WORLD TRADE
ORGANIZATIONG/SCM/Q2/TPKM/3
23 October 2002
(02-5807)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Replies to Questions Posed by the UNITED STATES1 and AUSTRALIA2 Regarding the
New and Full Notification of THE SEPARATE CUSTOMS TERRITORY OF
TAIWAN, PENGHU, KINMEN AND MATSU3
The following communication, dated 21 October 2002, has been received from the Permanent
Mission of the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu.
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QUESTIONS FROM THE UNITED STATES
II. FISHERY
Fishing Vessel Buy-Back ProgrammeQ1. Please explain in greater detail how this  programme works.  In your response, please
address the following:
(a) What are the specific eligibility crit eria? Why were the 5 fishing vessels that
received funds during the reporting period selected over other applicants?  Are
vessels that are not currently or actively used eligible for purchase?
(b) Describe any monitoring mechanism a ssociated with this programme.  For
instance, what happens to the vessel s that are bought back? Are there any
restrictions on the use of funds received in these buy-backs?
Reply
The programme is drawn up by the government in order to promote the conservation and
management of fishery resources, and to take care of fishermen’s livelihood and welfare.
1. Eligibility criteria
(1) In the order of priority, the vessels eligible for the buy-back programme are:
(a) Long liner larger than 100 tons.
                                                     
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(b) Trawler.
(c) Other types of fishing vessels
(2) The method of calculating the buy-back value:
(a) The buy-back value is based on the tonnage of the vessel purchased, in
principle it is calculated at NT$15,000 per gross tonnage;
(b) The buy-back value for per gross tonnage is NT$18,000 for those fishing
vessels that had been in operation for more than 60 days in the previous year;
(c) The ceiling value for the buy-back programme is NT$7,000,000 per vessel.
2. For the purpose of promoting a sustainable fisheries industry, the number of fishing vessels
has been controlled by a licensing system in accordance with our Fisheries Law and related
regulations.  The license itself has become a valuable good, because the owner of the license can sellit to other fisherman who may use it to build a new vessel.  The value of the license sold to other
fishermen has usually been more favorable than the buy-back programme offers.  This is the reason
why there were only 5 fishing vessels purchased back by the fund during the reporting period.
3. Vessels that are eligible for the buy-back programme are those in poor condition or at a loss
situation.
4. Purchased vessels will be remodelled into artificial reefs or taken apart for scrap.5. There is not any restriction on the use of funds received from the buy-back programme.
Marine Insurance on Fishing Vessel and Fisherman
Q1. Please explain in greater detail how this programme works with regard to coverage of
fishing vessels.  For example:
(a) What are the eligibility criteria?(b) What portion of insurance costs for a given vessel is covered under this
programme?
What types of damage are covered and not covered (i.e. do these funds cover extraordinary
disasters only, or is more routine damage also covered)?
Q2. Of the average total NT amount you have listed for this programme, how much of this
represents benefits to fishing vessels (rather than to fishers)?
Reply
1. Eligibility criteria: Powered vessels operating in fishery with the tonnage less than 100 tons
which are licensed by the competent authorities in accordance with related laws and regulations.
2. The range of premium to be subsidized is between 20 per cent and 70 per cent, depending on
the tonnage of the vessels.G/SCM/Q2/TPKM/3
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3. The types of damage covered in the insurance depend on the clauses of insurance policy.  It
normally includes disasters occurred in navigable waters, fires, and explosions.
4. The benefit of the programme is granted to fishing vessels.  Its purpose is to encourage
fishermen to insure against marine disasters so that a stable livelihood can be secured.  The totalamount of insurance granted by the government was NT$97,108,000 in 2001.
Aquaculture Facilities Loan Programme
Q1. Please explain in greater detail how this programme works.  In your response please
address the following:
(a) What are the eligibility criteria?
(b) Are there certain aspects of the aquaculture industry this programme intends to
promote, or is it more general.  For example, do these funds cover regular
working capital costs in the industry, or can these funds be used only to financeexpansions or new projects?
Q2. Please clarify whether the total amount figu re you have reported reflects the total value
of the loans made under the programme or, instead, only the gap between the “guaranteed loan
rate and the commercial bank interest rate.”
Reply
1. How the aquaculture facilities loan programme works:
(1) Eligibility criteria: In terms of qualification for application, all members of the first
grade category of any regional fishermen’s association or of any agriculture
association, registered and licensed for aquaculture industry are eligible to apply for
the loan.
(2) The objectives of the loan programme: In Taiwan, there are three major types of
aquaculture, namely, fresh water pond aquaculture, brackish water pond aquacultureand marine aquaculture.  This programme covers all three types of aquaculture.  The
loan is limited to the purchase of production equipment for operating in aquaculture
in general; therefore, it does not cover regular working capital costs in the industry.
2. The annual budget of the loan programme is NT$100 million.  Due to economic depression in
recent years, fishermen have not been interested in applying for the loan.  The total amount of loans
granted was only NT$17.55 million for the first 5 months in 2002.  The reported total amount was the
total value of the loans made under the programme during the reported period, not just the difference
of loan rate and interest rate.
III. INDUSTRY
Five-year tax exemption for the emergi ng, important and strategic industries
Q1. Can you please explain which industries or sectors qualify as “emerging, important or
strategic”?G/SCM/Q2/TPKM/3
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Reply
The term “emerging, important and strategic industries” includes both manufacturing and
technical service enterprises.  The scope of products to be produced by manufacturing enterprises or
of the technical services to be provided are defined as follows:
• 3 C (computer, communication and consumer electronics) industries
• Precision electronic elements industries
• Precision mechanical equipment industries
• Aerospace industries
• Biomedical and special chemical industries
• Green-technology-based industries
• High-grade material industries
• Technical service business
Q2. How many companies took advantage of th is exemption during the notification period?
Reply
There was no application during the notification period.
Q3. Is this programme in any way contingent upon exporting?  Do industries receive
incentives for using locally prod uced goods in their products?
Reply
This programme is applicable to any companies established under the Company Law of
Taiwan.  There is no difference between companie s using locally produced goods and imported goods
in their products.  Therefore, this programme is not in any way contingent upon exporting.
Five-Year tax credit for invest ment in disadvantage region
Q1. How many companies benefit from subsidies under this programme?
Reply
There has been 62 cases which received subsidy benefit under this programme during the
period of July 1999 to December 2000.
Q2. What are the principal industry sectors that benefit from this programme?
Reply
In order to promote balanced development of industries in various geographical areas, if a
company makes investment up to a specific amount of its capital or employs a specific number ofemployees in any industries of a county or township  area with scanty natural resources or with slow
development, it may credit up to twenty percent of the total amount of its investment against the
amount of the for-profit enterprise income tax payable for the then current year.  If the amount of the
for-profit enterprise income tax payable for that year is less than the deductible amount, the balance
may be used for further deduction in the following four years.G/SCM/Q2/TPKM/3
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This programme is applicable to any companies established under the Company Law of
Taiwan.  The beneficiaries are not limited to any specific industry sectors.
LOANS
Medium and long term loans for product market ing, and loans for overseas investment and
construction projects
Q1. Explain how the terms of these loans differ from the terms of typical commercial loans
in Taiwan.
Reply
1. Typically, there is no de facto difference between commercial loans and these loans in
Taiwan.
2. The capital of these loans is supported entirely by the SME Development Fund for providing
loans for export, overseas investment and construction projects. Approved loan applications are
implemented by Export-Import Bank of the Republic of China.
3. The interest rates of these loans are in line with the rates set by LIBOR (London Interbank
Offered Rates).
Q2. What are the principal industry sectors that benefit from this programme?
Reply
1. All enterprises which meet “the Standards for Identifying a Small and Medium-Sized
Enterprise” set by Executive Yuan are eligible for application.
According to “the Standards for Identifying a Small and Medium-Sized Enterprises,” SME
refers to an enterprise which is a company or comm ercial enterprise registered in accordance with the
law with capital or operating revenue below the following thresholds:
(1) For enterprises engaged in manufacturing, construction, mining, or excavating
business, paid-in capital of less than NT$80 million, or
(2) For enterprises engaged in agriculture, logging, fishing, the raising of livestock,
utilities, commerce, transport, warehousing, communications, finance, insurance, realestate, commercial, social or individual services, with annual operating revenue of
less than NT$100 million.
Duty and Tax Exemptions for High-Technology Industries
Q1. Aside from the High Technology industries, what are the other industry sectors that
benefit from locating within the “Park”?
Reply
All industries are welcomed by the Science-based Industrial Park.  The threshold set up by the
Park Supervisory Committee is not by industry sector but by technological level.  The science-based
industries currently established in the Park include the following business sectors: integrated circuits,
computers and peripherals, telecommunications, optoelectronics, precision machinery andG/SCM/Q2/TPKM/3
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biotechnology.  The above-mentioned sectors are segregated for the convenience of statistics.  All
Park enterprises are entitled to duty free benefit within the bonded area.
Q2. Is this programme in any way contingent upon exporting?  Do industries receive
incentives for using locally prod uced goods in their products?
Reply
The programme has nothing to do with any exporting activities.  Also, Park enterprises
receive no incentives for using locally produced goods in their products.
Duty and Tax Exemptions for In-Zone Enterprises
Q1. What are the main industry sectors that benefit from locating within the “In-Zone”?
Reply
Enterprises made decision to locate within the EPZs based on their commercial consideration.
Currently over 80 per cent of the enterprises in EPZs are the industries relate to IC, electronics,
optoelectronics, communication and precision machin ery.  Other industries also include metal
products, chemical products, garment and miscellaneous industrial products.  All in-zone enterprises
are entitled to duty free benefit within the bonded area.
QUESTIONS FROM AUSTRALIA
III. INDUSTRY
A. TAX CREDITS OR TAX EXEMPTIONS FOR DESIGNATED ENTERPRISES1. Five-year tax exemption for the emergi ng, important and strategic industries
Q1. Can you please advise whether the progra mme is contingent in any way on the use of
domestic content, or export performance?
Reply
This programme is applicable to any companies established under the Company Law of
Taiwan.  There is no difference between companie s using locally produced goods and those using
imported goods in their products.  This programme is not in any way contingent upon a company's
export performance either.
Q2. Can you please advise what are the type  of high value-added industries that have
benefited from the scheme during the reporting period?
Reply
This programme is to benefit the following types of industries:
• 3C (computer, communication and c onsumer electronics) industries
• Precision electronic elements industries
• Precision mechanical equipment industriesG/SCM/Q2/TPKM/3
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• Aerospace industries
• Biomedical and special chemical industries
• Green-technology-based industries
• High-grade material industries
• Technical service business
Q3. How many enterprises have benefited from this scheme during the reporting period?
Reply
There was no application during the notification period.
Q4. How is an “emerging, important or strategic” industry defined?
Reply
The answer is the same as for question 2.
Q5. What will be the maximum amount of fundin g that an enterprise can be eligible for on
an annual basis?
Reply
This programme is a type of tax exemption, and whether for a newly incorporated enterprise
or the expansion of an existing enterprise, the tax exemption is for a period of five consecutive years.
There is no maximum amount of funding.
B. LOANS
2. Medium and long term loans for product ma rketing, and loans for overseas investment
and construction projects
Q1. We note that the programme provides financial assistance to SMEs to explore new
markets for machinery and equipment. Is the funding contingent on the export of these
products?
Reply
1. The SME Development Fund provides financial assistance to SMEs not only to explore new
marketx for machinery and equipment, but also for the purpose of overseas investment and
construction projects.
2. All enterprises which meet “the Standards for Identifying a Small and Medium-Sized
Enterprise” set by the Executive Yuan are eligible for application. There is no discrimination for any
sectors of SMEs.
3. The interest rates of these loans are in line with the rates set by LIBOR (London Inter-bank
Offered Rates).  The funding will not affect the competitiveness on the export of these products.G/SCM/Q2/TPKM/3
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IV. RESEARCH AND DEVELOPMENT
Funds granted for development of products of the ten new leading industries.Q1. What is the maximum level of grant and interest-free loan available per enterprise?
Reply
The average ratio of the granted fund, interest-free loan and self-raised fund are 12 per cent,
12 per cent and 76 per cent respectively.
Q2. Can you please advise whether the progra mme is contingent in any way on the use of
domestic content, or export performance?
Reply
There is no difference between companies using locally produced goods and imported goods
in their products, nor is this programme in any way contingent upon company's export performance.
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