UNITED STATES – COUNTERVAILING DUTY INVESTIGATION ON DYNAMIC RANDOM ACCESS MEMORY SEMICONDUCTORS (DRAMS) FROM KOREA
Document: Report of the Appellate Body
Date: 27 June 2005
Document codes: WT/DS296/AB/R
Complainant: South Korea
Respondent: U.S.
Third parties: China, Taiwan, EU, Japan
Dispute stage: Appellate Body
Agreements cited: Art. 1, 2, 10, 12, 14, 15, 19, 22, 32  Subsidies and Countervailing Measures (SCM)Art. VI:3  GATT 1994

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

AB-2005-4

Report of the Appellate Body

APPELLATE BODY

United States, Appellant/Appellee
Korea, Appellant/Appellee

China, Third Participant
European Communities, Third Participant
Japan, Third Participant
Separate Customs Territory of Taiwan, Penghu,
 Kinmen, and Matsu, Third Participant

 AB-2005-4

 Present:

 Abi-Saab, Presiding Member
Janow, Member
Taniguchi, Member

I. Introduction
1. The United States and Korea each appeals certain issues of law and legal interpretations
developed in the Panel Report, (the "Panel Report").1 The Panel was
established to consider a complaint by Korea agai nst the United States regarding the imposition of
countervailing duties ("CVDs") on DRAMS and memory models containing DRAMS 2 from Korea,
following an investigation by the United States Department of Commerce (the "USDOC") and the
United States International Trade Commission (the "USITC").
2. The CVD investigation was initiated in Novemb er 2002, in response to a petition filed by
Micron Technology, Inc. ("Micron"). 3 The Korean companies i nvestigated included Hynix
Semiconductor, Inc. ("Hynix") and Samsung Electronics Co., Ltd. ("Samsung"). 4 The Government of

1, 21 February 2005.
2Hereinafter, these products will be referred to collectively as "DRAMS".
3Notice of Initiation of Countervailing Duty Investigation: Dynamic Random Access Memory
Semiconductors from the Republic of Korea , United States Federal Register, Vol. 67, No. 229 (27 November
2002), p. 70927 (Exhibit GOK-2 submitted by Korea to the Panel).
4The countervailable subsidy rate determined for Samsung was 0.04 per cent, which is below the
de minimis level of two per cent. Accordingly, the USDOC made a negative finding of subsidization with
respect to Samsung. ( Final Affirmative Countervailing Duty Determination: Dynamic Random Access Memory
Semiconductors from the Republic of Korea , United States Federal Register, Vol. 68, No. 120 (23 June 2003),
p. 37122, at p. 37124 (Exhibit GOK-5 submitted by Korea to the Panel))

Korea (the "GOK") participated in the investigation as an interested party. The USDOC published a
final subsidy determin ation on 23 June 2003
5, concluding that Hynix had received financial
contributions from the GOK by virtue of, inter alia, the GOK's entrustment or direction of Hynix's
creditors to maintain the financial viability of Hynix. 6 The USDOC determined that Hynix's
countervailable subsidy rate was 44.29 per cent.7
3. The USITC published a preliminary injury determination on 27 December 2002 and a final
injury determination on 11 August 2003. 8 In its final injury determination, the USITC concluded that
the United States DRAMS industry had been materially injured by reason of imports of subsidized
DRAMS from Korea. On the basis of these subsid y and injury determinations by the USDOC and
the USITC, respectively, the USDOC issued a CVD order on 11 August 2003, imposing CVDs
of 44.29 per cent on Hynix, which wo uld be paid by importers as cash deposits at the same time as
they would normally deposit estimated customs duties.9
4. Before the Panel, Korea alleged that the United States acted inconsistently with its obligations
under Articles 1, 2, 10, 12, 14, 15, 19, 22, and 32 of the Agreement on Subsidies and Countervailing
Measures (the "SCM Agreement"), as well as under Article VI:3 of the General Agreement on Tariffs
and Trade 1994 (the "GATT 1994").10
5. In the Panel Report, circulated to Members of the World Trade Organization (the "WTO")
on 21 February 2005, the Panel concluded that:

5Final Affirmative Countervailing Duty Determination , supra, footnote 4, amended as Notice of
Amended Final Affirmative Countervailing Duty De termination: Dynamic Random Access Memory
Semiconductors from the Republic of Korea , United States Federal Register, Vol. 68, No. 144 (28 July 2003),
p. 44290 (Exhibit GOK-6 submitted by Korea to the Panel).
6Issues and Decision Memorandum, for Final Affirmative Countervailing Duty Determination , supra,
footnote 4, dated 16 June 2003 (the "Issues and Decision Memorandum"), pp. 61-62 (Exhibit GOK-5 submitted
by Korea to the Panel).
7Notice of Amended Final Affirmative Countervailing Duty Determination, supra, footnote 5, p. 44290,
at p. 44291.
8DRAMs and DRAM Modules from Korea , Investigation No. 701-TA-431 (Preliminary), USITC
Pub. 3569 (December 2002) (Exhibit GOK-9 submitted by Korea to the Panel); DRAMs and DRAM Modules
from Korea , Investigation No. 701-TA-431 (Final), USITC Pub. 3616 (August 2003) (Exhibit GOK-10
submitted by Korea to the Panel).
9Notice of Countervailing Duty Order: Dynamic Random Access Memory Semiconductors from the
Republic of Korea , United States Federal Register, Vol. 68, No. 154 (11 August 2003), p. 47546 (Exhibit
GOK-8 submitted by Korea to the Panel). Because of the USDOC's finding of de minimis subsidization with
respect to Samsung, imports from Samsung were excluded from the CVD order and therefore not subject to
CVDs. (Ibid.)
10Panel Report, para. 3.1.

... the [US]DOC's Final Subsidy Determination , the [US]ITC's Final
Injury Determination , and the Final Countervailing Duty Order
based thereon, are inconsistent w ith Articles 1, 2 and 15.5 of the
SCM Agreement. We therefore conclude that the [United States] is in
violation of those provisions of the SCM Agreement.11
6. The Panel rejected Korea's claims that th e United States acted inconsistently with
Articles 212, 12.6, 15.2, 15.4, and 15.5 13 of the SCM Agreement .14 Moreover, the Panel did "not
consider it necessary to address" certain additiona l claims made by Korea under Articles 1 and 2 of
the SCM Agreement , or the claims Korea made pursuant to Articles 10, 14, 15.1, 19.4, 22.3,
and 32.1 of the SCM Agreement and Article VI:3 of the GATT 1994. 15 In the course of its
examination of Korea's claims, the Panel also dism issed a request by the United States that the Panel
reject Korea's claims against the CVD order because Korea's request for consultations did not meet
the requirements of Article 4.4 of the Understanding on Rules and Procedures Governing the
Settlement of disputes (the "DSU").16
7. In the light of its findings, the Panel recommended that the United States "bring the
[US]DOC's Final Subsidy Determination , the [US]ITC's Final Injury Determination , and the
[US]DOC's final [CVD] order, into conformity with the SCM Agreement".17
8. On 29 March 2005, the United States notified the Di spute Settlement Body (the "DSB") of its
intention to appeal certain issues of law covered in the Panel Report and certain legal interpretations
developed by the Panel, pursuant to paragraph 4 of Article 16 of the DSU, and filed a Notice of
Appeal 18 pursuant to Rule 20 of the Working Procedures for Appellate Review (the " Working
Procedures").19 On 11 April 2005, Korea notified the DSB of its intention to appeal certain issues of
law covered in the Panel Report and certain legal interpretations deve loped by the Panel, pursuant to

11Panel Report, para. 8.1.
12The Panel rejected Korea's claim pursuant to Article 2 of the SCM Agreement insofar as it concerned
the USDOC's finding of specificity in relation to the alleged subsidies provided by public bodies. (Panel Report,
para. 7.208) With respect to other creditors, however, the Panel agreed with Korea that the USDOC's subsidy
determination did not satisfy the requirements of Article 2.
13The Panel rejected Korea's claim th at the United States acted inconsis tently with Article 15.5 of the
SCM Agreement because the USITC "failed to demonstrate the requisite causal link between subject imports and
injury". (Panel Report, para. 8.2)
14Ibid.
15Ibid., para. 8.3.
16Ibid., paras. 7.410 and 7.415.
17Ibid., para. 8.4.
18WT/DS296/5 (attached as Annex I to this Report).
19WT/AB/WP/5, 4 January 2005.

paragraph 4 of Article 16 of the DSU, and filed a Notice of Other Appeal
20 pursuant to Rule 23(1) of
the Working Procedures. On 5 April 2005, the United States filed an appellant's submission. 21 On
13 April 2005, Korea filed an other appellant's submission.22 On 25 April 2005, Korea and the United
States each filed an appellee's submission. 23 On the same day, China, the European Communities,
Japan, and the Separate Customs Territory of Taiw an, Penghu, Kinmen, and Matsu, each filed a third
participant's submission.24
9. The oral hearing in this appeal was held on 11 May 2005. The participants and third
participants presented oral arguments (with the exception of the Separate Customs Territory of
Taiwan, Penghu, Kinmen, and Matsu) and responde d to questions posed by the Members of the
Division hearing the appeal.
II. Arguments of the Participants and the Third Participants
A. Claims of Error by the United States – Appellant
1. Request for Consultations under Article 4.4 of the DSU
10. The United States appeals the Panel's finding that Korea's request for consultations met the
requirements of Article 4.4 of the DSU. Acco rding to the United States, Korea's request for
consultations failed to provide the legal basis for th e complaint with respect to the CVD order. The
United States therefore requests the Appellate Body to reverse the Panel's finding.
11. The United States argues that it is "not credible" 25 to assert that, by referring to the fact that it
had filed a prior request for consultations on one set of alleged measures, Korea satisfied its obligation
to provide an indication of the legal basis for its complaint with respect to the CVD order, which was
identified only in the second request for consultations . The United States further contends that Korea
cited numerous provisions in its first request for consultations and that the United States could not
have been "supposed to guess which provi sion(s) applied to the [CVD] order".
26 In addition, the
United States maintains that Korea refused to iden tify the provision(s) of a covered agreement with
which it considered the CVD order to be inconsiste nt, even when specifically asked to do so by the

20WT/DS296/6 (attached as Annex II to this Report).
21Pursuant to Rule 21 of the Working Procedures.
22Pursuant to Rule 23(3) of the Working Procedures.
23Pursuant to Rules 22 and 23(4) of the Working Procedures.
24Pursuant to Rule 24(1) of the Working Procedures.
26Ibid.

United States after the filing of the second request for consultations. In the United States' submission
"the requirements of Article 4.4 are minimal, [but] they cannot be ignored."27
2. Interpretation of Article 1.1(a)(1)(iv) of the SCM Agreement
12. The United States claims that the Panel incorr ectly interpreted the terms "entrusts" and
"directs" in Article 1.1(a)(1)(iv) of the SCM Agreement 28 and then applied that erroneous
interpretation to its assessment of the record eviden ce. According to the United States, the Panel's
interpretation of the terms "entrusts" and "directs" is inconsistent with the ordinary meanings of these
terms. The proper interpretation of "entrusts" and "directs" would have considered the multiple
meanings of these terms found in their dictionary definitions. In the United States' view, had the
Panel looked to these meanings, it would have arrive d at an understanding of "entrusts" and "directs"
that takes account of the full range of government ac tions that fall within the ordinary meanings of
these terms, namely: a government investing trust in a private body to carry out a task; a government
giving responsibility to a private body to carry out a task; a government informing or guiding a
private body as to how to carry out a task; a gove rnment regulating the course of a private body's
conduct; as well as a government delegating or commanding a private body to carry out a task. The
Panel, however, disregarded these definitions and settle d on a definition of "entrusts" and "directs" as
"delegation" and "command"
29, respectively. The United States a lleges that this narrow interpretation
fails to recognize the numerous means by which a government may provide subsidies through private
bodies.
13. The United States submits that the Panel also faile d to consider sufficiently the context of the
terms "entrusts" and "directs", because the use of th e term "practice" in Article 1.1(a)(1)(iv) clearly
implies that entrustment or direction cannot be limited to an official or formal program, but also must
include broader "practices". The United States ar gues that the context also makes clear that the
negotiators did not intend that governments would be able to evade the subsidy disciplines by using
other means—that is, means that differ "in no real sense" 30 from those normally used by
governments—of granting subsidies. In the United St ates' view, the words "in no real sense" as used
in Article 1.1(a)(1)(iv) suggest that the drafters were seeking to avoid circumvention of the obligation

28Article 1.1(a)(1)(iv) of the SCM Agreement states that a financial contribution exists where:
a government makes payments to a funding mechanism, or entrusts or
directs a private body to carry out one or more of the type of functions
illustrated in (i) to (iii) above which would normally be vested in the
government and the practice, in no real sense, differs from practices
normally followed by governments[.]
29Panel Report, para. 7.31.
30Article 1.1(a)(1)(iv) of the SCM Agreement.

not to provide prohibited subsidies. This understanding, according to the United States, would
support an interpretation of "entrusts" and "directs" that gives effect to their full range of meanings so
as not to permit subsidization in any form by governments through private bodies. The United States
further asserts that the Panel's interpretation is not supported by the object and purpose of the SCM
Agreement because the Panel's reading of Article 1. 1(a)(1)(iv) would cover an unduly limited range
of government subsidization achieved through the actions of private bodies.
14. Finally, the United States contends that the Panel's narrow interpreta tion of "entrusts" and
"directs" permeates the rest of its analysis. The Un ited States points to several of the Panel's findings
as examples of errors resulting from this interpre tation, including the Panel's analyses of Prime
Minister's Decree No. 408, meetings between Hy nix creditors and GOK officials, and Kookmin
Bank's prospectus for the United States Securities and Exchange Commission. Taken together, these
findings undermine the Panel's ultimate conclusion of inconsistency with Article 1.1(a)(1)(iv).
Therefore, the United States requests the Appellate Bo dy to reverse the Panel's findings with respect
to its interpretation of "entrusts" and "directs" , as well as the Panel's conclusions based on that
interpretation.
3. Review of the USDOC's Evidence of Entrustment or Direction

(a) The Panel's "Probative and Compelling" Evidentiary Standard
15. The United States argues that the Panel errone ously applied a "probative and compelling"
evidentiary standard in its review of the USDOC's subsidy determination and requests the Appellate
Body to reverse the Panel's findings setting forth its evidentiary standard and the subsequent findings
based on the application of that standard.
16. According to the United States, there is no basis in the SCM Agreement , the DSU, or any
other covered agreement for the Pane l's finding that evidence of entrus tment or direction "must in all
cases be probative and compelling". 31 The United States recognizes that provisions of various
covered agreements set forth a number of evid entiary standards, such as "positive evidence" 32,
"relevant evidence"33, or "sufficient evidence". 34 The United States also recalls the Appellate Body's
interpretation of the term "positive evidence" in US – Hot-Rolled Steel that "[t]he word 'positive'

31Panel Report, para. 7.35.
32Article 3.1 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs
and Trade 1994 (the "Anti-Dumping Agreement").
33Articles 3.5 and 5.2 of the Anti-Dumping Agreement; Articles 42 and 50.1(b) of the Agreement on
Trade-Related Aspects of Intellectual Property Rights.
34Articles 5.3, 5.6, 5.8, 10.7, and 12.1 of the Anti-Dumping Agreement; Article 5.4 of the Agreement
on Textiles and Clothing.

means [...] that the evidence must be of an affirm ative, objective and verifiable character, and that it
must be credible." 35 The United States contends, however, that this requirement does not translate
into an evidentiary standard of "probative and compelling".
17. Referring to the definition of the term "compelling", th e United States argues that a standard
of "compelling" evidence would appear to require ev idence that "forces" or "obliges" a fact-finder to
reach a particular conclusion, or evidence that is "overwhelming" 36 or "irrefutable". 37 In the
United States' view, such a standard cannot be rec onciled with the decision of the Appellate Body in
US – Lamb 38, according to which a panel's duty is to de termine whether an investigation authority
provided a reasoned and adequate e xplanation as to why the evidence le d to a particular conclusion,
rather than whether that conclusion was based on probative and compelling evidence.
(b) The Panel's Approach to the Evidence
(i) Reviewing the Totality of the Evidence
18. The United States alleges that the Panel erre d by assessing the USDOC's determination of
entrustment or direction on the basis of each piece of evidence in isolation, without considering the
totality of the evidence. In the Un ited States' submission, this approach necessarily led to a finding of
insufficiency of the evidence underlying the USDOC's determination. Therefore, the United States
requests the Appellate Body to reverse the Panel's findings as to the individual pieces of evidence, as
well as those findings that were the product of the Panel's erroneous approach.39
19. The United States observes that the Panel indicat ed that it would adopt the same approach in
examining the evidence as did the USDOC, "rel[ying] on the totality of the evidence before it, without
attaching particular importance to one or several evidentiary factors". 40 However, the United States
argues, the Panel Report reveals that the Panel in fact assessed whether each piece of evidence, in and
of itself , demonstrated entrustment or direction, ra ther than assessing whethe r the evidence in its
entirety supports the finding of entrustment or direction.41

35United States' appellant's submission, para. 51 (quoting Appellate Body Report, US – Hot-Rolled
Steel, para. 192).
36Ibid., para. 49 (quoting The New Shorter Oxford English Dictionary , L. Brown (ed.) (Clarendon
Press, 1993), Vol. 1, p. 458).
37Ibid.
39Ibid., para. 73.
41Ibid.

20. In particular, the United States alleges that the Panel employed this "piecemeal approach"
42 at
several points in its analysis of the USDOC's finding on entrustment or direction. The United States
points to the Panel's examination of various items of evidence relied on by the USDOC—including
the Public Funds Oversight Act, Prime Minister's Decree No. 408, and Kookmin Bank's prospectus
for the United States Securities and Exchange Commi ssion—as examples of the Panel's failure to
consider the evidence in its totality.
43 The United States further alle ges that, even where the Panel
claimed to consider pieces of evidence in a broader context, it "marginalized"44 this evidence, as in the
Panel's failure to appreciate the relevance of GO K ownership or control of the dominant Hynix
creditors.45 Therefore, the United States requests the A ppellate Body to reverse those findings that
were based on the Panel's error of reviewing in isolation pieces of evidence supporting the USDOC's
determination of entrustment or direction.
(ii) Circumstantial Evidence
21. The United States alleges that the Panel effec tively required every piece of evidence to be
direct evidence of entrustment or direction and th ereby precluded legitimate inferences drawn from
circumstantial and secondary evidence. The United States therefore requests the Appellate Body to
reverse the Panel's findings affected by its "legally erroneous"46 analytical framework.
22. As an example of the Panel's error, the United States refers to the Panel's discussion of the
GOK's coercion of Hana Bank, where the Panel stated that "[a]n objective and impartial investigating
authority would not have treated a simple reference to a footnote in an article as sufficient proof of
such a significant issue as government entrustment or direction." 47 The United States argues that this
statement reveals the Panel's failure to recognize that the value of a piece of circumstantial evidence is
not in its sufficiency, but rather, in "the inferences created, together with other pieces of evidence,
regarding the existence of a particular fact or set of facts".48
23. The United States contends that instead of "f ixating" on whether certain individual pieces of
evidence were dispositive of entrustment or direc tion, the Panel should have drawn from the totality
of circumstantial evidence that "the GOK had an established practice, purpose, and process for

43Ibid., paras. 60-67.
44Ibid., para. 69.
45Ibid., para. 68.
46Ibid., para. 85.
47Ibid., para. 76 (quoting Panel Report, para. 7.129). (emphasis added by the United States)
48Ibid. (footnote omitted)

entrusting and directing Hynix's creditors". 49 In doing so, it should have given special attention to
"the GOK's longstanding policy of supporting Hyni x; the GOK's powerful influence over Hynix's
creditors as a consequence of, inter alia , the significant GOK ownershi p interests in the Korean
financial sector; and the utter lack of any commercial basis for assisting Hynix."50
24. The United States submits that the Panel's treatment of circumstantial evidence differs sharply
from the way prior panels and the Appellate Body ha ve assessed circumstantial evidence. In addition
to the panel reports in Argentina – Textiles and Apparel and Canada – Aircraft , the United States
points to the statement of the Appellate Body in Canada – Aircraft that "inferences derived may be
inferences of law: for example the ensemble of facts found to exist warrants the characterization of a
'subsidy'".51 According to the United States, circumstan tial evidence is particularly relevant to
establishing a financial contribution under Article 1.1(a)(1)(iv). Direct evidence of government
entrustment or direction is difficult for outside pa rties to obtain because such information typically
will be treated by the exporting gove rnment or foreign parties as conf idential. As a result, the United
States submits, the Panel's failure to appreciate the circumstantial evidence on which the USDOC
relied effectively established an evidentiary requirement that is "virtually impossible" to meet in cases
involving government entrustment or direction.52
(iii) Burden of Proof
25. The United States argues that the manner in which the Panel assessed the evidence in the
present case effectively led to an improper shift in the burden of proof from Korea to the United
States and, therefore, requests the Appellate Body to reverse the Panel's findings that resulted from
this error. According to the United States, the Panel recognized—in accordance with prior WTO
decisions—that Korea bears the burden of proof as the complaining party. However, the United
States alleges, the Panel analyzed pieces of evidence in isolation, required that each piece of evidence
be "compelling", and disregarded inferences drawn from circumstantia l evidence, thereby requiring
the United States to produce a "smoking gun" 53 document that itself would be dispositive of
entrustment or direction. Because the Panel did not find such a "smoking gun", the United States
submits, it concluded that the USDOC had not demons trated entrustment or direction. Requiring the
United States to justify the USDOC's determina tion with evidence of a "smoking gun"—instead of

50Ibid., para. 79. (footnotes omitted)
52Ibid., para. 83.
53Ibid., para. 87.

requiring Korea to establish how the evidence could not collectively support a finding of entrustment
or direction—amounted to a shift in the burden of proof from Korea to the United States.
(iv) Ex post Rationalization
26. The United States submits that the Panel errone ously characterized the United States' reliance
on certain record evidence during the Panel proceedings as ex post rationalizations and consequently
erred in declining to consider this evidence wh en assessing the USDOC's finding of entrustment or
direction. Accordingly, the United States requests the Appellate Body to reverse the Panel's findings
regarding ex post rationalization as well as the conclusions that resulted from these findings.
27. The United States acknowledges that some panels have rejected arguments and reasoning on
the grounds that they constituted ex post rationalizations.
54 However, the United States argues, in
those cases, panels objected to the introduction of new reasoning, whereas, in this case, the United
States merely provided to the Panel additional ev identiary support relating to reasoning that had
already been employed in the USDOC's published determination. Specifically, the United States
submits that each of these items of evidence—such as the article in the Dong-A Daily , entitled
"'Gangster-Style' Solution for Hynix", which the Panel refused to consider 55—related directly to the
reasoning of the USDOC regarding certain fact ual inferences underlying the USDOC's finding of
entrustment or direction, and thus, do not constitute ex post rationalizations.
28. In support of this argument, the United States refers to Article 22.5 of the SCM Agreement,
which provides that an agency's published determin ation at the end of a CVD investigation "shall
contain ... all relevant information on the matters of fact and law a nd reasons which have led to the
imposition of final measures". In the United Stat es' view, this provision addresses what must be
contained in a final determinati on and, by its plain language, do es not require an investigating
authority "to cite to every piece of record evidence that supports its reasons for the imposition of final
measures".56 Therefore, the United States contends, nothing in the SCM Agreement permits a panel to
disregard record evidence, even when not cited in the final determination, provided that it is not being
introduced to support new reasoning. By concluding to the contrary, the United States argues, the
Panel impermissibly limited the evidence on which a Member may rely under Article 22.5 of the
SCM Agreement, in contravention of Articles 3.2 and 19.2 of the DSU.

54United States' appellant's submission, para. 89 (referring to Panel Report Argentina – Ceramic Tiles ,
55Panel Report, para. 7.88.

29. The United States additionally points to a GATT pa nel decision applying Article 2.15 of the
Agreement on Interpretation and Application of Ar ticles VI, XVI, and XXIII of the General Agreement
on Tariffs and Trade (the "Tokyo Round Subsidies Code"), which is "quite similar" to Article 22.5 of
the SCM Agreement.57 That panel decision recognized that a panel was not precluded, by virtue of
Article 2.15, from considering evidence not included in a published determination, provided that it
could reasonably be inferred that the agency ha d relied on such evidence. The United States also
refers to the Appellate Body Report in US – Upland Cotton . In that case, the Appellate Body, in the
context of the panel's application of Article 6.3 of the SCM Agreement , found no error where the
panel did not refer to every item of evidence provi ded by the parties to the dispute because it had
found certain items less significant for its reasoning than others. 58 In the United States' view, similar
reasoning should apply in this case so as not to require an investigating authority to cite every item of
supporting evidence from the agency's record.
30. Finally, the United States argues that the USDOC did, in fact, explicitly cite, in its Direction
of Credit Memorandum 59, some of the articles that the Panel refused to take into account, such as
articles in the Korea Economic Daily , Euromoney, and the Korea Times. The United States submits
that the Direction of Credit Memorandum had been referenced in th e USDOC's determination in
support of the USDOC's finding of entrustment or direction. Therefore, according to the United
States, the Panel erred in basing its refusal to take these articles into consideration on the fact that they
had not been cited in the USDOC's published determination.
(c) The Panel's Failure to Comply with Article 11 of the DSU
(i) Non-record Evidence
31. The United States contends that the Panel im properly relied on evidence that was not on the
record before the USDOC and that, in so doi ng, the Panel engaged in an impermissible de novo
review of the USDOC's subsidy determination in violation of Article 11 of the DSU. The United
States accordingly requests the Appellate Body to re verse those findings of the Panel that were based
on the erroneous use of non-record evidence.
32. Referring to the Appellate Body Report in US – Cotton Yarn and the panel report in Egypt –
Steel Rebar , the United States submits that relia nce on non-record evidence constitutes a de novo

57United States' appellant's submission, para. 92 (referring to GATT Panel Report, Brazil – EEC Milk ,
paras. 286-287).
59Direction of Credit Memorandum for Countervailing Duty Investigation : Dynamic Random Access
Memory Semiconductors from the Republic of Korea , dated 31 March 2003 (Exhibit US-8 submitted by the
United States to the Panel).

review and results in a violation of Article 11 of the DSU. Additionally, the United States relies on
Article 12.2 of the SCM Agreement , which provides, in relevant part, that a "decision of the
investigating authorities can only be based on such information and arguments as were on the written
record of this authority".
33. The United States points, in particular, to the findings of the Panel contained in
paragraphs 7.63, 7.91, and 7.155 of the Panel Report. In the United States' submission, each of these
findings was expressly based on the Panel's finding that certain creditors of Hynix exercised
mediation rights in connection with the October 2001 restructuring. However, the United States
argues, there was no evidence on the record of the US DOC that certain Hynix creditors did, in fact,
engage in mediation and thereb y avoid the restructuring terms established by the dominant GOK-
owned and -controlled creditors. According to the United States, the only evidence of such mediation
was submitted by Korea in the course of the Panel pr oceedings, and not by any interested party to the
USDOC during the CVD investigation.
34. With regard to the Panel's conclusion that Article 29(5) of the Corporate Restructuring
Promotion Act (the "CRPA") should have put the USDOC on notice about the possibility of
mediation, the United States contends that, absen t evidence on the record from Hynix or the GOK
regarding " actual instances of mediation ", the USDOC was in no positio n to consider how such
mediation would affect its findings.
60 In the United States' view, a reference to the possibility of
mediation alone does not constitute record evidence that mediation did take place.
35. Moreover, the United States argues, the USDOC, in the course of the investigation, asked
specific questions regarding the CRPA and the differe nt options provided to Hynix's creditors at the
time of the October 2001 restructuring. Notwithst anding this request for information, the United
States submits, "neither Hynix nor the GOK ever mentioned anything about mediation". 61
Furthermore, the United States asserts, neither Hynix nor the GOK ever mentioned in their
submissions to the USDOC that mediation had in fact taken place.
36. The United States disagrees with the Panel's finding that a statement in Hynix's 2001 Audit
Report indicated that the mediation provisions had been invoked and that this should have put the
USDOC on notice that a request for mediation had been filed. 62 In the United States' view, the
referenced excerpt to the Hynix 2001 Audit Report did not indicate that mediation had occurred, only

60United States' appellant's submission, para. 109. (original emphasis)
61Ibid., footnote 156 to para. 108.
62Ibid., para. 111 (referring to Panel Report, paras. 7.85-7.86).

that certain banks had "raised objections" 63, without clarifying the relationship, if any, between the
"raising of objections" and the recourse to mediation.
(ii) Standard of Review
37. The United States submits that, in addition to the individual Panel errors listed above 64, the
cumulative effect of these errors also constitutes a violation of Article 11 of the DSU. The United
States asserts that it was appropriate for the USDOC to examine the evid ence in its totality, to rely on
circumstantial and secondary eviden ce, and to draw reasonable infere nces from this evidence. The
Panel's task in reviewing the USDOC's determin ation was to decide whether the USDOC properly
established the facts and evaluated them in an unbiased and objective way, and whether the USDOC,
given the totality of the record evidence, in cluding circumstantial evidence, could have found
entrustment or direction. In the United States' submission, however, the individual errors committed
by the Panel led it to substitute a "new analytic framework" for that used by the USDOC, redefine the
scope and structure of the USDOC's analysis, and reweigh the USDOC's evidence. 65 In so doing, the
United States argues, the Panel failed to follow th e proper standard of review and thereby exceeded
the bounds of its discretion under Article 11 of the DSU. The United States, therefore, requests the
Appellate Body to reverse the Panel's conclusions stemming from its improper application of the
standard of review.
4. Benefit and Specificity

38. The United States appeals the Panel's findings regarding the USDOC's determination of
benefit and specificity. The United States obser ves that the Panel found the USDOC's benefit
determination to be inconsistent with Article 1.1(b) of the SCM Agreement , and its specificity
determination to be inconsis tent with Article 2 of the SCM Agreement insofar as it relates to alleged
subsidies by creditors not identified by the USDOC as public bodies. The United States submits that
these findings are based solely on the Panel's erroneous conclusion that the USDOC's determination of
GOK entrustment or direction of certain Hynix credito rs is inconsistent with Article 1.1(a)(1)(iv) of
the SCM Agreement . Accordingly, the United States request s the Appellate Body to reverse the
Panel's findings on benefit and specificity.

63United States' appellant's submission, para. 111 (quoting 2001 Hynix Audit Report, p. 40 (Exhibit
US-125 submitted by the United States to the Panel)). The Panel also quoted the Hynix 2001 Audit Report at
paragraph 7.85 of the Panel Report.
64Supra, Section II.A.3(a)-(c)(i).

B. Arguments of Korea – Appellee
1. Request for Consultations under Article 4.4 of the DSU

39. Korea submits that the United States' appeal re garding the request for consultations is not
properly before the Appellate Body because the United States' Notice of Appeal does not sufficiently
identify the alleged errors of law and legal interpretations as required by Rule 20(2)(d) of the Working
Procedures. Korea argues that subparagraph (i) of Rule 20(2)(d) would be rendered redundant, in the
light of subparagraphs (ii) and (iii), if it were suffi cient for an appellant to state merely what the panel
holds, and claim simply that it disagrees. In its Notice of Appeal, the United States failed to offer "the
least bit of description of what the [United States] considers to be the legal error". 66 Korea, therefore,
requests the Appellate Body to dismiss this claim of the United States.
40. In the alternative, Korea argues that the United States' claim regarding Article 4.4 of the DSU
should be dismissed because Korea's request for c onsultations did satisfy the requirements of that
provision. Korea refers to its requ est for consultations, dated 30 June 200367, and to the addendum to
this request, dated 18 Augu st 2003 (the "Addendum"). 68 Korea disagrees with the United States that
Korea did not indicate the legal provisions with whic h the CVD order is alleged to be inconsistent.
Korea submits that the 18 August 2003 document made clear that it was an "addendum" to the
30 June 2003 request for consultati ons and that, therefore, the same violations set out in the initial
request were being alleged in the Addendum with respect to the CVD order. Korea further argues that
the CVD order is "dependent" on the final determ inations of the USDOC and the USITC and is
effectively a "ministerial function without discretion". 69 In Korea's view, it follows that the legal
basis for the complaint as to the CVD order is identi cal to the legal basis fo r the complaint as to the
underlying determinations. Therefore, Korea submits that its request for consultations and Addendum
met the requirements of Article 4.4 of the DSU and requests the Appellate Body to dismiss the United
States' appeal of this issue.
2. Interpretation of Article 1.1(a)(1)(iv) of the SCM Agreement
41. Korea contests the United States' challe nge to the Panel's interpretation of
Article 1.1(a)(1)(iv) of the SCM Agreement , and therefore submits that the interpretation should be
upheld by the Appellate Body. In particular, Korea argues that the Panel's interpretation of the terms
"entrusts" and "directs" was consistent with the ordi nary meanings of these terms. Korea recalls that

67WT/DS296/1 (attached as Annex III to this Report).
68WT/DS296/1/Add. 1 (attached as Annex IV to this Report).

the Panel agreed with the panel in US – Export Restraints that "entrustment" and "direction" contain
an element of "delegation" and "command". Kor ea contends that the definitions of the terms
"entrusts" and "directs" proposed by the United States were chosen selec tively and that, in so
choosing, the United States arrives at an overly broa d reading of these terms. Korea presents several
examples applying the definitions suggested by the United States, arguing that such examples reveal
that these definitions incorporate a broader range of government action than contemplated by the SCM
Agreement.
42. Korea further submits that the Panel's prope r understanding of the context of the terms
"entrusts" and "directs" supports its interpretation. Korea rejects the United States' reading of the term
"practice" in Article 1.1(a)(1)(iv) as implying that entrustment or direction cannot be limited to an
official programme, but may also include broade r "practices". Korea argues that "[t]he term
'practices' refers to what is being entrusted or directed, not whether such types of governmental
activities have been so entrusted or directed". 70 Similarly, Korea disagr ees with the United States'
assertion that by equating "entrusts" and "directs" with "delegation" and "command", the Panel did
not take account of the "full range of methods" 71 by which a government might provide a subsidy.
Korea submits that, although there may be a broad range of the types of financial transactions covered
by Article 1.1(a)(1), that is a "distinct matter" from determining whether such transactions can be
attributed to the Member's government due to entrustment or direction by the government to a private
body.72
43. Korea agrees with the United States that the SCM Agreement aims to discipline subsidies
offered by governments. In Korea's view, under the United States' interpretation, a Member would be
allowed to countervail a private body's actions that are not affirmatively entrusted or directed by the
government. This would "turn the SCM Agreement from a pro-competitive agreement to a tool of
gross protectionism".73
44. Korea responds to the various examples subm itted by the United States with a view to
demonstrating the Panel's application of its interpre tation of the terms "entrusts" and "directs" to the
facts of this case. In Korea's view, the Panel's findings referred to by the United States are not based
on an improper reading of Article 1.1(a)(1)(iv); the Panel found instead that the USDOC had
improperly relied on evidence to support conclusions that do not logically fo llow from the evidence.
Korea further emphasizes that the Panel agreed w ith the United States on the principal legal issues

70Korea's appellee's submission, para. 43. (original emphasis)
72Ibid., para. 50.
73Ibid., para. 52.

relating to the interpretation of Ar ticle 1.1(a)(1)(iv) and that, in f act, the United States is "trying to
appeal factual issues under the guise of spurious legal claims".
74 Korea, therefore, requests the
Appellate Body to uphold the Panel's findings claime d by the United States to be based on the Panel's
erroneous interpretation of Article 1.1(a)(1)(iv).
3. Review of the USDOC's Evidence of Entrustment or Direction
(a) The Panel's "Probative and Compelling" Evidentiary Standard
45. Korea contests the United States' claim that the Panel impermissibly created a new legal
standard for evaluating evidence by requiring ev idence to be "probative and compelling". Korea
submits that the term "probative and compelling" is not a new legal standard, but rather, a description
of the type of circumstantial evidence that would be sufficient to establish entrustment or direction.
46. In Korea's view, the Panel addressed the questio n whether an investigating authority could
properly base its finding of entrustm ent or direction on circumstantial evidence, or whether direct
evidence was required to sustain such a finding. Ko rea notes that the Panel found that an agency may
rest its finding of entrustment or direction on ci rcumstantial evidence, and argues that the Panel's
statement at issue must be understood in this particul ar context. Korea contends that the Panel should
be understood to have found that the further aw ay from direct evidence one moves, the more
important it is that the circumstantial evidence be persuasive. When assessing what sort of evidence
could be considered persuasive in this context, the Panel required the evid ence to be "probative and
compelling". Therefore, Korea submits, the Panel employed these terms merely to give a description
of the quality or type of evidence that was require d in the specific circumstances of the present case,
without purporting to define a new evidentiary standard under the SCM Agreement.
47. Furthermore, Korea alleges that the United St ates mischaracterizes the evidentiary standard
articulated by the Panel by reading the Panel's desc ription of "probative and compelling" evidence to
require "overwhelming"75 or "irrefutable" evidence. 76 Based on dictionary de finitions of "probative"
and "compelling", as well as synonyms for "compe lling", Korea concludes that evidence can be
regarded as "probative and compelling" if it has a "quality of proof and [has] fitness to induce
conviction of truth". 77 Korea submits that the Panel followed this standard in finding that there was

75Ibid., para. 86 (quoting United States' appellant's submission, para. 49; in turn quoting The New
Shorter Oxford English Dictionary, supra, footnote 36, Vol. 1, p. 458).
76Ibid. (quoting United States' appellant's submission, para. 49).
77Ibid., para. 98 (quoting Black's Law Dictionary, 7th edn, B.A. Garner (ed.) (West Group, 1999),
p. 628).

adequate evidence that Korea First Bank ("KFB") had been coerced by reason of alleged verbal
threats from an official from the Financial Supervisor y Service, even though the sole evidence for this
finding consisted of a single newspa per report. Therefore, Korea concludes, if there is any criticism
of the Panel in its examination of the evidence, it is that the Panel "set the bar too low".78
(b) The Panel's Approach to the Evidence
(i) Reviewing the Totality of the Evidence
48. Korea challenges the United St ates' allegation that the Pane l evaluated the evidence in a
manner that required that each piece of evidence, in and of itself , demonstrate entrustment or
direction. Korea submits that, although the Panel did look at individual pieces of evidence, it did not
state that each piece of evidence, in and of itself, had to demonstrate entrustment and direction. Korea
points instead to instances in which the Panel explic itly stated that it viewed a piece of evidence "in
conjunction with" other evidentiary factors.79
49. Moreover, according to Korea, if the Panel found that a piece of evidence was of little or no
evidentiary value—in the sense that it did not suppor t the conclusion that the USDOC derived from it,
or that it was contradicted, or that it was inaccura te—there would be no merit in taking into account
several such pieces of evidence as a whole. In other words, Korea submits, "[i]t is a mathematical
truism that no matter how many zeros and negative numbers one adds together, the sum can never be
a positive number." 80 Korea further alleges that, by arguing that the Panel reviewed the evidence in
an improper manner, the United States attempts to re-argue on appeal the specific facts of the case.
50. Korea contests the examples of Panel findings cited by the United States in support of its
allegation. Korea submits that a correct reading of the Panel's reasoning does not reveal the Panel to
have required each piece of evidence, in and of itself , to establish entrustment or direction. Instead,
according to Korea, these examples reflect the Pane l's finding that several pieces of evidence relied
upon by the USDOC were not probative, that is, they did not support the conclusion of entrustment or
direction that the USDOC sought to draw on the basi s of that evidence. In Korea's view, the United
States' appeal amounts to a disagreement with the Panel's weighing of the evidence, which does not
provide a permissible basis for appeal.

79Ibid., para. 111 (quoting Panel Report, paras. 7.56 and referring to paras. 7.63, 7.168, and 7.177).
80Ibid., para. 114.

(ii) Circumstantial Evidence
51. Korea argues that, contrary to the United Stat es' submission, the Panel did not effectively
require every piece of evidence to be direct evidence of entrustment or direction. Accordingly, Korea
requests the Appellate Body to uphold the findings challenged by the United States on the basis that
the Panel erred in its assessment of the USDOC's circumstantial evidence.
52. Korea asserts that the Panel did, in fact, acc ept circumstantial and secondary evidence. In
support of its argument, Korea submits that the Pa nel found entrustment or direction of KFB on the
basis of a single newspaper article, which w as "both secondary and circumstantial" evidence.
81
Because the Panel considered su ch evidence in its analysis, as the United States requested, Korea
submits that there is no basis for the United States' appeal.
53. In Korea's submission, the Panel did not reject evidence because it was circumstantial or
secondary evidence, but rather, because much of the evidence was inaccurate, illogical, or simply not
probative. For example, in response to the United States' argument that the Panel did not properly
assess the evidence regarding GOK coercion of Hana Ba nk, Korea submits that the Panel Report does
not indicate that the basis for findi ng this evidence insufficient was its circumstantial nature. Rather,
in Korea's view, this evidence w as rejected because the r ecord showed that the USDOC had not itself
examined the evidence submitted before th e Panel, instead having relied on a mere citation of that
evidence contained in a footnote of another document.
54. Korea submits that the Panel's examination of circumstantial evidence in the present case is
consistent with prior panel decisions, in particular, with the panel reports in Argentina – Textiles and
Apparel and Canada – Aircraft, cited by the United States in support of its appeal. Korea asserts that
these two cases essentially stand for the same propos ition ultimately accepted by the Panel in this
dispute at the urging of the United States, namely , that a Member may establish the existence of
certain conditions on the basis of circumstantial rath er than direct evidence. In Korea's view, the
Panel's articulation of a "probative and compelling" requirement for the evidence does not diminish a
Member's right to rely on circumstantial evidence because the "probative and compelling"
requirement "exists whether or not the evidence is circumstantial or direct".82
(iii) Burden of Proof
55. Korea submits that the United States' claim—that the Panel's assessment of the USDOC's
determination led to a shift in the burden of pr oof from Korea to the United States—is "baseless" and

81Korea's appellee's submission, para. 164. (emphasis omitted)
82Ibid., para. 173.

should be rejected by the Appellate Body. 83 Korea disagrees with the United States' contention that
the Panel required the United States to produce a "smoking gun". 84 Korea asserts that, rather than
looking for each piece of evidence in isolation to be dispositive of entrustment or direction, the Panel
assessed whether an objective and impartial investig ating authority could r easonably have relied on
the USDOC's evidence " as a part of building a finding of entrustment or direction". 85 Reliance on
such evidence, Korea argues, was in any event found by the Panel to be inappropriate because the
evidence was typically not relevant to the infere nce or conclusion it was meant to support and,
therefore, was neither probative nor compelling. In Korea's view, the Panel's refusal to accept
unquestioningly the United States' assertions as to the relevance of certain evidence does not
constitute an improper allocation of the burden of proof to the United States.
(iv) Ex post Rationalization
56. Korea submits that the Panel correctly identif ied evidence submitted by the United States as
ex post rationalizations and requests the Appellate Body to uphold the Panel's findings refusing to
consider such evidence. Referring to Article 22.5 of the SCM Agreement , Korea contends that an
investigating authority must cite , in its published determination, every piece of record evidence that
supports the agency's reasons for the imposition of final measures. Korea submits that the United
States' argument—that a panel must accept an y evidence not being submitted to support new
reasoning—is not consistent with the plain text of Artic le 22.5. Korea points, in particular, to the
requirement that the publishe d determination contain " all relevant information" in support of its view
that evidence not cited by the agency—and, th erefore, presumably not "relevant"—may not
subsequently be relied on by that Member in WTO dispute settlement proceedings.
57. Korea contends that the United States' reliance on a GATT panel decision is misplaced
because that decision was under the Tokyo Round Subsidies Code , which differs significantly in
pertinent respects from the SCM Agreement. Korea notes that, whereas the Tokyo Round Subsidies
Code obliged an investigating authority to include "all issues of fact and law" in its published
determination86, the SCM Agreement requires the inclusion of "all relevant information". 87 K o r e a
maintains that this difference in language suggests that, whatever may have been the understanding of
this obligation under the Tokyo Round Subsides Code, the plain language of the SCM Agreement now

83Korea's appellee's submission, heading II.E.
85Ibid., para. 175. (original emphasis)
86Article 2.15 of the Tokyo Round Subsidies Code.
87Article 22.5 of the SCM Agreement.

requires that every piece of information upon which the investigating authority relied in making its
determination be contained in the agency's published determination.
58. Korea submits that the United States' reliance on the Appellate Body decision in US – Upland
Cotton is similarly "inapposite".
88 According to Korea, the section of that Appellate Body Report
cited by the United States considers the question whether a panel evaluating the consistency of a
measure with a particular provision needs to "address" 89 each piece of evidence or each argument
raised by the parties, or whether it suffices, inst ead, for a panel to explain the reasoning underlying its
conclusions. This issue, in Korea's view, has "nothing to do with" 90 the requirement in Article 22.5 of
the SCM Agreement that the agency's determination contain "all relevant information".
59. Furthermore, Korea disagrees with the United St ates' assertion that the newspaper and journal
articles disregarded by the Panel were cited by the USDOC in the Direction of Credit Memorandum.
Korea submits, first, that certain of the articles implicated by this issue on appeal are not included
among the citations in that document. In addition, according to Korea, the Direction of Credit
Memorandum is merely a list of c itations that does not contain any discussion of the evidence listed
and, therefore, cannot establish that the documents were in fact taken into account by the USDOC so
that contradictions and nuances found therein could be reasonably and adequa tely explained by the
agency. Finally, Korea asserts that the date of the Direction of Credit Memorandum, which is the
same date as that of the USDOC's preliminary subsidy determination 91, as well as the fact that no
reference is made to materials supporting the respondent's arguments, suggest that it was drafted "at
the last second ... to support a decision already reached without reliance on the articles".92
(c) The Panel's Failure to Comply with Article 11 of the DSU
(i) Non-record Evidence
60. Korea submits that the Panel did not base it s findings on non-record information and,
therefore, requests the Appellate Body to uphold th e respective findings of the Panel as well as the
Panel's conclusions that the United States contends resulted from this alleged error. The United States
bases its argument on the premise that the reco rd evidence shows only that creditors had the
possibility of going to mediation in connection with the October 2001 restructuring, not, as the Panel

89Ibid. (quoting Appellate Body Report, US – Upland Cotton, para. 446).
90Ibid.
91Preliminary Affirmative Countervailing Duty De termination: Dynamic Random Access Memory
Semiconductors from the Republic of Korea , United States Federal Register, Vol. 68, No. 66 (7 April 2003),
p. 16766 (Exhibit GOK-4 submitted by Korea to the Panel).

found, that certain creditors exercised mediation rights. In Korea's view, however, the Panel's
analysis did not rest on the fact that certain credito rs did engage in mediation. Instead, according to
Korea, the Panel faulted the USDOC for not conducting further inquiry on this issue, given that
Article 29(5) of the CRPA, which was on the record, explicitly provided for the option of mediation to
determine appraisal rights.93
61. Korea also challenges the United States' argumen t that the record ev idence does not establish
that certain Hynix creditors exercised their rights to pursue mediation. Korea argues that the Panel
linked Article 29(5) of the CRPA to other pieces of evidence, which together could support the
Panel's understanding that me diation did take place. 94 Korea refers, in particular, to the Panel's
discussion of the Hynix 2001 Audit Report, which stat es that three creditors "raised objections" to the
terms of reimbursement "[b]ased on" the CRPA. 95 Korea submits that this language was properly
understood by the Panel to indicate recourse to mediation by certain creditors of Hynix.
62. Finally, Korea contends that the United States fa ils to recognize that the Panel pointed also to
contradictory evidence from one of the USDOC's own experts. According to Korea, the Panel quoted
the USDOC's expert as acknowledging that "certain cr editors were able to act independently within
the framework of the CRPA".96 Because the USDOC did not even take this statement into account in
its explanation, Korea argues, the Panel properly concluded that the record evidence put the USDOC
on notice as to certain creditors' recourse to mediation in connection with the October 2001
restructuring.
63. Korea concludes that there was evidence on th e record that mediation occurred pursuant to
the authority of the CRPA and, therefore, that the Panel did not impermissibly base its findings on
non-record information, in violation of Article 11 of the DSU.
(ii) Standard of Review
64. Korea challenges the United States' contention that the cumulative effect of the alleged errors
that the Panel made in its review of the evidence constitutes a separate violation of Article 11 of the
DSU. Korea argues that the United States adds no new arguments when it alleges a separate violation
of Article 11 of the DSU, relying instead on its previ ous claims relating to the totality of the evidence,

94Ibid., para. 200.
95Ibid., para. 201 (quoting Hynix 2001 Audit Report, supra, footnote 63, p. 40; also quoted in Panel
Report, para. 7.85). (Korea's emphasis omitted)
96Ibid., para. 210 (quoting Panel Report, footnote 98 to para. 7.87; in turn quoting Issues and Decision
Memorandum, supra, footnote 6, p. 55).

circumstantial and secondary evidence, the burden of proof, and the Panel's alleged use of non-record
evidence.
97 Having already established the absence of an y basis for these claims, Korea requests the
Appellate Body to dismiss the United States' additi onal claim as to the Panel's application of the
standard of review under Article 11 of the DSU.
4. Benefit and Specificity
65. Korea submits that the United States' sole argumen t with regard to benefit and specificity is
that the Panel based its conclusions on its a llegedly erroneous findings with respect to GOK
entrustment or direction. 98 Because the Panel correctly found the USDOC's determination of
entrustment or direction to rest on insufficient evidence, Korea contends that the Appellate Body
should dismiss the United States' claims relating to benefit and specificity.
C. Claim of Error by Korea – Other Appellant
66. Korea appeals the Panel's finding that a private body, KFB, was entrusted or directed by the
GOK to undertake a financial contribution within the meaning of Article 1.1(a)(1)(iv) of the SCM
Agreement. Korea contends that this finding was pr emised on the Panel's erroneous understanding
that there could be entrustment or direction under Article 1.1(a)(1)(iv) when the action that the private
body was supposed to "carry out"—in this case th e participation in the Fast Track Debenture
Programme—never took place. Korea maintains that KFB did not "carry out" the allegedly entrusted
action and that, accordingly, the Panel was incorr ect in finding that an objective and impartial
investigating authority could have found that there was entrustment or direction of KFB to participate
in the Fast Track Debenture Programme. 99 Korea further asserts that its appeal focuses on the Panel's
interpretation of Article 1.1(a)(1)(iv) and th at, although Korea disagrees with the Panel's factual
finding that there was coercion by the GOK with respect to KFB, it is not challenging this factual
finding on appeal.
100
67. According to Korea, the Panel's interpretati on of Article 1.1(a)(1)(iv)—that a private body
may be entrusted to take an action even when the action never occurs—is legally and logically
incorrect. Korea submits that the terms "entrusts" and "directs" cannot be read in isolation from the
remainder of Article 1.1(a)(1)(iv), in particular, th e requirement that the private body "carry out" one
of the functions identified in Article 1.1(a)(i) thr ough (iii). Korea submits that Article 1.1(a)(1)(iv)
further requires that the private body engage in a "practice" of a governmental type and that a

98Ibid., para. 226.
99Ibid., paras. 15-16.
100Ibid., para. 4.

"practice" is the application of a plan, not simply the plan itself. 101 In Korea's view, to read "entrusts"
and "directs" without regard to these subsequent terms in the same provision "makes no linguistic or
logical sense".102
68. Korea finds support for its reading of Article 1. 1(a)(1)(iv) in the Appellate Body Report in
US – Corrosion-Resistant Steel Sunset Review , which established that only overt government actions
or omissions may constitute a "measure" that can be challenged in WTO dispute settlement
proceedings.103 Korea argues that in the absence of su ch action or omission—in this case, the
participation of KFB in the Fast Track Debenture Programme—there can be no basis for the Panel's
finding of entrustment or direction.
69. Korea additionally refers to Article 8 of the International Law Commission's Draft Articles on
State Responsibility. 104 Korea explains that Article 8, which is entitled " Conduct directed or
controlled by a State", provides that private conduct shall be attributed to a State only "if the person[]
or group of persons is in fact acting on the instruct ions of, or under the direction or control of, that
State in carrying out the conduct." 105 Korea finds "striking" the simila rity of wording in the reference
to "carrying out" a conduct and submits that th e requirement of conduct taking place in order to
establish State responsibility is a matter of "common sense". 106 Consequently, Korea requests the
Appellate Body to reverse the Panel's finding th at the GOK had entrusted or directed KFB to
participate in the Fast Track Debenture Programme.
D. Arguments of the United States – Appellee
70. The United States submits that the Panel corr ectly found, based upon press accounts of GOK
threats directed at KFB, that it was reasonable for the USDOC to conclude that there was GOK
entrustment or direction in respect of KFB.

101Korea's other appellant's submission, para. 20.
102Ibid., para. 18.
103Ibid., para. 21 (referring to Appellate Body Report, US – Corrosion Resistant Steel Sunset Review ,
para. 81).
104International Law Commission's Draft Articles on Responsibility of States for internationally
wrongful acts, Report of the ILC on th e work of its Fifty-third session, Official Records of the General
Assembly, Fifty-sixth session, Supplement No. 10 (A/56/10), chp. IV.E.2 ("ILC Draft Articles").
105Korea's other appellant's submission, para. 25 (quoting ILC Draft Articles, supra, footnote 104,
Article 8). (Korea's emphasis omitted)
106Ibid., para. 26.

71. The United States argues that Korea has misunderstood the analysis and findings of the Panel.
In the United States' view, the Panel addressed GOK coercion and threats against Hynix creditors as
evidence of entrustment or direction generally, rather than specifically in relation to the Fast Track
Debenture Programme. The United States asserts that the Panel explicitly clarified in footnote 136 to
paragraph 7.117 of the Panel Report that it would al so consider, in a subsequent portion of the Panel
Report, "[t]he issue of the evidentiary value of the coercion of KFB in respect of the alleged
entrustment or direction of other private creditors".
107 Thus, according to the United States, the action
entrusted or directed to KFB, properly understood, is KFB's participation in the broader bailout of
Hynix, which action was in fact "carr[ied] out".
72. The United States considers "axiomatic" Korea's argument that "an act by a private body
cannot be attributed to the government unless there is an act by the private body to attribute." 108
According to the United States, the existence of su ch acts by private bodies was not in dispute before
the Panel, as the Panel itself recognized in footnote 42 to paragraph 7.27 of the Panel Report. In the
United States' view, Korea "confuse[s]" 109 the question of "entrust[ment] or direct[ion]", in the first
part of Article 1.1(a)(1)(iv), with that of whether one of the functions identified in Article 1.1(a)(1)(i)
through (iii) has been "carr[ied] out" by the priv ate body, as required by the subsequent part of
Article 1.1(a)(1)(iv). Therefore, the United Stat es requests the Appellate Body to uphold the Panel's
finding as to the GOK's entrustment or direction of KFB.
E. Arguments of the Third Participants
1. China
73. China agrees with the Panel's interpretation of the terms "entrusts" and "directs" as well as
with the "probative and compelling" standard adopted by the Panel. With regard to the interpretation
of the terms "entrusts" and "directs", China contends that, pursuant to Article 31 of the Vienna
Convention on the Law of Treaties 110 (the " Vienna Convention "), the decision-maker begins the
interpretive process with the ordinary meaning, but does not end its inquiry there. Looking beyond
the terms "entrusts" and "directs" to the other language in Article 1.1(a)(1)(iv) of the SCM Agreement,

107Panel Report, footnote 136 to para. 117 (referred to in United States' appellee's submission, para. 5).
108United States' appellee's submission, para. 6 (referring to Korea's other appellant's submission,
para. 26).
109Ibid., para. 7.
110Done at Vienna, 23 May 1969, 1155 UNTS 331; 8 International Legal Materials 679.

China submits that the term "direct s", when followed by "to" and a verb, can be interpreted only to
mean "give a formal order or command to".111
74. Furthermore, in China's view, there is no support in Article 31 of the Vienna Convention or in
WTO jurisprudence for the view, implicitly advanced by the United States, that in ascertaining the
ordinary meaning of a certain term, all possible meanings listed in a dictionary should be taken into
account. A proper understanding of the terms "entrust s" and "directs" reveals that these terms do not
include "vague concepts"112 such as the meanings proffered by the United States.
75. China disagrees with the United States that the Panel articulated and adopted a new
"probative and compelling" evidentiary standard. Ch ina maintains that the Panel adopted and applied
the general standard of review based on Article 11 of the DSU, as specified by the Appellate Body in
US – Lamb. China submits that, even though the Panel di d mention that "the evidence of entrustment
or direction must in all cases be probative and compelling" 113, this does not amount to a "special"
evidentiary standard because the Panel's statements purporting to apply this standard are only "general
in nature".114
2. European Communities
76. The European Communities agrees with the United States that the Panel (i) erred in its
interpretation of the terms "entrusts" and "directs" in Article 1.1(a)(1)(iv) of the SCM Agreement ;
(ii) applied an improper standard of review; (iii) impermissibly shifted the burden of proof;
and (iv) incorrectly refused to consider certain United States evidence on the ground of ex post
rationalization. With regard to the interpreta tion of "entrusts" and "directs", the European
Communities submits that the Panel reformulated these terms in a restrictive way, in particular by
limiting their meanings to "affirmative action[s]" of "delegation" and "command" as set out in the
panel report in US – Export Restraints. The Panel then applied this reformulated understanding to the
facts of the present case. The Eur opean Communities maintains that this constitutes legal error as the
factual circumstances in the present case ar e fundamentally different from those in US – Export
Restraints.
77. The European Communities agrees with the United States that, in applying the restrictive and
very specific language of that panel report, the Panel incorrectly discarded some of the ordinary

111China's third participant's submission, para. 5 (quoting Panel Report, US – Export Restraints ,
para. 8.28).
112Ibid., paras. 13, 14, 16, and 20.
114Ibid.

meanings of the words "entrusts" and "direct s", which meanings were recognized by the US – Export
Restraints panel. In particular, the European Comm unities maintains that a government can entrust
one or more private bodies to carry out not only a specific task—such as the payment of funds to a
particular firm—but also to carry out a more general task—such as a public policy objective.
115 The
European Communities contends that, although the Panel recognized that leaving discretion to a
private body is not necessarily at odds with entrus tment or direction of the private body, the Panel
failed to fully appreciate this point in its analysis of the facts of the case.
78. The European Communities agrees with the United States that the conclusions of the USDOC
were reasonable and that the Pa nel impermissibly engaged in a de novo review of the USDOC's
determination. The European Communities submits that, by considering the facts and evidence only
in isolation, without assessing the weight of the individual facts when taken together, the Panel
effectively applied a "different methodological ap proach" from that adopted by the investigating
authority.
116 The European Communities maintains that the Panel's sole task was to determine
whether or not the conclusion of the USDOC with respect to "entrustment" or "direction" was "so
outlandish, so unreasonable, so lacking in objectivity" 117 that it left no choice for the Panel but to rule
against the investigating authority. Instead, the Pa nel examined whether certain facts, on their own,
were decisive of the question of entrustment or di rection and, finding that they were not, failed to
include them in its weighing of all the facts in question collectively. In doing so, according to the
European Communities, the Panel conducted its own independent asse ssment of GOK entrustment or
direction of Hynix's creditors.
79. Furthermore, the European Communities agr ees with the United States that the Panel
effectively shifted the burden of proof from Korea to the United States through its erroneous review
of the USDOC's evidence. In th is respect, the European Communiti es agrees with the United States
that the Panel's "probative and compelling" evidentiary standard has no basis in the SCM Agreement
or any other covered agreement, and that such st andard essentially requires the investigating authority
to produce a "smoking gun". 118 Furthermore, the European Communities emphasizes the importance
of circumstantial evidence in subsidies investigati ons, and that the Panel's approach improperly limits
an investigating authority's ability to rely on such evidence. The European Communities asserts that,
as the complaining party, Korea bore the burden of establishing a prima facie case and that, as such, if
certain events—such as meetings with GOK offi cials—had no connection with entrustment or

115European Communities' third participant's submission, para. 10.
116Ibid., para. 20.
117Ibid., para. 19.
118Ibid., para. 23.

direction, Korea should have been required to pr oduce certain exculpatory evidence, which could
have been only in its control.119
80. Finally, the European Communities agrees with th e United States that it is appropriate for a
Member to provide additional details and evidence of the elements on which its findings were based,
provided that the Member does not seek to alter the r easoning set out in the agency's decision. In the
European Communities' view, the submission of r ecord evidence relied upon but not cited in the
agency's decision does not constitute the introduc tion of new reasoning, because such evidence is
merely an additional part of a factual or legal finding already articulated in the agency's decision.120
3. Japan
81. Japan agrees with the United States that th e Panel (i) erred in the interpretation and
application of the terms "entrusts" and "directs" in Article 1.1(a)(1)(iv) of the SCM Agreement ;
(ii) applied an erroneous "probative and compelli ng" evidentiary standard; (iii) improperly assessed
the probative value of each item of evidence separatel y; and (iv) erred in disregarding evidence not
specifically mentioned in the USDOC's determination.
82. With regard to the interpretation of the terms "entrusts" and "directs", Japan submits that the
Panel did not base its analysis on the full range of meanings of these terms, but rather interpreted
these terms in an overly narrow manner to mean only "delegation" and "c ommand". According to
Japan, the Panel failed to recognize that the terms "entrusts" and "directs" "encompass a wide range of
acts", including "a government's offer to a person to do something".121
83. In relation to the standard of review, Japan ag rees with the United States that the Panel erred
in requiring evidence to be "probative and compel ling". Japan contends that nothing in the SCM
Agreement or the DSU provides a legal basis for the Pa nel's standard. Indeed, Japan argues, the
proper evidentiary standard for this case is found in Article 11 of the DSU, which requires a panel to
determine only whether "an objective assessment of evidence on the record reasonably allows the
conclusion reached by the authority." 122 The use of any other standard for the examination of an
investigating authority's evidence, in Japan's view, amounts to legal error.

119European Communities' third participant's submission, para. 25.
120Ibid., para. 26.
121Japan's third participant's submission, para. 5. (original emphasis)
122Ibid., para. 9.

84. Japan further contends that the Panel errone ously considered that each item of evidence, in
and of itself , must be probative of entrustment or direction. Japan notes that the Panel correctly
recognized that the USDOC relied on the totality of the evidence before it to determine entrustment or
direction. The Panel erred, however, in subse quently considering that it "must consider the
[US]DOC's assessment of the probative value of each evidentiary factor separately".
123 Instead, Japan
submits, the Panel's task under Article 11 of the DSU was simply to find whether the USDOC's
conclusion was supported by evidence on the record as a whole . Reviewing the evidence in its
entirety is particularly important in cases, such as the present dispute, where the evidence by its nature
would be circumstantial because "[a]n individual piece of circumstantial evidence shows a limited
aspect of the entire picture." 124 According to Japan, the Panel's failu re to evaluate the evidence in its
totality resulted in several findings that are inconsis tent with Article 11 of the DSU and Article 1.1 of
the SCM Agreement.
85. Japan also argues that the Pane l erred in rejecting certain evidence submitted by the United
States on the ground that the USDOC did not explicitly refer to such evidence in its published subsidy
determination. Japan contends that neither Article 11 of the DSU, nor any other provision of the DSU
or the SCM Agreement, obliges the authority to discuss in its determination "each and every reason
and fact" on which the authority based its conclusi on, or precludes a Member from relying before a
panel on record evidence that was not e xplicitly referred to in the investigating
authority's determination.125 Japan finds support for its view in the Appellate Body decisions in
Thailand – H-Beams and EC – Tube or Pipe Fittings , which explained that a panel's obligation under
Article 17.6(i) of the Agreement on Implementation of Article VI of the General Agreement on Tariffs
and Trade 1994 (the "Anti-Dumping Agreement") to review the agency's fact-finding does not prevent
the respondent Member from relying before a panel on facts that are not discernible from the
published determination. Japan submits that, given the similar obligation of panels to review facts
under Article 11 of the DSU, the rationale of these decisions applies equally in the present case to
permit the United States to rely on the evidence improperly rejected by the Panel.
4. Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu

86. The Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu agrees with the
Panel's interpretation of the terms "entrusts" and "directs" in Article 1.1(a)(1)(iv) of the SCM
Agreement and submits that, contrary to the United St ates' assertion, the Panel did not erroneously
apply a special evidentiary standard. The Separa te Customs Territory of Taiwan, Penghu, Kinmen,

124Ibid., para. 14.
125Ibid., para. 25.

and Matsu contends that the interpretation of the terms "entrusts" and "directs" suggested by the
United States "blurs the line" between a subsidy captured by the provisions of the SCM Agreement, on
the one hand, and the "general administrative discretion" 126 of Members to adopt WTO-consistent
practices to regulate or influence their industries or markets, on the other hand. In contrast, the
Panel's interpretation of "entrusts" and "direct s" ensures that government actions under Article
1.1(a)(1)(iv) are differentiated from more routine government interventions in the marketplace.
87. The Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu disagrees with the
United States' claim that the Panel erroneously applied a "probative and compelling" evidentiary
standard. Pointing to the Panel's own descriptio n of what it meant by the term "probative and
compelling"—namely, that the evidence "d emonstrate" entrustment or direction 127—the Separate
Customs Territory of Taiwan, Penghu, Kinmen, and Ma tsu maintains that the Panel's application of
this standard does not impose additional obligations on investigating authorities. In the view of the
Separate Customs Territory of Ta iwan, Penghu, Kinmen, and Matsu, th e Panel's characterization falls
within its discretion as the trier of fact, and is merely "an extension of Article 11 of the DSU". 128 The
Separate Customs Territory of Taiwan, Penghu, Ki nmen, and Matsu asserts that, even though the
Panel could have elaborated further on its understa nding of the "probative and compelling" standard,
it agrees with that standard and requests the Appella te Body to take its views into account should the
Appellate Body "feel the need to further elaborate on this standard".129
III. Issues Raised in This Appeal
88. The following issues are raised in this appeal:
(a) whether the Panel erred in finding that Kor ea's request for consultations did not fail
to indicate the legal basis for the comp laint in relation to the United States
Department of Commerce's (the "USDOC's ") countervailing duty ("CVD") order, as
required by Article 4.4 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (the "DSU");

126Third participant's submission of the Separate Customs Territory of Taiwan, Penghu, Kinmen, and
Matsu, para. 3.
127Ibid., para. 6 (quoting Panel Report, paras. 7.35 and 7.46).
128Ibid., para. 7.
129Ibid., para. 8.

(b) as regards the USDOC's finding of entrustment or direction:
(i) whether the Panel erred in interpreting Article 1.1(a)(1)(iv) of the Agreement
on Subsidies and Countervailing Measures (the "SCM Agreement
 "), in
particular:
(A) in finding that, in order to cons titute entrustment or direction under
Article 1.1(a)(1)(iv), "the action of the government must contain a
notion of delegation (in the case of entrustment) or command (in the
case of direction)"; and
(B) in finding that the evidence was "sufficient for an objective and
impartial investigating authorit y to properly find government
entrustment or direction in respect of KFB", notwithstanding that
Korea First Bank ("KFB") did not carry out the activity allegedly
entrusted or directed by the Government of Korea (the "GOK");
(ii) whether the Panel erred in its review of the USDOC's finding of entrustment
or direction under Article 1.1(a)(1)(iv) of the SCM Agreement, in particular:
(A) in finding that evidence of entrustment or direction must be
"probative and compelling";
(B) in failing to examine the USDO C's evidence in its totality, and
instead, requiring that individual pieces of evidence, in and of
themselves, establish entrustment or direction by the GOK of the
creditors of Hynix Semiconductors, Inc. ("Hynix");
(C) in declining to consider certa in evidence on the record of the
underlying investigation but not cited by the USDOC in its published
determination;
(D) in failing to comply with its obligations under Article 11 of the DSU
by finding that "the mediation provisions [of the Corporate
Restructuring Promotion Act ("CRPA")] had actually been invoked
by three creditors in respect of the October 2001 restructuring", in the
absence of supporting evidence on the record of the underlying
investigation; and

(E) in failing to apply the proper standard of review and, therefore,
failing to comply with its obligations under Article 11 of the DSU;
and, consequently,
(iii) whether the Panel erred in finding that the USDOC's determination of GOK
entrustment or direction of certain of Hynix's creditors is inconsistent with
Article 1.1(a)(1)(iv) of the SCM Agreement;
(c) whether the Panel erred in finding that the USDOC's benefit determination is
inconsistent with Article 1.1(b) of the SCM Agreement; and
(d) whether the Panel erred in finding that th e USDOC's determination of specificity,
insofar as it relates to subsidies provided by virtue of GOK entrustment or direction
of certain of Hynix's creditors, is inconsistent with Article 2 of the SCM Agreement.
IV. Consultations
A. Introduction and Relevant Procedural Background
89. We begin with the United States' assertion that the Panel erred by failing to reject Korea's
claims against the USDOC's CVD order on the grounds that Korea did not provid e, in its request for
consultations, the legal basis for its complaint agains t this measure, as required by Article 4.4 of the
DSU.
90. Before examining the United States' appeal, we set out the relevant procedural history of the
dispute. Korea requested consultations with the United States, for the first time, on 30 June 2003. 130
In its request for consultations, Korea referred to th e preliminary and final s ubsidy determinations of
the USDOC and to the preliminary injury determ ination of the United States International Trade
Commission (the "USITC"). The request also indicated the provisions of the General Agreement on
Tariffs and Trade 1994 (the "GATT 1994") and the SCM Agreement with which Korea considered
"these determinations" to be inconsistent.131 Consultations were held on 20 August 2003.132
91. On 18 August 2003, Korea submitted an addendum to its request for consultations (the
"Addendum"), which stated:

130WT/DS296/1 (attached as Annex III to this Report).
131The request refers to Articles 1, 2, 10, 11, 12, 14, 17, 22, and 32.1 of the SCM Agreement and to
Articles VI:3 and X:3 of the GATT 1994.
132According to the United States, the consultations "were limited to the preliminary and final
determinations of the [US]DOC". (United States' appellant's submission, para. 134)

With reference to document WT/DS296/1 ... circulated on 8 July
2003 [the original request for consultations], my authorities have
instructed me to request further consultations with the Government of
the United States ... with regard to the [USITC's] final determination
of material injury, ... and the [USD OC's] final [CVD] order... . Both
of these actions relate to the same underlying measures at issue in our
previous request for consultations.
133
This language was followed by a list of provis ions with which Korea considered "these
determinations" to be inconsistent.134 Another round of consultations was held on 1 October 2003,
prior to which Korea and the United States exchan ged correspondence indicating that they disagreed
about the conformity of Korea's request for consultations with Article 4.4 of the DSU. 135 K o r e a
submitted a request for the establishment of a panel on 19 November 2003. 136 The request identified
the USDOC's CVD order and stated that it "was the result" of the USDOC's final CVD determination
and of the USITC's final material injury dete rmination. The United States objected to the
establishment of a panel on the grounds that the parties had not held consultations on the CVD
order.137 The Panel was established on 23 January 2004.138
92. The United States requested the Panel to reject Korea's claims in respect of the USDOC's
CVD order. 139 According to the United States, Korea fa iled to comply with the requirements of
Article 4.4 of the DSU because it did not provide "any indication of the legal basis of its complaint" in

133WT/DS296/1/Add.1 (attached as Annex IV to this Report), p. 1.
134Each item on the list identified a pa ragraph of Article 15 of the SCM Agreement with which "these
determinations" were allegedly inconsistent.
135In its letter accepting further consultations, the United States noted Korea's alleged failure to provide
the legal basis for its complaint in respect of the USDO C's CVD order. (United States' appellant's submission,
para. 136 (referring to letter from the Ambassador and Permanent Representative of the United States to the
WTO to the Ambassador and Permanent Representative of the Republic of Korea to the WTO, dated 28 August
2003 (Exhibit US-2 submitted by the United States to the Panel))) Korea responded by letter, explaining that
the bases for its complaint were "found in both of [its] consultation requests", and that "under U.S. law, the
[CVD] order cannot be imposed without affirmative determinations by both" the USDOC and the USITC.
(Letter from the Ambassador and Permanent Representative of the Republic of Korea to the WTO to the
Ambassador and Permanent Representative of the United States to the WTO, dated 8 September 2003 (Exhibit
US-3 submitted by the United States to the Panel)) According to the United States, during the consultations,
"the parties agreed to disagree concerning the conformity of Korea's consultation request with Article 4.4 of the
DSU" and "the United States declined to engage in any discussions regarding the [CVD] order." (United States'
appellant's submission, para. 137)
136WT/DS296/2 (attached as Annex V to this Report).
137The United States observes that "[a]t the meeting of the [DSB] at which Korea’s request was first
considered, the United States objected to the establishment of a panel on the grounds that Korea’s panel request
sought to cover matters on which the parties had not consulted" and "described Korea’s failure to comply with
Article 4.4 of the DSU and the resulting absence of cons ultations with respect to the [USDOC's CVD] order".
(United States' appellant's submission, para. 138 (referring to WT/DSB/M/159, paras. 32-38 (Exhibit US-5
submitted by the United States to the Panel)))
138Panel Report, para. 1.5.
139Ibid., para. 7.410.

respect of the CVD order. 140 The Panel disagreed, noting that Korea's second request for
consultations referred to Korea's first request for consultations.141 This reference, in the Panel's view,
was "sufficient for the second request to be read in light of the first request" and consequently, "in
addition to the provisions of the SCM Agreement set forth (in a non-exhaus tive manner) in Korea's
second request for consultations, its claims in that document should also be read in light of the
provisions of the SCM Agreement and GATT 1994 set out in" the original request. 142 The Panel
concluded that "the totality of th ese provisions provides sufficient 'indication of the legal basis for the
complaint' within the meaning of Article 4.4 of the DSU."143
93. The United States appeals this Panel finding. According to the United States, "it is not
credible to assert that by simply referring to the f act that it had filed a prior consultation request on
one set of alleged measures, Korea satisfied its oblig ation to provide an indication of the legal basis
for its complaint with respect to a different measure." 144 It adds that, given that Korea cited many
provisions in its first request for consultations, the United States could not have been expected
"to guess which provision(s) applied to the [CVD] order". 145 "At a minimum", the United States
explains, Article 4.4 requires "a n indication of at least one provision with which a measure is
considered to be inconsistent".146 For these reasons, the United Stat es submits, the Panel should have
rejected Korea's claims in respect of the CVD order.
94. Korea requests the Appellate Body to dismiss th e United States' appeal with respect to this
issue on the grounds that the Notice of Appeal did not meet the requirements of Rule 20(2)(d) of the
Working Procedures for Appellate Review (the "Working Procedures").147 In Korea's submission, the
United States' Notice of Appeal does not identify the "alleged errors in the issues of law covered in
the panel report and legal interpre tations developed by the panel" as required by Rule 20(2)(d)(i);
instead, the Notice of Appeal "repeats a [United Stat es] version of what the Panel stated and says the
[United States] disagrees". 148 In any event, Korea asserts, the Panel was correct in declining the
United States' request to reject Korea's claim in respect of the CVD order. Korea explains that
"[b]ecause the [CVD] order is wholly dependant on the administrative determinations and is

140Panel Report, para. 7.410.
141Ibid., para. 7.414.
142Ibid., para. 7.415.
143Ibid. (footnote omitted)
145Ibid.
146Ibid., para. 144.
148Ibid., para. 230.

effectively a ministerial function without discretion, it follows that the legal claims of the underlying
determinations are identical to the legal claims with respect to the [CVD] order."
149
B. Sufficiency of the United States' Notice of Appeal
95. Before turning to the United States' claim re lating to Korea's request for consultations, we
address Korea's assertion that the United States' Noti ce of Appeal does not meet the requirements of
Rule 20(2)(d) of the Working Procedures in respect of this claim. Rule 20(2) provides, in relevant
part:
A Notice of Appeal shall include ...
(d) a brief statement of the nature of the appeal, including:
(i) identification of the alleged errors in the issues of law
covered in the panel report and legal interpretations
developed by the panel;
(ii) a list of the legal provision(s) of the covered
agreements that the panel is alleged to have erred in
interpreting or applying; and
(iii) without prejudice to the ability of the appellant to
refer to other paragraphs of the panel report in the
context of its appeal, an indicative list of the
paragraphs of the panel re port containing the alleged
errors.
96. In its Notice of Appeal, the United States indicates that it seeks review of:
... the Panel's legal conclusion that, with respect to the [US]DOC
[CVD] order, Korea's consultation request provides a sufficient
indication of the legal basis of the complaint within the meaning of
Article 4.4 of the DSU. This conc lusion is in error and is based on
erroneous findings on issues of law and related legal interpretations.
10
10Panel Report, paragraphs 7.414-7.415.
97. Korea alleges that the United States' Notice of Appeal does not identify the alleged errors in
the issues of law covered in the Panel Report and le gal interpretations develo ped by the Panel. We
disagree. Although Korea is correct that the United States' Notice of Appeal simply tracks the Panel's
finding150, nevertheless, the Notice of Appeal states that the alleged error of the Panel is the finding

150The Panel found that "the totality of these provisions [referred to in Korea's request for consultations
and the Addendum] provides sufficient 'indication of the legal basis for the complaint' within the meaning of
Article 4.4 of the DSU." (Panel Report, para. 7.415) (footnote omitted)

that Korea's request for consultations provides sufficient indication of the legal basis for the
complaint; it mentions that Article 4.4 of the DSU is the relevant legal provision, and it indicates the
paragraphs of the Panel Report where this finding is made. Thus, the United States' Notice of Appeal
provides adequate notice to Korea of the "nature of the appeal" in order to allow it to know the case to
which it must respond. 151 In our view, this is sufficient, in this case, for purposes of Rule 20(2)(d) of
the Working Procedures.
C. Does Korea's Request for Consultations Fulfil the Requirements of Article 4.4 of the
DSU?
98. Having disposed of Korea's objection regarding the United States' Notice of Appeal, we
examine the United States' claim on appeal. Th e requirements that apply to a request for
consultations are set out in Article 4.4 of the DSU, which provides, in relevant part:
Any request for consultations sha ll be submitted in writing and shall
give the reasons for the request, including identification of the
measures at issue and an indication of the legal basis for the
complaint.
99. As observed above
152, Korea's initial request for consultati ons did not refer to the CVD order,
which was not in existence at th e time the request was made. In the Addendum to its request for
consultations, Korea sought "further consultatio ns" with regard to the USITC's final injury
determination and the USDOC's CVD order. The Addendum referred to the original request for
consultations and expressly indicated that both the US ITC's final affirmative injury determination and
the CVD order "relate to the same underlying me asures at issue in our previous request for
consultations".153 The United States considers that this language does not permit a conclusion that the
claims asserted in the initial request for consultatio ns apply also to the CVD order, which is referred
to only in the Addendum.
100. We disagree. The Addendum expressly refers to the initial request for consultations. It is
clear that the Addendum was intended to be read toge ther with the original request for consultations;
indeed, that is the very nature of an addendum. Moreover, we recall that Korea explains that, under
United States law, "the [CVD] order is wholly de pendant on the administrativ e determinations and is
effectively a ministerial function without discretion". 154 According to Korea, "it follows that the legal

151Appellate Body Report, US – Countervailing Measures on Certain EC Products, para. 62; Appellate
Body Report, EC – Export Subsidies on Sugar, para. 344.
152Supra, para. 90.
153WT/DS296/1/Add.1 (attached as Annex IV to this Report), p. 1.

claims of the underlying determinations are identical to the legal claims w ith respect to the [CVD]
order."
155 At the oral hearing, the United States confirmed that this is an accurate description of a
CVD order under United States law. In these circum stances, it should have been apparent that the
allegations of inconsistency, set forth by Korea in the original request for consultations and in the
Addendum in relation to the USDOC's subsidy determ ination and the USITC's injury determination,
applied also to the CVD order. Nor can it be said that the United States was expected "to guess which
provision(s) applied to the [CVD] order".156 Accordingly, we find that it was reasonable for the Panel
to conclude that the "totality" of the provisions in Korea's initial request for consultations and in the
Addendum provides, with respect to the USDOC's CVD order, a sufficient indication of the legal
basis for the complaint within the meaning of Article 4.4.157
101. For these reasons, we uphold the Panel's finding, in paragraph 7.415 of the Panel Report, that
Korea's request for consultations did not fail to indi cate the legal basis for the complaint in relation to
the USDOC's CVD order, as required by Article 4.4 of the DSU.
V. Interpretation of Article 1.1(a)(1)(iv) of the SCM Agreement
A. Introduction
102. We examine next the United States' and Kor ea's contentions that the Panel incorrectly
interpreted Article 1.1(a)(1)(iv) of the SCM Agreement.
103. In the course of its analysis of Korea's claim under Article 1.1(a)(1)(iv), the Panel stated that
it "agree[d] with the US – Export Restraints panel that '[i]t follows from the ordinary meanings of
the two words "entrust" and "direct" that the action of the government must contain a notion of
delegation (in the case of entrustment) or command (in the case of direction).'"158
104. The United States asserts that the Panel's interpre tation of the terms "entrusts" and "directs" is
erroneous because it fails to "take[] account of the full range of government actions that fall within the
ordinary meaning[s] of th[ese] term[s]".159 In response, Korea argues that the Panel's interpretation of

157Panel Report, para. 7.415.
159United States' appellant's submission, para. 24. The European Communities and Japan support the
United States' position. (European Communities' third pa rticipant's submission, para. 3; Japan's third
participant's submission, para. 2)

the terms "entrusts" and "directs" is "appropriate" and, consequently, should be upheld by the
Appellate Body.160
105. Korea's challenge relates to a different aspect of the Panel's interpretation of
Article 1.1(a)(1)(iv). In particular, Korea appeals the Panel's finding that certain evidence relied on
by the USDOC was "sufficient for an objective and im partial investigating authority to properly find
government entrustment or direction in respect of KFB". 161 According to Korea, this finding is a
consequence of the Panel's incorrect interpretati on that an affirmative finding of entrustment or
direction under Article 1.1(a)(1)(iv) is possible, even though the act that the private body was
allegedly entrusted or directed to carry out was never undertaken.
162 The United States requests the
Appellate Body to uphold the Panel's finding that the USDOC had a sufficient factual basis to
conclude that there was entrustment or direction by the GOK with respect to KFB.
163
B. Article 1.1(a)(1)(iv) of the SCM Agreement
1. The Meaning of the Terms "Entrusts" and "Directs"
106. Article 1.1 lays down when a "subsidy" sh all be deemed to exist for purposes of the SCM
Agreement, namely, when (i) there is a "financial contribution by a government or any public body",
and (ii) "a benefit is thereby conferred". 164 This part of the appeal is concerned with the "financial
contribution" element of the definition of a "subsidy". 165 Article 1.1(a)(1) of the SCM Agreement
states that there is a financial contribution by a government or any public body where:
(i) a government practice involves a direct transfer of funds (e.g.
grants, loans, and equity infusion), potential direct transfers
of funds or liabilities (e.g. loan guarantees);
(ii) government revenue that is otherwise due is foregone or not
collected (e.g. fiscal incentives such as tax credits);

160Korea's appellee's submission, heading II.A. China and the Separate Customs Territory of Taiwan,
Penghu, Kinmen, and Matsu also assert that the United States' appeal should be rejected. (China's third
participant's submission, para. 20; Third participant's submission of the Separate Customs Territory of Taiwan,
161Panel Report, para. 7.117. (footnote omitted)
162Korea's other appellant's submission, para. 4.
164We note that, pursuant to Articles 1.1(a)(2) and 1.1(b) of the SCM Agreement, a subsidy shall also be
deemed to exist if "there is a form of income or price support in the sense of Article XVI of the GATT 1994"
and "a benefit is thereby conferred". This case does not raise the issue of subsidies granted in the form of
income or price support.
165We examine the United States' appeal of the Panel's finding relating to "benefit" in Section VII of
this Report.

(iii) a government provides goods or services other than general
infrastructure, or purchases goods;
(iv) a government makes payments to a funding mechanism, or
entrusts or directs a private body to carry out one or more of
the type of functions illustrate d in (i) to (iii) above which
would normally be vested in the government and the practice,
in no real sense, differs from practices normally followed by
governments[.] (footnote omitted)
107. Article 1.1(a)(1) makes clear that a "financial contribution" by a government or public body is
an essential component of a "subsidy" under the SCM Agreement. No product may be found to be
subsidized under Article 1.1(a)(1), nor may it be countervailed, in the absence of a financial
contribution. Furthermore, situations involving exclusively private conduct—that is, conduct that is
not in some way attributable to a government or public body—cannot constitute a "financial
contribution" for purposes of determining the existence of a subsidy under the SCM Agreement.
108. Paragraphs (i) through (iv) of Article 1.1(a)(1 ) set forth the situations where there is a
financial contribution by a government or public body. The situations listed in paragraphs (i) through
(iii) refer to a financial contribution that is provided directly by the government through the direct
transfer of funds, the foregoing of revenue, the pr ovision of goods or services, or the purchase of
goods.
166 By virtue of paragraph (iv), a financ ial contribution may also be provided indirectly by a
government where it "makes payments to a funding mechanism", or, as alleged in this case, where a
government "entrusts or directs a private body to carry out one or more of the type of functions
illustrated in (i) to (iii) ... which would normally be vested in the government and the practice, in no
real sense, differs from practices normally followed by governments". Thus, paragraphs (i) through
(iii) identify the types of actions that, when taken by private bodies that have been so "entrusted" or
"directed" by the government, fall within the scope of paragraph (iv). In othe r words, paragraph (iv)
covers situations where a private body is being used as a proxy by the government to carry out one of
the types of functions listed in para graphs (i) through (iii). Seen in this light, the terms "entrusts" and
"directs" in paragraph (iv) identify the instances wh ere seemingly private conduct may be attributable
to a government for purposes of determining whether there has been a financial contribution within
the meaning of the SCM Agreement.
109. With this in mind, we turn to examine the mean ings of the terms "entrusts" and "directs" in
Article 1.1(a)(1)(iv). We recall that the Panel stated that it "agree[d] with the US – Export Restraints
panel that '[i]t follows from the ordinary meanings of the two words "entrust" and "direct" that the
action of the government must contain a notion of delegation (in the case of entrustment) or command

166Like the SCM Agreement, we use the term "government" to refer to "a government or any public
body within the territory of a Member", unless otherwise noted.

(in the case of direction).'" 167 In so doing, the Panel effectivel y replaced the terms "entrusts" and
"directs" with two other terms, "delegation" and "command", whose scope it did not define, and went
no further in clarifying the meaning of any of these terms. 168 The United States asserts that the Panel
"failed to give full meaning and effect to the treaty terms at issue". 169 It points out that the dictionary
definitions of the term "entrust" include "[i]nvest w ith a trust; give (a person, etc.) the responsibility
for a task ... [c]ommit the ... execution of (a task) to a person".170 The United States also notes that the
dictionary definitions of "direct" include "[c]ause to move in or take a specified direction; turn
towards a specified destination or target"; "[g]ive authoritative instructions to; to ordain, order (a
person) to do, (a thing) to be done; order the performance of"; and "[r]egulate the course of; guide
with advice". 171 The United States, therefore, would have us adopt an interpretation of the terms
"entrusts" and "directs" that includes all the dictionary definitions of these terms.
110. The term "entrusts" connotes the action of givi ng responsibility to someone for a task or an
object.172 In the context of paragraph (iv) of Article 1.1(a)(1), the government gives responsibility to
a private body "to carry out" one of the types of f unctions listed in paragrap hs (i) through (iii) of
Article 1.1(a)(1). As the United States acknowledges 173, "delegation" (the word used by the Panel)
may be a means by which a government gives respons ibility to a private body to carry out one of the
functions listed in paragraphs (i) through (iii). Delegation is usuall y achieved by formal means, but
delegation also could be informal. Moreover, there may be other means, be they formal or informal,
that governments could employ for the same purpose. Therefore, an interpretation of the term
"entrusts" that is limited to acts of "delegation" is too narrow.

168The Panel's subsequent discussion of the context and the object and purpose of the terms "entrusts"
and "directs" focused on whether Article 1.1(a)(1)(iv) requires that the government action allegedly constituting
entrustment or direction be explicit. (Ibid.. 7.36-7.41)
 170Ibid., para. 19 (quoting The New Shorter Oxford English Dictionary , supra, footnote 36, Vol. 1,
p. 831.
 171Ibid., para. 20 (quoting The New Shorter Oxford English Dictionary , supra, footnote 36, Vol. 1,
p. 679. (original italics)
172The Spanish and French versions of the SCM Agreement use the verbs "encomendar" and
"charger", respectively, which have similar meanings . The Diccionario de la lengua española defines
"encomendar" as:
Encargar a alguien que haga algo o que cuide de algo o de alguien.
(Diccionario de la lengua española, 22nd edn (Real Academia Española, 2001), p. 612)
Le Nouveau Petit Robert defines "charger" as:
Revêtir d'une fonction, d'un office. … commettre, déléguer, préposer (à).
(Le Nouveau Petit Robert, P. Varrod (ed.) (Dictionnaires Le Robert, 1993), p. 403)
173United States' appellant's submission, para. 24; United States' response to questioning at the oral
hearing.

111. As for the term "directs", we note that some of the definitions—such as "give authoritative
instructions to" and "order (a person) to do "—suggest that the person or entity that "directs" has
authority over the person or entity that is directed. In contrast, some of the other definitions—such as
"inform or guide"—do not necessarily convey this sense of authority. In our view, that the private
body under paragraph (iv) is directed "to carry out" a function underscores the notion of authority that
is included in some of the definitions of the term "d irect". This understanding of the term "directs" is
reinforced by the Spanish and French versions of the SCM Agreement , which use the verbs
"ordenar"
174 and "ordonner"175, respectively.176 Both of these verbs unambiguously convey a sense of
authority exercised over someone. In the context of paragraph (iv), this authority is exercised by a
government over a private body. A "command" (the word used by the Panel) is certainly one way in
which a government can exercise authority ove r a private body in the sense foreseen by
Article 1.1(a)(1)(iv), but governments are likely to have other means at their disposal to exercise
authority over a private body. Some of these means may be more subtle than a "command" or may
not involve the same degree of compulsion. Thus, an interpretation of the term "directs" that is
limited to acts of "command" is also too narrow.
112. Paragraph (iv) of Article 1.1(a)(1) further states that the private body must have been
entrusted or directed to carry out one of the type of functions in paragraphs (i) through (iii). As the
panel in US – Export Restraints explained, this means that "the scope of the actions ... covered by
subparagraph (iv) must be the same as those covered by subparagraphs (i)-(iii)".
177 A situation where
the government entrusts or directs a private body to carry out a function that is outside the scope of
paragraphs (i) through (iii) would consequently fall outside the scope of paragraph (iv). Thus, we
agree with the US – Export Restraints panel that "the difference between subparagraphs (i)-(iii) on the
one hand, and subparagraph (iv) on the other, has to do with the identity of the actor, and not with the
nature of the action."178 In addition, we must not lose sight of the fact that Article 1.1(a)(1)(iv)

174The Diccionario de la lengua española defines "ordenar" as:
Mandar que se haga algo. … Encaminar y dirigir a un fin.
(Diccionario de la lengua española, supra, footnote 172, p. 1105)
175Le Nouveau Petit Robert defines "ordonner " as:
(Le Nouveau Petit Robert, supra, footnote 172, p. 1795)
176In this respect, we recall Article 33(3) of the Vienna Convention, which provides that "[t]he terms of
the treaty are presumed to have the same meaning in each authentic text."
178Ibid. (original emphasis)

requires the participation of the government, albeit i ndirectly. We therefore agree with Korea that
there must be a demonstrable link between the government and the conduct of the private body.179
113. We recall, moreover, that Article 1.1(a)(1) of the SCM Agreement is concerned with
the existence of a financial contribution. Paragrap h (iv), in particular, is intended to ensure that
governments do not evade their obligations under the SCM Agreement by using private bodies to
take actions that would otherwise fall within Artic le 1.1(a)(1), were they to be taken by the
government itself. In other words, Article 1. 1(a)(1)(iv) is, in essence, an anti-circumvention
provision.180 A finding of entrustment or direction, therefore, requires that the government give
responsibility to a private body—or exercise its author ity over a private body—in order to effectuate a
financial contribution.
114. It follows, therefore, that not all governme nt acts necessarily amount to entrustment or
direction. We note that both the United States and Korea agree that "mere policy pronouncements" by
a government would not, by themselves, constitute entrustment or direction for purposes of
Article 1.1(a)(1)(iv).
181 Furthermore, entrustment and dir ection—through the giving of responsibility
to or exercise of authority over a private body— imply a more active role than mere acts of
encouragement.182 Additionally, we agree with the panel in US – Export Restraints that entrustment
and direction do not cover "the s ituation in which the government in tervenes in the market in some
way, which may or may not have a particular result simply based on the given factual circumstances
and the exercise of free choice by the actors in that market".
183 Thus, government "entrustment" or

179Korea's appellee's submission, para. 22. We note that the conduct of private bodies is presumptively
not attributable to the State. The Commentaries to th e ILC Draft Articles explain that "[s]ince corporate
entities, although owned by and in that sense subject to th e control of the State, are considered to be separate,
prima facie their conduct in carrying out their activities is not attributable to the State unless they are exercising
elements of governmental authority". (C ommentaries to the ILC Draft Articles, supra, footnote 104, Article 8,
Commentary (6), pp. 107-108); see also Korea's appellee's submission, paras. 58-59)
180Appellate Body Report, US – Softwood Lumber IV, para. 52.
181Korea's and the United States' responses to questio ning at the oral hearing. The United States
asserts, however, that a policy pronouncement may be relevant evidence for demonstrating entrustment or
direction.
 182In contrast to Article 1.1(a)(1)(iv) of the SCM Agreement , Article 11.3 of the Agreement on
Safeguards uses the term "encourage". It reads:
Members shall not encourage or support the adoption or maintenance by
public and private enterprises of non-governmental measures equivalent to
those referred to in paragraph 1.
Paragraph 1 refers to voluntary export restraints, orderly marketing arrangements, or any other similar measures
on the export or import side.

"direction" cannot be inadvertent or a me re by-product of governmental regulation.
184 This is
consistent with the Appellate Body's statement in US – Softwood Lumber IV that "not all government
measures capable of conferring benefits would necess arily fall within Article 1.1(a)"; otherwise
paragraphs (i) through (iv) of Article 1.1(a) would not be necessary "because all government
measures conferring benefits, per se, would be subsidies."185
115. Furthermore, such an interpretation is cons istent with the object and purpose of the SCM
Agreement, which reflects a delicate ba lance between the Members th at sought to impose more
disciplines on the use of subsidies and those that sought to impose more disciplines on the application
of countervailing measures. Indeed, the Appellate Body has said that the object and purpose of the
SCM Agreement is "to strengthen and improve GATT discip lines relating to the use of both subsidies
and countervailing measures, while, recognizing at the same time, the right of Members to impose
such measures under certain conditions".
186 This balance must be borne in mind in interpreting
paragraph (iv), which allows Members to apply countervailing measures to products in situations
where a government uses a private body as a proxy to provide a financial contribution (provided, of
course, that the other requirements of a counter vailable subsidy are proved as well). At the same
time, the interpretation of paragraph (iv) cannot be so broad so as to allow Members to apply
countervailing measures to products whenever a government is merely exercising its general
regulatory powers.

184In interpreting the phrase "payments … financed by virtue of governmental action" in Article 9.1(c)
of the Agreement on Agriculture, the Appellate Body has stated that "[ g]overnments are constantly engaged in
regulation of different kinds in pursuit of a variety of objectives." It further explained that where regulation
merely enables payments to occur, "the link between the governmental action and the financing of the payments
is too tenuous for the 'payments' to be regarded as ' financed by virtue of governmental action' … within the
meaning of Article 9.1(c). Rather, there must be a tighter nexus between the mechanism or process by which
the payments are financed, even if by a third person, and governmental action." (Appellate Body Report,
Canada – Dairy (Article 21.5 – New Zealand and US ), para. 115 (original emphasis); see also Appellate Body
Report, Canada – Dairy (Article 21.5 – New Zealand and US II), para. 131)
185Appellate Body Report, US – Softwood Lumber IV , footnote 35 to para. 52. The Appellate Body
referred to the following discussion of the panel in US – Export Restraints:
[the] negotiating history [of Article 1 of the SCM Agreement] demonstrates
... that the requirement of a financ ial contribution from the outset was
intended by its proponents precisely to ensure that not all government
measures that conferred benefits could be deemed to be subsidies. This
point was extensively discussed during the negotiations, with many
participants consistently maintaining that only government actions
constituting financial contributions should be subject to the multilateral
rules on subsidies and countervailing measures.
(Panel Report, US – Export Restraints, para. 8.65 (quoted in Appellate Body Report, US – Softwood Lumber IV,
footnote 35 to para. 52))
186Appellate Body Report, US – Softwood Lumber IV, para. 64. (footnote omitted)

116. In sum, we are of the view that, pursuant to paragraph (iv), "entrustment" occurs where a
government gives responsibility to a private body, and "direction" refers to situations where the
government exercises its authority over a private body. In both instances, the government uses a
private body as proxy to effectuate one of the typ es of financial contributi ons listed in paragraphs
(i) through (iii). It may be difficult to identify pr ecisely, in the abstract, the types of government
actions that constitute entrustment or direction and those that do not. The particular label used to
describe the governmental action is not necessarily dispositive. Indeed, as Korea acknowledges, in
some circumstances, "guidance" by a government can constitute direction. 187 In most cases, one
would expect entrustment or direction of a private body to involve some form of threat or inducement,
which could, in turn, serve as evidence of entrustmen t or direction. The dete rmination of entrustment
or direction will hinge on the particular facts of the case.188
2. The United States' Appeal
117. The United States alleges that, by equating "ent rustment" and "direction" with "delegation"
and "command", the Panel failed to interpret tho se treaty terms in accordance with the customary
rules of interpretation codified in the Vienna Convention on the Law of Treaties .189 In this respect,
the United States submits that, had the Panel properl y interpreted "entrusts" and "directs", it would
have recognized that these terms also encompass:
... a government investing trust in a private body to carry out a task, a
government giving responsibility to a private body to carry out a
task, a government informing or guiding a private body as to how to
carry out a task, [and] a government regulating the course of a private
body’s conduct[.]
190
The United States refers to several findings 191 allegedly demonstrating th at the Panel applied an
incorrect interpretation of Article 1.1(a)(1)(iv), and that "the Panel's errone ous interpretation of ...
Article 1.1(a)(1)(iv) affected its entire analysis of the [US]DOC's findings concerning the Hynix
bailout."192

187Korea's response to questioning at the oral hearing.
188The Commentaries to the ILC Draft Articles similarly state that "it is a matter for appreciation in
each case whether particular conduct was or was not carried out under the contro l of a State, to such an extent
that conduct controlled should be attributed to it". (Commentaries to the ILC Draft Articles, supra, footnote 104,
Article 8, Commentary (5), p. 107) (footnote omitted)
189Supra, footnote 110.
191Ibid., paras. 40-46.
192Ibid., para. 46. (footnote omitted)

118. As Korea explains
 193, the issue raised on appeal by the United States—that is, the range of
government actions that constitute entrustment or direction—was not the main interpretative issue
before the Panel. Instead, the Panel was consider ing whether entrustment or direction needs to be
demonstrated on the basis of explicit (as opposed to implicit) government acts only. On this issue, the
Panel essentially agreed with the United States and he ld that Article 1.1(a)(1)(iv) does not "require[]
an investigating authority to demonstrate an e xplicit government action addressed to a particular
entity, entrusting or directing a particular task or duty". 194 In the course of its analysis, the Panel
"agree[d] with the US – Export Restraints panel that '[i]t follows from the ordinary meanings of the
two words "entrust" and "direct" that the action of the government must contain a notion of delegation
(in the case of entrustment) or command (in the case of direction).'" 195 We explained earlier that the
terms "entrusts" and "directs" in Article 1.1(a)(1)(iv) are not limited to "delegation" and "command",
respectively. In our view, there may be other m eans by which governments can give responsibility to
or exercise authority over a private body that may not fall within the terms "delegation" and
"command", if these terms are strictly construed. We note that the Panel initially used the expression
"a notion of" delegation or command. 196 This suggests that the Panel was using the terms
"delegation" and "command" with a certain degree of flexibility. However, the Panel's repeated use
of the terms "delegation" and "command", without qualification, in its subsequent analysis, could give
the impression that the terms "entrusts" and "dir ects" correspond strictly to "delegation" and
"command". We do not consider that these word s, on their own, convey what we understand by
"entrusts" or "directs", as used in Article 1.1(a )(1)(iv), for the terms "delegation" and "command", as
we have explained above, are too narrow. Therefore, we modify the Panel's interpretation of
Article 1.1(a)(1)(iv) of the SCM Agreement , set out in paragraph 7.31 of the Panel Report, to the
extent that it may be understood as limiting the terms "entrusts" and "directs" to acts of "delegation"
and "command".
119. The United States' request, that the Appellate Body review the Panel's application of
Article 1.1(a)(1)(iv) to the particular facts of this case 197, is examined in the next Section of this
Report.198

193Korea's appellee's submission, paras. 24-25.
194Panel Report, para. 7.42.
196Ibid. As the United States points out, however, the Panel did not consistently use the phrase "the
notion of" in the paragraphs that followed. (United States' appellant's submission, para. 21 (referring to Panel
Report, paras. 7.33-7.35))
198See infra, Section VI.

3. Korea's Cross-appeal
120. We turn to Korea's cross-appeal, which challe nges the Panel's finding that certain evidence
referred to by the USDOC was "sufficient for an objective and impartial investigating authority to
properly find government entrustment or direction in respect of KFB". 199 This finding was made in
the context of the Panel's examination of the US DOC's reference to alleged threats by the GOK
against KFB and another two Korean banks.200
121. Korea pointed out to the Panel that "ultimately KF B declined to participate in the Fast Track
[Debenture] Programme, and in fact did not participate in the Fast Track [Debenture] Programme, and
exercised its appraisal rights in the October restructuring." 201 "KFB's actions", according to Korea,
"are hardly consistent with the [United St ates'] theory of coercion from the [GOK]." 202 The Panel did
not find Korea's argument relevant because "[its] analysis at [that] stage [was] concerned first and
foremost with the acts of the GOK, rather than private entities' reaction to those acts."
203
122. On appeal, Korea asserts that the Panel's conc lusion regarding entrustment or direction of
KFB rests on an incorrect interpretation of Article 1.1(a)(1)(iv) of the SCM Agreement . Korea
explains that a finding of entrustment or direction under Article 1.1(a)(1)(iv) requires that the private
body carry out one of the functions listed in that provision. 204 "Mere direction without action", Korea
submits, is not sufficient. 205 Korea adds that, in this case, KF B did not carry out the action it was
allegedly entrusted or directed to carry out and, therefore, the Panel's finding of entrustment or
direction in respect of KFB is incorrect.206
123. The United States responds to Korea's appeal by explaining that the Panel's finding in respect
of KFB does not relate specifically to KFB's par ticipation in the Fast Track Debenture Programme. 207
It states that "[t]he fact that KFB did not particip ate in the Fast Track [Debenture] Program was never
in dispute." 208 The United States further explains that "the GOK's threats and coercive behavior

199Panel Report, para. 7.117. (footnote omitted)
200Ibid., para. 7.107.
201Ibid., para. 7.108.
202Ibid.
203Ibid., footnote 136 to para. 7.117.
204Korea's other appellant's submission, para. 18.
205Ibid., para. 29.
206Korea does not challenge "the Panel's factual dete rmination that there was [government] coercion
with respect to KFB". (Ibid., para. 4)
208Ibid. (footnote omitted)

occurred because of 'KFB's failure to participate in th e Fast Track [Debenture] Programme.'"
209 The
Panel record confirms that KFB participated in the financial transactions that preceded and followed
the Fast Track Debenture Programme. 210 We do not read the Panel's finding that the evidence was
sufficient to demonstrate GOK entrustment or direc tion of KFB as necessarily related exclusively to
the Fast Track Debenture Programme. Thus, even assuming arguendo Korea is correct that a finding
of entrustment or direction requires that the function so entrusted or directed be carried out, we are not
persuaded that the basis for the Panel's finding is as narrow as that alleged by Korea.
124. In any event, a finding of entrustment or direc tion, by itself, does not establish the existence
of a financial contribution. Where a government entrusts or directs a private body—by giving
responsibility to or exercising its authority over the private body—it is likely that the function that is
allegedly entrusted or directed w ill indeed be carried out. The private body's refusal to carry out the
function may be evidence that the government did not give it responsibility for such function, or that
the government did not exercise the requisite authority over it such that the private body did not heed
the government.
211 It does not, however, on its own, mean that the private body was not entrusted or
directed. Depending on the circumstances, a private body may decide not to carry out a function with
which it was so entrusted or directed, despite the possible negative consequences that may follow.
125. Still, this does not mean that it is possible to make a finding of a fina ncial contribution under
Article 1.1(a)(1)(iv) where a private body does not carry out the function allegedly entrusted or
directed to it. Failure by the private body to ca rry out one of the functions of the types listed in
paragraphs (i) through (iii) means that nothing of economic value has been transferred from the
grantor to the recipient.
212 Simply put, if the private body has not carried out the function allegedly
entrusted or directed to it, nothing will have ch anged hands. Therefore, there is no financial
contribution and, consequently, there would be no right to apply countervailing measures.
126. For these reasons, we uphold the Panel's finding, in paragraph 7.117 of the Panel Report,
that the evidence was "sufficient for an objective and impartial investigating authority to properly find
government entrustment or direction in respect of KFB".

209United States' appellee's submission, para. 5 (quoting Panel Report, para. 7.117). (original emphasis;
footnote omitted)
210See, for example, Panel Report, para. 7.114; and Figure US-4 submitted by the United States to the
Panel.
211We explained earlier that in most cases government entrustment or direction would include a threat
212See Appellate Body Report, Canada – Dairy, para. 87, where the Appellate Body explained that "a
'subsidy' involves a transfer of ec onomic resources from the grantor to the recipient for less than full
consideration."

VI. The Panel's Review of the USDOC's Evidence
A. Introduction
127. We consider next the Panel's examination of the evidence underlying the USDOC's finding of
entrustment or direction. After providing a genera l interpretation of Article 1.1(a)(1)(iv) of the SCM
Agreement, the Panel turned to the evidence relied upon by the USDOC in order to determine whether
it was sufficient to support the USDOC's finding of en trustment or direction. Based on its review of
the evidence, the Panel concluded that the USDOC "could not properly have found that there was
sufficient evidence to support a generalized finding of entrustment or direction with respect to private
bodies spanning multiple creditors and multiple tran sactions over the period of investigation."
213
Accordingly, the Panel concluded that the USDOC' s subsidy determination is inconsistent with
Article 1.1(a)(1)(iv) of the SCM Agreement.214
128. The United States alleges multiple errors in the Pa nel's application of Article 1.1(a)(1)(iv) to
the facts of this case, in particular, with respect to the Panel's review of the USDOC's evidence. First,
the United States claims that the Panel erre d in applying an "evidentiary standard" 215 that required
evidence of entrustment or direction to be "probative and compelling". 216 Secondly, the United States
argues that the Panel erred in its approach to the examination of the USDOC's evidence under
Article 1.1(a)(1)(iv), because it failed to consider the USDOC's evidence in its totality, disregarded
the inferences reasonably drawn from circumstantial evidence, and, as a consequence, effectively
shifted the burden of proof from Korea to the United States. 217 Thirdly, the United States argues that
the Panel erroneously refused to admit certain evidence submitted by the United States during the
panel proceedings on the ground that argum ents based on such evidence constituted " ex post
rationalizations".218
129. In addition to these allegations of error in the Panel's application of Article 1.1(a)(1)(iv), the
United States contends that the Panel failed to co mply with its obligations under Article 11 of the
DSU by relying on evidence that was not on the record of the USDOC during the investigation. 219
Finally, the United States claims that the aforementi oned errors, taken together, give rise to a separate

213Panel Report, para. 7.177.
214Ibid., para. 7.178.
216Ibid. (referring to Panel Report, paras. 7.35 and 7.46).
217Ibid., paras. 58-87.
218Ibid., para. 94 (referring to, inter alia, Panel Report, paras. 7.88, 7.102, and 7.141).
219Ibid., para. 101.

and additional ground of er ror under Article 11 of the DSU because of the Panel's failure to apply the
proper standard of review to its examination of the USDOC's finding of entrustment or direction.
220
130. Before beginning our analysis, we briefly describe the USDOC's finding of entrustment
or direction, as contained in its subsidy determination, to facilitate the subsequent discussion of the
Panel's review of the USDOC's evidence. We then address each of the above allegations of error by
the United States. Finally, we consider the impli cations of our analysis for the Panel's conclusion
regarding the USDOC's finding of entrustment or direction.
B. The USDOC's Finding of Entrustment or Direction
131. In its subsidy determination, the USDOC found that numerous financial institutions, both
public as well as private bodies, participated in fina ncial transactions related to Hynix. For the
purpose of this determination, the USDOC distinguished between public bodies
221, government-
owned and -controlled private creditors, and privat e creditors not owned or controlled by the GOK. 222
The Panel maintained this distinction in its analysis, adopting the categorization of Group A, B, and C
creditors put forward by the United States. 223 Accordingly, Hynix's public body creditors were
referred to as Group A creditors, and included the Korean Development Bank ("KDB"), the Industrial
Bank of Korea, and other "specialized" banks. 224 The GOK-owned or -cont rolled private creditors,
which were found by the USDOC not to be public bodies 225, were referred to as Group B creditors;
these included the Korea Exchange Bank and KFB. 226 Private entities in which the GOK had much
smaller, or even non-existent shareholdi ngs, were referred to as Group C creditors 227; among these
creditors were KorAm Bank, Hana Bank, and Kookmin Bank.228 We use the same categories herein.

221In its determination, the USDOC referred to public bodies as "government authorities". (United
States' response to Question 3 posed by the Panel at the First Panel Meeting, Panel Report, p. E-37, para. 10 and
footnote 9 thereto) See also Issues and Decision Memorandum, supra, footnote 6, pp. 15-17.
222See Issues and Decision Memorandum, supra, footnote 6, p. 49.
223Panel Report, para. 7.8 (referring to Figure US-4 submitted by the United States to the Panel).
224United States' response to Question 3 posed by the Panel at the First Panel Meeting, Panel Report,
p. E-37, para. 10 and footnote 9 thereto.
225Some of Hynix's creditors were treated by the USDO C as Group B creditors despite the fact that the
GOK held a 100 per cent ownership interest. The Panel noted that, in its view, the USDOC might have been
entitled to treat these 100 per cent-owned firms as "public bodies", but having refused to so classify them, the
USDOC was required to establish entrustment or direct ion with respect to such creditors. (Panel Report,
226Panel Report, para. 7.8; United States' responses to Questions 4-6 posed by the Panel at the First
Panel Meeting, Panel Report, p E-38, para. 17.
227Panel Report, para. 7.8; United States' responses to Questions 4-6 posed by the Panel at the First
Panel Meeting, Panel Report, p E-38, para. 19.
228Figure US-4 submitted by the United States to the Panel.

132. In its analysis of entrustment and directi on, the USDOC examined, in particular, four
financial transactions. The first was an 800 billion won syndicated bank loan (the "December
2000 syndicated loan") extended to Hynix at the end of 2000 in order to finance short-term debt that
was coming due in early 2001. 229 The second financial transa ction was the KDB Fast Track
Debenture Programme, which was also designed to address the liquidity crisis caused by maturing
bonds in the same time period. The USDOC's Issues and Decision Memo randum describes this
programme as follows:
Under the Fast Track program, which was administered by the KDB,
companies selected to participate in this program first had to redeem
20 percent of their bonds that were maturing in 2001; the remaining
80 percent of the maturing bonds were purchased by the KDB, and
were subsequently replaced with new bonds issued by the
participating companies. Of the bonds purchased by the KDB that
were replaced by new issues, 10 percent of the new bonds issued
were kept by the KDB, 20 percent of each new issue was purchased
by the company's creditors (a bla nket waiver was issued by the GOK
in order to allow the creditors to exceed their loan exposure limits),
and the remaining 70 percent of each new issue was bundled with
other bonds and sold as [Collateralized Bond Obligations] or
[Collateralized Loan Obligations] (which were partially guaranteed
by the [Korea Credit Guarantee Fund]).
230
133. The third financial transaction was a restruct uring programme agreed between Hynix and its
creditors in May 2001 (the "May 2001 restructuring"). A group of 17 major creditors formed a
creditors' council (the "May 2001 Creditors' Counc il"), based on the debt restructuring process
established in June 1998 by the Corporate Restru cturing Agreement (the "CRA"), which was "an
informal agreement that comprised 210 [Korean] financial institutions". 231 The May 2001 Creditors'
Council agreed to an overall restructuring plan fo r Hynix, involving the rescheduling and refinancing
of Hynix's debt through maturity extensions and shor t-term debt instruments, as well as the issuance
of convertible bonds and Global Depository Shares.232
134. The fourth financial transaction identified by the USDOC was another restructuring
programme, developed in view of Hynix's "conti nuing financial troubles" and the downturn in the

229Issues and Decision Memorandum, supra, footnote 6, p. 19.
230Ibid., p. 23.
231Ibid., p. 19.
232Issues and Decision Memorandum, supra, footnote 6, p. 20. We understand that the references in
the Issues and Decision Memorandum to Global Depositor y Shares relate to company shares offered for sale
globally, that is, in multiple markets around the world, by virtue of receipts that are issued by banks in several
countries and that evidence the sharehol der's ownership interest in that company. (See P. Moles and N. Terry,
The Handbook of International Financial Terms (Oxford University Press, 1999), p. 256)

DRAMS
233 market, and adopted by Hynix and its cred itors in October 2001 (the "October 2001
restructuring").234 This restructuring plan was formulated under the CRPA, a codification under
Korean law of the corporate workout methods u tilized informally under the CRA. The creditors'
council governing this restructuring plan (the "October 2001 Creditors' Council") provided Hynix's
creditors with three options: (i) extend new loans to Hynix; (ii) convert a certain amount of Hynix's
debt into equity, with a portion of the debt being forgiven; or (iii) exercise appraisal rights
235, with a
portion of the debt being forgiven. As a result of this restructuring, almost 3 trillion won of Hynix's
debt was converted to equity, 1.45 trillion won in debt was forgiven, and Hynix was issued new loans
as well, having other loans refinanced or their terms extended.236
135. The USDOC drew three factual inferences from th e evidence on the record before it: (i) the
GOK maintained a policy of supporting Hynix's fi nancial restructuring and thereby avoiding the
firm's collapse237; (ii) the GOK exercised the control or in fluence over Hynix's creditors necessary to
implement this policy 238; and (iii) the GOK at times used th is control/influence to "pressure" or
coerce Hynix's creditors to continue supporting the financial restructuring of the firm. 239 On the basis
of these inferences, the USDOC arrived at a conclusion of entrustment or dir ection covering virtually
all of Hynix's creditors and their participation in any or all of the four financial transactions examined:
[T]he GOK has entrusted or directed financial institutions to carry
out the GOK subsidy program to bail out Hynix. In so doing, the
GOK both entrusted and directed vari ous GOK financial institutions.
As outlined above, the GOK gave authoritative instructions and
directives to financial institutions , and made it well known that it
fully backed the bailout program. Moreover, once the Hynix
Creditors' Council was formed and had a majority of GOK-owned or
controlled banks, the GOK entrusted those banks with continuing the

233Dynamic random access memory semiconductors (DRAMS) and memory models containing
DRAMS are herein collectively referred to as "DRAMS".
234Issues and Decision Memorandum, supra, footnote 6, p. 20.
235The exercise of appraisal rights involved a creditor seeking not to continue financing Hynix, which
would have its Hynix debt purchased by the other Hynix creditors at a price determined either through
consultation or with the assistance of an accounting firm. (See infra, paras. 169-170)
236Issues and Decision Memorandum, supra, footnote 6, p. 20.
237Ibid., pp. 49-50. See also United States' first written submission to the Panel, para. 37; and United
States' second written submission to the Panel, para. 10.
238Issues and Decision Memorandum, supra, footnote 6, pp. 50-59. See also United States' first written
submission to the Panel, para. 37; and United States' second written submission to the Panel, para. 10.
239Issues and Decision Memorandum, supra, footnote 6, pp. 57 and 60-61. See also United States' first
written submission to the Panel, para. 37; and United St ates' second written submission to the Panel, para. 10.
In its Issues and Decision Memorandum, the USDOC also categorized the second and third inferences under one
broader finding that "evidence on the record establishes a pattern of practices on the part of the GOK to act upon
that policy to entrust or direct lending decisions as part of the restructurin g." (Issues and Decisions
Memorandum, supra, footnote 6, p. 49)

bailout process to its conclusion. Accordingly, we find that the
GOK's entrustment or direction to these institutions allowed the GOK
to execute its bailout policy program, thus providing a financial
contribution to Hynix ... .
240
C. "Probative and Compelling" Evidentiary Standard
136. We begin our analysis with the United States' ch allenge to the Panel's alleged articulation and
application of an erroneous "evidentiary standard".241 Having agreed with the United States in finding
that entrustment or direction need not be dete rmined on the basis of explicit acts, the Panel
nevertheless cautioned:
[T]he evidence of entrustment or direction must in all cases be
probative and compelling . Thus, whatever the nature or form of the
affirmative acts of delegation or command at issue, the evidence
must demonstrate that each privat e entity allegedly providing, or
participating in, a financial contri bution was entrusted or directed by
the government to do so.
242 (emphasis added; footnote omitted)
Subsequently, at the outset of its examination of the USDOC's evidence of entrustment or direction,
the Panel reiterated its unde rstanding that "such evidence [be] probative and compelling, in the sense
that it demonstrates that each of the private credito rs participating in the financial contributions was
entrusted or directed to do so."243
137. The United States challenges the Panel's requi rement that the evidence underlying the
USDOC's determination of "entrustment" or "direc tion" must be "probative and compelling". The
United States agrees that evidence, by its very nature, must be "probative" 244, but argues that the
standard of "compelling" evidence is not contained in either the SCM Agreement or the DSU. The
term "compelling" is understood by the United States to refer to evidence of such weight as to require
the decision-maker to arrive at one given conclusion. 245 According to the Un ited States, by applying
such a standard, the Panel effectively required the USDOC to have "overwhelm ing" or "irrefutable"

240Issues and Decision Memorandum, supra, footnote 6, pp. 61-62. Based on its findings in previous
investigations, the USDOC determined that "the lending and credit practices of Citibank are not directed by the
GOK." (Ibid., p. 17)
242Panel Report, para. 7.35.
243Ibid., para. 7.46.
244United States' appellant's submission, footnote 56 to para. 48.
245Ibid., paras. 48-49.

evidence that "force[d]" or "oblige[d] " it to find entrustment or direction.
246 Korea submits that the
term "compelling", in the context in which it was us ed by the Panel, is more properly understood in a
sense similar to "probative", merely to describe ev idence tending to persuade the decision-maker of a
certain conclusion. 247 Korea therefore contests the United States' characterization of the Panel's
"probative and compelling" statement as a new eviden tiary standard, arguing instead that it merely
describes the "quality of evidence" needed to establish entrustment or direction.248
138. We agree with the participants 249 that neither the SCM Agreement nor the DSU explicitly
articulates a standard for the evidence required to su bstantiate a finding of entrustment or direction
under Article 1.1(a)(1)(iv). 250 Article 12 of the SCM Agreement ¸ entitled "Evidence", specifies in
paragraph 2 that a decision of the investigating aut hority as to the existence of a subsidy "can only be
based on" evidence on the record of that agency; this applies equa lly to evidence used to support a
finding of a financial contribu tion under Article 1.1(a)(1)(iv). 251 Beyond this requirement, however,
we see no basis in the SCM Agreement or in the DSU to impose upon an investigating authority a
particular standard for the evidence supporting its finding of entrustment or direction.
139. The Panel explained that, in using the term s "probative" and "compelling", it was expressing
the view that the total evidence relied upon by an ag ency must "demonstrate" entrustment or direction
with respect to each private body in a given financial contribution. 252 In so stating, the Panel, in our
view, did not require that the evidence relied upon by the USDOC be "irrefutable" 253, nor did it
require the evidence to be of such quality or quantity so as to "force" 254 the USDOC to arrive at a
finding of entrustment or direction. Indeed, after reviewing the USDOC's evidence, the Panel
concluded that the USDOC "could not properly ha ve found that there was sufficient evidence to

246United States' appellant's submission, para. 49 (quoting The New Shorter Oxford English Dictionary,
supra, footnote 36, Vol. 1, p. 458; and Oxford Dictionary of English, C. Soanes and A. Stevenson (eds) (Oxford
University Press, 2004) 2nd edn, p. 352).
247Korea's appellee's submission, paras. 96-97.
248Ibid., para. 82.
249Korea's and the United States' responses to questioning at the oral hearing.
250In contrast, Article 15.1 of the SCM Agreement provides that a "determina tion of injury … shall be
based on positive evidence".
251Other provisions of the SCM Agreement relevant to a finding of entrustment or direction similarly
suggest the investigating authority is to "base" its findi ng on evidence, but they do not clarify further the nature
or quantum of evidence required to support such a finding. (See Articles 12.5, 12.8, 22.4, and 22.5 of the SCM
Agreement)
252Panel Report, paras. 7.35 and 7.46.
253United States' appellant's submission, para. 49 (referring to Oxford Dictionary of English , supra,
footnote 246, p. 352).
254Ibid. (quoting The New Shorter Oxford English Dictionary, supra, footnote 36, p. 458).

support [its] finding of entrustment or direction."255 It appears to us, on balance, that the Panel did not
apply the term "compelling" in the manner suggested by the United States; had it done so, it would
have erroneously imposed a qualitative standard higher than that contemplated by the SCM
Agreement. Rather, the Panel properly examined wh ether the USDOC's evidence could support its
conclusion. Thus, we do not read the Panel to have imposed an "evidentiary standard"256 beyond what
we have found in the SCM Agreement.257
140. Therefore, we find that the Panel did not err in finding, in paragraphs 7.35 and 7.46 of the
Panel Report, that the evidence underlying the USDOC's finding of entrustment or direction must be
"probative and compelling", to the extent the Pane l understood these terms to require only that the
evidence demonstrate entrustment or direction.
D. The Panel's Approach to the Evidence
141. We turn now to the United States' allegation that the Panel employed an erroneous approach
under Article 1.1(a)(1)(iv) to its review of the US DOC's evidence. In particular, the United States
alleges, first, that the Panel's approach fails to appreciate that the USDOC's conclusion rested on the
totality of the evidence. 258 Secondly, according to the United States, the Panel's approach
impermissibly restricts the ability of the agency to draw legitimate inferences from circumstantial
evidence, because it effectively requires examini ng whether each piece of evidence constitutes direct
evidence of entrustment or direction. 259 Thirdly, the United States submits that the Panel's improper
approach to examining the evidence effectively sh ifted the burden of proof from Korea to the United
States, because the Panel appeared not to have cons idered seriously any evidence that did not amount
to a "smoking gun".260
142. At the outset of its examination, the Pane l acknowledged the factual underpinnings of the
USDOC's finding—that is, the GOK policy to save Hynix, the ability of the GOK to control or
influence Hynix's creditors, and the pressure put on those creditors by the GOK—and structured its

255Panel Report, para. 7.177. (emphasis added)
257We note that third participants China and the Separate Customs Territory of Taiwan, Penghu,
Kinmen, and Matsu similarly understand the Panel not to have imposed additional obligations on Members
merely by requiring evidence to be "probative and compelling". (China's third participant's submission, para. 25;
Third participant's submission of the Separate Custom s Territory of Taiwan, Penghu, Kinmen, and Matsu,
para. 7)
258United States' appellant's submission, paras. 58-73.
259Ibid., paras. 74-85.
260Ibid., para. 87.

analysis along the lines of these factual premises.
261 The Panel also observed that the USDOC had
based its finding on the totality of the evidence, "without attaching particular importance to one or
several evidentiary factors".262 The Panel determined that it woul d follow the "same approach" to the
evidence.263 We understand that, in so doing, the Pane l implicitly accepted the reasonableness of this
approach.
143. In our view, the Panel was correct in decidi ng to follow the agency's approach to the
examination of the evidence. Despite its stated intention, however, the Panel followed a different
approach, which we examine below.
1. Examining Individual Pieces of Evidence
144. Notwithstanding the USDOC's reliance on the totality of the evidence, the Panel maintained
that "[i]n order to" follow the same approach, it was required to assess the "probative value of each
evidentiary factor separately".264 Accordingly, with respect to each of the factual underpinnings of the
USDOC's finding of entrustment or direction 265, the Panel examined individually the pieces of
evidence on which the USDOC relied to support the particular premise.
145. We see no error, in principle, in a panel's review of individual pieces of evidence under
Article 1.1(a)(1)(iv), even where the investig ating authority draws its conclusion from the totality of
the evidence. Indeed, in our view, in many cases a pa nel will be able to examine the sufficiency of
the evidence supporting an investigating authority's conclusion of entrustment or direction only by
looking at each individual piece of evidence.

261See Panel Report, para. 7.45 and Section VII.C.1(b), sub-sections (i)-(iii).
262Ibid., para. 7.45.
263Ibid.
264Ibid.
265Supra, para. 135.

146. We find that the Panel erred, however, in the manner in which it reviewed the individual
pieces of evidence. We note, first, that the Pane l often appeared to examine whether each piece of
evidence, viewed in isolation , demonstrated entrustment or direction. For example, the USDOC
found relevant that the Financial Supervisory Co mmission (the "FSC") had increased the credit limits
placed on banks providing loans to a single borrower so that additional funds could be provided to
Hynix.266 The Panel disagreed:
Even though the [United States] may be correct in arguing that
certain creditors would not have b een able to participate in the
syndicated loan without the loan limit waiver, we do not consider
that the [US]DOC could properly have inferred from this that
creditors were entrusted or directed to participate in the syndicated
loan. ... The [United States] also ar gues that entrustment or direction
to the banks to assist Hynix would be meaningless if the banks were
legally precluded from complying with the GOK's directives. While
this may be the case, this does not mean that there is government
entrustment or direction every time that a loan limit waiver is
provided.
267 (emphasis added)
We do not read the USDOC to have inferred solely from the waiver of loan limits that entrustment or
direction had taken place. Nor do we consider th at the USDOC's reliance on this evidence suggests
that "there is government entrustment or direction every time that a loan limit waiver is provided", for
this would follow only if the USDOC had based its finding of entr ustment or direction exclusively on
the waivers of loan limits.
147. Similarly, the USDOC also relied on documents provided during verification meetings to find
that an FSC vice-chairman 268 had attended a meeting of the May 2001 Creditors' Council "to urge
creditor banks to execute the r esolutions made by creditors". 269 This evidence was relied on by the
USDOC in support of its understanding that the G OK had applied pressure on Hynix's creditors to
participate in the financial restructuring of the firm. The Panel dismissed the relevance of this
evidence:

266Issues and Decision Memorandum, supra, footnote 6, p. 51.
267Panel Report, para. 7.101.
268The Panel observed that Korea disputed this f act, claiming instead that the meeting had been
attended by an official of the Financial Supervisory Service, which was "not a governmental organization, but a
special public corporation affiliated with FSC [and] fu nctioning as an executive arm of the FSC". The Panel
found that it did not need to resolve this disagreement because of its "finding regarding the DOC's treatment of
this issue". (Panel Report, footnote 166 to 7.141) Similarly, given the basis for our finding of error in the
Panel's approach to reviewing individual pieces of evidence, we do not need to resolve this factual disagreement
of the participants.
269Issues and Decision Memorandum, supra, footnote 6, p. 60 (quoting GOK Verification Report, p. 19
(Exhibit US-12 submitted by the United States to the Panel)).

[T]he fact that a regulatory authority attends a meeting of creditors at
the request
 of the lead creditor in order to urge – and not instruct –
creditor banks to execute resolutions made by creditors would not
allow an investigating authority to properly conclude that such
attendance amounted to governmental entrustment or direction of
creditors to participate in the restructuring.
270 (original underlining;
italics added)
The USDOC did not advance the view that the atte ndance of the FSC official, in and of itself,
"amounted to" entrustment or direction. In arrivi ng at this conclusion, the Panel essentially faulted
the USDOC for drawing a certain inference from a single piece of evidence, where, in fact, the agency
did no such thing.
148. The USDOC had also pointed in its determina tion to internal documents from Kookmin Bank
to support a link between the GOK policy to save Hynix and the actions of creditors in the bailout of
the firm.271 One of those documents identified nine reasons for Kookmin Bank's participation in the
December 2000 syndicated loan 272, including one referring to a GOK policy relating to the role of
financial institutions in the r estructuring of troubled firms. 273 The Panel observed that the United
States did not contest that the other eight stated reasons for Kookmin Bank's participation related to
commercial considerations, and then addressed the significance of the ninth reason as follows:
[T]he above statement appears to re fer to an overarching government
policy relating to financial institu tions participating in remedial
restructuring, rather than affirm ative government acts of delegation
or command made pursuant to GOK's stated policy to save Hynix. ...
A determination of government entrustment or direction requires
more than finding that private bodies act with regard to generalized
governmental policy requests.
... [A]n objective and impartial i nvestigating authority could not
properly have determined that conduct with an ostensibly commercial
rationale should be attributed to a government simply on the basis of
a reference to a generalized governmental policy request. As noted
above, we do not consider that th e mere existence of a government
policy is sufficient to establish government entrustment or
direction.274 (emphasis added; footnote omitted)

270Panel Report, para. 7.141.
271Issues and Decision Memorandum, supra, footnote 6, p. 59.
272Supra, para. 132.
273Panel Report, para. 7.167. The reason relating to the GOK policy cannot be quoted because Korea
identified it before the Panel as business confidential information. (See ibid., para. 7.166 and footnote 188
thereto)
274Ibid., paras. 7.167-7.168.

The Panel overlooks the fact that the USDOC did not find entrustment or direction "simply on the
basis of" the one non-commercial reason supporting K ookmin Bank's decision to participate in the
December 2000 syndicated loan. It is no doubt true , as the Panel states, that the fact that eight
commercial reasons are provided to support the Kookmin Bank loan may affect the emphasis given by
the agency to the ninth (non-commercial) reason. It is equally true, however, as the Panel failed to
recognize, that that ninth reason could reasonably take on greater meaning when viewed in the light of
other corroborating evidence.
149. In each of the above instances, the Panel appears to have implicitly required that entrustment
or direction be established, or determined, or inferred, solely on the basis of the particular piece of
evidence examined. Furthermore, these are not isolat ed statements, but rather, reflect a view of the
Panel that is evident throughout its analysis.275 This is troubling, especially as the Panel itself initially
recognized that at no point in the USDOC's determin ation did the agency contend that any individual
piece of evidence, in isolation, would be sufficient for its finding of entrustment or direction.
150. In our view, having accepted an investigating authority's approach, a panel normally should
examine the probative value of a piece of evidence in a similar manner to that followed by the
investigating authority. Moreover, if, as here, an investigating authority relies on individual pieces of
circumstantial evidence viewed toge ther as support for a finding of entrustment or direction, a panel
reviewing such a determination nor mally should consider that evidence in its totality, rather than
individually, in order to assess its probative valu e with respect to the agency's determination. 276
Indeed, requiring that each piece of circumstantial evidence, on its own, establish entrustment or
direction effectively precludes an agency from fi nding entrustment or direction on the basis of
circumstantial evidence.277 Individual pieces of circumstantial evidence, by their very nature, are not
likely to establish a proposition, unless and until viewed in conjunction with other pieces of evidence.

275See, for example, Panel Report, paras. 7.62, 7.77-7.78, 7.129, 7.141, and 7.167-7.168.
276We note that the European Communities makes a similar observation:
By considering the facts and evidence in isolation only, and also failing to
consider the weight of the individual facts taken together the panel
effectively applied a different methodological approach from that adopted
by the investigating authority.
(European Communities' third participant's submission, para. 20) (original underlining)
277We agree with the United States, and third partic ipants the European Communities and Japan, that
this approach is particularly relevant in cases of entrustment or direction under Article 1.1(a)(1)(iv), where much
of the evidence that is publicly-available, and theref ore readily accessible to in terested parties and the
investigating authority, will likely be of a circumstantia l nature. (United States', the European Communities',
and Japan's responses to questioning at the oral hearing) Moreover, strictly speaking, entrustment or direction is
not a pure fact. It is, rather, a legal assessment based on a proven set of facts.

151. Furthermore, in order to exam ine the evidence in the light of the investigating authority's
methodology, a panel's analysis us ually should seek to review the agency's decision on its own terms,
in particular, by identifying the inference drawn by the agency from the evidence, and then by
considering whether the evidence could sustain that inference. Where a panel examines whether a
piece of evidence could directly lead to an ultimat e conclusion—rather than support an intermediate
inference that the agency sought to draw from th at particular piece of evidence—the panel risks
constructing a case different from that put forward by the investigating authority. 278 In so doing, the
panel ceases to review the agency's determination and embarks on its own de novo evaluation of the
investigating authority's decision. As we explain below 279, panels may not conduct a de novo review
of agency determinations.
152. In this case, as we observed above 280, the USDOC relied on the evidence to arrive at certain
factual conclusions as an intermediate step in its analysis before finding entrustment or direction.
These intermediate factual conclusions were: (i) the GOK pursued a policy of preventing the
financial collapse of Hynix; (ii) the GOK held control or influence over Hynix's Group B and C
creditors; and (iii) the GOK pressu red certain of Hynix's Group B and C creditors into participating
in the financial restructuring. A proper assessment by the Panel, therefore, would have considered
whether the individual piece of evidence being ex amined could tend to support—not establish in and
of itself—the particular intermediate factual conclusion that the USDOC was seeking to draw from
it. By looking instead to whether such eviden ce directly supported a finding of entrustment or
direction, the Panel determined certain pieces of ev idence not to be probative when, in fact, had they
been properly viewed in the framework of the USDOC 's examination, their relevance would not have
been overlooked.
2. Examining the Totality of the Evidence

153. The Panel ended its examination of the USDOC's evidence, in paragraphs 7.175 to 7.178 of
the Panel Report, with a "global review of all th e reasoning set forth by the [US]DOC". The Panel
summarized its several earlier findings on the indivi dual pieces of evidence and, on the basis of this
"global review", concluded that the USDOC "could not properly have found that there was sufficient

278This is not to say that a panel is prohibited from examining whether the agency has given a reasoned
and adequate explanation for its determination, in pa rticular, by considering other inferences that could
reasonably be drawn from—and explanations that could reasonably be given to—the evidence on record.
Indeed, a panel must undertake such an inquiry. (See infra, para. 186)
279We address infra, in sub-section G, the implications of the Panel's approach to the evidence for its
application of the proper standard of review.
280Supra, para. 135.

evidence to support a generalized finding of entrustm ent or direction with respect to private bodies
spanning multiple creditors and multiple transactions over the period of investigation."281
154. We note, first, that the Panel's discussion of the totality of the evidence appears to be
primarily a summation of errors that the Panel fou nd in the course of its review of the individual
pieces of evidence. Such errors undoubtedly would affect an examination of the totality of the
evidence, as these pieces would constitute the evid ence the Panel would consider as a whole in
assessing the evidentiary support of the USDOC's finding of entrustment or direction. Nevertheless,
what is absent from the Panel's "global" assessment, in our view, is a consideration of the inferences
that might reasonably have been drawn by the USDOC on the basis of the totality of the evidence. 282
As we have already observed 283, individual pieces of circumstantial evidence are unlikely to establish
entrustment or direction; the significance of individual pieces of evidence may become clear only
when viewed together with other evidence. In other words, a piece of evidence that may initially
appear to be of little or no probative value, when viewed in isolation, could, when placed beside
another piece of evidence of the same nature, form part of an overall picture that gives rise to a
reasonable inference of entrustment or direction. Although the USDOC relied on such an approach—
and the Panel, not finding it unreasonable, stated its intention to emulate it—the Panel stopped short
of assessing the evidence on such a global basis.
155. A few examples from the Panel Report will illustra te the Panel's error. Although the Panel
found sufficient evidentiary support for the USDOC's determination that the GOK pursued a policy to
ensure the financial viability of Hynix 284, the Panel did not find meaningful the USDOC's reliance on
Kookmin Bank's 2001 and 2002 prospectuses filed w ith the United States Securities and Exchange
Commission, in which Kookmin Bank stated:
We expect that all loans made pursuant to government policies will
be reviewed in accordance with [Kookmin Bank's] credit review
policies. However, we cannot assu re you that government policy
will not influence [Kookmin Bank] to lend to certain sectors or in a
manner in which [Kookmin Bank] otherwise would not in the
absence of the government policy.
285

281Panel Report, para. 7.177.
282As a result of its approach to the individual pieces of evidence, (see supra, paras. 144-152), several
pieces of evidence erroneously deemed irrelevant by the Panel were not part of the Panel's "global review".
283Supra, para. 150.
284Panel Report, para. 7.51.
285Kookmin Bank Prospectus (10 September 2001), p. 24, Exhibit US-45 submitted by the United
States to the Panel (quoted in Issues and Decision Memorandum, supra, footnote 6, p. 58).

We expect that all loans made pursuant to government policies will
be reviewed in accordance with our credit review policies. However,
government policy may influence us to lend to certain sectors or in a
manner in which we otherwise w ould not in the absence of the
government policy.
286
In its determination, the USDOC stated:
The timing of the September 2001 [United States Securities and
Exchange Commission] prospectus ... clearly links the statements
about government influence over bank lending decisions to the
[period of investigation]. More over, the plain reading of these
documents, along with documents exam ined at verification, connect
the government’s influence over [Kookmin Bank] and the
government objective to rescue Hynix from financial collapse.
287
In our view, the admission by Kookmin Bank that "government policy" might lead it to extend loans
that it otherwise might not offer, and the existe nce of a GOK policy to save Hynix, should have
prompted the Panel to consider, as did the USDO C, whether the Kookmin Bank prospectuses might
carry greater relevance than initially believed when the Panel examined them in isolation.
156. The Panel also found that evidence of coercion with respect to Hana Bank, a Group C
creditor, would be of limited evidentiary valu e towards the USDOC's finding of entrustment or
direction, because the evidence related to pressure placed on Hana Bank to provide funds to Hyundai
Petrochemical, not to Hynix.288 The USDOC had noted in its determination:
[T]he [Financial Supervisory Servic e] threatened to fine Hana Bank
if it failed to provide emergency liquidity to [Hyundai
Petrochemical], which was a part of the Hyundai Group that was
going through the workout process. Hana Bank was also an
important Hynix creditor. Moreove r, while [the cited newspaper
article] discusses [Hyundai Petrochemical], as we outlined above, the
GOK's policies during this period were aimed at the corporate and
financial restructuring of the entire Hyundai Group, including Hynix'
predecessor, HEI, which was part of that group.
289
Although we see no error in the Panel raising ques tions initially about the evidentiary value of
coercion taking place with respect to financial tran sactions involving a benefici ary other than Hynix,
its subsequent failure to consider the value of this evidence in conjunction with other pieces of

286Kookmin Bank Prospectus (18 June 2002), p. 22, Exhibit US-46 submitted by the United States to
the Panel (referred to in Issues and Decision Memorandum, supra, footnote 6, p. 58).
287Issues and Decision Memorandum, supra, footnote 6, p. 58.
288Panel Report, para. 7.127.
289Issues and Decision Memorandum, supra, footnote 6, p. 61.

evidence constitutes legal error. Specifically, the Pa nel did not take into account in this context the
fact that a GOK policy existed sp ecifically with respect to Hynix, and that Kookmin Bank (another
Group C creditor) acknowledged making loans in pur suit of government policy. If the GOK was
pursuing a policy to prevent the failure of Hynix, and if the GOK had previously shown a willingness
to coerce private banks (Group C creditors in the Hy nix context) into participating in other Hyundai
Group restructurings, the Panel should have at least cons idered whether, in the light of these facts, it
was reasonable to conclude that coercion was also likely to have taken place with respect to loans for
Hynix. And, having so considered, the Panel migh t have had a more complete basis for evaluating
whether it was reasonable to find entrustment or direction in respect of Group C creditors. The
Panel's failure to approach the evidence in its totality, however, precluded such a possibility.
157. We do not raise these questions to suggest that , had the Panel conducted a proper analysis of
the evidence under Article 1.1(a)(1)(iv), it would ha ve discovered sufficient evidentiary support for
the USDOC's finding of entrustment or direction. Nor do we seek to re-evaluate the evidence before
the Panel; that is not our task. Rather, we are speaking about the method used by the Panel to assess
the evidence. In our view, when an investigating authority relies on the totality of circumstantial
evidence, this imposes upon a panel the obliga tion to consider, in the context of the totality of the
evidence, how the interaction of certain pieces of evidence may ju stify certain inferences that could
not have been justified by a review of the individua l pieces of evidence in isolation. Having failed to
undertake such an assessment, th e Panel could not have arrived at a proper conclusion as to the
sufficiency of the evidence underlying the USDOC's finding of entrustment or direction.
158. In sum, we are of the view that, in an alyzing the USDOC's evidence under Article
1.1(a)(1)(iv), the Panel assessed the relevance of many individual pieces of evidence by examining
whether each of them was sufficient to establish entrustmen t or direction. In so doing, the Panel
failed to appreciate the circumstantial nature of th e USDOC's evidence and to consider the relevance
of that evidence for the particular inferences th e USDOC sought to draw. This error, in turn,
contributed to various findings of the Panel di smissing or discounting individual pieces of evidence
relied on by the USDOC. Furthermore, in its "global" examination of the evidence, the Panel failed to
consider that pieces of evidence, especially circum stantial evidence, might become more significant
when viewed in their totality. For these reasons, we find that the Panel erred in failing to examine the
USDOC's evidence in its totality, and requiring, inst ead, that individual pieces of evidence, in and of
themselves, establish entrustment or direction by the GOK of Hynix's creditors.

E. Admissibility of Evidence
159. In the course of making submissions before the Panel, the United States at several points
attempted to rely on evidence that, although contained in the record of the CVD investigation, had not
been cited in the USDOC's decision. The Panel refused to consider this evidence on the ground that
submission of such evidence constituted " ex post rationalization" on the part of the United States.
290
The United States acknowledges that Members may no t defend the decisions of their investigating
authorities on the basis of a rationale not set out in those decisions. 291 The United States contends,
however, that the Panel misunderstood the scope of this prohibition against " ex post
rationalization".292 According to the United States, this pr ohibition limits only a Member's right to
raise before a panel new reasons as the basis for its investigating authority's challenged decision, but
not the right to rely during panel proceedings on evidence that, although contained in the record of the
investigating authority, is not explicitly referred to in its decision.293
160. Korea argues that, in requiring that "all relevant information on the matters of fact and law"
be included in an investigating authority's published determination, Article 22.5 of the SCM
Agreement supports the Panel's decision to refuse to consider the evidence submitted by the United
States.294 Korea asserts that "all relevant information" includes any evidence on which the agency
relies to support its decision. 295 Thus, in Korea's view, the United States' understanding that only
"new reasoning" 296 may properly be rejected by panels is inconsistent with the "clear" text of
Article 22.5.297

290Panel Report, paras. 7.88, 7.102, and 7.141. See also paras. 7.116 and 7.121.
291United States' appellant's submission, paras. 90 and 93.
292Ibid., para. 90.
293The United States does not appeal the Panel's conclusion of ex post rationalization with respect to a
new factual argument advanced by the United States before the Panel. The United States argued before the
Panel that the GOK had disciplined various credit rating agencies for giving Hynix a low credit rating. This was
advanced in support of the USDOC's determination that the GOK exercised control or influence over Hynix's
creditors. The Panel found that the USDOC had not referr ed in its determination to the coercion of credit rating
agencies and, therefore, argument and evidence relating to such coercion "[fell] outside the scope of [the
Panel's] proceedings." (Panel Report, para. 7.135)
294Article 22.5 of the SCM Agreement provides, in relevant part:
A public notice of conclusion ... of an investigation in the case of an
affirmative determination providing for the imposition of a definitive duty ...
shall contain, or otherwise make available through a separate report, all
relevant information on the matters of fact and law and reasons which have
led to the imposition of final measures[.]
295Korea's appellee's submission, paras. 183-184.
297Ibid.

161. There is no doubt that a Member may not seek to defend its agency's decision on the basis of
evidence not contained in the record of the investigati on. Indeed, neither participant seeks to argue
otherwise.298 Moreover, Korea acknowledges that the evid ence relevant to this aspect of the United
States' challenge was part of the USDOC's record and was disclosed to the parties during the CVD
investigation.299
162. Article 1.1(a)(1)(iv), the provision under whic h the Panel examined the USDOC's subsidy
determination, provides that there is a financial contribution by a government or public body where:
... a government makes payments to a funding mechanism, or
entrusts or directs a private body to carry out one or more of the type
of functions illustrated in (i) to (iii) above which would normally be
vested in the government and the pr actice, in no real sense, differs
from practices normally followed by governments [.]
The provision, on its face, does not speak to the ev idence that a Member may (or must) adduce before
a panel to demonstrate "entrustment" or "direction". The Panel itself did not explain what it
understood by a prohibition on " ex post rationalization", nor on what basis such a prohibition would
limit a Member's right to present evidence—as opposed to reasoning—in dispute settlement
proceedings.
163. Korea suggests that Article 22.5 of the SCM Agreement provides the basis for the Panel's
exclusion of the United States' evidence, particular ly as it requires an investigating authority's final
determination to contain "all relevant information on the matters of fact and law and reasons which
have led to the imposition of final measures". We note, first, that the Panel itself did not seek to
justify its treatment of the United States' evidence on the basis of Article 22.5. Moreover, Korea does
not allege that the facts for which the evidence at issue here was introduced were not set out in the
USDOC's final determination.
300 Nor does Korea allege that those facts set out in the final
determination were asserted without citation of any supporting evidence. Indeed, Korea could not so
allege because the USDOC's final determination did set out those facts and did seek to support those

298United States' appellant's submission, para. 102; Korea's appellee's submission, para. 196.
299Korea's response to questioning at the oral hearing.
300The facts for which the United States sought to submit the excluded evidence were: (i) the influence
held by the GOK over Hynix's creditors by virtue of the CRPA (Panel Report, paras. 7.72-7.74); (ii) decisions
taken during the Economic Ministers' meetings that facilitated the extension of further credit to Hynix ( Ibid.,
para. 7.102); (iii) pressure applied to KFB by the GOK ( Ibid., para. 7.115); (iv) pressure applied to KorAm
Bank by the GOK ( Ibid., para. 7.121); and (v) attendance by FSC of ficials at a meeting of Hynix creditors.

facts by referring to record evidence, even if not the precise evidence the Panel refused to consider.
301
Thus, insofar as it relates to the evidence at issu e here, the USDOC's final determination provided
Korea with notice of the factual bases of the finding of entrustment or direction, as well as notice of
certain record evidence underlying each of those facts.
164. In these circumstances, we are of the view that Article 22.5 does not require the agency to cite
or discuss every piece of supporting record evidence for each fact in the final determination. 302
Therefore, even assuming arguendo that Article 22.5 of the SCM Agreement could provide the basis
for a panel's exclusion of evidence, we see no reas on why it would support such exclusion in this
case.303
165. In the light of the above, we find no basis fo r the Panel's exclusion of the United States
evidence in question. That evidence was on the record of the inv estigation and it was not put before
the Panel in support of a new reas oning or rationale. We therefore find that the Panel erred, in
paragraphs 7.88, 7.102, 7.116, 7.121, and 7.141 of the Panel Report, in declining to consider certain
record evidence not cited by the USDOC in its published determination.
F. Non-record Evidence
166. We consider now whether, as the United States alleges 304, the Panel erred in relying on
evidence that was not on the record before the USDOC in the underlying CVD investigation. We first
set out the uncontested facts relating to this issue and then examine the Panel's approach.
167. As noted above, one of the factual conclusions established by the USDOC in support of its
finding of entrustment or direction was that the GOK had the ability to contro l or influence Hynix's

301See Issues and Decision Memorandum, supra, footnote 6, pp. 53-55 (discussing the influence held
by the GOK over Hynix's creditors by virtue of the CRPA); ibid., pp. 50-52 (discussing the Economic
Ministers' meetings); ibid., pp. 60-61 (discussing pressure applied to KFB by the GOK); ibid., p. 60 (discussing
pressure applied to KorAm Bank by the GOK); ibid., p. 60 (discussing attendance by FSC officials at a meeting
of Hynix creditors).
302On this point, Japan expressed the view that "no provision of the DSU or the SCM Agreement
requires that an [investigating] authority discuss each and every individual item of evidence, which the
authorit[y] assessed, or was supportive of its conclusi on, in a particular determination." (Japan's third
participant's submission, para. 30)
303We recall that previous decisions of the Appellate Body have addressed, in the context of the Anti-
Dumping Agreement, the evidence a panel may consider when reviewing decisions of investigating authorities.
(See Appellate Body Report, Thailand – H-Beams, paras. 109-110; and Appellate Body Report, EC – Tube or
Pipe Fittings, paras. 131-132)

creditors.305 One of the mechanisms examined by the USDOC, through which the GOK allegedly
exercised control or influence over Hynix's creditors, was the CRPA.
168. According to the USDOC, under the CRPA, those creditors holding at least 75 per cent of a
firm's outstanding debt could set the restructuring terms for all of that firm's creditors. 306
Article 29 of the CRPA established a mechanism wher eby those creditors that did not agree to the
restructuring terms could be bought out by the remaining creditors. 307 The price at which the
dissenting creditors' debt would be bought was to be determined by consultations between the
dissenting creditors and the remaining creditors. 308 Article 29(5) of the CRPA provided that, if
consultations did not result in an agreed price:
... the mediation committee ... shall make a decision on the price of
purchase or redemption of claims and conditions thereof. In such
case, the mediation committee shall take into consideration the price
computed by an accounting specia list selected under a consultation
between the council and opposing creditors[.]
309
169. The restructuring terms established by the October 2001 Creditors' Council provided Hynix's
creditors with three options, the third of which provided that:
... creditors that did not agree to either new loans [Option 1] or the
debt-to-equity conversion [Option 2] could exercise their appraisal
rights for all of their secured debt and 25 percent of the unsecured
debt based on Hynix' liquidation va lue (as established by an external
consultant), and have the remainder of the debt forgiven.310
170. Thus, under the third option ("Option 3"), credito rs that declined to provide new loans to
Hynix and declined to convert their debt to equity in Hynix could exercise their appraisal rights and
be bought out by the other creditors on the October 2001 Creditors' Council. The GOK and Hynix
pointed out to the USDOC during the investigation that, in fact, three 311 creditors had exercised

305Supra, para. 135.
306Issues and Decision Memorandum, supra, footnote 6, p. 55.
307Article 29(1) of the CRPA, Exhibit GOK-22(c) submitted by Korea to the Panel.
308Article 29(4) of the CRPA, Exhibit GOK-22(c) submitted by Korea to the Panel.
309Article 29(5) of the CRPA, Exhibit GOK-22(c) submitted by Korea to the Panel.
310Issues and Decision Memorandum, supra, footnote 6, p. 20.
311At the oral hearing, Korea stated that, alt hough the 2001 Hynix Audit Report referred to three
creditors that exercised their rights to mediation, the correct number was four, as the GOK and Hynix submitted
to the USDOC. (Issues and Decision Memorandum, supra, footnote 6, p. 61) Korea suggested at the oral
hearing that the reference to three creditors in the 2001 Hynix Audit Report reflected an error in translation. We
need not resolve this discrepancy for purposes of resolving this issue and refer throughout our discussion to
three creditors.

Option 3 and had "severed their ties from Hynix and the restructuring process in October 2001".
312
The USDOC responded in its determination that , notwithstanding those creditors' lack of
participation, the GOK's alleged ability to control or influence Hynix's creditors remained by virtue of
the fact that "the terms on which these creditor bank s terminated their relationship with Hynix were
dictated by the banks that mattered in this case, namely the [Group A and B] creditors."313
171. The Panel found that the USDOC had not explai ned how the restructuring terms were "set" 314
by Group A and B creditors, notwithstanding that Article 29(5) of the CRPA provided the
"possibility"315 for dissenting creditors to avoid these restructuring terms and be bought out by other
creditors at a price determined through mediation. The Panel asserted that "there was also evidence
on the [US]DOC's record indicating that the mediatio n provisions had actually been invoked by three
creditors in respect of the October 2001 restructuring." 316 Therefore, the Panel determined that the
evidence on record was sufficient to "bring into question" the USDOC' s conclusion that the terms of
the October 2001 restructuring were established by the Group A and B creditors.317
172. The United States challenges the Panel's finding th at certain creditors of Hynix "actually ...
invoked"318 their right to mediation under the CRPA. A ccording to the United States, the evidence on
the record before the USDOC contained no information relating to the exercise of mediation rights by
the three creditors.319 The United States submits that the only basis for the Panel's finding that certain
creditors exercised their mediation rights was evid ence submitted by Korea to the Panel but never
provided to the USDOC. 320 By arriving at a conclusion on the basis of non-record evidence, the
United States argues, the Panel acted inconsistently with its obligations under Article 11 of the
DSU.321
173. Korea argues that the United States misstates the Panel's finding, which Korea understands to
be that the USDOC had not undertaken a sufficient inqui ry with respect to the participation of certain
creditors in the October 2001 restructuring. 322 This finding, according to Korea, was based not only

312Issues and Decision Memorandum, supra, footnote 6, p. 61.
313Ibid.
314Panel Report, para. 7.84 (quoting Issues and Decision Memorandum, supra, footnote 6, p. 55).
315Ibid.
316Ibid., para. 7.85.
317Ibid., para. 7.87.
318Ibid., para. 7.85.
319United States' appellant's submission, paras. 108-111.
320Ibid., paras. 112-114.
321Ibid., para. 117.

on "actual incidents of mediation", as discernibl e from the 2001 Hynix Audit Report, but also on
Article 29(5) of the CRPA and the opin ion of one of the USDOC's experts. 323 With respect to
the 2001 Hynix Audit Report, Korea notes that the excerpt from this document made clear reference
to mediations under the CRPA, and then provided that, "[b]ased on this clause", three creditors "raised
objection[s]".324 On this basis, Korea submits, the USDOC should have understood that the raising of
objections, in connection with the future payout by Hynix, necessarily implied recourse to mediation
by those creditors.
174. Although the United States characterizes the error of the Panel as its reliance on non-record
evidence, we note that the Panel explicitly agreed with the United States that its "review of the
[US]DOC's determination should be confined to f acts actually recorded on the [US]DOC's record of
investigation."325 The Panel insisted that its finding was based exclusively on "evidence on the
[US]DOC's record"326, namely the 2001 Hynix Audit Report. The issue raised by the United States'
appeal, therefore, is not whether the evidence was contained in the record, but rather, whether the
evidence contained in the record should have "indi cate[d]" to the USDOC "that three of the four
creditors exercising appraisal rights under option 3 act ually exercised their right to seek mediation in
respect of the October 2001 restructuring."327
175. The United States brings its challenge under Article 11 of the DSU, which requires that a
panel "make an objective assessment of the matter before it". The Appellate Body has stated
previously that, when assessing an investigating au thority's determination, a panel may not fault the
agency for failing to take into account fact s that it could not reasonably have known. 328 A panel must
therefore limit its examination to the facts that the agency should have discerned from the evidence on
record. Where a panel reads evidence with the "b enefit of hindsight", it fails to consider how the
evidence should have fairly been understood at the time of the investigation, and thereby fails to make
an "objective assessment" in accordance with Article 11 of the DSU.329

323Korea's appellee's submission, paras. 198-199 and 210.
324Ibid., para. 203.
325Panel Report, para. 7.84.
326Ibid., para. 7.85.
327Ibid., para. 7.82.
328See Appellate Body Report, US – Cotton Yarn, para. 78.
329Ibid.

176. We turn now to the evidence relied upon by th e Panel. The Panel pointed to a single
paragraph in Hynix's 2001 Audit Report, which was on the record of the investigation, as the basis for
finding that the USDOC should have been aware that three creditors had resorted to mediation after
exercising their appraisal rights under Option 3.
330 That paragraph states:
According to [the CRPA], any creditor financial institution who is
dissatisfied with the creditor banks resolution is entitled to apply for
mediation to Mediation Committee. Based on this clause, three
creditor banks, including Korea First Bank, raised objection to the
terms of reimbursement of remaining debts after debt to equity swap
and debt exemption, five-year debentures with no interest.
Accordingly, [Hynix] recognized 80,100 million [won] of other
payables as current liabilities.
331
177. This excerpt does not indicate explicitly that thr ee creditors participated in a mediation. Nor
does it state that a mediation in fact occurred, or that it was the mediation (rather than, for example, an
agreement with the October 2001 Creditors' Council) that resulted in the payout of over 80 billion
won. All that one can glean from this paragraph is that three creditors raised objections to the terms
of reimbursement and that 80 billion won was "recognized". During the oral hearing, Korea insisted
that this paragraph made clear that mediation had taken place, and explained that, under the CRPA,
the "rais[ing]" of "objections" necessarily resulted in recourse to mediation. 332 In our view, however,
it is not evident from a reading of Article 29(5) of the CRPA 333, the legal basis for the exercise of
appraisal rights, that the raising of "objections" automatically results in mediation proceedings.
Furthermore, at no point in its responses to questions during the oral hearing was Korea able to
identify where in the record such an explanation could be found. Thus, we do not read the record
evidence as supporting the Panel's conclusion that the USDOC should have understood the "rais[ing]"
of "objections" to include the recourse to mediation by three Hynix creditors.
178. Moreover, we note that, during the investigation, the USDOC asked Hynix about creditors
exercising rights under Option 3—that is, those credito rs that "did not exchange their convertible

330Although the Panel also referred to Article 29(5) of the CRPA and the testimony of one of the
USDOC's experts, the Panel did not fi nd that either of these pieces of evidence could have informed the
USDOC about the recourse to mediation—rather than the "possibility" of such recourse—by three Hynix
331Hynix Audit Report (2001), p. 40 (Exhibit US-125 submitted by the United States to the Panel)
332Korea's response to questioning at the oral hearing.
333Supra, para. 168.

bonds for the new convertible bonds w ith an obligation of conversion". 334 The USDOC also asked
Hynix, in a supplemental questionnaire, more specif ically about how appraisal rights were exercised
under Option 3. 335 In neither response did Hynix indicate that mediation had even been requested,
much less that it had taken place. 336 Therefore, faced with no mention of mediation in response to
questions, and given the wording of Article 29(5) of the CRPA, the USDOC, in our view, should not
have been expected to read Hynix's 2001 Audit Report as indicating the recourse to mediation by
three Hynix creditors.
179. In our view, therefore, the Panel erroneously concluded that the USDOC should have made a
factual inference from evidence on the record that would not reasonably have suggested such an
inference. We therefore find that the Panel failed to "make an objective assessment of the matter
before it", as required by Article 11 of the DSU, by finding, in paragraph 7.85 of the Panel Report,
that "the mediation provisions [of the CRPA] had actually been invoked by th ree creditors in respect
of the October 2001 restructuring", in the absen ce of supporting evidence on the record of the
underlying investigation.

334In its questionnaire, the USDOC had asked:
For each creditor that did not exchange their convertible bonds for the new
convertible bonds with an obligation of conversion, if applicable, provide
the value of these convertible bond s as recorded in Hynix's capital
adjustment account, if they were so recorded.
(Hynix's response to the USDOC Questionnaire, 28 January 2003, p. 60 (Exhibit US-129 submitted by the
United States to the Panel))
Hynix responded:
Four banks refused to participate in the second financial restructuring ....
This decision meant that they would not extend new loans to Hynix, nor
would they agree to exchange their debt holdings for equity. Instead, they
exercised appraisal rights against th eir debt holdings. This included
conversion of their debt holdings (loans and bonds) into debentures, with no
coupon interest rate and a five year maturity for 100% of their secured loans
and 25.46% of their unsecured loans based on Hynix's liquidation value[.]
(Ibid.)
335In its supplemental questionnaire to Hynix, the USDOC had asked:
Please explain in greater detail the final plan option which allowed creditors
to exercise appraisal rights. Explai n how that process worked and on what
basis the appraisal rights were exercised[.]
(USDOC Supplemental Questionnaire to Hynix, 11 February 2003 (Exhibit US-130 submitted by the United
States to the Panel) Question 54, p. 10)
336Korea's response to questioning at the oral hearing.

G. Standard of Review
180. We turn now to the United States' allegation that the Panel failed to examine the USDOC's
subsidy determination consistently with the applicable standard of review. The Panel began its
analysis by observing that Article 11 of the DSU sets forth the applicable standard of review. On the
basis of this provision and the Appellate Body 's discussion on standard of review in US – Lamb, the
Panel stated:
[W]e consider that our standard of review is to determine whether the
[US]DOC and [the US]ITC evaluated all relevant factors, and
provided a reasoned and adequate explanation of how the facts
support their determination. In doi ng so, we shall consider whether
an objective and impartial assessment of all relevant facts on the
record could properly support the [US]DOC and [the US]ITC's
determinations of subsidization an d injury respectively. In other
words, we shall determine whether an objective and impartial
investigating authority, looking at the same evidentiary record as the
[US]DOC and [the US]ITC, could properly have reached the same
conclusions as did those agencies. In applying this standard of
review, we are conscious that we must not conduct a de novo review
of the evidence on the record, nor subs titute our judgment for that of
the [US]DOC or [the US]ITC.
337
181. The United States does not contest the Panel's artic ulation of the standard of review based on
US – Lamb . The United States contends, instead, that th e errors alleged in sub-sections C through F
above, viewed collectively, amount to error in the Panel's application of the proper standard of review
prescribed by Article 11 of the DSU, and as clarified by the Appellate Body in US – Cotton Yarn and
US – Lamb .338 Korea contends that the Panel prope rly engaged in the "in-depth review" 339
contemplated by the Appellate Body decision in US – Lamb, and that, as is evident from a review of
the challenged Panel findings in this case, the Un ited States' appeal is based on "partial or chopped
and twisted quotations from the Panel Report".340

337Panel Report, para. 7.3.
338United States' appellant's submission, para. 119; United States' response to questioning at the oral
hearing.
340Ibid.

182. Article 11 of the DSU sets out the proper standard of review to be applied by panels when
examining Members' subsidy determinations.341 That provision states, in relevant part:
[A] panel should make an objective assessment of the matter before
it, including an objective assessment of the facts of the case and the
applicability of and conformity with the relevant covered agreements.
183. The Appellate Body has observed that, with r espect to a panel's review, in accordance with
Article 11, of facts established by an investigating authority:
... a panel may not conduct a de novo review of the evidence or
substitute its judgement for that of the competent authorities.342
184. The Panel and both participants 343 have recognized that the Appellate Body has in the past
elaborated on the standard of review mandated by Article 11 with respect to factual and legal issues in
the context of claims under the Agreement on Safeguards .344 The standard of review articulated by
the Appellate Body in the context of agency determ inations under that Agreement is instructive for
cases under the SCM Agreement that also involve agency determinations. 345 Nevertheless, we recall
that an "objective assessment" under Article 11 of the DSU must be understood in the light of the
obligations of the particular covered agreement at issue in order to derive the more specific contours
of the appropriate standard of review. 346 In this respect, we are especially mindful, in this appeal, of
Articles 12, 19, and 22 of the SCM Agreement.
185. We have noted above that Article 12.2 requires th at an investigating authority's determination
of entrustment or direction be "based on" evidence. 347 We also note that, under Article 19.1,
countervailing duties may be imposed only where the investigating authority has "determin[ed]", inter
alia, the "existence" of a subsidy. The existence of a subsidy is "determined", in turn, by reference to

341Appellate Body Report, US – Lead and Bismuth II, para. 51.
342Appellate Body Report, US – Steel Safeguards , para. 299 (referring to Appellate Body Report,
Argentina – Footwear (EC), para. 121).
343Panel Report, paras. 7.2-7.3; United States' appe llant's submission, footnote 181 to para. 123;
Korea's appellee's submission, paras. 213-214.
344See, for example, Appellate Body Report, US – Lamb, paras. 103 and 106.
345In this respect, we note that disputes under the Agreement on Safeguards as well as the SCM
Agreement are subject only to the standard of revi ew in Article 11 of the DSU, whereas the Anti-Dumping
Agreement contains a specific standard of review in Article 17.6, which must be applied in conjunction with
Article 11 of the DSU for disputes arising under the Anti-Dumping Agreement. (Appellate Body Report, US –
Hot-Rolled Steel, para. 55)
346See, for example, Appellate Body Report, US – Lamb, para. 105; and Appellate Body Report, US –
Cotton Yarn, paras. 75-78.
347Supra, para. 138.

the definition of "subsidy" set out in Article 1.
348 Finally, Article 22.5 requires an investigating
authority's affirmative determination to include the "reasons" for the decision 349 as well as "the basis
on which the existence of a subsidy has been determined".350
186. In the light of the above, we are of the view that the "objective assessment" to be made by a
panel reviewing an investigating authority's s ubsidy determination will be informed by an
examination of whether the agency provided a reasoned and adequate explanation as to: (i) how the
evidence on the record supported its factual findings ; and (ii) how those factual findings supported
the overall subsidy determination. 351 Such explanation should be discernible from the published
determination itself. The explanation provided by the investigating authority—with respect to its
factual findings as well as its ultimate subsidy de termination—should also address alternative
explanations that could reasonably be drawn from the evidence, as well as the reasons why the agency
chose to discount such alternatives in coming to its conclusions.352
187. A panel may not reject an agency's conclusions simply because the panel would have arrived
at a different outcome if it were making the determ ination itself. In addition, in the absence of an
allegation that the agency failed to investigate sufficiently or to collect certain information 353, a panel
must limit its examination to the evidence that was before the agency during the course of the
investigation, and must take into account all such evidence submitted by the parties to the dispute. In
other words, a panel may not conduct a de novo review of the evidence or substitute its judgement
for that of the investigating authority. A failure to apply the proper standard of review constitutes
legal error under Article 11 of the DSU.354
188. These general principles reflect the fact that a panel examining a subsidy determination
should bear in mind its role as reviewer of agency action, rather than as initial trier of fact . Thus, a
panel examining the evidentiary basis for a subsidy determination should, on the basis of the record
evidence before the panel, inquire whether the evidence and explanation relied on by the investigating

348We understand the relevant definitions of the term "determine" to include "[c]onclude from
reasoning or investigation, deduce" as well as "[s]ettle or decide (a dispute, controversy, etc., or a sentence,
conclusion, issue, etc.) as a judge or arbiter". (Appellate Body Report, US – Corrosion-Resistant Steel Sunset
Review, para. 110 (quoting Shorter Oxford English Dictionary , 5th edn, W.R. Trumble, A. Stevenson (eds)
(Oxford University Press, 2002), Vol. 1, p. 659). (emphasis added))
349Article 22.5 of the SCM Agreement.
350Article 22.4(iii) of the SCM Agreement (incorporated by reference into Article 22.5). (emphasis
added)
351Compare Appellate Body Report, US – Steel Safeguards , paras. 276-279; and Appellate Body
Report, US – Lamb, para. 103.
352Compare Appellate Body Report, US – Lamb, para. 106.
353Ibid., para. 114; and Appellate Body Report, US – Wheat Gluten, paras. 55-56.
354Appellate Body Report, US – Wheat Gluten, para. 162.

authority reasonably supports its conclusions. In the context of reviewing individual pieces of
evidence, for example, a panel should focus on issu es such as the accuracy of a piece of evidence, or
whether that piece of evidence may reasonably be relied on in support of th e particular inference
drawn by the investigating aut hority. As we observed above 355, however, the Panel in this case
examined whether certain pieces of evidence were sufficient to estab lish certain conclusions that the
USDOC did not seek to draw, at least solely on th e basis of those pieces of evidence. Moreover, it
failed to examine the evidence in its totality.356 The Panel thus failed to assess the agency's
determination. Instead, the Panel's examination re flected its own view of whether entrustment or
direction existed in this case; the Pa nel thereby engaged, improperly, in a de novo review of the
evidence before the agency.357
189. Furthermore, with respect to the Panel's refu sal to admit certain evidence submitted by the
United States, we note that the Panel did not indicate that the evidence was not contained in the record
of the underlying investigation. Neverthe less, the Panel excluded such evidence from its
consideration in the absence of any legal basis to do so. 358 In addition, the Panel erred in concluding
that the USDOC should have been aware of a fact that was not reasonably based on evidence in the
agency record, namely, that three creditors exercised mediation rights under the CRPA. 359 I n s o
doing, the Panel essentially "second-guessed" the inves tigating authority's analysis of the evidence
and thus overstepped the bounds of its review.
190. Taken together, these errors lead us to concl ude that the Panel went beyond its role as the
reviewer of the investigating authority's decision and, instead, conducted its own assessment, relying
on its own judgement, of much of the eviden ce before the USDOC. Accordingly, we find that the
Panel failed to apply the proper standard of revi ew and, therefore, failed to comply with its
obligations under Article 11 of the DSU.

355Supra, paras. 149-152.
356Supra, paras. 154-157.
357We observe that the European Communities agrees that, by failing to consider the evidence in its
totality, the Panel effectively conducted a de novo review of the USDOC's finding of entrustment or direction.
(European Communities' third participant's submission, para. 20)
358Supra, para. 165.
359Supra, para. 179.

H. The Panel's Conclusion under Article 1.1(a)(1)(iv) of the SCM Agreement
191. Following its examination of the evidence in rela tion to the factual premises of the USDOC's
finding of entrustment or direction, the Panel concluded:
[A]lthough the [US]DOC established that the GOK had a policy to
save Hynix, and that the GOK had a certain capacity to influence
Group B and C creditors, we consider – on the basis of a thorough
and global review of all the reas oning set forth by the [US]DOC in
light of the standard set forth in Article 1.1(a)(1)(iv) of the SCM
Agreement - that the [US]DOC did not properly demonstrate that the
GOK availed itself of that capacity to entrust or direct all Group B
and C creditors to participate in all four of the financial contributions
at issue. For this reason, we consider that the [US]DOC could not
properly have found that there was sufficient evidence to support a
generalized finding of entrustment or direction with respect to private
bodies spanning multiple creditors a nd multiple transactions over the
period of investigation.
360
192. Although the Panel may have intended to convey a broader meaning of the terms "entrusts"
and "directs" than what might be understood from a strict reading of the terms "delegation" and
"command", we have found it useful, nevertheless, to modify the Panel's inte rpretation of "entrusts"
and "directs" in order to clarify the meaning of these terms in accordance with the interpretation we
set out above. 361 We have also found multiple errors in the Panel's analysis of the USDOC's finding
of entrustment or direction. In particular, we have found that the Panel erred in (i) applying
Article 1.1(a)(1)(iv) so as to examine the USDOC's evidence piecemeal rather than in its totality,
notwithstanding the Panel's stated intention to follow the USDOC's approach 362; (ii) refusing to admit
certain record evidence submitted by the United States; and (iii) faulting the USDOC for its failure to
address facts that were not on the record of the inv estigation. On the basis of these errors, we have
found that the Panel failed to apply the proper standard of review in accordance with Article 11 of the
DSU. In our view, these errors, taken togeth er with the modification we found necessary to the
Panel's interpretation of the terms "entrusts" an d "directs", invalidate the basis for the Panel's
conclusion, quoted above, that there was not su fficient evidence to support the USDOC's finding of
entrustment or direction.363

360Panel Report, para. 7.177.
361Supra, para. 118.
362Panel Report, para. 7.45.
363We note that Korea agrees that a finding of error in this case under Article 11 of the DSU, with
respect to the Panel's standard of review, would require a reversal of the Panel's finding that the USDOC's
subsidy determination is inconsistent with Article 1.1(a)(1)(iv) of the SCM Agreement . (Korea's response to
questioning at the oral hearing)

193. Because this conclusion is the sole basis fo r the Panel's finding of inconsistency with
Article 1.1(a)(1)(iv) of the SCM Agreement , we reverse the Panel's findings, in paragraphs
7.178, 7.209, and 8.1 of the Panel Report, that the USDOC's determination of GOK entrustment or
direction of Hynix's Group B and C creditors is in consistent with Article 1.1(a)(1)(iv) of the SCM
Agreement.
194. We note that neither participant requested, in its written submissions, that we complete the
analysis by undertaking our own review of the USDOC's finding of entrustment or direction if we
were to reverse the Panel's finding of inconsiste ncy with Article 1.1(a)(1)(iv). In response to
questions posed at the oral heari ng, Korea stated that, although it had not made such a request in its
written submissions, it did want the Appellate Body to complete the analysis and find the USDOC's
subsidy determination inconsistent with Article 1.1(a)(1)(iv) of the SCM Agreement. Korea suggested
that, because the USDOC's finding of entrustment or direction rests on its finding that a "single
[subsidy] program" exists, we could complete the analysis by reviewing only the evidentiary basis of
the USDOC's finding of a "single program".364
195. We might have been able to resolve this dispute solely by addressing the USDOC's finding of
a "single program", as Korea suggests, only if this were one of the indispensable bases for the
USDOC's ultimate finding of entrustment or direction. We are not persuaded, however, that this is
the case. In support of its "single program" findi ng, the USDOC pointed to conclusions it had drawn
in the course of its entrustment and direction analysis. 365 As we read the USDOC's determination,
therefore, the characterization of the alleged subsidy as a "single program" appears to follow from the

364Issues and Decision Memorandum, supra, footnote 6, p. 48; see also Panel Report, paras. 7.146-
7.155.
365Ibid., pp. 48-49:
Rather than view each of the measures taken by the financial institutions
that participated in Hynix' restructurin g as separate events, these actions are
appropriately examined as part of a single program that occurred over a
short, ten-month period. The objective of this program was the complete
financial restructuring of Hynix in order to maintain the company as an
ongoing concern. Each of the m easures taken over the period from
December 2000 through October 2001, whether by government entities such
as the KDB, FSC, or the [Korea Deposit Insurance Corporation], or by the
government-owned and controlled creditor banks, reflected a pattern of
GOK practices to ensure the continued viability of Hynix. Many of these
events were overlapping and had the ef fect of reinforcing each other with
respect to the goal of keeping Hynix operating. As we will detail more fully
below, the GOK's role was essential at each stage in dir ectly supporting the
restructuring process through its own actions and by directing, facilitating,
and guiding the actions taken by the creditor banks. The GOK's presence
and policies throughout this restructuring process were clear, and Hynix'
creditor banks, whether specialized GOK entities, majority government-
owned, or private, were guided by ... these governmental policies and
objectives. (footnote omitted)

USDOC's analysis of entrustment or direction, rather than serve as a premise of this analysis. As a
result, even if we were to determine that the US DOC's finding of a "single program" lacked sufficient
evidentiary support, as Korea contends, that alone would not undermine the USDOC's finding of
entrustment or direction. Examining the USDOC's finding of a "single program" would therefore not
provide us with a basis to arrive at a definitive answer as to the consistency of the USDOC's subsidy
determination with Article 1.1(a)(1)(iv).
196. Moreover, in our view, the nature of the e rrors we have found in the Panel's decision,
especially with respect to the approach taken by th e Panel to the admissibility and probative value of
several individual pieces of evidence, is such that completing the analysis would require us to
examine anew the entire USDOC finding of entrustment or direction. We have stated above that the
determination of entrustment or direction will hi nge largely on the particular facts of the case.
366
Thus, in completing the analysis—that is, in exam ining the legal question whether the USDOC could
have arrived at a finding of entrustment or dir ection on the basis of the evidence and explanation
provided—we would need to engage in a thorough examination of the evidence, particularly as the
Panel improperly excluded certain evidence from its consideration.
197. Furthermore, we do not consider that the par ticipants have addressed sufficiently, in their
submissions, those issues that we might need to exam ine if we were to complete the analysis in this
case, including, for example: (i) whether the probativ e value of certain pieces of evidence is affected
by our modification of the Panel's interpretation of the terms "entrusts" and "directs"; (ii) the
probative value of the United States evidence improperl y excluded by the Panel; (iii) the relevance of
certain factual disagreements that the Panel consider ed unnecessary to resolve in the light of its legal
analysis367; and (iv) the inferences that may reasonably be drawn from an analysis of the evidence in
its totality. In these circumstances, we believe it is more appropriate to limit our examination to a
review of the issues of law cove red in the Panel Report and the lega l interpretations developed by the
Panel. Therefore, we do not complete the analysis to arrive at our own conclusion on the consistency
of the USDOC's subsidy determination with Article 1.1(a)(1)(iv) of the SCM Agreement.
198. This does not mean that we are hereby expr essing any view as to whether the USDOC's
determination of entrustment or direction—which is a necessary co mponent of its determination of
financial contribution—is necessarily supported by su fficient evidence. We conclude only that the
Panel's finding of inconsistency, which resulted from its flawed approach to reviewing the evidence,
is in error. Of course, the inquiry into the existe nce of a subsidy does not end with a determination of
a financial contribution. Such an inquiry must proceed to exam ine whether the alleged financial

366Supra, para. 116.

contribution confers a "benefit". 368 In addition, the SCM Agreement requires that a subsidy be
"specific" in order for countervailing measures to be imposed. 369 We turn to these issues in the
following Section of our Report.
VII. Benefit and Specificity
199. The United States appeals the Panel's findings relating to the USDOC's determination of
benefit and, in respect of Group B and C creditors, specificity.
200. As to the determination of benefit, the Panel noted that the USDOC's benefit analysis "was
predicated almost entirely upon the [US]DOC's dete rmination that Group B and C (except Citibank)
creditors were entrusted or directed by GOK to pa rticipate in the four financial contributions at
issue".370 "[T]hese creditors", the Panel explained, "w ere rejected as market benchmarks ... because
the [US]DOC found that they were acting pursuant to government entrustment or direction, rather
than market principles, when participating in the Hynix restructuring". 371 The Panel reasoned that,
because the USDOC could not properly have found that these private creditors had been entrusted or
directed by the GOK, "government entrustment or direction of these creditors could not have been a
proper basis for the [US]DOC to reject them as market benchmarks". 372 Therefore, the Panel found
that "the [US]DOC's benefit determination is inconsistent with Article 1.1(b) of the SCM
Agreement".373
201. The Panel made the following finding in respect of the USDOC's determination of specificity
relating to Group B and C creditors:
[W]e understand that the [US]DOC found that the alleged
subsidies provided by Group B and C creditors are specific because
of the role allegedly played by the GOK in entrusting and directing
those creditors to save a specific entity, i.e., Hynix. In other
words, the [US]DOC's finding of specificity in respect of Group B
and C creditors was based on its finding of GOK entrustment or
direction of private creditors to participate in the single programme
of Hynix restructuring. We recall, however, that we have found that
the [US]DOC's determination of government entrustment or direction
is factually flawed, and inconsistent with Article 1 of the SCM
Agreement. In the circumstances, the [US]DOC's finding of GOK
entrustment cannot provide a proper basis for a determination of

368Article 1.1(b) of the SCM Agreement.
369Article 1.2 of the SCM Agreement.
370Panel Report, para. 7.190.
371Ibid. (footnote omitted)
372Ibid. (footnote omitted)
373Ibid.

specificity in respect of alleged subsidies provided by Group B and C
creditors.

For these reasons, we find that the [US]DOC's finding of specificity
is inconsistent with Article 2 of the SCM Agreement in so far as it
relates to alleged subsidies by Group B and C creditors[.]
374
202. On appeal, the United States requests the Appella te Body to reverse these findings because
"the Panel's conclusions are based solely on its erroneous finding that the [US]DOC's determination
of GOK entrustment or direction of certain Hynix creditors is inconsistent with Article 1.1(a)(1)(iv) of
the SCM Agreement."375
203. At the oral hearing, Korea disagreed with th e United States' assertion that the Panel's finding
relating to benefit is premised exclusively on the Pa nel's finding on entrustment or direction. Korea
stated that the Panel also criticized the USDOC's rejection of Citibank as an appropriate benchmark
for the determination of benefit.376
204. We find no such "criticism" in the paragraph of the Panel Report referred to by Korea; in that
paragraph, the Panel is merely describing the approach taken by the USDOC, including its rejection of
Citibank as a benchmark. In para graph 7.191 of the Panel Report, the Panel expressly indicates that,
in the light of its finding that the USDOC's de termination of benefit was inconsistent with
Article 1.1(b) because it was premised on an improper finding of entrustment or direction, "it is not
necessary ... to examine other issues raised by the pa rties regarding market benchmarks". Thus, we
agree with the United States' assertion that the Pa nel's finding concerning the USDOC's determination
of benefit is premised exclusively on the Panel's finding relating to entrustment or direction.
205. Having reversed the Panel's findings that th e USDOC's determination of entrustment or
direction is inconsistent with Article 1.1(a)(1)(iv), there is no basis for us to uphold the Panel's finding
on benefit. Consequently, we also reverse the Panel's finding, in paragr aphs 7.190, 7.209, and 8.1 of
the Panel Report, that the USDOC's benefit determina tion is inconsistent with Article 1.1(b) of the
SCM Agreement.377

374Panel Report, paras. 7.206 and 7.208. (footnote omitted) The Panel found that the USDOC could
have properly found specificity in respect of Group A creditors. (Ibid., para. 7.207)
375United States' appellant's submission, para. 131. (footnote omitted)
376Korea's response to questioning at the oral hearing (referring to Panel Report, para. 7.180).
377Because we have reversed the Panel's findings of inconsistency with Article 1.1(a)(1)(iv) and 1.1(b),
we do not address whether a Member may be found to be acting inconsistently with a definitional provision,
such as Article 1 of the SCM Agreement. (Appellate Body Report, US – FSC (Article 21.5 – EC), para. 85)

206. As to specificity, Korea agreed at the oral hearing that the Panel's finding of inconsistency in
respect of the USDOC's determination of specificity relating to Group B and C creditors is premised
exclusively on the Panel's finding on entrustment or direction. Korea acknowledged that a reversal of
the Panel's finding relating to entr ustment or direction would necessarily result in the reversal of the
Panel's finding of inconsistency concerning the determ ination of specificity in respect of Group B and
C creditors. We agree. In paragraph 7.206 of the Pa nel Report, the Panel explains its view that "the
[US]DOC's finding of GOK entrustment cannot provi de a proper basis for a determination of
specificity in respect of alleged subsidies provide d by Group B and C creditors". The Panel provides
no other basis for its finding.
207. Accordingly, we reverse the Panel's findings, in paragraphs 7.208, 7.209, and 8.1 of the Panel
Report, that the USDOC's finding of specificity is inconsistent with Article 2 of the SCM Agreement
insofar as it relates to alleged subsidies by Group B and C creditors.
208. The Panel did not examine these issues further. Consequently, there are neither sufficient
findings by the Panel nor undisputed facts contained in the record to allow us to conduct our own
analysis of Korea's claims regarding benefit and specificity.
378 We recall that it is not sufficient to
determine that there is a "financial contribution by a government or any public body" in order to find
that there is a "subsidy" under Article 1.1 of the SCM Agreement. This provision also requires that "a
benefit is thereby conferred". Article 1.2 requires, in addition, that the subsidy be "specific". Because
the Panel's findings on benefit and sp ecificity were premised exclusiv ely on its conclusion relating to
entrustment or direction, there is insufficient basi s for us to examine the consistency of the USDOC's
benefit and specificity determinations with the SCM Agreement. Even though we reverse the Panel's
findings, we offer no view as to the consistency of the USDOC's underlying determinations of benefit
and specificity.

378Appellate Body Report, US – Softwood Lumber IV, para. 113.

VIII. Findings and Conclusions
209. For the reasons set out in this Report, the Appellate Body:
(a) upholds
 the Panel's finding, in paragraph 7.4 15 of the Panel Report, that Korea's
request for consultations did not fail to i ndicate the legal basis for the complaint in
relation to the USDOC's CVD order, as required by Article 4.4 of the DSU;
(b) as regards the USDOC's finding of entrustment or direction:
(i) with respect to the Panel's interpretation of Article 1.1(a)(1)(iv) of the SCM
Agreement:
(A) modifies the Panel's interpretation of Article 1.1(a)(1)(iv), set out in
paragraph 7.31 of the Panel Report, to the extent that it may be
understood as limiting the terms "ent rusts" and "directs" to acts of
"delegation" and "command"; and
(B) upholds
 the Panel's finding, in paragr aph 7.117 of the Panel Report,
that the evidence was "sufficien t for an objective and impartial
investigating authority to properly find government entrustment or
direction in respect of KFB";
(ii) with respect to the Panel's review of the USDOC's finding of entrustment or
direction under Article 1.1(a)(1)(iv) of the SCM Agreement:
(A) finds
 that the Panel did not err in finding, in paragraphs 7.35 and 7.46
of the Panel Report, that the evidence underlying the USDOC's
finding of entrustment or direction must be "probative and
compelling", to the extent the Panel understood these terms to require
only that the evidence demonstrate entrustment or direction;
(B) finds
 that the Panel erred in failing to examine the USDOC's
evidence in its totality, and requiring , instead, that individual pieces
of evidence, in and of themselves, establish entrustment or direction
by the GOK of Hynix's creditors;

(C) finds that the Panel erred , in paragraphs 7.88, 7.102, 7.116, 7.121,
and 7.141 of the Panel Report, in declining to consider certain
evidence on the record of the underlying investigation but not cited
by the USDOC in its published determination;
(D) finds that the Panel failed to comply with its obligations under
Article 11 of the DSU by finding, in paragraph 7.85 of the Panel
Report, that "the mediation provisions [of the CRPA] had actually
been invoked by three creditors in respect of the October 2001
restructuring", in the absence of supporting evidence on the record of
the underlying investigation; and
(E) finds
 that the Panel failed to apply th e proper standard of review and,
therefore, failed to comply with its obligations under Article 11 of
the DSU; and, consequently,
(iii) reverses the Panel's findings, in paragraphs 7.178, 7.209, and 8.1 of the Panel
Report, that the USDOC's determination of GOK entrustment or direction of
Hynix's Group B and C creditors is incons istent with Article 1.1(a)(1)(iv) of
the SCM Agreement;
(c) reverses the Panel's findings, in paragraphs 7.19 0, 7.209, and 8.1 of the Panel Report,
that the USDOC's benefit determination is inconsistent with Article 1.1(b) of the SCM
Agreement; and
(d) reverses the Panel's findings, in paragraphs 7.20 8-7.209, and 8.1 of the Panel Report,
that the USDOC's finding of specificity, inso far as it relates to subsidies provided by
virtue of GOK entrustment or direction of Hynix's Group B and C creditors, is
inconsistent with Article 2 of the SCM Agreement.
210. Based on these findings, the Appellate Body makes no recommendation to the Dispute
Settlement Body pursuant to Article 19.1 of the DSU.

Signed in the original in Geneva this 9th day of June 2005 by:

Georges Abi-Saab
Presiding Member

 _________________________ _________________________
 Merit E. Janow Yasuhei Taniguchi
 Member Member

Annex I

1 April 2005
 (05-1309)
 Original: English

Notification of an Appeal by the United States

under Article 16.4 and Article 17 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes (DSU),
and under Rule 20(1) of the Working Procedures for Appellate Review

 The following notification, dated 29 March 200 5, from the Delegation of the United States, is
being circulated to Members.

 Pursuant to Article 16 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes ("DSU") and Rule 20 of the Working Procedures for Appellate Review, the
United States hereby notifies its decision to appeal to the Appellate Body certain issues of law
covered in the Report of the Panel on (WT/DS296/R) ("Panel Report") and
certain legal interpretations developed by the Panel in this dispute.

1. The United States seeks review by the Appellate Body of the Panel's legal conclusion that the
determination by the U.S. Department of Commerce ("DOC") of Government of Korea ("GOK")
entrustment or direction of Hynix's Group B and C cr editors is inconsistent with Article 1.1(a)(1)(iv)
of the Agreement on Subsidies and Countervailing Measures ("SCM Agreement").
1 This conclusion
is in error and is based on erroneous findings on issu es of law and related legal interpretations. These
erroneous findings include, for example, the findings described below.

 (a) The Panel erroneously interprete d the phrase "entrusts or directs" in
Article 1.1(a)(1)(iv) of the SCM Agreem ent and then applied that erroneous
interpretation to the record evidence.2

 (b) The Panel applied an erroneous "probative and compelling" evidentiary standard that
is not found in Article 1.1(a)(1)(iv) or any other provision of the SCM Agreement (or
any other covered agreement), and that, inter alia, effectively shifted the burden of

1Panel Report, paragraphs 7.175-7.178.
2The Panel's erroneous interpretation is articulated in, inter alia , paragraphs 7.27-7.46 of the Panel
Report, and is applied in subsequent paragraphs, including, inter alia , paragraphs 7.51, 7.56, 7.62-7.63,
7.76-7.78, 7.82-7.91, 7.99-7.104, 7.129-7.130, 7.135, 7.141, 7.155, 7.163-7.168, 7.172-7.174, 7.175-7.178.

proving a WTO-inconsistent action from Korea to the United States, caused the Panel
to discount the circumstantial evidence re lied upon by the DOC, and resulted in the
Panel disregarding certain evidence altogether.
3

 (c) The Panel relied upon evidence that was not on the record of the DOC and that was
contradicted by evidence that was on the DOC record. Such reliance was inconsistent
with the Panel's obligation under Article 11 of the DSU to conduct an objective
assessment of the matter before it.
4

 (d) The Panel failed to consider certain reco rd evidence cited by the United States based
on the Panel's erroneous findings that U.S. reliance on such record evidence
constituted ex post facto rationalizations. These findings are erroneous because
neither the SCM Agreement nor any ot her covered agreement requires an
investigating authority to cite in its pub lished determinations to every piece of
evidence on which the authority relies. In addition, in most instances the DOC, in
fact, had cited to the record evidence that the Panel disregarded. In those instances
where the DOC had not cited to the record evidence disregarded by the Panel, the
evidence was consistent with the record evidence that the DOC had cited. The
Panel's disregard of record evidence was inconsistent with the Panel's obligation
under Article 11 of the DSU to conduct an obj ective assessment of the matter before
it.
5

 (e) The standard of review actually applied by the Panel amounted to an impermissible
de novo review of the DOC determination. As noted above in subparagraphs (c)
and (d), the Panel improperly considered non-record evidence and disregarded record
evidence. In addition, instead of looking at the totality of the record evidence, as had
the DOC, the Panel considered each piece of evidence in isolation, ignored and/or
mischaracterized ev idence upon which the DOC relied, and substituted its own
interpretation of the evidence for that of the DOC. The Panel's conduct of a de novo
review was inconsistent with the Panel' s obligation under Article 11 of the DSU to
conduct an objective assessment of the matter before it.
6

 (f) The Panel made an erroneous legal findi ng that the DOC finding of entrustment or
direction under Article 1.1(a)(1)(iv) was not supported by sufficient evidence.7

2. The United States seeks review by the Appellate Body of the Panel's legal conclusion that the
DOC's benefit determination is inconsistent with Article 1.1(b) of the SCM Agreement. This
conclusion is in error and is based on the Panel's erroneous legal conclusion, described in paragraph 1,
above, that the DOC's determination of GOK entr ustment or direction of Hynix's Group B and C
creditors is inconsistent with Article 1.1(a)(1)(iv) of the SCM Agreement.8

3The Panel's erroneous standard of proof is set forth in, inter alia , paragraphs 7.35 and 7.46 of the
Panel Report, and is applied in, inter alia, paragraphs 7.35, 7.45, 7.46, 7.51, 7.76-7.78, 7.99-7.103, 7.129-7.130,
7.141, 7.164, 7.168, 7.173.
4These errors are contained in, inter alia , paragraphs 7.63, 7.82-7.89, 7.91, 7.152 and 7.155 of the
Panel Report.
5These errors are contained in, inter alia , paragraphs 7.76, 7.88, 7.90, 7.102, 7.105, 7.116, 7.121,
7.125-7.130 and 7.141 of the Panel Report.
6These errors permeate section VII.C. 1 of the Panel Report, but examples of such errors are contained
in, inter alia, paragraphs 7.45, 7.51, 7.56, 7.62-7.63, 7.77-7.7 8, 7.81-7.82, 7.85, 7.89, 7.91, 7.103-7.104, 7.130,
7.146-7.155, 7.164, 7.168, and 7.174 of the Panel Report.
7This finding is set forth in, inter alia, paragraphs 7.175-7.177 of the Panel Report.
8The Panel's findings are contained in paragraphs 7.190-7.191 of the Panel Report.

3. The United States seeks review by the Appellate Body of the Panel's legal conclusion that the
DOC's finding of specificity is inconsistent with Ar ticle 2 of the SCM Agreement insofar as it relates
to subsidies by Group B and C creditors. This co nclusion is in error and is based on the Panel's
erroneous legal conclusion, described in paragra ph 1, above, that the DOC's determination of GOK
entrustment or direction of Hynix's Group B and C cred itors is inconsistent with Article 1.1(a)(1)(iv)
of the SCM Agreement.9

4. The United States seeks review by the Appella te Body of the Panel's legal conclusion that,
with respect to the DOC countervailing duty order, Korea's consultation request provides a sufficient
indication of the legal basis of the complaint within the meaning of Article 4.4 of the DSU. This
conclusion is in error and is based on erroneous findings on issues of law and related legal
interpretations.10

9Panel Report, paragraphs 7.204-7.208.
10Panel Report, paragraphs 7.414-7.415.

Annex II

11 April 2005
 (05-1531)
 Original: English

Notification of an Other Appeal by Korea
under Article 16.4 and Article 17 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes (DSU),
and under Rule 23(1) of the Working Procedures for Appellate Review

 The following notification, dated 11 April 20 05, from the Delegation of the Republic of
Korea, is being circulated to Members.

Pursuant to Article 16 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes ("DSU") and Rule 23 of the Working Procedures for Appellate Review, the
Republic of Korea hereby notifies its decision to a ppeal to the Appellate Body certain issues of law
and legal interpretations contai ned in the report of the Panel
(WT/DS296/R) (the "Panel Report").

Specifically, Korea seeks review of the legal conclusion and interpretation by the Panel in
upholding the finding of the U.S. Department of Co mmerce that a certain private Korean bank, Korea
First Bank ("KFB"), was entrusted or directed to make a financial contribution to Hynix Corporation
within the meaning of Article 1.1, (including Artic le 1.1(a)(1)(iv)) of the Agreement on Subsidies and
Countervailing Measures ("SCM Agreement").
1

 In particular, the Panel found that the governme nt of Korea had coerced KFB and that this
constituted "entrustment or direction" despite th e fact that KFB ultimately did not undertake the
action that was supposedly the purpose of the intended coercion. Korea considers this conclusion and
legal interpretation to be a legal error. Under the terms of Article 1.1 of the SCM Agreement there
can be no legally cognizable entrustment or directio n to undertake a specified function if the private
body never actually undertakes the function supposedly entrusted or directed.

Annex III

8 July 2003

(03-3687)
 Original: English

Request for Consultations by Korea

 The following communication, dated 30 June 2003, from the Permanent Mission of Korea to
the Permanent Mission of the United States and to th e Chairman of the Dispute Settlement Body, is
circulated in accordance with Article 4.4 of the DSU.

 My authorities have instructed me to request consultations with the Government of the United
States pursuant to Article 4 of the Understandi ng of the Rules and Procedures Governing the
Settlement of Disputes ("DSU"), Article 30 of the Agreement on Subsidies and Countervailing
Measures ("SCM Agreement"), and Article XXII of the General Agreement on Tariffs and Trade
1994 ("GATT 1994"), with regard to US Department of Commerce's ("DOC") affirmative preliminary
and final countervailing duty determinations, publ ished on 7 April 2003 at 68 Fed. Reg. 16766 and
23 June 2003 at 68 Fed. Reg. 37122 in Dynamic Random Access Memory Semiconductors from the
Republic of Korea (case number C-580-851), US International Trade Commission's affirmative
preliminary injury determina tion published on 27 December at 67 Fed. Reg. 79148 and any
subsequent determinations that may be made during the Commission's injury investigation in DRAMS
and DRAM Modules from Korea (Inv. No. 701-TA-431), and the re lated laws a nd regulations
including Section 771 of the Tariff Act of 1930 and 19 CFR 351 respectively.

 The Government of Korea considers these determinations by the Government of the United
States to be inconsistent with its obligations un der the relevant provisions of the GATT 1994 and the
SCM Agreement, including, but not limited to:

1. Article 1 of the SCM Agreement because, inter alia, DOC failed to demonstrate the existence
of a financial contribution by the Government of Korea within the meaning of Article 1 of the
SCM Agreement.

2. Article 1 of the SCM Agreement because, inter alia, DOC failed to examine each separate
alleged government measure at issue in the investigation.

3. Articles 1 and 14 of the SCM Agreement because, inter alia, DOC failed to demonstrate that
a benefit was conferred on the respondent Hynix Semiconductor In c., given available market
benchmarks.

4. Articles 1 and 14 of the SCM Agreement because, inter alia, the "creditworthy,"
"equityworthy," and other analysis required by Section 771(5) of the Tariff Act of 1930 and
19 CFR 351 are as such inconsistent with DOC's obligations under the SCM Agreement.
5. Articles 1 and 2 of the SCM Agreement because, inter alia, Section 771(5) and (5A) of the
Tariff Act of 1930 and 19 CFR 351 impose and DOC applied an improper burden of proof on
respondents and, in turn, DOC did not base its decisions on affirmative, objective, and
verifiable evidence.

6. Articles 11 of the SCM Agreement because, inter alia , DOC did not base its decision to
initiate its countervailing duty investigation on sufficient evidence.

7. Article 12 of the SCM Agreement because, inter alia , DOC conducted various verification
meetings over the explicit objection of the Government of Korea.

8. Article 17 of the SCM Agreement because, inter alia , DOC imposed provisional measures
based on flawed analysis of financial contributi on, benefit, and other factual and legal issues
that were inconsistent with the US obligations under the SCM Agreement.

9. Article 22 of the SCM Agreement because, inter alia , DOC failed to provide all relevant
information on the matters of fact and law and reasons for its determinations.

10. Articles 10 and 32.1 of the SCM Agreement and Articles VI:3 and X:3 of the GATT 1994
because, inter alia , DOC failed to conduct its investiga tion and make determinations in
accordance with fundamental substantive and procedural requirements.

 The Government of Korea reserves its rights to raise additional factual and legal issues during
the course of the consultations and in the request for the establishment of a panel.

 We look forward to the response of the Governme nt of the United States to this request so
that we can schedule a mutually convenient date to begin consultations.

Annex IV

21 August 2003

(03-4353)
 Original: English

Request for Consultations by Korea

Addendum

 The following communication, dated 18 August 2003, from the Permanent Mission of Korea
to the Permanent Mission of the United States and to the Chairman of the Dispute Settlement Body, is
circulated in accordance with Article 4.4 of the DSU.

With reference to document WT/DS296/1, G/L/633, G/SCM/D55/1 circulated on 8 July 2003,
my authorities have instructed me to request furthe r consultations with the Government of the United
States pursuant to Article 4 of the Understandi ng of the Rules and Procedures Governing the
Settlement of Disputes ("DSU"), Article 30 of the Agreement on Subsidies and Countervailing
Measures ("SCM Agreement"), and Article XXII of the General Agreement on Tariffs and Trade
1994 ("GATT 1994"), with regard to the US Inte rnational Trade Commission's ("ITC") final
determination of material injury, as reported on 4 August 2003 and as reflected in DRAMs and DRAM
Modules from Korea , Inv No. 701-TA-431 (Final), USITC Pub 3617 (August 2003) and the US
Department of Commerce's ("DOC") final counterva iling duty order, both published on 11 August
2003 at 68 Fed. Reg. 47607 and 68 Fed. Reg. 47546, respec tively. Both of these actions relate to the
same underlying measures at issue in our previous request for consultations.
The Government of Korea considers these determinations by the Government of the United
States to be inconsistent with its obligations un der the relevant provisions of the GATT 1994 and the
SCM Agreement, including, but not limited to:

 1. Article 15.1 of the SCM Agreement, becau se the ITC determination was not based on
positive evidence and an objective assessment of the effects of allegedly subsidized
imports;

 2. Article 15.2 of the SCM Agreement, because the ITC determination improperly
assessed the significance of the volume and price effects of subject imports;

 3. Article 15.4 of the SCM Agreemen t, because the ITC improperly assessed the
condition of the domestic industry;

 4. Article 15.5 of the SCM Agreement, b ecause the ITC improperly assessed the role of
other factors, and improperly attributed the effect of other factors to the allegedly
subsidized imports.

 The Government of Korea reserves the right to raise additional factual and legal issues during
the course of the consultations and in the request for the establishment of a panel.

 We look forward to the response of the Govern ment of the United States to this request for
further consultations on the countervailing duties imposed on DRAMs from Korea, so that we can
schedule a mutually convenient date to resume consultations following the first set of consultations
scheduled for 20 August in Geneva.

Annex V

21 November 2003

 (03-6239)
 Original: English

Request for the Establishment of a Panel by Korea

 The following communication, dated 19 November 2003, from the Delegation of Korea to the
Chairman of the Dispute Settlement Body, is circulated pursuant to Article 6.2 of the DSU.

 On 11 August 2003, the United States publishe d a final countervailing duty order in the US
Federal Register in the matter of Dynamic Random Access Memory Semiconductors (DRAMS) from
the Republic of Korea (68 Fed. Reg. 47546), c onfirming under US law countervailing duties against
DRAMS from Korea. Provisional countervailing duti es had been in place since 7 April 2003, with
publication in the Federal Register of the DOC's preliminary affirmative countervailing duty
determination (68 Fed. Reg.16766). The final or der was the result of the US Department of
Commerce's (DOC's) final countervailing duty determination, published in the Federal Register on 23
June 2003 (68 Fed. Reg. 37122), as amended on 28 July 2003 (68 Fed. Reg. 44290), and as further
explained in an unpublished Decision Memorandum.
1 It was also the result of the US International
Trade Commission's (ITC's) final material injury determination, also published in the Federal
Register on 11 August 2003 (68 Fed. Reg. 47607), and as further elaborated in the ITC's report of its
final DRAMS investigation.2

 The Government of Korea considers these determ inations by the DOC and the ITC that led to
the US countervailing duty ("CVD") order against DR AMS from Korea, and thereby the order itself,
to be inconsistent with US obligations under the relevant provisions of the GATT 1994 and the
Agreement on Subsidies and Countervailing Measur es ("SCM Agreement"). As a result, the
Government of Korea requested consultations with the Government of the United States regarding
these determinations pursuant to Article 4 of the Understanding of the Rules and Procedures
Governing the Settlement of Disputes ("DSU"), Arti cle 30 of the SCM Agreement, and Article XXII
of the GATT 1994. Consultations were re quested on 30 June 2003 concerning the DOC's
determination,
3 and on 18 August 2003 concer ning the ITC's determination. 4 The consultations were

1 The DOC makes the Decision Memorand um available on the internet at
http://ia.ita.doc.gov/frn/summary/korea-south/03-15793-1.pdf.
2 DRAM Modules from Korea, Inv. No. 701-TA-431 (Final), USITC Pub. 3617 (August 2003).
3 WT/DS296/1, G/L/633, G/SCM/D55/1.
4 WT/DS296/1/Add.1, G/L/633/Add.1, G/SCM/D55/1/Add.1.

held with the United States on 20 August 2003 and 1 October 2003, respectively. These consultations
failed to resolve the dispute between the parties.

 As a result of the failure to resolve the di spute, the Government of Korea requests the
establishment of a panel pursuant to Article 6 of the DSU, Article XXIII of the GATT 1994, and
Article 30 of the SCM Agreement regarding the DOC and ITC determ inations and the resulting CVD
order imposed on DRAMS from Korea. The Govern ment of Korea requests that the panel make
findings that the United States has act ed inconsistently with its obligations under Articles 1, 2, 10, 12,
14, 15, 19, 22 and 32 of the SCM Agreement, as well as Article VI:3 of GATT 1994. Specifically,
the Government of Korea makes claims under the following:

 1. Article 1.1 of the SCM Agreement because, inter alia, the DOC failed to demonstrate
the existence of a financial contribution by the Government of Ko rea with respect to
each distinct financial transaction at issue in its subsidy investigation;

 2. Article 1.1 of the SCM Agreement because, inter alia, the DOC erroneously assumed
that every Korean private financial institu tion involved in its subsidy investigation
was under the direction or entrustment of the Government of Korea;

 3. Articles 1.1 and 14 of the SCM Agreement because, inter alia , the DOC failed to
demonstrate that a benefit was conferre d on the respondent Hynix Semiconductor,
Inc., given available market benchmarks among Hynix's creditors;

 4. Articles 1.1 and 14 of the SCM Agreement because, inter alia, the DOC disregarded
market benchmarks for measuring benefit established by a foreign bank operating in
the Korean market that extended financi ng to the respondent Hynix Semiconductor,
Inc. during the period of investigation;

 5. Articles 1.1 and 14 of the SCM Agreement because, inter alia, the DOC failed to
utilize relevant market benchmarks in determining whether Hynix was "creditworthy"
or "equityworthy," and otherwise applied an improper "uncreditworthy" benchmark
and discount rate in calculating the benefit to Hynix Semiconductor, Inc., in this case;

 6. Article 19.4 of the SCM Agreement a nd Article VI:3 of the GATT 1994 because,
inter alia, the DOC's failure to measure the be nefit in accordance with the principles
of Article 14 of the SCM Agreement resulted in countervailing duties levied in excess
of the amount allowed under the SCM Agreement and the GATT 1994;

 7. Articles 1 and 2 of the SCM Agreement because, inter alia , the DOC imposed an
improper burden of proof on respondents, that is the Government of Korea and Hynix
Semiconductor, Inc., and thereby failed to base its decision on affirmative, objective,
and verifiable evidence;

 8. Article 2 of the SCM Agreement because, inter alia, the DOC disregarded the fact
that many Korean companies underwent debt restructuring similar to that undergone
by Hynix Semiconductor, Inc. Therefore, the DOC did not establish that all of the
alleged subsidies were specific to the respondent Hynix Semiconductor, Inc., on the
basis of positive evidence;

 9. Article 12.6 of the SCM Agreement because, inter alia, the DOC conducted various
private verification meetings in the territory of Korea, at which the Government of
Korea had no representatives, over the explicit objection of the Government of Korea;

 10. Article 15.1 of the SCM Agreement because, inter alia , the ITC determinations on
injury and causation were not based on positive evidence and an objective assessment
of the effects of allegedly subsidized imports;

 11. Article 15.2 of the SCM Agreement because, inter alia , the ITC determinations on
injury and causation improperly assessed the significance of the volume and price
effects of subject imports;

 12. Article 15.4 of the SCM Agreement because, inter alia, the ITC improperly assessed
the overall condition of the domestic industry;

 13. Articles 15.2 and 15.4 of the SCM Agreement because, inter alia, the ITC improperly
ignored the definition of domestic industry as set forth in Article 16 of the SCM
Agreement, defined the domestic industry and imports inconsistently, and thus
distorted the volume of imports and the effects thereof on the domestic industry;

 14. Article 15.5 of the SCM Agreement, because , inter alia , the ITC failed to
demonstrate the requisite causal link betw een subject imports and injury, improperly
assessed the role of other factors, and improperly attributed the effect of other factors
to the allegedly subsidized imports;

 15. Article 22.3 of the SCM Agreement because, inter alia , the ITC's injury
determination did not set forth in sufficien t detail the ITC's findi ngs and conclusions
on all material issues of fact and law; and

 16. Articles 10 and 32.1 of the SCM Agreement because, inter alia , the CVD order
imposed by the United States against DR AMS from Korea was not in accordance
with the relevant provisions of the SCM Agreement or the relevant provisions of the
GATT 1994.

 The Government of Korea requests that the pa nel be established with the standard terms of
reference set forth in Article 7 of the DSU.

 The Government of Korea further requests that this request be placed on the agenda for the
meeting of the Dispute Settlement Body on 1 December 2003.