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WTO backs Hynix over US DRAM duties

But low-priced imports did hurt US memory makers

The World Trade Organisation (WTO) has said that the US should not have imposed import duties on South Korean memory maker Hynix.

However, early indications suggest the US may be preparing to appeal against the judgement.

The WTO's decision follows the US inability to prove that the South Korean government had provided Hynix with aid outlawed by the trade body. The organisation's investigation was spurred by a complaint made by South Korea after the US imposed the 44.7 per cent import duty in the summer of 2003, itself the result of a local probe made at the behest of US-based memory maker Micron.

Hynix has always maintained that the rescue financing it received in 2001 did not amount to state aid, even though at the time the South Korean government held stakes in some of its creditor banks. Since then South Korea has moved to reduce its level of ownership of these institutions. More to the point, said Hynix, funding also came from foreign banks.

The WTO judgement did not go entirely Hynix's way, however. The organisation said that imports of lower-priced memory chips from South Korea had harmed US producers.

That ruling will allow the US to maintain import duties on Hynix DRAM, but at a reduced rate in punishment solely for that harm done to domestic DRAM makers and not for receiving state aid.

The full text of the WTO trade panel's decision has yet to be published, though its broad thrust was made public in a preliminary ruling sent recently to both the US and South Korean governments.

If the US does appeal against the WTO's decision, as officials cited by a number of reports this morning suggest it will, then it will likely focus on "misleading" and "exaggerated" claims made by South Korea, one official said, according to an Economic Times report.

Should the appeal also fail, the US will have the opportunity to present further evidence to back its claim. But the US appears confident that, one way or another, the duty will remain in force.

"To presume that these tariffs at the end of the day will be removed, I think, is a significant overstatement," the official said.

Meanwhile, the WTO continues to ponder South Korea's complaint against the European Union over a similar import duty imposed last year on Hynix memory products. Like the US levy, the EU tariff arose - amounting to 34.8 per cent - after Hynix was found guilty of receiving illegal state aid. Once again, that ruling came after a local memory maker - this time Infineon - had grumbled about Hynix's rescue funding.

The WTO is expected to issue a preliminary report on the EU duty in March 2005. ®

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