U.S. Wins Appeal Against Korean Chip Maker

Reversing an earlier loss to a World Trade Organization panel, the United States has prevailed in a trade dispute involving subsidies provided by the government of Korea to Hynix, a Korean manufacturer of memory semiconductors.

In its ruling, the WTO Appellate Body said a WTO panel was incorrect in concluding that U.S. duties on Hynix semiconductors were improper. As a result, the duties will remain in place.

The decision is good news for two U.S. chipmakers involved in the case, Micron and Infineon.

The Department of Commerce said the dispute arose after it found that the Korean government directed creditors to bail out Hynix, a financially troubled Korean company.

Commerce asserted that the aid to Hynix, a leading producer of DRAM memory chips, amounted to an illegal subsidy by the Korean government directly affecting the competitiveness of U.S. DRAM suppliers.

“This is an important turnaround for U.S. high-tech manufacturers, as well as the international trading system,” said U.S. Trade Representative Rob Portman in a statement.

“The international trading system is built on fairness, and the Korean government unfairly subsidized a Korean company. The Appellate Body report will help to ensure that governments play by the rules.”

Under WTO rules, Appellate Body reports are not subject to further
appeal.

The Department of Commerce first pushed for the imposition of a special duty on Hynix on August 11, 2003, as a follow up to its finding the company was being subsidized. The amount of the so-called “countervailing duty” was in order to offset the subsidization, the Commerce Department said. Under WTO rules, the U.S. will be allowed a “reasonable period of time” in which to take whatever action is necessary.

The precise amount of time for such action typically is determined either through agreement of the parties, in this case, the U.S. and Korea, or through WTO arbitration. In the meantime, imports of Hynix DRAMs will continue to be subject to countervailing duties.