Public reaction has been universally negative to the U.S. Department of Commerce's decision to impose a 57 percent tariff against memory-chip imports from Korea's Hynix Semiconductor.
SEOUL, South KoreaPublic reaction has been universally negative here to the U.S. Department of Commerces decision late last month to impose a 57 percent tariff against memory-chip imports from Koreas Hynix Semiconductor. Insiders say the tariffs are unjustified and may be only the beginning of U.S. government-sanctioned financial pressure against Korean chip makers.
The larger-than-anticipated penalties follow charges by U.S. semiconductor maker Micron Technology that Hynix received subsidies from the Korean government in the form of debt relief. Korean government officials and industry experts here, however, say theyve explained to their U.S. counterparts that Hynix creditors made independent decisions, without any interference by the Korean government. The Korea International Trade Association (KITA) has called the Commerce Departments decision "unfair" and has asked that it be withdrawn.
"It is regrettable that the United States has moved to impose these high countervailing duties on Hynix," said a high-ranking official in the Ministry of Foreign Affairs and Trade (MFAT). "Hynixs debt-rescheduling plan was agreed to voluntarily by Hynixs Korean and foreign creditor banks. Past financial assistance and tax benefits by the Korean government were not in violation of the WTO subsidy pact."
Koreas industrial circles also panned the U.S. decision against Hynix. The Federation of Korean Industries (FKI), representing conglomerates here, said the U.S government gave financial aid for U.S. airline companies after the Sept. 11 terrorist attacks. U.S. officials, disregarding its own case, lost the principle of equity, insiders complained.
"Hynix creditors debt-for-equity conversion program was not an aid package for the company, but a way to collect debt. Since this type of intervention by creditors is common throughout the world, the U.S. Commerce Departments decision is unfair," noted an officer at the Financial Supervisory Commission (FSC). "Micron has received tax refunds amounting to $500 million from the U.S. government. If Hynix creditors action amounts to undue aid, Micron is guilty of the same.
"Unlike Korean tax law, U.S. law allows companies to get tax refunds in case of financial losses. Each nation has its own financial policies to assist companies in dealing with financial distress," The FSC official explained.
Hynix, undergoing a series of restructuring measures over several years, is likely to suffer mightily if the U.S. Commerce Department upholds its preliminary determination. Until then, Hynix will have to post a bond requiring it to deposit an estimated $30 million each month for its chip exports to the United States because the tariff would take effect retroactively.
In addition to the U.S. penalties, Hynix is facing 30 percent to 35 percent import duties in Europe, following similar charges by the European Union. E.U. officials have proposed imposing these import duties on Hynixs DRAM chip products. Korean technology industry sources suggest that Micron and German chip maker Infineon, having tried to acquire Hynix in 1999, are now trying to protect themselves against competition from Hynix.
"In spite of extensive evidence that the Korean government was not behind the restructuring measures adopted by Hynixs creditors in 2001 and 2002, the sobering decision was widely expected after Hynixs rival, U.S.-based Micron Technology, filed its complaint and initiated a controversial review over the alleged state-subsidized exports of memory chips," said a Hynix spokesman.
A Labor Union representative at Hynix stated, "The bank restructurings that were the focus of the allegations in this case were wholly decided by Hynixs creditors based on market principles. But Hynix is now expected to pay countervailing duties that will benefit Micron, which has recorded losses for the last nine quarters."
A researcher at an economic research institute speculated, "With support from the U.S. government, Micron has targeted Hynix. Their next target may be Samsung Electronics, Koreas other big chip maker."
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