The World Trade Organization appellate body has announced the rejection of an earlier ruling of the WTO that claimed that the U.S. could not proof illegality of financial aid received by memory maker Hynix Semiconductor several years ago. This effectively closes opportunities for the company to appeal and whenever it imports DRAM to the USA, it has to pay punitive tariffs.

Even though earlier a WTO’s panel concluded that the U.S. tariffs violated international trade laws, the appellate body discovered that the original WTO dispute settlement board “failed to apply the proper standard of review”. The current panel believes that the original group who considered the case did not consider certain evidences.

“The overturning of the previous WTO ruling against U.S. punitive duties on the company’s chip exports will have little impact on the company as we have paid little tariffs,” a Hynix official reportedly told The Korea Times. “The company, however, believes it will not be hit by the tariffs as the company’s U.S. plant in Eugene, Oregon, where the chips are not subject to U.S. tariffs, will cover the majority of the chip supply to the U.S.”

Micron Technology, a USA-based memory maker, who has been accusing Hynix of illegal aid by the South Korean government, welcomed the decision of the WTO.

“We are gratified that the WTO Appellate Body has agreed with the U.S. position on these unlawful subsidies. I would like to thank the Idaho, Utah and Virginia Congressional delegations for their strong support and advocacy throughout this process. Additionally, the Bush Administration, Ambassador Portman, Secretary Gutierrez, and the Department of Commerce and U.S. Trade Representative staff deserve recognition for tireless work on this important case. Today's decision represents a tremendous victory for U.S. free trade laws,” said Steve Appleton, Micron Technology's Chairman, Chief Executive Officer and President.

In March, 2005, WTO said that neither EU, nor U.S., could proof that Hynix had received illegal subsidies. In mid-June the WTO ruled that the European Union should reconsider punitive duties it imposes on memory chips sold by Hynix Semiconductor. It is unclear whether that decision will also be changed in the light of the U.S. case.

The EU Commission and the US Department of Commerce found Hynix Semiconductor guilty in getting illegitimate financial support from its creditors that were said to be controlled by the Korean government as well as numerous other kinds of financial assist.

In the first half of 2003 the USA and the European Union imposed definitive anti-dumping duties on shipments of Hynix DRAM products in the EU and the USA. The US Department of Commerce slapped 44.71% on imported DRAMs from Hynix Semiconductor, the EU Commission taxes the memory maker with 34.8% tariff. Both duties became effective in Summer 2003.

The World Trade Organization initiated the investigation of the legality of countervailing duties imposed by the USA and the EU in 2003 on production of Hynix Semiconductor in early 2004. The probe was requested by the Korean government, who opposes punitive tariffs and rulings against Hynix.