South Korea says it will go to the World Trade Organization to protest a U.S. ruling that it unfairly subsidized a computer-chip maker. The South Korean company now faces stiff new tariffs.
Officials in Seoul will ask the World Trade Organization to overturn a U.S. decision to impose punitive tariffs on South Korean computer chips. The ruling primarily affects chips made by Hynix.
The U.S. Department of Commerce said Tuesday the South Korean government has subsidized Hynix, which is an unfair trade practice. As a result, Hynix chips will be slapped with a 44.7 percent tariff if the U.S. International Trade Commission approves the decision next month.
But Tony Michell of Euro-Asian Business Consultancy in Seoul says South Korea can argue that aid given Hynix is allowed under international trade rules. "It was all part of a legitimate restructuring allowed for in the WTO rules, so I think the U.S. will have quite a hard case when they actually get to WTO," says Mr. Michell.
The European Union has already imposed a 33-percent tariff on Hynix chips, and Seoul plans to bring that to the WTO also.
Hynix's shares fell 15 percent in the Seoul stock market Wednesday because of the news. It is the world's third largest maker of dynamic random access memory chips - or D-RAMs.
Mr. Michell notes that the WTO moves very slowly in such matters, and that until the case is resolved, the Korean chip-maker will still face the tariffs. He says the high tariffs could doom the company, which has been struggling for years.
"Hynix has been in serious trouble for a long time, and this may be one of the final nails in their coffin," says Mr. Michell.
South Korean and foreign banks have been extending special loans and helping Hynix restructure. The U.S. Commerce Department says the aid constitutes subsidies.
Hynix and other South Korean D-RAM-makers could also fight the decision in U.S. courts.