November 30, 2007 – An appeal conducted by the World Trade Organization (WTO) has reiterated a July ruling that Japan’s 27.2% tariffs levied against Korean DRAM chips (targeting Hynix) are illegal.

Japan, which based its move on complaints from Elpida Memory Inc. and Micron Japan Ltd., claimed the South Korean government improperly gave Hynix export subsidies, enabling the chipmaker to set product prices unfairly low in the Japanese market. South Korea contended the money was a loan from a government-financed bank, not subsidies. The European Union and the US both imposed duties on Hynix in 2003; the WTO upheld the US’ 44% tariff in summer 2004, but ruled that the EU should lower its countervailing tariff on Hynix memory chips to 32.9% from 34.8%.

In a mixed ruling, the WTO said its latest decision agrees, among other things, that “Japan acted inconsistently […] by levying countervailing duties on imports which the JIA itself had found were not subsidized at the time of duty imposition.”

The appeal ruling was mixed, noted the San Jose Mercury News. Japan’s level of tariff against Korea were in contradiction with global regulations; but other findings from the earlier ruling against Japan were reversed, including that Japan’s methods to calculate of the benefits conferred on Hynix were, in fact, allowed under Japan’s national legislation.

In statements, Japan trade negotiators said they were “pleased” with some of the findings, while Korean officials were “not dissatisfied,” noted the Associated Press.

Hynix investors, meanwhile, cheered the ruling, since Japan accounts for about 10% of the company’s sales, and removing the tariff will boost profits, noted Dongbu Securities analyst Lee Min-hee, cited in a San Jose Mercury News story.