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April 17, 2007 12:49 pm

WTO panel backs Hynix over Japan tariffs

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The World Trade Organisation is leaning toward endorsing South Korea’s complaint that Hynix Semiconductor was unfairly penalised by Japanese tariffs.

A WTO panel established to solve the bilateral trade dispute has issued an interim report in favour of South Korea, Seoul’s commerce ministry said yesterday.

If the WTO’s interim report is confirmed in a final ruling expected in May, that would provide substantial relief to the Korean chipmaker, paving the way for it to expand its exports to Japan. Hynix has tried to avoid the Japanese tariffs on shipments from its domestic factories by diverting production to its plant in China.

“The WTO sided with us on some key disputes [relating to] the period during which Hynix received the subsidies and whether the government was involved in the company’s refinancing process,” said a ministry official. Hynix declined to comment.

Japan has levied a 27.2 per cent punitive duty on D-Ram chips from Hynix’s Korean plants since January 2006, saying the world’s second-largest memory chipmaker was being illegally subsidised by the South Korean government.

Japan’s trade minister, Akira Amari, told a news conference in Tokyo yesterday that the country was fighting the dispute, “believing that Japan’s claim is perfectly right.”

“It’s a natural action and completely correct handling to impose countervailing duties against export subsidies in line with WTO [rules],” he said.

Tokyo has said that the Korean government violated WTO rules by providing Hynix with export subsidies which enabled the company to sell its D-Ram chips at an unfairly low price in the Japanese market, inflicting damage on Japanese rivals.

Seoul has rejected the claim, saying that the Hynix bailout was purely a commercial decision made by the company’s creditors. Seoul took the case to the WTO last year after failing to reach an agreement with Tokyo.

Hynix, which was on the verge of bankruptcy in 2001, has been saved by a series of controversial multibillion-dollar bail-outs from state-backed banks. But the company has recovered from the financial trouble and reported record earnings last year. Apart from Japanese tariffs, Hynix also has to pay heavy anti-dumping duties on shipments to the EU and the US.

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