An interim World Trade Organization ( WTO ) report has rejected European Union allegations that South Korea had been subsidising its shipbuilders, according to a South Korean government source.
The source at the Ministry of Foreign Affairs and Trade said South Korea has been notified of the finding and said it was expected to be adopted as the final ruling by early next year.
"The interim report contains complicated phrasing, but as a conclusion it rejects the EU's claim," said the source.
The European Union has taken South Korea to the world trade body, alleging the Asian country was effectively dumping ships on the world market by subsidising its manufacturers through nationalised financial institutions.
South Korean financial companies nationalised during the 1997 Asian financial crisis have provided financing to debt-ridden companies, including shipbuilders, sparking complaints from trading partners.
The interim ruling appears to mark a second victory for South Korea, the world's 12th-largest exporter, after sources in Seoul told Reuters last week the WTO has also cleared the country of paying subsidies to chipmaker Hynix Semiconductor Inc.
The U.S. International Trade Commission imposed a 44 percent duty on Hynix, the world's third-largest maker of dynamic random access memory chips, in June 2003 because it said Hynix received subsidies in the form of creditor-led bail-outs.
South Korea has said these bail-outs led by banks did not constitute government subsidies because the banks were only technically nationalised and had made the decisions out of commercial considerations.