassessment to implement the DSB's recommendations

(7) In the light of the recommendations set out in the Panel report, the Commission conducted a
thorough and objective reassessment of the releva nt findings in the definitive Regulation on
the basis of information on the record. The scope of the reassessment is appropriately limited
to an examination of the five specific aspects of the existing measure, as described above, that
were found to be inconsistent with the SCM Agreement. This examination is based on the
re-evaluation of the existing evidence on the record of the original investigation in light of the
relevant findings in the Panel report.

(8) The reassessment set out below shows that in jurious subsidisation still exists, although at a
slightly lower level.

B. PRODUCT UNDER CONSIDERATION AND LIKE PRODUCT

(9) The product under consideration and the like pr oduct are the same as that covered by the
original investigation, i.e. certain electr onic microcircuits known as dynamic random access
memories (DRAMs), of all types, densities and variations, whether assembled, in processed
wafer or chips (dies), manufactured using va riations of metal oxi de-semiconductors (MOS)
process technology, including complementary MOS types (CMOS), of all densities (including
future densities), irrespective of access speed , configuration, package or frame etc.,
originating in the Republic of Korea. The product concerned also includes DRAMs presented
in (non-customised) memory modules or (non-cust omised) memory boards, or in some other
kind of aggregate form, provided the main purpose of which is to provide memory.
7

(10) The product concerned is currently classifi able within CN codes 8542 21 11, 8542 21 13,
8542 21 15, 8542 21 17, ex 8542 21 01, ex 8542 21 05, ex 8548 90 10, ex 8473 30 10 and ex
8473 50 10.

(11) The Panel report did not cover any claims affecting the findings set out in the definitive
Regulation concerning the product under consideration and the like product.

C. REVISED FINDINGS BASED ON THE PANEL REPORT

 1. Subsidies

 1.1. Introduction

(12) This part sets out the reassessed findings b ased on the conclusions a nd recommendations of
the Panel report concerning:

 (a) whether the May 2001 restructuring pr ogramme constituted a financial contribution
by the GOK within the meaning of Article 2(1) of the basic Regulation;

7 Regulation (EC) No 2116/2005 amended the definitive Regulation for the purpose of adopting special
provisions in order to ensure that the countervailing duty is properly levied on the product concerned.

 (b) whether there was a benefit in the case of the syndicated loan within the meaning of
Article 2(2) of the basic Regulation;

 (c) the calculation of the amount of the be nefit with regard to all subsidy programmes
within the meaning of Articles 2(2) and 6 of the basic Regulation.

(13) All other findings concerning subsidies remain as established in the original investigation and
set out in the provisional Regulation and the definitive Regulation.

 1.2. May 2001 bond purchase by creditor banks in the amount of KRW 1 trillion and first
roll-over of debt (restructuring programme)

(14) The Panel found that the determination that th e creditor banks were directed to participate in
the May 2001 restructuring programme and that their purchase of KRW 1 trillion of
convertible bonds (CBs) as part of the pr ogramme therefore constituted a financial
contribution by the GOK was not consistent with Article 1.1(a) of the SCM Agreement.
8
More specifically, the Panel found that 'while the May 2001 restructuring programme is a
close case, we consider that the evidence before the investigating authority was insufficient to
reasonably conclude that the government entruste d or directed the private banks to purchase
the Hynix CBs.'9

(15) In accordance with the Pane l's assessment, the funds provided to Hynix in the context of the
May 2001 restructuring programme shall not be countervailed.10

 1.3. Syndicated loan of KRW 800 billion

(16) With respect to the syndicated loan of KRW 800 billion, the Panel found that the EC had
properly established that the GOK directed the Ko rea Exchange Bank (KEB) to participate in
the loan and that this constituted a financial c ontribution via entrustment or direction of KEB
in accordance with Article 1.1(a) of the SCM Agreement. The Panel also found that the Korea
Development Bank (KDB) provided a direct financ ial contribution through its participation in
the syndicated loan, and, becau se the KDB was a public body, the EC was not required to
make a finding of entrustment or direction.
11 However, the Panel found that the EC failed to
establish the existence of a benefit from the fi nancial contribution provided by the KDB and
the KEB within the meaning of Article 1(b) of the SCM Agreement. 12 Specifically, the Panel
stated that the EC had not examined whether there were comparable commercial loans that
could actually have been obtained by Hynix on the market and stated that the EC had ignored
the other participants in the syndicated loans as possible benchmarks.13

(17) In the view of the Commission, the particip ation by the other banks in the syndicated loan
cannot serve as a proper benchmark for determining the existence of a benefit. As the Panel
itself noted, in determining the existence of a commercial benchmark, authorities must

8 Panel report, paragraph 7.110.
9 Panel report, paragraph 7.109.
10 Based on the Panel's findings, the purchase of CBs by the public bodies involved in the May 2001
restructuring programme remains a countervailable subsidy. However, no further action is required on this point,
as any benefit has already been accounted for in the subsidy found to be conferred by the October 2001
restructuring programme (see recital 65 et seq.).
11 Panel report, paragraph 7.69.
12 Panel report, paragraph 7.186.
13 Panel report, paragraph 7.184.

examine whether such loans were so influenced by the alleged government intervention that
they do not represent loans that could actually be obtained on the market.
14 The Commission
has conducted a thorough re-examination of th e extensive record in this case and has
employed the type of analysis discussed by th e Panel. On this basis, the Commission has
determined that the loans from the other banks participating in the syndicated loan could not
serve as a proper benchmark.

(18) First, bearing in mind the financial condition of Hynix at the time that the syndicated loan was
arranged, as noted in recital 19 of the definitive Regulation, at the time the loan was agreed
to, at the end of 2000, Hynix was in severe fi nancial distress. It had over USD 9,46 billion in
liabilities at the end of 2000, which was over twice its net worth and over four times the
market capitalisation of the company. It suffered a loss in 2000, a year in which other large
DRAM producers registered profits and which was generally considered to have been a very
good year in the DRAM industry. The majority of Hynix liabilities were coming due in 2001
and the company was facing intense liquidity problems. Many independent analysts and
brokerage houses were saying at that time that the company would not be able to generate
sufficient cash flow or asset disposals to pay off its maturing liabilities. Under such
circumstances, profit maximising banks operating under normal commercial conditions would
not voluntarily participate in loans with such enormous risk of default.
15

(19) Second, there is ample evidence on the record that other participants in the syndicated loan
were pressured to participate in the overall re structuring of Hynix's debt. For example, the
record contains evidence that one of the par ticipants, Kookmin Bank, was required to lend
directly to 'troubled corporate borrowers'. Speci fically, in a statemen t to the Securities and
Exchange Commission of the United States, Kookmin stated:

 'The Korean government has promoted, and, as a matter of policy, may continue to promote
lending to certain types of borrowers. It generally has done this by requesting banks to
participate in remedial programs for troubled borrowers (such as Hynix) 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 this manner promoted low-income mortgage lending and lending to technology companies.
We expect that all loans made pursuant to government policies will be reviewed in
accordance with our credit review policies. However, government policies may influence us
to lend to certain sectors or in a manner in wh ich we otherwise would not in the absence of
government policy.'
16

 It is clear that Kookmin refers to Hynix in mentioning 'troubled borrowers', because the
bank's 2001 annual report lists Hynix as the si ngle largest financially troubled borrower. 17
Further, Kookmin, as a GOK-inv ested enterprise, was subject to audit and inspection by the
GOK Board of Audit and Inspection and as such was under pressure to comply with GOK
policy.

14 Panel report paragraph 7.184. See also footnote 171, where the Panel states that the examination of
other participants is important, but that 'we emphasise that we do not wish to imply that it is necessarily the end-
point of such an analysis, as it will need to be determined whether the behaviour of these market players is so
distorted by the government's intervention that they can no longer serve as the benchmark against which to
measure the alleged government distortion'.
15 Definitive Regulation, recital 19.
16 Kookmin Bank Prospectus, Offering of American Depositary Shares (18 June 2002) (attachment 67
to Micron Technology Italia's 14 May 2003 submission on the provisional Regulation) (emphasis added).
17 Kookmin Bank, Annual Report (2001), page 58.

(20) Other participants in the syndicated loan were also under pressure from the GOK to assist
Hynix. In this respect, recital 55 of the de finitive Regulation provides extensive information
regarding the extent to which the GOK put pr essure on Korea First Bank (KFB) to provide
ongoing financing to Hynix. In a high-level ec onomic ministerial meeting in November 2000
the GOK took steps to 'alleviate Hynix's cash crunch' and waived statutory credit limits for
KFB, KEB and KDB. The Panel did not examine the evidence in relation to KFB, because the
Commission concluded its involvement to be neg ligible. However, given that the Panel found
that the same GOK tactics employed in relati on to KEB amounted to direction and that the
GOK owns 49 % of KFB, it is reasonable to conclude that the GOK was in a position to and
did exert influence over KFB in relation to its d ecision to participate in the syndicated loan.
KDB is a public body and KEB was found by the Panel to have been directed by the GOK.
The participation of these banks in the syndicat ed loan is thus not a reliable commercial
benchmark. Other banks that were part of the syndicated loan were also subject to similar
pressure from the GOK. The GOK put very direct pressure on both Shinhan and KorAm
banks regarding the extension of the export cred it arrangements, which was made at the same
time as the syndicated loan. These banks had conc luded that they were already overexposed
to Hynix and reversed their earlier decision to increase the export credit ceiling available to
Hynix. In response, an FSS official criticised their move as 'unthinkable'.
18 The GOK held
18,3 % of Shinhan and was its larg est shareholder, thus able to exert considerable influence
over the bank. It is clear that Shinhan was not acting commercially given that it increased its
loan loss reserves for Hynix even as it continued to assist the company and that it offered no
legitimate credit risk analysis for assisting it. KorAM Bank again faced GOK threats when the
bank refused to purchase Hynix CBs, because it decided that doing so was not financially
sound. In response to the bank's decision not to purchase the bonds, an FSS official rebuked
KorAm, using language uncharacteristic of a government apparently uninvolved in credit
decisions. The official stated : 'If KorAm does not honour the agreement, we will not forgive
the bank'.
19 He further stated that the FSS would take stern measures against the bank, such as
disapproving new financial instruments and subjecting the bank to a tighter audit. 20 As a
result of these threats, KorAm Bank capitulated and reversed its decision 21, while at the same
time increasing its loan loss reserves for Hynix and offering no legitimate credit analysis for
providing such financial assistance. Of the re maining banks which participated in the
syndicated loan, Chohung Bank, Woori Bank, the NACF, Seoul Bank, Kwangju Bank, Peace
Bank, Kyongnam Bank and the Industrial Bank of Korea are all GOK-owned and thus their
credit decisions are tainted by GOK policy. Th e Housing and Commercial Bank, of which the
GOK has a 20 % share, admitted government direction in its credit decisions in a sworn
statement to the US SEC.
22 Finally, although Pusan Bank had no GOK ownership, it was
nevertheless ordered by the FSS in 1999 to fi re or replace its executives and to increase its
paid-in capital by USD 86,2 million before the end of March 200023, to 'slash their manpower,
the number of branches and organisations, while disposing of ailing subsidiaries' 24 and, in
2000, the FSS sanctioned its former and current officials for mismanagement. 25 Given this
degree of GOK control over Pusan Bank, the bank' s decision to participate in the syndicated
loan cannot be considered to be a safe commercial benchmark.

18 'Banks Under Fire for Reducing Export Credit Ceilings for HEI', Korea Herald, 27 January 2001.
19 'KorAm Reluctantly Continues Financial Support for Hynix', Korea Times, 21 June 2001.
20 See footnote 1.
21 See 'Koran Bks Complete Purchase of KRW1T Hynix Conn Bond,' Dow Jones International News,
20 June 2001 ('KorAm Bank's reversal of its board's decision comes after the Financial Supervisory Service
warned of a possible sanction for KorAm for threatening to break the earlier rescue pact for Hynix.').
22 Kookmin/H&CB Prospectus, 10 September 2001 (Micron Italia post hearing submission,
14 February 2003 at Exhibit 9).
23 'Pusan, Kyongnam Banks Receive Conditional Approval from FSS', Korea Herald 18 January 1999.
24 See footnote 1.
25 'Officials of NFLC, Pusan Bank Punished for Mismanagement', Korea Herald, 29 April 2000.

(21) Third, it would clearly not be appropriate to use Citibank Seoul as a benchmark to determine
the commercial reasonableness of participating in the syndicated loan, for the reasons set
forth in recitals 130 to 133 of the definitive Regulation. First, Citibank Seoul failed to
cooperate in this investigation, thus forc ing the Commission to rely on facts available
regarding the participation of Citibank Seoul. Second, the evidence on the record discussed in
recital 133 of the definitive Regulation reflect s an unusually close relationship between the
GOK and Citibank that calls into question the im partiality of Citibank in lending to Hynix.
Third, Citibank itself was a financial advisor to Hynix regarding its restructuring and thus had
an inherent conflict with respect to participation in new lending to Hynix.
26 It had not given
financing to Hynix prior to becoming Hynix's financial advisor. Fourth, the Panel itself
recognised that Citibank cannot serve as a basis for determining whether any of the loans to
Hynix were made on the basis of commercial considerations.27

(22) Finally, it is important to note that Hynix defaulted on its interest payments on the syndicated
loan almost as soon as the loan was given. As noted in recital 87 of the definitive Regulation,
Hynix had not been servicing the syndicated loan that it received in January 2001.

(23) Based on the foregoing, it may be concluded that none of the other seven participants in the
syndicated loan can serve as an appropria te benchmark for measuring the commercial
reasonableness or the amount of benefit to Hynix from the portions of the loan provided by
KEB and KDB.

(24) On this basis, the participation of KE B and KDB in the syndicated loan may still be
considered to be a countervailable subsidy that provides a benefit to Hynix. However, as set
out in recital 37 of the definitive Regulation, no subsidy amount has been countervailed under
the syndicated loan in order to avoid double-counting, as the syndicated loan amount was
subsequently rolled-over into the October 20 01 measures. Thus, no amendment of the
findings is necessary with regard to this measure.

 1.4. Calculation of the amount of benefit

(25) The Panel found, at para. 7.215 of its report, that the calculation of the amount of the benefit
conferred by each of the financial contributions was inconsistent with Articles 1.1(b) and 14
of the SCM Agreement. The GOK did not raise any claims challenging 'as such' provisions of
the basic Regulation or the Guidelines
28 relating to the calculation of the amount of the
benefit. Thus, the Panel report only addressed how the EC applied these provisions and
calculated the amount of the benefit with respect to the measures at issue in this proceeding
(the definitive Regulation).

(26) In particular, the Panel considered that the EC acted inconsistently with Article 1.1(b) and 14
of the SCM Agreement by taking as a starting point that the amount of the benefit conferred

26 Provisional Regulation, recital 87.
27 Panel report, footnote 185:
'While it is certainly true that Citibank, and its s ubsidiary SSB, are not government owned at all, we
consider that the EC sufficiently demonstrated that the close relationship with the government and the specific
role as financial advisor to Hynix throughout the restructuring make Citibank particularly inapt to serve as an
appropriate market benchmark for assessing whether the government's financial contribution was in line with
the normal market conditions, or whether it, on the contrary, conferred a benefit to Hynix. This is especially so
given the very small participation in Hynix by Citibank, whose share of the total Hynix loans in October 2001
was 1,3 %. (Preliminary Deterimantion, paragraph 93).'
28 Guidelines for the calculation of the amount of subsidy in countervailing duty investigations (Official
Journal of the European Communities C 394, 17.12.1998, p. 6) (the Guidelines).

by each of the financial contributions, which were generally in the form of loans, guarantees
or equity, was to be calculated as if those fina ncial contributions had been grants, irrespective
of their terms and conditions. The Panel reasone d that the calculation of the amount of the
benefit should be based on the benefit to the reci pient, not the cost to the provider. It further
reasoned that the provision in this case of funds to Hynix in the form of loans, guarantees and
equity may have been of less benefit to Hynix th an if the funds had been provided in the form
of grants. In particular, the Panel reasoned th at the funds would appear as debt in Hynix's
balance sheet or would have given rise to the dilution of the ownership claims of existing
shareholders in Hynix.29

(27) The Panel considered that, as a matter of WT O law, the correct starting point for the EC in
this case must be the search for an alternativ e benchmark as a base for the calculation of the
amount of benefit. The Panel particularly re ferred, at para. 7.213 of its report, to 'a
comparable commercial loan which the firm could actually obtain on the market'
(Article 14(b) SCM Agreement) and 'a comp arable commercial loan absent the government
guarantee' (Article 14(a) SCM Agreement). The Panel also referred, by way of example, to
so-called 'junk bonds' or 'vulture funds'.30

(28) The Panel observed that there may be circ umstances in which there is an absence of any
comparable benchmark, and that the inv estigating authority was and is entitled to
considerable leeway in adopting a reasonabl e approach to calculating the amount of the
benefit to Hynix.
31

(29) In the light of the Panel's findings, for each of the relevant financia l contributions in the
measure at issue, the Commission has re-examined all of the relevant facts and evidence on
the record, taking into account all of the submissi ons of interested parties, specifically with
respect to possible alternative benchmarks, in cluding 'junk bonds' and 'vulture funds', and, for
each relevant financial contribution, redetermined the amount of the benefit to Hynix.

(30) The Commission has not re-examined or made any redeterminations with respect to any
substantive or procedural matters confirmed by the Panel report or not found by the Panel to
be inconsistent with the SCM Agreement, in cluding, but not limited to: Hynix's financial
situation or worth, conditions in the DRAM ma rket, conditions in the financial markets and
the use of facts available. The Commission has li mited itself to the specific issue that is the
subject of the Panel's findings: the availability of alternative benchmarks.

(31) In making this redetermination, the Commiss ion has based its calculation of subsidy on a
'benefit to the recipient' and not on a 'cost to the government' standard, as is required by
Article 6 of the basic Regulation, consiste nt with the Panel's reasoning, with the
determinations in the defin itive Regulation and with the Commission's established practice.
32
In this regard, the Commission notes that one of the key features of the SCM Agreement
(Article 14) following the Uruguay Round was the confirmation that the 'benefit to the
recipient' standard would normally prevail ove r the 'cost to the government' standard. The
Commission further notes that the former will ge nerally lead to a higher amount of subsidy
than the latter, because it requires a comparison with commercial, rather than governmental,
funding. Consequently, the Commission notes that the 'cost to the government' approach

29 Panel report, paragraphs 7.211 and 7.212.
30 Panel report, footnote 186.
31 Panel report, paragraph 7.213.
32 The Panel refers to the cost to the 'provider of the financial contribution', that is, the Government of
Korea and the private banks which it directs.

would not generally be expected to lead to a higher amount of subsidy than the 'benefit to the
recipient' approach.

(32) Thus, consistent with the Panel's reas oning, the Commission has examined the financial
contributions 'from the perspective of the reci pient'. The Commission has done this by means
of an objective examination of the information on the record of the case. The Commission has
not enquired into what might have been the s ubjective state of mind of one or more Hynix
executives at the time. Rather, it has enquired into what, objectively, the amount of the benefit
would have been for a company in exactly Hy nix's situation at the time. Calculating the
amount of the benefit from the perspective of the recipient does not entail switching from an
objective to a subjective basis of enquiry.

 1.5. KEIC guarantee for export credits (D/A extension) in the amount of USD 600 million

(33) The Panel summarised the facts concerning the KEIC guarantee in the following terms:

 '7.85 The second action which was found to be a subsidy was the extension of a guarantee
by the Korea Export Insurance Corporation (KEIC) which is the official export credit agency
of Korea. The KEIC provides export insurance and guarantees to manage the risk associated
with overseas transactions. In January 2001, 14 Hynix creditor banks increased the ceiling of
the export credit facility for D/A's (documents against acceptance) provided to Hynix from
USD 800 million to USD 1,4 billion, an increase of USD 600 million, The KEIC granted the
short-term export credit insurance for the extended D/A limit as regards the transaction
between Hynix and its overseas subsidiaries. In other words, Hynix collects the foreseen
payment for the export transaction from the banks concerned, which hold the D/A documents.
The affiliated importer in the country of des tination then makes the payments for the goods
concerned directly to the banks against th e D/A. Hynix pays KEIC a premium for the
guarantee and pays interest to the banks c oncerned for the D/A amounts withdrawn until the
importer makes the final payment. The KEIC in surance covers the amounts due to the banks
which cannot be collected due to the bankruptcy of either the exporter or the importer.'
33

(34) The Panel found that the EC reached a reasona ble and reasoned conclusion on the basis of the
record before it that the KEIC Guarantee conferred a benefit to Hynix.
34 In doing so, it
recalled that the KEIC itself was hesitant to provide the guarantee on Hynix's debt and needed
its own guarantee from the GOK. 35 However, as regards the amount of the benefit, the Panel
report indicates that the EC should, as a matter of WTO law, re-examine the question of the
availability of alternative benchmarks for calculating the benefit to Hynix.36

(35) As the Panel observed, the question of be nefit in the case of a government guarantee can be
examined from more than one angle.37

(36) One reasonable method of enquiring into the amount of benefit from such a measure might be
to compare the guarantee provided by the govern ment with a comparable guarantee provided
by the market.
38

33 Panel report, paragraph 7.85.
34 Panel report, paragraphs 7.189 to 7.192.
35 Panel report, paragraph 7.189.
36 Panel report, paragraph 7.213.
37 Panel report, paragraph 7.189.
38 Panel report, paragraph 7.189.

(37) A second reasonable method is indicated by Article 6(b) of the basic Regulation (which
generally corresponds to Article 14(b) of the SCM Agreement), which refers to government
loans; and Article 6(c) of the basic Regulati on (which generally corresponds to Article 14(c)
of the SCM Agreement), which refers to a loan guarantee by a government. 39 In this case, the
'loan guaranteed by the government' is the revol ving amount of debt outstanding at any time
owed by the Hynix group, via its affiliated importers in vari ous countries of export, to the
banks, in respect of export transactions where payment has yet to be made, but funds have
already been advanced by the banks to Hynix. The financial contribution under consideration
related to the extension of the facility by USD 600 million. However, the facility itself had an
overall ceiling of USD 1,4 billion.

(38) The Commission has re-examined the extensiv e record in this case and considered whether
there is any relevant benchmark against which the amount of the benefit could be calculated.
First, the Commission considered whether Hynix had received new loans at the time that the
USD 600 million increase had been granted. The record demonstrates, however, that no new
commercially comparable lending had been provided. Second, the Commission looked for
verified evidence regarding the cost and term s of a comparable commercial guarantee or a
'comparable commercial loan absent the government guarantee' that Hynix or another firm in
a situation comparable to Hynix concluded at the relevant time. A comparable commercial
loan would ideally be one of approximately th e same size, would related to the same or a
similar sector of economic activity, would involve a comparable type of activity, such as
export credit insurance, and would have been c oncluded at approximately the same time. It
could not involve any government guarantee, express or implied, and would need to involve a
firm in a comparable financial situation to that of Hynix.

(39) Having conducted this re-e xamination, the Commission has determined that there is no
reliable information on the record regardi ng these matters. The Commission has not found
any such benchmark as regards Hynix itself. The loans provided to Hynix were generally
either provided by the GOK or by banks that were entrusted and directed by the GOK, and the
rate on the syndicated loan would also be an inappropriate benchmark for the reasons stated in
recitals 17 to 20 above. Lending from Citibank Seoul is also not an appropriate benchmark for
the reasons stated in recital 21 above. Citibank' s participation was insu fficiently significant,
was influenced by the participation of othe r lenders and the GOK and was distorted by both
its interest, together with SSB, as Hynix's financial advisor and its long-term relationship with
the GOK. In any event, Citibank did not cooperate in the investigation.

(40) Given Hynix's financial condition, there are no Hynix-specific benchmarks that can be used
and there is no data on the record regarding loans to companies in a similar financial
condition to Hynix. Moreover, the available info rmation indicates that Hynix did not obtain,
and would not have been able to obtai n, the relevant funds in the market.
40 The KEIC export
credit guarantee programme and the KDB debent ure programme were in effect throughout
2001. During this period, Hynix was, by all measures, uncreditworthy. Hynix's already dismal
financial condition worsened markedly in 2000, when the company suffered a net loss of over
KRW 2 trillion. At year-end 2000, Hynix's total indebtedness was KRW 8 trillion, and
Hynix's current ratio, which measures the degree to which a firm's current assets cover current
liabilities, was 0,33.41 Hynix's net profit margin fell from 2,08 % in 1999 to minus 24,03 % in

39 Panel report, paragraph 7.189.
40 Definitive Regulation, recitals 87 and 101 to 112.
41 The 'target ratio' for healthy firms is 2 or better, and a ratio below 1 'signals a firm in extreme
financial distress.' Expert report of Anthony Saunders, p. 12. The Commission notes that although Hynix's
current ratio improved somewhat to 0,65 in 2001, this improvement was solely attributable to the October 2001

2000 (when the DRAM industry as a whole performed well) and minus 93,83 % in 2001.
42
Clearly, during 2000 and 2001, Hynix was unable to generate adequate cash flow to cover its
existing debt, much less new debt.

(41) Market analysts agreed that Hynix was not creditworthy during this period. Hynix's Standard
& Poor's rating was B- in March 2001, CCC+ in August 2001 and 'selective default' in
October 2001. In January 2001, UBS Warburg explained that Hynix's 'debt refinancing
agreement with KDB … merely puts off the evil day but does not solve (Hynix's) core
problem, that it is not profitable and is not payi ng off debt at a sufficiently fast rate from
internal cash flow or asset disposals'.
43 UBS Warburg subsequently stated that Hynix's lack of
product diversity was a concern and that Hynix's excessive focus on commodity DRAMs
would contribute to its 'deteriorating funda mentals' throughout the first half of 2001. 44
Similarly, in February 2001, Deutsche Ba nk posited the cash flow problem bluntly: 'We
believe the most critical concern for (Hynix) is its ongoing cash flow concerns. In our view, it
is unlikely that the Korean Government woul d be willing to give up on the company yet … .
We believe (Hynix's) financial crisis will continue to carry a heavy burden on its ability to
recover, as the DRAM sector is perhaps the most capital-intensive sector within
semiconductors, with a constant requirement to upgrade technology processes'.
45

(42) In February 2001, in an article in the Korea Herald
46, another market expert stated that: 'Given
the fact that credit risk is still pronounced and haunting investors, I don't think fluent capital
will flow into corporate bonds rated below BBB+'. This coincides with the early period of the
KEIC Guarantee and KDB Debenture Programme. The article goes on to point out the yield
difference between investment grade bonds and junk bonds, concluding that 'this indicates
that investors continue to shun low-grade corporate bonds, expanding the spread between
high-credited bonds and the so- called junk bonds to their widest margin'. A press report in
June 2001 stated that 'Investors have started g azing down the Asian credit curve, but they still
lack the nerve to eye corporates with ratings below the bottom rung of investment grade at
BBB-minus. Only companies with strong cash flows, ability to service debt and growth
prospects are likely to make them look.'
47 Another report stated that 'Especially in the latter
half of last year, it was nearly impossible for a company to issue junk bonds based on its own
credit and the junk bonds market existed th rough primary collateralised bond obligations,
collateral loan obligations and a government-initiated bond-refinancing plan.'
48

(43) Thus, the Commission confirms its original finding that Hynix fell short of the investment
grade required by investors for the junk bond market; and that, during the IP, the type of
capital markets referred to by the Panel were inaccessible to companies with prospects as
weak as those of Hynix. Accordingly, such information as is on the record does not permit the
establishment of a reliable benchmark with respect to such markets.

restructuring, which enabled Hynix to drastically reduce the current portion of its long-term debt and, thus, its
current liabilities. See footnote 2.
42 Saunders Report, p. 18.
43 'Korea Daily Comment: Hyundai Electronics,' UBS Warburg, 4 January 2001, p. 2 (Micron Italia, 14
February 2003, post-hearing submission, Exhibit 64).
44 'Hyundai Electronics,' UBS Warburg, 8 January 2001, p. 7 (Micron Italia, 14 February 2003, post-
hearing submission, Exhibit 19).
45 'Hyundai Electronics Inc. Digging a Deeper Hole,' Deutsche Bank, 23 February 2001, p. 8 (Micron
Italia, 14 February 2003, post-hearing submission, Exhibit 66).
46 The Korea Herald, 15 February 2001.
47 Reuters News, 21 June 2001.
48 The Korea Herald, 13 June 2001.

(44) The Commission would therefore be in a pos ition to reasonably and objectively conclude that
no alternative commercial benchmark would actua lly be available in this case. Accordingly,
in these circumstances, the Commission finds that the amount of the benefit to Hynix could
not exceed the full amount of the loan, plus compound interest and the costs of recovery or
attempted recovery in the event of default. Because there is also no reliable information on
the record regarding these latter additional cost s, the Commission has confined itself to the
full amount of the loan. The Commission believes that this conclusion is fully supported by
its (unchanged) determinations regarding the fi nancial situation and worth of Hynix, and the
situation in the DRAMs market and the financial markets, and that it is consistent with the
basic Regulation and the Guidelines.

(45) However, mindful of the WTO Panel's reas oning, the Commission has, exceptionally and for
this reason only, also considered whether or not, even absent any relevant benchmarks, there
is anything that might serve as the basis for a proxy benchmark, adjusted where necessary to
take account of the particular circumstances of th is case. Such a proxy could, for example, be
based on a commercial interest rate, with the addition of a risk premium, reflecting the default
rates of companies exhibiting comparable risk. Such a calculation would take into account the
term of the loan, a benchmark interest rate that would be paid by a creditworthy company, the
probability of default by an uncreditwothy comp any within a specified period of time and the
probability of default by a creditworthy compan y within the same specified period of time.
This approach is premised on the commonly understood notion that when a lender makes a
loan to a company that is cons idered to be uncreditworthy, the lender faces higher probability
that the borrower will default on repayment of the loan. As a consequence of this higher
default probability, the lender will charge a hi gher rate of interest, and one that is in
proportion to the increased probability of defa ult. Essentially, this would entail taking an
interest rate available in the market to cred itworthy borrowers and adding a 'risk premium' to
it in order to account for the increased risk associ ated with lending to a company that is not
creditworthy.

(46) For purposes of implementing the Panel's re port in this case, the Commission has used the
following formula to calculate an appropriate uncreditworthy benchmark interest rate:

 ib= [(1-qn)(1+if)n/(1-pn)]1/n -1

 Where:

 n = the term of the loan

 ib = the benchmark interest rate for an uncreditworthy borrower

 if = the long-term interest rate that would be paid by a creditworthy company

 pn = the probability of default by an uncreditworthy company within n years

 qn = the probability of default by a creditworthy company within n years.

(47) For the purposes of this implementation, the Commission has used as the creditworthy (or
commercial) rate for USD loan s the average USD lending interest rate for 2001, which,
according to the IMF International Financial Statistics Service, was 6,922 %. Although the
credit received by Hynix by virtue of the guarantee was short term, the measure under
consideration, i.e., the guarantee itself, was in fact a form of rolling credit. The Commission
used data from Moody's Investor Service to obtain default rates for creditworthy and
uncreditworthy companies. For the uncreditwor thy rate, the Commission used the likelihood

of default for companies with a credit rating of Caa to C during the term of the relevant
measure (i.e., one year for the KEIC guarantee) . Similarly, the Commission used the default
rate for a creditworthy company during the term of the measure in question, calculated based
on a cumulation of data for investment grad e companies. The rate of default of an
uncreditworthy company in 2001 within one y ear was, according to Moody's, 34,34 %. The
rate of default of a creditworthy company in 2001 within one year was 0,13 %. This led to
total interest rate of 62,70 %. In contrast, the interest rate payable by Hynix on the USD loans
in question was 8,33 %, i.e., a total interest differential of 54,37 %.

(48) The Commission recalls that, normally, having dete rmined that the benefit is equivalent to the
full amount of the financial contribution (in this case, a loan or loan guarantee), the
Commission treats it as a 'non-recurring' subs idy and allocates it over a period of time
corresponding to the normal depreciation of fi xed assets in the industry concerned. The
Commission uses a straight-line allocation and does not increase the total amount of benefit
by using the 'time value of money' method; it merely adds interest to each annual allocated
portion. In this case, the allocation period was five years and no additional costs were added
to the full amount of the loan as explained in recital 44 above, which means that 20 % of the
financial contribution was allocated to each year.

(49) Had the Commission used an interest rate comp arison as described in recitals 45 to 47 above,
the benefit (i.e., the difference between the be nchmark and the actual interest rate) would
have been considered as a recurring subsidy. The amount of subsidy allocated to each year
would have been the interest rate differentia l multiplied by the fact amount of the loan.
Therefore, depending on the size of the interest rate differential, the terms and conditions of
the loan, and the length of the depreciation period, the annual benefit obtained by making an
interest rate comparison may be bigger or smaller than that which results from the application
of the Commission's original approach.

(50) In this case, the Commission's original approach would result in an allocated annual benefit of
20 % of the financial contribution. Depending on th e exact terms of the loan, i.e., whether the
beneficiary repays interest and capital or in terest only each year, this amount would be
reached with an interest rate differential of no less than 20 % and no more than about 35 %
per year. The actual interest differential in th is case is 54,37 %. This means that a strict
application of this method would result in a much higher rate of countervailable subsidy
allocated on turnover, in fact 12,8 % instead of the 5,1 % originally calculated by the
Commission.

(51) Consequently, the Commission considers that its original approach was and is reasonable in
this case. Indeed, it is only in extreme cases that the Commission will determine the amount
of the benefit to be equivalent to the full amount of a loan (i.e., when there is no realistic
possibility of repayment) and in such circumstances it is usual that the benchmark interest rate
will be extremely high. Therefore, the interest rate differential will often give a higher amount
of benefit than a simple allocation of the face amount of the loan over time. In these
circumstances, the Commission has used the more conservative of the two options in order to
be sure that it has not exaggerated the amount of the subsidy, and will treat the face amount of
the loan as the basis for a cap on the maximum amount of the benefit.

(52) On the above basis, the amount of benefit conferred by the KEIC guarantee ad valorem of
export turnover was 5,1 %.

 1.6. KDB debenture programme

(53) The Panel summarised the facts concerning the KDB debenture programme in the following
terms:

 '7.88 A third programme found to constitute a subsidy by Korea was the KDB debenture
programme to which Hynix was admitted on 4 January 2001. This was a programme which
essentially lasted for one year (2001) and was set up by the government in response to
financial instability in Korea caused by the fact that a large amount of bonds issued by a few
companies (including Hynix) were due to ma ture simultaneously. Under this programme,
maturing debt was rolled-over and re-packaged fo r investors. A participating company repaid
on its own 20 % of its corporate bonds falling due and the KDB assumed the remaining 80 %.
This constituted the first phase of the progra mme. Of the 80 % originally assumed by the
KDB, 20 % of the bonds was then sold to the co mpany's creditor banks in proportion to their
debt exposure to the company; 70 % was re-p ackaged for sale to inv estors as collateralised
bond obligations (CBOs) and/or collateralised loan obligations (CLOs), guaranteed by the
Korea Credit Guarantee Fund (KCGF) (*); and the KDB retained the remaining 10 %. The
participating company had to repurchase at least 3 % of any CBOs and 5 % of any CLOs (**).

 7.89 We note that companies were placed in the programme upon nomination by the main
creditor bank, and needed the approval by th e Creditors Financial Institutions Council
(CFIC), based on an assessment of the company's financial future. The CFIC consisted of
representatives of the KCGF, the KDB and 17 other creditor banks (***). The CFIC
ultimately decided on participation in the progr amme. If banks holding 75 % of the loans of
the company agreed to the participation of the company in the programme, the CFIC
considered the decision unanimous. To be placed in the programme, companies had to be able
to repay 20 % of their maturing bonds; normalise business operations through a rescue plan;
have credit ratings below A but higher than BB; and agree to any change in majority
shareholdings requested by their creditor banks, or to the replacement of management in case
of insolvency. Hynix was admitted to the pr ogramme on 4 January 2001 with a credit rating
of BBB-. In total six companies were admitted, four of which, including Hynix, belonged to
the Hyundai group (****). The EC found that the bond purchase by the KDB as part of this
programme constituted a financia l contribution by the government which conferred a benefit
on Hynix.

 (*) The CBO's and CLO's are asset-backed se curities that are sold to investment
trusts.
 (**) Preliminary Determina tion, paragraphs 47 and 48.
 (***) Preliminary Determ ination, paragraph 49.
 (****) Preliminary Determination, paragr aphs 49 to 52. The EC states that the budget
for the programme was KRW 6,2 trillion, of which KRW 2,9 trillion was earmarked for
Hynix, eventual expenditure being KRW 2,9 trillion, of which KRW 1,2 trillion (41 %) was
for Hynix and 38 % was used for the other three Hyundai companies.
49'

(54) The Panel found that the EC reached a reasona ble and reasoned conclusion on the basis of the
record before it that the KDB debenture progr amme conferred a benefit on Hynix. In doing
so, it recalled that the KDB debenture programme was itself set up and effectively guaranteed
by the GOK.
50 However, as regards the amount of the benefit, the Panel report indicates that

49 Panel report, paragraphs 7.88 and 7.89.
50 Panel report, paragraphs 7.194 to 7.199.

the Commission should, as a matter of WTO law, re-examine the question of the availability
of alternative benchmarks.

(55) As the Panel observed, the question of benefit, at least in the case of a government guarantee,
can be examined from more than one angle
51, and in applying the guidelines contained in
Article 14 of the SCM Agreement, an investig ating authority is entitled to considerable
leeway52. The KDB debenture programme, for example, exhibits some of the characteristics
of a guarantee, insofar as the entire measure wa s set up, sponsored and effectively guaranteed
by the GOK or a GOK public body. Thus, one reasonable method of enquiring into the
amount of benefit of such a measure might be to compare the guarantee provided by the
government with a comparable guarantee provided by the market. The KDB debenture
programme might also be considered in the light of Article 6(b) of the basic Regulation
(which generally corresponds to Article 14(b) of the SCM Agreement), which refers to
government loans, and Article 6(c) of the b asic Regulation (which generally corresponds to
Article 14(c) of the SCM Agreement), which refers to a loan guarantee by a government.

(56) The Commission has re-examined the record to consider whether there is any relevant
benchmark against which the amount of the bene fit could be calculated. It has looked for
verified evidence about a comparable governme nt guarantee or 'a comparable commercial
loan' or 'a comparable commercial loan ab sent the government guarantee' that Hynix or
another firm in a situation comparable to Hyni x concluded at the relevant time. A comparable
commercial loan would ideally be one of approximately the same size, would relate to the
same or a similar sector of economic activity, would involve a comparable type of activity,
and would have been concluded at approximate ly the same time. It could not involve any
government guarantee, express or implied, and would need to involve a firm in a comparable
financial situation to that of Hynix.

(57) Having conducted this re-e xamination, the Commission has determined that a commercial
benchmark meeting these criteria was not availabl e in this case. Hynix itself did not sell any
corporate bonds into the commercial market at the time it participated in the KDB debenture
programme. In fact, one of the threshold crite ria for participation in the KDB debenture
programme was that the company in question could not obtain loans or sell bonds on the
normal commercial market. Moreover, as noted in recital 53 of the definitive Regulation,
Hynix provided no evidence on the record that it tried to access foreign debt markets during
this period. In addition, the fact that the in ternational ratings agency Standard and Poor's
downgraded Hynix's debt to a speculative rati ng of 'B-' makes it unlikely that Hynix would
have been able to access foreign bond or loan ma rkets, even if it had tried to do so. Even the
Korean government itself noted in January 2001 that Hynix was 'in a state of technical
insolvency.'
53

(58) Moreover, other lending to Hynix during the period that the KDB rolled over Hynix's
maturing bonds cannot serve as a basis for measuri ng whether a benefit to Hynix exists. For
the reasons noted in recitals 17 to 22 above, the loans provided as part of the syndicated loan
cannot serve as an appropriate basis of comp arison. The lending made pursuant to the
syndicated loan was so distorted by the governme nt's intervention in that loan that it cannot
serve as a reasonable commercial benchmark by which to measure whether a benefit has

51 Panel report, paragraph 7.189.
52 Panel report, paragraph 7.213.
53 See 'Direct Intervention by the Government in Supporting Hynix,' Korea Economic Daily, 28 August
2001 (reporting on the discovery by the Korean Natio nal Assembly of correspond ence between the Korean
Economic Ministers and the KEIC directing the KEIC to provide assistance to Hynix) (Attachment 1 to Micron
Italia's 14 May 2003 submission on the provisional Regulation).

occurred or the amount of that benefit. In this regard, the Commission recalls that the
syndicated loan itself was made possible by the GOK waiving the lending limits for three key
participants in that loan. Without the participa tion of these three banks in the syndicate, it is
unclear whether the loan would have been able to go forward at all, given that it would have
been significantly undersubscribed.54

(59) Further, the convertible bonds purchased by private bodies as part of the May 2001
restructuring programme cannot serve as a benchmark because, although the evidence on
record did not rise to the level sufficient for a fi nding of entrustment or direction, it indicates
a level of government involvement that makes the participation by private creditors an
inappropriate measure of the commercial reasonableness of the CB purchases: the creditor
banks themselves acknowledged in the 7 May 2 001 creditor financial institution resolution
that Hynix was unable to service its debts in May 2001
55 and the GOK was clearly heavily
involved in overseeing the completion of the May 2001 CB offering, going as far as having a
high level FSS official attend the March 2001 meeting of the creditor council.
56 Further, a
comparable commercial loan which could serve as a benchmark is one which is concluded at
approximately the same period of time; the CB offering took place five months after the KDB
debenture programme, when both Hynix's financ ial situation and the state of the DRAMs
market were markedly different.

(60) As already indicated above
57, no other comparable commercial benchmark was actually
available in the market. On the contrary, the available information indicates Hynix would not
have obtained the relevant funds in the market.

(61) The Commission would therefore be in a pos ition to reasonably and objectively conclude that
no alternative commercial benchmark would actua lly be available in this case. Accordingly,
under these circumstances, the Commission finds that the amount of the benefit to Hynix
could not exceed the full amount of the funds obtained by Hynix as a result of the operation
of the KDB debenture programme, plus compound interest and the costs of recovery or
attempted recovery in the event of default. Because there is also no reliable information on
the record regarding these latter additional cost s, the Commission has confined itself to the
full amount of the funds. The Commission believes that this conclusion is fully supported by
its (unchanged) determinations regarding the fi nancial situation and worth of Hynix, and the
situation in the DRAMs market and the financial markets, and that it is consistent with the
basic Regulation and the Guidelines.

(62) However, mindful of the WTO Panel's re asoning, the Commission has also considered
whether or not, even without the availabilit y of any appropriate commercial benchmarks,
there is anything that might serve as the b asis for a proxy benchmark, adjusted where
necessary to take account of the particular circ umstances of this case. Such a proxy could, for
example, be calculated along the lines already indicated above in recitals 45 and 46 with
respect to the KEIC Guarantee.

(63) For the purposes of this calculation, and as suggested by GOK, the Commission has used as
the creditworthy rate for KRW loans the IMF In ternational Financial St atistics rate on short-

54 As stated in recital 53 of the definitive Regulation, Hynix had originally requested a syndicated loan
of KRW 1 trillion, but was only able to raise KRW 800 billion. If the three ba nks which accounted for KRW
300 billion of the KRW 800 billion total were unable to participate without the GOK's specific permission, it is
highly speculative that the remaining banks would have gone forward with the loan.
55 Panel report, paragraph 7.104.
56 Panel report, paragraph 7.97.
57 Recitals 17 to 22, 56 and 57.

term KRW denominated-lending, which was 7,7 %. The default rates for both creditworthy
and uncreditworthy companies for the term of the measure in question were taken from
Moody's Investor Services (0,13 % and 34,37 % resp ectively). This led to a total interest rate
of 63,89 %. In contrast, the average interest rate payable by Hynix on the KDB debentures in
question was 12,7 %, i.e., a total interest rate differential of 51,19 %.

(64) Viewing the financial contribution as a recurring subsidy, rather than as a non-recurring
subsidy to be allocated over time, and applying this model to the calculation of the amount of
the benefit in the financial contribution under consideration, would lead to an amount of
benefit of KRW 626,9 billion, resulting in a c ountervailable subsidy allocated on turnover of
11,8 %, instead of the 4,9 % originally cal culated by the Commission. Consequently, the
Commission considers that its original approach was and is reasonable in this case, as the
interest rate differential would give a much hi gher amount of benefit than a simple allocation
of the face amount of the loan over time. In these circumstances, the Commission has used
the more conservative of the two options in orde r to be sure that it has not exaggerated the
amount of the subsidy and will treat the face am ount of the loan as the basis for a cap on the
maximum amount of the benefit.

(65) Taking the amount of the funds obtained by Hynix as a result of the operation of the KDB
debenture programme as a cap on the maximum am ount of the benefit, the Commission finds
that the amount of benefit to Hynix in the financial contribution at issue ad valorem of
turnover was 4,9 %.

 1.7. October 2001 rescue package, consisting of debt-toequity swap, second roll-over of
debt and provision of new loan of KRW 658 billion

(66) The Panel summarised the f acts concerning the October 2001 r estructuring programme in the
following terms:

 '7.111 The fifth and final programme consider ed to constitute a subsidy was the October
2001 restructuring programme. On 4 October 2001, a second Hynix CFIC was set up in
accordance with the provisions of the Corporat e Restructuring Promotion Act (CRPA). The
CRPA was enacted in August 2001 and its purpose wa s to facilitate corporate restructuring,
which before was based on agreements between creditor banks and the companies concerned.
The CFIC consisted of 110 financial instituti ons including 17 banks and 15 investment trust
companies. The decisions of the CFIC were taken by a 75 % majority. The votes were
allocated in proportion of each institution's exposure to the total loans to Hynix. Any financial
institution exercising its dissenter's rights by disagreeing with a CFIC resolution would be
excluded from the CFIC permanently. In its seco nd meeting held on 31 October 2001, the
CFIC decided on a 'second restructuring packag e' for Hynix. The following measures were
proposed:

 (a) provision of a new loan of KRW 1 trillion to Hynix with an interest rate of 7 %;

 (b) debt-to-equity swap by provisi on of bonds convertible into shares;

 (c) extending the maturities of existing lo ans until 31 December 2004, converting the
maturing corporate bonds into corporate bonds with a three-year maturity and an
interest rate of 6,5 % and adjusting the inte rest rate of the remaining loans in Korean
currency to 6 %.

 7.112 The financial institutions were given three options by the CFIC in the 31 October
meeting. The first option was to agree w ith the proposals by extending new credit and

participating in a debt-to-equity swap (Option 1). Secondly, the banks which did not want to
participate in the new loan were obliged to swap 28,5 % of thei r loans into equity and waive
the rest of the Hynix debt (Option 2). Thirdly, the CFIC also decided that those banks which
objected to the measures and used their dissen ter's rights would have their loans purchased
back at the liquidation value as establishe d by Arthur Andersen, the firm that was
commissioned to conduct a study on the financial situation of Hynix at the time (Option 3).

 7.113 Nevertheless, only six banks agreed to extend new credit, which amounted to KRW
658 billion instead of the planned KRW 1 tr illion. These banks swapped a considerable
amount of their loans into equity. These so-c alled Option 1 banks were the KEB, Woori
Bank, Chohung Bank, KDB, NACF and Citibank (*). Eight banks refused to extend new
loans, so they swapped approximately one-third of their loans into equity and wrote-off the
rest as a loss. The remaining banks objected to the restructuring and elected to receive the
liquidation value of their loans, and had to write the remaining debt off as a loss. The loans
remaining with the banks of the first category were subject to maturity extensions and interest
rate cuts as explained above (**). The EC considered that the participation by the six Option 1
banks in the October 2001 restructuring programme constituted a financial contribution by the
government which conferred a benefit on Hynix. The rate of subsidisation for this October
2001 restructuring programme was calculated to be 19,4 %.

 (*) Preliminary Determination, paragraph 77. The KDB did not participate in the new
loan of KRW 658 billion.
 (**) Preliminary Determina tion, paragraphs 69 to 71.'

(67) The Panel found that the EC reached a reasona ble and reasoned conclusion on the basis of the
record before it that the October 2001 rest ructuring programme conferred a benefit on
Hynix.
58 However, as regards the amount of the benefi t, the Panel report indicates that the EC
should, as a matter of WTO law, re-examine th e question of the availability of alternative
benchmarks.

 (i) Debt-to-equity swap

(68) As the Panel indicated, in approaching the question of benefit in the case of the government
provision of equity capital and in applying th e guidelines contained in Article 14 of the
SCM Agreement, an investigating author ity is entitled to considerable leeway.
59 The
Commission considers that the debt-to-equity swap in the October 2001 restructuring
programme may be considered in the light of Article 6(1) of the basic Regulation (which
generally corresponds to Article 14(a) of the SCM Agreement), which refers to government
provision of equity capital inconsistent with th e usual investment practice, including for the
provision of risk capital, or private investors in the territory of the relevant Member. The
Commission notes that, unlike subparagraphs (b) and (c), subparagraph (a) contains no final
sentence providing further guidance on how the amount of the benefit is to be calculated.

(69) The Commission has re-examined the record to consider whether there is any relevant
benchmark against which the amount of the bene fit could be calculated. It has looked for
verified evidence about a comparable private provision of equity capital that Hynix or another
firm in a situation comparable to Hynix concluded at the relevant time. A comparable
provision of equity ideally would be one of a pproximately the same size, would relate to the
same or a similar sector of economic activity, would involve a comparable type of activity

58 Panel report, paragraphs 7.204 to 7.210.
59 Panel report, paragraph 7.213.

and would have been concluded at approximate ly the same time. It could not involve any
government guarantee, express or implied, and would need to involve a firm in a comparable
financial situation to that of Hynix.

(70) Having conducted this re-e xamination, the Commission has determined that there is no
verified information on the record regarding these matters. The Commission has not found
any such benchmark as regards Hynix itself. The equity provided to Hynix was generally
either provided by the GOK or by banks that were entrusted or directed by the GOK.

(71) Moreover, no other comparable commercial benchmark was actually available in the market.
On the contrary, the available information indicated Hynix would not have obtained the
relevant funds in the market. As noted in rec ital 103 of the definitive Regulation, in October
2001 Hynix's credit rating from Standard & Poor's was 'SD' (selective default). Hynix went
into default of interest payments on the sy ndicated loan in May 2001 and several creditor
banks raised their loan-loss provisions as regards Hynix already in May 2001 and again in
October 2001, before the measures under consid eration were put in place. The six banks
concerned by the October 2001 measures rated Hynix internally from 'precautionary' to
'doubtful' and the Option 2 banks involved in the debt-to-equity swap were given very little
choice: they either took the shares or they effectively wrote off Hynix's debts completely. The
GOK suggestion that the difference between the sw ap price paid and the market price should
serve as the amount of benefit ignores the realities of Hynix's abysmal financial situation; no-
one would invest in a company with an SD rating. The conclusions set out in recitals 101 to
112 of the definitive Regulation supporting the fi nding that no comparable equity financing
that might serve as a benchmark was available to Hynix on the commercial market are hereby
confirmed.

(72) The Commission would therefore be in a pos ition to reasonably and objectively conclude that
no alternative commercial benchmark would actua lly be available in this case. Accordingly,
under these circumstances, the Commission finds that the amount of the benefit to Hynix
could not exceed the full amount of the funds obtained by Hynix as a result of the operation
of the debt to equity swap in the October 2001 restructuring programme. The Commission
believes that this conclusion is fully supported by its (unchanged) dete rminations regarding
the financial situation and worth of Hynix, and the situation in the DRAMs market and the
financial markets, and that it is consistent with the basic Regulation and the Guidelines.

(73) However, mindful of the WTO Panel's re asoning, the Commission has also considered
whether or not, even without any relevant be nchmarks, there is any other method by which
the amount of the benefit might be adjusted to take into account the particular circumstances
of this case. The Commission considers that the uncreditworthy analysis conducted with
respect to debt cannot provide an appropriate basis for comparison, precisely because this
particular financial contribution is concerned with equity, whic h is a fundamentally different
type of measure from debt.

(74) The Commission has taken into considera tion the possibility that, in the particular
circumstances of the present reassessment, the co st to the recipient of receiving the financial
contribution should be taken into account. The Commission notes that, in order to examine
the cost, if any, of the swap from the point of view of the recipient, the obligations imposed
on a company when issuing new equity would have to be considered. The Commission notes
in this respect that injections of ordinary share capital do not generally impose particular
obligations on a company, as there is neither a fixed rate of return which the company must
achieve nor, in fact, do any payments need to be made. However, the company has at least a
theoretical obligation to distribute its profits or part thereof to its shareholders; the return on
equity ratio (ROE) could provide some indica tion of the level of return the company is

expected to provide to its shareholders and c ould be used in the calculation of the amount of
the benefit to Hynix. However, the ROE of Hynix for 2001 was minus 96,75 %, as calculated
by reference to its financial statements for th e year. Therefore, on the basis of an objective
evaluation of Hynix's financial standing at the time of the debt-toequity swap, it is
unreasonable to expect that Hynix would be in a pos ition to distribute any sort of return to its
shareholders for the relevant year. Hence, using the ROE as a benchmark, it would still be
concluded that the entire amount of the debt-to-equity swap is a countervailable subsidy.

(75) The Commission has also examined whether th ere are costs to Hynix associated with having
to surrender ownership shares as a result of the swap or the cost to Hynix from potential
dilution of the share price resulting from the issuance of new shares.
60 Based on its review of
the record evidence, the Commission does not believe that the net benefit to Hynix of the full
debt-to-equity swap is diminished as a result of the issuance of new shares. In this regard, the
Commission believes it is essential to recognise the impact that the debt-to-equity swap had
on Hynix's financial situation

(76) As a threshold matter, it is key to recognise that this was not a straight equity infusion. The
fundamental benefit to Hynix resulted from the massive amount of debt that was extinguished
as a result of the swap, namely KRW 2,483 b illion. This effectively absolved Hynix from
having to repay any of this principal amount and from having to pay interest. Instead, this
massive amount of debt was replaced with equity shares issued to the Option 1 creditor banks.
However, there was no real quantifiable cost to Hynix of issuing the new shares. While the
existing share values were diluted as a result of the issuance, this had absolutely no balance
sheet impact on Hynix. It did not result in any cash outlays (apart from the expense associated
with the issuance of the new shares) and did not obligate Hynix to any sort of cash payments
in the future, as would have been the case with debt instruments.

(77) Consequently, in light of all these consider ations and since Hynix did not report any costs
associated with the issuance of equity, the appropriate approach to measuring the benefit from
the debt-to-equity swap is to take the full amount of the swap. This results in an overall
benefit to Hynix of KRW 358,2 billion and a c ountervailable subsidy allocated on turnover of
9,6 %.

 (ii) Debt roll-over and new loan

(78) The Commission considers that the debt roll-over and new loan in the October 2001
restructuring programme may be considered in the light of Article 6(b) of the basic
Regulation (which generally corresponds to Article 14(b) of the SCM Agreement), which
refers to the amount which the firm would pay on a comparable commercial loan that the firm
could actually obtain on the market.

(79) The Commission has re-examined the record to consider whether there is any relevant
benchmark against which the amount of the bene fit could be calculated. It has looked for
verified evidence about a comparable commercia l loan that Hynix or another firm in a
situation comparable to Hynix concluded at th e relevant time. A comparable commercial loan
ideally would be one of approximately the same size, would relate to the same or a similar
sector of economic activity, would involve a co mparable type of activity, and would have
been concluded at approximately the same time. It could not involve any government

60 See Panel report paragraphs 7.212 and 7.213 which discuss the Panel's opinion that the full amount
of the debt-to-equity swap may not reflect the full amount swapped because of the obligation placed on Hynix,
in the form of surrendering ownership shares or in dilution of the shares to existing shareholders.

guarantee, express or implied, and would need to involve a firm in a comparable financial
situation to that of Hynix.

(80) The bonds purchased as part of the May 2001 restructuring programme cannot serve as a
basis for determining the commercial reasonablen ess of the new loan and the debt roll-over,
as Hynix's financial situation deteriorated substantially between May and October 2001.
Therefore, the two situations cannot be considered to be comparable.

(81) Having conducted this re-e xamination, the Commission has determined that there is no
verified information on the record regarding these matters. The Commission has not found
any such benchmark as regards Hynix itself. The loans provided to Hynix were generally
either provided by the GOK or by banks that were entrusted or directed by the GOK.

(82) As already indicated above
61, no other comparable commercial benchmark was actually
available in the market. On the contrary, the available information indicates Hynix could not
have obtained the relevant funds in the market.

(83) The Commission would therefore be in a pos ition to reasonably and objectively conclude that
no alternative commercial benchmark would actua lly be available in this case. Accordingly,
under these circumstances, the Commission finds that the amount of the benefit to Hynix
could not exceed the full amount of the funds obtained by Hynix as a result of the operation
of the debt roll-over and new loan in th e October 2001 restructuring programme. The
Commission believes that this conclusion is fully supported by its (unchanged) determinations
regarding the financial situation and worth of Hynix, and the situation in the DRAMs market
and the financial markets, and that it is consistent with the basic Regulation and the
Guidelines.

(84) However, mindful of the WTO Panel's re asoning, the Commission has also considered
whether or not, even in the absence of any rele vant benchmarks, there is any other method by
which the amount of the benefit might be adju sted to take into account the particular
circumstances of this case. In this respect, the same me thodology as the one outlined in
recitals 45 and 46 was used to calculate th e amount of the benefit received by Hynix from
these two measures.

(85) For the purposes of this calculation, the Commission has used as the creditworthy rate for
KRW loans the average Bank of Korea interest rate on investment grade corporate bonds in
2001, which was 11,38 %. The default rates for both creditworthy and uncreditworthy
companies for the term of the measures in question were taken from Moody's Investor
Services. The rate of default of an uncreditw orthy company in 2001 within three years (the
term of the new loan and of the roll-over) w as 57,97 %, whereas the rate of default of a
creditworthy company within three years in 2001 wa s 0,94 %. This led to a total interest rate
of 48,22 %. In contrast, the interest rate payable by Hynix on the new loan was 7 % and on
the roll-over 6,5 %, i.e., an interest rate differential of 41,2 % and 41,7 % respectively.

(86) Viewing the financial contributions as r ecurring subsidies, rather than as non-recurring
subsidies to be allocated over time, and applying this model to the calculation of the amount
of the benefit in the financial contributions unde r consideration, would lead to an amount of
benefit of KRW 271,5 billion for the new loan and KRW 761,4 billion for the roll-over. This
would result in countervailable subsidies allocat ed on turnover of 6,8 % for the new loan and
19,1 % for the roll-over, compared to 3,5 % and 9,8 % respectively, as originally calculated
by the Commission. Consequently, the Commission considers that its original approach was

61 Recitals 17 to 22 and 57 to 59.

and is reasonable in this case, as the interest rate differential would give a much higher
amount of benefit than a simple allocation of the face amount of the loans over time. In these
circumstances, the Commission has used the more conservative of the two options in order to
be sure that it has not exaggerated the amount of the subsidy and will treat the face amount of
the loans as the basis for a cap on the maximum amount of the benefit. On the basis of these
considerations, the Commission had determined that the amount of the benefit to Hynix
ad valorem of turnover is, for both measures, 13,3 %.

(87) It is noted that, in relation to the debt ro ll-over, contrary to recital 166 of the definitive
Regulation, the amount of CBs purchased by Option 1 banks has not been deducted, as the
May 2001 measures are no longer countervailed.

 (iii) Total subsidy of October 2001 rescue package

(88) The subsidy amount thus calculated for the debt-to-equity swap, the debt roll-over and the
new loan was considered to confer a large non -recurring benefit and was spread across a five-
year period corresponding to the normal depreciation period of assets in the DRAMs industry.
The resulting amount was then allocated on Hynix' s turnover during the IP and interest based
on the average commercial rate applicable in Korea during the IP was added. The revised
amount expressed ad valorem is 22,9 %.

 1.8. Total subsidy amount

(89) In summary, the calculation of the total amount of the subsidy has thus been revised on the
basis of the Panel's recommendations and is now as follows:

Type of
subsidy
D/A
extension
KDB
debenture
programme
May 2001
CB
purchase,
debt
rollover
October
2001
rescue
package
Total
– 5,1 % 4,9 % 0 % 22,9 % 32,9 %

 2. Injury

 2.1. Introduction

(90) This part sets out the reassessed finding s based on the recommendation of the Panel report
concerning the evaluation of the factor 'wages' as a relevant factor affecting the state of the
Community industry within the meaning of Article 8(5) of the basic Regulation (which
generally corresponds to Article 15.4 of the SCM Agreement).

(91) All other findings concerning injury remain as established in the original investigation and set
out in the provisional Regulation and the definitive Regulation.

 2.2. Wages

(92) In the original investigation the EC had c onsidered and evaluated the wages factor, but found
wages to be irrelevant to its injury determination. However, the Panel found that:

 'without a written record of the analytical pr ocess undertaken by the investigating authority to
evaluate "wages", we cannot examine whether an adequate and reasoned explanation has been

provided of how the facts support the injury determination made by the EC and,
consequently, whether that determination was consistent with Article 15.4. Without that
written record, we would be forced to embark on post hoc speculation about the thought
process by which the investigating authority arri ved at its ultimate conclusions. We consider
that the standard of review in Article 11 of the DSU prevents us from embarking upon this
exercise.'
62

 Consequently, the Panel concluded that the EC acted inconsistently with Article 15.4 of the
SCM Agreement in not evaluating the 'wages' factor when examining the impact of the
subsidised imports on the state of the domestic industry.
63

(93) In the light of the Panel's finding, the Commission, having again reviewed the information on
the record concerning Community wages, both in isolation and together with the other injury
factors set out in Article 8(5) of the basic Regulation, provides herein a written record of its
evaluation of the wages factor.

(94) The Commission examined the average co st of wages per employee for the Community
industry during the IP, and in the three prior years. The indexed results are shown in the
following table.
64

Average cost for wages per
employee 1998 1999 2000 2001
(IP)
Index 100 99 115 109

(95) The table shows that the average cost of the Community industry for wages and salaries
during the period under consideration varied, decreasing and increasing over time. In 2000, it
increased by 15 %. In 2001, compared to 1998, it had increased by 9 %. Overall, the increase
was lower than the increase of the total hourly labour costs in the euro area during this
period.
65 Thus, there were no unusual developments in wages during the relevant period, and
any developments only had very limited effect s on the financial situation of the domestic
industry as a whole.66

62 Panel report, paragraph 7.360.
63 Panel report, paragraph 7.362.
64 Data obtained from the confidential version of the questionnaire responses and the financial
statements of the Community producers.
65 The total hourly labour costs in the euro area for the whole economy (excluding agriculture, public
administration, education, health and other services) increased between 1998 and 2001 by 10,5 % (see ECB
Monthly Bulletin for December 2001 and May 2002).
66 However, there were adverse wage and benefit e ffects suffered by at least one Community DRAM
manufacturer, Micron, due to financial losses caused by substantial volumes of subsidised Hynix imports sold at
prices that caused substantial DRAM price depression. In October 2001, Micron suspended all wage and cost-
of-living increases. In addition, Micron executives to ok a 20 % reduction in pay. Micron's employee profit
sharing programme, whereby 10 % of each quarterly profit is shared with Micron employees, was suspended,
and senior staff took a 10 % reduction in pay. In addition, in December 2001 all employees were placed on
mandatory leave for two to three weeks which, for employees who had already exhausted their annual vacation
allowance, was unpaid (Micron post-hearing submission, 18 February 2003, p. 62). In addition to these wage
and benefit reductions, in February 2003 Micron was compelled to lay off 10 % (more than 1 850) of its
company-wide workforce (see Micron post-hearing submission), and Infineon 'was obliged to reduce the
number of employees in the fourth quarter of 2001 as a result of the losses related to subsidised imports from
Korea.' (Infineon post-hearing submission, 14 March 2003, p. 36).

(96) Furthermore, the Commission recalls that DRAMs are capital intensive products and, thus,
labour may only have a limited contribution to their cost of production (see also recital 41
above). Consequently, this relatively small incr ease in wages had hardly any effect on the
overall financial situation of the Community industry.

(97) Given its negligible impact, consideration of the wages factor together with the other factors
referred to in Article 8(5) of the basic Regulation is not such as to alter the conclusion that the
Community industry suffered material injury.67

 2.3. Conclusion

(98) Based on the foregoing, the conclusion set out in recital 188 of the definitive Regulation that
the Community industry suffered material injury within the meaning of Article 8 of the basic
Regulation is hereby confirmed.

 3. Causation

 3.1. Introduction

(99) This part sets out the reassessed findings based on the recommendations of the Panel report
concerning the non-attribution to the subsidised imports of any injury caused by other factors
(in particular, decline in demand, overcapacity and other, non-subsidised imports) within the
meaning of Article 8(7) of the basic Regulation. The Panel's determination in paragraph 7.437
of its report does not preclude a conclusion of a causal relationship between subsidised
imports and the material injury suffered by the Community industry, but added that a
satisfactory explanation of the nature and extent of the injurious effects of those other factors,
preferably with quantitative analysis, as dis tinguished from the effects of the subsidised
imports, is required.

 3.2. Decline (contraction) in demand and economic downturn

(100) Article 8(7) of the basic Regulation (which generally corresponds to Article 15.5 of the
SCM Agreement) requires examination of any k nown factors other than subsidised imports
which at the same time are injuring the Comm unity industry, and not to attribute injury
caused by these other factors to subsidised im ports. One of the factors referred to is
'contraction in demand'.

(101) The Panel found in paragraph 8. 1(e) of its report that the EC had failed to make sure that the
injury caused by 'decline in demand' was not attributed to the subsidised imports. This
conclusion was reached in the light of the Pane l's findings in paragra phs 7.411 to 7.414 of its
report, which treat a 'decline in demand' as synonymous with a 'general economic downturn'.

EC
consumption 1998 1999 2000 2001 (IP)
DRAMs in
'000 Mbits 16 593 400 28 961 100 45 873 600 68 967 600
Index 100 175 276 416

67 Article 8(5) of the basic Regulation states that '[t]his list [of relevant economic factors having a
bearing on the state of the industry] is not exhaustive, nor can one or seve ral of these factors necessarily give
decisive guidance.'

(102) The Commission recalls that, all other thi ngs being equal, demand (i.e., the willingness and
ability to obtain an amount of a particular good) may generally be considered to be equivalent
to consumption (i.e., the actual physical pro cess of using a good irrespective of the level of
trade). The above table sets out EC consumption during the relevant period in terms of Mbits.
The use of this unit of measurement was not di sputed before the Panel. It appears from the
above table that because the actual consump tion in the Community for DRAMs increased
constantly and significantly during the period under consideration, it is incorrect to allege that
the level of demand for DRAMs in the Community declined during the same period. Thus, all
of the relevant argumentation concerning the impact of the 'decline in demand' on the
injurious situation of the Community industry (in particular its prices) raised by the GOK and
Hynix is irrelevant, because, as shown above, the level of demand increased. With respect to
the claim by the GOK and Hynix that the allege d decline in demand affected the Community
industry's prices, this is unfounded in light of the fact that there was no decline in the level of
demand. On the contrary, the subsidised imports had a significant impact on the prices of the
Community industry and, thus, on its injuri ous condition (see recitals 191 and 192 of the
definitive Regulation).

(103) Hynix and the GOK noted that worldwide demand for DRAMs grew in 2001 by only 59 %
compared to the average year on year growth rate of 75 %, apparently contending that in 2000
to 2001 there was a huge slowdown in the grow th rate of demand (see recital 193 of the
definitive Regulation). The Commission does not agree. Hynix and the GOK correctly point
out that the DRAMs market is cyclical ( see recital 193 of the definitive Regulation).
However, in cyclical markets, demand growth rates vary sharply from one year to another,
and it would be unreasonable to expect the growth rate of demand in a particular year to
reflect the average growth rate of demand for an entire business cycle. A reasonable way to
assess whether demand growth slowed significantly in 2000 to 2001, taking into account the
cyclical nature of the market, would be to compare the growth rate of demand in 2000 to
2001, which was a cyclical trough, with the average growth of demand during troughs in
previous cycles. Neither Hynix nor the GOK ma de any arguments nor submitted any data in
support of such a comparison. Accordingly, r ecord evidence does not support the conclusion
that in 2000 to 2001 the growth rate of de mand slowed down significantly, considering the
cyclical nature of the DRAMs market.

(104) It was also considered whether the growth rate of demand in the Community slowed down in
2000 to 2001 as compared to the actual growth rates observed in previous years. The demand
for DRAMs in the Community, measured in term s of EC consumption, increased by 75 % in
1998 to 1999, 58 % in 1999 to 2000 and 51 % in 2000 to 2001. Thus, while there was a
constant increase in demand during the period u nder consideration, this increase followed a
declining trend. Nevertheless, demand growth rate remained significant in the IP (51 %).

(105) The declining trend in demand growth was more pronounced between 1999 and 2000 (where
demand growth declined by 17 percentage poi nts) than between 2000 and the IP (where
demand growth declined by 8 percentage points) . This evolution of demand growth has to be
assessed by comparison with the evolution of the sales prices of the Community industry, the
primary cause of injury to the Community industry during the period under consideration (see
recital 188 of the definitive Regulation). In particular, in 1999 to 2000, demand growth
declined by a sizable 23 %, but the average sales price of the Community industry dropped by
only 5 %. Conversely, between 2000 and the IP demand growth declined moderately by
12 %, but the average sales price of the Commun ity industry plummeted by 77 % (see recital
128 and the relevant table of the provisional Re gulation). If slowing demand growth had been
a cause of injury, one would have expected th e sales prices of the Co mmunity industry to
decline more sharply in the period when demand growth declined more steeply. Record

evidence shows no such relationship between trends in demand growth and trends in the sales
prices of the Community industry. It is theref ore concluded that ther e is no apparent link
between demand growth and the sales prices of the Community industry which could indicate
that slowing demand growth contributed to the injury suffered by the Community industry.

(106) This approach is consistent with the findi ngs of recent WTO panels reviewing determinations
in respect of non-attribution. In particular, WTO panels have upheld non-attribution findings
where record evidence showed that the factor concerned could not have caused injury because
trends in such factor were independent from tre nds in key indicators of the domestic industry.
Specifically, in US-Steel, the Panel noted that the facts appeared to support the investigating
authority's finding, in respect of hot-rolled bar, that cost increases had not caused injury
because trends in operating margin (a key measure of profitability) were unrelated to trends in
the cost of goods sold (COGS). 68 Similarly, while the Panel concluded that the investigating
authority's finding, in respect of stainless stee l bar, concerning demand as a factor of injury,
did not satisfy the non-attribution requirement, the Panel noted that the investigating authority
could have met this requirement, through a 'rea soned and adequate explanation', simply by
showing that trends in demand had no connection with trends in a key variable attesting to the
condition of the domestic industry.69

(107) Accordingly, the Commission is of the vi ew that its redetermin ation satisfies the non-
attribution requirement under Article 8(7) of the basic Regulation (which generally
corresponds to Article 15.5 of the SCM Agreemen t) in respect of demand growth by showing
that, during the period under consideration, tren ds in demand growth were independent from
trends in the sales prices of the Community indus try. The Commission is also of the view that
its redetermination satisfies the non-attribution requirement in respect of declines in the level
of demand by showing that during the period under consideration no such demand declines
took place.

 3.3. Overcapacity

(108) The Panel noted in paragraph 7.421 of its report that the question of separating and
distinguishing the effects of overcapacity in driving prices down should be addressed,
irrespective of who is to blame for such overcapacity.

(109) The Commission notes that 'overcapacity' is not expressly referred to in Article 8(7) of the
basic Regulation (which generally corresponds to Article 15.5 of the SCM Agreement). The
concept is discussed in the provisional and defi nitive Regulations insofar as it is invoked by

68 '[T]he Panel does consider that the USITC was probably correct in concluding that changes in input
costs were not a cause of serious inju ry. If, indeed, COGS played a significant role in [the] situation of the
domestic industry, one would have expected operating profits to increase while COGS was decreasing …
However, as can be seen from the graph below, which has been generated using USITC data, the trends in
operating margin appear to be independent of trends in COGS.' Report of the Panel, United States — Definitive
safeguard measures on imports of certain steel products, WT/DS248/R, WT/DS249/R, WT/DS251/R,
WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R , WT/DS259/R, adopted December 10, 2003, as
modified by the Appellate Body report (on other grounds), paragraphs 10.440 and 10.443.
69 In particular, the Panel stated: 'While … reluctant to prescribe what may amount to a reasoned and
adequate explanation, the Panel considers that the USIT C could have, for example, demonstrated that there was
no linkage between demand declines during the period of investigation and injury suffered in this particular
case. More particularly, the USITC could have explained that operating margin, perhaps the most relevant injury
factor in this regard, declined irrespective of demand trends. This analysis could have been bolstered by an
explanation that declines in operating margin coincide d with increases in imports rather than declines in
demand' (emphasis added). Report of the Panel, United States — Definitive safeguard measures on imports of
certain steel products, paragraph 10.558.

certain of the interested parties. It is a rela tive concept, insofar as it depends on how much
capacity is available and how much capacity is being used – that is, on the level of demand.
'Overcapacity' may thus arise either because capacity is increased, or demand falls.

(110) 'Overcapacity' as a possible factor of injury can be examined in the context of the world
market or in the context of the Community market. The Commission considers both situations
below.

(111) As set out in recital 153 of the provisi onal Regulation and recital 197 of the definitive
Regulation, some overcapacity existed worldwide during a number of years including the
period under consideration. No major change in this overcapacity situation has been observed
during the period under consideration and in particular at the end of this period leading to the
IP. This worldwide overcapacity may have asserted pressure on prices during the period
under consideration, which may have contribut ed to the injury suffered by the Community
industry. This finding has not been disputed by any party concerned.

(112) However, as set out in recital 147 of the provisional Regulation, the worldwide overcapacity
was estimated to be approximately 20 % of the market. Hynix accounted for around 17 % of
worldwide production during the IP. Given that Hynix was virtually bankrupt during the IP
and remained afloat only through the subsidies provided by the GOK, it can be concluded that
the worldwide overcapacity situation has b een artificially maintained through the
subsidisation of Hynix. Thus, the effect of worldwide overcapacity on the injurious situation
of the Community industry was channelled thro ugh Hynix's subsidised imports. This effect
has been analysed in recitals 144 to 149 of the provisional Regulation and recitals 191 and
192 of the definitive Regulation. In this respect , the effect of worldwide overcapacity created
by Hynix cannot be considered as a factor separate from the effects of the subsidised imports.

(113) In any event, even if the effect of worl dwide overcapacity could be considered separately
from the effect of subsidised imports, the fo llowing can be observed. Information from the
questionnaire responses of the four producers of DRAMs cooperating with the original
investigation (i.e., Samsung, Hynix, Infineon and Micron, which together represented around
80 % of the worldwide DRAMs market) shows that their total capacity in Mbits increased by
129 % between 1999 and 2000 and by 85 % between 2000 and the IP. Their total production
in Mbits increased in line by 124 % between 1999 and 2000 and by 81 % between 2000 and
the IP. In other words, the capacity and the pr oduction of the four major worldwide producers
increased significantly more between 1999 an d 2000, the good year during which the
Community industry maintained some price stability and made profits, than between 2000
and the IP (2001), during which the Community industry suffered significant losses because
of the collapse of prices (see recitals 128 a nd 131 and relevant tables of the provisional
Regulation). Consequently, the existing worl dwide overcapacity throughout the period under
consideration did not, in the Commission's vi ew, contribute significantly to the collapse of
prices and the material injury suffered by the Community industry in the IP.

(114) In addition, record eviden ce shows that Community overcapacity was not a factor of injury.
During 1999 to 2000, Community capacity more than tripled (increasing by 252 %), and from
2000 to 2001 it nearly doubled (increasing by 92 %). These additions to Community capacity
were accompanied by increases in Community pr oduction. While capacity utilisation in the
Community did drop by 28 % from 1999 to 2000, it recovered by 4 % from 2000 to 2001 (see
recital 125 and relevant table of the provisional Regulation).

(115) Trends in Community overcapacity (defined as the inverse of Community capacity utilisation)
show little or no correlation with trends in th e sales prices of the Community industry. In
particular, during 1999 to 2000, Community overcapacity rose by 28 %, but the sales prices

of the Community industry fell by only 5 %. Further, from 2000 to 2001, Community
overcapacity went down by 4 % but the sales prices of the Community industry plummeted
by 77 % (see recitals 125 and 128 and relevant tables of the provisional Regulation). It may
be concluded that, if rising overcapacity were correlated to falling price levels, the significant
increase in overcapacity over 1999 to 2000 would have resulted in severe price depression,
whereas the contraction in overcapacity in 2000 to 2001 would have led to rising prices, or at
least to some degree of price stability. R ecord evidence shows the opposite. Over 1999 to
2000, there was very mild price depression, d espite the significant increase in overcapacity,
while from 2000 to 2001, there was substantial price depression, despite the contraction in
overcapacity. This stands in sharp contrast with the close correlation between trends in the
prices of the subsidised imports and trends in the sales prices of the Community industry. In
fact, during 2000 to 2001 the trend in the sales prices of the Community industry mirrored
almost perfectly the trend in the prices of the subsidised imports: over this period, the former
dropped by 74 % and the latter did so by 77 % (see recitals 119 and 128 of the provisional
Regulation).

(116) Record evidence also shows that trends in Community overcapacity bear no correlation with
trends in other key indicators of the conditio n of the Community industry. In particular,
during 1999 to 2000, the profitability of the Community industry was rising, and returns on
investment and cash flow were positive, in spite of the significant increase in Community
overcapacity. In contrast, in 2001 the Commun ity industry suffered h eavy losses, and returns
on investment and cash flow were negative, in spite of the contraction in Community
overcapacity during 2000 and 2001. The performance of the Community industry over 2000
to 2001 in terms of profitability, returns on in vestment and cash flow is correlated instead
with the trend in the prices of the subsidised imports over that period. As noted, in 2000 to
2001, as the Community industry suffered heavy lo sses and negative cash flow and return on
investment, the prices of the subsidised imports decreased by 74 %.

(117) Hynix claimed that Community overcapacity was another known factor contributing to
material injury during the period under cons ideration. However, trends in Community
overcapacity show no or only negligible corre lation with trends in the condition of the
Community industry. The Commission therefor e concludes that Community overcapacity
cannot be considered as a factor of material injury to the Community industry. Given that
Community overcapacity did not adversely aff ect the condition of the Community industry,
there is no need to distinguish any alleged in jury caused by capacity from the injury caused
by Hynix's imports. The Commission believes this finding is consistent with the findings of
recent WTO Panels reviewing determinations in respect of non-attribution described in recital
106 above.

(118) As reviewed, there is no demonstrated cau sal relationship between overcapacity and either
price declines or injury to the Community industry. In contrast, the Community industry
suffered severe declines during 2001, which is the same period when subject import prices
plummeted and when subject import volumes r eached peak penetration in the Community
market. This contrast establishes that subject import volumes and price effects are a separate
and distinguishable cause of material injury to the Community industry as compared with
overcapacity.

 3.4. Other non-subsidised imports

(119) The Panel noted in paragraph 7.426 of its re port that there is no requirement to consider non-
subsidised imports on a country-per-country basi s. The Panel also noted in paragraph 7.435
that a satisfactory explanation of the nature and extent of the injurious effects of
non-subsidised imports, as distinguished from the injurious effects of the subsidised imports,

should be provided. Accordingly, the effects of non-subsidised imports were examined by
considering jointly imports from countries other than Korea (e.g. the United States, Japan, and
Taiwan) and imports from Samsung. Recital 151 of the provisional Regulation and recitals
194 and 200 of the definitive Regulation provide the growth rates of import volume, market
share, and average prices of non-subsidised imports during the period under consideration.
These data are re-stated below in aggregated index form.
70 Given the very limited number of
players in the DRAMs market, for reasons of confidentiality, indices are used to show the
evolution of trends.

 1998 1999 2000 2001
(IP)
Non-subsidised imports in
'000 Mbits 100 142 166 233
Market share of
non-subsidised imports 100 81 60 56
Average price of
non-subsidised imports 100 89 104 48

(120) During the period under consideration, non-s ubsidised imports increased significantly less
than did subsidised imports, i.e., by 133 % as opposed to 361 % (see recital 177 and relevant
table of the definitive Regulation). It is noted that during the same period Community
consumption increased by 316 %. Hence, whereas the rate of growth in non-subsidised
imports was only a fraction of the rate of gr owth of Community consumption, subsidised
imports increased well in excess of Community cons umption. Accordingly, during the period
under consideration, the market share of non-s ubsidised imports contracted by 44 % whilst
the market share of subsidised imports expande d by 20 % (see recita l 185 and relevant table
of the definitive Regulation). If the market sh are of non-subsidised imports heavily declined
during the period under consideration, as shown by the above facts, it can be concluded that
non-subject imports did not injure the Community industry by reason of their volume effects.

(121) Record evidence also indicates that non-subject imports did not injure the Community
industry by reason of their price effects. During the IP, the prices of non-subsidised imports
exceeded not only the prices of subsidised imports but also the sales prices of the Community
industry. In particular, during the IP the average price of non-subsidised imports was 19 %
higher than the average price of subsidised im ports and 24 % higher than the average sales
price of the Community industry. In addition, during the period under consideration, the
prices of non-subsidised imports fell, but not anywhere as much as the prices of subsidised
imports and the Community industry. In partic ular, during the period under consideration the
average price of non-subsidised imports decreased by 52 %. In contrast, over such period, the
average price of subsidised imports decreased by 80 % (see recital 178 and relevant table of
definitive Regulation) and the average sales pric e of the Community industry by 79 % (see
recital 128 and relevant table of the provisional Re gulation). On the basis of these facts, it can
be concluded that the prices of non-subsidised imports did not affect adversely the sales
prices of the Community industry.

70 They derived from the confidential questionnaire responses of companies cooperating with the
original investigation, as verified, and publicly available external sources like Gartner Dataquest and In-Stat
MDR.

(122) As is the case with overcapacity, there is no demonstrated causal relationship between non-
subject imports and price declines or injury to the Community industry. There is, at the same
time, a clear deterioration in Community i ndustry performance while subject import volumes
steadily increased and while subject import pr ices undercut the Community like product. This
contrast establishes that subject import volumes and price effects are a separate and
distinguishable cause of material injury to the Community industry as compared with non-
subject imports.

(123) Therefore, the Commission is of the view th at its redetermination satisfies the non-attribution
requirement under Article 8(7) of the basic Regulation (which generally corresponds to
Article 15.5 of the SCM Agreement) in resp ect of non-subject imports by separating and
distinguishing this other factor from subsidised imports and showing that, during the period
under consideration, non-subject imports did not cause material injury to the Community
industry, either in terms of their volume effects or in terms of their price effects.

 3.5. Conclusion

(124) Having separated, where appropriate, and analysed further the effects, if any, of the decline in
demand, overcapacity and other non-subsidised im ports, it is considered that no injury caused
by any of these factors has been attributed to the subsidised imports within the meaning of
Article 8(7) of the basic Regulation. Furthermor e, it is confirmed that the subsidised imports
through the effects set out in recitals 144 to 149 of the provisional Regulation and recitals 191
and 192 of the definitive Regula tion have caused material injury to the Community industry
within the meaning of Article 8(6) of the basic Regulation.

 4. Community interest

(125) The contents and conclusions reached in recitals 206 to 209 of the definitive Regulation
remain unaffected by the Panel report.

D. REVISED MEASURES

(126) The Panel report and the reassessed findings do not concern Samsung which was not found to
be subsidised and thus was attributed a 0 % duty rate in the original investigation. The revised
subsidy amount for Hynix was found to be lower than the injury elimination level established
during the original investigation and, thus, the revised countervailing duty rate should be
based on the revised subsidy amount expressed ad valorem, i.e. 32,9 %.

(127) It is noted that the revised duty rate for Hynix should apply on the duty as specified by
Regulation (EC) No 2116/2005.

(128) The GOK, Hynix and the Community producers Infineon and Micron received disclosure of
the reassessed findings and were given an opportunity to comment and to be heard. They each
submitted comments.
71

(129) The GOK generally submits that the revised findings do not reasonably address the Panel's
recommendations. The Commission does not agree, for the reasons set out in this Regulation.
The Commission does not agree that the revised duty must necessarily be lower than the
original duty, and notes that in any event it is. The GOK specifically submits that the

71 GOK letter dated 13 February 2006; Hynix letter dated 14 February 2006; Infineon letter dated 13
February 2006; Micron letter dated 13 February 2006, with exhibits 1 to 27, including an Expert Report from
Professor J. Hausman dated 13 February 2006.

Commission should have used seven banks in the syndicated loan as a benchmark. The
Commission disagrees, particularly for the reas ons set out in recitals 16 to 24 above. The
GOK also submits that the Commission shoul d have made its benchmark calculations
differently. In the light of the GOK's comment s the Commission has made some adjustments
to its calculations, as reflected in this Regulati on. For the reasons set out in this Regulation,
the other aspects of the calculations remain unchanged. Finally, the GOK submits that the
Commission's injury redetermination does not separate and distinguish the effects of other
known factors, particularly with respect to economic downturn, overcapacity and other
non-subsidised imports. The Commission disagrees, particularly for the reasons set out in
recitals 100 to 123 above.

(130) Hynix aligns itself with the submissions of the GOK, discussed in the preceding recital. In
addition, Hynix submits that the period of time during which duties should be imposed should
have been terminated on 1 January 2006. This is not a matter that was the subject of dispute
or recommendations by the WTO Panel; and is not therefore part of the 'measure taken to
comply' with the Panel's recommendations which is encapsulated within this Regulation. This
Regulation does not alter the impending expiry date of the definitive Regulation. The question
of an early termination of the measure rather falls within the ambit of an eventual interim
review, not within the ambit of implementation of the Panel report. Hynix also submits that
the revised rate of duty must apply retroactiv ely from the date on which measures were first
imposed. The Commission similarly considers that this issue is not part of the 'measure taken
to comply' and in any event does not agree. No thing in the relevant legal rules obliges the
Commission to apply the revised duty retroactively, the Panel limiting itself to recommending
that the measure be brought in conformity, which is achieved by the present Regulation.

(131) Infineon substantially agrees with the re determination. However, it submits that the
Commission should impose a higher duty based on a proxy benchmark and the original injury
determination, rather than the lower duty set out in this Regulation. The Commission has
carefully considered that request. However, for the reasons set out in this Regulation and due
to the specific purpose of this Regulation, notably as an implementation of the Panel's
recommendations, the Commission has not altered its initial determination on this point.

(132) Micron also substantially agrees with the redete rmination, referring in this respect to facts and
evidence that tend to confirm and corroborate the Commission's conclusions, including an
expert report prepared by Professor J. Hausman. Therefore, Micron's comments do not
necessitate any modification of those conclusions as such. Micron further submits that the
Commission should reaffirm, based on current WTO precedent, that the GOK entrusted or
directed the banks in the May 2001 restructuring programme and should countervail the
subsidies provided by the public bodies. The Commission has carefully considered this
submission which, in principle, has merit. Ho wever, as noted in this Regulation, the May
2001 restructuring programme would not in any ev ent be countervailed, given that the largest
proportion of the benefit would have been accounted for in the October 2001 measures.
Mainly for this reason, the Commission has d ecided not to return to these issues in this
implementing Regulation.

(133) Thus, all comments submitted by the interest ed parties were considered and taken into
account where appropriate. However, certain comments were outside the scope of this
Regulation which is only intended to impl ement the DSB recommendations. Thus, such
comments have not resulted in any changes to this Regulation,

HAS ADOPTED THIS REGULATION:

Article 1

Council Regulation (EC) No 1480/2003 is hereby amended as follows:

1. Article 1(2) and (3) shall be replaced by the following:

 '2. The rate of the definitive countervailing duty applicable to the net free-at-
Community-frontier price, before duty, shall be as follows:

Korean producers
Rate of
duty
(%)
TARIC
additional
code
Samsung Electronics Co., Ltd (Samsung)
24th Fl., Samsung Main Bldg
250, 2-Ga, Taepyeong-Ro
Jung-Gu, Seoul
0 % A437
Hynix Semiconductor Inc.
891, Daechidong
Kangnamgu, Seoul
32,9 % A693
All other companies 32,9 % A999

 3. Upon presentation to the Member State's customs authorities of the customs
declaration for release into free circulation of multi-combinational forms of DRAMs, the
declarant shall indicate in box 44 of the Single Administrative Document (SAD) the reference
number corresponding to the below product/origi n descriptions indicated in the following
table. The rate of the definitive countervailing duty applicable to the net-free-at-Community-
frontier price, before duty, shall be as follows:

No Product/origin description Reference
number
Rate of
duty (%)
1 Multi-combinational forms of DRAMs originating
in countries other than the Republic of Korea,
incorporating DRAM chips and/or mounted
DRAMs originating in countries other than the
Republic of Korea or originating in the Republic of
Korea and manufactured by Samsung
D010 0 %
2 Multi-combinational forms of DRAMs originating
in countries other than the Republic of Korea,
incorporating DRAM chips and/or mounted
DRAMs originating in the Republic of Korea and
manufactured by all companies other than Samsung
and representing less than 10 % of the net free-at-
Community-frontier price of the
multi-combinational form of DRAM
D011 0 %

No Product/origin description Reference
number
Rate of
duty (%)
3 Multi-combinational forms of DRAMs originating
in countries other than the Republic of Korea,
incorporating DRAM chips and/or mounted
DRAMs originating in the Republic of Korea and
manufactured by all companies other than Samsung
and representing 10 % or more but less than 20 %
of the net free-at-Community-frontier price of the
multi-combinational form of DRAM
D012 3,2 %
4 Multi-combinational forms of DRAMs originating
in countries other than the Republic of Korea,
incorporating DRAM chips and/or mounted
DRAMs originating in the Republic of Korea and
manufactured by all companies other than Samsung
and representing 20 % or more but less than 30 %
of the net free-at-Community-frontier price of the
multi-combinational form of DRAM
D013 6,5 %
5 Multi-combinational forms of DRAMs originating
in countries other than the Republic of Korea,
incorporating DRAM chips and/or mounted
DRAMs originating in the Republic of Korea and
manufactured by all companies other than Samsung
and representing 30 % or more but less than 40 %
of the net free-at-Community-frontier price of the
multi-combinational form of DRAM
D014 9,8 %
6 Multi-combinational forms of DRAMs originating
in countries other than the Republic of Korea,
incorporating DRAM chips and/or mounted
DRAMs originating in the Republic of Korea and
manufactured by all companies other than Samsung
and representing 40 % or more but less than 50 %
of the net free-at-Community-frontier price of the
multi-combinational form of DRAM
D015 13,1 %
7 Multi-combinational forms of DRAMs originating
in countries other than the Republic of Korea,
incorporating DRAM chips and/or mounted
DRAMs originating in the Republic of Korea and
manufactured by all companies other than Samsung
and representing 50 % or more of the net free-at-
Community-frontier price of the multi-
combinational form of DRAM
D016 16,4 %';

2. Article 1(5) shall be re placed by the following:

 '5. In the case of no indication of any reference number in the SAD, as foreseen in
paragraph 3, or if the customs declaration is not accompanied by any statement in the cases
required in paragraph 4, the multi-combinational form of DRAM shall – unless the contrary is

proved – be considered as originating in the Republic of Korea and as having been
manufactured by all companies other than Samsung, and the countervailing duty rate of
32,9 % shall apply.

 In cases where some of the DRAM chips and/ or mounted DRAMs incorporated in multi-
combinational forms of DRAMs are not clearly marked and their manufacturers are not
clearly identifiable from the statement required in paragraph 4, such DRAM chips and/or
mounted DRAMs shall – unless the contrary is pr oved – be considered as originating in the
Republic of Korea and as having been manufactured by companies subject to the
countervailing duty. In such cases, the c ountervailing duty rate applicable to multi-
combinational forms of DRAMs shall be calculated on the basis of the percentage represented
by the net free-at- Community-frontier price of the DRAM chips and/or mounted DRAMs
originating in the Republic of Korea out of the net free-at-Community-frontier price of the
multi-combinational forms of DRAM, as establishe d in the table contained in paragraph 3,
numbers 2 to 7. Should, however, the value of the aforementioned DRAM chips and/or
mounted DRAMs be such to determine that the multi-combinational forms of DRAMs in
which they are incorporated becomes of Korean origin, the countervailing duty rate of 32,9 %
shall apply to the multi-combinational forms of DRAMs.'

Article 2

This Regulation shall enter into force on the day following its publication in the Official Journal of
the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 10 April 2006.

 For the Council
 The President
 U. PLASSNIK