Complaint by Korea.
On 9 September 2008, Japan and Korea notified the DSB of Confirmed Procedures under Articles 21 and 22 of the DSU. Also, on 9 September 2008, Korea requested the establishment of compliance panel. At its meeting on 23 September 2008, the DSB agreed to refer to the original Panel, if possible, the question of whether Japan had complied with the DSB recommendations and rulings. The European Communities, Chinese Taipei and the United States reserved their third-party rights. Subsequently, China reserved its third-party rights. On 8 October 2008, the compliance panel was composed. On 19 December 2008, the Chairman of the Panel informed the DSB that it would not be possible for the Panel to complete its work in 90 days in light of scheduling conflicts. The Panel expects to complete its work in June 2009.
Appellate Body and Panel Reports Adopted
On 14 March 2006, Korea requested consultations with Japan concerning countervailing duties imposed by Japan on certain Dynamic Random Access Memories (DRAMs) from Korea. According to Korea, notice of the imposition of such duties was provided by Japan in Cabinet Order No. 13 and Finance Notice. 35, published respectively in Issue No. 4264 and Special Issue No. 17 of the Official Gazette dated 27 January 2006. The request for consultations also concerns certain aspects of the investigation and the determination that led to the imposition of such duties.
Korea considers that the foregoing determinations are inconsistent with Japan's obligations under the GATT 1994 and under the SCM Agreement , "including, but not limited to", Articles VI:3 and X:3 of the GATT 1994 and Articles 1, 2, 10, 11, 12, 14, 15, 15.5, 19, 19.1, 21, 22 and 32.1 of the SCM Agreement.
On 27 March 2006, the United States requested to join the consultations. On 29 March 2006, the European Communities requested to join the consultations. Subsequently, Japan informed the DSB that it had accepted the requests of the European Communities and the United States to join the consultations.
On 18 May 2006, Korea requested the establishment of a panel. At the DSB meeting on 30 May 2006, the DSB deferred the establishment of a panel. At its meeting on 19 June 2006, the DSB established a panel. China, the European Communities and the United States reserved their third-party rights. On 24 August 2006, the Panel was composed.
On 26 January 2007, the Chairman of the Panel informed the DSB that the Panel would not be able to complete its work in six months in light of scheduling conflicts. The Panel expects to complete its work in May 2007.
On 13 July 2007, the panel report was circulated to Members. The Panel rejected Korea's claims that:
* Japan improperly found government "entrustment or direction" of the Four Creditors to participate in the October 2001 restructuring, contrary to Article 1.1(a)(1)(iv) of the SCM Agreement;
* Japan improperly found that the October 2001 restructuring conferred a benefit on Hynix, contrary to Articles 1.1(b) and 14 of the SCM Agreement;
* Japan improperly treated certain Hynix creditors as "interested parties", and improperly applies facts available and made adverse inferences, contrary to Articles 12.7 and 12.9 of the SCM Agreement;
* Japan improperly found that the October 2001 and December 2002 restructurings constituted "direct transfer[s] of funds", contrary to Article 1.1(a)(1)(i) of the SCM Agreement;
* Japan improperly determined that the October 2001 and December 2002 restructurings were specific, contrary to Article 2 of the SCM Agreement;
* Japan improperly failed to determine whether or not a benefit continued to exist following changes in the ownership of Hynix as a result of the October 2001 and December 2002 restructurings; and
* Japan's determination improperly failed to demonstrate that the subsidized imports were, through the effects of subsidies, causing injury, contrary to Article 15.5 of the SCM Agreement.
In light of its findings, the Panel upheld Korea's claims that:
* Japan improperly found government "entrustment or direction" of the Four Creditors to participate in the December 2002 restructuring, contrary to Article 1.1(a)(1)(iv) of the SCM Agreement;
* Japan improperly found that the December 2002 restructuring conferred a benefit on Hynix, contrary to Articles 1.1(b) and 14 of the SCM Agreement;
* Japan improperly calculated the amount of benefit conferred by the October 2001 and December 2002 restructurings, contrary to Articles 1.1(b) and 14 of the SCM Agreement;
* Japan improperly used methods to calculate the amount of benefit to the recipient that were not provided for in its national legislation or implementing regulations, contrary to the chapeau of Article 14 of the SCM Agreement; and
* Japan improperly levied countervailing duties in 2006 to offset some of the subsidies provided by the October 2001 restructuring, even though the JIA only found that some of those subsidies applied from 2001 through 2005, contrary to Article 19.4 of the SCM Agreement.
In light of its findings, the Panel declined to rule separately on Korea's claims that:
* Japan acted inconsistently with Articles 1 and 2 of the SCM Agreement by reversing the burden of proof and basing its findings of "financial contribution" and "benefit" on the absence of evidence;
* Japan improperly imposed countervailing duties on the basis of a flawed analysis of benefit, contrary to Article 19.4 of the SCM Agreement and Article VI:3 of the GATT 1994; and
* Japan improperly imposed countervailing duties contrary to Article 32.1 of the SCM Agreement.
On 30 August 2007, Japan notified its decision to appeal to the Appellate Body certains issues of law covered in the Panel report and certain legal interpretations developed by the Panel. On 24 October 2007, the Chairman of the Appellate Body informed the DSB that the Appellate Body would not be able to circulate its report within 60 days due to the time required for completion and translation of the report. The Appellate Body estimated that the report would be circulated to WTO Members no later than 28 November 2007.
On 28 November 2007, the Appellate Body report was circulated to Members. The Appellate Body:
* as regards the Panel's review of the JIA's finding of "entrustment or direction" of the Four Creditors with respect to the December 2002 Restructuring (i) found that the Panel erred in failing to examine the JIA's evidence in its totality, and that the Panel thereby failed to apply the proper standard of review in a manner consistent with its obligations under Article 11 of the DSU; and consequently, reversed the Panel's finding that the JIA's determination of "entrustment or direction" of the Four Creditors is inconsistent with Article 1.1(a)(1)(iv) of the SCM AGreement.
* upheld the Panel's finding that the JIA acted inconsistently with Article 1.1(b) and Article 14 of the SCM Agreement by determining that the December 2002 Restructuring conferred a benefit on Hynix;
* upheld, albeit for different reasons, the Panel's findings that the JIA calculated the amount of benefit conferred on Hynix by the October 2001 and December 2002 Restructurings inconsistently with Articles 1.1(b) and 14 of the SCM Agreement; and found that the Panel did not fail to conduct an objective assessment of the matter before it, as required by Article 11 of the DSU;
* reversed the Panel's finding that the methods used by Japan to calculate the amount of benefit conferred on Hynix were not provided for in Japan's national legislation or implementing regulations as required under the chapeau of Article 14 of the SCM Agreement;
* upheld the Panel's finding that Japan acted inconsistently with Article 19.4 of the SCM Agreement by levying countervailing duties on imports which the JIA itself had found were not subsidized at the time of duty imposition; and found that the Panel did not fail to conduct an objective assessment of the matter before it, as required by Article 11 of the DSU;
* upheld the Panel's findings that the JIA's determination of the existence of benefit with respect to the October 2001 Restructuring was not inconsistent with Articles 1.1(b) and 14 of the SCM Agreement;
* upheld the Panel's finding that the JIA did not act inconsistently with Article 12.7 and 12.9 of the SCM Agreement by including certain financial institutions as "interested parties" and by using "facts available" for those financial institutions that failed to provide information;
* upheld the Panel's finding that the JIA could properly characterize the transactions at issue in the October 2001 and December 2002 Restructurings as "direct transfer[s] of funds" within the meaning of Article 1.1(a)(1)(i) of the SCM Agreement; and
* upheld the Panel's finding that the JIA did not act inconsistently with Articles 15 and 19.1 of the SCM Agreement by not demonstrating separately that the allegedly subsidized imports were, "through the effects of subsidies", causing injury within the meaning of the SCM Agreement.
On 17 December 2007, the DSB adopted the Appellate Body report and the Panel report, as modified by the Appellate Body report.
Implementation Status of Adopted Reports
At the DSB meeting of 15 January 2008, Japan announced its intention to implement the recommendations and rulings of the DSB in a manner consistent with its WTO obligations. In that regard, Japan was prepared to consult with Korea to reach an agreement on the reasonable period of time. On 25 February 2008, Korea requested that the reasonable period of time be determined through binding arbitration pursuant to Article 21.3(c) of the DSU. In a joint letter dated 4 March 2008, Korea and Japan requested Mr David Unterhalter to act as arbitrator. On 5 March 2008, Mr Unterhalter informed Korea and Japan that he accepted the appointment to serve as arbitrator. On 5 May 2008, the arbitration award was circulated to Members. The arbitrator determined that the reasonable period of time for Japan to implement the recommendations and rulings of the DSB is eight months and two weeks from the date of the adoption of the Panel and Appellate Body reports. The reasonable period of time expired on 1 September 2008.
On 9 September 2008, Japan and Korea notified the DSB of Confirmed Procedures under Articles 21 and 22 of the DSU. On 9 September 2008, Korea requested the establishment of an Article 21.5 panel.
| Brief Date | Brief Description |
|---|---|
| 12/22/2006 | Replies of the United States to Question from the Panel (pdf) |
| 12/11/2006 | Executive Summary of the Oral Statement of the United States at the Third Party Session of the First Substantive Meeting of the Panel with the Parties (pdf) |
| 12/06/2006 | Oral Statement of the United States at the Third Party Session of the First Substantive Meeting of the Panel with the Parties (pdf) |
| 11/20/2006 | Executive Summary of the First Written Submission of the United States (pdf) |
| 11/10/2006 | First Written Submission of the United States (pdf) |
| Brief Date | Brief Description |
|---|---|
| 10/11/2007 | Oral Statement of the United States of America (pdf) |
| 09/24/2007 | Third Participant Submission of the United States of America (pdf) |
| Brief Date | Brief Description |
|---|---|
| 12/15/2008 | Third Party Submission of the United States (pdf) |
