WTO rejects EU charges against Hynix

WTO rejects EU charges against Hynix

Agence France-Presse, Seoul

Microchip giant Hynix Semiconductor has scored a partial victory in a battle with the European Union over tariffs imposed on exports by the South Korean company, officials said on Friday.

The World Trade Organization (WTO) has partially rejected EU claims that Hynix was illegally subsidized by the government, the foreign ministry said, adding the decision would be disclosed later in Geneva.

"This is a partial victory in our battle with the EU. If they accept the WTO's decision, their tariffs imposed on Hynix products would be lowered," a ministry official told AFP.

The EU slapped anti-dumping tariffs of 34.8 percent on Hynix products on August 12 in 2003. Hynix filed a petition against the EU move with the WTO.

Hynix was on the edge of bankruptcy in 2001 before being saved by a 3.25 trillion won (US$3.21 billion) bailout arranged by South Korean creditor banks.

Based on its bailout, the creditors took over Hynix and injected further loans into the debt-ridden company. Creditors put together another 3.2 trillion won bailout in 2003.

Ministry officials said the WTO panel ruled that the 2001 rescue package and syndicated loans arranged by creditors for Hynix were not illegal subsidies.

However, the WTO upheld EU's claim that financial backing by a state insurance company for Hynix exports and the purchase of Hynix bonds by the government-controlled Korea Development Bank in 2001 were commercially unjustiable, they said.

The ruling proved the EU had "incorrectly imposed countervailing duties" on microchips exported by Hynix, the ministry said in a statement.

The WTO concluded that the EU violated its WTO obligaions and misapplied the agreement on subsidies and countervailing measures (SCM) "on several grounds including both its subsidy findings and its determinations that Korean imports caused material injury" to its industry, it said.

The ministry, however, insisted the WTO had made "some basic errors" in its legal interpretation of the SCM agreement by supporting part of EU's charges.

South Korea will carefully consider whether to appeal "some or all of the errors," it added.

In April, Hynix agreed to pay a $185 million fine ordered by the United States for price-fixing. The penalty was the third- largest criminal anti-trust fine in U.S. history.

Hynix has insisted it has set aside enough provisions to pay the fine.

Meanwhile, the company, the world's second largest chip maker, is set to emerge from creditor oversight after successfully raising $1.3 billion through a series of syndicated loans, bank officials said.

Five creditors including its largest lender, Korea Exchange Bank, contributed to the fresh financing to enable Hynix it to pay off debts and stand on its own two feet, they said.

"We have provided a total of $1.3 billion which will be used for the refinancing of Hynix (debt)," they said in a statement.

The creditors had previously planned to keep Hynix under their control until the end of 2006 but decided to let it stand on its own early, citing its robust recovery.