Commercial Vessels - World Trade Organization

World Trade
Organization | | |
| | |
| |WT/DS273/R |
| |7 March 2005 |
| |(05-0810) |
| | |
| |Original: English | KOREA - MEASURES AFFECTING TRADE
IN COMMERCIAL VESSELS
(WT/DS273)
Report of the Panel TABLE OF CONTENTS
PAGE
I. introduction 1
A. complaint of the european communities 1
B. establishment and composition of the panel 1
C. information gathering procedure under annex v of the scm agreement 2
D. additional procedures for the protection of business confidential
information 2
E. panel proceedings 3
II. FACTUAL ASPECTS 3
III. parties' requests for findings and recommendations 3
A. the european communities 3
B. korea 4
IV. ARGUMENTS OF THE PARTIES 4
V. ARGUMENTS OF THE THIRD PARTIES 4
VI. Interim Review 4
A. Korea's general comments in its cover letter 4
B. Korea's specific comments on certain identified paragraphs of the
interim report 5
VII. FINDINGS 9
A. korean requests for preliminary rulings 9
1. 29 August 2003 request for suspension of the Annex V information-
gathering procedure 9
2. Other preliminary rulings requested by Korea on 29 August 2003 9
3. Exclusion of certain Annex V information 18
4. Prejudice to Korea's earlier preliminary ruling request 20
5. Withdrawal of Article 5(a) claim 20
6. Price suppression and price depression / Article 6.3(c) 21
(a) Exclusion of price undercutting claim 21
(b) Scope of serious prejudice claim 21
7. The extent of the record 21
8. Continued relevance of Korea's 29 August 2003 request for preliminary
rulings 21
B. alleged prohibited export subsidies 21
1. Kexim Legal Regime 22
(a) Does the KLR Provide for Financial Contributions? 22
(i) Arguments of the parties 22
(ii) Evaluation by the Panel 23
(b) Is KEXIM a Public Body? 24
(i) Arguments of the parties 24
(ii) Evaluation by the Panel 27
(c) Subsidization 29
(i) Application of the Traditional Mandatory/Discretionary Distinction
30
Arguments of the parties 30
Evaluation by the Panel 30
(ii) Benefit 32
Non-competition clause 32
No obligation to take market conditions into account 33
Government funding 34
Market Adjustment Rate 35
KEXIM On-Line Road Show 37
Maintenance of international competitiveness 37
Conclusion 39
(d) Export contingency 39
(i) Arguments of the parties 39
(ii) Evaluation by the Panel 39
(e) Conclusion 39
2. APRG programme 39
(a) Arguments of the Parties 40
(b) Evaluation by the Panel 40
3. PSL programme 41
(a) Arguments of the Parties 41
(b) Evaluation by the Panel 42
4. Individual APRG transactions 43
(a) Horizontal issues 44
(i) Buyer's designation of foreign APRG-provider 44
(ii) Foreign market benchmark 44
(iii) Country risk spreads 45
(iv) Domestic market benchmark 47
(v) Credit risk spread 47
(vi) Past subsidies 48
(vii) Adverse inferences 48
(b) Transaction-specific issues 49
(i) Daewoo 49
(ii) Samho/Halla 51
(iii) STX/Daedong 52
(iv) Hanjin 53
(v) Samsung 54
(c) Export contingency 54
(i) Arguments of the Parties 54
(ii) Evaluation by the Panel 55
(d) Specificity 55
(e) Item (j) defence 55
(i) Is an a contrario interpretation permissible? 55
(ii) If an a contrario interpretation of item (j) were permissible, what
conditions would need to be fulfilled? 60
(iii) Are the relevant conditions for the application of item (j) as an
affirmative defence fulfilled? 60
Do APRGs constitute export credit guarantees? 60
Do APRGs constitute guarantees against increases in the cost of the
exported product? 61
(f) Conclusion 62
5. Individual PSL transactions 62
(a) Alternative benchmarks proposed by Korea 63
(i) Corporate bonds issued by shipyards 63
DHI/DSME 63
Samho 64
STX/Daedong 64
Hyundai / Mipo 64
HHI 65
Conclusion 65
(ii) Other benchmarks proposed by Korea 65
(iii) Conclusion 66
(b) The EC's proposed market benchmark 66
(i) Alleged differences in rating practices 66
(ii) The use of indexed bond pricing 70
(iii) The choice of maturity of the KSDA index data 71
(iv) Risk management under the PSL disbursement process 71
(v) Admissibility of certain EC arguments and data 72
(vi) Conclusion 72
(c) The application of the EC's market benchmark to individual KEXIM PSL
transactions 73
(i) DSME 73
(ii) Samho/Halla 74
(iii) STX/Daedong 75
(iv) Hyundai/MIPO 76
(v) Hanjin 76
(vi) Hyundai Heavy Industries 76
(d) Export contingency 76
(i) Arguments of the parties 76
(ii) Evaluation by the Panel 77
(e) Specificity 77
(f) Defence under the first paragraph of item (k) of the Illustrative
List 77
(i) Is an a contrario interpretation of the first paragraph of item (k)
permissible? 77
(ii) If an a contrario interpretation of the first paragraph of item (k)
were permissible, what conditions would need to be fulfilled? 79
(iii) Are the relevant conditions fulfilled? 79
(g) Conclusion 82
6. Conclusion 82
C. alleged actionable subsidies 82
1. Debt restructurings 83
(a) Factual Review 83
(i) Daewoo workout 83
(ii) Halla reorganization 83
(iii) Daedong 84
(b) Financial Contribution Issues 85
(i) Public Bodies 85
KAMCO 85
KDB 86
IBK 86
BOK and KDIC 86
(ii) Entrustment or Direction of Private Bodies? 86
Arguments of the parties 86
Evaluation by the Panel 88
- Access to public funds 91
- Corporate Restructuring Agreement 93
- Prime Ministerial Decree No. 408 94
- Kookmin Bank Statement 95
- 1998 December Agreement / Guarantee Against Loss 96
- Liquidation as a source of capital 97
- Government ownership 97
- Conclusion 97
(iii) Transfer of Pecuniary Value 98
Arguments of the parties 98
Evaluation by the Panel 98
(iv) Financial Contribution to Oneself 99
Arguments of the parties 99
Evaluation by the Panel 100
(v) Financial contributions "by" public bodies 101
(vi) Conclusion 101
(c) Benefit Issues 102
(i) The creditors' participation in the restructurings 102
(ii) The Daewoo workout 103
The Anjin report 103
- Commissioned by DHI and KDB 104
- Amount of time for review 105
- Existing shareholder adjustment 107
- Tax Shield Effect 107
- Perpetual growth rate 109
- Interest coverage ratio 110
- Unbooked liabilities 110
- Receivables from Daewoo Affiliates 111
- Conclusion 112
The debt write-off / rescheduling 112
Debt-for-equity swap 112
Conclusion 113
(iii) The Halla reorganization 114
The Rothschild determination - the decision to restructure 114
Terms of the restructuring 114
(iv) The Daedong reorganization 115
2. Daewoo tax concessions 116
(a) Arguments of the parties 116
(b) Evaluation by the Panel 117
3. Specificity 117
4. Conclusion 118
D. serious prejudice 118
1. Annex V information 118
2. Summary of the claim 118
3. Scope of the claim 119
4. Legal framework 119
(a) Article 5(c) - serious prejudice 120
(b) Article 6.3(c) 120
5. Meaning of price suppression or price depression 121
6. Existence of price suppression/depression 122
7. Does the concept of "like product" apply in respect of price
suppression/price depression? 123
(a) Arguments of the parties 123
(b) Evaluation by the Panel 124
8. Can "the same market" be the world market? 128
(a) Arguments of the parties 128
(b) Evaluation by the Panel 129
9. "Significant" 129
(a) Arguments of the parties 129
(b) Evaluation by the Panel 130
10. "Serious prejudice may arise" 131
(a) Arguments of the parties 131
(b) Evaluation by the Panel 131
(i) Text 133
(ii) Prior dispute settlement 134
(iii) Negotiating history 136
11. Causation 138
(a) Main arguments of the parties 138
(b) Evaluation by the Panel 139
12. Summary of the EC's claims and general approach of the Panel 141
(a) Main arguments and general approach of the EC 142
(b) Main rebuttal arguments of Korea 145
13. Product-specific analysis 147
(a) Arguments of the parties 147
(i) LNGs 147
(ii) Product/chemical tankers 150
(iii) Container ships 152
(b) Evaluation by the Panel 154
(i) LNGs 156
(ii) Product/chemical tankers 157
(iii) Container ships 157
VIII. conclusions and recommendations 158 ATTACHMENTS Attachment 1 - Procedure under Annex V of the Agreement on Subsidies and
Countervailing Measures - Report to the Panel from the Designated
Representative
of the Dispute Settlement Body
page 159 Attachment 2 - Procedures for the protection of business confidential
informati