VI. Trade Regulations and Standards Tariffs and Import Taxes Recently, Taiwan has made significant progress in reducing its tariff level on products of export interest to the United States. In early 1994 Taiwan committed to tariff reductions on 483 items of high priority to U.S. exporters. These unilateral concessions covered trade worth US$890 million with an average depth of cut of 20 percent. The Executive Yuan (EY) will implement these tariff cuts by means of the discretionary modification authority in Article 47-1 of the Customs Law or exert its best efforts to secure enactment of these tariff reductions by the Legislative Yuan (LY). The former step was completed on March 30, 1994, when the EY temporarily reduced tariffs on 74 industrial products for one year. The tariff cut averaged 34 percent. The latter step will occur in two stages; by the end of the Spring 1994 legislative session, i.e., no later than July 31, 1994 for the agricultural products, or by the end of the Fall 1994 session or no later than January 31, 1995 for the balance of the reductions. On May 12, 1994, the EY approved tariff reductions on 758 industrial and agricultural products, pending final approval by the LY. If approved, the tariff reductions will lower the average nominal and effective tariff rates to 8.64 percent and 4.69 percent respectively. The United States is seeking by means of Taiwan's GATT accession tariff negotiation to create a vastly improved environment for increased U.S. industrial and agricultural exports to Taiwan. In addition to the import duty, importers must also pay a 0.5 percent harbor construction fee and a 5 percent value-added tax. Goods entering Taiwan by air freight or parcel post are exempt from harbor fees. A commodity tax must be paid if an imported product falls into one of eight commodity categories. The rates range from 2-60 percent. The tax is assessed on the C.I.F. and duty-paid value of affected imports. The eight commodity categories include rubber tires, cement, beverages, oil and gas, electric appliances, and automotive products. Customs Valuation Taiwan revised its Customs Law in July 1986 in order to implement procedures consistent with the "Agreement on Implementation of Article VII of the GATT." This article refers to the valuation of all imports for the assessment of duties. The Taiwan authorities have stated that upon its accession to GATT, it will fully adhere to the Customs Valuation Code. The dutiable value of an import into Taiwan is defined as its cost, insurance, freight (C.I.F.) value. If customs officials consider an invoice's transaction value to be too low, they will value the item based on the actual transaction value. Import Licenses Taiwan continue to maintain an import licensing system, but the number of items requiring import licenses is being gradually reduced. As of January, 1994, 6082 items, or 66 percent of the 9,284 items in Taiwan's tariff schedule, can be imported without a license. Of the 2,981 items that do require some kind of license, 2,210 require only pro-forma visas from local commercial banks and 771 require import permits from the Board of Foreign Trade (BOFT). Another 221 items, largely arms, munitions, and several important agricultural products, include rice, are banned outright. Problems still remain in the pharmaceutical industry, where import licenses are not granted for seven specific products. In addition, Taiwan maintains a de facto ban on the importation of fishing boats (including sport fishing boats). In other cases where licenses are required, the importer may need to first obtain the authorization of numerous agencies, such as Taiwan's Department of Health for medical equipment, and the Council of Agriculture for fishing boats and many agricultural items. Often these additional approvals and documentary requirements add to the administrative burdens of importing the products into Taiwan and cause long delays. In January, 1993, the Legislative Yuan passed a Trade Act that provides for replacing the import licensing system with a simplified "negative list" that would reduce the number of items subject to licensing. Local authorities plan to finalize the negative list in July, 1994. As part of Taiwan's GATT accession, the United States is requesting the elimination of import bans, quotas, and other non-tariff restrictions, mostly on agricultural imports, that are prohibited by GATT rules. The United States is also seeking Taiwan's adherence to the Tokyo Round negotiated licensing code and customs valuation code. Export Controls Of the total 9,312 items in Taiwan's current tariff schedule (HS), 99.44 percent may be exported. In the past, most exports required export permits. As of June 1994, 1856 items require export licenses. Licenses are required for the following reasons: - Implementation of quantitative restriction arrangements on export of textile and garment products to the U.S., Canada, the European Communities (EC). - National security, i.e. the security of supply of certain daily necessities and important industrial materials, including rice, salt, coal and uranium. - Implementation of trade and social policies, i.e. the export of munitions and armaments, high-tech equipment and supplies, and narcotics. - Protection of intellectual properties and endangered species of wild fauna and flora. - Concern over hygiene and health of certain products. Import/Export Documentation A foreign supplier's proforma invoice (quotation) is required for application of an import permit. Documents required for shipments to, or from Taiwan include the commercial invoice, bill of lading or air waybill, packing list, and certificate of origin. Shipments of agricultural products, plants, and animals to Taiwan may require certificates of inspection or quarantine issued in the country of origin and are subject to inspection and quarantine upon importation into Taiwan. The commercial invoice must show the import license number; F.O.B., C&F, or C.I.F. value; insurance; freight; and discounts or commissions, if any. The commodity description and value shown on the commercial invoice must agree with those on the import license. No requirements exist as to the form of a commercial invoice or a bill of lading. In addition to the information generally included in a standard bill of lading, all marks and case numbers appearing on packages must be shown. Customs does not permit the grouping of marks or numbers on a shipment of mixed commodities. Temporary Entry Taiwan is not a member of ATA carnet system due to the lack of diplomatic relations with ATA carnet members. However, Taiwan has signed bilateral agreements with the EU, South Africa, Singapore, Korea and New Zealand to implement ATA carnet. These agreements grant temporary customs exemptions for a wide range of products such as test instruments, scientific equipment, exhibition goods, etc. which are brought into Taiwan for sales promotion and exhibition purposes on a temporary basis. Taiwan is discussing such an agreement with the United States. Labeling, Marking requirements Taiwan labeling regulations require that the net contents of packaged goods shall be shown in metric units. Dual labeling in metric and nonmetric units is permitted. Measuring instruments calibrated in nonmetric units must show metric equivalents. It is recommended that labels on containers of prepared foods and pharmaceutical show a quantitative analysis of the contents. It is strongly recommended to clearly mark the origin of products exported to Taiwan. Taiwan's new Consumer Protection Law requires that all imported goods have Chinese language labels and instructions which shall be at least as comprehensive as the language-of-origin labels and accompanying instructions. All imported cargo must bear a mark of distinctive design, a set of three or more letters, or a combination of design and letters indelibly stenciled, stamped, or burned on the packing or on the cargo itself. For cargo packed in cases, boxes, crates, casks, drums, or cylinders, each container should bear a separate number which cannot be repeated for two years. Bags or bales also must bear a nonrecurring number, date, or set of three or more letters. In addition, each package of a consignment must be numbered consecutively. Numbering is not essential for large lots of cargo except when packaged in cases, boxes, or crates, provided that each package of the consignment contains cargo of identical weight. Prohibited Imports Narcotics are barred from entry into Taiwan. Arms, munitions, and several important agricultural products, include rice, animal offal, and sugar, are banned outright. Problems still remain in the pharmaceutical industry, where import licenses are not granted for seven specific products. In addition, Taiwan maintains a de facto ban on the importation of fishing boats (including sport fishing boats), which has frustrated the efforts of several U.S. firms. Standards (E.G. ISO 9000 Usage) Taiwan's standards are generally not a problem for U.S. exporters. "Chinese National Standards (CNS)", written and published by the National Bureau of Standards of the Ministry of Economic Affairs, list relevant standards requirements for imported products into Taiwan. CNS are similar to or in conformity with international standards such as ISO and IEC. The Bureau of Commodity Inspection and Quarantine carries out necessary commodity inspection measures according to the Commodity Inspection Law. The purpose of this inspection is to promote the quality of commodities, safeguard product safety, and protect consumer interests. The method of commodity inspections generally conform to international standards. Free Trade Zones/Warehouses Taiwan's three export processing zones (EPZs) are established in order to encourage investments, and to expand the export of products and services. Therefore, all products imported by enterprises located in EPZs for their own use are exempt from customs duties. The products of the manufacturing industry in the EPZs are normally for export. However, 50 percent of their annual production are allowed for sale on the local market after the payment of customs duties. If the quantity to be sold locally is over 50 percent of annual production, then it should be approved by the Export Processing Zone Investment Screening Board. Opened in 1980, the Hsinchu Science-Based Industrial Park is Taiwan's most visible attempt to move into technology-intensive industries. Firms investing in the park enjoy substantial tax benefits, concessionary public financing, low land cost, and support services such as warehousing, factories, and telecommunications facilities. Customs duties must be paid if the finished product is sold domestically. Bonded factories may be established anywhere in Taiwan. Bonded factory companies produce primarily for export markets and may import their manufacturing components and raw materials duty free. However, the authorities will not extend duty-free treatment to items whose duty rate is already considered minimal, materials known to pollute the environment, and items for which a domestic source is readily available. Bonded storage facilities are available in Taiwan and are limited almost entirely to those warehouses under the direct supervision of the Directorate General of Customs. Goods may be entered into bonded warehouses on arrival in Taiwan, provided the consignee has made prior application customs for such entry. Special Import Provisions For political, diplomatic, or economic reasons, the authorities have placed restrictions on the imports of certain permissible goods from designated procurement areas. To counter its chronic trade deficit with Japan and its trade surpluses with the United States and the EC countries, Taiwan frequently excludes Japan and favors North America and Western Europe through regional restrictions in import licensing procedures and in public procurement tenders. However, the area import restrictions will no longer apply if Taiwan joins the General Agreement on Tariffs and Trade (GATT). Also restricted and/or controlled is the importation of certain products on the grounds of national security, maintaining the public order, or preserving human, animal or plant health. All require a prior import permit issued by the Board of Foreign Trade. Taiwan also prohibits all direct imports from mainland China. Membership in Free Trade Arrangements Although Taiwan is currently not a member of any free trade organizations, it has made some progress in its attempt to join international organizations in recent years. Taiwan has applied to join the GATT and its application is being handled by a GATT working committee. Taiwan is now holding bilateral talks with GATT members on tariff reductions and market liberalization issues. Taiwan hopes to become a GATT member by the end of this year so that it can be a charter member of the World Trade Organization (WTO). Taiwan became a member of the Asia Pacific Economic Cooperation (APEC) in November, 1991. Taiwan also became a member of the Central American Bank for Economic Integration in 1992.