Sun, Jul 06, 2003 - Page 11 News List

South Korea will appeal sanctions on Hynix chips

GOVERNMENT SUBSIDIESBoth the US and the EU have decided that Hynix received unfair advantages through bank bailouts, but South Korea doesn't agree

NY TIMES WIRE SERVICE , SEOUL

The South Korean government warned the EU on Friday that it would appeal to the World Trade Organization (WTO) if Europe decided to extend heavy tariffs against Hynix Semiconductor.

The ministry of foreign affairs and trade said such action would be comparable to the appeal that it had already filed against the decision by the US Department of Commerce to impose a tariff of 44.71 percent on Hynix memory chips.

Most members of the EU favor a 34 percent tariff on Hynix chips, which would slightly increase a tariff already in place.

South Korean officials fear that the tariffs will force Hynix into bankruptcy proceedings and liquidation, a process that many foreign analysts think would be healthy for the semiconductor industry and the South Korean economy but that Korean officials fear would precipitate more business failures.

The Commerce Department issued its tariff ruling in June based on a complaint by Micron Technology of Boise, Idaho, which surpassed Hynix two years ago as the world's second-leading manufacturer of memory chips after Samsung Electronics.

Micron was rebuffed last year in an attempt to buy the plants that produce Hynix memory chips.

The company contended that Hynix had cut into its sales in the US because of large infusions of credit which had been provided by government-controlled South Korean banks.

Infineon Technologies of Germany, which is challenging Hynix for third place in the manufacturing of memory chips, has lodged much the same complaint with European authorities. Both Micron and Infineon contend that Hynix is responsible for driving the price of memory chips well below US$4 each, the average cost that it takes to make one.

At the heart of the complaints by Micron and Infineon is the role of the Korea Exchange Bank, the lead creditor for Hynix, which now owes more than US$6 billion after three major infusions of cash.

Independent action

Both the Korean government and the Korea Exchange Bank have insisted that the bank acted independently.

The government, through the Bank of Korea and the government-owned Export-Import Bank, owns a controlling 36 percent stake in the bank.

The European Commission imposed a provisional tariff of 33 percent on all imported Hynix chips in April and is expected to impose the full 34 percent tariff on Aug. 25 when it meets for its final decision.

Among the EU's 15 members, only France and the Netherlands have been reported to oppose the tariff, which would remain in effect for as long as five years.

The South Korean government, in battling the tariffs, stated its case in strong terms in a letter to Linnet Deily, the US representative to the WTO in Geneva, according to Bloomberg News.

The letter, according to Bloomberg, said that the US had "failed to demonstrate the existence of a financial contribution by the government of Korea."

That is an argument that Korean officials have made repeatedly. The last hope of reversal of the Commerce Department's ruling, short of a long appeals process before the WTO, rests with the US International Trade Commission, which will review the decision on July 31.

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