WTO Rules for U.S. in Chip Tariff Debate

The World Trade Organization on Monday upheld U.S. duties on imports of computer memory chips from South Korea.

The ruling by the WTO’s appellate body overturned a WTO decision from December on the grounds that it failed to take all evidence into account.

The ruling leaves U.S. measures in place despite Korean objections. The two countries have battled over the tariffs for three years.

Monday’s ruling stopped short of saying Washington’s duties were legal, but the appellate body rejected last year’s decision because it “failed to apply the proper standard of review” and erred “in declining to consider certain evidence on the record of the underlying investigation.”

In last year’s panel decision in favor of Seoul, the WTO dismissed U.S. claims that Hynix Semiconductor Inc., the world’s third-largest producer of memory chips, received illegal subsidies from South Korea’s state-controlled banks. It ruled that U.S. tariffs breached global trade rules.

“This is an important turnaround for U.S. high-tech manufacturers, as well as the international trading system,” said U.S. Trade Representative Rob Portman in a statement. “The international trading system is built on fairness, and the Korean government unfairly subsidized a Korean company. The Appellate Body report will help to ensure that governments play by the rules.”

“Korea has lost its case against the United States, but we need more time to look at the ruling,” a South Korean diplomat, speaking on condition of anonymity, told Associated Press.

In June 2003, the United States slapped a 44.71% import tariff on Hynix chips, accusing the firm of receiving illegal government subsidies in the form of restructuring loans and debt-for-equity swaps made by South Korea’s state-controlled banks.

The United States claimed these amounted to a government subsidy to Hynix enabling the company, which had suffered from consecutive years of losses and heavy debt, to undercut its competitors.