Voluntary Report - public distribution

**Date:** 2006/02/14

**GAIN Report Number:** TW6006

**Taiwan**

**Market Development Reports**

**Ginseng**

**2006**

**Approved by:**

######## ![](media/image1.wmf)Hoa Van Huynh, Director

ATO Taipei

**Prepared by:**

Welly Chen

**Report Highlights:**

Taiwan imported 1,272.8 MT of various varieties of ginsengs in 2003,
1147.1 MT in 2004 and 856.1 MT in the seven months through July 2005.
Imports of US product represent only a tiny fraction, however, with 6.2
MT in 2003, 10.1 MT in 2004 and 4.7 MT in the seven months through July
in 2005. Taiwan's new inspection policy on herbs will be implemented
very soon in the next few months. This presents a very good opportunity
for US ginseng due to its superior quality, purity and safety in
comparison with other imported ginseng.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Taipei ATO \[TW2\]

\[TW\]

**General Market Overview**

The overall value of the ginseng market in Taiwan is about \$31 million.
Societies throughout Asia place great value on the benefits of ginseng.
It is been widely used in Chinese throughout Asian to improve overall
energy and vitality, particularly during times of fatigue or stress.
While there is little clinical evidence to support the claim that
ginseng offers an energy boosting effect, there are studies showing
ginseng's potential value in lowering blood sugar and cholesterol
levels, stimulating immune functions, treating male impotence, promoting
relaxation and enhancing memory. Oriental medicine has deemed ginseng a
necessary element in all their best prescriptions, and regards it as
preventive, a cure, and a treatment for the infirmities of old age.

###### Due to its climate, Taiwan does not cultivate ginseng and all ginseng is imported mainly from Korea, Canada, U.S., China and small amounts from Japan. According to Taiwan Customs in the first seven months of 2005, Taiwan imported 595 MT of various ginseng species roots; 1,286 MT in 2004, and 1,413 MT in 2003. American ginseng accounts for only about 6% of total imported ginseng. 

Chinese and Korean ginseng are called Asian ginseng and belong to the
species of panax ginseng. Asian ginseng has been positioned as a
"hot-nourishing ginseng", widely used to maintain body temperature and
to boost energy during the winter. Closely related to Asian ginseng is
American ginseng (panax quinquefolium), which is sometimes preferred for
its milder effects, considered appropriate for any season, and thus can
be taken throughout the year. Korean ginseng is considered most
expensive and valuable among all ginseng species with American ginseng
seen as second. Because Korean ginseng and American ginseng are seen to
have different properties and different medicinal uses, so they should
have different appeal to consumers. However, Taiwan consumers have
traditionally preferred Korean ginseng. In addition, years of strong
commercial promotion to build the image of Korean ginseng as a
prestigious gift and medicinal source has played a major role driving
consumers to buy Korean ginseng.

Ginseng appears on this market in the forms of liquid extract, powder
capsules and is sold as the whole root. Ginseng root is used in
beverages; tea, candy, chewing gum, cosmetics and skin care products.
Ginseng-containing foods and dietary supplements are typically made from
a powder or extract of ginseng root. Whole or sliced ginseng roots are
marketed in pharmaceuticals only for medicinal use and health care,
other ginseng by-products are available in the retail market.

Tihua Street is Taipei's best-preserved and most historically
significant retail/wholesale district where most of Taiwan's
pharmaceutical (Chinese medicine) retailers and wholesalers are located.
Most consumers in Taiwan buy ginseng there. These outlets are located in
Taipei's oldest commercial district and wholesalers have operated here
for over 100 years. Most have run herb businesses for three generations.
They offer a vast array of ginseng, displayed on their shelves. Ginseng
typically occupies 50% of a store's shelf space. There is keen
competition between these pharmaceuticals. However, as they have been in
Tihua Street for years and years, they have their loyal customers. The
typical Taiwan medicine shopper always goes back to the same store and
does not shop for the lowest price or different products. The so-called
competition only happens with walk in customers, which represent very
small percentage of ginseng shoppers.

###### Statistics of Taiwan's Ginseng Import

The statistics of the following are included all imported ginseng roots
species.

12.11.20.10 Chie Lin Ginseng,

12.11.20.21 Radix Ginseng Rubua (Korea),

12.11.20.22 Radix Ginseng Alba (Korea),

12.11.20.41 Pao Sheng (American Ginseng)**,**

12.11.20.42 Pao Shen Weu, Hsu, I Chung Shen (Radix Ginseng),

12.11.20.43 I Chung Shen Wei, Hsu (Ginseng Radix),

12.11.20.90 Other Ginseng Roots

+----------------+----------------+----------------+------------------+
| #              | #########      |                |                  |
| ####### Countr | Year {#year-1} |                |                  |
| y {#country-1} |                |                |                  |
|                | ######### Impo |                |                  |
|                | rt volume (MT) |                |                  |
+----------------+----------------+----------------+------------------+
|                | CY 2003        | 2004           | 2005 (Jan. --    |
|                |                |                | July)            |
+----------------+----------------+----------------+------------------+
| China          | 1065.4         | 984.6          | 763.2            |
+----------------+----------------+----------------+------------------+
| Korea          | 42.5           | 44.1           | 27.7             |
+----------------+----------------+----------------+------------------+
| Canada         | 155.5          | 99.3           | 53.3             |
+----------------+----------------+----------------+------------------+
| Japan          | 3.2            | 5.6            | 3.9              |
+----------------+----------------+----------------+------------------+
| USA            | 6.2            | 10.1           | 4.7              |
+----------------+----------------+----------------+------------------+
| Hong Kong      | 0              | 0              | 0.02             |
+----------------+----------------+----------------+------------------+
| Other          | 0              | 3.4            | 3.3              |
| countries      |                |                |                  |
+----------------+----------------+----------------+------------------+
|                |                |                |                  |
+----------------+----------------+----------------+------------------+
| Total          | 1278.8         | 1147.1         | 856.12           |
+----------------+----------------+----------------+------------------+

Source: Directorate of General Customs, Ministry of Finance

###### Regulations and Policies　

American ginseng is listed under HS code 1211.20.41.00 for \"Pao Shen"
(American ginseng) and 1211.20.42.00 for "Radix ginseng".

Fresh ginseng imported to Taiwan are required to have phytosanitary
certificates indicating they are free of specific diseases and pets that
the Taiwan quarantine authority -- Bureau of Animal & Plants Inspection
Quarantine (BAPHIQ) forbids from the individual countries. Fresh ginseng
from the U.S. is not allowed to enter Taiwan except for products from
the states of California and Alaska. Phytosanitary certificate
indicating free of Ditylenchus dipsaci and Rhizonglyphus echinopus for
California fresh ginseng and free of Ditylenchus dipsaci from Alaska is
required for quarantine inspection. Most ginsengs from the U.S. are
dried, so this quarantine policy has little affect on U.S. ginseng
imports. The Taiwan import tariff on dried ginseng is 0% and no plant
quarantine inspection is required at port.

It is the responsibility of the importer, and not the exporter, to have
a business license for the marketing of Chinese medicines or a
pharmaceutical manufacturing license issued by the Department of Health
(DOH). For ginseng products, the commodity description should indicate,
in Chinese, that the product is raw Chinese medicine and the specific
name of the herbal medicine. In addition, the importer must obtain prior
approval from the DOH to import foods in capsule or tablet form. This
approval letter may be used only by the importer and authorization for
others to use it is prohibited.

Taiwan's import requirements for food products and their enforcement are
frequently modified. It is recommended that U.S. exporters contact their
Taiwan importer directly to ensure that product specifications meet
current Taiwan regulations.

**New Inspection Policy for Herb**

###### Pesticide and heavy-metal contamination are safety concerns in some botanical products. Herbal ingredients in this market specially been questioned for containing pesticide residue and heavy-metal beyond the standard limits. Local news has reported that studies conducted by university professors showed that some Chinese medicinal materials in the local market contained residue of organochlorine pesticides. In particular, ginseng roots tested positive for organochlorine pesticide. This news has brought public concern and worry about the use of ginseng. Plus a few years ago, the United States detected pentachloronitrobenzene (PCNB) in ginseng products, have driven government's attention in herb inspection on pesticide and toxic substances standards.

######## In order to impose a new inspection regime, the draft of a new inspection policy on herbs for specific pesticides and heavy metal contamination initiated by the Committee on Chinese Medicine & Pharmacy, Department of health (DOH) was distributed to herb related industries for comment on July 27, 2005. DOH will hold a conference and gather more inputs on this issue from Taiwan government agencies, industries, scholars, research institutes, academic, and inspection agencies to finalize the new standards before implementing the new inspection policy.

Toxic substance standards for ginseng roots (proposed draft)

+-----------------------------------+-----------------------------------+
| Toxic Substance                   | Maximum Residue Limit (MRL)       |
+-----------------------------------+-----------------------------------+
| #######                           | \<20ppm                           |
| # Total Heavy-Metal contamination |                                   |
+-----------------------------------+-----------------------------------+
| Lead                              | \< 2ppm                           |
+-----------------------------------+-----------------------------------+
| DDT                               | \< 0.2ppm                         |
| (Di                               |                                   |
| chloro-diphenyl-trichloroethanum) |                                   |
+-----------------------------------+-----------------------------------+
| BHC (Hexachlorobenzene)           | \< 0.2ppm                         |
+-----------------------------------+-----------------------------------+
| PCNB (Quintozene)                 | \< 0.1ppm                         |
+-----------------------------------+-----------------------------------+

P.S. hexachlorobenzene (PCNB) and lindane are not allowed for use on
U.S. food crops because they are possible carcinogens that may also be
toxic to the liver and kidneys and may impair oxygen transport in the
blood. Another potentially carcinogenic pesticide, hexachlorobenzene
(BHC) has been banned from most food-crop use throughout the world
including the US. However, both quintozene and hexachlorobenzene have
been found in some samples of ginseng in Taiwan. (It has not been found
in US ginseng).

###### U.S. Market Position and Third-Country Competition

Wisconsin grown American ginseng used to enjoy a strong presence in the
Taiwan market with its pure, clean premium quality and was well received
and recognized by Taiwan consumers. Taiwan ginseng importers also
appreciated the value of Ginseng Board of Wisconsin (GBW) seal on the
products, but over the past 20 years the amount of imported American
ginseng from Wisconsin has steadily decreased from 98% of the market to
less than 1% of the market in volume terms. 0.7 MT was imported during
first seven months of 2005. This dramatic decline is attributed to three
primary factors 1) market pressure from Canada and China; 2) lack of
marketing efforts in Taiwan by US exporters; 3) the failure to control
and manage of the WGB seal.

GBW members have sold American ginseng seeds to China and Canada for 10
years, and ginseng has been widely grown and harvested in Ontario,
Canada, where production unit costs and crop yields are significantly
cheaper than in Wisconsin. With the same investment, the production of
ginseng in Ontario is about 4,000 pounds per acre, compared to 1,800
pounds per acre in Wisconsin. The import cost difference between
Canadian ginseng and Wisconsin ginseng is about 30% lower.

According to Taiwan importers, China's ginseng harvest was around 1,700
MT in 2005; Canada is the second with 850 MT, Wisconsin with 215 MT.
China, with its cheaper labor and land, and relaxed environmental
controls, has seen considerable production increases in recent years.
Large production plus low price (about one third of Wisconsin ginseng)
has allowed China to take most of ginseng market in Taiwan. U.S.
gradually being squeezed out of the Taiwan market. This is also due to
the fact that WTO has forced Taiwan to open its market to certain
Chinese goods a few years ago.

American ginseng used to be marketed very aggressively in Taiwan. The
Lieutenant Governor of Wisconsin visited Taiwan 15 years ago and
conducted a series of ginseng promotion activities, which successfully
started to build, a very positive image of American ginseng in the mind
of the Taiwan consumers. The Hong Kong-based Ginseng Board of Wisconsin
(GBW) representative was able register more than 30 ginseng importers as
certified members of GBW, allowing them to use GBW's licensed seal on
their products. That was the peak point and most prosperous period for
Wisconsin ginseng. Consumers still think of Wisconsin ginseng is the
best ginseng in the market.

However, high sales for Wisconsin ginseng were not maintained for long.
GBW lacked effective monitoring and management of their seal in the
market because it did not require importers to renew their membership.
All importers registered and paid the license fee for one year only, but
they still continue to use the GBW seal on their ginseng root and
ginseng products. Taiwan importers are very cost sensitive, they
imported cheaper ginseng from Canada and China and mislabeled the
product with the GBW ginseng seal.

####### 

####### 

####### Ginseng Board of Wisconsin (GBW)

In order to restore the vitality of market share GBW used to enjoy, ATO
Taipei assisted GBW with a group visit in August 2005 by arranging
meetings with pharmaceutical companies, herbal medicine chains, ginseng
wholesalers/importers, and the management of National Union of Chinese
Medicine Association (NUCM) to exchange views on ginseng current market
situation, IPR and trademark infringement, to promote GBW seal contract
applications, and to introduce GBW's marketing arm \-- The Ginseng &
Herb Co-op.

GBW group also informed Taiwan contacts that a GBW Representative would
be hired to cover China, Hong Kong and Taiwan markets and would work
closely with Taiwan ginseng related industries. A tour of retail outlets
let GBW observe the alleged abuse of their registered/approved trademark
and purchase products, which were suspected of falsely carrying GBW's
trademark. A broadcast of an interview local TV channel performed with
GBW Chairman presented about the purpose of GBW's visit were to inform
the people about the specialty of Wisconsin ginseng, to sign up the
ginseng seal members, and to look into those stores who are misleading
the customers with the non-Wisconsin ginseng.

# Comment

Wisconsin ginseng has a long trade relationship with Taiwan, but over
the past 10 years has lost most of its market share. Last summer's GBW
visit to Taiwan aimed to resurrect Wisconsin ginseng in Taiwan market.
The GBW also retained a legal firm to register their trademark in
Taiwan. However, the GBW also should target consumers to explain that in
the future the GBW trademark will be limited to authorized importers
only. The GBW also needs to take actions against those misusing their
trademark and authorize their legal firm in Taiwan to execute the IPP
issue strictly.

Finally, GHC (Co-op)'s role as a single supply window is being received
skeptically by importers in Taiwan. Although the purpose is to ensure
uniform Wisconsin ginseng quality and reputation, the coop's monopoly
position as a supplier is a concern for importers, who prefer (and most
often do) negotiating and purchasing directly with the growers or
processors. The first ever ginseng auction was held on November 16 to
17, 2005. Taiwan importers were invited, but , as far as we know, none
of Taiwan importers attended, as they did not think this auction would
run successfully. While Taiwan importers are interested in purchasing
Wisconsin ginseng and are willing to become legitimate users of the GBW
seal, importers hope the GBW would review/assess the way the GHC (Co-op)
operates and do its best to make the GHC function more efficiently.

#######