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

• (86) 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 contributions 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 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 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 %.

• (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 countervailed.

Total subsidy of October 2001 rescue package

• (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 %.

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 programme	May 2001 CB purchase, debt roll-over	October 2001 rescue package	Total
—	5,1 %	4,9 %	0 %	22,9 %	32,9 %

InjuryIntroduction

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

• (91) All other findings concerning injury remain as established in the original investigation and set out in the provisional Regulation and the definitive Regulation.

Wages

• (92) In the original investigation the EC had considered and evaluated the wages factor, but found wages to be irrelevant to its injury determination. However, the Panel found that:

‘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 and, consequently, whether that determination was consistent with Article 15.4. Without that written record, we would be forced to embark on post hoc speculation about the thought process by which the investigating 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.’ ([^E0068]).

Consequently, the Panel concluded that the EC acted 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 ([^E0069]).

• (93) In the light of the Panel's finding, the Commission, 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 ([^E0070]).

Average cost for wages per employee	1998	1999	2000	2001 (IP)
Index	100	99	115	109

• (95) 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. In 2000, it increased by 15 %. In 2001, compared to 1998, it had increased by 9 %. Overall, the increase was lower than the increase of the total hourly labour costs in the euro area during this period ([^E0071]). Thus, there were no unusual developments in wages during the relevant period, and any developments only had very limited effects on the financial situation of the domestic industry as a whole ([^E0072]).

• (96) Furthermore, the Commission recalls that DRAMs are capital intensive products and, thus, 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.

• (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 conclusion that the Community industry suffered material injury ([^E0073]).

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.

CausationIntroduction

• (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 meaning of Article 8(7) of the basic Regulation. The Panel's determination in paragraph 7.437 of its report does not preclude a conclusion of a causal relationship 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.

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’.

• (102) The Commission recalls that, all other things being equal, demand (i.e., the willingness and ability to obtain an amount of a particular good) may generally be considered to be equivalent to consumption (i.e., 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 disputed before the Panel. It appears from the above table that because the actual consumption in the Community for DRAMs increased constantly and significantly during the period under consideration, it 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 impact of the ‘decline in demand’ on the injurious situation of the Community industry (in particular its prices) raised by the GOK and Hynix is irrelevant, because, as shown above, the level of demand 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 significant impact on the prices of the Community industry and, thus, on its injurious condition (see recitals 191 and 192 of the definitive Regulation).

• (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 193 of the definitive Regulation). The Commission 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 cycles. Neither Hynix nor the GOK made any arguments nor submitted any data in support of such a comparison. Accordingly, record evidence does not support the conclusion that in 2000 to 2001 the growth rate of demand slowed down significantly, considering the cyclical nature of the DRAMs market.

• (104) It was also considered whether the growth rate of 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 %).

• (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 Community industry, the primary cause of injury to the Community industry during the period under consideration (see recital 188 of the definitive Regulation). In particular, in 1999 to 2000, demand growth declined by a sizable 23 %, but the 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 average sales price of the Community industry 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 there is no apparent link between demand growth and the sales prices of the Community industry which could indicate that slowing demand growth contributed to the injury suffered by the Community industry.

• (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 the factor concerned could not have caused injury because trends in such factor were independent from trends in key indicators of the domestic industry. Specifically, in US-Steel, the Panel noted that the facts appeared to support the investigating authority’s 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) ([^E0074]). Similarly, while the Panel concluded that the investigating authority’s finding, in respect of stainless steel bar, concerning demand as a factor of injury, did not satisfy the non-attribution requirement, the Panel noted that 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 ([^E0075]).

• (107) Accordingly, the Commission is of the view that its redetermination satisfies the non-attribution requirement under Article 8(7) of the basic Regulation (which generally corresponds to Article 15.5 of the SCM 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.

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.

• (109) The Commission notes that ‘overcapacity’ is not expressly referred to in Article 8(7) of the basic Regulation (which generally corresponds to Article 15.5 of 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 level of demand. ‘Overcapacity’ may thus arise either 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 context of the Community market. The Commission considers both situations below.

• (111) As set out in recital 153 of the provisional Regulation and recital 197 of the definitive Regulation, some overcapacity 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 the end of 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 industry. This finding has not been disputed by any party concerned.

• (112) However, as set out in recital 147 of the provisional Regulation, the worldwide overcapacity was estimated to be approximately 20 % of 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 artificially maintained through the subsidisation of Hynix. Thus, the effect of worldwide overcapacity on the injurious situation of the Community industry was channelled 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 Regulation. In this respect, the effect of worldwide overcapacity created by Hynix cannot be considered as a factor separate from the effects of the subsidised imports.

• (113) 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. Information from the questionnaire responses of the four producers of DRAMs cooperating with the original investigation (i.e., Samsung, Hynix, Infineon and Micron, which together represented around 80 % of the worldwide DRAMs market) shows that their 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 relevant tables of the provisional Regulation). Consequently, the existing worldwide overcapacity throughout the period under consideration did not, in the Commission’s view, contribute significantly to the collapse of prices and the material injury suffered by the Community industry in the IP.

• (114) In addition, record evidence shows that Community overcapacity was not a factor of injury. During 1999 to 2000, Community capacity more 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).

• (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, Community overcapacity rose by 28 %, but the sales prices of the Community industry fell by only 5 %. Further, from 2000 to 2001, Community overcapacity went down by 4 % but the sales prices of the Community industry plummeted by 77 % (see recitals 125 and 128 and relevant tables of the provisional Regulation). 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 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).

• (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 increase in Community overcapacity. In contrast, in 2001 the Community industry suffered 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 %.

• (117) Hynix claimed that Community overcapacity was another known factor contributing to material injury during the period under consideration. However, trends in Community overcapacity show no or only negligible correlation with trends in the condition of the Community industry. The Commission therefore concludes that Community overcapacity cannot be considered as a factor of material injury to the Community industry. Given that Community overcapacity did not adversely affect the condition of 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 WTO Panels reviewing determinations in respect of non-attribution described in recital 106 above.

• (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 penetration in the Community market. This 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 overcapacity.

Other non-subsidised imports

• (119) The Panel noted in paragraph 7.426 of its report that there is no requirement to consider non-subsidised 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. the United States, 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 consideration. These data are re-stated below in aggregated index form ([^E0076]). Given the very limited number of players in the DRAMs market, for reasons of confidentiality, indices are used to show the evolution of trends.

• (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 Regulation). It is noted that during the same period Community consumption increased by 316 %. Hence, whereas the rate of growth in non-subsidised imports was only a fraction of the rate of 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 Regulation). If the market share of non-subsidised imports heavily declined during the period under consideration, as shown by the above facts, it can be concluded that non-subject imports did not injure the Community industry by reason of their volume effects.

• (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 imports exceeded not only the prices of subsidised 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 average sales price of the Community industry. In addition, during the period under consideration, the prices of non-subsidised imports fell, but not anywhere as much as the prices of subsidised 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.

• (122) As is the case with overcapacity, there is no demonstrated 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 volumes steadily increased and while subject import prices undercut the Community like product. This 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.

• (123) Therefore, the Commission is of the view that its redetermination satisfies the non-attribution requirement under Article 8(7) of the basic Regulation (which generally corresponds to Article 15.5 of the SCM Agreement) in respect of non-subject imports by separating and distinguishing this other factor from 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.

Conclusion

• (124) Having separated, where appropriate, and analysed further the effects, if any, of the decline in demand, overcapacity and other non-subsidised imports, it is 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 Regulation. Furthermore, it is confirmed that the subsidised 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.

Community interest

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

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 established during the original investigation and, thus, the revised countervailing duty rate should be based on the revised subsidy amount expressed ad valorem, i.e. 32,9 %.

• (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 ([^E0077]).

• (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 specifically submits that the Commission should have used seven banks in the syndicated loan as a benchmark. The Commission disagrees, particularly for the reasons set out in recitals 16 to 24 above. The GOK also submits that the Commission should have made its benchmark calculations differently. In the light of the GOK’s comments the Commission has made some adjustments to its calculations, as reflected in this Regulation. 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, particularly for the reasons set out in recitals 100 to 123 above.

• (130) Hynix aligns itself with the submissions of the GOK, discussed in the preceding recital. In addition, Hynix submits that the period of 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 apply retroactively from the date on which measures were first imposed. The Commission similarly considers that this issue is not part of the ‘measure taken to comply’ and in any event does not agree. Nothing in the relevant legal rules obliges the Commission to 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.

• (131) Infineon substantially agrees with the redetermination. However, it submits that the Commission should impose a higher duty based on a proxy benchmark and the original injury determination, rather than the 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 necessitate any modification of those conclusions as such. Micron further submits that the Commission should reaffirm, based on current WTO precedent, that the GOK entrusted or directed the banks in the May 2001 restructuring programme and should countervail the subsidies provided by the public bodies. The Commission has carefully considered this submission which, in principle, has merit. However, as noted in this Regulation, the May 2001 restructuring programme would not in any event be countervailed, given that the largest proportion of the benefit would have been accounted for in the October 2001 measures. Mainly for this reason, the Commission has decided not to return to these issues in this implementing Regulation.

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

HAS ADOPTED THIS REGULATION:

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 rate of the definitive countervailing duty applicable to the net free-at-Community-frontier price, before duty, shall be as follows:

Korean producers Rate of duty (%) TARIC additional code Samsung Electronics Co., Ltd (Samsung)24th Fl., Samsung Main Bldg250, 2-Ga, Taepyeong-RoJung-Gu, Seoul 0 % A437 Hynix Semiconductor Inc.891, DaechidongKangnamgu, Seoul 32,9 % A693 All other companies 32,9 % A999

No Product/origin description Reference number Rate of duty (%) 1 (Non-customised) multi-combinational forms of DRAMs originating in countries other than the Republic of Korea, incorporating DRAM chips and/or mounted DRAMs originating in countries other than the Republic of Korea or originating in the Republic of Korea and manufactured by Samsung D010 0 % 2 (Non-customised) multi-combinational forms of DRAMs originating in countries other than the Republic of Korea, incorporating DRAM chips and/or mounted DRAMs originating in the Republic of Korea and manufactured by all companies other than Samsung and representing less than 10 % of the net free-at-Community-frontier  price of the (non-customised) multi-combinational form of DRAM D011 0 % 3 (Non-customised) multi-combinational forms of DRAMs originating in countries other than the Republic of Korea, incorporating DRAM chips and/or mounted DRAMs originating 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 (non-customised) multi-combinational form of DRAM D012 3,2 % 4 (Non-customised) multi-combinational forms of DRAMs originating in countries other than the Republic of Korea, incorporating DRAM chips and/or mounted DRAMs originating 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 (non-customised) multi-combinational form of DRAM D013 6,5 % 5 (Non-customised) multi-combinational forms of DRAMs originating in countries other than the Republic of Korea, incorporating DRAM chips and/or mounted DRAMs originating 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 (non-customised) multi-combinational form of DRAM D014 9,8 % 6 (Non-customised) multi-combinational forms of DRAMs originating in countries other than the Republic of Korea, incorporating DRAM chips and/or mounted DRAMs originating 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 (non-customised) multi-combinational form of DRAM D015 13,1 % 7 (Non-customised) multi-combinational forms of DRAMs originating in countries other than the Republic of Korea, incorporating DRAM chips and/or mounted DRAMs originating 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 (non-customised) multi-combinational form of DRAM D016 16,4 %’;

• 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 DRAMs incorporated in multi-combinational forms of 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 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 the DRAM chips 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 value of the aforementioned DRAM chips and/or mounted DRAMs be such to determine that the multi-combinational forms of DRAMs in which they are incorporated 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.

[^E0001]: OJ L 201, 26.7.2001, p. 10.

[^E0002]: OJ L 288, 21.10.1997, p. 1. Regulation as last amended by Regulation (EC) No 461/2004 (OJ L 77, 13.3.2004, p. 12).

[^E0003]: 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).

[^E0004]: OJ L 102, 24.4.2003, p. 7.

[^E0006]: OJ L 336, 23.12.1994, p. 156.

[^E0007]: 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.

[^E0008]: Panel report, paragraph 7.110.

[^E0009]: Panel report, paragraph 7.109.

[^E0010]: 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.).

[^E0011]: Panel report, paragraph 7.69.

[^E0012]: Panel report, paragraph 7.186.

[^E0013]: Panel report, paragraph 7.184.

[^E0014]: 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 intervention that they can no longer serve as the benchmark against which to measure the alleged government distortion’.

[^E0015]: Definitive Regulation, recital 19.

[^E0016]: 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).

[^E0017]: Kookmin Bank, Annual Report (2001), page 58.

[^E0018]: ‘Banks Under Fire for Reducing Export Credit Ceilings for HEI’, Korea Herald, 27 January 2001.

[^E0019]: ‘KorAm Reluctantly Continues Financial Support for Hynix’, Korea Times, 21 June 2001.

[^E0020]: See footnote 1.

[^E0021]: 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.’).

[^E0022]: Kookmin/H&CB Prospectus, 10 September 2001 (Micron Italia post hearing submission, 14 February 2003 at Exhibit 9).

[^E0023]: ‘Pusan, Kyongnam Banks Receive Conditional Approval from FSS’, Korea Herald 18 January 1999.

[^E0024]: See footnote 1.

[^E0025]: ‘Officials of NFLC, Pusan Bank Punished for Mismanagement’, Korea Herald, 29 April 2000.

[^E0026]: Provisional Regulation, recital 87.

[^E0027]: 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 appropriate market benchmark for assessing whether the government’s financial contribution was 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).’

[^E0028]: Guidelines for the calculation of the amount of subsidy in countervailing duty investigations (Official Journal of the European Communities C 394, 17.12.1998, p. 6) (the Guidelines).

[^E0029]: Panel report, paragraphs 7.211 and 7.212.

[^E0030]: Panel report, footnote 186.

[^E0031]: Panel report, paragraph 7.213.

[^E0032]: The Panel refers to the cost to the ‘provider of the financial contribution’, that is, the Government of Korea and the private banks which it directs.

[^E0033]: Panel report, paragraph 7.85.

[^E0034]: Panel report, paragraphs 7.189 to 7.192.

[^E0035]: Panel report, paragraph 7.189.

[^E0036]: Panel report, paragraph 7.213.

[^E0037]: Panel report, paragraph 7.189.

[^E0038]: Panel report, paragraph 7.189.

[^E0039]: Panel report, paragraph 7.189.

[^E0040]: Definitive Regulation, recitals 87 and 101 to 112.

[^E0041]: 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 restructuring, which enabled Hynix to drastically reduce the current portion of its long-term debt and, thus, its current liabilities. See footnote 2.

[^E0042]: Saunders Report, p. 18.

[^E0043]: ‘Korea Daily Comment: Hyundai Electronics,’ UBS Warburg, 4 January 2001, p. 2 (Micron Italia, 14 February 2003, post-hearing submission, Exhibit 64).

[^E0044]: ‘Hyundai Electronics,’ UBS Warburg, 8 January 2001, p. 7 (Micron Italia, 14 February 2003, post-hearing submission, Exhibit 19).

[^E0045]: ‘Hyundai Electronics Inc. Digging a Deeper Hole,’ Deutsche Bank, 23 February 2001, p. 8 (Micron Italia, 14 February 2003, post-hearing submission, Exhibit 66).

[^E0046]: The Korea Herald, 15 February 2001.

[^E0047]: Reuters News, 21 June 2001.

[^E0048]: The Korea Herald, 13 June 2001.

[^E0049]: The CBO’s and CLO’s are asset-backed securities that are sold to investment trusts.

[^E0050]: Preliminary Determination, paragraphs 47 and 48.

[^E0051]: Preliminary Determination, paragraph 49.

[^E0052]: 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 ([^E0053]).’

[^E0053]: Panel report, paragraphs 7.88 and 7.89.

[^E0054]: Panel report, paragraphs 7.194 to 7.199.

[^E0055]: Panel report, paragraph 7.189.

[^E0056]: Panel report, paragraph 7.213.

[^E0057]: 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).

[^E0058]: 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.

[^E0059]: Panel report, paragraph 7.104.

[^E0060]: Panel report, paragraph 7.97.

[^E0061]: Recitals 17 to 22, 56 and 57.

[^E0062]: Preliminary Determination, paragraph 77. The KDB did not participate in the new loan of KRW 658 billion.

[^E0063]: Preliminary Determination, paragraphs 69 to 71.’

[^E0064]: Panel report, paragraphs 7.204 to 7.210.

[^E0065]: Panel report, paragraph 7.213.

[^E0066]: 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 full amount swapped because of the obligation placed on Hynix, in the form of surrendering ownership shares or in dilution of the shares to existing shareholders.

[^E0067]: Recitals 17 to 22 and 57 to 59.

[^E0068]: Panel report, paragraph 7.360.

[^E0069]: Panel report, paragraph 7.362.

[^E0070]: Data obtained from the confidential version of the questionnaire responses and the financial statements of the Community producers.

[^E0071]: 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).

[^E0072]: 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 % of each quarterly profit is shared with Micron employees, was suspended, and senior staff took a 10 % reduction in pay. In addition, in December 2001 all employees were placed on 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).

[^E0073]: 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.’

[^E0074]: ‘[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.

[^E0075]: 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 margin, perhaps the most relevant injury factor in this regard, 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.

[^E0076]: 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.

[^E0077]: 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.