Department of Commerce Can Impose Tariff On Hynix Chip Imports

by Mike Godfrey, Tax-News.com, Washington

28 July 2003

A 44.71% tariff imposed by the US Department of Commerce on the imports of Korean chip maker Hynix has been endorsed by the United States International Trade Commission in a ruling delivered last week.

The Department of Commerce decided to impose the tariff on Hynix following a complaint from rival chip maker, Micron that the firm had received government subsidies which were tantamount to illegal state aid under WTO (World Trade Organisation) rules.

Hynix has denied the accusation, stating in its defence that Micron's claim originates from the bailing out of Hynix by a creditor bank that was partly owned by the Korean government. The firm argued that this does not amount to a direct subsidy. Hynix has reasoned that this does not present a threat to the US chip industry, but the US ITC has rejected this argument, and the Commerce Department tariff will go ahead.

However, it is thought the imposition of the tariff will not have a significant effect on Hynix's profit levels, as many of its US sales originate from a plant based in Oregon, which will not therefore attract the tariff. Also, products manufactured outside the United States are often shipped directly to customers' foreign facilities, again avoiding the US tariff.

A route of appeal remains open for Hynix, which can take the case to the Court of International Trade. The South Korean government is also lobbying the WTO on the firm's behalf.

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