Council Regulation (EC) No 320/2008 of 7 April 2008 repealing the countervailing duty imposed on imports of certain electronic microcircuits known as DRAMs (Dynamic Random Access Memories) originating in the Republic of Korea and terminating the proceeding
Date: 2008-04-07
Institutions: Council of the European Union
Subjects: South Korea, countervailing charge, electronic component, import, originating product, repeal

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Official Journal of the European Union

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(Acts adopted under the EC Treaty/Euratom Treaty whose publication is obligatory)

I

REGULATIONS

COUNCIL REGULATION (EC) No 320/2008

of 7 April 2008

repealing the countervailing duty imposed on imports of certain electronic microcircuits known as
DRAMs (Dynamic Random Access Memories) originating in the Republic of Korea and terminating
the proceeding

THE COUNCIL OF THE EUROPEAN UNION,

(2)

Having regard to the Treaty
Community,

establishing the European

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 (1)
(the basic Regulation) and in particular Article 19 thereof,

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

Whereas:

A. PROCEDURE

I. Existing measures

(1)

By Council Regulation (EC) No 1480/2003 (2) (the de-
finitive duty Regulation), the Council imposed a definitive
countervailing duty of 34,8 % on imports of certain elec-
tronic microcircuits known as Dynamic Random Access
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 duty 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 (3) (the provisional
duty Regulation).

Following a report adopted by the Dispute Settlement
Body of the World Trade Organisation (4) (the EC-Korea
DRAMs Panel Report), the Council adopted Regulation
(EC) No 584/2006 (5),
implementing the recommen-
dations made by the Panel Report and lowering the de-
finitive countervailing duty to 32,9 % (the implementing
Regulation).

(3)

II. Ex officio initiation of a partial interim review

The Community producers Micron Europe Ltd and
Qimonda AG (formerly,
Infineon Technologies AG)
provided prima facie evidence to the Commission indi-
cating that Hynix Semiconductor Inc.
(Hynix) was in
receipt of additional subsidies in the period following
investigation.
the original
the investigation period of
Additionally, Hynix submitted a request
for a partial
interim review alleging that the subsidies found to be
countervailable in the original
investigation had ceased
to exist.

(4)

In view of
decided to proceed ex officio.

the submissions above,

the Commission

III. Investigation

(5)

consulted

Having determined that sufficient evidence existed to
interim review and
justify the initiation of a partial
having
the
the Advisory
Commission announced on 18 March 2006, by a
Notice of Initiation published in the Official
Journal of
the European Union (6),
the ex officio initiation of a
partial interim review, in accordance with Article 19 of
the basic Regulation.

Committee,

(1) 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).

(2) 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).

(3) OJ L 102, 24.4.2003, p. 7.

(4) WT/DS299/R European Communities — Countervailing Measures
on Dynamic Random Access Memory Chips from Korea, adopted
on 3 August 2005.

(5) OJ L 103, 12.4.2006, p. 1.
(6) OJ C 67, 18.3.2006, p. 16.

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Official Journal of the European Union

9.4.2008

(6)

(7)

(8)

(9)

The review was limited in scope to the examination of
subsidisation of one exporting producer, Hynix, in order
to assess the need for the continuation, removal or
amendment of the existing measures. The investigation
period ran from 1 January 2005 to 31 December 2005
(IP).

the

advised
the Government of

The Commission
officially
exporting
the
producer concerned (Hynix),
Republic of Korea (the GOK) and the Community
producers of the initiation of the partial interim review.
Interested parties were given the opportunity to make
their views known in writing and to request a hearing
within the time limits set out in the Notice of Initiation.

(CMOS),

(DRAMs) of

variations, whether

all
assembled,

technology,
of

of Metal Oxide-Semiconductors

types,
Random Access Memories
in
densities
and
(dies), manufactured using
processed wafer or chips
(MOS)
variations
including complementary MOS
process
future
all
types
densities),
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.

irrespective of access

(including

densities

In order to obtain the information necessary for its inves-
to all
the Commission sent questionnaires
tigation,
parties known to be concerned and received replies
from the company, the GOK and a number of Korean
banks, as well as Deutsche Bank AG.

to verify the

information
The Commission sought
the
at
received and carried out verification visits
premises of
and
Finance
the GOK (Ministry of
Economy — MOFE and the Financial Supervisory
Commission — FSC) and the following companies and
institutions in Seoul:

(11)

The product concerned is currently classifiable within CN
codes ex 8473 30 20, ex 8473 50 20, ex 8542 32 10,
ex 8542 32 31, ex 8542 32 39 and ex 8548 90 20.

C. SUBSIDIES

I. Introduction

(12) On the basis of

the information available to the
Commission at initiation and the replies given to the
the following measures
Commission's questionnaires,
were investigated:

— Hynix Semiconductor Inc.,

— Korea Exchange Bank (KEB),

— Korea Development Bank (KDB),

— Woori Bank,

— Shinhan Bank,

— Deutsche Bank AG,

— National Agricultural Cooperative Federation (NACF),

— Hyundai Marine & Fire Insurance.

B. PRODUCT UNDER CONSIDERATION AND LIKE
PRODUCT

(10)

The product under consideration and the like product are
the same as that covered in the original investigation, i.e.
certain electronic microcircuits known as Dynamic

(a) a rescue package approved by the Hynix Creditors'
on
and
Financial
30 December
new restructuring),
comprising a debt-to-equity swap, a debt rollover
and changes in the interest payment conditions;

Institutions Council
(the
2002

(CFIC)

(b) alleged preferential

financing provided by Korean
banks to Beijing Orient Electronics (BOE) to facilitate
the purchase of Hydis, a Hynix operation;

(c) alleged preferential

financing provided by Korean
banks to CVC to facilitate the purchase of System
IC, a Hynix operation,
including the transfer of
Hynix debt to another entity at a discount;

(d) a discounted cash buyout of the Hynix debt;

(e) preferential tax treatment allegedly given to Hynix by

GOK;

(f)

the July 2005 refinancing of Hynix debt.

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Official Journal of the European Union

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all

above,

exception of

(13) All the measures listed above were ad hoc measures.
With the
investigated
(e)
measures were taken by the creditor banks/institutions
of Hynix, allegedly under direction by the GOK. The
contribution by a government’,
issue of
within the meaning of Article 2 of the basic Regulation,
is, as
to this
proceeding and recitals 9 to 15 of the definitive duty
Regulation are hereby recalled.

investigation, central

in the original

‘financial

II. The financial situation of Hynix after the original

investigation

it was obvious that

(14) Despite the large bail-out packages received by Hynix in
2001, its financial situation did not improve and in 2002
it was still rated Selective Default by Standard & Poor. It
reported a loss of KRW 1,03 trillion for the first nine
months of 2002;
it was in no
position to pay any maturing debt. Its ratios, based on
its 2002 financial statement, show that it could not cover
its current liabilities with current assets, could not cover
its interest expense with its earning, was financed with
significantly more debt than equity and had large net
losses. Although the October 2001 bail out had helped
matters to some degree, the company was still in con-
siderable distress. Morgan Stanley Dean Witter, one of
Hynix's external advisors,
in a report produced in
September 2002,
stated that Hynix would be very
unlikely to ‘accumulate enough cash in the next two
years to meet maturing debt obligations’ or ‘expand
capacity and fund the technological upgrades and R&D
necessary for
competitive DRAM
to remain a
producer.’ Morgan Stanley Dean Witter went on to say
technically bankrupt, kept alive only
that
‘The
though debt restructuring programmes’ and that
financial commitment required to bring the company
back to a competitive level
looks too great. Creditors
cannot afford to nurse the company back to health.
Whatever
to
investors: Hynix is not an investment grade company.’

the outcome,

the message

‘Hynix is

clear

is

it

(15) Merrill Lynch, again in September 2002, stated, ‘We are
increasingly concerned about Hynix's dismal earnings
prospects. We are cutting 02-03 estimates into deficit
territory as cost
improvements and supply growth is
constrained by lack of investment in the process tech-
nology upgrade’. Another one of Hynix's advisors,
admitted that
Deutsche Bank Korea,
equities
department, although it
followed the semiconductor
industry, did not follow Hynix, as ‘there was a lack of
investor appetite’. The company itself does not dispute
the severity of
its financial difficulties at the relevant
time.

their

(20)

III. The New Restructuring

(16)

In October 2001, a business normalisation plan was
adopted by the CFIC to pursue the reconstruction of

the company. The CFIC was made up of banks and
other
institutions which were Hynix's creditors. The
decisions of the CFIC were taken by a 75 % majority.
The voting rights of each institution were determined
in accordance with its exposure to Hynix.

(17) Hynix was under the Corporate Restructuring Promotion
Act (the CRPA) and, as such, was effectively under the
its creditors. The CFIC decided to sell the
control of
business or part of the business to a third party.
In
December 2002, the Restructuring Committee, which is
a sub-committee of the CFIC, initiated negotiations with
Micron Technology Inc. These lasted for five months; a
Memorandum of Understanding was signed between the
parties, but the terms of the sale were eventually rejected
by the Hynix Board of Directors.

(18)

In May 2002, as a follow-up measure given the
continuing deterioration of Hynix's finances, the CFIC
hired a number of external advisors, including Deutsche
Bank (DB), Morgan Stanley Dean Witter, Deloitte &
Touche and A. D. Little, to analyse Hynix and come
up with a plan to rescue the company. Together with
these external advisors, KEB, which was the head of the
CFIC as lead creditor, performed due diligence on Hynix
until November 2002. The resulting report, prepared by
Deutsche Bank and KEB (the DB Report), was submitted
to the CFIC.

(19) On 30 December 2002, the CFIC decided to implement
a corporate turnaround and sell-off of the business, as
outlined in the DB Report. The corporate turnaround
involved a restructuring, comprising:

— a debt-to-equity swap of KRW 1 861,5 bn,

— a capital write-down on a ratio of 21:1,

— a rollover of debt amounting to KRW 3 293 bn, and

— changes to the interest payment conditions of the

rolled-over debt.

IV. Description of the Measures

(i) Debt-to-equity swap

amounting

to swap debt

The CFIC decided
to
KRW 1 861,5 bn for Hynix shares; this amounted to
approximately 50 % of Hynix's unsecured loans. The
swap share price was fixed to KRW 435 at the time
the decision was taken in December 2002, by taking
the one-month average market price. Although there is
an obligation under the CRPA on the CFIC to use a
reasonable method in calculating the swap price, no
specific method is provided.

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(21)

The restructuring plan involved a capital write-down
prior to the swap taking place, which required share-
holder approval; hence the swap could not take place
immediately. Once the capital write-down was
im-
the share swap price
plemented, at a ratio of 21:1,
became KRW 9 135 (21 × KRW 435) and the swap
went ahead. As the shares pursuant to the swap were
not to be issued until April 2003, this price was to serve
as a floor, but no ceiling was set. The actual share price
at the time of the decision was in fact KRW 280; it fell
to KRW 167 in April 2003.

(ii) Debt rollover

(22)

The maturity of the Hynix debt which was not converted
to equity was extended to December 2006. This rolled-
over debt amounted, in total, to KRW 3 293 bn.

(iii) Changes in the terms of interest payments

(23)

The interest rate on the rolled-over debt was reduced to
3,5 % from 6,5 %. The 3 % difference was treated as
additional principal and was added on to the outstanding
debt, with a maturity date of December 2006, as well.
Interest on this additional principal was set at 6 %, to be
paid quarterly.

been ongoing for months before that. The GNP report,
therefore, is not irrelevant to the question of whether the
GOK had a policy to save Hynix.

(25) During the first half of the year, the Vice Minister for
Finance stated that ‘creditors will have to find a solution
to Hynix as soon as possible to minimise the adverse
impact on the economy’. To that end, a meeting
between the GOK and Hynix's creditors had taken
place to express the GOK's views with regard to the
then ongoing negotiations with Micron. The MOFE
could neither confirm nor deny whether other meetings
had taken place and claimed that records of meetings
were not always kept. The FSC, on the other hand,
said that no other meetings had taken place, although
it was kept abreast of what was happening by informal
telephone calls. However, evidence on the record suggests
that the GOK, mindful of the previous investigations in
its involvement in Hynix by the European Communities
and the United States, directed that any communication
relating to Hynix should be made orally to avoid being
traceable (1). The FSC stated that it had no power to
intervene in the restructuring efforts of each company,
but that it did conduct partial monitoring of the process,
for example, where they thought
there could be a
potential shock to the markets. The FSC conducts such
monitoring by contacts with ‘work-level’ persons, but not
records are kept of such contacts. Although the FSC
admitted that Hynix was restructured because it was so
big, it insisted that the manner and mode of such restruc-
turing was determined solely by the creditors. The Hynix
creditor banks confirmed that the FSC kept a close eye
on the restructuring by telephone calls and requests for
information.

V. The Policy of the GOK as regards Hynix

(26)

(24) As described in the provisional and the definitive duty
Regulations, the GOK had a keen interest in the fact of
Hynix. The GOK admitted that, due to Hynix's situation,
foreign investors were not willing to invest in Korea,
because the Korean banks' exposure to Hynix was so
high. It need the Hynix problem to be solved, in order
in fact, Hynix's ‘structural
to remove the uncertainty;
adjustment’ was cited as a main policy issue for the
second half of 2002 in a report by the Ministry of
Finance and Economy. A report
submitted to the
National Assembly by Korea's Grand National Party
(GNP), in opposition, criticised the GOK's insistence on
rescuing the Hyundai Group,
in which Hynix was a
subsidiary, stating that the GOK, by saving Hynix, was
‘injecting money into bottomless pits’. Hynix claims that,
it
as the report was submitted in November 2002,
should not be considered as evidence of the GOK's in-
volvement in the new restructuring. However, the new
restructuring was approved by the creditors only a
month following the submission of
the GNP report
and deliberations on the best way to rescue Hynix had

to buffer

to rescue it

The GOK, in the meetings of April 2002, communicated
its official position to Hynix's creditors, which was either
the shock.
to sell Hynix or
Although the GOK insisted that
the decision of
whether liquidation was on the table or not was left to
the creditors, its statements regarding the importance of
rescuing Hynix (by a restructuring or a sale) in order to
restore confidence in the Korean markets belies such
insistence. The GOK's belief that Hynix was too big to
fail is corroborated by a statement by one of the creditor
banks that Hynix was such a big company, employing
such a large number of people and contracts you can
it went bankrupt or
imagine what would happen if
insolvent. Further, one of Hynix's external advisors,
in
its engagement letter wrote that it would assist … in
(the) effort to find a realistic and viable restructuring
solution for Hynix that would minimise social damage …
(emphasis added).
It was plain that the liquidation of
Hynix was not an option.

(1) Kangwon Lee, CEO of KEB ‘I will not tell’, Maeil Business Newspaper,

23 August 2002.

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VI. GOK involvement in Hynix creditor banks

(27)

The GOK is a major shareholder in a large number of
Hynix creditor banks. The information on the record
provided by the banks, Hynix and the GOK shows that
the GOK has at least a significant shareholding (> 20 %)
institutions holding at least
in creditor banks/financial
75 % of
is recalled
that
the required majority in the CFIC was 75 %;
therefore, the GOK's involvement in the decisions taken
by the Creditors' Council cannot be doubted.

the voting rights in the CFIC.

It

investigation, KDB and NACF are
(28) As in the original
wholly-owned
thus
considered public bodies within the meaning of
Article 1(3) of the basic Regulation.

government

entities

and

are

(29)

(30)

There is no evidence on the record to suggest that the
situation as regards Woori Bank changed from the one
described in recitals 80 to 82 of the provisional duty
Regulation. Further, as stated in the provisional duty
Regulation, Chohung Bank, now called Shinhan Bank
since its merged with Shinhan Bank on 1 April 2006,
entered into a Memorandum of Understanding with the
Korean Deposit Insurance Corporation (KDIC) in January
2002, giving KDIC, a public body, a decisive influence
over Chohung Bank's decision-making.

intervene

in banks

and financial

Prime Minister's Decree 408 is further evidence that there
is legal scope for GOK intervention in the financial sector
for policy reasons. The GOK cites the Decree as evidence
that the Korean government officially stated that it would
not
institutions.
However, Article 5(1) of Prime Minister's Decree 408
stipulates that ‘In case a financial supervisory organis-
ation makes a request for a financial institution's coop-
eration or support in necessity for the stabilisation of the
financial market … it shall be done in a document or by
meeting.’ Therefore, not only does
the Decree not
preclude government
insti-
tutions,
it expressly sets out the ways in which such
intervention may be carried out.

intervention in financial

its independence from GOK intervention.

(31) Hynix claimed that KEB was not controlled by the GOK
and presented Commerzbank's shareholding as evidence
It also
of
submitted documents which refer
to Commerzbank's
veto right over some issues, including risk management.
However, KEB could not confirm that Commerzbank,
although it had sent a person to become a member of
the credit team, actually exercised any control over credit
decisions and, in fact, stated that they were unaware of
the existence of such veto rights. Further,
the recent
investigation into the GOK's involvement in Lone Star's
purchase of shares in KEB in 2003 demonstrates further

is
that KEB is controlled by the GOK. Therefore,
considered that there is no reason to depart from the
conclusions of the original
investigation regarding the
GOK's influence on the decisions of KEB.

it

(32) Another example of GOK involvement

in the Hynix
former
creditor banks was
Minister of Industry and Commerce as Chairman of the
Restructuring Committee of Hynix's CFIC, by the Steering
Committee of that body, only for him to be re-appointed
Minister a few months later.

appointment of

the

a

(33)

(34)

(35)

to the

in their prospectuses

Kookmin and Woori Bank have also indicated that GOK
lead them to make policy-based
interference might
decisions
Securities
Exchange Commission in 2002. Hynix has submitted
evidence that
the wording in question did not refer
specifically to Hynix and should not be taken as
intending to imply that the GOK exercised control over
the Korean banking sector. However,
the evidence
submitted by Hynix does not dispute other parts of the
prospectus warning, for example, that GOK shareholding
‘could cause us
to take actions or pursue policy
objectives that may be against (creditors') interests’.

they

they did not act

The Commission asked to see the internal documentation
relating to creditors institutions' decision to approve the
restructuring plan. These confidential documents show
through their
that, although the creditors each went
standard internal procedures in deciding to participate
in the restructuring,
in accordance
with the credit rating they had each ascribed to Hynix
for the period in question. Although all creditors had
given Hynix a rating equivalent to Standard & Poor's
to
Selective Default,
proceeded
approve the restructuring plan. For example, at
the
time the restructuring was approved, one bank's credit
rating for Hynix indicated that the company was highly
vulnerable and that the possibility of the business being
restored was very unlikely. The rating given to Hynix by
another of the banks involved indicated that the possi-
bility of default was very high and that there was no
possibility of future recovery. Instead, these banks went
ahead and approved the restructuring proposal, even
though the evidence suggests that this was not consistent
with a market-oriented approach and the DB report does
not indicate otherwise.

nevertheless

This was demonstrated by the creditors' treatment of
they rolled over and the equity they
both the debt
received
around
80-90 % of the Hynix debt had been written off as a
loss — in one case, even 100 % — and the equity was
booked at around 20 % of the price the creditors paid.

debt-to-equity

under

swap:

the

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(36)

first of all

this is an ex post

The company claims that subsequent events demonstrate
that the creditors' decision was the correct one; Hynix
has been profitable since 2005 and the creditors sold
their shares in the company for a considerable profit.
facto analysis,
However,
which does not at all justify the conclusion that at the
time the creditors approved the restructuring plan, this
was
consistent with a market oriented approach.
Moreover, the fact that Hynix survived was due to the
enormous subsidies it received. One cannot argue that,
because Hynix survived, subsidies were not subsidies, if
that
those
survival was only possible because of
subsidies. Finally,
the creditors were in the position
they were in at the end of 2002 because they had par-
ticipated in the 2001 restructuring, which constituted a
subsidy. Therefore, they cannot argue that they should be
compared to private creditors who have taken all the
steps leading to their position at a certain point
in
their own volition. Thus, Hynix's
time entirely of
argument does not affect
the
creditors were not acting conformity with a market-
oriented approach.

the conclusion that

(37)

VII. Conclusion on financial contribution

In view of the evidence on the record regarding the
GOK's policy as regards Hynix and its involvement in
the decision-making process of Hynix's creditors, as
well as the evidence relating to the dire state of Hynix
and the market's unwillingness to advance capital, as well
as the lack of evidence that the existing creditors acted in
accordance with a market benchmark, itself undistorted
by subsidies, it is concluded that the GOK entrusted and
directed Hynix's creditors to rescue Hynix by approving
the restructuring described in recital 19 above. This
constituted a financial contribution within the meaning
of Article 2(1) of the basic Regulation.

the external advisors. Further,

(38) Hynix claimed that the GOK had nothing to do with the
new restructuring, which was devised by the creditors
with the help of
it
claimed that the evidence on record only showed that
the GOK was concerned about Hynix's future, but that it
fell short of the requirement for a demonstrable link
between the GOK and the banks' actions. Although
GOK shareholding is not conclusive proof of direction
or entrustment,
it is strong evidence of the extent to
which the GOK can influence the banks' decision-
making process. As was the case in the original investi-
gation, evidence on the record shows that, as major
shareholder, the GOK can appoint directors and is thus
able to influence the outcome of voting at board
meetings. Further, the various press articles and reports
on record demonstrate clearly that the GOK would not
allow Hynix to fail; this is also demonstrated by the fact
that one of the wholly-owned GOK banks purchased
Hynix debt
the
financial burden on the banks that had been entrusted

from the other

creditors

to ease

to save Hynix. It is not disputed that the new restruc-
turing plan was devised by Hynix's external advisors in
conjunction with its creditors; however, the evidence on
the record suggests that
the GOK had entrusted and
directed Hynix's creditors to restructure Hynix and not
let it fail.

(39)

The behaviour of the banks also clearly demonstrates that
acting in accordance with normal
they were not
commercial considerations. None of
the banks rated
Hynix as an investment grade company; in fact, all the
rating ascribed to Hynix by its creditors show that they
considered it a substantial risk and doubted that it would
be able to survive. The company claimed that
the
creditors' behaviour should be examined from the point
of view of an ‘existing creditor’. However, as is discussed
in recital 36 and recitals 41 to 44,
in more detail
certainly in this case, which is affected by very large
and similar subsidies having been granted only around
a year earlier, the correct test to be applied with regard to
the commercial reasonableness of the creditors is the
private investor test. Therefore, the question of whether
an existing creditor would have behaved in a manner
similar
the Hynix creditors need not be
addressed.

to that of

VIII. Benefit

(40) With regard to any benefit conferred to Hynix, KEB,
Woori Bank, Shinhan Bank, KDB and NACF all argued
that
they had participated in the new restructuring
because they wanted to maximise the recovery rate for
the loans already granted to Hynix. They considered that
the value of Hynix as a going concern was higher than its
immediate
this
comparison, whatever its merits are as a standard for
the existence of a benefit, would in any
analysis of
case not be applicable in the present case for
the
reasons explained in recital 36 and 41 to 44 below.
Furthermore, the existence of a potential benefit to the
heavily exposed creditors does not demonstrate that there
was no benefit to Hynix.

Nevertheless,

liquidation

value.

(41) Hynix claims that

eventually

action which was

the new restructuring was market-
based, as it was devised by external advisors, such as
DB and Deloittes, after months of due diligence and
was based on the DB report which recommended the
course of
followed.
the DB report was addressed to Hynix's
However,
creditors.
Its aim was to maximise debt recovery for
such creditors while keeping the company from failing.
Hynix argued that the test to be applied to ascertain the
benefit received by the company from the new restruc-
turing should be the ‘private creditor’ test and not the
‘private investor’ test. The position of the creditors is a
factor which could be considered in an analysis; however,
as explained in recital 36 and following, it cannot play a
role in this case.

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(42)

(43)

(44)

In general terms, the relevant standard is whether or not
a market-oriented investor with or without an existing
exposure to Hynix, would have assessed the proposed
investment
in Hynix as one worth making. The DB
report does not provide a reliable response to that
question, because, being addressed to the
existing
creditors,
it is premised on using what are in general
terms the existing Hynix debt and equity structures as
a vehicle for the proposed investment, thus reducing to
vanishing point any possibility for hypothetical outside
investment on the same terms. The DB report contains
no evidence that outside private investors would have
had any interest in putting money into Hynix. Indeed,
DB's advice to private investors was, in fact, not to invest
research
in Hynix, as
department did not follow Hynix equity.

shown by the fact

that

its

is evident

In any event, the financial situation of Hynix at the time
of the new restructuring, as described in recital 14, was
dire and it was evident that Hynix was not in a position
to service its liabilities; hence, no funding was forth-
coming from the market, as
from the
statements of financial advisors cited in recitals 14 and
15. While the DB report points the way for Hynix's
creditors to minimise their losses, it gives no indication
as to why the market would have continued to lend or
invest money in Hynix, a company in selective default.
Therefore, such other data as are available concerning the
position of Hynix and the market situation confirm that
the DB report does not provide any reliable response to
the question of whether or not a market-oriented
investor would have assessed the proposed investment
in Hynix as one worth making.

and

irrational

investment

In addition, leaving aside the question of what course of
action might or might not have been open to the parties
in 2002 given the situation as it then existed, the fact
remains that Hynix had been put in this situation by
lending
economically
decisions taken by or on behalf of the GOK in 2001,
the effects of which continued into 2002 and beyond.
The express purpose of the new restructuring was to re-
finance Hynix and it cannot be divorced from the initial
2001 bail-out. The two are inextricably linked. In other
words, it is only because of the irrational nature and the
it
subsequent
failure of
became necessary to rollover
the
existing creditors in the 2002 measure. Therefore, the
solution proposed in the DB report was only possible
on the back of the 2001 measures. It is not possible
to treat a certain proposed course of action as a
market benchmark if that course of action is itself a
continuation of a previous unreasonable government
investment decision. For this reason also, the DB report
does not provide a reliable answer to the question of
whether or not a market-oriented investor would have
assessed the proposed investment in Hynix as one worth
making.

the earlier restructuring that

the exposure of

(45)

is therefore considered that
to the

It
conferred a benefit
meaning of Article 2(2) of the basic Regulation.

the new restructuring
company, within the

IX. Specificity

(46) As the measures comprising the new restructuring were
taken exclusively for Hynix, the debt rollover, the princi-
interest and the debt-to-equity swap are
palisation of
considered to be
specific within the meaning of
Article 3 of the basic Regulation.

X. Calculation of the amount of benefit

(i) Timing of the benefit

(47) According to Article 5 of

the basic Regulation,

the
amount of countervailable subsidies shall be calculated
in terms of the benefit to the recipient which is found
to exist during the investigation period of subsidisation.
The amount of debt equivalent to the amount to be
swapped into equity was moved away from loans and
booked as a capital adjustment when the decision for the
restructuring was taken on 30 December 2002 (Note 14
to Hynix's Financial Statements 2002). Similarly, Hynix
was released from its interest payment obligations with
regard to this debt on the same date.

(48)

The Community industry argued that the benefit from
the new restructuring did not accrue to Hynix until
13 April 2003, when shares were in fact issued to the
creditors. On the other hand, the company argued that
the effective date of the benefit is,
in fact, December
2002, as
the date when the decision to
approve the restructuring was taken by the creditors
and the date on which Hynix was released from its obli-
gations as regards its debt.

that was

(49) As the DSB Panel on DRAMs stated that the benefit of a
subsidy must be viewed form the point of view of the
recipient and the company was no longer under any
obligation vis-à-vis its debt exposure to its creditors
from the date the decision to proceed with the new
restructuring was
the
it
effective date for the accrual of the benefit to Hynix
was 30 December 2002.

considered that

taken,

is

(ii) Basis for calculation

(50)

Debt rollover and changes to the interest rate and
payment conditions

In accordance with the methodology adopted in the
investigation, a debt rollover is taken to be a
original
loan for the purposes of
the benefit calculation. The
principalised interest will also be treated as a loan for
these purposes. In the original investigation, the subsidy
was considered to be the face amount of the principal of
the loan, allocated over the normal five-year depreciation
period of assets. Each annual amount so allocated was
increased by adding the standard commercial interest rate

L 96/8

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Official Journal of the European Union

9.4.2008

(51)

(52)

in Korea (7 %). The EC-Korea DRAMs Panel criticised this
as being a ‘grant methodology’ which did not reflect the
fact that loans, unlike grants, are repayable and that ‘it is
thus obviously less beneficial for a company to be given
is to be given a grant’ (1). The Panel
a loan than it
considered that the EC should base its calculation on
benchmarks reflecting normal investment practices.

Following the WTO Panel's comments with regard to the
grant methodology employed in the original
investi-
gation,
it was considered appropriate in this review to
find a loan-based benchmark against which the benefit
could be calculated.

The financial situation of Hynix at the time of the new
restructuring, as described in recitals 14 and 15 above,
was dire and it was evident that Hynix was not in a
position to service its liabilities; hence, no funding was
forthcoming
commercially
from the market. No
comparable lending had been provided to Hynix at the
time of the new restructuring, nor was there any verified
evidence on record regarding the cost and terms of a
comparable commercial
loan that Hynix or another
firm in a situation comparable to Hynix had been
that private
provided at
entities had also participated in the new restructuring
does not provide a reliable benchmark;
the entities
involved were small and held insignificant amounts of
debt in Hynix, compared to the GOK-directed entities.
Further,
in accordance with the findings of the WTO
Panel
in the Japan DRAMs case, which considered the
same facts as the current investigation, the presence of
contemporaneous
the
decision-making process regarding the new restructuring
acts to distort the market and thus private, non-directed
entities cannot be taken as a reliable benchmark (2).

time. The fact

the relevant

involvement

government

in

(53)

therefore constructed a proxy
The Commission has
benchmark, based on a commercial
interest rate, with
the addition of a risk premium reflecting the default
rates of companies exhibiting comparable risk. Such a
benchmark takes into account the term of the loan, a
benchmark interest rate that would be paid by a credit-
worthy company, the probability of default by an uncre-
ditworthy company within a specified period of time and
the probability of default by a creditworthy company
within the same period of time.

(54)

The Commission has used the following formula to
calculate
an appropriate uncreditworthy benchmark
interest rate:

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

(1) EC-Korea DRAMs Panel Report, Para 7.212.
(2) Japan-Korea DRAMs WT/DS336/R Panel Report Para 7.283-7.298.

Where:

n

= the term of the loan

ib = the benchmark interest
worthy borrower

rate for an uncredit-

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.

(55)

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 2003, which was 10,43 %. 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 2003 within three
years (the term of the rollover) was 54,86 %, whereas
the rate of default of a creditworthy company within
three years in 2003 was 0,33 %. This led to a total
the interest rate
interest rate of 43,8 %.
payable by Hynix on the rolled-over debt was 3,5 %,
i.e. an interest rate differential of 40,3 %, which leads
to a countervailing duty rate of 23,7 %.

In contrast,

Debt-to-equity swap

(56) As described in recital 21, the CFIC calculated a swap
the debt-to-equity swap of KRW 435 on
price for
30 December 2002, based on the one-month average
market price. The company claims that
this was a
commercially valid method to determine the share
price and that it reflected market reality.
In fact, this
the share price went up
if
price reflected a ceiling;
between 30 December 2002 and the day the shares
were actually issued,
the price would have changed
accordingly. The actual price on the day the decision to
proceed with the new restructuring was taken was KRW
280. When the debt was eventually converted into
following the capital reduction, at a price of
equity,
KRW 9 135 (KRW 435 × 21), the share price was,
in
fact, KRW 3 500. If the effect of the capital writedown
is ignored, the shares issued were trading well below par,
at KRW 167. It is not disputed that the CFIC had a
discretion as to the method by which it could set the
swap price. Notwithstanding such a discretion, however,
as the swap price was not a fixed price, but a guarantee
that the company would receive a minimum amount for
its shares, it cannot be considered to be a price which
corresponds to commercial reality, especially given the
actual price at the time the swap price was set and the
unsurprising downward trend between the time of the
CFIC meetings until the swap date in April 2003.

9.4.2008

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Official Journal of the European Union

L 96/9

(57)

the recipient,

In order to calculate the benefit received by Hynix from
the debt-to-equity swap, the cost of issuing equity to
Hynix must be considered. The Commission noted that,
in order the examine the cost, if any, of the swap from
the obligations
the point of view of
imposed on a company when issuing new equity
would have to be considered. The Commission noted
in this respect, that injections of ordinary share capital
do not generally impose particular obligations on a
return
company, as there is nether a fixed rate of
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
shareholders and could be used in the calculation of
the amount of the benefit to Hynix. However, the ROE
of Hynix in 2003 was a negative percentage, as
calculated by reference to its financial statements for
the year. Therefore, on the basis of an objective
evaluation of Hynix's financial standing at the time of
the debt-to-equity swap,
is unreasonable to expect
it
that Hynix would be in a position to distributed any
sort of return to its shareholders for the relevant year.
Hence, using the ROE as a benchmark, it would still be
concluded that the entire amount of the debt-to-equity
swap is a countervailable subsidy.

(58)

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 a potential dilution of
the share price
resulting from the issuance of new shares. Based on its
review of the record evidence, the Commission does not
believe that the net benefit to Hynix of the full debt-to-
equity swap is diminished as a result of the issuance of
new shares. In this regard, the Commission believes it is
essential to recognise the impact that the debt-to-equity
swap had on Hynix's financial situation.

(59) 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
1 861,5 billion. This absolved Hynix from having to
repay any of this principal amount and from having to
pay interest. Instead, this massive amount of debt was
issued to the creditor banks.
replaced with shares
However, there was no real quantifiable cost to Hynix
of issuing the new shares. While the existing share value
was diluted as a result of the issuance, this had absolutely
no balance sheet impact for 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 make any kind of cash payments in the
future,
case with debt
instruments.

as would have been the

(60)

for

in paragraph E(f)(iii),

The company claimed that the market value of the shares
has to be deducted from any finding of benefit and cited
the Commission's Guidelines
the Calculation of
Subsidy in Countervailing Duty Investigations, which
that ‘if the government
provide,
buys shares in a company and pays above the market
price for these shares (taking into account of any other
factors which may have influenced a private investor),
the
amount of subsidy is the difference between the two
prices (emphasis added)’. However, a private investor
would not have purchased Hynix shares in the relevant
period at all. In fact, evidence on the record shows that
Hynix's shares were trading at such a low level that they
should have been suspended, but for an exception to the
Korean Listing Regulations which appeared to have been
carved out for Hynix alone. Further, the fact that there
was a market value attached to the shares does not
impact on the company, which does not have to pay
it. This would only be a relevant consideration if there
was an element in the debt-to-equity swap which obliged
Hynix to enter into a share buy-back.

(61)

in light of the above considerations and
Consequently,
since Hynix did not report any costs associated with the
issuance of equity, it is considered that the appropriate
approach to measuring the benefit
from the debt-to-
equity swap is to take the full amount of the swap.

(iii) Final calculation of benefit

(62) As explained in recital 61, the full amount of the debt-to-
equity swap has been taken as the benefit accruing to
Hynix from that measure. This subsidy confers a large,
non-recurring benefit as, as described above, the allo-
cation method over a period of five years was considered
appropriate. The amount of subsidy so allocated was
expressed as a percentage of the total sales of Hynix in
2005. With interest, using the average commercial
interest rates applicable in Korea for the review investi-
gation period,
the countervailable subsidy is 6,8 %.
However, as the debt-to-equity swap is a one-off, non-
recurring subsidy, allocated over a set period of time and
as such allocation period is deemed to begin at the time
the benefit was actually received,
is considered it
expired on 31 December 2007.

it

(63) As mentioned in recital 50, the debt-rollover and the
principalised interest were treated as
loans and are
considered to be a recurring subsidy. The company
argued that it has repaid the subsidy received in the

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Official Journal of the European Union

9.4.2008

December 2002 restructuring when it refinanced its debt
in July 2005 to a consortium of Korean and non-Korean
banks (see recitals 75 and 76). Hynix claims that the
refinancing, by which it assumed new debt in order to
pay the debt under the new restructuring and graduate
from the CRPA, extinguished the subsidy. When the refi-
nancing took place in 2005, Hynix had returned to profit
and had a credit rating of BBB+ according to the Korea
Investors Service Inc. The refinancing of
its debt on
terms by Hynix effectively stopped the
commercial
subsidy from recurring, thus the benefit ceased to exist.
As a result, it is considered that from 13 July 2005 the
debt-rollover and the principalised interest ceased to
confer a benefit to Hynix.

The System IC Sale

(67) As envisaged by the terms of the new restructuring, in
October 2004 Hynix sold its System IC assets to a
consortium led by CVC Partners, a private equity fund
managed by Citigroup Venture Capital for KRW 954,3
billion. Acquisition financing made up KRW 481,3
billion of
the purchase price and it mostly took the
form of a debt transfer from Hynix to MagnaChip, the
company formed to buy the System IC assets. Hynix
creditors
to
MagnaChip at a 21 % discount rate, but secured debts
were assumed by the new company without any
concession.

transferred their unsecured Hynix debts

(68)

(69)

(70)

(71)

XI. Other alleged subsidy schemes

The BOE-Hydis sale

(64)

In January 2003, Hynix sold its liquid crystal display
business (Hydis) to Beijing Orient Electronics Technology
Group Co. Limited (BOE), a Chinese company,
for
approximately USD 380 million. The purchase price
was funded to a large degree by loans provided by
Hynix creditor banks, namely, KEB, KDB, Woori Bank
and Hyundai Marine and Fire Insurance (HMFI), which
collectively lent USD 188 million to the new company
formed to buy the assets, BOE-Hydis.

(65)

The Community industry alleged that the GOK entrusted
and directed the Korean banks to provide funding on
preferential terms in order to enable BOE to purchase
the assets, thus providing a much-needed cash injection
to Hynix.

(66) Although there was some evidence that pressure was
exerted on to some of the other lenders by KEB and
Hynix and that BOE was not able to attract financing
from independent creditors, there was no evidence that
the funding provided was,
in fact, a countervailable
subsidy. A finding of entrustment and/or direction of
the Korean banks by the GOK is not enough; in order
to find a countervailable subsidy in the circumstances
described by the Community industry,
it must be
shown that BOE was itself entrusted and directed by
the GOK to purchase Hydis. Even though the terms of
the
funding provided by the Korean banks were
generous, BOE still assumed a debt of USD 188
million and paid the remainder of the purchase price
in cash; there is no evidence of entrustment/direction
In any event, the funding was
by the GOK of BOE.
and no evidence has been
given to BOE-Hydis,
presented that a benefit passed though to Hynix.
Therefore, the loans of USD 188 million given to BOE-
Hydis by Korean banks are not considered to constitute a
subsidy within the meaning of Article 2 of the basic
Regulation.

first

there

should

the discounted
The Community industry alleged that
transfer amounted to a countervailable subsidy.
debt
However, given that MagnaChip assumed debt of KRW
481,3 billion and paid KRW 481,3 billion in cash,
in
order to find that the transaction involved a financial
contribution
of
entrustment or direction of MagnaChip/CVC Partners
and none was provided or found. Participation in the
discounted debt transfer by the creditors was voluntary.
Similarly to the BOE-Hydis sale, the funding was given to
a third party and not Hynix, thus there is no evidence of
a benefit having passed through to Hynix. Therefore, the
discounted debt transfer to MagnaChip is not considered
to constitute a subsidy within the meaning of Article 2 of
the basic Regulation.

evidence

be

Cash Buyout

the debt

In October 2004, Hynix used the proceeds from the sale
of the System IC assets to implement a Cash Buyout
plan, approved by the CFIC, according to which Hynix
‘bought back’
it owed to its creditors at a
discount.
In effect, Hynix offered to repay its debt
early, albeit at a reduced rate. A second cash buyout
(CBO) took place in December 2004. The Community
industry alleged that these discounted cash CBOs were a
countervailable subsidy.

The creditors who wished to participate in the October
CBO agreed that Hynix would repay 70 % of
the
unsecured debt owed to them and 96 % of any secured
debt. The discount rate for unsecured debt was reduced
to 21,84 % in for the December CBO.

Evidence on the record shows that participation in the
CBOs was voluntary. Further,
there is no evidence
suggesting that
the participating creditors' behaviour
was commercially unreasonable as the discount on the
unsecured debt was compensated by the fact of early
repayment
time value of money.
the
Therefore, the CBOs are not considered to constitute a
subsidy within the meaning of Article 2 of the basic
Regulation.

and, hence,

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Official Journal of the European Union

L 96/11

(72)

(73)

(74)

Preferential tax treatment

The Community industry alleged that
the GOK gave
preferential tax treatment to Hynix by not requiring it
to recognise the gains from the debt-to-equity swap in
the new restructuring as income. Although Hynix's losses
were such in 2003 that it would not have been required
to pay corporation tax even if it had recognised the gain
from the swap as income,
the Community industry
claimed that Hynix received a benefit because, by not
recognising the gain,
it did not reduce its loss carry-
forwards, which it was then able to set off against
taxable gains in 2005, when it became profitable.

The alleged preferential tax treatment stems from a post-
ponement of a change in the law which would require
companies under voluntary restructurings, such as Hynix,
to recognise gains from debt-to-equity swaps as taxable
income. The Community industry has alleged that the
GOK originally intended the change in legislation to
come into force in March 2003, thus making the gains
from Hynix's debt-to-equity swap pursuant to the new
restructuring taxable. The Community industry claimed
that
three
companies directly affected by this change in the law,
of which Hynix was one,
the GOK postponed the
coming into force of this new provision to 1 January
the
2004. Hynix claimed that
effective date of the new provision was made when the
GOK realised that the ruling's immediate effect would
have been contrary to the principles of non-retroactivity
and to the established practice of tax provisions coming
into force at the beginning of the tax year.

following complaints from at

the postponement of

least one of

the

and

facts

findings of

The Community industry reiterated its claims in its
the
comments submitted following the disclosure of
essential
investigation.
However, there is insufficient evidence on the record of
the GOK's intention to ensure that Hynix's gain from its
debt-to-equity swap was not taxed or that the alleged
in fact, specific, within the
preferential treatment was,
meaning of Article 3 of the basic Regulation. Further,
it is doubtful whether Hynix received any benefit from
this tax exemption given the size of its net operating
losses and the fact that these could be carried forward
only for five years. Hynix eventually made a profit in
2005, but its losses were such that, even if the gain
from the debt-to-equity swap was recognised as taxable
income, its remaining loss carry-forward was still more
than enough to absorb the profit made in 2005, thus, no
benefit would have accrued to Hynix during (or before)
the IP. Moreover, as the benefit from the debt-to-equity
swap was countervailed ‘gross’,
i.e. without taking any
potential
into account, any benefit
from such preferential tax treatment, has already been

taxation impact

(75)

(76)

(77)

(78)

it again would
taken into account and to countervail
be double counting. Therefore,
the tax treatment of
Hynix's debt-to-equity by the GOK is not considered to
be a subsidy within the meaning of Article 2 of the basic
Regulation.

July 2005 refinancing

In July 2005, Hynix refinanced KRW 1,2 trillion of its
debt and graduated early from the CRPA. The refinancing
involved a term loan of USD 500 million, raised by a
bond issue on the New York Stock Exchange, and KRW
250 billion and a USD 550 million revolving credit
agreement with the participation of both Korean and
The
foreign
Community
July 2005
refinancing involves a further subsidy, as Hynix was
still a heavily indebted company to which no funding
was available on the market.

July 2005 refinancing).
claimed that

(the
industry

banks

the

By July 2005, Hynix was a much healthier company,
although a highly indebted one. It had returned to profit-
ability and its credit rating was BBB+. Evidence on the
record show that the terms of the financing provided by
the Korean banks were not inconsistent with its credit
rating. Further,
foreign
banks supports Hynix's claim that the refinancing was
made on commercial terms. In addition, there was no
evidence of entrustment or direction of the Korean banks
in relation to the loans extended to Hynix pursuant to
this refinancing. Therefore, the July 2005 refinancing is
not considered to be a subsidy within Article 2 of the
basic Regulation.

the degree of participation of

XII. Conclusion on measures

investigation was

from the subsidies countervailed in the
The benefit
original
to have been
deemed
received on 1 January 2001 and was allocated over a
period of five years, which corresponded to the normal
depreciation period of the assets in the semiconductor
industry.

The measures
investigation
imposed in the original
related to one-off, non-recurring subsidies, allocated
over a set period of time and as such allocation period
is deemed to begin at the time the benefit was actually
received, it is considered that the measures imposed by
the definitive duty Regulation expired on 1 January
and the principalised
rollover
2006. As
interest of December 2002 ceased to confer a benefit
on Hynix on 13 July 2005 and as the debt-to-equity
swap of December 2002 expired on 31 December
2007,
should be repealed with effect
from 31 December 2007 and the proceeding terminated.

the measures

the debt

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Official Journal of the European Union

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(79)

Consequently, the definitive countervailing duties paid or
entered in the accounts pursuant to Council Regulation
(EC) No 1480/2003 on imports of certain electronic
integrated circuits known as Dynamic Random Access
Memories (DRAMs) manufactured using variations of
metal oxide-semiconductors (MOS) process technology,
including complementary MOS types (CMOS), of all
types, densities, variations, access speed, configuration,
package or frame etc., originating in the Republic of
from
circulation as
Korea
31 December 2007 should be repaid or remitted.

and released for

free

or it has been demonstrated that the subsidies no longer
confer any benefit on the exporters involved.’ As the
the subsidies
result of
the investigation indicates that
given to Hynix have ceased to confer a benefit,
the
measures cannot be kept in force and the claim of the
Community industry has to be rejected,

HAS ADOPTED THIS REGULATION:

Article 1

(80) Hynix, the GOK, the Community industry and all other
interested parties were informed of the essential facts and
considerations on the basis of which it is intended to
recommend the repeal of
the measures in force and
the termination of the proceeding and had the oppor-
tunity to comment. Where appropriate, such comments
this Regulation
were addressed in the
specifically dealing with the issues raised.

sections of

The countervailing duty imposed on imports of certain elec-
tronic integrated circuits known as Dynamic Random Access
Memories (DRAMs) manufactured using variations of metal
oxide-semiconductors
including
(MOS) process
complementary MOS types (CMOS), of all
types, densities,
variations, access speed, configuration, package or frame etc.
originating in the Republic of Korea imposed by Regulation
(EC) No 1480/2003 is repealed as of 31 December 2007 and
the proceeding is terminated.

technology,

(81)

(82)

Repayment or remission must be requested from national
in accordance with applicable
customs
customs legislation.

authorities

five years after the imposition of

In its comments, the Community industry also claimed
that measures should remain in force until they expire in
August 2008,
the
definitive measures in order to offset countervailable
subsidisation and cite Article 19 of the basic Regulation
in support of such claim. However, Article 19 provides,
inter alia, the possibility to repeal measures if they are no
longer
subsidisation.
Furthermore, Article 15 of the basic Regulation, which
provides the basis for the imposition of measures, states
that measures can be imposed — and by analogy, main-
tained — ‘unless the subsidy or subsidies are withdrawn

countervail

necessary

to

Article 2

The definitive countervailing duties paid or entered into account
pursuant to Article 1 of Regulation (EC) No 1480/2003 as from
31 December 2007 shall be repaid or remitted, pursuant to
Article 236 of Council Regulation (EEC) No 2913/92 of
12 October 1992 establishing the Community Customs
Code (1). Repayment or
remission shall be requested from
national customs authorities in accordance with applicable
customs legislation.

Article 3

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 Luxembourg, 7 April 2008.

For the Council
The President
R. ŽERJAV

(1) OJ L 302, 19.10.1992, p. 1. Regulation as last amended by Regu-

lation (EC) No 1791/2006 (OJ L 363, 20.12.2006, p. 1).