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.