Reproduced from Practical Law with the permission of the publishers. For further information, visit "www.practicallaw.com".
A Q&A guide to international trade in goods and services in Taiwan.
This Q&A covers key matters relating to the regulation of international trade in Taiwan, including recent trends, trade agreements, trade negotiations, rules relating to the supply of services, imports and exports requirements, trade remedies, and international trade restrictions.
This Q&A is part of the International Trade and Commercial Transactions Global Guide.
For more information on sale and storage of goods in Taiwan, visit Sale and storage of goods in Taiwan: overview.
Political pressures of the Chinese Government have reduced trade between China and Taiwan. As a result, the Taiwanese Government has been promoting the "New Southbound Policy" since 2016 to enhance its relations with countries in Southeast Asia. Although international agencies have indicated that economic growth in ASEAN (Association of Southeast Asian Nations) and South Asian countries has been higher than the global average in recent years, the New Southbound Policy, which is still at a very early stage, has not yet generated satisfying outcomes for Taiwan.
The Brexit referendum and the direction of the US trade policy have injected a great deal of uncertainty in global economic development, potentially negatively affecting Taiwan. Taiwan's monthly export and import performances in 2016 show that the overall performance started out low, with negative growth in January, and tended to increase steadily to December. It appears that Taiwan has to some extent recovered its economic and trade momentum. Since 2018, the US-China trade war has led to higher customs on Chinese imports into the US and has substantially lowered China's advantages in international trade. Taiwanese and foreign investors in China have turned to Taiwan and raised Taiwan's core capability in high-tech outsourcing industries. However, this momentum may have been negatively affected by the political situation across the Taiwan Strait. Following the conclusion of the Phase One deal between China and the US in January 2020, Taiwan is likely to be affected by subsequent negotiations between the two countries.
Since 2002, Taiwan has held bilateral trade negotiations with Vietnam, Cambodia, Laos, Russia, Saudi Arabia, Ukraine, Belarus, Kazakhstan, Azerbaijan, Tajikistan, Uzbekistan, Libya, Liberia, Lebanon, Iraq, Afghanistan and Algeria under the WTO framework, with the aim to obtain market access and tariff reductions.
In 2016, the Ministry of Finance imposed anti-dumping duties on hot-rolled carbo steel plate imported by manufacturers located in China, South Korea, Indonesia and other countries (Tai-Fi-Customs No.1061003661). During the anti-dumping investigation process, some Chinese and Korean companies, including Hyundai Steel Company, reached a settlement with the Taiwanese Government, which led to much lower anti-dumping duties. The settlement was effective until 20 February 2017.
Since 2019, the Ministry of Finance has initiated or continued anti-dumping measures aimed at hot-rolled stainless steel products, certain carbon cold-rolled steel products, cold-rolled stainless steel products, shoes, towels, and so on. The targets of these measures are mostly Chinese companies. The most recent decision, adopted in August 2019, is to continue levying anti-dumping duties on cold-rolled stainless steel products of certain Chinese and Korean companies.
Taiwan is a member of the WTO.
According to the Taiwanese Bureau of Foreign Trade, Taiwan has signed bilateral Admission Temporaire/Temporary Admission (ATA) Carnet Agreements and Administrative Protocols with 44 countries and economic entities, including the US, Japan, Singapore, the EU, and Switzerland. Most of these countries have started issuing ATA Carnets for Taiwanese goods, except the Philippines, Vietnam, and El Salvador. To date, Taiwan is also a party to:
For more information, see: www.mof.gov.tw/multiplehtml/264.
The authority responsible for negotiating trade agreements in Taiwan is the Bureau of Foreign Trade, Ministry of Economic Affairs. It is difficult to estimate the time needed to conclude a trade deal with Taiwan due to the political pressures of the Chinese Government. However, the Taiwanese Government is doing its best to negotiate trade deals with other countries.
Taiwan may apply interim rules during trade negotiations. Generally, Taiwan applies WTO rules during the negotiation process.
Taiwan has reached an agreement with Mainland China regarding the cross-border supply of services pending the review of the Legislative Yuan (Taiwan Congress). However, for political reasons, a resolution of the Legislative Yuan on this agreement is not expected in the near future. In addition, Taiwan is taking part in the negotiations of the TiSA along with 22 other WTO members.
Regulatory framework. The regulation of financial services in Taiwan is administered by the Financial Supervisory Commission (FSC). The main statutes governing financial services include the:
Securities and Exchange Act.
Securities Investment Trust and Consulting Act.
Banking Act.
Insurance Act.
Main requirements. Any financial service that can be considered as an "offering" of securities under the FSC standard (similar to the Howey test in the US) is regulated by the FSC. Under the Company Act, foreign companies have the same legal capacity as Taiwanese companies, subject to certain restrictions. Foreign companies are no longer required to file a request with the Taiwanese Government for a certificate of recognition before conducting business in Taiwan. However, a foreign company cannot conduct business in Taiwan without completing the procedure for branch office registration.
Under the Banking Act, banks must be incorporated as companies limited by shares and obtain prior approval of the FSC. Their shares must be sold through public offering procedures.
Under the Insurance Act, insurance companies must be incorporated as companies limited by shares unless the FSC provides otherwise, and their shares must be sold through public offering procedures.
Regulatory framework. The Taiwanese Attorney Regulation Act is the main statute governing the supply of legal services in Taiwan. The Ministry of Justice is responsible for the regulation of legal services. The bar associations of each city or county are responsible for handling violations of ethic rules.
Main requirements. A foreign attorney can apply to the Ministry of Justice for permission to practise in Taiwan if he or she both:
Has practised for at least five years in the jurisdiction of admission.
(Article 116, Taiwanese Attorney Regulation Act.)
To practise law in Taiwan, a person must pass the Taiwan bar exam and be further trained for five months in a law firm or an entity approved by the Ministry of Justice.
The training requirement does not apply to any person who has held a position of:
Judge or prosecutor in Taiwan for not less than two years.
(Article 3, Taiwanese Attorney Regulation Act.)
To sit on the bar exam, a person must have a law degree or have completed at least 20 credits of a law course.
Regulatory framework. The main statutes governing retail sales include the:
Civil Code.
Consumer Protection Act.
The main authority that supervises retail sales is the Fair Trade Commission.
Main requirements. To establish a retail business in Taiwan, a foreign national can set up a company after obtaining approval of the Investment Commission, Ministry of Economic Affairs.
Before entering the Taiwan market, a business should:
Check whether the products or services are prohibited in Taiwan.
Check whether there are restrictions on the amount of products authorised on the market.
For example, the sale and manufacture of cigarettes and alcoholic beverages require prior approval of the National Treasury Administration, Ministry of Finance. Establishing a cram school requires prior approval of the Ministry of Education.
The Taiwanese Government has discretion to grant approval subject to conditions to satisfy before entering the Taiwan market.
The Customs Administration, Ministry of Finance is responsible for enforcing customs laws and regulations. The Customs Administration can initiate an investigation for violation of customs laws and regulations. When a violation is confirmed, the Customs Administration can order the importer or exporter to correct the violation, impose a fine, and/or refuse to grant a permission or registration.
When a case may involve criminal penalties, the Customs Administration will transfer it to the prosecutor's office or the Investigation Bureau for further investigation.
Generally, Taiwan imposes import tariffs based on the cost, insurance and freight (CIF) price of imported products (that is, the purchase price plus freight and insurance). Import tariffs for each product can be searched with entering a Chinese or English keyword, or tariff number such as the Standard Classification of Commodities of the Republic of China Code (CCC Code), on the Taiwan Tariff Database System (https://portal.sw.nat.gov.tw). For example, the import tariff rate is 12% for cotton clothes (CCC Code: 61142000007).
An importer must also pay:
An additional 5% business tax, which is equivalent to value added tax.
An importer may have to pay:
Commodity tax, which is levied on certain goods under the Commodity Tax Act (for example, TWD600 per metric ton of white cement or 13% of the price of a refrigerator).
Tobacco and alcohol tax, which is levied under the Tobacco and Alcohol Tax Act (for example, TWD1,590 per 1,000 cigarettes or TWD26 per litre of beer).
Port duty.
Since 1 January 2018, the threshold to benefit from import tariffs exemption for goods imported by parcel post has been lowered to TWD2,000. Therefore, when a parcel's CIF price exceeds TWD2,000, the importer must pay the applicable tax such as import tariffs and business tax.
Importers can make claims for preferential tariffs under free trade agreements, which are listed here: www.trade.gov.tw/english/Pages/List.aspx?nodeID=672.
No import tariffs (or reduced tariffs) apply to certain goods originating from Panama, Paraguay, Guatemala, Honduras, Eswatini, New Zealand, Nicaragua, El Salvador, and Singapore. Certain goods from China listed in the Economic Cooperation Framework Agreement (ECFA) may enjoy preferential tariffs. Goods from least developed countries may also benefit from tariff-free treatment (https://eweb.customs.gov.tw/News_Content.aspx?n=ED8CD5C431231133&sms=25E3E5F48BB4DFCC&s=A7B7E04D610733B6).
Taiwan restricts the importation of certain goods that may endanger animals/plants and of strategic advanced technology. Products originating from certain embargoed countries are prohibited from importation.
Country of origin marking is required on imported socks, towels, textiles, bedding, tiles, and shoes. The Ministry of Finance has issued a standard called "Regulations Governing the Determination of Country of Origin of Import Goods" to identify the country of origin of imported goods. Where Taiwan has signed a free trade agreement with a particular country, the agreement will determine the country of origin of goods imported from these countries.
Taiwan does not generally impose absolute import quotas.
Customs decisions and import restrictions can be challenged.
To challenge import tariffs, an importer must file a petition for review with the Customs Administration within 30 days from receipt of the import tariff decision. An importer that does not agree with the decision of the Customs Administration can file a petition with the Ministry of Finance within 30 days after receipt of the review decision. If the importer is not satisfied with the decision of the Ministry of Finance, it can file a complaint with the courts within two months, seeking to revoke the decision.
Other decisions made by the customs authorities (such as an order to return goods) can be challenged directly before the courts.
WTO rules on trade remedies are implemented in Taiwan. The Taiwanese Government can impose countervailing duties and anti-dumping duties in accordance with the:
Customs Act.
Regulations Governing the Implementation of the Imposition of Countervailing and Anti-Dumping Duties.
The Ministry of Finance is responsible for investigating whether imported products are subsidised or dumped. The Ministry of Economic Affairs is responsible for investigating whether subsidised or dumped imports cause injury to the domestic industry. Depending on the outcome of these initial investigations, the Ministry of Economic Affairs will direct its International Trade Commission to conduct an investigation. The Ministry of Finance is responsible for deciding on the imposition of trade remedies after investigations have been conducted.
Producers of domestic like products and commercial, industrial, labour, agricultural associations or other legal organisations can apply for the imposition of countervailing or anti-dumping duties on behalf of the domestic industry if they are legally established and are representative of the industry. The Ministry of Economic Affairs determines whether an applicant is "representative of the industry" by referring to the total production of like products in the most recent year. In addition:
The application must be supported by those domestic producers whose collective output constitutes more than 50% of the total production of the like product produced by the portion of the domestic industry expressing either support for, or opposition to, the application.
The domestic producers expressing support for the application must account for more than 25% of the total production of the like product by the domestic industry.
Foreign parties importing goods into Taiwan can make representations, access documents, and be heard during investigations. A foreign government or a foreign company can apply for an undertaking to eliminate dumping in exchange for an exemption from further investigation and anti-dumping duties.
Parties that are subject to a countervailing or anti-dumping duty can appeal to the Taipei High Administrative Court within two months from the announcement of the decision.
The Bureau of Foreign Trade, Ministry of Economic Affairs, is responsible for enforcing export regulations in Taiwan. The main export regulations are the:
Foreign Trade Act.
Regulations Governing Export of Commodities.
Exporters must be registered with the Bureau of Foreign Trade before they can export products.
Goods that are subject to export restrictions under the Foreign Trade Act include:
Goods to be exported to specific countries or areas.
Strategic high-tech commodities.
Endangered species of wild fauna and flora.
The Bureau of Foreign Trade has compiled a list of restricted export commodities, available at: https://fbfh.trade.gov.tw/fh/ap/listIERegf_e.do?q_type=2&language=E. Exporters of restricted goods must file an application for an export licence in accordance with the regulations referred to in this list. Exporters that cannot comply with these regulations must obtain special permits from the Bureau of Foreign Trade, which are granted on a case-by-case basis.
Exporters that export strategic high-tech commodities to restricted areas without a licence are liable to imprisonment for up to five years and a fine of up to TWD3 million. The Bureau of Foreign Trade will also suspend their registration for at least one month and no more than a year. For other violations of export regulations, exporters are liable to a fine of between TWD60,000 and TWD300,000, and will be prohibited from exporting goods for between one month and one year.
Taiwan is currently restricting trade with Iran in line with the US sanctions. These restrictions are similar to the sanctions imposed by the US (see www.treasury.gov/resource-center/sanctions/Programs/Documents/jcpoa_winddown_faqs.pdf).
The Bureau of Foreign Trade is responsible for enforcing trade restrictions. It has powers to:
Issue warnings.
Impose fines on exporters.
Suspend exporters' registration.
Prohibit exports.
See Question 17 and Question 19.
The Foreign Trade Act does not provide for specific compliance requirements. However, a business must maintain its import and export registration with the Bureau of Foreign Trade, and therefore comply with the restrictions of the Foreign Trade Act (see Question 16) and orders of the Bureau of Foreign Trade.
The Bureau of Foreign Trade is responsible for dealing with trade agreements, handling complaints of local exporters against foreign trade barriers, and addressing unfair trade practices. When local exporters file a complaint, the Bureau of Foreign Trade will analyse and decide whether an unfair trade practice exists. If so, the Bureau will contact the relevant foreign government to address a potential dispute.
In recent years, the Bureau of Foreign Trade has been promoting the Cross-Border Exchange of Electronic Certificates of Origin Project. To date, Taiwan has established electronic certificates of origin mechanisms with both China and South Korea.
Taiwan has signed Memorandums of Understanding on the Mutual Acceptance of Certificates of Origin with Vietnam in July 2016 and Belgium in November 2016, to facilitate trade and strengthen bilateral co-operation.
From 2016 to 2019, Taiwan has also signed protocols of economic co-operation with Paraguay and Eswatini, in line with the global trend of free trade.
AUTHOR: Hung Ou Yang
Managing Attorney
Taipei
+886-2-2707-9976
[email protected]
AUTHOR: Jia-Jun Fang
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Taipei
+886-2-2707-9976
[email protected]
Copyright Brain Trust International Law Firm
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
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