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WORLD TRADE
ORGANIZATION

WT/DS296/AB/R
27 June 2005

(05-2728)

  Original: English

UNITED STATES – COUNTERVAILING DUTY INVESTIGATION ON DYNAMIC
RAMDOM ACCESS MEMORY SEMICONDUCTORS (DRAMS) FROM KOREA


AB-2005-4

 Report of the Appellate Body


I. Introduction 

II. Arguments of the Participants and the Third Participants 

A. Claims of Error by the United States – Appellant 

1. Request for Consultations under Article 4.4 of the DSU 

2. Interpretation of Article 1.1(a)(1)(iv) of the SCM Agreement 

3. Review of the USDOC's Evidence of Entrustment or Direction 

(a) The Panel's "Probative and Compelling" Evidentiary Standard 

(b) The Panel's Approach to the Evidence 

(c) The Panel's Failure to Comply with Article 11 of the DSU 

4. Benefit and Specificity 

B. Arguments of Korea – Appellee 

1. Request for Consultations under Article 4.4 of the DSU 

2. Interpretation of Article 1.1(a)(1)(iv) of the SCM Agreement 

3. Review of the USDOC's Evidence of Entrustment or Direction 

(a) The Panel's "Probative and Compelling" Evidentiary Standard

(b) The Panel's Approach to the Evidence

(c) The Panel's Failure to Comply with Article 11 of the DSU 

4. Benefit and Specificity 

C. Claim of Error by Korea – Other Appellant 

D. Arguments of the United States – Appellee 

E. Arguments of the Third Participants 

1. China 

2. European Communities 

3. Japan 

4. Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu

III. Issues Raised in This Appeal

IV. Consultations

A. Introduction and Relevant Procedural Background 

B. Sufficiency of the United States' Notice of Appeal 

C. Does Korea's Request for Consultations Fulfil the Requirements of Article 4.4 of the DSU? 

V. Interpretation of Article 1.1(a)(1)(iv) of the SCM Agreement 

A. Introduction 

B. Article 1.1(a)(1)(iv) of the SCM Agreement 

1. The Meaning of the Terms "Entrusts" and "Directs" 

2. The United States' Appeal 

3. Korea's Cross-appeal 

VI. The Panel's Review of the USDOC's Evidence 

A. Introduction

B. The USDOC's Finding of Entrustment or Direction 

C. "Probative and Compelling" Evidentiary Standard 

D. The Panel's Approach to the Evidence 

1. Examining Individual Pieces of Evidence 

2. Examining the Totality of the Evidence

E. Admissibility of Evidence 

F. Non-record Evidence 

G. Standard of Review 

H. The Panel's Conclusion under Article 1.1(a)(1)(iv) of the SCM Agreement

VII. Benefit and Specificity

VIII. Findings and Conclusions 

ANNEX I Notification of an Appeal by the United States under Article 16.4 and Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), and under Rule 20(1) of the Working Procedures for Appellate Review

ANNEX II Notification of an Other Appeal by Korea under Article 16.4 and Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), and under Rule 23(1) of the Working Procedures for Appellate Review

ANNEX III Request for Consultations by Korea

ANNEX IV Request for Consultations by Korea, Addendum

ANNEX V Request for the Establishment of a Panel by Korea


TABLE OF CASES CITED IN THIS REPORT

Short Title

Full Case Title and Citation

Argentina – Ceramic Tiles   Panel Report, Argentina – Definitive Anti-Dumping Measures on Imports of Ceramic Floor Tiles from Italy, WT/DS189/R, adopted 5 November 2001, DSR 2001:XII, 6241
Argentina – Footwear (EC)   Appellate Body Report, Argentina – Safeguard Measures on Imports of Footwear, WT/DS121/AB/R, adopted 12 January 2000, DSR 2000:I, 515
Argentina – Textiles and Apparel   Panel Report, Argentina – Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items, WT/DS56/R, adopted 22 April 1998, as modified by the Appellate Body Report, WT/DS56/AB/R, DSR 1998:III, 1033
Brazil – EEC Milk   GATT Panel Report, Imposition of Provisional and Definitive Countervailing Duties on Milk Powder and Certain Types of Milk from the European Economic Community ("Brazil – EEC Milk "), adopted 28 April 1994, BISD 41S/II/467
Canada – Aircraft   Appellate Body Report, Canada – Measures Affecting the Export of Civilian Aircraft, WT/DS70/AB/R, adopted 20 August 1999, DSR 1999:III, 1377
Canada – Aircraft   Panel Report, Canada – Measures Affecting the Export of Civilian Aircraft, WT/DS70/R, adopted 20 August 1999, as upheld by the Appellate Body Report, WT/DS70/AB/R, DSR 1999:IV, 1443
Canada – Dairy   Appellate Body Report, Canada – Measures Affecting the Importation of Milk and the Exportation of Dairy Products, WT/DS103/AB/R, WT/DS113/AB/R and Corr.1, adopted 27 October 1999, DSR 1999:V, 2057
Canada – Dairy
(Article 21.5 – New Zealand and US)
 
Appellate Body Report, Canada – Measures Affecting the Importation of Milk and the Exportation of Dairy Products – Recourse to Article 21.5 of the DSU by New Zealand and the United States, WT/DS103/AB/RW, WT/DS113/AB/RW, adopted 18 December 2001, DSR 2001:XIII, 6829
Canada – Dairy
(Article 21.5 – New Zealand and US II)
 
Appellate Body Report, Canada – Measures Affecting the Importation of Milk and the Exportation of Dairy Products – Second Recourse to Article 21.5 of the DSU by New Zealand and the United States, WT/DS103/AB/RW2, WT/DS113/AB/RW2, adopted 17 January 2003
EC – Export Subsidies on Sugar Appellate Body Report, European Communities – Export Subsidies on Sugar, WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R, adopted 19 May 2005
EC – Tube or Pipe Fittings Appellate Body Report, European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/AB/R, adopted 18 August 2003
Egypt – Steel Rebar   Panel Report, Egypt – Definitive Anti-Dumping Measures on Steel Rebar from Turkey, WT/DS211/R, adopted 1 October 2002
Guatemala – Cement II   Panel Report, Guatemala – Definitive Anti-Dumping Measures on Grey Portland Cement from Mexico, WT/DS156/R, adopted 17 November 2000, DSR 2000:XI, 5295
Thailand – H-Beams   Appellate Body Report, Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland, WT/DS122/AB/R, adopted 5 April 2001, DSR 2001:VII, 2701
US – Corrosion-Resistant Steel Sunset Review  Appellate Body Report, United States – Sunset Review of Anti-Dumping Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan, WT/DS244/AB/R, adopted 9 January 2004
US – Cotton Yarn   Appellate Body Report, United States – Transitional Safeguard Measure on Combed Cotton Yarn from Pakistan, WT/DS192/AB/R, adopted 5 November 2001, DSR 2001:XII, 6027
US – Countervailing Duty Investigation on DRAMS Panel Report, United States – Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea, WT/DS296/R, 21 February 2005
US – Countervailing Measures on Certain EC Products Appellate Body Report, United States – Countervailing Measures Concerning Certain Products from the European Communities, WT/DS212/AB/R, adopted 8 January 2003
US – Export Restraints Panel Report, United States – Measures Treating Exports Restraints as Subsidies, WT/DS194/R and Corr.2, adopted 23 August 2001, DSR 2001:XI, 5767
US – FSC
(Article 21.5 – EC)
 
Appellate Body Report, United States – Tax Treatment for "Foreign Sales Corporations" – Recourse to Article 21.5 of the DSU by the European Communities, WT/DS108/AB/RW, adopted 29 January 2002, DSR 2002:I, 55
US – Hot-Rolled Steel   Appellate Body Report, United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R, adopted 23 August 2001, DSR 2001:X, 4697
US – Lamb   Appellate Body Report, United States – Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia, WT/DS177/AB/R, WT/DS178/AB/R, adopted 16 May 2001, DSR 2001:IX, 4051
US – Softwood Lumber IV   Appellate Body Report, United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada, WT/DS257/AB/R, adopted 17 February 2004
US – Steel Safeguards Appellate Body Report, United States – Definitive Safeguard Measures on Imports of Certain Steel Products, WT/DS248AB/R, WT/DS249AB/R, WT/DS251AB/R, WT/DS252AB/R, WT/DS253AB/R, WT/DS254AB/R, WT/DS258AB/R, WT/DS259AB/R, adopted 10 December 2003
US – Upland Cotton

Appellate Body Report, United States – Subsidies on Upland Cotton, WT/DS267/AB/R, adopted 21 March 2005

US – Wheat Gluten Appellate Body Report, United States – Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities, WT/DS166/AB/R, adopted 19 January 2001, DSR 2001:II, 717

TABLE OF ABBREVIATIONS USED IN THIS REPORT

Abbreviation

Definition

Addendum WT/DS296/1/Add.1, Addendum to Korea's request for consultations, WT/DS296/1
Anti-Dumping Agreement Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994
CRA Agreement of Financial Institutions for Promoting Corporate Restructuring (Corporate Restructuring Agreement)
CRPA Corporate Restructuring Promotion Act
CVDs countervailing duties
Direction of Credit Memorandum Direction of Credit Memorandum, C-580-851, 31 March 2003, for Countervailing Duty Determination: Dynamic Random Access Memory Semiconductors from the Republic of Korea (Exhibit US-8 submitted by the United States to the Panel)
DRAMS dynamic random access memory semiconductors (DRAMS) and memory models containing DRAMS
DSB Dispute Settlement Body
DSU Understanding on Rules and Procedures Governing the Settlement of Disputes
FSC Financial Supervisory Commission
GATT 1994 General Agreement on Tariffs and Trade 1994
GOK Government of Korea
Hynix Hynix Semiconductor, Inc.
ILC Draft Articles International Law Commission's Draft Articles on Responsibility of States for internationally wrongful acts, Report of the ILC on the work of its Fifty-third session, Official Records of the General Assembly, Fifty-sixth session, Supplement No. 10 (A/56/10), chp. IV.E.2
Issues and Decision Memorandum Issues and Decision Memorandum, C-580-851, 16 June 2003, for Final Affirmative Countervailing Duty Determination: Dynamic Random Access Memory Semiconductors from the Republic of Korea, United States Federal Register, Vol. 68, No. 120 (23 June 2003), p. 37122 (Exhibit GOK-5 submitted by Korea to the Panel)
KDB Korea Development Bank
KFB Korea First Bank
Micron Micron Technology, Inc.
Panel Report Panel Report, United States – Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea, WT/DS296/R, 21 February 2005
Samsung Samsung Electronics Co., Ltd
SCM Agreement Agreement on Subsidies and Countervailing Measures
Tokyo Round Subsidies Code Agreement on Interpretation and Application of Articles VI, XVI, and XXIII of the General Agreement on Tariffs and Trade 
USDOC United States Department of Commerce
USITC United States International Trade Commission
Vienna Convention Vienna Convention on the Law of Treaties, done at Vienna, 23 May 1969, 1155 UNTS 331; 8 International Legal Materials 679
Working Procedures Working Procedures for Appellate Review, WT/AB/WP/5, 4 January 2005
WTO World Trade Organization

WORLD TRADE ORGANIZATION
APPELLATE BODY

United States – Countervailing Duty
Investigation on Dynamic Ramdom Access
Memory Semiconductors (DRAMS) from
Korea
AB-2005-4


Present:
   

United States, Appellant/Appellee Korea,
Appellant/Appellee
 

Abi-Saab, Presiding Member
Janow, Member
Taniguchi, Member
China, Third Participant
European Communities, Third Participant
Japan, Third Participant
Separate Customs Territory of Taiwan, Penghu,
    Kinmen, and Matsu, Third Participant
 
 

I. Introduction

1. The United States and Korea each appeals certain issues of law and legal interpretations developed in the Panel Report, United States – Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea (the "Panel Report").1 The Panel was established to consider a complaint by Korea against the United States regarding the imposition of countervailing duties ("CVDs") on DRAMS and memory models containing DRAMS2 from Korea, following an investigation by the United States Department of Commerce (the "USDOC") and the United States International Trade Commission (the "USITC").

2. The CVD investigation was initiated in November 2002, in response to a petition filed by Micron Technology, Inc. ("Micron").3 The Korean companies investigated included Hynix Semiconductor, Inc. ("Hynix") and Samsung Electronics Co., Ltd. ("Samsung").4 The Government of Korea (the "GOK") participated in the investigation as an interested party. The USDOC published a final subsidy determination on 23 June 20035, concluding that Hynix had received financial contributions from the GOK by virtue of, inter alia, the GOK's entrustment or direction of Hynix's creditors to maintain the financial viability of Hynix.6 The USDOC determined that Hynix's countervailable subsidy rate was 44.29 per cent.7

3. The USITC published a preliminary injury determination on 27 December 2002 and a final injury determination on 11 August 2003.8 In its final injury determination, the USITC concluded that the United States DRAMS industry had been materially injured by reason of imports of subsidized DRAMS from Korea. On the basis of these subsidy and injury determinations by the USDOC and the USITC, respectively, the USDOC issued a CVD order on 11 August 2003, imposing CVDs of 44.29 per cent on Hynix, which would be paid by importers as cash deposits at the same time as they would normally deposit estimated customs duties.9

4. Before the Panel, Korea alleged that the United States acted inconsistently with its obligations under Articles 1, 2, 10, 12, 14, 15, 19, 22, and 32 of the Agreement on Subsidies and Countervailing Measures (the "SCM Agreement"), as well as under Article VI:3 of the General Agreement on Tariffs and Trade 1994 (the "GATT 1994").10

5. In the Panel Report, circulated to Members of the World Trade Organization (the "WTO")
on 21 February 2005, the Panel concluded that:

... the [US]DOC's Final Subsidy Determination, the [US]ITC's Final Injury Determination, and the Final Countervailing Duty Order based thereon, are inconsistent with Articles 1, 2 and 15.5 of the SCM Agreement. We therefore conclude that the [United States] is in violation of those provisions of the SCM Agreement.11

6. The Panel rejected Korea's claims that the United States acted inconsistently with Articles 212, 12.6, 15.2, 15.4, and 15.513 of the SCM Agreement.14 Moreover, the Panel did "not consider it necessary to address" certain additional claims made by Korea under Articles 1 and 2 of the SCM Agreement, or the claims Korea made pursuant to Articles 10, 14, 15.1, 19.4, 22.3, and 32.1 of the SCM Agreement and Article VI:3 of the GATT 1994.15 In the course of its examination of Korea's claims, the Panel also dismissed a request by the United States that the Panel reject Korea's claims against the CVD order because Korea's request for consultations did not meet the requirements of Article 4.4 of the Understanding on Rules and Procedures Governing the Settlement of disputes (the "DSU").16

7. In the light of its findings, the Panel recommended that the United States "bring the [US]DOC's Final Subsidy Determination, the [US]ITC's Final Injury Determination, and the [US]DOC's final [CVD] order, into conformity with the SCM Agreement".17

8. On 29 March 2005, the United States notified the Dispute Settlement Body (the "DSB") of its intention to appeal certain issues of law covered in the Panel Report and certain legal interpretations developed by the Panel, pursuant to paragraph 4 of Article 16 of the DSU, and filed a Notice of Appeal18   pursuant to Rule 20 of the Working Procedures for Appellate Review (the "Working Procedures").19 On 11 April 2005, Korea notified the DSB of its intention to appeal certain issues of law covered in the Panel Report and certain legal interpretations developed by the Panel, pursuant to paragraph 4 of Article 16 of the DSU, and filed a Notice of Other Appeal20 pursuant to Rule 23(1) of the  Working Procedures. On 5 April 2005, the United States filed an appellant's submission.21 On 13 April 2005, Korea filed an other appellant's submission.22 On 25 April 2005, Korea and the United States each filed an appellee's submission.23 On the same day, China, the European Communities, Japan, and the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu, each filed a third participant's submission.24

9. The oral hearing in this appeal was held on 11 May 2005. The participants and third participants presented oral arguments (with the exception of the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu) and responded to questions posed by the Members of the Division hearing the appeal.

II. Arguments of the Participants and the Third Participants

A. Claims of Error by the United States – Appellant

1. Request for Consultations under Article 4.4 of the DSU

10. The United States appeals the Panel's finding that Korea's request for consultations met the requirements of Article 4.4 of the DSU. According to the United States, Korea's request for consultations failed to provide the legal basis for the complaint with respect to the CVD order. The United States therefore requests the Appellate Body to reverse the Panel's finding.

11. The United States argues that it is "not credible"25 to assert that, by referring to the fact that it had filed a prior request for consultations on one set of alleged measures, Korea satisfied its obligation to provide an indication of the legal basis for its complaint with respect to the CVD order, which was identified only in the second request for consultations. The United States further contends that Korea cited numerous provisions in its first request for consultations and that the United States could not have been "supposed to guess which provision(s) applied to the [CVD] order".26 In addition, the United States maintains that Korea refused to identify the provision(s) of a covered agreement with which it considered the CVD order to be inconsistent, even when specifically asked to do so by the United States after the filing of the second request for consultations. In the United States' submission "the requirements of Article 4.4 are minimal, [but] they cannot be ignored."27

2. Interpretation of Article 1.1(a)(1)(iv) of the SCM Agreement

12. The United States claims that the Panel incorrectly interpreted the terms "entrusts" and "directs" in Article 1.1(a)(1)(iv) of the SCM Agreement28 and then applied that erroneous interpretation to its assessment of the record evidence. According to the United States, the Panel's interpretation of the terms "entrusts" and "directs" is inconsistent with the ordinary meanings of these terms. The proper interpretation of "entrusts" and "directs" would have considered the multiple meanings of these terms found in their dictionary definitions. In the United States' view, had the Panel looked to these meanings, it would have arrived at an understanding of "entrusts" and "directs" that takes account of the full range of government actions that fall within the ordinary meanings of these terms, namely: a government investing trust in a private body to carry out a task; a government giving responsibility to a private body to carry out a task; a government informing or guiding a private body as to how to carry out a task; a government regulating the course of a private body's conduct; as well as a government delegating or commanding a private body to carry out a task. The Panel, however, disregarded these definitions and settled on a definition of "entrusts" and "directs" as "delegation" and "command"29, respectively. The United States alleges that this narrow interpretation fails to recognize the numerous means by which a government may provide subsidies through private bodies.

13. The United States submits that the Panel also failed to consider sufficiently the context of the terms "entrusts" and "directs", because the use of the term "practice" in Article 1.1(a)(1)(iv) clearly implies that entrustment or direction cannot be limited to an official or formal program, but also must include broader "practices". The United States argues that the context also makes clear that the negotiators did not intend that governments would be able to evade the subsidy disciplines by using other means—that is, means that differ "in no real sense"30 from those normally used by governments—of granting subsidies. In the United States' view, the words "in no real sense" as used in Article 1.1(a)(1)(iv) suggest that the drafters were seeking to avoid circumvention of the obligation not to provide prohibited subsidies. This understanding, according to the United States, would support an interpretation of "entrusts" and "directs" that gives effect to their full range of meanings so as not to permit subsidization in any form by governments through private bodies. The United States further asserts that the Panel's interpretation is not supported by the object and purpose of the SCM Agreement because the Panel's reading of Article 1.1(a)(1)(iv) would cover an unduly limited range of government subsidization achieved through the actions of private bodies.

14. Finally, the United States contends that the Panel's narrow interpretation of "entrusts" and "directs" permeates the rest of its analysis. The United States points to several of the Panel's findings as examples of errors resulting from this interpretation, including the Panel's analyses of Prime Minister's Decree No. 408, meetings between Hynix creditors and GOK officials, and Kookmin Bank's prospectus for the United States Securities and Exchange Commission. Taken together, these findings undermine the Panel's ultimate conclusion of inconsistency with Article 1.1(a)(1)(iv). Therefore, the United States requests the Appellate Body to reverse the Panel's findings with respect to its interpretation of "entrusts" and "directs", as well as the Panel's conclusions based on that interpretation.

3. Review of the USDOC's Evidence of Entrustment or Direction

(a) The Panel's "Probative and Compelling" Evidentiary Standard

15. The United States argues that the Panel erroneously applied a "probative and compelling" evidentiary standard in its review of the USDOC's subsidy determination and requests the Appellate Body to reverse the Panel's findings setting forth its evidentiary standard and the subsequent findings based on the application of that standard.

16. According to the United States, there is no basis in the SCM Agreement, the DSU, or any other covered agreement for the Panel's finding that evidence of entrustment or direction "must in all cases be probative and compelling".31 The United States recognizes that provisions of various covered agreements set forth a number of evidentiary standards, such as "positive evidence"32, "relevant evidence"33, or "sufficient evidence".34 The United States also recalls the Appellate Body's interpretation of the term "positive evidence" in US – Hot-Rolled Steel that "[t]he word 'positive' means [...] that the evidence must be of an affirmative, objective and verifiable character, and that it must be credible."35 The United States contends, however, that this requirement does not translate into an evidentiary standard of "probative and compelling".

17. Referring to the definition of the term "compelling", the United States argues that a standard of "compelling" evidence would appear to require evidence that "forces" or "obliges" a fact-finder to reach a particular conclusion, or evidence that is "overwhelming"36 or "irrefutable".37 In the United States' view, such a standard cannot be reconciled with the decision of the Appellate Body in US – Lamb38, according to which a panel's duty is to determine whether an investigation authority provided a reasoned and adequate explanation as to why the evidence led to a particular conclusion, rather than whether that conclusion was based on probative and compelling evidence.

(b) The Panel's Approach to the Evidence

(i) Reviewing the Totality of the Evidence

18. The United States alleges that the Panel erred by assessing the USDOC's determination of entrustment or direction on the basis of each piece of evidence in isolation, without considering the totality of the evidence. In the United States' submission, this approach necessarily led to a finding of insufficiency of the evidence underlying the USDOC's determination. Therefore, the United States requests the Appellate Body to reverse the Panel's findings as to the individual pieces of evidence, as well as those findings that were the product of the Panel's erroneous approach.39

19. The United States observes that the Panel indicated that it would adopt the same approach in examining the evidence as did the USDOC, "rel[ying] on the totality of the evidence before it, without attaching particular importance to one or several evidentiary factors".40 However, the United States argues, the Panel Report reveals that the Panel in fact assessed whether each piece of evidence, in and of itself, demonstrated entrustment or direction, rather than assessing whether the evidence in its entirety supports the finding of entrustment or direction.41

20. In particular, the United States alleges that the Panel employed this "piecemeal approach"42 at several points in its analysis of the USDOC's finding on entrustment or direction. The United States points to the Panel's examination of various items of evidence relied on by the USDOC—including the Public Funds Oversight Act, Prime Minister's Decree No. 408, and Kookmin Bank's prospectus for the United States Securities and Exchange Commission—as examples of the Panel's failure to consider the evidence in its totality.43 The United States further alleges that, even where the Panel claimed to consider pieces of evidence in a broader context, it "marginalized"44 this evidence, as in the Panel's failure to appreciate the relevance of GOK ownership or control of the dominant Hynix creditors.45 Therefore, the United States requests the Appellate Body to reverse those findings that were based on the Panel's error of reviewing in isolation pieces of evidence supporting the USDOC's determination of entrustment or direction.

(ii) Circumstantial Evidence

21. The United States alleges that the Panel effectively required every piece of evidence to be direct evidence of entrustment or direction and thereby precluded legitimate inferences drawn from circumstantial and secondary evidence. The United States therefore requests the Appellate Body to reverse the Panel's findings affected by its "legally erroneous"46 analytical framework.

22. As an example of the Panel's error, the United States refers to the Panel's discussion of the GOK's coercion of Hana Bank, where the Panel stated that "[a]n objective and impartial investigating authority would not have treated a simple reference to a footnote in an article as sufficient proof of such a significant issue as government entrustment or direction."47 The United States argues that this statement reveals the Panel's failure to recognize that the value of a piece of circumstantial evidence is not in its sufficiency, but rather, in "the inferences created, together with other pieces of evidence, regarding the existence of a particular fact or set of facts".48

23. The United States contends that instead of "fixating" on whether certain individual pieces of evidence were dispositive of entrustment or direction, the Panel should have drawn from the totality of circumstantial evidence that "the GOK had an established practice, purpose, and process for entrusting and directing Hynix's creditors".49 In doing so, it should have given special attention to "the GOK's longstanding policy of supporting Hynix; the GOK's powerful influence over Hynix's creditors as a consequence of, inter alia, the significant GOK ownership interests in the Korean financial sector; and the utter lack of any commercial basis for assisting Hynix."50

24. The United States submits that the Panel's treatment of circumstantial evidence differs sharply from the way prior panels and the Appellate Body have assessed circumstantial evidence. In addition to the panel reports in Argentina – Textiles and Apparel and Canada – Aircraft, the United States points to the statement of the Appellate Body in Canada – Aircraft that "inferences derived may be inferences of law: for example the ensemble of facts found to exist warrants the characterization of a 'subsidy'".51 According to the United States, circumstantial evidence is particularly relevant to establishing a financial contribution under Article 1.1(a)(1)(iv). Direct evidence of government entrustment or direction is difficult for outside parties to obtain because such information typically will be treated by the exporting government or foreign parties as confidential. As a result, the United States submits, the Panel's failure to appreciate the circumstantial evidence on which the USDOC relied effectively established an evidentiary requirement that is "virtually impossible" to meet in cases involving government entrustment or direction.52

(iii) Burden of Proof

25. The United States argues that the manner in which the Panel assessed the evidence in the present case effectively led to an improper shift in the burden of proof from Korea to the United States and, therefore, requests the Appellate Body to reverse the Panel's findings that resulted from this error. According to the United States, the Panel recognized—in accordance with prior WTO decisions—that Korea bears the burden of proof as the complaining party. However, the United States alleges, the Panel analyzed pieces of evidence in isolation, required that each piece of evidence be "compelling", and disregarded inferences drawn from circumstantial evidence, thereby requiring the United States to produce a "smoking gun"53 document that itself would be dispositive of entrustment or direction. Because the Panel did not find such a "smoking gun", the United States submits, it concluded that the USDOC had not demonstrated entrustment or direction. Requiring the United States to justify the USDOC's determination with evidence of a "smoking gun"—instead of requiring Korea to establish how the evidence could not collectively support a finding of entrustment or direction—amounted to a shift in the burden of proof from Korea to the United States.

(iv) Ex post Rationalization

26. The United States submits that the Panel erroneously characterized the United States' reliance on certain record evidence during the Panel proceedings as ex post  rationalizations and consequently erred in declining to consider this evidence when assessing the USDOC's finding of entrustment or direction. Accordingly, the United States requests the Appellate Body to reverse the Panel's findings regarding ex post rationalization as well as the conclusions that resulted from these findings.

27. The United States acknowledges that some panels have rejected arguments and reasoning on the grounds that they constituted ex post rationalizations.54 However, the United States argues, in those cases, panels objected to the introduction of new reasoning, whereas, in this case, the United States merely provided to the Panel additional evidentiary support relating to reasoning that had already been employed in the USDOC's published determination. Specifically, the United States submits that each of these items of evidence—such as the article in the Dong-A Daily, entitled "'Gangster-Style' Solution for Hynix", which the Panel refused to consider55—related directly to the reasoning of the USDOC regarding certain factual inferences underlying the USDOC's finding of entrustment or direction, and thus, do not constitute ex post rationalizations.

28. In support of this argument, the United States refers to Article 22.5 of the SCM Agreement, which provides that an agency's published determination at the end of a CVD investigation "shall contain ... all relevant information on the matters of fact and law and reasons which have led to the imposition of final measures". In the United States' view, this provision addresses what must be contained in a final determination and, by its plain language, does not require an investigating authority "to cite to every piece of record evidence that supports its reasons for the imposition of final measures".56 Therefore, the United States contends, nothing in the SCM Agreement permits a panel to disregard record evidence, even when not cited in the final determination, provided that it is not being introduced to support new reasoning. By concluding to the contrary, the United States argues, the Panel impermissibly limited the evidence on which a Member may rely under Article 22.5 of the SCM Agreement, in contravention of Articles 3.2 and 19.2 of the DSU.

29. The United States additionally points to a GATT panel decision applying Article 2.15 of the Agreement on Interpretation and Application of Articles VI, XVI, and XXIII of the General Agreement on Tariffs and Trade (the "Tokyo Round Subsidies Code"), which is "quite similar" to Article 22.5 of the SCM Agreement.57 That panel decision recognized that a panel was not precluded, by virtue of Article 2.15, from considering evidence not included in a published determination, provided that it could reasonably be inferred that the agency had relied on such evidence. The United States also refers to the Appellate Body Report in US – Upland Cotton. In that case, the Appellate Body, in the context of the panel's application of Article 6.3 of the SCM Agreement, found no error where the panel did not refer to every item of evidence provided by the parties to the dispute because it had found certain items less significant for its reasoning than others.58 In the United States' view, similar reasoning should apply in this case so as not to require an investigating authority to cite every item of supporting evidence from the agency's record.

30. Finally, the United States argues that the USDOC did, in fact, explicitly cite, in its Direction of Credit Memorandum59, some of the articles that the Panel refused to take into account, such as articles in the Korea Economic Daily, Euromoney, and the Korea Times. The United States submits that the Direction of Credit Memorandum had been referenced in the USDOC's determination in support of the USDOC's finding of entrustment or direction. Therefore, according to the United States, the Panel erred in basing its refusal to take these articles into consideration on the fact that they had not been cited in the USDOC's published determination.

(c) The Panel's Failure to Comply with Article 11 of the DSU

(i) Non-record Evidence

31. The United States contends that the Panel improperly relied on evidence that was not on the record before the USDOC and that, in so doing, the Panel engaged in an impermissible de novo review of the USDOC's subsidy determination in violation of Article 11 of the DSU. The United States accordingly requests the Appellate Body to reverse those findings of the Panel that were based on the erroneous use of non-record evidence.

32. Referring to the Appellate Body Report in US – Cotton Yarn and the panel report in Egypt – Steel Rebar, the United States submits that reliance on non-record evidence constitutes a de novo review and results in a violation of Article 11 of the DSU. Additionally, the United States relies on Article 12.2 of the SCM Agreement, which provides, in relevant part, that a "decision of the investigating authorities can only be based on such information and arguments as were on the written record of this authority".

33. The United States points, in particular, to the findings of the Panel contained in paragraphs 7.63, 7.91, and 7.155 of the Panel Report. In the United States' submission, each of these findings was expressly based on the Panel's finding that certain creditors of Hynix exercised mediation rights in connection with the October 2001 restructuring. However, the United States argues, there was no evidence on the record of the USDOC that certain Hynix creditors did, in fact, engage in mediation and thereby avoid the restructuring terms established by the dominant GOK-owned and -controlled creditors. According to the United States, the only evidence of such mediation was submitted by Korea in the course of the Panel proceedings, and not by any interested party to the USDOC during the CVD investigation.

34. With regard to the Panel's conclusion that Article 29(5) of the Corporate Restructuring Promotion Act (the "CRPA") should have put the USDOC on notice about the possibility of mediation, the United States contends that, absent evidence on the record from Hynix or the GOK regarding "actual instances of mediation", the USDOC was in no position to consider how such mediation would affect its findings.60 In the United States' view, a reference to the possibility of mediation alone does not constitute record evidence that mediation did take place.

35. Moreover, the United States argues, the USDOC, in the course of the investigation, asked specific questions regarding the CRPA and the different options provided to Hynix's creditors at the time of the October 2001 restructuring. Notwithstanding this request for information, the United States submits, "neither Hynix nor the GOK ever mentioned anything about mediation".61 Furthermore, the United States asserts, neither Hynix nor the GOK ever mentioned in their submissions to the USDOC that mediation had in fact taken place.

36. The United States disagrees with the Panel's finding that a statement in Hynix's 2001 Audit Report indicated that the mediation provisions had been invoked and that this should have put the USDOC on notice that a request for mediation had been filed.62 In the United States' view, the referenced excerpt to the Hynix 2001 Audit Report did not indicate that mediation had occurred, only that certain banks had "raised objections"63, without clarifying the relationship, if any, between the "raising of objections" and the recourse to mediation.

(ii) Standard of Review

37. The United States submits that, in addition to the individual Panel errors listed above64, the cumulative effect of these errors also constitutes a violation of Article 11 of the DSU. The United States asserts that it was appropriate for the USDOC to examine the evidence in its totality, to rely on circumstantial and secondary evidence, and to draw reasonable inferences from this evidence. The Panel's task in reviewing the USDOC's determination was to decide whether the USDOC properly established the facts and evaluated them in an unbiased and objective way, and whether the USDOC, given the totality of the record evidence, including circumstantial evidence, could have found entrustment or direction. In the United States' submission, however, the individual errors committed by the Panel led it to substitute a "new analytic framework" for that used by the USDOC, redefine the scope and structure of the USDOC's analysis, and reweigh the USDOC's evidence.65 In so doing, the United States argues, the Panel failed to follow the proper standard of review and thereby exceeded the bounds of its discretion under Article 11 of the DSU. The United States, therefore, requests the Appellate Body to reverse the Panel's conclusions stemming from its improper application of the standard of review.

4. Benefit and Specificity

38. The United States appeals the Panel's findings regarding the USDOC's determination of benefit and specificity. The United States observes that the Panel found the USDOC's benefit determination to be inconsistent with Article 1.1(b) of the SCM Agreement, and its specificity determination to be inconsistent with Article 2 of the SCM Agreement insofar as it relates to alleged subsidies by creditors not identified by the USDOC as public bodies. The United States submits that these findings are based solely on the Panel's erroneous conclusion that the USDOC's determination of GOK entrustment or direction of certain Hynix creditors is inconsistent with Article 1.1(a)(1)(iv) of the SCM Agreement. Accordingly, the United States requests the Appellate Body to reverse the Panel's findings on benefit and specificity.

B. Arguments of Korea – Appellee

1. Request for Consultations under Article 4.4 of the DSU

39. Korea submits that the United States' appeal regarding the request for consultations is not properly before the Appellate Body because the United States' Notice of Appeal does not sufficiently identify the alleged errors of law and legal interpretations as required by Rule 20(2)(d) of the Working Procedures. Korea argues that subparagraph (i) of Rule 20(2)(d) would be rendered redundant, in the light of subparagraphs (ii) and (iii), if it were sufficient for an appellant to state merely what the panel holds, and claim simply that it disagrees. In its Notice of Appeal, the United States failed to offer "the least bit of description of what the [United States] considers to be the legal error".66 Korea, therefore, requests the Appellate Body to dismiss this claim of the United States.

40. In the alternative, Korea argues that the United States' claim regarding Article 4.4 of the DSU should be dismissed because Korea's request for consultations did satisfy the requirements of that provision. Korea refers to its request for consultations, dated 30 June 200367, and to the addendum to this request, dated 18 August 2003 (the "Addendum").68 Korea disagrees with the United States that Korea did not indicate the legal provisions with which the CVD order is alleged to be inconsistent. Korea submits that the 18 August 2003 document made clear that it was an "addendum" to the 30 June 2003 request for consultations and that, therefore, the same violations set out in the initial request were being alleged in the Addendum with respect to the CVD order. Korea further argues that the CVD order is "dependent" on the final determinations of the USDOC and the USITC and is effectively a "ministerial function without discretion".69 In Korea's view, it follows that the legal basis for the complaint as to the CVD order is identical to the legal basis for the complaint as to the underlying determinations. Therefore, Korea submits that its request for consultations and Addendum met the requirements of Article 4.4 of the DSU and requests the Appellate Body to dismiss the United States' appeal of this issue.

2. Interpretation of Article 1.1(a)(1)(iv) of the SCM Agreement

41. Korea contests the United States' challenge to the Panel's interpretation of Article 1.1(a)(1)(iv) of the the SCM Agreement, and therefore submits that the interpretation should be upheld by the Appellate Body. In particular, Korea argues that the Panel's interpretation of the terms "entrusts" and "directs" was consistent with the ordinary meanings of these terms. Korea recalls that the Panel agreed with the panel in US – Export Restraints that "entrustment" and "direction" contain an element of "delegation" and "command". Korea contends that the definitions of the terms "entrusts" and "directs" proposed by the United States were chosen selectively and that, in so choosing, the United States arrives at an overly broad reading of these terms. Korea presents several examples applying the definitions suggested by the United States, arguing that such examples reveal that these definitions incorporate a broader range of government action than contemplated by the SCM Agreement.

42. Korea further submits that the Panel's proper understanding of the context of the terms "entrusts" and "directs" supports its interpretation. Korea rejects the United States' reading of the term "practice" in Article 1.1(a)(1)(iv) as implying that entrustment or direction cannot be limited to an official programme, but may also include broader "practices". Korea argues that "[t]he term 'practices' refers to what is being entrusted or directed, not whether such types of governmental activities have been so entrusted or directed".70 Similarly, Korea disagrees with the United States' assertion that by equating "entrusts" and "directs" with "delegation" and "command", the Panel did not take account of the "full range of methods"71 by which a government might provide a subsidy. Korea submits that, although there may be a broad range of the types of financial transactions covered by Article 1.1(a)(1), that is a "distinct matter" from determining whether such transactions can be attributed to the Member's government due to entrustment or direction by the government to a private body.72

43. Korea agrees with the United States that the SCM Agreement aims to discipline subsidies offered by governments. In Korea's view, under the United States' interpretation, a Member would be allowed to countervail a private body's actions that are not affirmatively entrusted or directed by the government. This would "turn the SCM Agreement from a pro-competitive agreement to a tool of gross protectionism".73

44. Korea responds to the various examples submitted by the United States with a view to demonstrating the Panel's application of its interpretation of the terms "entrusts" and "directs" to the facts of this case. In Korea's view, the Panel's findings referred to by the United States are not based on an improper reading of Article 1.1(a)(1)(iv); the Panel found instead that the USDOC had improperly relied on evidence to support conclusions that do not logically follow from the evidence. Korea further emphasizes that the Panel agreed with the United States on the principal legal issues relating to the interpretation of Article 1.1(a)(1)(iv) and that, in fact, the United States is "trying to appeal factual issues under the guise of spurious legal claims".74 Korea, therefore, requests the Appellate Body to uphold the Panel's findings claimed by the United States to be based on the Panel's erroneous interpretation of Article 1.1(a)(1)(iv).

3. Review of the USDOC's Evidence of Entrustment or Direction

(a) The Panel's "Probative and Compelling" Evidentiary Standard

45. Korea contests the United States' claim that the Panel impermissibly created a new legal standard for evaluating evidence by requiring evidence to be "probative and compelling". Korea submits that the term "probative and compelling" is not a new legal standard, but rather, a description of the type of circumstantial evidence that would be sufficient to establish entrustment or direction.

46. In Korea's view, the Panel addressed the question whether an investigating authority could properly base its finding of entrustment or direction on circumstantial evidence, or whether direct evidence was required to sustain such a finding. Korea notes that the Panel found that an agency may rest its finding of entrustment or direction on circumstantial evidence, and argues that the Panel's statement at issue must be understood in this particular context. Korea contends that the Panel should be understood to have found that the further away from direct evidence one moves, the more important it is that the circumstantial evidence be persuasive. When assessing what sort of evidence could be considered persuasive in this context, the Panel required the evidence to be "probative and compelling". Therefore, Korea submits, the Panel employed these terms merely to give a description of the quality or type of evidence that was required in the specific circumstances of the present case, without purporting to define a new evidentiary standard under the SCM Agreement.

47. Furthermore, Korea alleges that the United States mischaracterizes the evidentiary standard articulated by the Panel by reading the Panel's description of "probative and compelling" evidence to require "overwhelming"75 or "irrefutable" evidence.76 Based on dictionary definitions of "probative" and "compelling", as well as synonyms for "compelling", Korea concludes that evidence can be regarded as "probative and compelling" if it has a "quality of proof and [has] fitness to induce conviction of truth".77 Korea submits that the Panel followed this standard in finding that there was adequate evidence that Korea First Bank ("KFB") had been coerced by reason of alleged verbal threats from an official from the Financial Supervisory Service, even though the sole evidence for this finding consisted of a single newspaper report. Therefore, Korea concludes, if there is any criticism of the Panel in its examination of the evidence, it is that the Panel "set the bar too low".78

(b) The Panel's Approach to the Evidence

(i) Reviewing the Totality of the Evidence

48. Korea challenges the United States' allegation that the Panel evaluated the evidence in a manner that required that each piece of evidence, in and of itself, demonstrate entrustment or direction. Korea submits that, although the Panel did look at individual pieces of evidence, it did not state that each piece of evidence, in and of itself, had to demonstrate entrustment and direction. Korea points instead to instances in which the Panel explicitly stated that it viewed a piece of evidence "in conjunction with" other evidentiary factors.79

49. Moreover, according to Korea, if the Panel found that a piece of evidence was of little or no evidentiary value—in the sense that it did not support the conclusion that the USDOC derived from it, or that it was contradicted, or that it was inaccurate—there would be no merit in taking into account several such pieces of evidence as a whole. In other words, Korea submits, "[i]t is a mathematical truism that no matter how many zeros and negative numbers one adds together, the sum can never be a positive number."80 Korea further alleges that, by arguing that the Panel reviewed the evidence in an improper manner, the United States attempts to re-argue on appeal the specific facts of the case.

50. Korea contests the examples of Panel findings cited by the United States in support of its allegation. Korea submits that a correct reading of the Panel's reasoning does not reveal the Panel to have required each piece of evidence, in and of itself, to establish entrustment or direction. Instead, according to Korea, these examples reflect the Panel's finding that several pieces of evidence relied upon by the USDOC were not probative, that is, they did not support the conclusion of entrustment or direction that the USDOC sought to draw on the basis of that evidence. In Korea's view, the United States' appeal amounts to a disagreement with the Panel's weighing of the evidence, which does not provide a permissible basis for appeal.

(ii) Circumstantial Evidence

51. Korea argues that, contrary to the United States' submission, the Panel did not effectively require every piece of evidence to be direct evidence of entrustment or direction. Accordingly, Korea requests the Appellate Body to uphold the findings challenged by the United States on the basis that the Panel erred in its assessment of the USDOC's circumstantial evidence.

52. Korea asserts that the Panel did, in fact, accept circumstantial and secondary evidence. In support of its argument, Korea submits that the Panel found entrustment or direction of KFB on the basis of a single newspaper article, which was "both secondary and circumstantial" evidence.81 Because the Panel considered such evidence in its analysis, as the United States requested, Korea submits that there is no basis for the United States' appeal.

53. In Korea's submission, the Panel did not reject evidence because it was circumstantial or secondary evidence, but rather, because much of the evidence was inaccurate, illogical, or simply not probative. For example, in response to the United States' argument that the Panel did not properly assess the evidence regarding GOK coercion of Hana Bank, Korea submits that the Panel Report does not indicate that the basis for finding this evidence insufficient was its circumstantial nature. Rather, in Korea's view, this evidence was rejected because the record showed that the USDOC had not itself examined the evidence submitted before the Panel, instead having relied on a mere citation of that evidence contained in a footnote of another document.

54. Korea submits that the Panel's examination of circumstantial evidence in the present case is consistent with prior panel decisions, in particular, with the panel reports in Argentina – Textiles and Apparel and Canada – Aircraft, cited by the United States in support of its appeal. Korea asserts that these two cases essentially stand for the same proposition ultimately accepted by the Panel in this dispute at the urging of the United States, namely, that a Member may establish the existence of certain conditions on the basis of circumstantial rather than direct evidence. In Korea's view, the Panel's articulation of a "probative and compelling" requirement for the evidence does not diminish a Member's right to rely on circumstantial evidence because the "probative and compelling" requirement "exists whether or not the evidence is circumstantial or direct".82

(iii) Burden of Proof

55. Korea submits that the United States' claim—that the Panel's assessment of the USDOC's determination led to a shift in the burden of proof from Korea to the United States—is "baseless" and should be rejected by the Appellate Body.83 Korea disagrees with the United States' contention that the Panel required the United States to produce a "smoking gun".84 Korea asserts that, rather than looking for each piece of evidence in isolation to be dispositive of entrustment or direction, the Panel assessed whether an objective and impartial investigating authority could reasonably have relied on the USDOC's evidence "as a part of building a finding of entrustment or direction".85 Reliance on such evidence, Korea argues, was in any event found by the Panel to be inappropriate because the evidence was typically not relevant to the inference or conclusion it was meant to support and, therefore, was neither probative nor compelling. In Korea's view, the Panel's refusal to accept unquestioningly the United States' assertions as to the relevance of certain evidence does not constitute an improper allocation of the burden of proof to the United States.

(iv) Ex post Rationalization

56. Korea submits that the Panel correctly identified evidence submitted by the United States as ex post rationalizations and requests the Appellate Body to uphold the Panel's findings refusing to consider such evidence. Referring to Article 22.5 of the SCM Agreement, Korea contends that an investigating authority must cite, in its published determination, every piece of record evidence that supports the agency's reasons for the imposition of final measures. Korea submits that the United States' argument—that a panel must accept any evidence not being submitted to support new reasoning—is not consistent with the plain text of Article 22.5. Korea points, in particular, to the requirement that the published determination contain "all relevant information" in support of its view that evidence not cited by the agency—and, therefore, presumably not "relevant"—may not subsequently be relied on by that Member in WTO dispute settlement proceedings.

57. Korea contends that the United States' reliance on a GATT panel decision is misplaced because that decision was under the Tokyo Round Subsidies Code, which differs significantly in pertinent respects from the SCM Agreement. Korea notes that, whereas the Tokyo Round Subsidies Code obliged an investigating authority to include "all issues of fact and law" in its published determination86, the SCM Agreement requires the inclusion of "all relevant information".87 Korea maintains that this difference in language suggests that, whatever may have been the understanding of this obligation under the Tokyo Round Subsides Code, the plain language of the SCM Agreement now requires that every piece of information upon which the investigating authority relied in making its determination be contained in the agency's published determination.

58. Korea submits that the United States' reliance on the Appellate Body decision in US – Upland Cotton is similarly "inapposite".88 According to Korea, the section of that Appellate Body Report cited by the United States considers the question whether a panel evaluating the consistency of a measure with a particular provision needs to "address"89 each piece of evidence or each argument raised by the parties, or whether it suffices, instead, for a panel to explain the reasoning underlying its conclusions. This issue, in Korea's view, has "nothing to do with"90 the requirement in Article 22.5 of the SCM Agreement that the agency's determination contain "all relevant information".

59. Furthermore, Korea disagrees with the United States' assertion that the newspaper and journal articles disregarded by the Panel were cited by the USDOC in the Direction of Credit Memorandum. Korea submits, first, that certain of the articles implicated by this issue on appeal are not included among the citations in that document. In addition, according to Korea, the Direction of Credit Memorandum is merely a list of citations that does not contain any discussion of the evidence listed and, therefore, cannot establish that the documents were in fact taken into account by the USDOC so that contradictions and nuances found therein could be reasonably and adequately explained by the agency. Finally, Korea asserts that the date of the Direction of Credit Memorandum, which is the same date as that of the USDOC's preliminary subsidy determination91, as well as the fact that no reference is made to materials supporting the respondent's arguments, suggest that it was drafted "at the last second ... to support a decision already reached without reliance on the articles".92

(c) The Panel's Failure to Comply with Article 11 of the DSU

(i) Non-record Evidence

60. Korea submits that the Panel did not base its findings on non-record information and, therefore, requests the Appellate Body to uphold the respective findings of the Panel as well as the Panel's conclusions that the United States contends resulted from this alleged error. The United States bases its argument on the premise that the record evidence shows only that creditors had the possibility of going to mediation in connection with the October 2001 restructuring, not, as the Panel found, that certain creditors exercised mediation rights. In Korea's view, however, the Panel's analysis did not rest on the fact that certain creditors did engage in mediation. Instead, according to Korea, the Panel faulted the USDOC for not conducting further inquiry on this issue, given that Article 29(5) of the CRPA, which was on the record, explicitly provided for the option of mediation to determine appraisal rights.93

61. Korea also challenges the United States' argument that the record evidence does not establish that certain Hynix creditors exercised their rights to pursue mediation. Korea argues that the Panel linked Article 29(5) of the CRPA to other pieces of evidence, which together could support the Panel's understanding that mediation did take place.94 Korea refers, in particular, to the Panel's discussion of the Hynix 2001 Audit Report, which states that three creditors "raised objections" to the terms of reimbursement "[b]ased on" the CRPA.95 Korea submits that this language was properly understood by the Panel to indicate recourse to mediation by certain creditors of Hynix.

62. Finally, Korea contends that the United States fails to recognize that the Panel pointed also to contradictory evidence from one of the USDOC's own experts. According to Korea, the Panel quoted the USDOC's expert as acknowledging that "certain creditors were able to act independently within the framework of the CRPA".96 Because the USDOC did not even take this statement into account in its explanation, Korea argues, the Panel properly concluded that the record evidence put the USDOC on notice as to certain creditors' recourse to mediation in connection with the October 2001 restructuring.

63. Korea concludes that there was evidence on the record that mediation occurred pursuant to the authority of the CRPA and, therefore, that the Panel did not impermissibly base its findings on non-record information, in violation of Article 11 of the DSU.

(ii) Standard of Review

64. Korea challenges the United States' contention that the cumulative effect of the alleged errors that the Panel made in its review of the evidence constitutes a separate violation of Article 11 of the DSU. Korea argues that the United States adds no new arguments when it alleges a separate violation of Article 11 of the DSU, relying instead on its previous claims relating to the totality of the evidence, circumstantial and secondary evidence, the burden of proof, and the Panel's alleged use of non-record evidence.97 Having already established the absence of any basis for these claims, Korea requests the Appellate Body to dismiss the United States' additional claim as to the Panel's application of the standard of review under Article 11 of the DSU.

4. Benefit and Specificity

65. Korea submits that the United States' sole argument with regard to benefit and specificity is that the Panel based its conclusions on its allegedly erroneous findings with respect to GOK entrustment or direction.98 Because the Panel correctly found the USDOC's determination of entrustment or direction to rest on insufficient evidence, Korea contends that the Appellate Body should dismiss the United States' claims relating to benefit and specificity.

C. Claim of Error by Korea – Other Appellant

66. Korea appeals the Panel's finding that a private body, KFB, was entrusted or directed by the GOK to undertake a financial contribution within the meaning of Article 1.1(a)(1)(iv) of the SCM Agreement. Korea contends that this finding was premised on the Panel's erroneous understanding that there could be entrustment or direction under Article 1.1(a)(1)(iv) when the action that the private body was supposed to "carry out"—in this case the participation in the Fast Track Debenture Programme—never took place. Korea maintains that KFB did not "carry out" the allegedly entrusted action and that, accordingly, the Panel was incorrect in finding that an objective and impartial investigating authority could have found that there was entrustment or direction of KFB to participate in the Fast Track Debenture Programme.99 Korea further asserts that its appeal focuses on the Panel's interpretation of Article 1.1(a)(1)(iv) and that, although Korea disagrees with the Panel's factual finding that there was coercion by the GOK with respect to KFB, it is not challenging this factual finding on appeal.100

67. According to Korea, the Panel's interpretation of Article 1.1(a)(1)(iv)—that a private body may be entrusted to take an action even when the action never occurs—is legally and logically incorrect. Korea submits that the terms "entrusts" and "directs" cannot be read in isolation from the remainder of Article 1.1(a)(1)(iv), in particular, the requirement that the private body "carry out" one of the functions identified in Article 1.1(a)(i) through (iii). Korea submits that Article 1.1(a)(1)(iv) further requires that the private body engage in a "practice" of a governmental type and that a "practice" is the application of a plan, not simply the plan itself.101 In Korea's view, to read "entrusts" and "directs" without regard to these subsequent terms in the same provision "makes no linguistic or logical sense".102

68. Korea finds support for its reading of Article 1.1(a)(1)(iv) in the Appellate Body Report in US – Corrosion-Resistant Steel Sunset Review, which established that only overt government actions or omissions may constitute a "measure" that can be challenged in WTO dispute settlement proceedings.103 Korea argues that in the absence of such action or omission—in this case, the participation of KFB in the Fast Track Debenture Programme—there can be no basis for the Panel's finding of entrustment or direction.

69. Korea additionally refers to Article 8 of the International Law Commission's Draft Articles on State Responsibility.104 Korea explains that Article 8, which is entitled ";Conduct directed or controlled by a State", provides that private conduct shall be attributed to a State only "if the person[] or group of persons is in fact acting on the instructions of, or under the direction or control of, that State in carrying out the conduct.105" Korea finds "striking" the similarity of wording in the reference to "carrying out" a conduct and submits that the requirement of conduct taking place in order to establish State responsibility is a matter of "common sense".106 Consequently, Korea requests the Appellate Body to reverse the Panel's finding that the GOK had entrusted or directed KFB to participate in the Fast Track Debenture Programme.

D. Arguments of the United States – Appellee

70. The United States submits that the Panel correctly found, based upon press accounts of GOK threats directed at KFB, that it was reasonable for the USDOC to conclude that there was GOK entrustment or direction in respect of KFB.

71. The United States argues that Korea has misunderstood the analysis and findings of the Panel. In the United States' view, the Panel addressed GOK coercion and threats against Hynix creditors as evidence of entrustment or direction generally, rather than specifically in relation to the Fast Track Debenture Programme. The United States asserts that the Panel explicitly clarified in footnote 136 to paragraph 7.117 of the Panel Report that it would also consider, in a subsequent portion of the Panel Report, "[t]he issue of the evidentiary value of the coercion of KFB in respect of the alleged entrustment or direction of other private creditors".107 Thus, according to the United States, the action entrusted or directed to KFB, properly understood, is KFB's participation in the broader bailout of Hynix, which action was in fact "carr[ied] out".

72. The United States considers "axiomatic" Korea's argument that "an act by a private body cannot be attributed to the government unless there is an act by the private body to attribute."108 According to the United States, the existence of such acts by private bodies was not in dispute before the Panel, as the Panel itself recognized in footnote 42 to paragraph 7.27 of the Panel Report. In the United States' view, Korea "confuse[s]"109 the question of "entrust[ment] or direct[ion]", in the first part of Article 1.1(a)(1)(iv), with that of whether one of the functions identified in Article 1.1(a)(1)(i) through (iii) has been "carr[ied] out" by the private body, as required by the subsequent part of Article 1.1(a)(1)(iv). Therefore, the United States requests the Appellate Body to uphold the Panel's finding as to the GOK's entrustment or direction of KFB.

E. Arguments of the Third Participants

1. China

73. China agrees with the Panel's interpretation of the terms "entrusts" and "directs" as well as with the "probative and compelling" standard adopted by the Panel. With regard to the interpretation of the terms "entrusts" and "directs", China contends that, pursuant to Article 31 of the Vienna Convention on the Law of Treaties110 (the "Vienna Convention"), the decision-maker begins the interpretive process with the ordinary meaning, but does not end its inquiry there. Looking beyond the terms "entrusts" and "directs" to the other language in Article 1.1(a)(1)(iv) of the SCM Agreement, China submits that the term "directs", when followed by "to" and a verb, can be interpreted only to mean "give a formal order or command to".111

74. Furthermore, in China's view, there is no support in Article 31 of the Vienna Convention or in WTO jurisprudence for the view, implicitly advanced by the United States, that in ascertaining the ordinary meaning of a certain term, all possible meanings listed in a dictionary should be taken into account. A proper understanding of the terms "entrusts" and "directs" reveals that these terms do not include "vague concepts"112 such as the meanings proffered by the United States.

75. China disagrees with the United States that the Panel articulated and adopted a new "probative and compelling" evidentiary standard. China maintains that the Panel adopted and applied the general standard of review based on Article 11 of the DSU, as specified by the Appellate Body in US – Lamb. China submits that, even though the Panel did mention that "the evidence of entrustment or direction must in all cases be probative and compelling"113, this does not amount to a "special" evidentiary standard because the Panel's statements purporting to apply this standard are only "general in nature".114

2. European Communities

76. The European Communities agrees with the United States that the Panel (i) erred in its interpretation of the terms "entrusts" and "directs" in Article 1.1(a)(1)(iv) of the SCM Agreement; (ii) applied an improper standard of review; (iii) impermissibly shifted the burden of proof; and (iv) incorrectly refused to consider certain United States evidence on the ground of ex post rationalization. With regard to the interpretation of "entrusts" and "directs", the European Communities submits that the Panel reformulated these terms in a restrictive way, in particular by limiting their meanings to "affirmative action[s]" of "delegation" and "command" as set out in the panel report in US – Export Restraints. The Panel then applied this reformulated understanding to the facts of the present case. The European Communities maintains that this constitutes legal error as the factual circumstances in the present case are fundamentally different from those in US – Export Restraints.

77. The European Communities agrees with the United States that, in applying the restrictive and very specific language of that panel report, the Panel incorrectly discarded some of the ordinary meanings of the words "entrusts" and "directs", which meanings were recognized by the US – Export Restraints panel. In particular, the European Communities maintains that a government can entrust one or more private bodies to carry out not only a specific task—such as the payment of funds to a particular firm—but also to carry out a more general task—such as a public policy objective.115 The European Communities contends that, although the Panel recognized that leaving discretion to a private body is not necessarily at odds with entrustment or direction of the private body, the Panel failed to fully appreciate this point in its analysis of the facts of the case.

78. The European Communities agrees with the United States that the conclusions of the USDOC were reasonable and that the Panel impermissibly engaged in a de novo review of the USDOC's determination. The European Communities submits that, by considering the facts and evidence only in isolation, without assessing the weight of the individual facts when taken together, the Panel effectively applied a "different methodological approach" from that adopted by the investigating authority.116 The European Communities maintains that the Panel's sole task was to determine whether or not the conclusion of the USDOC with respect to "entrustment" or "direction" was "so outlandish, so unreasonable, so lacking in objectivity"117 that it left no choice for the Panel but to rule against the investigating authority. Instead, the Panel examined whether certain facts, on their own, were decisive of the question of entrustment or direction and, finding that they were not, failed to include them in its weighing of all the facts in question collectively. In doing so, according to the European Communities, the Panel conducted its own independent assessment of GOK entrustment or direction of Hynix's creditors.

79. Furthermore, the European Communities agrees with the United States that the Panel effectively shifted the burden of proof from Korea to the United States through its erroneous review of the USDOC's evidence. In this respect, the European Communities agrees with the United States that the Panel's "probative and compelling" evidentiary standard has no basis in the SCM Agreement or any other covered agreement, and that such standard essentially requires the investigating authority to produce a "smoking gun".118 Furthermore, the European Communities emphasizes the importance of circumstantial evidence in subsidies investigations, and that the Panel's approach improperly limits an investigating authority's ability to rely on such evidence. The European Communities asserts that, as the complaining party, Korea bore the burden of establishing a prima facie case and that, as such, if certain events—such as meetings with GOK officials—had no connection with entrustment or direction, Korea should have been required to produce certain exculpatory evidence, which could have been only in its control.119

80. Finally, the European Communities agrees with the United States that it is appropriate for a Member to provide additional details and evidence of the elements on which its findings were based, provided that the Member does not seek to alter the reasoning set out in the agency's decision. In the European Communities' view, the submission of record evidence relied upon but not cited in the agency's decision does not constitute the introduction of new reasoning, because such evidence is merely an additional part of a factual or legal finding already articulated in the agency's decision.120

3. Japan

81. Japan agrees with the United States that the Panel (i) erred in the interpretation and application of the terms "entrusts" and "directs" in Article 1.1(a)(1)(iv) of the SCM Agreement; (ii) applied an erroneous "probative and compelling" evidentiary standard; (iii) improperly assessed the probative value of each item of evidence separately; and (iv) erred in disregarding evidence not specifically mentioned in the USDOC's determination.

82. With regard to the interpretation of the terms "entrusts" and "directs", Japan submits that the Panel did not base its analysis on the full range of meanings of these terms, but rather interpreted these terms in an overly narrow manner to mean only "delegation" and "command". According to Japan, the Panel failed to recognize that the terms "entrusts" and "directs" "encompass a wide range of acts", including "a government's offer to a person to do something".121

83. In relation to the standard of review, Japan agrees with the United States that the Panel erred in requiring evidence to be "probative and compelling". Japan contends that nothing in the SCM Agreement or the DSU provides a legal basis for the Panel's standard. Indeed, Japan argues, the proper evidentiary standard for this case is found in Article 11 of the DSU, which requires a panel to determine only whether "an objective assessment of evidence on the record reasonably allows the conclusion reached by the authority."122 The use of any other standard for the examination of an investigating authority's evidence, in Japan's view, amounts to legal error.

84. Japan further contends that the Panel erroneously considered that each item of evidence, in and of itself, must be probative of entrustment or direction. Japan notes that the Panel correctly recognized that the USDOC relied on the totality of the evidence before it to determine entrustment or direction. The Panel erred, however, in subsequently considering that it "must consider the [US]DOC's assessment of the probative value of each evidentiary factor separately".123 Instead, Japan submits, the Panel's task under Article 11 of the DSU was simply to find whether the USDOC's conclusion was supported by evidence on the record as a whole. Reviewing the evidence in its entirety is particularly important in cases, such as the present dispute, where the evidence by its nature would be circumstantial because "[a]n individual piece of circumstantial evidence shows a limited aspect of the entire picture."124 According to Japan, the Panel's failure to evaluate the evidence in its totality resulted in several findings that are inconsistent with Article 11 of the DSU and Article 1.1 of the SCM Agreement.

85. Japan also argues that the Panel erred in rejecting certain evidence submitted by the United States on the ground that the USDOC did not explicitly refer to such evidence in its published subsidy determination. Japan contends that neither Article 11 of the DSU, nor any other provision of the DSU or the SCM Agreement, obliges the authority to discuss in its determination "each and every reason and fact" on which the authority based its conclusion, or precludes a Member from relying before a panel on record evidence that was not explicitly referred to in the investigating authority's determination.125 Japan finds support for its view in the Appellate Body decisions in Thailand – H-Beams and EC – Tube or Pipe Fittings, which explained that a panel's obligation under Article 17.6(i) of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the "Anti-Dumping Agreement") to review the agency's fact-finding does not prevent the respondent Member from relying before a panel on facts that are not discernible from the published determination. Japan submits that, given the similar obligation of panels to review facts under Article 11 of the DSU, the rationale of these decisions applies equally in the present case to permit the United States to rely on the evidence improperly rejected by the Panel.

4. Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu

86. The Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu agrees with the Panel's interpretation of the terms "entrusts" and "directs" in Article 1.1(a)(1)(iv) of the SCM Agreement and submits that, contrary to the United States' assertion, the Panel did not erroneously apply a special evidentiary standard. The Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu contends that the interpretation of the terms "entrusts" and "directs" suggested by the United States "blurs the line" between a subsidy captured by the provisions of the SCM Agreement, on the one hand, and the "general administrative discretion"126 of Members to adopt WTO-consistent practices to regulate or influence their industries or markets, on the other hand. In contrast, the Panel's interpretation of "entrusts" and "directs" ensures that government actions under Article 1.1(a)(1)(iv) are differentiated from more routine government interventions in the marketplace.

87. The Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu disagrees with the United States' claim that the Panel erroneously applied a "probative and compelling" evidentiary standard. Pointing to the Panel's own description of what it meant by the term "probative and compelling"—namely, that the evidence "demonstrate" entrustment or direction127—the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu maintains that the Panel's application of this standard does not impose additional obligations on investigating authorities. In the view of the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu, the Panel's characterization falls within its discretion as the trier of fact, and is merely "an extension of Article 11 of the DSU".128 The Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu asserts that, even though the Panel could have elaborated further on its understanding of the "probative and compelling" standard, it agrees with that standard and requests the Appellate Body to take its views into account should the Appellate Body "feel the need to further elaborate on this standard".129

III. Issues Raised in This Appeal

88. The following issues are raised in this appeal:

(a) whether the Panel erred in finding that Korea's request for consultations did not fail
to indicate the legal basis for the complaint in relation to the United States Department of Commerce's (the "USDOC's") countervailing duty ("CVD") order, as required by Article 4.4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the "DSU");

(b) as regards the USDOC's finding of entrustment or direction:

(i) whether the Panel erred in interpreting Article 1.1(a)(1)(iv) of the  Agreement on Subsidies and Countervailing Measures (the "SCM Agreement "), in particular:

(A) in finding that, in order to constitute entrustment or direction under Article 1.1(a)(1)(iv), "the action of the government must contain a notion of delegation (in the case of entrustment) or command (in the case of direction)"; and

(B) in finding that the evidence was "sufficient for an objective and impartial investigating authority to properly find government entrustment or direction in respect of KFB", notwithstanding that Korea First Bank ("KFB") did not carry out the activity allegedly entrusted or directed by the Government of Korea (the "GOK");

(ii) whether the Panel erred in its review of the USDOC's finding of entrustment or direction under Article 1.1(a)(1)(iv) of the SCM Agreement, in particular:

(A) in finding that evidence of entrustment or direction must be "probative and compelling";

(B) in failing to examine the USDOC's evidence in its totality, and instead, requiring that individual pieces of evidence, in and of themselves, establish entrustment or direction by the GOK of the creditors of Hynix Semiconductors, Inc. ("Hynix");

(C) in declining to consider certain evidence on the record of the underlying investigation but not cited by the USDOC in its published determination;

(D) in failing to comply with its obligations under Article 11 of the DSU by finding that "the mediation provisions [of the Corporate Restructuring Promotion Act ("CRPA")] had actually been invoked by three creditors in respect of the October 2001 restructuring", in the absence of supporting evidence on the record of the underlying investigation; and

(E) in failing to apply the proper standard of review and, therefore, failing to comply with its obligations under Article 11 of the DSU; and, consequently,

(iii) whether the Panel erred in finding that the USDOC's determination of GOK entrustment or direction of certain of Hynix's creditors is inconsistent with Article 1.1(a)(1)(iv) of the SCM Agreement;

(c) whether the Panel erred in finding that the USDOC's benefit determination is inconsistent with Article 1.1(b) of the SCM Agreement; and

(d) whether the Panel erred in finding that the USDOC's determination of specificity, insofar as it relates to subsidies provided by virtue of GOK entrustment or direction of certain of Hynix's creditors, is inconsistent with Article 2 of the SCM Agreement.

IV. Consultations

A. Introduction and Relevant Procedural Background

89. We begin with the United States' assertion that the Panel erred by failing to reject Korea's claims against the USDOC's CVD order on the grounds that Korea did not provide, in its request for consultations, the legal basis for its complaint against this measure, as required by Article 4.4 of the DSU.

90. Before examining the United States' appeal, we set out the relevant procedural history of the dispute. Korea requested consultations with the United States, for the first time, on 30 June 2003.130 In its request for consultations, Korea referred to the preliminary and final subsidy determinations of the USDOC and to the preliminary injury determination of the United States International Trade Commission (the "USITC"). The request also indicated the provisions of the General Agreement on Tariffs and Trade 1994 (the "GATT 1994") and the  SCM Agreement  with which Korea considered "these determinations" to be inconsistent.131 Consultations were held on 20 August 2003.132

91. On 18 August 2003, Korea submitted an addendum to its request for consultations (the "Addendum"), which stated:

With reference to document WT/DS296/1 ... circulated on 8 July 2003 [the original request for consultations], my authorities have instructed me to request further consultations with the Government of the United States ... with regard to the [USITC's] final determination of material injury, ... and the [USDOC's] final [CVD] order... . Both of these actions relate to the same underlying measures at issue in our previous request for consultations.133

This language was followed by a list of provisions with which Korea considered "these determinations" to be inconsistent.134 Another round of consultations was held on 1 October 2003, prior to which Korea and the United States exchanged correspondence indicating that they disagreed about the conformity of Korea's request for consultations with Article 4.4 of the DSU.135 Korea submitted a request for the establishment of a panel on 19 November 2003.136 The request identified the USDOC's CVD order and stated that it "was the result" of the USDOC's final CVD determination and of the USITC's final material injury determination. The United States objected to the establishment of a panel on the grounds that the parties had not held consultations on the CVD order.137 The Panel was established on 23 January 2004.138

92. The United States requested the Panel to reject Korea's claims in respect of the USDOC's CVD order.139 According to the United States, Korea failed to comply with the requirements of Article 4.4 of the DSU because it did not provide "any indication of the legal basis of its complaint" in respect of the CVD order.140 The Panel disagreed, noting that Korea's second request for consultations referred to Korea's first request for consultations.141 This reference, in the Panel's view, was "sufficient for the second request to be read in light of the first request" and consequently, "in addition to the provisions of the  SCM Agreement  set forth (in a non-exhaustive manner) in Korea's second request for consultations, its claims in that document should also be read in light of the provisions of the SCM Agreement  and GATT 1994 set out in" the original request.142 The Panel concluded that "the totality of these provisions provides sufficient 'indication of the legal basis for the complaint' within the meaning of Article 4.4 of the DSU."143

93. The United States appeals this Panel finding. According to the United States, "it is not credible to assert that by simply referring to the fact that it had filed a prior consultation request on one set of alleged measures, Korea satisfied its obligation to provide an indication of the legal basis for its complaint with respect to a different measure."144 It adds that, given that Korea cited many provisions in its first request for consultations, the United States could not have been expected "to guess which provision(s) applied to the [CVD] order".145 "At a minimum", the United States explains, Article 4.4 requires "an indication of at least one provision with which a measure is considered to be inconsistent".146 For these reasons, the United States submits, the Panel should have rejected Korea's claims in respect of the CVD order.

94. Korea requests the Appellate Body to dismiss the United States' appeal with respect to this issue on the grounds that the Notice of Appeal did not meet the requirements of Rule 20(2)(d) of the Working Procedures for Appellate Review (the "Working Procedures").147 In Korea's submission, the United States' Notice of Appeal does not identify the "alleged errors in the issues of law covered in the panel report and legal interpretations developed by the panel" as required by Rule 20(2)(d)(i); instead, the Notice of Appeal "repeats a [United States] version of what the Panel stated and says the [United States] disagrees".148 In any event, Korea asserts, the Panel was correct in declining the United States' request to reject Korea's claim in respect of the CVD order. Korea explains that "[b]ecause the [CVD] order is wholly dependant on the administrative determinations and is effectively a ministerial function without discretion, it follows that the legal claims of the underlying determinations are identical to the legal claims with respect to the [CVD] order."149

B. Sufficiency of the United States' Notice of Appeal

95. Before turning to the United States' claim relating to Korea's request for consultations, we address Korea's assertion that the United States' Notice of Appeal does not meet the requirements of Rule 20(2)(d) of the  Working Procedures  in respect of this claim. Rule 20(2) provides, in relevant part:

A Notice of Appeal shall include ...

(d) a brief statement of the nature of the appeal, including:

(i) identification of the alleged errors in the issues of law covered in the panel report and legal interpretations developed by the panel;

(ii) a list of the legal provision(s) of the covered agreements that the panel is alleged to have erred in interpreting or applying; and

(iii) without prejudice to the ability of the appellant to refer to other paragraphs of the panel report in the context of its appeal, an indicative list of the paragraphs of the panel report containing the alleged errors.

96. In its Notice of Appeal, the United States indicates that it seeks review of:

... the Panel's legal conclusion that, with respect to the [US]DOC [CVD] order, Korea's consultation request provides a sufficient indication of the legal basis of the complaint within the meaning of Article 4.4 of the DSU. This conclusion is in error and is based on erroneous findings on issues of law and related legal interpretations.10

_________________________________

10Panel Report, paragraphs 7.414‑7.415.

97. Korea alleges that the United States' Notice of Appeal does not identify the alleged errors in the issues of law covered in the Panel Report and legal interpretations developed by the Panel. We disagree. Although Korea is correct that the United States' Notice of Appeal simply tracks the Panel's finding150, nevertheless, the Notice of Appeal states that the alleged error of the Panel is the finding that Korea's request for consultations provides sufficient indication of the legal basis for the complaint; it mentions that Article 4.4 of the DSU is the relevant legal provision, and it indicates the paragraphs of the Panel Report where this finding is made. Thus, the United States' Notice of Appeal provides adequate notice to Korea of the "nature of the appeal" in order to allow it to know the case to which it must respond.151 In our view, this is sufficient, in this case, for purposes of Rule 20(2)(d) of the  Working Procedures.

C. Does Korea's Request for Consultations Fulfil the Requirements of Article 4.4 of the DSU?

98. Having disposed of Korea's objection regarding the United States' Notice of Appeal, we examine the United States' claim on appeal. The requirements that apply to a request for consultations are set out in Article 4.4 of the DSU, which provides, in relevant part:

Any request for consultations shall be submitted in writing and shall give the reasons for the request, including identification of the measures at issue and an indication of the legal basis for the complaint.

99. As observed above152, Korea's initial request for consultations did not refer to the CVD order, which was not in existence at the time the request was made. In the Addendum to its request for consultations, Korea sought "further consultations" with regard to the USITC's final injury determination and the USDOC's CVD order. The Addendum referred to the original request for consultations and expressly indicated that both the USITC's final affirmative injury determination and the CVD order "relate to the same underlying measures at issue in our previous request for consultations".153 The United States considers that this language does not permit a conclusion that the claims asserted in the initial request for consultations apply also to the CVD order, which is referred to only in the Addendum.

100. We disagree. The Addendum expressly refers to the initial request for consultations. It is clear that the Addendum was intended to be read together with the original request for consultations; indeed, that is the very nature of an addendum. Moreover, we recall that Korea explains that, under United States law, "the [CVD] order is wholly dependant on the administrative determinations and is effectively a ministerial function without discretion".154 According to Korea, "it follows that the legal claims of the underlying determinations are identical to the legal claims with respect to the [CVD] order."155 At the oral hearing, the United States confirmed that this is an accurate description of a CVD order under United States law. In these circumstances, it should have been apparent that the allegations of inconsistency, set forth by Korea in the original request for consultations and in the Addendum in relation to the USDOC's subsidy determination and the USITC's injury determination, applied also to the CVD order. Nor can it be said that the United States was expected "to guess which provision(s) applied to the [CVD] order".156 Accordingly, we find that it was reasonable for the Panel to conclude that the "totality" of the provisions in Korea's initial request for consultations and in the Addendum provides, with respect to the USDOC's CVD order, a sufficient indication of the legal basis for the complaint within the meaning of Article 4.4.157

101. For these reasons, we uphold the Panel's finding, in paragraph 7.415 of the Panel Report, that Korea's request for consultations did not fail to indicate the legal basis for the complaint in relation to the USDOC's CVD order, as required by Article 4.4 of the DSU.

V. Interpretation of Article 1.1(a)(1)(iv) of the SCM Agreement

A. Introduction

102. We examine next the United States' and Korea's contentions that the Panel incorrectly interpreted Article 1.1(a)(1)(iv) of the  SCM Agreement.

103. In the course of its analysis of Korea's claim under Article 1.1(a)(1)(iv), the Panel stated that it "agree[d] with the  US – Export Restraints  panel that '[i]t follows from the ordinary meanings of the two words "entrust" and "direct" that the action of the government must contain a notion of delegation (in the case of entrustment) or command (in the case of direction).'"158

104. The United States asserts that the Panel's interpretation of the terms "entrusts" and "directs" is erroneous because it fails to "take[] account of the full range of government actions that fall within the ordinary meaning[s] of th[ese] term[s]".159 In response, Korea argues that the Panel's interpretation of the terms "entrusts" and "directs" is "appropriate" and, consequently, should be upheld by the Appellate Body.160

105. Korea's challenge relates to a different aspect of the Panel's interpretation of Article 1.1(a)(1)(iv). In particular, Korea appeals the Panel's finding that certain evidence relied on by the USDOC was "sufficient for an objective and impartial investigating authority to properly find government entrustment or direction in respect of KFB".161 According to Korea, this finding is a consequence of the Panel's incorrect interpretation that an affirmative finding of entrustment or direction under Article 1.1(a)(1)(iv) is possible, even though the act that the private body was allegedly entrusted or directed to carry out was never undertaken.162 The United States requests the Appellate Body to uphold the Panel's finding that the USDOC had a sufficient factual basis to conclude that there was entrustment or direction by the GOK with respect to KFB.163

B. Article 1.1(a)(1)(iv) of the SCM Agreement

1. The Meaning of the Terms "Entrusts" and "Directs"

106. Article 1.1 lays down when a "subsidy" shall be deemed to exist for purposes of the SCM Agreement, namely, when (i) there is a "financial contribution by a government or any public body", and (ii) "a benefit is thereby conferred".164 This part of the appeal is concerned with the "financial contribution" element of the definition of a "subsidy".165 Article 1.1(a)(1) of the SCM Agreement states that there is a financial contribution by a government or any public body where:

(i) a government practice involves a direct transfer of funds (e.g. grants, loans, and equity infusion), potential direct transfers of funds or liabilities (e.g. loan guarantees);

(ii) government revenue that is otherwise due is foregone or not collected (e.g. fiscal incentives such as tax credits);

(iii) a government provides goods or services other than general infrastructure, or purchases goods;

(iv) a government makes payments to a funding mechanism, or entrusts or directs a private body to carry out one or more of the type of functions illustrated in (i) to (iii) above which would normally be vested in the government and the practice, in no real sense, differs from practices normally followed by governments[.] (footnote omitted)

107. Article 1.1(a)(1) makes clear that a "financial contribution" by a government or public body is an essential component of a "subsidy" under the  SCM Agreement. No product may be found to be subsidized under Article 1.1(a)(1), nor may it be countervailed, in the absence of a financial contribution. Furthermore, situations involving exclusively private conduct—that is, conduct that is not in some way attributable to a government or public body—cannot constitute a "financial contribution" for purposes of determining the existence of a subsidy under the  SCM Agreement.

108. Paragraphs (i) through (iv) of Article 1.1(a)(1) set forth the situations where there is a financial contribution by a government or public body. The situations listed in paragraphs (i) through (iii) refer to a financial contribution that is provided  directly  by the government through the direct transfer of funds, the foregoing of revenue, the provision of goods or services, or the purchase of goods.166 By virtue of paragraph (iv), a financial contribution may also be provided  indirectly p; by a government where it "makes payments to a funding mechanism", or, as alleged in this case, where a government "entrusts or directs a private body to carry out one or more of the type of functions illustrated in (i) to (iii) ... which would normally be vested in the government and the practice, in no real sense, differs from practices normally followed by governments". Thus, paragraphs (i) through (iii) identify the types of actions that, when taken by private bodies that have been so "entrusted" or "directed" by the government, fall within the scope of paragraph (iv). In other words, paragraph (iv) covers situations where a private body is being used as a proxy by the government to carry out one of the types of functions listed in paragraphs (i) through (iii). Seen in this light, the terms "entrusts" and "directs" in paragraph (iv) identify the instances where seemingly private conduct may be attributable to a government for purposes of determining whether there has been a financial contribution within the meaning of the  SCM Agreement.

109. With this in mind, we turn to examine the meanings of the terms "entrusts" and "directs" in Article 1.1(a)(1)(iv). We recall that the Panel stated that it "agree[d] with the  US – Export Restraints  panel that '[i]t follows from the ordinary meanings of the two words "entrust" and "direct" that the action of the government must contain a notion of delegation (in the case of entrustment) or command (in the case of direction).'"167 In so doing, the Panel effectively replaced the terms "entrusts" and "directs" with two other terms, "delegation" and "command", whose scope it did not define, and went no further in clarifying the meaning of any of these terms.168 The United States asserts that the Panel "failed to give full meaning and effect to the treaty terms at issue".169 It points out that the dictionary definitions of the term "entrust" include "[i]nvest with a trust; give (a person, etc.) the responsibility for a task ... [c]ommit the ... execution of (a task) to a person".170 The United States also notes that the dictionary definitions of "direct" include "[c]ause to move in or take a specified direction; turn towards a specified destination or target"; "[g]ive authoritative instructions to; to ordain, order (a person)  to do,o, (a thing)  to be done; order the performance of"; and "[r]egulate the course of; guide with advice".171 The United States, therefore, would have us adopt an interpretation of the terms "entrusts" and "directs" that includes all the dictionary definitions of these terms.

110. The term "entrusts" connotes the action of giving responsibility to someone for a task or an object.172 In the context of paragraph (iv) of Article 1.1(a)(1), the government gives responsibility to a private body "to carry out" one of the types of functions listed in paragraphs (i) through (iii) of Article 1.1(a)(1). As the United States acknowledges173, "delegation" (the word used by the Panel) may be a means by which a government gives responsibility to a private body to carry out one of the functions listed in paragraphs (i) through (iii). Delegation is usually achieved by formal means, but delegation also could be informal. Moreover, there may be other means, be they formal or informal, that governments could employ for the same purpose. Therefore, an interpretation of the term "entrusts" that is limited to acts of "delegation" is too narrow.

111. As for the term "directs", we note that some of the definitions—such as "give authoritative instructions to" and "order (a person)  to do"—suggest that the person or entity that "directs" has authority over the person or entity that is directed. In contrast, some of the other definitions—such as "inform or guide"—do not necessarily convey this sense of authority. In our view, that the private body under paragraph (iv) is directed "to carry out" a function underscores the notion of authority that is included in some of the definitions of the term "direct". This understanding of the term "directs" is reinforced by the Spanish and French versions of the  SCM Agreement, which use the verbs "ordenar"174 and "ordonner"175, respectively.176 Both of these verbs unambiguously convey a sense of authority exercised over someone. In the context of paragraph (iv), this authority is exercised by a government over a private body. A "command" (the word used by the Panel) is certainly one way in which a government can exercise authority over a private body in the sense foreseen by Article 1.1(a)(1)(iv), but governments are likely to have other means at their disposal to exercise authority over a private body. Some of these means may be more subtle than a "command" or may not involve the same degree of compulsion. Thus, an interpretation of the term "directs" that is limited to acts of "command" is also too narrow.

112. Paragraph (iv) of Article 1.1(a)(1) further states that the private body must have been entrusted or directed to carry out  one of the type of functions in paragraphs (i) through (iii). As the panel in  US – Export Restraints  explained, this means that "the scope of the actions ... covered by subparagraph (iv) must be the same as those covered by subparagraphs (i)-(iii)".177 A situation where the government entrusts or directs a private body to carry out a function that is outside the scope of paragraphs (i) through (iii) would consequently fall outside the scope of paragraph (iv). Thus, we agree with the US – Export Restraints panel that "the difference between subparagraphs (i)-(iii) on the one hand, and subparagraph (iv) on the other, has to do with the identity of the actor, and not with the nature of the action."178 In addition, we must not lose sight of the fact that Article 1.1(a)(1)(iv) requires the participation of the government, albeit indirectly. We therefore agree with Korea that there must be a demonstrable link between the government and the conduct of the private body.179

113. We recall, moreover, that Article 1.1(a)(1) of the  SCM Agreement  is concerned with the existence of a financial contribution. Paragraph (iv), in particular, is intended to ensure that governments do not evade their obligations under the  SCM Agreement  by using private bodies to take actions that would otherwise fall within Article 1.1(a)(1), were they to be taken by the government itself. In other words, Article 1.1(a)(1)(iv) is, in essence, an anti-circumvention provision.180 A finding of entrustment or direction, therefore, requires that the government give responsibility to a private body—or exercise its authority over a private body—in order to effectuate a financial contribution.

114. It follows, therefore, that not all government acts necessarily amount to entrustment or direction. We note that both the United States and Korea agree that "mere policy pronouncements" by a government would not, by themselves, constitute entrustment or direction for purposes of Article 1.1(a)(1)(iv).181 Furthermore, entrustment and direction—through the giving of responsibility to or exercise of authority over a private body—imply a more active role than mere acts of encouragement.182 Additionally, we agree with the panel in  US – Export Restraints  that entrustment and direction do not cover "the situation in which the government intervenes in the market in some way, which may or may not have a particular result simply based on the given factual circumstances and the exercise of free choice by the actors in that market".183 Thus, government "entrustment" or "direction" cannot be inadvertent or a mere by-product of governmental regulation.184 This is consistent with the Appellate Body's statement in  US – Softwood Lumber IV that "not all government measures capable of conferring benefits would necessarily fall within Article 1.1(a)"; otherwise paragraphs (i) through (iv) of Article 1.1(a) would not be necessary "because all government measures conferring benefits, per se, would be subsidies."185

115. Furthermore, such an interpretation is consistent with the object and purpose of the  SCM Agreement, which reflects a delicate balance between the Members that sought to impose more disciplines on the use of subsidies and those that sought to impose more disciplines on the application of countervailing measures. Indeed, the Appellate Body has said that the object and purpose of the SCM Agreement is "to strengthen and improve GATT disciplines relating to the use of both subsidies and countervailing measures, while, recognizing at the same time, the right of Members to impose such measures under certain conditions".186 This balance must be borne in mind in interpreting paragraph (iv), which allows Members to apply countervailing measures to products in situations where a government uses a private body as a proxy to provide a financial contribution (provided, of course, that the other requirements of a countervailable subsidy are proved as well). At the same time, the interpretation of paragraph (iv) cannot be so broad so as to allow Members to apply countervailing measures to products whenever a government is merely exercising its general regulatory powers.

116. In sum, we are of the view that, pursuant to paragraph (iv), "entrustment" occurs where a government gives responsibility to a private body, and "direction" refers to situations where the government exercises its authority over a private body. In both instances, the government uses a private body as proxy to effectuate one of the types of financial contributions listed in paragraphs (i) through (iii). It may be difficult to identify precisely, in the abstract, the types of government actions that constitute entrustment or direction and those that do not. The particular label used to describe the governmental action is not necessarily dispositive. Indeed, as Korea acknowledges, in some circumstances, "guidance" by a government can constitute direction.187 In most cases, one would expect entrustment or direction of a private body to involve some form of threat or inducement, which could, in turn, serve as evidence of entrustment or direction. The determination of entrustment or direction will hinge on the particular facts of the case.188

2. The United States' Appeal

117. The United States alleges that, by equating "entrustment" and "direction" with "delegation" and "command", the Panel failed to interpret those treaty terms in accordance with the customary rules of interpretation codified in the  Vienna Convention on the Law of Treaties.189 In this respect, the United States submits that, had the Panel properly interpreted "entrusts" and "directs", it would have recognized that these terms also encompass:

... a government investing trust in a private body to carry out a task, a government giving responsibility to a private body to carry out a task, a government informing or guiding a private body as to how to carry out a task, [and] a government regulating the course of a private body’s conduct[.]190

The United States refers to several findings191 allegedly demonstrating that the Panel applied an incorrect interpretation of Article 1.1(a)(1)(iv), and that "the Panel's erroneous interpretation of ... Article 1.1(a)(1)(iv) affected its entire analysis of the [US]DOC's findings concerning the Hynix bailout."192

118. As Korea explains193, the issue raised on appeal by the United States—that is, the range of government actions that constitute entrustment or direction—was not the main interpretative issue before the Panel. Instead, the Panel was considering whether entrustment or direction needs to be demonstrated on the basis of explicit (as opposed to implicit) government acts only. On this issue, the Panel essentially agreed with the United States and held that Article 1.1(a)(1)(iv) does not "require[] an investigating authority to demonstrate an explicit government action addressed to a particular entity, entrusting or directing a particular task or duty".194 In the course of its analysis, the Panel "agree[d] with the  US – Export Restraints  panel that '[i]t follows from the ordinary meanings of the two words "entrust" and "direct" that the action of the government must contain a notion of delegation (in the case of entrustment) or command (in the case of direction).'"195 We explained earlier that the terms "entrusts" and "directs" in Article 1.1(a)(1)(iv) are not limited to "delegation" and "command", respectively. In our view, there may be other means by which governments can give responsibility to or exercise authority over a private body that may not fall within the terms "delegation" and "command", if these terms are strictly construed. We note that the Panel initially used the expression "a notion of" delegation or command.196 This suggests that the Panel was using the terms "delegation" and "command" with a certain degree of flexibility. However, the Panel's repeated use of the terms "delegation" and "command", without qualification, in its subsequent analysis, could give the impression that the terms "entrusts" and "directs" correspond strictly to "delegation" and "command". We do not consider that these words, on their own, convey what we understand by "entrusts" or "directs", as used in Article 1.1(a)(1)(iv), for the terms "delegation" and "command", as we have explained above, are too narrow. Therefore, we modify the Panel's interpretation of Article 1.1(a)(1)(iv) of the  SCM Agreement, set out in paragraph 7.31 of the Panel Report,  to the extent that it may be understood as limiting the terms "entrusts" and "directs" to acts of "delegation" and "command".

119. The United States' request, that the Appellate Body review the Panel's application of Article 1.1(a)(1)(iv) to the particular facts of this case197, is examined in the next Section of this Report.198

To continue with  3. Korea's Cross-appeal

1 WT/DS296/R, 21 February 2005.

2 Hereinafter, these products will be referred to collectively as "DRAMS".

3 Notice of Initiation of Countervailing Duty Investigation: Dynamic Random Access Memory Semiconductors from the Republic of Korea, United States Federal Register, Vol. 67, No. 229 (27 November 2002), p. 70927 (Exhibit GOK-2 submitted by Korea to the Panel).

4 The countervailable subsidy rate determined for Samsung was 0.04 per cent, which is below the
de minimis level of two per cent. Accordingly, the USDOC made a negative finding of subsidization with respect to Samsung. (Final Affirmative Countervailing Duty Determination: Dynamic Random Access Memory Semiconductors from the Republic of Korea, United States Federal Register, Vol. 68, No. 120 (23 June 2003), p. 37122, at p. 37124 (Exhibit GOK-5 submitted by Korea to the Panel))

5 Final Affirmative Countervailing Duty Determination, supra, footnote 4, amended as Notice of Amended Final Affirmative Countervailing Duty Determination: Dynamic Random Access Memory Semiconductors from the Republic of Korea, United States Federal Register, Vol. 68, No. 144 (28 July 2003), p. 44290 (Exhibit GOK-6 submitted by Korea to the Panel).

6 Issues and Decision Memorandum, for Final Affirmative Countervailing Duty Determination, supra, footnote 4, dated 16 June 2003 (the "Issues and Decision Memorandum"), pp. 61-62 (Exhibit GOK-5 submitted by Korea to the Panel).

7 Notice of Amended Final Affirmative Countervailing Duty Determination, supra, footnote 5, p. 44290, at p. 44291.

8 DRAMs and DRAM Modules from Korea, Investigation No. 701-TA-431 (Preliminary), USITC Pub. 3569 (December 2002) (Exhibit GOK-9 submitted by Korea to the Panel); DRAMs and DRAM Modules from Korea, Investigation No. 701-TA-431 (Final), USITC Pub. 3616 (August 2003) (Exhibit GOK-10 submitted by Korea to the Panel).

9 Notice of Countervailing Duty Order: Dynamic Random Access Memory Semiconductors from the Republic of Korea, United States Federal Register, Vol. 68, No. 154 (11 August 2003), p. 47546 (Exhibit
GOK-8 submitted by Korea to the Panel). Because of the USDOC's finding of  de minimis  subsidization with respect to Samsung, imports from Samsung were excluded from the CVD order and therefore not subject to CVDs. (Ibid.)

10 Panel Report, para. 3.1.

11 Panel Report, para. 8.1.

12 The Panel rejected Korea's claim pursuant to Article 2 of the SCM Agreement insofar as it concerned the USDOC's finding of specificity in relation to the alleged subsidies provided by public bodies. (Panel Report, para. 7.208) With respect to other creditors, however, the Panel agreed with Korea that the USDOC's subsidy determination did not satisfy the requirements of Article 2.

13 The Panel rejected Korea's claim that the United States acted inconsistently with Article 15.5 of the SCM Agreement because the USITC "failed to demonstrate the requisite causal link between subject imports and injury". (Panel Report, para. 8.2)

14 Ibid.

15 Ibid., para. 8.3.

16 Ibid., paras. 7.410 and 7.415.

17 Ibid., para. 8.4.

18 WT/DS296/5 (attached as Annex I to this Report).

19 WT/AB/WP/5, 4 January 2005.

20 WT/DS296/6 (attached as Annex II to this Report).

21 Pursuant to Rule 21 of the Working Procedures.

22 Pursuant to Rule 23(3) of the Working Procedures.

23 Pursuant to Rules 22 and 23(4) of the Working Procedures.

24 Pursuant to Rule 24(1) of the Working Procedures.

25 United States' appellant's submission, para. 143.

26 Ibid.

27 United States' appellant's submission, para. 144.

28 Article 1.1(a)(1)(iv) of the SCM Agreement states that a financial contribution exists where:

a government makes payments to a funding mechanism, or entrusts or directs a private body to carry out one or more of the type of functions illustrated in (i) to (iii) above which would normally be vested in the government and the practice, in no real sense, differs from practices normally followed by governments[.]

29 Panel Report, para. 7.31.

30 Article 1.1(a)(1)(iv) of the SCM Agreement.

31 Panel Report, para. 7.35.

32 Article 3.1 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the "Anti-Dumping Agreement").

33 Articles 3.5 and 5.2 of the Anti-Dumping Agreement; Articles 42 and 50.1(b) of the Agreement on Trade-Related Aspects of Intellectual Property Rights.

34 Articles 5.3, 5.6, 5.8, 10.7, and 12.1 of the Anti-Dumping Agreement; Article 5.4 of the Agreement on Textiles and Clothing.

35 United States' appellant's submission, para. 51 (quoting Appellate Body Report, US – Hot-Rolled Steel, para. 192).

36 Ibid., para. 49 (quoting The New Shorter Oxford English Dictionary, L. Brown (ed.) (Clarendon Press, 1993), Vol. 1, p. 458).

37 Ibid.

38 Ibid., para. 54 (referring to Appellate Body Report, US – Lamb, para. 103).

39 Ibid., para. 73.

40 Ibid., para. 58 (quoting Panel Report, para. 7.45).

41 Ibid.

42 United States' appellant's submission, para. 65.

43 Ibid., paras. 60-67.

44 Ibid., para. 69.

45 Ibid., para. 68.

46 Ibid., para. 85.

47 Ibid., para. 76 (quoting Panel Report, para. 7.129). (emphasis added by the United States)

48 Ibid. (footnote omitted)

49 United States' appellant's submission, para. 80.

50 Ibid., para. 79. (footnotes omitted)

51 Ibid., para. 82 (quoting Appellate Body Report, Canada – Aircraft, para. 198). (original emphasis)

52 Ibid., para. 83.

53 Ibid., para. 87.

54 United States' appellant's submission, para. 89 (referring to Panel Report Argentina – Ceramic Tiles, para. 6.27; and Panel Report, Guatemala – Cement II, para. 8.245).

55 Panel Report, para. 7.88.

56 United States' appellant's submission, para. 91.

57 United States' appellant's submission, para. 92 (referring to GATT Panel Report, Brazil – EEC Milk, paras. 286-287).

58 Ibid., para. 93 (quoting Appellate Body Report, US – Upland Cotton, para. 446).

59 Direction of Credit Memorandum for Countervailing Duty Investigation: Dynamic Random Access Memory Semiconductors from the Republic of Korea, dated 31 March 2003 (Exhibit US-8 submitted by the United States to the Panel).

60 United States' appellant's submission, para. 109. (original emphasis)

61 Ibid., footnote 156 to para. 108.

62 Ibid., para. 111 (referring to Panel Report, paras. 7.85-7.86).

63 United States' appellant's submission, para. 111 (quoting 2001 Hynix Audit Report, p. 40 (Exhibit US-125 submitted by the United States to the Panel)). The Panel also quoted the Hynix 2001 Audit Report at paragraph 7.85 of the Panel Report.

64 Supra, Section II.A.3(a)-(c)(i).

65 United States' appellant's submission, para. 119.

66 Korea's appellee's submission, para. 230.

67 WT/DS296/1 (attached as Annex III to this Report).

68 WT/DS296/1/Add. 1 (attached as Annex IV to this Report).

69 Korea's appellee's submission, para. 242.

70 Korea's appellee's submission, para. 43. (original emphasis)

71 Ibid., para. 48 (quoting United States' appellant's submission, para. 37).

72 Ibid., para. 50.

73 Ibid., para. 52.

74 Korea's appellee's submission, para. 53.

75 Ibid., para. 86 (quoting United States' appellant's submission, para. 49; in turn quoting The New Shorter Oxford English Dictionary, supra, footnote 36, Vol. 1, p. 458).

76 Ibid. (quoting United States' appellant's submission, para. 49).

77 Ibid., para. 98 (quoting Black's Law Dictionary, 7th edn, B.A. Garner (ed.) (West Group, 1999), p. 628).

78 Korea's appellee's submission, para. 109.

79 Ibid., para. 111 (quoting Panel Report, paras. 7.56 and referring to paras. 7.63, 7.168, and 7.177).

80 Ibid., para. 114.

81 Korea's appellee's submission, para. 164. (emphasis omitted)

82 Ibid., para. 173.

83 Korea's appellee's submission, heading II.E.

84 Ibid., para. 176 (quoting United States' appellant's submission, para. 87).

85 Ibid., para. 175. (original emphasis)

86 Article 2.15 of the Tokyo Round Subsidies Code.

87 Article 22.5 of the SCM Agreement.

88 Korea's appellee's submission, para. 186.

89 Ibid. (quoting Appellate Body Report, US – Upland Cotton, para. 446).

90 Ibid.

91 Preliminary Affirmative Countervailing Duty Determination: Dynamic Random Access Memory Semiconductors from the Republic of Korea, United States Federal Register, Vol. 68, No. 66 (7 April 2003), p. 16766 (Exhibit GOK-4 submitted by Korea to the Panel).

92 Korea's appellee's submission, para. 193.

93 Korea's appellee's submission, para. 198.

94 Ibid., para. 200.

95 Ibid., para. 201 (quoting Hynix 2001 Audit Report, supra, footnote 63, p. 40; also quoted in Panel Report, para. 7.85). (Korea's emphasis omitted)

96 Ibid., para. 210 (quoting Panel Report, footnote 98 to para. 7.87;  in turn quoting Issues and Decision Memorandum, supra, footnote 6, p. 55).

97 Korea's appellee's submission, para. 215.

98 Ibid., para. 226.

99 Ibid., paras. 15-16.

100 Ibid., para. 4.

101 Korea's other appellant's submission, para. 20.

102 Ibid., para. 18.

103 Ibid., para. 21 (referring to Appellate Body Report, US – Corrosion Resistant Steel Sunset Review, para. 81).

104 International Law Commission's Draft Articles on Responsibility of States for internationally wrongful acts, Report of the ILC on the work of its Fifty-third session, Official Records of the General Assembly, Fifty-sixth session, Supplement No. 10 (A/56/10), chp. IV.E.2 ("ILC Draft Articles").

105 Korea's other appellant's submission, para. 25 (quoting ILC Draft Articles, supra, footnote 104, Article 8). (Korea's emphasis omitted)

106 Ibid., para. 26.

107 Panel Report, footnote 136 to para. 117 (referred to in United States' appellee's submission, para. 5).

108 United States' appellee's submission, para. 6 (referring to Korea's other appellant's submission, para. 26).

109 Ibid., para. 7.

110 Done at Vienna, 23 May 1969, 1155 UNTS 331; 8 International Legal Materials 679.

111 China's third participant's submission, para. 5 (quoting Panel Report, US – Export Restraints, para. 8.28).

112 Ibid., paras. 13, 14, 16, and 20.

113 Ibid., para. 25 (quoting Panel Report, para. 7.35).

114 Ibid.

115 European Communities' third participant's submission, para. 10.

116 Ibid., para. 20.

117 Ibid., para. 19.

118 Ibid., para. 23.

119 European Communities' third participant's submission, para. 25.

120 Ibid., para. 26.

121 Japan's third participant's submission, para. 5. (original emphasis)

122 Ibid., para. 9.

123 Japan's third participant's submission, para. 12 (quoting Panel Report, para. 7.45).

124 Ibid., para. 14.

125 Ibid., para. 25.

126 Third participant's submission of the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu, para. 3.

127 Ibid., para. 6 (quoting Panel Report, paras. 7.35 and 7.46).

128 Ibid., para. 7.

129 Ibid., para. 8.

130 WT/DS296/1 (attached as Annex III to this Report).

131 The request refers to Articles 1, 2, 10, 11, 12, 14, 17, 22, and 32.1 of the  SCM Agreement  and to Articles VI:3 and X:3 of the GATT 1994.

132 According to the United States, the consultations "were limited to the preliminary and final determinations of the [US]DOC". (United States' appellant's submission, para. 134)

133 WT/DS296/1/Add.1 (attached as Annex IV to this Report), p. 1.

134 Each item on the list identified a paragraph of Article 15 of the  SCM Agreement  with which "these determinations" were allegedly inconsistent.

135 In its letter accepting further consultations, the United States noted Korea's alleged failure to provide the legal basis for its complaint in respect of the USDOC's CVD order. (United States' appellant's submission, para. 136 (referring to letter from the Ambassador and Permanent Representative of the United States to the WTO to the Ambassador and Permanent Representative of the Republic of Korea to the WTO, dated 28 August 2003 (Exhibit US-2 submitted by the United States to the Panel))) Korea responded by letter, explaining that the bases for its complaint were "found in both of [its] consultation requests", and that "under U.S. law, the [CVD] order cannot be imposed without affirmative determinations by both" the USDOC and the USITC. (Letter from the Ambassador and Permanent Representative of the Republic of Korea to the WTO to the Ambassador and Permanent Representative of the United States to the WTO, dated 8 September 2003 (Exhibit US-3 submitted by the United States to the Panel)) According to the United States, during the consultations, "the parties agreed to disagree concerning the conformity of Korea's consultation request with Article 4.4 of the DSU" and "the United States declined to engage in any discussions regarding the [CVD] order." (United States' appellant's submission, para. 137)

136 WT/DS296/2 (attached as Annex V to this Report).

137 The United States observes that "[a]t the meeting of the [DSB] at which Korea’s request was first considered, the United States objected to the establishment of a panel on the grounds that Korea’s panel request sought to cover matters on which the parties had not consulted" and "described Korea’s failure to comply with Article 4.4 of the DSU and the resulting absence of consultations with respect to the [USDOC's CVD] order". (United States' appellant's submission, para. 138 (referring to WT/DSB/M/159, paras. 32-38 (Exhibit US-5 submitted by the United States to the Panel)))

138 Panel Report, para. 1.5.

139 Ibid., para. 7.410.

140 Panel Report, para. 7.410.

141 Ibid., para. 7.414.

142 Ibid., para. 7.415.

143 Ibid. (footnote omitted)

144 United States' appellant's submission, para. 143.

145 Ibid.

146 Ibid., para. 144.

147 Korea's appellee's submission, para. 228.

148 Ibid., para. 230.

149 Korea's appellee's submission, para. 242.

150 The Panel found that "the totality of these provisions [referred to in Korea's request for consultations and the Addendum] provides sufficient 'indication of the legal basis for the complaint' within the meaning of Article 4.4 of the  DSU." (Panel Report, para. 7.415) (footnote omitted)

151 Appellate Body Report, US – Countervailing Measures on Certain EC Products, para. 62; Appellate Body Report, EC – Export Subsidies on Sugar, para. 344.

152 Supra, para. 90.

153 WT/DS296/1/Add.1 (attached as Annex IV to this Report), p. 1.

154 Korea's appellee's submission, para. 242.

155 Korea's appellee's submission, para. 242.

156 United States' appellant's submission, para. 143.

157 Panel Report, para. 7.415.

158 Ibid., para. 7.31 (quoting Panel Report, US – Export Restraints, para. 8.29).

159 United States' appellant's submission, para. 24. The European Communities and Japan support the United States' position. (European Communities' third participant's submission, para. 3; Japan's third participant's submission, para. 2)

160 Korea's appellee's submission, heading II.A. China and the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu also assert that the United States' appeal should be rejected. (China's third participant's submission, para. 20; Third participant's submission of the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu, para. 3)

161 Panel Report, para. 7.117. (footnote omitted)

162 Korea's other appellant's submission, para. 4.

163 United States' appellee's submission, para. 9.

164 We note that, pursuant to Articles 1.1(a)(2) and 1.1(b) of the SCM Agreement, a subsidy shall also be deemed to exist if "there is a form of income or price support in the sense of Article XVI of the GATT 1994" and "a benefit is thereby conferred". This case does not raise the issue of subsidies granted in the form of income or price support.

165 We examine the United States' appeal of the Panel's finding relating to "benefit" in Section VII of this Report.

166 Like the SCM Agreement, we use the term "government" to refer to "a government or any public body within the territory of a Member", unless otherwise noted.

167 Panel Report, para. 7.31 (quoting Panel Report, US – Export Restraints, para. 8.29).

168 The Panel's subsequent discussion of the context and the object and purpose of the terms "entrusts" and "directs" focused on whether Article 1.1(a)(1)(iv) requires that the government action allegedly constituting entrustment or direction be explicit. (Ibid.. 7.36-7.41)

169 United States' appellant's submission, para. 28.

170 Ibid., para. 19 (quoting The New Shorter Oxford English Dictionary, supra, footnote 36, Vol. 1, p. 831.

171 Ibid., para. 20 (quoting  The New Shorter Oxford English Dictionary, supra, footnote 36, Vol. 1, p. 679. (original italics)

172 The Spanish and French versions of the  SCM Agreement  use the verbs "encomendar" and "charger", respectively, which have similar meanings. The Diccionario de la lengua española  defines "encomendar" as:

Encargar a alguien que haga algo o que cuide de algo o de alguien.

(Diccionario de la lengua española, 22nd edn (Real Academia Española, 2001), p. 612)

Le Nouveau Petit Robert  defines "charger" as:

Revêtir d'une fonction, d'un office. … commettre, déléguer, préposer (à).

(Le Nouveau Petit Robert, P. Varrod (ed.) (Dictionnaires Le Robert, 1993), p. 403)

173 United States' appellant's submission, para. 24; United States' response to questioning at the oral hearing.

174 The Diccionario de la lengua española  defines "ordenar" as:

Mandar que se haga algo. … Encaminar y dirigir a un fin.

(Diccionario de la lengua española, supra, footnote 172, p. 1105)

175 Le Nouveau Petit Robert defines "ordonner " as:

Prescrire par un ordre. … adjurer, commander, dicter, enjoindre, prescrire.

(Le Nouveau Petit Robert, supra, footnote 172, p. 1795)

176 In this respect, we recall Article 33(3) of the  Vienna Convention, which provides that "[t]he terms of the treaty are presumed to have the same meaning in each authentic text."

177 Panel Report, US – Export Restraints, para. 8.53.

178 Ibid. (original emphasis)

179 Korea's appellee's submission, para. 22. We note that the conduct of private bodies is presumptively not attributable to the State. The Commentaries to the ILC Draft Articles explain that "[s]ince corporate entities, although owned by and in that sense subject to the control of the State, are considered to be separate, prima facie their conduct in carrying out their activities is not attributable to the State unless they are exercising elements of governmental authority". (Commentaries to the ILC Draft Articles, supra, footnote 104, Article 8, Commentary (6), pp. 107-108); see also Korea's appellee's submission, paras. 58-59)

180 Appellate Body Report, US – Softwood Lumber IV, para. 52.

181 Korea's and the United States' responses to questioning at the oral hearing. The United States asserts, however, that a policy pronouncement may be relevant evidence for demonstrating entrustment or direction.

182 In contrast to Article 1.1(a)(1)(iv) of the SCM Agreement, Article 11.3 of the  Agreement on Safeguards  uses the term "encourage". It reads:

Members shall not encourage or support the adoption or maintenance by public and private enterprises of non‑governmental measures equivalent to those referred to in paragraph 1.

Paragraph 1 refers to voluntary export restraints, orderly marketing arrangements, or any other similar measures on the export or import side.

183 Panel Report, US – Export Restraints, para. 8.31.

184 In interpreting the phrase "payments … financed by virtue of governmental action" in Article 9.1(c) of the  Agreement on Agriculture, the Appellate Body has stated that "[g]overnments are constantly engaged in regulation of different kinds in pursuit of a variety of objectives." It further explained that where regulation merely enables payments to occur, "the link between the governmental action and the financing of the payments is too tenuous for the 'payments' to be regarded as 'financed  by virtue of governmental action' … within the meaning of Article 9.1(c). Rather, there must be a tighter nexus between the mechanism or process by which the payments are financed, even if by a third person, and governmental action." (Appellate Body Report, Canada – Dairy (Article 21.5 – New Zealand and US), para. 115 (original emphasis); see also Appellate Body Report, Canada – Dairy (Article 21.5 – New Zealand and US II), para. 131)

185 Appellate Body Report, US – Softwood Lumber IV, footnote 35 to para. 52. The Appellate Body referred to the following discussion of the panel in  US – Export Restraints:

[the] negotiating history [of Article 1 of the SCM Agreement] demonstrates ... that the requirement of a financial contribution from the outset was intended by its proponents precisely to ensure that not all government measures that conferred benefits could be deemed to be subsidies. This point was extensively discussed during the negotiations, with many participants consistently maintaining that only government actions constituting financial contributions should be subject to the multilateral rules on subsidies and countervailing measures.

(Panel Report, US – Export Restraints, para. 8.65 (quoted in Appellate Body Report, US – Softwood Lumber IV, footnote 35 to para. 52))

186 Appellate Body Report, US – Softwood Lumber IV, para. 64. (footnote omitted)

187 Korea's response to questioning at the oral hearing.

188 The Commentaries to the ILC Draft Articles similarly state that "it is a matter for appreciation in
each case whether particular conduct was or was not carried out under the control of a State, to such an extent that conduct controlled should be attributed to it". (Commentaries to the ILC Draft Articles, supra, footnote 104, Article 8, Commentary (5), p. 107) (footnote omitted)

189 Supra, footnote 110.

190 United States' appellant's submission, para. 24.

191 Ibid., paras. 40-46.

192 Ibid., para. 46. (footnote omitted)

193 Korea's appellee's submission, paras. 24-25.

194 Panel Report, para. 7.42.

195 Ibid., para. 7.31 (quoting Panel Report, US – Export Restraints, para. 8.29).

196 Ibid. As the United States points out, however, the Panel did not consistently use the phrase "the notion of" in the paragraphs that followed. (United States' appellant's submission, para. 21 (referring to Panel Report, paras. 7.33-7.35))

197 United States' appellant's submission, para. 46.

198 See infra, Section VI.