P 070936Z NOV 08
FM AIT TAIPEI
TO SECSTATE WASHDC PRIORITY 0310
INFO CHINA POSTS COLLECTIVE
AMEMBASSY SEOUL 
AMEMBASSY TOKYO 
USDOC WASHDC

UNCLAS AIT TAIPEI 001580 
 
 
STATE FOR EAP/TC, EB/TBB/BTA 
STATE PASS TO USTR/BLUE AND WINELAND AND AIT/W 
COMMERCE FOR 4431/ITA/MAC/AP/OPB/TAIWAN 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EFIN TW
SUBJECT: TAIWAN: PART ONE OF 2009 NATIONAL TRADE ESTIMATE REPORT 
 
REF:  STATE 88685 
 
 
TRADE SUMMARY 
------------- 
 
¶1. The U.S. goods trade deficit with Taiwan was $11.9 billion in 
2007, a decrease of $3.2 billion from $15.2 billion in 2006. U.S. 
goods exports in 2007 were $26.4 billion, up 14.4 percent from the 
previous year. Corresponding U.S. imports from Taiwan were $38.3 
billion, up 0.2 percent. Taiwan is currently the 10th largest export 
market for U.S. goods. 
 
¶2. U.S. exports of private commercial services (i.e., excluding 
military and government) to Taiwan were $7.1 billion in 2006 (latest 
data available), and U.S. imports were $7.0 billion. Sales of 
services in Taiwan by majority U.S.-owned affiliates were $11.2 
billion in 2005 (latest data available), while sales of services in 
the United States by majority Taiwan-owned firms were $439 million. 
 
¶3. The stock of U.S. foreign direct investment (FDI) in Taiwan was 
$16.4 billion in 2007 (latest data available), up from $16.1 billion 
in 2006. U.S. FDI in Taiwan is largely in the finance, 
manufacturing, and wholesale trade sectors. 
 
¶4. The United States and Taiwan continued to work together to 
enhance economic cooperation through the bilateral Trade and 
Investment Framework Agreement (TIFA) process. The TIFA, which was 
signed in 1994, provides an important mechanism for both parties to 
resolve bilateral trade issues and to address the concerns of the 
U.S. business community. 
 
IMPORT POLICIES 
-------------- 
 
Tariffs 
------- 
 
¶5. Taiwan comprehensively revised its tariff schedule in 2006, and 
continuing unilateral improvement to its tariff structure on 
finished goods and raw materials have pushed down the average 
nominal tariff rate on imported goods to 5.56 percent from 5.6 
percent in 2006. 
 
¶6. However, in order to stabilize commodity prices in Taiwan, the 
Executive Yuan (EY) implemented temporary tariff cuts on seven bulk 
imports - including wheat, flour, and flour of soybean and corn - 
until February 5, 2009, and in addition implemented additional 
temporary measures to cover all other types of durum wheat, tomatoes 
preserved other than by vinegar or acetic acid, sesames, milk and 
cream in powder form, and butter. 
 
¶7. Taiwan is working to pass legislation outlining a new version of 
its tariff schedule to meet the World Customs Organization's 
Harmonized System (HS) requirements. Taiwan estimates it needs to 
reclassify goods in more than 11 percent of its tariff lines. U.S. 
industry continues to request that Taiwan lower tariffs on many 
goods, including large motorcycles, wine, canned soups, cookies 
(sweet biscuits), savory snack foods, vegetable juices, potato and 
potato products, table grapes, apples, fresh vegetables, and citrus 
products. 
 
¶8. When Taiwan became a WTO Member in January 2002, Taiwan 
implemented tariff-rate quotas (TRQs) on small passenger cars, three 
categories of fish and fish products, and a number of agricultural 
products. On January 1, 2007, in accordance with its WTO 
commitments, Taiwan made additional tariff cuts and increased TRQ 
amounts on these products. For example, the commodity tax on 
passenger cars with engine displacement of over 2000cc dropped from 
35 percent to 30 percent, and this rate will remain in place until 
¶2011.  Also by 2011, Taiwan has committed to fully eliminate TRQs on 
small passenger cars. 
 
¶9. Taiwan maintains Special Safeguards (SSGs) for a number of 
agricultural products covered by TRQs. SSGs, permitted under Article 
5 of the WTO Agreement on Agriculture, allow Taiwan to impose 
additional duties when import quantities exceed SSG trigger volumes 
or import prices fall below SSG trigger prices. Because Taiwan did 
not previously import many of these products, SSG trigger volumes 
are relatively low. Over the last few years, Taiwan has imposed 
safeguard provisions on poultry imports several times, and SSGs have 
also been triggered on several other products, including types of 
offal. Imports of affected products usually continue despite 
safeguard tariffs. 
 
¶10. Taiwan has eliminated more that 99 percent of import controls, 
but 87 product categories still face import restrictions, up from 71 
product categories in 2008. Of these categories, 24 require import 
permits from the Board of Foreign Trade (BOFT) and 63 are 
prohibited. Most of the permit-required categories are related to 
public sanitation and national defense concerns and include 
ammunition and some agricultural products. 
 
Agricultural and Fish Products 
------------------------------ 
 
¶11. Beef: Taiwan allows the import from the United States of deboned 
beef from animals less than 30 months of age, but requires that 
tissues listed by the World Health Organization for Animal Health 
(OIE) as Specified Risk Materials (SRMs) appropriate for removal 
from animals over 30 months of age are removed from animals less 
than 30 months of age as well.  Ruminant and non-ruminant products 
intended for use in animal feed and pet food -- such as tallow 
(including protein-free tallow), lard, poultry and porcine meal -- 
are banned due to Bovine Spongiform Encephalopathy (BSE) related 
concerns, while limited exceptions for pet food have been approved 
after a thorough case-by-case review or plant clearance process. 
Taiwan does not maintain a BSE-related import suspension on 
U.S.-origin protein-free tallow for human consumption. 
 
¶12. The United States has engaged Taiwan intensively to request that 
imports of U.S. beef and beef products (and non-ruminant products 
subject to the BSE-related suspensions) be resumed consistent with 
OIE guidelines and the May 2007 OIE classification of the United 
States as controlled-risk for BSE.  Taiwan indicates it has 
completed its regulatory review on the U.S. request after finalizing 
a report on the risk assessment study and a second on-site visit to 
U.S. beef slaughter and processing facilities conducted by the 
Department of Health (DOH) and experts on its BSE Risk Advisory 
Committee.  A similar, independent risk assessment on beef products 
for animal feeding conducted by the Council of Agriculture (COA) and 
its review committee was completed, but progress on the proposed 
rule-making process has languished.  With the scientific review and 
technical work complete, the only step that remains is a final 
decision and the necessary administrative procedures to expand 
access.  While the U.S. Government has pushed hard for opening, the 
Taiwan authorities have delayed action in anticipation of negative 
domestic reaction, especially from consumer groups. 
 
¶13. Resuming the trade in trade of bone-in beef and other beef 
products would increase U.S. exports by $50-100 million based on 
pre-ban trade figures and hopes for market growth driven by record 
exports to Taiwan of U.S. boneless beef in 2008. 
 
¶14. Organics: In 2007, Taiwan promulgated new "Imported Organic 
Agricultural Product and Organic Agricultural Processed Products" 
regulations, which will come to effect on January 29th, 2009. 
Based on the new regulations, COA will adopt a two-step review 
system for raw or processed organic agricultural products.  First, 
COA will review the equivalence of the international accreditation 
organization, and then importers must apply for COA approval for 
each batch at importation with the required documentations including 
certificates from COA-recognized certifiers.  The products can not 
claim "organic" on the packaging unless COA approves both steps of 
the review.  However, COA currently does not recognize any 
international accreditation organizations for agricultural processed 
products, which may prevent importation of organics after the new 
regulations take effect. 
 
¶15. Based on the current volume of trade, these regulations will 
affect $10-25 million of U.S. exports. 
 
¶16. Rice: Taiwan's ceiling price mechanism is a major impediment to 
Taiwan's fulfillment of its World Trade Organization (WTO) 
obligations for rice because the system fails to keep pace with 
market conditions.  The ceiling price over the past year has been 
routinely lower than those bid by U.S. exporters, causing tenders to 
fail.  As of November 2008, Taiwan has been unable to fill its 2007 
country specific quota (CSQ) for U.S. rice under the traditional 
public tender portion of the quota. Taiwan has provided numerous 
arguments for not filling the 2007 quota and for delaying the 2008 
tender schedule.  These ranged from not wanting to affect world rice 
prices during a global food crisis, to having insufficient funds to 
purchase rice, to pointing out unusually high prices of California 
medium grain rice that exceed domestic wholesale prices, which would 
constitute COA paying a "subsidy" for imported rice. 
 
¶17. Estimated trade impact on U.S rice exporters is $17,280,000 
based on the unfilled 2007 U.S. quota of 32,000 metric tons at a 
free-on-board value of $540 per metric ton. 
 
¶18. Wood Products: Taiwan recently revised its building codes in 
line with international practices, and on October 31st, 2008, the 
Construction and Planning Agency of the Ministry of the Interior 
announced long-awaited companion fire codes for wood frame 
construction.  U.S. industry believes the new codes will allow 
builders to obtain insurance for construction and further encourage 
wood use in construction.  Fire codes for heavy timber were not 
included in this announcement.  However, those interested in using 
heavy timber in construction can apply to the Taiwan authorities for 
fire resistance testing, though this option is prohibitively 
costly. 
 
¶19. According to U.S. industry sources, these building code 
revisions may add $10 million to U.S. exports to Taiwan. 
 
¶20. Automobiles and Motorcycles: On November 1, 2007, the Ministry 
of Transportation and Communications (MOTC) opened most expressways 
to large motorcycles with engine displacement of 550cc or more, and 
asked the Directorate General of Highways (DGH) to further study the 
feasibility of opening highways to those motorcycles.   The deadline 
of the study will be in November 2009.  The tariff on small 
automobiles is 30 percent, that of motorcycles between 250-500cc 
displacement is 18 percent, and that of above-500cc-displacement 
motorcycles is 20 percent. 
 
STANDARDS, TESTING, LABELING, AND CERTIFICATION 
--------------------------------------------- --- 
 
¶21. Over 70 percent of the standards established by Taiwan's Bureau 
of Standards, Metrology & Inspection (BSMI) have been harmonized to 
some extent with international standards, and BSMI is continuing to 
harmonize existing standards with international standards.  Taiwan's 
Chinese National Standards (CNS), which are based on International 
Electro-Technical Commission (IEC) standards, provide rules and 
guidelines for products, processes and services. 
 
Agricultural Biotechnology Products 
----------------------------------- 
 
¶22. The current Taiwan agricultural biotechnology regulations are 
only applied to soybeans, corn and products of soybean and corn.  No 
bioengineered soybeans or corn may be produced, processed, prepared, 
packed, and imported or exported unless they are registered and 
approved by the Taiwan Department of Health (DOH) Food Safety Bureau 
(FSB).  Taiwan has approved 18 of the most widely commercialized 
bioengineered corn and soybean events. 
 
¶23. At present, Taiwan only regulates corn and soybeans and their 
products derived from recombinant-DNA.  According to Taiwan's 
current biotechnology regulations, prior market approval for biotech 
soybean and corn imports is required for food, feed or processing 
use (FFP use).  In May 2008, Taiwan implemented registration for 
stacked events.  While no disruptions to trade have resulted from 
Taiwan's biotechnology regulations, newly registered stack events 
have added to the growing number of products entering the regulatory 
approval pipeline.  This increase in applications, combined with 
resource constraints in the domestic regulatory infrastructure, may 
lead to approval delays. 
 
Alcoholic Beverage Products 
--------------------------- 
 
¶24. Taiwan has no ingredient-labeling requirements for alcoholic 
beverages, though beverages must include a warning label stating 
that excessive drinking is harmful to one's health. Since January 1, 
2008, alcohol product manufacturers and importers must comply with 
the Hygiene Standards for Alcohol Products on antiseptics, 
colorants, and additives, or face penalties of up to $90,900. 
Importers of alcoholic beverages can submit home country 
documentation of sanitary inspection or safety assurances issued by 
alcohol product inspection officials or professional alcohol 
associations as an alternative to customs-clearance product 
inspection. 
 
Automobiles 
----------- 
 
¶25. Before 2004, Taiwan's market was open to vehicles that met 
either the North American Federal Motor Vehicle Safety Standards 
(FMVSS) or the United Nations Economic Commission for Europe (ECE) 
vehicle safety standard. In 2004, however, the Ministry of 
Transportation and Communication (MOTC) began to phase in ECE 
standards in order to harmonize Taiwan with the majority of the 
world's markets outside of North America.  The new rules took 
partial effect for passenger cars in July 2008, and will take full 
effect for all vehicles in Taiwan by January 2013. 
 
¶26. Non-passenger vehicles, however, must already meet ECE standards 
to be sold in Taiwan. For FMVSS-spec vehicles that have 
manufacturer-provided "Self-certification" reports, Taiwan offers an 
alternative certification method through its Automotive Research and 
Testing Center (ARTC).  The process, however, is expensive and 
manufacturers complain that ARTC lacks sufficient test facilities 
and technical capabilities to conduct the needed tests. 
 
Biotechnology Foods 
------------------- 
 
¶27. Taiwan requires labels on foods containing biotechnology corn or 
soybeans. All food products containing 5 percent or more 
bioengineered soybean or corn ingredients by weight must be labeled 
as "Genetically Modified (GM)" or "Containing Genetically Modified." 
Highly processed food items (items with no proteins or DNA) do not 
require GM labels. 
 
Industrial and Home Appliance Products 
-------------------------------------- 
 
¶28. Taiwan accepts testing by National Institute of Standards and 
Technology-designated laboratories in the United States for 
information technology equipment as described in the APEC Telecom 
Mutual Recognition Arrangement implemented by the United States and 
Taiwan with respect to Phase I on March 16, 1999.  Under Taiwan's 
Commodity Inspection Act, industrial and home-appliance products, 
such as air-conditioning and refrigeration equipment, must meet 
safety and Electromagnetic Compatibility (EMC) testing requirements 
before clearing customs. US-produced electrical home appliances are 
certified by the United States' American National Standard (ANSI) or 
meet with Underwriters Laboratories (UL) Standards, but Taiwan's 
Bureau of Standards, Metrology, and Inspection (BSMI) requires these 
imports comply with Taiwan's International Electro-Technical 
Commission (IEC)-based safety standards, fording ANSI or 
UL-certified products to undergo duplicative safety testing by 
IEC-consistent laboratories. 
 
¶29. Since 2006, BSMI has regulated levels of lead, mercury, 
hexavalent chromium, polybrominated biphenyls, and polybrominated 
biphenyl ether in electro-technical products. Such products must 
pass BSMI-required product testing or production-site inspection. In 
addition to existing EMC and safety requirements, television 
receivers must be able to receive over-the-air digital television 
(DTV) broadcast signals. 
 
Maximum Residue Limits (MRLs) 
----------------------------- 
 
¶30. Taiwan's unwillingness to recognize international MRLs while it 
takes action to reduce a backlog of over 1,400 MRL applications is 
creating a significant level of uncertainty in the U.S. agricultural 
industry.  Because of the enormity of the backlog, an agreement by 
Taiwan to reference Codex and U.S. MRLs, in the absence of Codex 
tolerances, is crucial to avoid potential trade disruptions. 
 
¶31. Taiwan's inability to keep pace with requests to establish MRLs 
for pesticides has resulted in the rejection of various U.S. 
agricultural shipments including wheat, barley, strawberries, and 
corn due to residue violations.  A particularly visible case has 
been the pork ractopamine issue.  Taiwan banned the use of 
ractopamine domestically without any scientific assessment 
questioning its safety.  Even though Taiwan officials acknowledge 
that there is no health risk due to trace amounts of ractopamine in 
U.S. pork, in 2007, Taiwan began testing for ractopamine in U.S. 
pork, leading to a drop in imports of non-offal U.S. pork meat. 
Under domestic pressure from farmers, Taiwan has strongly resisted 
establishing a safe MRL for ractopamine despite having announced its 
intent to do so to the WTO in August 2007. 
 
¶32. In response to trading partner concerns, Taiwan recently 
established a priority list of 218 MRLs. The Taiwan Department of 
Health (DOH) will review applications for these high-priority MRLs 
over the next two-to-three years in an effort to reduce the backlog 
for establishing pesticide tolerances. 
 
¶33. Based on the pre-ban 2006 trade volume, we estimate that 
Taiwan's lack of a safe MRL for ractopamine is affecting $10-25 
million of U.S. pork exports. 
 
¶34. Melamine: In the wake of a fall 2008 melamine-contamination 
scandal involving adulterated dairy products in China, the Taiwan 
Department of Health (DOH) initially set a 2.5 ppm tolerance level 
for melamine presence in foods.  Due to consumer concerns, however, 
the DOH quickly withdrew the 2.5 ppm tolerance and instituted a 
"non-detectable" tolerance using the most sensitive testing 
equipment available, making the 0.05ppm detection limit adopted for 
these tests the de facto tolerance for melamine in foods. 
 
¶35. In late September 2008, Taiwan announced an indefinite import 
suspension on all Chinese-made milk, milk powder, ice cream bases, 
and dairy-containing beverage/mix, prepared and processed milk 
products, ice cream, animal protein products and protein 
derivatives, and other products.  Taiwan also imposed stringent 
melamine scrutiny on products from non-China sources by implementing 
a new, temporary test report requirement for imports in three 
categories: milk powder, infant formula, and creamers.  Under the 
new requirements, each batch of the covered products (a total of 20 
HS codes) destined for Taiwan that was loaded on board on or after 
October 8, 2008 now requires presentation of a melamine-free test 
report from a government-certified or appropriately accredited 
laboratory at import arrival. 
 
¶36. In the absence of such pre-export certification, the importer 
must provide a melamine-free test report conducted by a Taiwan 
DOH-accredited laboratory before customs clearance. However, an 
exporting country also has the option of seeking a waiver from this 
requirement by submitting a letter and supporting documentation to 
DOH that explains the country's system of safety controls for dairy 
production, processing and distribution, including information on 
relevant regulations and test data for melamine. 
 
¶37. We estimate that Taiwan's certification requirement for U.S. 
dairy exports is affecting U.S. exports by $10-20 million based on 
current trade volume. 
 
Sanitary and Phytosanitary Measures 
----------------------------------- 
 
¶38. Taiwan accepts meat and poultry imports from plants approved by 
the USDA Food Safety Inspection Service, and also accepts Codex 
Alimentarius or U.S. pesticide residue standards on a provisional 
basis for a limited number of chemicals used on imported fruits and 
vegetables. The slow and cumbersome approval process for new maximum 
residue limits for chemical/product combinations, however, poses a 
potential threat to current U.S. fresh produce and grain shipments. 
Moreover, the United States continues to be concerned that some 
Taiwan plant and animal quarantine measures are not necessarily 
based on sound science and are more trade restrictive than necessary 
to ensure health and safety.