The World Trade Organisation (WTO) has formally told the European Union to rethink its decision to impose punitive import duties on Hynix memory products from South Korea.
The WTO's demand was informally made public back in March, when it issued its preliminary ruling. The EU had an opportunity then to appeal against the WTO's decision, and it may do so now that the judgement has been formally declared. So too can Hynix.
The WTO said that the EU had not proved that the rescue package put together by a number of Hynix's creditor banks amounted to unlawful state aid. Since the South Korean government owned or held large stakes in a number of the banks, the EU argued, any support given to the memory maker by those banks was tantamount to money provided by the government.
Hynix denied the claim. It said a number of the creditor banks behind the rescue package were not South Korean companies, and of those that were, the country's government was in the process of loosening or even severing its ties with the banks.
The WTO also ruled that the EU had not correctly calculated the financial impact of the rescue package on Hynix's European competitors. However, it did find that some of the money Hynix received did contravene its regulations.
The EU imposed a 34.8 per cent levy on Hynix imports in July 2003. That's the figure the WTO has asked the EU to reconsider. It has a month to come up with an alternative, the WTO said.
The US imposed a similar import duty in 2003, to the tune of 44.7 per cent, for the same reason. In February, the WTO formally asked the US to rethink the size of the levy, much as it has now done with the EU.
Separately, Hynix has raised $1.3bn in a series of five-year loans, the Korea Times has revealed.
The loans will allow the company to pay back existing debt before the earlier lending reaches its final repayment date. It needs to raise a further $700m for the same reason, at which point the company's managers will be able to regain control of the memory maker from its creditor banks.
The plan was made public in April. Back then, however, the timetable had the company's managers taking control by the end of this month. That now seems unrealistic, the paper reported, with the transition now anticipated to take place at the end of July - still some 18 months before the move had originally been expected to take place. ®
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