1.      On August 3, 2004, the Japanese government decided to commence an investigation to determine 
whether or not to impose countervailing duties on the Korean Hynix DRAM. This decision is a follow-up of the 
request made on June 16 to impose countervailing duties on Hynix DRAM by Japanese DRAM 
manufacturers Elpida and Micron Japan.

2.       In the application submitted to the Japanese government requesting the imposition of countervailing 
duties, Elpida and Micron Japan claim that the Korean government's subsidies to Hynix - the syndicated 
loans of December 2000, the export-credit insurance grants by Korea Export Insurance Corporation of 
December 2000, the Fast Track Program by the Korea Development Bank from January to July 2001, and the 
financial restructuring of Hynix (purchases of convertible bonds, debt waivers, debt-equity swaps, extension 
of repayment date, conversion of interest into loans) of May and October 2001 and December 2002 -have 
enabled Hynix to export DRAM at an unreasonably low price, resulting in Elpida and Micron Japan's loss.

3.       During this investigation, the Japanese government is expected to send inquiries to (1) domestic 
Japanese companies related to the DRAM industry, (2) domestic Japanese DRAM importing companies, 
(3) DRAM manufacturers in Korea, (4) Hynix creditors, and (5) the Korean government.  Each organization 
can reply in writing within 30 days upon receipt of the inquiry.

4.       According to the WTO Agreement on Subsidies and Countervailing Measures, the Japanese 
government must make a decision on the imposition of countervailing duties within one year (in principle), 
or 18 months (maximum).  Furthermore, if this investigation fails to prove the existence of (1) subsidies 
given to a specific enterprise (Hynix), (2) damage done to the Japanese DRAM industry, and (3) a causal 
relationship between the export of subsidized DRAM to Japan and the loss of Japanese DRAM industries, 
countervailing duties cannot be imposed.

5.       Meanwhile, 60 days after the investigation, the Japanese government may issue temporary 
arrangements valid for 4 months. When these tentative arrangements come into effect, the Japanese 
government may order the companies that import Hynix DRAM to Japan to provide a security fee 
corresponding to the subsidy that is assumed to be granted by the Korean government during customs 
clearance procedures.

6.       At the conference between the Korean and Japanese governments held in Tokyo on July 27, the 
Korean government explained that what Elpida and Micron Japan suggested as a government subsidy was 
in fact part of a corporate and financial restructuring project promoted by the government in order to 
overcome the foreign exchange crisis of 1998. The Korean government explained that it was not an export 
subsidy for a particular corporation, and that Elpida and Micron Japan were blaming Hynix DRAM for the 
damages that were actually caused by a world-wide recession in the DRAM market and problems in 
management and sales strategies within Elpida and Micron Japan. Hence, in Korea's reply to Japan's 
inquiry, Korea will re-emphasize these aspects and point out the problems in the argument made by 
Japanese manufacturers.

                                                                       Spokesperson of MOFAT

 
* unofficial translation