U.S. Taxes on Hynix Rejected

The World Trade Organization backed a complaint by the South Korean government that U.S. tariffs on Hynix Semiconductor Inc.’s computer chips violate global trade rules, a U.S. trade official said.

The U.S. failed to prove that Hynix, the world’s third-biggest memory chip maker, got an unfair state subsidy when South Korean banks gave the company loan guarantees and rollovers in 2002, Geneva-based arbiters said in a confidential ruling. The U.S. alleged that the government directed banks to provide the aid.

The U.S. will appeal, and the decision won’t necessarily end the duties, said the trade official, who asked not to be identified. South Korea filed a separate WTO complaint against European Union tariffs on Hynix chips.

The U.S. and the EU accused South Korea of illegally bailing out Hynix through government-backed financial restructuring packages. The U.S. slapped 45% duties on Hynix’s memory chips and the EU imposed a 35% tax.

State-run Korea Development Bank and other creditors agreed in 2002 to convert 1.9 trillion won ($1.8 billion) of Hynix’s debt into equity and to extend payment on 3 trillion won of loans. Banks also issued new bonds to refinance old debts.

The U.S. imposed its tariffs after a complaint by Boise, Idaho-based Micron Technology Inc., and presented evidence to the WTO that it said showed debt forgiveness was part of a South Korean government effort to bail out Hynix.

The ruling is “very just,” Hynix spokesman Bang Min Ho said in Seoul. A Micron spokesman declined to comment.

A final WTO decision will take at least six months and won’t be retroactive, so the protection that Micron received since early 2003 won’t be taken back.