WASHINGTON -- The U.S. International Trade Commission Wednesday upheld a June ruling by the U.S. Commerce Department, finding that Hynix Semiconductor Inc. was responsible for causing injury to the U.S. DRAM industry when it accepted what Commerce found to be illegal government subsidies channeled to the company through several Korean banks.
The decision concluded the injury phase of the trade investigation and upheld the June ruling by Commerce, which imposed a 44.71% duty against all Hynix DRAM imported into the United States.
The tariff is a penalty for what Commerce said were illegal Korean government subsidies provided to the chipmaker as part of three separate financial bailouts made through government-owned or -controlled domestic banks.
In a statement issued shortly after today's ruling, Hynix stated that "it is very disappointed by the International Trade Commission's affirmative injury determination in the DRAMs case."
Hynix said it would withhold reaction until it was able to read the ITC's written rationale. "Today we just learned the outcome, not the reasons why," an unnamed company official said in the statement.
Upon receiving written word from the ITC, which is expected within two weeks, Hynix said it could appeal the decision to the U.S. Court of International Trade, ask the Korean government to appeal the decision to the World Trade Organization, or both.
The Korean government has already initiated a complaint with the WTO on the Commerce Department countervailing duty ruling, according to Daniel Porter, outside counsel for Hynix.
Porter said the Hynix case suffered because of the fact that Micron lost $2 billion in the past two years. "Although Micron's experience was really no different from any other DRAM producer, under U.S. law it is more difficult to win a 'no injury' defense when the petitioner lost so much money," he said.
Porter said the ITC decision may also have been influenced by a separate countervailing duty case against Hynix, now in its final stages before the European Commission. The EC has notified member nations of its final recommendation that a 35% countervailing duty be imposed on Hynix DRAM.
"The ITC may have been worried that if the EC imposed duties on Hynix and the U.S. didn't, then the U.S. market may become flooded with Hynix DRAMs," he said.
The U.S. complaint was filed last November by Micron Technology Inc., charging that the Korean government directed bailouts totaling $11.7 billion for the 18-month period from Jan. 1, 2001 through June 20, 2002. Micron later claimed that through the same banks the government engineered an additional $4 billion bailout for Hynix.
In a statement, Steve Appleton, Micron's chairman, president, and chief executive, said "I am pleased with the final determination of injury announced by the International Trade Commission. The Department of Commerce's and International Trade Commission's reviews of subsidies to Hynix were exhaustive and their respective determinations were based on substantial evidence.
"These actions validate that Hynix received billions of dollars in illegal subsidies, reaffirms that free trade must also be fair trade, and demonstrates our government's commitment to enforce trade laws."
Since April, Hynix has been forced to post a bond or pay into an escrow account an amount equal to the duties following a preliminary ruling by Commerce., which was finalized in June.
The ITC decision found that U.S. DRAM makers -- namely Micron and the U.S. DRAM business of German chipmaker Infineon Technologies A.G. -- were harmed by the Hynix bailouts.
Hynix said it has so far avoided the duty by shipping DRAM to customers in the United States from its fab in Eugene, Ore., which is exempt from the tariff. Hynix said it has been able to sidestep the duty by arranging with U.S. customers to drop ship DRAM to overseas plants.
"Hynix will increase the production of DRAMs in its Eugene, Oregon fab, which is not subject to the ... duty imposition, to continue to provide quality DRAMs to its U.S. customers," the company official said. "Therefore, our existing customers in the U.S. will not be affected at all by today's decision."