"Import price (Won/kg) of SMPP was 1,750 Won in 1993, 1,689 Won in 1994, 1,709 Won in 1995, and 2,008 Won in the January-April period of 1996. Its sales price (Won/kg) was 2,590 Won in 1993, 2,500 Won in 1994, 2,530 Won in 1995, and 2,971 Won in the January-April period of 1996 ²⁵⁸."

As for the domestic milk powder, the sales price (Won/kg) was 5,354 Won in 1993, 5,294 Won in 1994, 5,388 Won in 1995, and 4,994 Won in the January-to-April period of 1996. ²⁵⁹ ;

(a) "The sales price of SMPP undercut the sales price of the domestic milk powder by 2,764 Won in 1993, 2,796 Won in 1994, 2,858 Won in 1995, and 2,023 Won in the January-April period of 1996. Because the sales price of SMPP was approximately half the price of domestic milk powder, the volume of import of SMPP increased rapidly during the period of investigation.

(b) Because SMPP penetrated the domestic market by taking an increasingly large market share and significantly undercutting the price of domestic milk powder, the price of domestic milk was depressed from 5,354 Won in 1993 to 4,994 Won in the January-April period of 1996.

(c) As the increased import of SMPP depressed domestic price of milk powder, domestic producers' losses grew larger as the domestic sales price could not be increased to keep pace with the rate of production cost increase. These losses were 196 Won in 1993, turning to a loss of 132 Won in 1994, a larger loss of 472 Won in 1995 and a further loss of 1,184 Won in the January-April period of 1996.

(d) In sum, it is apparent that the increase of SMPP and its rapid rise in the market share caused a depression of the domestic sales price which fell below the production cost as of 1994. The large losses have been increasing and this combined with domestic sales price below production cost are causing injury to the domestic industry. ²⁶¹"

"The livestock cooperatives' volume of raw milk collected from dairy households was 40.56 per cent in 1990. The rate grew to 41.36 per cent in 1993, to 42.80 per cent in 1994, to 44.30 per cent in 1995, and to 45.30 per cent in January-June period of 1996." ²⁶²

"The increased import of SMPP caused the livestock cooperatives to increase their purchase of raw milk from dairy households, because processing companies that traditionally purchased raw milk from dairy households opted to purchase the much cheaper SMPP. The increased collection of raw milk by the livestock cooperatives caused the deterioration of their business operation, because the displaced raw milk had to be converted into milk powder inventory (see VI.2.A. first paragraph). ²⁶³"

"Of the total amount of milk produced, white milk accounted for 92.9 per cent in 1990, 92.4 per cent in 1991 and 92.4 per cent in 1992, maintaining almost the same level. However, the share of white milk decreased with the rapid increase in import of SMPP. The share of white milk fell to 91.3 per cent in 1993, to 88.6 per cent in 1994, to 83.8 per cent in 1995, and to 82.1 per cent in the January-June period of 1996.

The decline in the production of white milk occurred because the domestic producer chose to use the cheaper SMPP to produce flavoured milk which was favoured by the wholesalers and retailers for the product's higher profit margin.

The decline in the share of white milk which can only be produced from domestic raw milk depressed the demand for domestic raw milk. ²⁶⁵"

"Import of SMPP amounted to 3,217 tons in 1993, 15,561 tons in 1994, 28,007 tons in 1995, and 16,320 tons in the January-to-June [period] of 1996. In terms of the increase rate, it was 384.0 per cent in 1994, 80.0 per cent in 1995, and 16.9 per cent in the January-June period of 1996.

The market share of SMPP against total demand was 1.6 per cent in 1993, 7.0 per cent in 1994, 12.2 per cent in 1995, and 14.1 per cent in the January-June period of 1996, the rate growing larger every year.²⁶⁷"

"As the import of SMPP increased, its market share in the milk powder sector rose from 10.7 per cent in 1993 to 38.4 per cent in 1994, further to 60.6 per cent in 1995 and to 69.4 per cent in the January-June period of 1996." ²⁶⁸

As the import of SMPP increased, however, the amount of milk powder imported decreased from 14,843 tons in 1993 to 11,581 tons in 1994, to 7,576 tons in 1995, and further down to 583 tons in the January-June period of 1996. ²⁶⁹

In its First Submission, the EC contends that the competent authorities limited their analysis to whether increased market share caused a decrease in domestic milk powder price. Korea, however, directs the Panel to the price information for SMPP on page 63 of the OAI Report and in section V.1.2 of the Notification.

In its First Submission, the EC argues that the competent authorities focused solely on the decline in domestic milk powder prices at the end of the investigation. To the contrary, the competent authorities examined the decline in price at the end of the period, the declining price in real terms (i.e., price adjusted by the overall inflation rate) compared to increases in production costs, and the significant difference in price levels between imports of SMPP and domestic milk powder.

In its First Submission and in its Oral Statement, the EC makes several statements that demonstrate it has, intentionally or unintentionally, ignored the OAI Report and the Notification. Korea refers the EC to the OAI Report at 63 and the Notification at IV.3.7 and V.1.2.