Peter Clarke Courtesy of EE Times (06/17/2005 1:30 PM EST)

BRISTOL, England — As expected, the World Trade Organization ruled against the European Union's countervailing duties on Hynix chips imported from South Korea. The WTO said the EU should reconsider its duties but did not go as far as Hynix had sought and order an immediate stop to the duties.

In March reports surfaced that the WTO (Geneva, Switzerland) would rule along similar lines to the way it had against U.S. countervailing duties — that the European Union had not proved that the debt-for-equity swaps and loan guarantees provided by a syndicate of banks to Hynix were a Korean state subsidy.

The panel concluded that besides failing to prove the illegality of the restructuring support for Hynix, the European Union incorrectly calculated the material injury caused to its own producers by the subsidies.

However, the WTO, also found against South Korea on several counts, saying that some of Seoul's financial support for the company is illegal, according to online reports.

The U.S. imposed a 44.7 percent countervailing duty on Hynix DRAM imports in 2003, claiming the bailout package whereby government-owned banks led a consortium that exchanged debt for equity in Hynix amounted to illegal state subsidy. Europe followed in July 2003 with its 33 percent tariff using the same argument.

The European ruling echoed a similar WTO ruling against a U.S. countervailing duty of 44.7 percent on Hynix DRAMs imported into the U.S., handed down in February.

The EU has about a month to prepare its plan to bring its countervailing duties into "conformity", the WTO said. Meanwhile the duties continue and both sides can appeal the WTO ruling.