Japan has requested WTO dispute consultations with South Korea concerning alleged subsidies provided by the Korean government to its shipbuilding industry. Japan claims that the challenged measures, which include funds, loans, guarantees, insurance and other financing, are inconsistent with the WTO’s Agreement on Subsidies and Countervailing Measures (SCM Agreement) and the General Agreement on Tariffs and Trade (GATT) 1994.
Responding to the increased competition and the dwindling shipbuilding orders which have brought an idle period for the domestic shipbuilding industry, the Republic of Korea has developed and implemented a range of measures to provide financial support to its shipbuilders. These measures include providing both “producer support,” such as direct financing provided to Korean shipbuilders that, inter alia, enables their continued market presence and prolonged periods of otherwise unsustainable low pricing, and “sales support” to Korean shipbuilders and their customers, which is designed to stimulate sales for Korean shipbuilders, including during periods of relatively low demand.
Japan considers that certain measures taken by Korea provide subsidies that are inconsistent with its obligations under the SCM Agreement and the GATT 1994. The measures in question relate to the development, production, marketing, and/or sale or purchase of commercial vessels, including vessels designed to carry crude oil, LNG, and shipping containers. These measures include, but are not necessarily limited to:
- Corporate Restructuring Measures to Support Korean Shipbuilders: These include measures provided by the Korea Development Bank (KDB), by the Export-Import Bank of Korea (KEXIM), by the Korea Trade Insurance Corporation (K-Sure) or measures provided by the Korea Ocean Business Corporation (KOBC) pursuant to the Korea Ocean Business Corporation Act.
- Guarantees and Other Insurance for Financing Related to Commercial Vessel Orders Placed with Korean Shipbuilders: Japan is concerned about the provision by Korea, directly and/or through public and private institutions owned, controlled, entrusted and/or directed by the Korean Government, of guarantees or other types of insurance on sales-specific payments or financing on non-commercial terms
- Pre-Shipment Loans, Measures through the New Shipbuilding Program, and Other Financing for Commercial Vessel Orders Placed with Korean Shipbuilders: This financing includes provision of loans to finance production, or customers’ purchases, of commercial vessels produced by Korean shipbuilders, purchase of bonds to fund customers’ purchases of commercial vessels produced by Korean shipbuilders, and capital injections to finance customers’ purchases of commercial vessels produced by Korean shipbuilders. This financing is offered by a range of Korean public and private institutions owned, controlled, entrusted and/or directed by the Korean Government, including KEXIM.
- Eco-Ship Replacement Subsidies: Japan is concerned about the provision by Korea, directly and/or through public and private institutions owned, controlled, entrusted and/or directed by the Korean Government, of financial assistance on non-commercial terms to purchasers of commercial vessels produced by Korean shipbuilders, including providing price support (i.e., cover a portion of the cost) for the purchases of commercial vessels that comply with certain environmental standards from Korean shipbuilders.
- Other Korea’s Support for Commercial Vessel Purchases: Japan is concerned about the provision by Korea, directly and/or through public and private institutions owned, controlled, entrusted and/or directed by the Korean Government, of financial assistance on non-commercial terms to Korean shipbuilders and/or purchasers, lessors, lessees, and/or operators of commercial vessels produced by Korean shipbuilders.
