Council Regulation (EC) No 584/2006 of  10 April 2006  amending Regulation (EC) No 1480/2003 imposing a definitive countervailing duty and collecting definitely the provisional duty imposed on imports of certain electronic microcircuits known as DRAMs (dynamic random access memories) originating in the Republic of Korea
Date: 2006-04-10
Institutions: Council of the European Union
Subjects: South Korea, countervailing charge, electronic component, import, originating product

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I

(Acts whose publication is obligatory)

COUNCIL REGULATION (EC) No 584/2006

of 10 April 2006

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

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty
Community,

establishing the European

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

Having regard to Council Regulation (EC) No 2026/97 of 6
October 1997 on protection against subsidised imports from
countries not members of the European Community (2)
(the
basic Regulation),

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

Whereas:

A. PROCEDURE

1. Existing measures

(1)

By Regulation (EC) No 1480/2003 (3)
(the definitive
Regulation), the Council
imposed a definitive counter-
vailing duty of 34,8 % on imports of certain electronic
random access
microcircuits

dynamic

known

as

(1) OJ L 201, 26.7.2001, p. 10.
(2) OJ L 288, 21.10.1997, p. 1. Regulation as last amended by Regu-

lation (EC) No 461/2004 (OJ L 77, 13.3.2004, p. 12).

(3) OJ L 212, 22.8.2003, p. 1. Regulation as amended by Regulation

(EC) No 2116/2005 (OJ L 340, 23.12.2005, p. 7).

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

(2)

(3)

(4)

Two exporting producers located in the Republic of
Korea cooperated in the investigation which led to the
imposition of the existing measures (the original investi-
found receiving
gation): Samsung, which was not
subsidies, and Hynix Semiconductor Inc.
(Hynix). The
European Community (EC) industry in the original inves-
tigation consisted of two producers which accounted for
the major proportion of the total Community production
of DRAMs, Infineon Technologies AG, Munich, Germany
(Infineon) and Micron Europe Ltd, Crowthorne, United
Kingdom (Micron).

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

2. Report adopted by the Dispute Settlement Body

of the WTO

On 3 August 2005, the Dispute Settlement Body (DSB)
of the World Trade Organisation (WTOmm) adopted a
in ‘European Communities — Counter-
Panel
vailing measures on dynamic random access memory
chips from Korea’ (5).

report

(4) OJ L 102, 24.4.2003, p. 7.
(5) WT/DS299/R.

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(5)

According to the Panel report, the EC acted in a manner
inconsistent with its WTO obligations under:

2001 restructuring programme and the October
2001 restructuring programme;

(a) Article 1.1(a) of

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

that

(c) Articles 1.2 and 2 of the SCM Agreement in finding

de facto specificity (two Korean claims);

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

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

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

(e) Article 15.4 of the SCM Agreement in considering all
the

to the overall condition of
factors
domestic industry, except for the factor ‘wages’;

relevant

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

(f) Article 15.5 of the SCM Agreement in demonstrating
link between the subsidised

the requisite causal
imports and injury; and

(e) Article 15.5 of the SCM Agreement by failing to
make sure that the injury caused by certain other
factors (in particular, decline in demand, overcapacity,
and
not
attributed to the subsidised imports.

(non-subsidised)

imports) was

other

(6)

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

(7)

(a) Article 1.1(a) of the SCM Agreement in determining
that the syndicated loan, the KEIC guarantee, the KDB
debenture programme and the October 2001 restruc-
turing programme constituted a financial contri-
bution by the Government of Korea (GOK);

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

(g) Article 12.7 of the SCM Agreement in applying ‘facts
available’ with respect to the subsidy investigation.

3. Reassessment to implement the DSB's recommen-

dations

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

examination is based on the

the reassessment

(6) OJ L 336, 23.12.1994, p. 156.

(8)

The reassessment set out below shows that
injurious
subsidisation still exists, although at a slightly lower level.

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(9)

(10)

B. PRODUCT UNDER CONSIDERATION AND LIKE
PRODUCT

(DRAMs), of

variations, whether

all
assembled,

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

complementary MOS

including

(c)

the calculation of the amount of the benefit with
regard to all
subsidy programmes within the
meaning of Articles 2(2) and 6 of the basic Regu-
lation.

(13) All other findings concerning subsidies remain as estab-
investigation and set out in the

lished in the original
provisional Regulation and the definitive Regulation.

1.2. May 2001 bond purchase by creditor banks

in the
amount of KRW 1 trillion and first roll-over of debt
(restructuring programme)

The product concerned is currently classifiable within CN
8542 21 15,
codes
8542 21 17,
ex 8542 21 05,
ex 8542 21 01,
ex 8548 90 10, ex 8473 30 10 and ex 8473 50 10.

8542 21 13,

8542 21 11,

(14)

(11)

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

The Panel found that the determination that the creditor
banks were directed to participate in the May 2001
restructuring programme and that
their purchase of
KRW 1 trillion of convertible bonds (CBs) as part of
the programme therefore constituted a financial contri-
bution by the GOK was not consistent with Article 1.1(a)
of the SCM Agreement (8). More specifically, the Panel
restructuring
found
the May
programme is a close case, we consider
the
that
evidence before the investigating authority was insuf-
ficient
the government
entrusted or directed the private banks to purchase the
Hynix CBs.’ (9).

to reasonably conclude that

‘while

2001

that

C. REVISED FINDINGS BASED ON THE PANEL REPORT

1. Subsidies

1.1. Introduction

(15)

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

(12)

This part sets out the reassessed findings based on the
conclusions and recommendations of the Panel report
concerning:

(a) whether

the May 2001 restructuring programme
constituted a financial contribution by the GOK
within the meaning of Article 2(1) of the basic Regu-
lation;

1.3. Syndicated loan of KRW 800 billion

(16) With respect to the syndicated loan of KRW 800 billion,
the Panel found that the EC had properly established that
the GOK directed the Korea Exchange Bank (KEB) to
participate in the loan and that
this constituted a
financial contribution via entrustment or direction of
KEB in accordance with Article 1.1(a) of
the SCM
Agreement. The Panel also found that the Korea Devel-
financial
opment Bank

provided

(KDB)

direct

a

(b) whether

there was a benefit

the
syndicated loan within the meaning of Article 2(2)
of the basic Regulation;

in the case of

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

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

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contribution through its participation in the syndicated
loan, and, because the KDB was a public body, the EC
was not required to make a finding of entrustment or
direction (11). However, the Panel found that the EC failed
to establish the existence of a benefit from the financial
contribution provided by the KDB and the KEB within
the meaning of Article 1(b) of the SCM Agreement (12).
Specifically,
the EC had not
examined whether there were comparable commercial
loans that could actually have been obtained by Hynix
on the market and stated that the EC had ignored the
other participants in the syndicated loans as possible
benchmarks (13).

stated that

the Panel

(19)

(17)

(18)

itself noted,

In the view of the Commission, the participation by the
other banks in the syndicated loan cannot serve as a
proper benchmark for determining the existence of a
benefit. As the Panel
in determining the
existence of a commercial benchmark, authorities must
examine whether such loans were so influenced by the
they do not
alleged government
represent loans that could actually be obtained on the
market (14). The Commission has conducted a thorough
re-examination of the extensive record in this case and
has employed the type of analysis discussed by the Panel.
On this basis, the Commission has determined that the
loans
from the other banks participating in the
syndicated loan could not serve as a proper benchmark.

intervention that

First, bearing in mind the financial condition of Hynix at
the time that the syndicated loan was arranged, as noted
in recital 19 of the definitive Regulation, at the time the
loan was agreed to, at the end of 2000, Hynix was in
severe financial distress. It had over USD 9,46 billion in
liabilities at the end of 2000, which was over twice its
net worth and over four times the market capitalisation
of the company. It suffered a loss in 2000, a year in
which other large DRAM producers registered profits and
which was generally considered to have been a very good
year in the DRAM industry. The majority of Hynix
liabilities were coming due in 2001 and the company

(11) Panel report, paragraph 7.69.
(12) Panel report, paragraph 7.186.
(13) Panel report, paragraph 7.184.
(14) Panel report paragraph 7.184. See also footnote 171, where the
Panel states that the examination of other participants is important,
but that ‘we emphasise that we do not wish to imply that it is
necessarily the end-point of such an analysis, as it will need to be
determined whether the behaviour of these market players is so
distorted by the government's
they can no
longer serve as the benchmark against which to measure the
alleged government distortion’.

intervention that

was facing intense liquidity problems. Many independent
analysts and brokerage houses were saying at that time
the company would not be able to generate
that
sufficient cash flow or asset disposals to pay off
its
such circumstances, profit
maturing liabilities. Under
maximising banks operating under normal commercial
conditions would not voluntarily participate in loans
with such enormous risk of default (15).

Second, there is ample evidence on the record that other
participants in the syndicated loan were pressured to
participate in the overall restructuring of Hynix's debt.
For example, the record contains evidence that one of
the participants, Kookmin Bank, was required to lend
directly to ‘troubled corporate borrowers’. Specifically,
in a
Exchange
Commission of the United States, Kookmin stated:

statement

Securities

to the

and

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

It is clear that Kookmin refers to Hynix in mentioning
‘troubled borrowers’, because the bank's 2001 annual
report
financially
the
troubled borrower (17). Further, Kookmin, as a GOK-
invested enterprise, was subject to audit and inspection

lists Hynix as

largest

single

(15) Definitive Regulation, recital 19.
(16) Kookmin Bank Prospectus, Offering of American Depositary Shares
(18 June 2002) (attachment 67 to Micron Technology Italia’s 14
May 2003 submission on the provisional Regulation)
(emphasis
added).

(17) Kookmin Bank, Annual Report (2001), page 58.

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by the GOK Board of Audit and Inspection and as such
was under pressure to comply with GOK policy.

(20) Other participants in the syndicated loan were also under
pressure from the GOK to assist Hynix. In this respect,
recital 55 of the definitive Regulation provides extensive
information regarding the extent to which the GOK put
pressure on Korea First Bank (KFB) to provide ongoing
financing to Hynix. In a high-level economic ministerial
meeting in November 2000 the GOK took steps to
‘alleviate Hynix's cash crunch’ and waived statutory
credit limits for KFB, KEB and KDB. The Panel did not
examine the evidence in relation to KFB, because the
Commission concluded its involvement to be negligible.
However, given that the Panel found that the same GOK
tactics employed in relation to KEB amounted to
direction and that the GOK owns 49 % of KFB,
it is
reasonable to conclude that the GOK was in a position
to and did exert influence over KFB in relation to its
decision to participate in the syndicated loan. KDB is a
public body and KEB was found by the Panel to have
been directed by the GOK. The participation of these
banks in the syndicated loan is thus not a reliable
commercial benchmark. Other banks that were part of
the syndicated loan were also subject to similar pressure
from the GOK. The GOK put very direct pressure on
both
the
and KorAm banks
extension of the export credit arrangements, which was
made at the same time as the syndicated loan. These
banks had concluded that
they were already over-
exposed to Hynix and reversed their earlier decision to
increase the export credit ceiling available to Hynix. In
as
response,
‘unthinkable’ (18). The GOK held 18,3 % of Shinhan and
was its largest shareholder, thus able to exert consid-
erable influence over the bank. It is clear that Shinhan
was not acting commercially given that it increased its
loan loss reserves for Hynix even as it continued to assist
the company and that it offered no legitimate credit risk
analysis for assisting it. KorAM Bank again faced GOK
threats when the bank refused to purchase Hynix CBs,
financially
because it decided that doing so was not
sound.
to
purchase the bonds, an FSS official rebuked KorAm,

In response to the bank's decision not

criticised their move

an FSS official

regarding

Shinhan

(18) ‘Banks Under Fire for Reducing Export Credit Ceilings for HEI’,

Korea Herald, 27 January 2001.

a

of

language

uncharacteristic

government
using
apparently uninvolved in credit decisions. The official
‘If KorAm does not honour the agreement, we
stated:
will not forgive the bank’ (19). He further stated that the
FSS would take stern measures against the bank, such as
instruments and subjecting
disapproving new financial
the bank to a tighter audit (20). As a result of
these
threats, KorAm Bank capitulated and reversed its
decision (21), while at the same time increasing its loan
loss reserves for Hynix and offering no legitimate credit
analysis for providing such financial assistance. Of the
remaining banks which participated in the syndicated
loan, Chohung Bank, Woori Bank,
the NACF, Seoul
Bank, Kwangju Bank, Peace Bank, Kyongnam Bank and
the Industrial Bank of Korea are all GOK-owned and thus
their credit decisions are tainted by GOK policy. The
Housing and Commercial Bank, of which the GOK has
a 20 % share, admitted government direction in its credit
decisions in a sworn statement to the US SEC (22). Finally,
although Pusan Bank had no GOK ownership,
it was
nevertheless ordered by the FSS in 1999 to fire or
replace its executives and to increase its paid-in capital
by USD 86,2 million before the end of March 2000 (23),
to ‘slash their manpower, the number of branches and
organisations, while disposing of ailing subsidiaries’ (24)
the FSS sanctioned its
and,
former and
in 2000,
for mismanagement (25). Given this
current officials
degree of GOK control over Pusan Bank,
the bank's
decision to participate in the syndicated loan cannot be
considered to be a safe commercial benchmark.

(21)

Third, it would clearly not be appropriate to use Citibank
Seoul as a benchmark to determine the commercial
reasonableness of participating in the syndicated loan,
for the reasons set forth in recitals 130 to 133 of the

(19) ‘KorAm Reluctantly Continues Financial Support for Hynix’, Korea

Times, 21 June 2001.

(20) See footnote 1.
(21) See ‘Koran Bks Complete Purchase of KRW1T Hynix Conn Bond,’
Dow Jones International News, 20 June 2001 (‘KorAm Bank's
reversal of its board's decision comes after the Financial Supervisory
Service warned of a possible sanction for KorAm for threatening to
break the earlier rescue pact for Hynix.’).

(22) Kookmin/H&CB Prospectus, 10 September 2001 (Micron Italia post

hearing submission, 14 February 2003 at Exhibit 9).

(23) ‘Pusan, Kyongnam Banks Receive Conditional Approval from FSS’,

Korea Herald 18 January 1999.

(24) See footnote 1.
(25) ‘Officials of NFLC, Pusan Bank Punished for Mismanagement’, Korea

Herald, 29 April 2000.

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thus

forcing

in this

failed to
definitive Regulation. First, Citibank Seoul
cooperate
the
investigation,
Commission to rely on facts available regarding the parti-
cipation of Citibank Seoul. Second, the evidence on the
record discussed in recital 133 of the definitive Regu-
lation reflects an unusually close relationship between
the GOK and Citibank that calls into question the impar-
tiality of Citibank in lending to Hynix. Third, Citibank
itself was a financial advisor to Hynix regarding its
restructuring and thus had an inherent conflict with
respect to participation in new lending to Hynix (26). It
had not given financing to Hynix prior to becoming
Hynix's
itself
recognised that Citibank cannot serve as a basis for deter-
mining whether any of the loans to Hynix were made on
the basis of commercial considerations (27).

financial

advisor.

Fourth,

Panel

the

1.4. Calculation of the amount of benefit

(25)

the financial contributions was

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

the Panel

(22)

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

(26)

(23)

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

subsidy that provides a benefit

(24) On this basis, the participation of KEB and KDB in the
syndicated loan may still be considered to be a counter-
to Hynix.
vailable
However, as set out in recital 37 of the definitive Regu-
lation, no subsidy amount has been countervailed under
the syndicated loan in order to avoid double-counting, as
the syndicated loan amount was subsequently rolled-over
into the October 2001 measures. Thus, no amendment
of the findings is necessary with regard to this measure.

(27)

(26) Provisional Regulation, recital 87.
(27) Panel report, footnote 185:

‘While it is certainly true that Citibank, and its subsidiary SSB, are
not government owned at all, we consider that the EC sufficiently
demonstrated that the close relationship with the government and
the specific role as financial advisor to Hynix throughout
the
restructuring make Citibank particularly inapt to serve as an appro-
priate market benchmark for assessing whether the government’s
financial
in line with the normal market
conditions, or whether it, on the contrary, conferred a benefit to
Hynix. This is especially so given the very small participation in
Hynix by Citibank, whose share of the total Hynix loans in October
2001 was 1,3 %. (Preliminary Deterimantion, paragraph 93).’

contribution was

their

the benefit

that
conferred by each of

In particular,
the EC acted
the Panel considered that
inconsistently with Article 1.1(b) and 14 of the SCM
the
Agreement by taking as a starting point
amount of
the
financial contributions, which were generally in the
form of loans, guarantees or equity, was to be calculated
as if those financial contributions had been grants, irre-
terms and conditions. The Panel
spective of
reasoned that
the
benefit should be based on the benefit to the recipient,
not the cost to the provider. It further reasoned that the
provision in this case of funds to Hynix in the form of
loans, guarantees and equity may have been of
less
benefit to Hynix than if the funds had been provided
in the form of grants. In particular, the Panel reasoned
that the funds would appear as debt in Hynix's balance
sheet or would have given rise to the dilution of the
ownership claims of existing shareholders in Hynix (29).

the calculation of

the amount of

The Panel considered that, as a matter of WTO law, the
correct starting point for the EC in this case must be the
search for an alternative benchmark as a base for the
calculation of the amount of benefit. The Panel parti-
to ‘a
cularly referred, at para. 7.213 of
loan which the firm could
comparable commercial
actually obtain on the market’
(Article 14(b) SCM
Agreement) and ‘a comparable commercial
loan absent
the
SCM
14(a)
government
Agreement). The Panel
also referred, by way of
example, to so-called ‘junk bonds’ or ‘vulture funds’ (30).

guarantee’

its report,

(Article

(28) Guidelines for the calculation of the amount of subsidy in counter-
vailing duty investigations (Official Journal of the European Commu-
nities C 394, 17.12.1998, p. 6) (the Guidelines).

(29) Panel report, paragraphs 7.211 and 7.212.
(30) Panel report, footnote 186.

(29)

(30)

(31)

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(28)

The Panel observed that there may be circumstances in
which there is an absence of any comparable benchmark,
and that the investigating authority was and is entitled to
considerable leeway in adopting a reasonable approach to
calculating the amount of the benefit to Hynix (31).

(32)

for each of

In the light of
the
the Panel's findings,
relevant financial contributions in the measure at issue,
the Commission has re-examined all of the relevant facts
and evidence on the record, taking into account all of the
submissions of interested parties, specifically with respect
including ‘junk
to possible
funds’, and,
bonds’ and ‘vulture
each relevant
financial contribution, redetermined the amount of the
benefit to Hynix.

alternative benchmarks,

for

governmental,

because it requires a comparison with commercial, rather
Consequently,
funding.
than
the
to the government’
the ‘cost
Commission notes that
approach would not generally be expected to lead to a
to the
higher amount of
recipient’ approach.

subsidy than the ‘benefit

Panel's

reasoning,

record of

information on the

consistent with the

Thus,
the
Commission has examined the financial contributions
‘from the perspective of the recipient’. The Commission
has done this by means of an objective examination of
the
case. The
Commission has not enquired into what might have
been the subjective state of mind of one or more
it has enquired
Hynix executives at the time. Rather,
into what, objectively, the amount of the benefit would
have been for a company in exactly Hynix's situation at
the time. Calculating the amount of the benefit from the
perspective of
the recipient does not entail switching
from an objective to a subjective basis of enquiry.

the

to any

found by the Panel

The Commission has not re-examined or made any rede-
terminations with respect
substantive or
procedural matters confirmed by the Panel report or
to be inconsistent with the
not
SCM Agreement,
including, but not limited to: Hynix's
financial situation or worth, conditions in the DRAM
market, conditions in the financial markets and the use
of facts available. The Commission has limited itself to
the specific issue that
the Panel's
findings: the availability of alternative benchmarks.

is the subject of

1.5. KEIC guarantee for export credits (D/A extension) in the

amount of USD 600 million

(33)

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

the Commission has
In making this redetermination,
based its calculation of subsidy on a ‘benefit
to the
recipient’ and not on a ‘cost
to the government’
standard, as is required by Article 6 of the basic Regu-
lation, consistent with the Panel's reasoning, with the
determinations in the definitive Regulation and with
established practice (32).
In this
the Commission's
regard,
the key
the Commission notes that one of
features of the SCM Agreement (Article 14) following
the confirmation that
the Uruguay Round was
the
‘benefit
recipient’
standard would normally
to the
prevail over the ‘cost to the government’ standard. The
Commission further notes that the former will generally
lead to a higher amount of subsidy than the latter,

(31) Panel report, paragraph 7.213.
(32) The Panel refers to the cost to the ‘provider of the financial contri-
bution’, that is, the Government of Korea and the private banks
which it directs.

against

for D/A's

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

(33) Panel report, paragraph 7.85.

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(34)

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

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

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

government with

provided

the

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

in respect of export

consideration

related

under

the

to

is

the benefit
benchmark against which the amount of
could be calculated. First,
the Commission considered
whether Hynix had received new loans at the time that
the USD 600 million increase had been granted. The
record demonstrates, however, that no new commercially
comparable lending had been provided. Second,
the
Commission looked for verified evidence regarding the
cost and terms of a comparable commercial guarantee or
a ‘comparable commercial
loan absent the government
guarantee’
that Hynix or another firm in a situation
comparable to Hynix concluded at the relevant time. A
comparable commercial
loan would ideally be one of
approximately the same size, would related to the same
or a similar sector of economic activity, would involve a
such as export credit
comparable type of activity,
insurance, and would have been concluded at approxi-
mately the
any
It
government guarantee, express or implied, and would
need to involve a firm in a comparable financial
situation to that of Hynix.

could not

involve

same

time.

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

In any

(38)

The Commission has re-examined the extensive record in
this case and considered whether there is any relevant

(34) Panel report, paragraphs 7.189 to 7.192.
(35) Panel report, paragraph 7.189.
(36) Panel report, paragraph 7.213.
(37) Panel report, paragraph 7.189.
(38) Panel report, paragraph 7.189.
(39) Panel report, paragraph 7.189.

financial condition to Hynix. Moreover,

(40) Given Hynix's financial condition, there are no Hynix-
specific benchmarks that can be used and there is no
data on the record regarding loans to companies in a
similar
the
available
that Hynix did not
obtain, and would not have been able to obtain, the
in the market (40). The KEIC export
relevant
credit guarantee programme and the KDB debenture
programme were in effect
throughout 2001. During
this period, Hynix was, by all measures, uncreditworthy.

information indicates

funds

(40) Definitive Regulation, recitals 87 and 101 to 112.

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current

financial condition worsened
Hynix's already dismal
markedly in 2000, when the company suffered a net
loss of over KRW 2 trillion. At year-end 2000, Hynix's
total
indebtedness was KRW 8 trillion, and Hynix's
current ratio, which measures the degree to which a
firm's
liabilities, was
cover
0,33 (41). Hynix's net profit margin fell from 2,08 % in
1999 to minus 24,03 % in 2000 (when the DRAM
industry as
and minus
a whole performed well)
93,83 % in 2001 (42). Clearly, during 2000 and 2001,
Hynix was unable to generate adequate cash flow to
cover its existing debt, much less new debt.

current

assets

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

semiconductors, with

is unlikely that

throughout

is perhaps

it

a

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

(43)

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

(42)

In February 2001, in an article in the Korea Herald (46),
‘Given the fact that
another market expert stated that:

(41) The ‘target ratio’ for healthy firms is 2 or better, and a ratio below
1 ‘signals a firm in extreme financial distress.’ Expert report of
Anthony Saunders, p. 12. The Commission notes that although
Hynix's current ratio improved somewhat to 0,65 in 2001, this
improvement was solely attributable to the October 2001 restruc-
turing, which enabled Hynix to drastically reduce the current
portion of its long-term debt and, thus, its current liabilities. See
footnote 2.

(42) Saunders Report, p. 18.
(43) ‘Korea Daily Comment: Hyundai Electronics,’ UBS Warburg, 4
January 2001, p. 2 (Micron Italia, 14 February 2003, post-
hearing submission, Exhibit 64).

(44) ‘Hyundai Electronics,’ UBS Warburg, 8 January 2001, p. 7 (Micron
Italia, 14 February 2003, post-hearing submission, Exhibit 19).
(45) ‘Hyundai Electronics Inc. Digging a Deeper Hole,’ Deutsche Bank,
23 February 2001, p. 8 (Micron Italia, 14 February 2003, post-
hearing submission, Exhibit 66).
(46) The Korea Herald, 15 February 2001.

(44)

in these

the benefit

circumstances,

the amount of

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

conclusion is

that

this

(47) Reuters News, 21 June 2001.
(48) The Korea Herald, 13 June 2001.

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12.4.2006

this

the term of

(45) However, mindful of the WTO Panel’s reasoning, the
Commission has, exceptionally and for
reason
only, also considered whether or not, even absent any
relevant benchmarks, there is anything that might serve
as the basis for a proxy benchmark, adjusted where
necessary to take account of the particular circumstances
of this case. Such a proxy could, for example, be based
on a commercial interest rate, with the addition of a risk
premium, reflecting the default rates of companies exhi-
biting comparable risk. Such a calculation would take
into account
the loan, a benchmark
interest
rate that would be paid by a creditworthy
company, the probability of default by an uncreditwothy
company within a specified period of time and the prob-
ability of default by a creditworthy company within the
same specified period of time. This approach is premised
on the commonly understood notion that when a lender
makes a loan to a company that is considered to be
uncreditworthy, the lender faces higher probability that
the borrower will default on repayment of the loan. As a
consequence of this higher default probability, the lender
will charge a higher rate of interest, and one that is in
proportion to the increased probability of default. Essen-
tially, this would entail taking an interest rate available in
the market to creditworthy borrowers and adding a ‘risk
premium’ to it in order to account for the increased risk
associated with lending to a company that is not cre-
ditworthy.

(46)

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

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

(47)

(48)

the

term,

this
as

Financial

of
used

International

the guarantee was short
i.e.,

purposes
has
the
rate for USD loans

the
implementation,
For
creditworthy
(or
Commission
commercial)
the average USD
lending interest rate for 2001, which, according to the
Service, was
IMF
Statistics
received by Hynix by
6,922 %. Although the credit
virtue of
the measure
under consideration,
the guarantee itself, was in
fact a form of rolling credit. The Commission used
data from Moody's Investor Service to obtain default
rates for creditworthy and uncreditworthy companies.
For the uncreditworthy rate, the Commission used the
likelihood of default for companies with a credit rating
of Caa to C during the term of the relevant measure (i.e.,
the
one
Commission used the default rate for a creditworthy
company during the term of the measure in question,
calculated based on a cumulation of data for investment
grade companies. The rate of default of an uncredit-
worthy company in 2001 within one year was,
according to Moody's, 34,34 %. The rate of default of a
creditworthy company in 2001 within one year was
interest rate of 62,70 %.
0,13 %. This led to total
In
rate payable by Hynix on the
contrast,
USD loans in question was 8,33 %, i.e., a total interest
differential of 54,37 %.

the KEIC guarantee). Similarly,

the interest

year

for

normally,

Commission

recalls
the benefit

that,
is equivalent

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

Where:

n = the term of the loan

ib = the benchmark interest rate for an uncreditworthy

borrower

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

creditworthy company

pn = the probability of default by an uncreditworthy

company within n years

qn = the probability of default by a creditworthy

company within n years.

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

(50)

(51)

12.4.2006

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Official Journal of the European Union

L 103/11

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

80 % originally assumed by the KDB, 20 % of the bonds
was
in
then sold to the company's creditor banks
proportion to their debt exposure to the company;
70 % was re-packaged for sale to investors as collater-
alised bond obligations (CBOs) and/or collateralised loan
obligations
(CLOs), guaranteed by the Korea Credit
Guarantee Fund (KCGF) (*); and the KDB retained the
remaining 10 %. The participating company had to
repurchase at least 3 % of any CBOs and 5 % of any
CLOs (**).

cases

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

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

1.6. KDB debenture programme

(53)

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

‘7.88 A third programme found to constitute a subsidy
by Korea was the KDB debenture programme to which
Hynix was admitted on 4 January 2001. This was a
programme which essentially lasted for one year (2001)
and was set up by the government
in response to
financial
instability in Korea caused by the fact that a
large amount of bonds issued by a few companies
(including Hynix) were due to mature simultaneously.
Under this programme, maturing debt was rolled-over
and re-packaged for investors. A participating company
repaid on its own 20 % of its corporate bonds falling due
and the KDB assumed the
remaining 80 %. This
constituted the first phase of the programme. Of the

and needed the

Institutions Council

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

four of which,

___________

(*) The CBO’s and CLO’s are asset-backed securities

that are sold to investment trusts.

(**) Preliminary Determination, paragraphs 47 and 48.
(***) Preliminary Determination, paragraph 49.
(****) Preliminary Determination, paragraphs 49 to 52.
The EC states that the budget for the programme
was KRW 6,2 trillion, of which KRW 2,9 trillion
was earmarked for Hynix, eventual expenditure
being KRW 2,9 trillion, of which KRW 1,2
trillion (41 %) was for Hynix and 38 % was used
for the other three Hyundai companies (49).’

(54)

The Panel found that the EC reached a reasonable and
reasoned conclusion on the basis of the record before it
that the KDB debenture programme conferred a benefit

(49) Panel report, paragraphs 7.88 and 7.89.

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on Hynix. In doing so, it recalled that the KDB debenture
programme was itself set up and effectively guaranteed
by the GOK (50). However, as regards the amount of the
benefit, the Panel report indicates that the Commission
should, as a matter of WTO law, re-examine the question
of the availability of alternative benchmarks.

It could not involve any government guarantee,
time.
express or implied, and would need to involve a firm
in a comparable financial situation to that of Hynix.

the

The

KDB

leeway (52).

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

the government with a

amount of benefit of

the market.

KDB

by

(56)

about

verified evidence

‘a comparable commercial

The Commission has re-examined the record to consider
whether there is any relevant benchmark against which
It has
the amount of the benefit could be calculated.
looked for
comparable
a
‘a comparable commercial
government guarantee or
loan’ or
the
government guarantee’ that Hynix or another firm in a
situation comparable to Hynix concluded at the relevant
time. A comparable commercial
loan would ideally be
one of approximately the same size, would relate to
the same or a similar
sector of economic activity,
would involve a comparable type of activity, and
would have been concluded at approximately the same

loan absent

(50) Panel report, paragraphs 7.194 to 7.199.
(51) Panel report, paragraph 7.189.
(52) Panel report, paragraph 7.213.

sell bonds on the normal

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

(58) Moreover, other lending to Hynix during the period that
the KDB rolled over Hynix’s maturing bonds cannot
serve as a basis for measuring whether a benefit
to
Hynix exists. For the reasons noted in recitals 17 to 22
above, the loans provided as part of the syndicated loan
cannot serve as an appropriate basis of comparison. The
lending made pursuant to the syndicated loan was so
distorted by the government’s intervention in that loan
that
commercial
benchmark by which to measure whether a benefit has
occurred or the amount of that benefit. In this regard, the
Commission recalls that the syndicated loan itself was
made possible by the GOK waiving the lending limits
for three key participants in that loan. Without the parti-
cipation of
is
unclear whether the loan would have been able to go
forward at all, given that it would have been significantly
undersubscribed (54).

these three banks in the syndicate,

reasonable

cannot

serve

as

it

it

a

(53) See ‘Direct Intervention by the Government in Supporting Hynix,’
Korea Economic Daily, 28 August 2001 (reporting on the discovery
by the Korean National Assembly of correspondence between the
Korean Economic Ministers and the KEIC directing the KEIC to
provide assistance to Hynix) (Attachment 1 to Micron Italia’s 14
May 2003 submission on the provisional Regulation).

(54) As stated in recital 53 of the definitive Regulation, Hynix had
originally requested a syndicated loan of KRW 1 trillion, but was
only able to raise KRW 800 billion.
If the three banks which
accounted for KRW 300 billion of the KRW 800 billion total
were unable to participate without the GOK’s specific permission,
it is highly speculative that the remaining banks would have gone
forward with the loan.

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Official Journal of the European Union

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(59)

a

of

for

the

part

sufficient

finding of

creditor banks

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

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

(61)

the amount of

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

supported by

its

it

(62) However, mindful of the WTO Panel's reasoning, the
Commission has also considered whether or not, even
without the availability of any appropriate commercial
benchmarks, there is anything that might serve as the
basis for a proxy benchmark, adjusted where necessary

(63)

(64)

to take account of the particular circumstances of this
case. Such a proxy could,
for example, be calculated
along the lines already indicated above in recitals 45
and 46 with respect to the KEIC Guarantee.

For the purposes of this calculation, and as suggested by
GOK, the Commission has used as the creditworthy rate
for KRW loans the IMF International Financial Statistics
rate on short-term KRW denominated-lending, which
was 7,7 %. The default rates for both creditworthy and
uncreditworthy companies for the term of the measure in
question were taken from Moody's Investor Services
(0,13 % and 34,37 % respectively). This led to a total
interest
average
interest rate payable by Hynix on the KDB debentures
in question was 12,7 %, i.e., a total interest rate differ-
ential of 51,19 %.

rate of 63,89 %.

In contrast,

the

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

the Commission considers

that

(65)

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

1.7. October 2001 rescue package,

consisting of debt-to-
equity swap, second roll-over of debt and provision of
new loan of KRW 658 billion

(66)

The Panel summarised the facts concerning the October
2001 restructuring programme in the following terms:

(55) Panel report, paragraph 7.104.
(56) Panel report, paragraph 7.97.
(57) Recitals 17 to 22, 56 and 57.

‘7.111 The fifth and final programme considered to
constitute a subsidy was the October 2001 restructuring
programme. On 4 October 2001, a second Hynix CFIC

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institutions

including 17 banks

was set up in accordance with the provisions of the
Corporate Restructuring Promotion Act
(CRPA). The
CRPA was enacted in August 2001 and its purpose
was to facilitate corporate restructuring, which before
was based on agreements between creditor banks and
the companies concerned. The CFIC consisted of 110
financial
and 15
investment trust companies. The decisions of the CFIC
were taken by a 75 % majority. The votes were allocated
in proportion of each institution’s exposure to the total
loans to Hynix. Any financial
institution exercising its
dissenter’s rights by disagreeing with a CFIC resolution
would be excluded from the CFIC permanently. In its
second meeting held on 31 October 2001, the CFIC
decided on a ‘second restructuring package’ for Hynix.
The following measures were proposed:

(a) provision of a new loan of KRW 1 trillion to Hynix

with an interest rate of 7 %;

(b) debt-to-equity

swap

by

provision

of

bonds

convertible into shares;

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

into corporate bonds with a

7.112 The financial institutions were given three options
by the CFIC in the 31 October meeting. The first option
was to agree with the proposals by extending new credit
and participating in a debt-to-equity swap (Option 1).
Secondly, the banks which did not want to participate
in the new loan were obliged to swap 28,5 % of their
loans into equity and waive the rest of the Hynix debt
(Option 2). Thirdly, the CFIC also decided that those
banks which objected to the measures and used their
dissenter’s rights would have their loans purchased back
at
established by Arthur
as
Andersen, the firm that was commissioned to conduct
a study on the financial situation of Hynix at the time
(Option 3).

liquidation value

the

7.113 Nevertheless, only six banks agreed to extend new
credit, which amounted to KRW 658 billion instead of
the planned KRW 1 trillion. These banks swapped a
considerable amount of their loans into equity. These
so-called Option 1 banks were the KEB, Woori Bank,

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

___________
(*) Preliminary Determination, paragraph 77. The KDB
did not participate in the new loan of KRW 658
billion.

(**) Preliminary Determination, paragraphs 69 to 71.’

(67)

the October 2001 restructuring

The Panel found that the EC reached a reasonable and
reasoned conclusion on the basis of the record before it
that
programme
conferred a benefit on Hynix (58). However, as regards
the amount of the benefit, the Panel report indicates
that
re-
the EC should, as a matter of WTO law,
examine the question of the availability of alternative
benchmarks.

(i) D e b t - t o - e q u i t y s w a p

(68) As the Panel

indicated,

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

inconsistent with the usual

to Article 14(a) of

territory of

in the

further

the

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

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(69)

The Commission has re-examined the record to consider
whether there is any relevant benchmark against which
the amount of the benefit could be calculated.
It has
looked for verified evidence about a comparable private
provision of equity capital that Hynix or another firm in
a situation comparable to Hynix concluded at
the
relevant time. A comparable provision of equity ideally
would be one of approximately the same size, would
relate to the same or a similar sector of economic
activity, would involve a comparable type of activity
and would have been concluded at approximately the
same
any government
guarantee, express or
implied, and would need to
involve a firm in a comparable financial situation to
that of Hynix.

could not

involve

time.

It

the amount of

the
this case. Accordingly, under these circumstances,
Commission finds that
to
the benefit
Hynix could not exceed the full amount of the funds
obtained by Hynix as a result of the operation of the
debt to equity swap in the October 2001 restructuring
programme.
this
conclusion is fully supported by its (unchanged) determi-
nations regarding the financial situation and worth of
Hynix, and the situation in the DRAMs market and the
financial markets, and that it is consistent with the basic
Regulation and the Guidelines.

The Commission

believes

that

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

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

contribution
a

particular

this

(74)

into default of

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

realities of Hynix’s

abysmal

the

(72)

The Commission would therefore be in a position to
reasonably and objectively conclude that no alternative
commercial benchmark would actually be available in

The Commission has taken into consideration the possi-
bility that, in the particular circumstances of the present
reassessment, the cost to the recipient of receiving the
financial contribution should be taken into account. The
Commission notes that, in order to examine the cost, if
any, of the swap from the point of view of the recipient,
the obligations imposed on a company when issuing new
equity would have to be considered. The Commission
notes in this respect that injections of ordinary share
capital do not generally impose particular obligations
on a company, as there is neither a fixed rate of return
which the company must achieve nor,
in fact, do any
payments need to be made. However, the company has
at least a theoretical obligation to distribute its profits or
part thereof to its shareholders; the return on equity ratio
(ROE) could provide some indication of
the level of
return the company is expected to provide to its share-
holders and could be used in the calculation of
the
amount of the benefit to Hynix. However, the ROE of
Hynix for 2001 was minus 96,75 %, as calculated by
reference
the year.
Therefore, on the basis of an objective evaluation of
Hynix's financial standing at the time of the debt-to-
that Hynix
equity swap,
would be in a position to distribute any sort of return
to its shareholders for the relevant year. Hence, using the
ROE as a benchmark, it would still be concluded that the
entire amount of the debt-to-equity swap is a counter-
vailable subsidy.

is unreasonable to expect

statements

financial

to its

for

it

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(75)

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

the Commission believes it

In this regard,

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

to Hynix of

(77)

(78)

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

(ii) D e b t r o l l - o v e r a n d n e w l o a n

in

2001

the October

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

(79)

The Commission has re-examined the record to consider
whether there is any relevant benchmark against which

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

the full amount swapped because of

about

concluded at

time. A comparable commercial

verified evidence
a
loan that Hynix or another
to Hynix

It has
the amount of the benefit could be calculated.
comparable
looked for
firm in a
commercial
the
situation comparable
loan ideally
relevant
would be one of approximately the same size, would
relate to the same or a similar sector of economic
activity, would involve a comparable type of activity,
and would have been concluded at approximately the
any government
same
guarantee, express or
implied, and would need to
involve a firm in a comparable financial situation to
that of Hynix.

could not

involve

time.

It

(80)

The bonds purchased as part of the May 2001 restruc-
turing programme cannot serve as a basis for deter-
mining the commercial reasonableness of the new loan
and the debt roll-over, as Hynix's financial situation dete-
riorated substantially between May and October 2001.
Therefore, the two situations cannot be considered to
be comparable.

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

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

(83)

the amount of

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

(61) Recitals 17 to 22 and 57 to 59.

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(84) However, mindful of the WTO Panel's reasoning, the
Commission has also considered whether or not, even
in the absence of any relevant benchmarks,
there is
any other method by which the amount of the benefit
might be adjusted to take into account the particular
circumstances of
the same
methodology as the one outlined in recitals 45 and 46
was used to calculate the amount of the benefit received
by Hynix from these two measures.

In this respect,

this case.

(85)

(86)

interest

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

Viewing the financial contributions as recurring subsidies,
rather than as non-recurring subsidies to be allocated
over time, and applying this model to the calculation
of the amount of the benefit in the financial contri-
butions under consideration, would lead to an amount
of benefit of KRW 271,5 billion for the new loan and
KRW 761,4 billion for the roll-over. This would result in
countervailable subsidies allocated on turnover of 6,8 %
for the new loan and 19,1 % for the roll-over, compared
to 3,5 % and 9,8 % respectively, as originally calculated
by the Commission. Consequently,
the Commission
considers that its original approach was and is reasonable
in this case, as the interest rate differential would give a
much higher amount of benefit than a simple allocation
of the face amount of the loans over time.
In these
the Commission has used the more
circumstances,
conservative of
the two options in order to be sure
that it has not exaggerated the amount of the subsidy
and will treat the face amount of the loans as the basis
for a cap on the maximum amount of the benefit. On
the basis of these considerations, the Commission had
determined that the amount of the benefit to Hynix ad
valorem of turnover is, for both measures, 13,3 %.

(iii) T o t a l s u b s i d y o f O c t o b e r 2 0 0 1 r e s c u e

p a c k a g e

(88)

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

1.8. Total subsidy amount

(89)

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

Type of
subsidy

D/A
extension

KDB
debenture
program-
me

May 2001
CB
purchase,
debt roll-
over

October
2001
rescue
package

Total

—

5,1 %

4,9 %

0 %

22,9 %

32,9 %

2. Injury

2.1. Introduction

(90)

the Panel

the factor ‘wages’ as a relevant

This part sets out the reassessed findings based on the
report concerning the
recommendation of
evaluation of
factor
affecting the state of the Community industry within
the basic Regulation
the meaning of Article 8(5) of
the
(which generally corresponds to Article 15.4 of
SCM Agreement).

(91) All other findings concerning injury remain as estab-
investigation and set out in the

lished in the original
provisional Regulation and the definitive Regulation.

(87)

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

(92)

In the original investigation the EC had considered and
evaluated the wages factor, but found wages to be irre-
levant to its injury determination. However, the Panel
found that:

2.2. Wages

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(95)

consequently, whether

‘without a written record of
the analytical process
undertaken by the investigating authority to evaluate
“wages”, we cannot examine whether an adequate and
reasoned explanation has been provided of how the
facts support the injury determination made by the EC
that determination was
and,
consistent with Article 15.4. Without
that written
record, we would be forced to embark on post hoc spec-
ulation about the thought process by which the investi-
gating authority arrived at its ultimate conclusions. We
consider that the standard of review in Article 11 of the
DSU prevents us from embarking upon this exercise.’ (62).

it had increased by 9 %. Overall,

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

situation of

financial

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

(96)

intensive products and, thus,

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

(93)

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

(94)

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

Average cost for wages per
employee

1998

1999

2000

2001
(IP)

Index

100

99

115

109

(62) Panel report, paragraph 7.360.
(63) Panel report, paragraph 7.362.
(64) Data obtained from the confidential version of the questionnaire
the Community

statements of

and the

financial

responses
producers.

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

the

(65) The total hourly labour costs in the euro area for the whole
economy (excluding agriculture, public administration, education,
health and other services) increased between 1998 and 2001 by
10,5 % (see ECB Monthly Bulletin for December 2001 and May
2002).

(66) However, there were adverse wage and benefit effects suffered by at
least one Community DRAM manufacturer, Micron, due to financial
losses caused by substantial volumes of subsidised Hynix imports
sold at prices that caused substantial DRAM price depression. In
October 2001, Micron suspended all wage and cost-of-living
increases. In addition, Micron executives took a 20 % reduction in
pay. Micron's employee profit sharing programme, whereby 10 %
is shared with Micron employees, was
of each quarterly profit
suspended, and senior staff
In
took a 10 % reduction in pay.
in December 2001 all employees were placed on
addition,
mandatory leave for two to three weeks which,
for employees
who had already exhausted their annual vacation allowance, was
unpaid (Micron post-hearing submission, 18 February 2003, p. 62).
In addition to these wage and benefit reductions, in February 2003
Micron was compelled to lay off 10 % (more than 1 850) of its
company-wide workforce (see Micron post-hearing submission), and
Infineon ‘was obliged to reduce the number of employees in the
fourth quarter of 2001 as a result of the losses related to subsidised
imports from Korea.’ (Infineon post-hearing submission, 14 March
2003, p. 36).

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

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2.3. Conclusion

(98)

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

3. Causation

3.1. Introduction

(99)

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

3.2. Decline (contraction) in demand and economic downturn

(100) Article 8(7) of

the basic Regulation (which generally
corresponds to Article 15.5 of
the SCM Agreement)
requires examination of any known factors other than
subsidised imports which at the same time are injuring
the Community industry, and not
to attribute injury
caused by these other factors to subsidised imports.
One of the factors referred to is ‘contraction in demand’.

(101) The Panel found in paragraph 8.1(e) of its report that the
EC had failed to make sure that the injury caused by
‘decline in demand’ was not attributed to the subsidised
imports. This conclusion was reached in the light of the
Panel’s findings in paragraphs 7.411 to 7.414 of
its
report, which treat a ‘decline in demand’ as synonymous
with a ‘general economic downturn’.

EC
consump-
tion

DRAMs in
’000 Mbits

1998

1999

2000

2001 (IP)

16 593 400 28 961 100 45 873 600 68 967 600

Index

100

175

276

416

good) may

a particular

to consumption (i.e.,

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

impact on the prices of

shown above,

thus, on its

the

as

it

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

the conclusion that

the GOK made

L 103/20

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Official Journal of the European Union

12.4.2006

(104)

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

to

support

investigating

in US-Steel,

the Panel noted that

the factor concerned could not have caused injury
because trends in such factor were independent from
trends in key indicators of the domestic industry. Speci-
the facts
fically,
authority’s
the
appeared
finding, in respect of hot-rolled bar, that cost increases
had not caused injury because trends in operating margin
(a key measure of profitability) were unrelated to trends
in the cost of goods sold (COGS) (68). Similarly, while the
Panel concluded that the investigating authority’s finding,
in respect of stainless steel bar, concerning demand as a
satisfy the non-attribution
factor of
requirement,
the investigating
authority could have met this requirement, through a
‘reasoned and adequate explanation’, simply by showing
that trends in demand had no connection with trends in
a key variable attesting to the condition of the domestic
industry (69).

the Panel noted that

injury, did not

the Community industry,

(105) The declining trend in demand growth was more
pronounced between 1999 and 2000 (where demand
growth declined by 17 percentage points) than between
2000 and the IP (where demand growth declined by 8
percentage points). This evolution of demand growth has
to be assessed by comparison with the evolution of the
sales prices of
the primary
cause of injury to the Community industry during the
period under consideration (see recital 188 of the defi-
nitive Regulation).
in 1999 to 2000,
In particular,
the
demand growth declined by a sizable 23 %, but
average sales price of the Community industry dropped
by only 5 %. Conversely, between 2000 and the IP
demand growth declined moderately by 12 %, but the
industry
average
plummeted by 77 % (see recital 128 and the relevant
table of the provisional Regulation). If slowing demand
growth had been a cause of
injury, one would have
expected the sales prices of the Community industry to
decline more sharply in the period when demand growth
declined more steeply. Record evidence shows no such
relationship between trends
in demand growth and
trends in the sales prices of the Community industry. It
is therefore concluded that
link
there is no apparent
the
between demand growth and the sales prices of
Community industry which could indicate that slowing
demand growth contributed to the injury suffered by the
Community industry.

the Community

price

sales

of

(106) This approach is consistent with the findings of recent
WTO panels reviewing determinations in respect of non-
attribution. In particular, WTO panels have upheld non-
attribution findings where record evidence showed that

(107) Accordingly, the Commission is of the view that its rede-
the non-attribution requirement
termination satisfies
the basic Regulation (which
under Article 8(7) of
the SCM
to Article 15.5 of
generally corresponds
Agreement)
in respect of demand growth by showing
that, during the period under consideration, trends in
demand growth were independent from trends in the
sales prices of the Community industry. The Commission
is also of the view that its redetermination satisfies the
non-attribution requirement in respect of declines in the
level of demand by showing that during the period under
consideration no such demand declines took place.

(68) ‘[T]he Panel does consider that the USITC was probably correct in
concluding that changes in input costs were not a cause of serious
injury. If, indeed, COGS played a significant role in [the] situation
of the domestic industry, one would have expected operating profits
to increase while COGS was decreasing … However, as can be seen
from the graph below, which has been generated using USITC data,
the trends in operating margin appear to be independent of trends
in COGS.’ Report of the Panel, United States — Definitive safeguard
measures on imports of certain steel products, WT/DS248/R,
WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R,
WT/DS254/R, WT/DS258/R, WT/DS259/R, adopted December
10, 2003, as modified by the Appellate Body report (on other
grounds), paragraphs 10.440 and 10.443.

(69) In particular, the Panel stated: ‘While … reluctant to prescribe what
may amount to a reasoned and adequate explanation, the Panel
considers that the USITC could have, for example, demonstrated
that there was no linkage between demand declines during the
period of investigation and injury suffered in this particular case.
More particularly, the USITC could have explained that operating
injury factor in this regard,
margin, perhaps the most relevant
declined irrespective of demand trends. This analysis could have
been bolstered by an explanation that declines
in operating
margin coincided with increases in imports rather than declines
in demand’ (emphasis added). Report of the Panel, United States
— Definitive safeguard measures on imports of certain steel
products, paragraph 10.558.

12.4.2006

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Official Journal of the European Union

L 103/21

3.3. Overcapacity

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

(113)

to Article 15.5 of

(109) The Commission notes that ‘overcapacity’ is not expressly
referred to in Article 8(7) of the basic Regulation (which
generally corresponds
the SCM
Agreement). The concept is discussed in the provisional
and definitive Regulations insofar as it is invoked by
certain of the interested parties. It is a relative concept,
insofar as it depends on how much capacity is available
and how much capacity is being used – that is, on the
‘Overcapacity’ may thus arise either
level of demand.
because capacity is increased, or demand falls.

(110)

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

Regulation. In this respect, the effect of worldwide over-
capacity created by Hynix cannot be considered as a
factor separate from the effects of the subsidised imports.

around 80 % of
their
that
shows

In any event, even if the effect of worldwide overcapacity
could be considered separately from the effect of
subsidised imports, the following can be observed. Infor-
mation from the questionnaire responses of
the four
producers of DRAMs cooperating with the original inves-
Infineon and Micron,
tigation (i.e., Samsung, Hynix,
the
represented
which together
worldwide DRAMs market)
total
capacity in Mbits increased by 129 % between 1999
and 2000 and by 85 % between 2000 and the IP.
Their total production in Mbits increased in line by
124 % between 1999 and 2000 and by 81 % between
2000 and the IP. In other words, the capacity and the
production of
the four major worldwide producers
increased significantly more between 1999 and 2000,
the good year during which the Community industry
maintained some price stability and made profits, than
between 2000 and the IP (2001), during which the
Community industry suffered significant losses because
of the collapse of prices (see recitals 128 and 131 and
the provisional Regulation). Conse-
relevant
quently, the existing worldwide overcapacity throughout
in the
the period under
Commission’s
to the
view,
collapse of prices and the material
injury suffered by
the Community industry in the IP.

consideration did not,
significantly
contribute

tables of

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

industry. This

the end of

(114)

capacity more

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

approximately 20 % of

(112) However, as set out in recital 147 of the provisional
the worldwide overcapacity was estimated
Regulation,
to be
the market. Hynix
accounted for around 17 % of worldwide production
during the IP. Given that Hynix was virtually bankrupt
during the IP and remained afloat only through the
subsidies provided by the GOK,
it can be concluded
that the worldwide overcapacity situation has been artifi-
cially maintained through the subsidisation of Hynix.
Thus,
the effect of worldwide overcapacity on the
injurious situation of the Community industry was chan-
nelled through Hynix’s subsidised imports. This effect has
been analysed in recitals 144 to 149 of the provisional
Regulation and recitals 191 and 192 of the definitive

(115) Trends

in Community overcapacity (defined as

the
inverse of Community capacity utilisation) show little
or no correlation with trends in the sales prices of the
Community industry. In particular, during 1999 to 2000,
the sales
Community overcapacity rose by 28 %, but
prices of
the Community industry fell by only 5 %.
Further, from 2000 to 2001, Community overcapacity
went down by 4 % but
the
Community industry plummeted by 77 % (see recitals
125 and 128 and relevant tables of the provisional Regu-
lation). It may be concluded that, if rising overcapacity
were correlated to falling price levels,
the significant
increase in overcapacity over 1999 to 2000 would
have resulted in severe price depression, whereas the

sales prices of

the

L 103/22

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Official Journal of the European Union

12.4.2006

contraction in overcapacity in 2000 to 2001 would have
led to rising prices, or at least to some degree of price
stability. Record evidence shows the opposite. Over 1999
to 2000, there was very mild price depression, despite
the significant increase in overcapacity, while from 2000
to 2001, there was substantial price depression, despite
the contraction in overcapacity. This stands in sharp
contrast with the close correlation between trends in
the prices of the subsidised imports and trends in the
sales prices of the Community industry. In fact, during
2000 to 2001 the trend in the sales prices of
the
Community industry mirrored almost perfectly the
trend in the prices of the subsidised imports: over this
period, the former dropped by 74 % and the latter did so
by 77 % (see recitals 119 and 128 of the provisional
Regulation).

increase

in Community overcapacity.

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

under

trends

in the

industry.

consideration. However,

(117) Hynix claimed that Community overcapacity was another
known factor contributing to material injury during the
period
in
Community overcapacity show no or only negligible
the
correlation with trends
Community
therefore
that Community overcapacity cannot be
concludes
considered as
injury to the
Community industry. Given that Community overca-
pacity did not adversely affect
the
Community industry,
there is no need to distinguish
any alleged injury caused by capacity from the injury
caused by Hynix’s imports. The Commission believes
this finding is consistent with the findings of recent

factor of material

the condition of

condition of

Commission

The

a

WTO Panels
non-attribution described in recital 106 above.

reviewing determinations

in respect of

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

3.4. Other non-subsidised imports

(119) The Panel noted in paragraph 7.426 of its report that
to consider non-subsidised
there is no requirement
imports on a country-per-country basis. The Panel also
noted in paragraph 7.435 that a satisfactory explanation
of the nature and extent of the injurious effects of non-
subsidised imports, as distinguished from the injurious
effects of the subsidised imports, should be provided.
Accordingly, the effects of non-subsidised imports were
examined by considering jointly imports from countries
other than Korea (e.g.
Japan, and
Taiwan) and imports from Samsung. Recital 151 of the
provisional Regulation and recitals 194 and 200 of the
definitive Regulation provide the growth rates of import
volume, market
share, and average prices of non-
subsidised imports during the period under consid-
eration. These data are re-stated below in aggregated
index form (70). Given the very limited number of
players in the DRAMs market, for reasons of confiden-
tiality, indices are used to show the evolution of trends.

the United States,

1998

1999

2000

2001
(IP)

Non-subsidised
in ’000 Mbits

imports

100

142

166

233

Market
subsidised imports

share of non-

Average price of non-
subsidised imports

100

81

60

56

100

89

104

48

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

12.4.2006

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Official Journal of the European Union

L 103/23

a

It

fraction of

is noted that during the

(120) During the period under consideration, non-subsidised
imports increased significantly less than did subsidised
imports,
i.e., by 133 % as opposed to 361 % (see
recital 177 and relevant table of the definitive Regu-
same period
lation).
Community consumption increased by 316 %. Hence,
whereas the rate of growth in non-subsidised imports
was only
growth of
Community consumption, subsidised imports increased
well in excess of Community consumption. Accordingly,
during the period under consideration, the market share
of non-subsidised imports contracted by 44 % whilst the
market share of subsidised imports expanded by 20 %
(see recital 185 and relevant table of the definitive Regu-
If the market share of non-subsidised imports
lation).
heavily declined during the period under consideration,
as shown by the above facts, it can be concluded that
non-subject
injure the Community
imports did not
industry by reason of their volume effects.

rate of

the

average

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

the prices of

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

to Article 15.5 of

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

3.5. Conclusion

(124) Having separated, where

appropriate,

and analysed
further the effects, if any, of the decline in demand, over-
it
capacity
is
imports,
and other non-subsidised
considered that no injury caused by any of
these
factors has been attributed to the subsidised imports
within the meaning of Article 8(7) of the basic Regu-
it is confirmed that the subsidised
lation. Furthermore,
imports through the effects set out in recitals 144 to 149
of the provisional Regulation and recitals 191 and 192
of the definitive Regulation have caused material injury
to the Community industry within the meaning of
Article 8(6) of the basic Regulation.

4. Community interest

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

D. REVISED MEASURES

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

investigation and,

thus,

L 103/24

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Official Journal of the European Union

12.4.2006

(127)

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

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

(131)

(129) The GOK generally submits that the revised findings do
not reasonably address the Panel’s recommendations. The
Commission does not agree, for the reasons set out in
this Regulation. The Commission does not agree that the
revised duty must necessarily be lower than the original
duty, and notes that in any event it is. The GOK speci-
fically submits that the Commission should have used
seven banks in the syndicated loan as a benchmark.
The Commission disagrees, particularly for the reasons
in recitals 16 to 24 above. The GOK also
set out
the Commission should have made its
submits that
benchmark calculations differently.
In the light of the
GOK’s comments
the Commission has made some
adjustments to its calculations, as reflected in this Regu-
lation. For the reasons set out in this Regulation, the
other aspects of
the calculations remain unchanged.
Finally, the GOK submits that the Commission’s injury
redetermination does not separate and distinguish the
effects of other known factors, particularly with respect
to economic downturn, overcapacity and other non-
subsidised imports. The Commission disagrees, parti-
cularly for the reasons set out in recitals 100 to 123
above.

the period of

(130) Hynix aligns itself with the submissions of the GOK,
In addition, Hynix
discussed in the preceding recital.
submits that
time during which duties
should be imposed should have been terminated on 1
January 2006. This is not a matter that was the subject
of dispute or recommendations by the WTO Panel; and
is not therefore part of the ‘measure taken to comply’
with the Panel's recommendations which is encapsulated
within this Regulation. This Regulation does not alter the
impending expiry date of the definitive Regulation. The
question of an early termination of the measure rather
falls within the ambit of an eventual interim review, not
within the ambit of implementation of the Panel report.
Hynix also submits that the revised rate of duty must

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

this issue is not part of

apply retroactively from the date on which measures
were first imposed. The Commission similarly considers
the ‘measure taken to
that
comply’ and in any event does not agree. Nothing in
the Commission to
rules obliges
the relevant
apply the revised duty retroactively, the Panel
limiting
itself to recommending that the measure be brought in
conformity, which is achieved by the present Regulation.

legal

it

that

submits

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

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

the Commission has decided not

carefully considered this

submission which,

that

(133) Thus, all comments submitted by the interested parties
were considered and taken into account where appro-
priate. However, certain comments were outside the
this Regulation which is only intended to
scope of
implement
such
comments have not resulted in any changes to this Regu-
lation,

the DSB recommendations. Thus,

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Official Journal of the European Union

L 103/25

HAS ADOPTED THIS REGULATION:

No

Product/origin description

Article 1

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

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

‘2.
The
applicable
before duty, shall be as follows:

rate of
to the net

the

definitive

duty
free-at-Community-frontier price,

countervailing

3 Multi-combinational

forms of DRAMs
originating in countries other than the
Republic of Korea, incorporating DRAM
chips and/or mounted DRAMs origi-
nating in the Republic of Korea and
manufactured by all companies other
than Samsung and representing 10 %
or more but less than 20 % of the net
free-at-Community-frontier price of the
multi-combinational form of DRAM

Reference
number

Rate of
duty (%)

D012

3,2 %

Korean producers

Samsung Electronics Co., Ltd (Samsung)
24th Fl., Samsung Main Bldg
250, 2-Ga, Taepyeong-Ro
Jung-Gu, Seoul

Hynix Semiconductor Inc.
891, Daechidong
Kangnamgu, Seoul

Rate of
duty
(%)

TARIC
additional
code

0 %

A437

32,9 %

A693

All other companies

32,9 %

A999

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

forms of DRAMs,

Reference
number

Rate of
duty (%)

D010

0 %

No

Product/origin description

1 Multi-combinational

forms of DRAMs
originating in countries other than the
Republic of Korea, incorporating DRAM
chips and/or mounted DRAMs origi-
nating in countries other
than the
Republic of Korea or originating in the
Republic of Korea and manufactured by
Samsung

D011

0 %

2 Multi-combinational

forms of DRAMs
originating in countries other than the
Republic of Korea, incorporating DRAM
chips and/or mounted DRAMs origi-
nating in the Republic of Korea and
manufactured by all companies other
than Samsung and representing less
than
free-at-
Community-frontier price of the multi-
combinational form of DRAM

10 % of

net

the

D013

6,5 %

4 Multi-combinational

forms of DRAMs
originating in countries other than the
Republic of Korea, incorporating DRAM
chips and/or mounted DRAMs origi-
nating in the Republic of Korea and
manufactured by all companies other
than Samsung and representing 20 %
or more but less than 30 % of the net
free-at-Community-frontier price of the
multi-combinational form of DRAM

D014

9,8 %

5 Multi-combinational

forms of DRAMs
originating in countries other than the
Republic of Korea, incorporating DRAM
chips and/or mounted DRAMs origi-
nating in the Republic of Korea and
manufactured by all companies other
than Samsung and representing 30 %
or more but less than 40 % of the net
free-at-Community-frontier price of the
multi-combinational form of DRAM

D015

13,1 %

D016

16,4 %’;

6 Multi-combinational

forms of DRAMs
originating in countries other than the
Republic of Korea, incorporating DRAM
chips and/or mounted DRAMs origi-
nating in the Republic of Korea and
manufactured by all companies other
than Samsung and representing 40 %
or more but less than 50 % of the net
free-at-Community-frontier price of the
multi-combinational form of DRAM

7 Multi-combinational

forms of DRAMs
originating in countries other than the
Republic of Korea, incorporating DRAM
chips and/or mounted DRAMs origi-
nating in the Republic of Korea and
manufactured by all companies other
than Samsung and representing 50 %
or more of the net free-at-Community-
frontier price of
the multi-combina-
tional form of DRAM

L 103/26

EN

Official Journal of the European Union

12.4.2006

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

‘5.
In the case of no indication of any reference number
in the SAD, as foreseen in paragraph 3, or if the customs
declaration is not accompanied by any statement in the cases
required in paragraph 4, the multi-combinational form of
DRAM shall — unless
the contrary is proved — be
considered as originating in the Republic of Korea and as
having been manufactured by all companies other than
Samsung, and the countervailing duty rate of 32,9 % shall
apply.

In cases where some of the DRAM chips and/or mounted
forms of
incorporated in multi-combinational
DRAMs
DRAMs are not clearly marked and their manufacturers are
not clearly identifiable from the statement
required in
paragraph 4, such DRAM chips and/or mounted DRAMs
shall — unless the contrary is proved — be considered as
originating in the Republic of Korea and as having been
manufactured by companies subject to the countervailing

the DRAM chips

duty. In such cases, the countervailing duty rate applicable
to multi-combinational forms of DRAMs shall be calculated
on the basis of the percentage represented by the net free-at-
Community-frontier price of
and/or
mounted DRAMs originating in the Republic of Korea out
of the net free-at-Community-frontier price of the multi-
combinational forms of DRAM, as established in the table
contained in paragraph 3, numbers 2 to 7. Should, however,
the aforementioned DRAM chips and/or
the value of
the multi-
mounted DRAMs be such to determine that
combinational forms of DRAMs in which they are incor-
porated becomes of Korean origin, the countervailing duty
rate of 32,9 % shall apply to the multi-combinational forms
of DRAMs.’.

Article 2

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

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

Done at Brussels, 10 April 2006.

For the Council
The President

U. PLASSNIK