RESTRICTEDWORLD TRADE
ORGANIZATIONWT/ACC/SPEC/TPKM/2
13 March 1998
(98-1040)
Working Party on the
Accession of Chinese Taipei
DRAFT REPORT OF THE WORKING PARTY ON THE
ACCESSION OF THE SEPARATE CUSTOMS TERRITORY
OF TAIWAN, PENGHU, KINMEN AND MATSU
I. INTRODUCTION
1. At its meeting on 29 September-1 October 1992, the GATT 1947 Council of Representatives
established a Working Party to examine the application of the Separate Customs Territory of Taiwan,
Penghu, Kinmen and Matsu (hereinafter referred to as "Chinese Taipei") to accede to the GeneralAgreement  1947 under Article XXXIII, and to submit to the Council recommendations which may
include a Draft Protocol of Accession, [on the basis of the terms set out in an understanding] [as
reflected in the respective Minutes (document C/M/259)].  Membership of the Working Party was
open to all contracting parties wishing to serve on it.  Following the request of Chinese Taipei,
circulated in document WT/ACC/TPKM/1, and purs uant to the decision of the General Council of
31 January 1995, the Working Party was transformed into a World Trade Organization (WTO)
Working Party to negotiate the terms of accession of Chinese Taipei to the Marrakesh Agreement
Establishing the World Trade Organization (hereinafter referred to as the "WTO Agreement") under
Article XII of that Agreement.
2. The Working Party met on 6 November 1992, 21 December 1992, 28 June 1993,
12 October 1993, 17 May 1994, 26 July 1994, 21 December 1994, 28 February 1997 and [.................]
under the Chairmanship of H.E. Mr. M. Morland (United Kingdom).  The terms of reference and the
membership of the Working Party are set out in document WT/ACC/TPKM/6.
II. INFORMATION PROVIDED
3. The Working Party had before it, to serve as a basis for its discussion, the Memorandum on
Chinese Taipei's Foreign Trade Regime (L/7097 and Addenda 1 - 11) and the questions submitted by
Members on the foreign trade regime of Chinese Taipei together with the replies of the ChineseTaipei authorities thereto (L/7089/Rev.1, L/74 29 and Add.1), and documents Spec(94)28 (Newly
Promulgated or Revised Laws and Regulations),  Spec(94)30 (Description of Service Sectors),
Spec(94)31 and Add.1 (Special Exchange Agreement), Spec(94)41 (Status Report of the Bilateral
Negotiations),  Spec(95)1 and Corr.1 (Checklist of Accession Issues - Preliminary Responses
Provided by Chinese Taipei), Spec(95)8 (Laws and regulations regarding agricultural products),
WT/ACC/TPKM/2 (Tariff reductions for 758 tariff lines effected as from 12 July 1995),
WT/ACC/TPKM/3 (Newly Promulgated or Revised Laws and Regulations), and WT/ACC/TPKM/4
(The Customs Import Tariff and Classification of Import and Export Commodities: revised edition of
August 1995).  In addition, the representative of Chinese Taipei made available to the Working Party
the following material:
1. Customs Regime:
- Customs Law;
- Rules Governing the Implementation of the Customs Law;
- Implementing Regulation on the Imposition of Countervailing Duty and Anti-Dumping Duty;
- Rules for the Collection of Customs Fees.WT/ACC/SPEC/TPKM/2
Page 2
2. Trade Regime:
(a) General:
- Foreign Trade Act;
- Enforcement Rules of the Foreign Trade Act;
- Regulations Governing the Process of Obje ctions Against Punishment on Violation of
Foreign Trade Act;
- Customs Import Tariff and Classification of Import & Export Commodities (Supplement,
August 1995);
- Consolidated List of Commodities Subject to Import Restriction and Commodities Entrusted
to Customs for Import Examination (June 1997 Edition);
- Regulations Governing Import of Commodities by Business Firms;
- Regulations Governing Registration and Administration of Exporters and Importers;
- Regulations Governing Revenue, Expenditure,  Custody, and Use of Trade Promotion Fund;
- Rules for Handling Import Relief Cases;
- Import Regulations Codes.
(b) Industrial Goods:
- Regulations Governing Export and Import of High-Tech Commodities;
- Operating Rules for Screening Applications to Import Fishing Vessels Using New Fishing
Methods;
- Requirements for Imported Drug Registration;
- Veterinary Drugs Control Act;
- Agro-Pesticide Act;
- Guidelines Governing the Application for and Issuance of Fertilizer Registration Certificate;- Operating Regulations Governing the Control of Restricted Methyl Bromide;
- Regulations of the Industrial Development Bureau of the Ministry of Economic Affairs for
Controlled Substances Pursuant to the Montreal Protocol.
(c) Agricultural Goods:
- Statute for Agricultural Development;
- Regulations Governing Relief and Aid for Major Agricultural Products Damages by
Importation;
- Guidelines for Screening Applications for Letter of Approval for the Importation of Livestock
and Poultry;
- Guidelines for the Issuance of Written Approval Regarding the Importation of Aquatic
Animals;
- Guidelines Governing Food Companies Applying  to Import Raw Glutinous Rice/Powder for
Processing for Export;
- Operating Procedures Governing Applications to Import Wheat and Operation of the
Stabilization Fund;
- Operating Procedures Governing Applications to Import Wheat Flour and Operation of the
Stabilization Fund;
- Feeds Control Act;
- Guidelines Governing Applicat ions to Import Aduki Beans;
- Screening Procedures and Criteria Governing the Issuance of Written Approval for the
Importation of Dried Betel Nuts (Ta-Fu-Tzu).WT/ACC/SPEC/TPKM/2
Page 3
3. Investment Regime:
- Statute for Investment by Foreign Nationals;
- Negative List for Investment by Overseas Chinese and Foreign Nationals;
- Statute for Upgrading Industries;
- Enforcement Rules of the Statute for Upgrading Industries;
- Statute for Technical Cooperation;- Statute for Development of Medium and Small Businesses;
- Statute for Establishment and Management of Export Processing Zones;
- Aeronautics and Space Industries Development Programme;
- Automotive Industry Development Policy.
4. Other Texts Affecting Trade:
(a) General:
- Income Tax Law;
- Business Tax Law;
- Statute for Commodity Tax;
- Statute for Foreign Exchange Regulation;
- Fair Trade Law.
(b) Intellectual Property Rights:
(i) Copyright:
- Copyright Law;
- Implementation Rules of the Copyright Law;
- Illustrated Contents of 'Each Kinds of Works' in Paragraph One, Article 5 of Copyright Law;
- Certain amounts of Items 2 and 3 of Paragraph One of Article 87 bis of the Copyright Law;
- Regulations of Application for Approval of  Compulsory License of  Translation Rights;
- Regulations of Application for Approval of Compulsory License of Musical Works;
- Organic Charter of the Copyright Examination and Mediation Committee of the Ministry of
Interior;
- Agreement for the Protection of Copyright between the Coordination Council for North
American Affairs and the American Institute in Taiwan;
- Agreement Concerning the Protection and Enforcement of Rights in Audiovisual Works
between the Coordination Council for North Amer ican Affairs and the American Institute in
Taiwan;
- Publication Law.
(ii) Trademark:
- Trademark Law.
(iii) Patent:
- Patent Law.(c) Standards, Quarantine, Inspection:
(i) Standards:
- Provisional Standard for Hi-Fi and Stereo Equipment.WT/ACC/SPEC/TPKM/2
Page 4
(ii) Quarantine:
- Quarantine Requirements for the Importation of Animal and Animal Products;
- Quarantine Regulations on Imported Fishery Products;
- Quarantine Restrictions on the Importation of Plants and Plant Products;
- Statute for Prevention and Control of Infectious Animals Diseases;
- Implementation Rules of the Statute for Prevention and Control of Infectious Animals
Diseases;
- Regulations Governing the Quarantine at International Ports.
(iii) Inspection:
- Commodity Inspection Law;
- Enforcement Rules for the Commodity Inspection Law (Implementation Rules of the
Commodity Inspection Act).
(iv) Others:
- Commodity Labelling Law;
- Law Governing Food Sanitation;
- Enforcement Rules of the Law Governing Food Sanitation;
- Law for the Control of Cosmetic Hygiene.
(d) Government Procurement:
- Law of Audit;
- Rules Governing Procuring Goods of Foreign Origin;
- Ordinance Concerning Inspection Procedure Governing Construction Work, Procurement and
Disposal of Properties by Government Agencies.
(e) Others:
- Guidelines for Screening Applications for Written Import/Export Approval Regarding Wild
Fauna and Flora Deserving Conservation;
- Wildlife Conservation Law;
- Implementing Regulations of the Wildlife Conservation Law;
- Rules of Royalty Rate for Public Interest Activities.
5. Trade in services:
(a) Schedule of Commitments:
- Draft Schedule of the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu
Concerning Initial Commitments on Trade in Services.
(b) Banking:
- Banking Law;
- Guidelines for the Screening and Approval of the Establishment of Branches and
Representative Offices by Foreign Banks.WT/ACC/SPEC/TPKM/2
Page 5
(c) Insurance:
- Insurance Law;
- Insurance Company Establishment Criteria;
- Criteria for Approving Foreign Insurance Enterprises and the Governing Regulation;
- Central Reinsurance Corporation Act.
(d) Securities:
- Securities and Exchange Law;
- Foreign Futures Trading Law;
- Regulations Governing the Standard for Incorporation of Securities Companies;
- Rules for the Administration of Securities Investment Trust Enterprises.
(e) Others:
- Broadcasting and Television Law;
- Motion Picture Law;- By-laws Governing the Execution of the Motion Picture Law;
- Employment Service Act;
- Rules Governing the Approval and Administration of Foreign Specialist and Technical
Personnel Employed by Public or Private Enterprises and Ranking Executives Employed by
Overseas Chinese or Foreign National Invested Enterprises.
III. INTRODUCTORY STATEMENTS
4. In  his statements the representative of Chinese Taipei inter alia recalled that Chinese Taipei,
which encompasses the islands of Taiwan, Penghu, Kinmen and Matsu, was short of natural
resources.  Its only substantial resource - labour - was the source of its strong rate of growth.  The
main economic indicators were as follows:WT/ACC/SPEC/TPKM/2
Page 6Chinese Taipei’s Main Economic Indicators
Year GNP
(Billion US$)GNP per Capita
(US$)*Annual Final Budget of
Central Government (Billion
US$)Annual Changes in Prices Unemployment Rate
(%)Foreign Exchange
(Billion US$)Export Statistics
(Billion US$)Import Statistics
(Billion US$)
Consumer price (%) Wholesale price
(%)
1993 226.2 10,852 37.5 2.9 2.5 1.5 92.5 85.1 77.1
1994 243.9 11,597 37.3 4.1 2.2 1.6 90.3 93.0 85.3
1995 263.0 12,396 36.3 3.7 7.4 1.8 90.3 111.7 103.6
1996 275.1 12,872 39.5 3.1 - 1.0 2.6 88.0 116.0 101.3
* Since 1960, the "Fiscal Year" refers to the 12-month period beginning from 1 July 1 of the preceding year to 30 June of the d esignated year.
Chinese Taipei’s Expenditure on Gross National Product
Unit: Billion US$
Year Gross National
ProductGross Domestic
Product=P r i v a t e
Consumption+ Government
Expenditure+ Gross Fixed   Capital
Formation+I n c r e a s e  i n
Inventory+ Export of
Goods & ServicesImports of Goods &
Services
1993 226.2 213.7 121.7 34.2 50.6 3.2 94.5  90.5
1994 243.9 232.0 137.2 35.0 53.1 2.2 102.3 97.9
1995 263.0 250.7 150.0 36.5 57.5 1.8 122.3 117.4
1996 275.1 272.7 164.2 39.6 57.3 1.1 131.8 121.3WT/ACC/SPEC/TPKM/2
Page 7
Chinese Taipei’s Employment Population by Sectors
Unit: 1000 Persons
Year Agriculture Sector Industrial Sector Services Sector
1993 1,005 3,418 4,323
1994 976 3,506 4,456
1995 954 3,504 4,587
1996 918 3,399 4,751
Chinese Taipei’s Balance of Payments
Unit: Million US$
Year Current
Account= Capital Account Long-term  capital Short-term
capitalChange in Net Foreign
Asset
1993 6,714 - 4,662 - 2,660 - 2,062 - 1,541
1994 6,154 - 1,397 - 1,960 563 - 4,622
1995 4,824 - 8,190 - 1,227 - 6,963 3,931
1996 10,481 - 8,875 - 2,974 - 5,901 - 1,102
He added that government policies had restructured the economy from agriculture towards basic andheavy industries.  As part of an import substitution and integration process, intermediate goods
industries were established.  Transportation was streamlined and large investments were made in new
ports, airports and highways.  The Chinese Taipei authorities had also intensified rural development
and supported the moves to improve farm income.  More recently, industrial restructuring was furtherpromoted.  Educational institutions placed greater emphasis on science and technology in order to
provide a highly trained workforce.  In the 1990's, economic liberalization and the internationalization
of the economy had continued.  Infrastructure investments, the regulation of pollution and the
privatization of the economy had accelerated.  Employment had shifted from the agricultural sector to
the industrial and service sectors.  The representative of Chinese Taipei also stated that when Chinese
Taipei initiated its import-substitution strategy, exports were mostly composed of sugar, rice, bananas,
tea and processed agricultural products.  Few industrial products were sufficiently competitive forexport.  Gradually the import substitution industries became capable of producing competitive export
products.  As a result, the share of exports of traditional products declined whilst industrial products
took an increasing share of exports.  At first, major export items were labour intensive products such
as textiles and plywood.  Recently, electronic goods had become major export items.  Recent total
exports value in US$000  was as follows:
YEAR 1993 1994 1995 1996
TOTAL 85,061,411 92,948,783 111,598,800 115,942,064
Recent total imports value in US$000 was as follows:
YEAR 1993 1994 1995 1996
TOTAL 77,061,203 85,322,194 103,549,956 101,373,051
5. Referring to the direction of the future economic policies, the representative of Chinese
Taipei said that overall global economy expanded steadily in 1996, in contrast, Chinese Taipei’s
economy reached its slowest growth rate that year at 5.9 per cent, the lowest in six years.  his was a
significant reduction since its peak in 1991 at 7.6 per cent.  Economic growth for 1994 and 1995 had
been 6.5 per cent  and 6.0 per cent respectively.  The downturn in Chinese Taipei’s economy could be
attributed to slackening private investment and sh rinking public investment, especially in the realWT/ACC/SPEC/TPKM/2
Page 8
estate sector.  In 1996, inflation was moderate at the rate of 3.1 per cent, compared with 4.1 and 3.7 in
1994 and 1995. Trade surplus in 1996 rose to a nine-year high of US$14.7 billion. However, the rise
in trade surplus stemmed from a drop in imports rather than an expansion of exports.  For 1997, the
economy of Chinese Taipei was expected to grow 6.7 per cent, with per capita GNP expected to reach
almost US$14,000 and consumer prices to rise no more than 3 per cent. Nevertheless, these
expectations would, to a large extent, depend on whether public investment projects proceedaccording to schedule. An additional source of major impetus to growth would be the private sector as
a result of regained strength in private consumption, steady improvement in the investment climate
and greater private investment in public projects.  In his statements he also outlined the sectors where
Chinese Taipei would need transition periods to bring specific measures into full conformity with
WTO obligations and said that Chinese Taipei was ready to assume obligations comparable to those
undertaken by WTO Members with a comparable level of economic development.
6. Members of the Working Party warmly welcomed the application of Chinese Taipei for
accession to the WTO.  Notwithstanding limitations on its natural resources and the relative size of
the economy, Chinese Taipei had transformed itself into one of the world's most dynamic trade
centres.  Chinese Taipei's membership of the WTO would strengthen the multilateral trading system.
Members also congratulated Chinese Taipei on its willingness to make the required adjustments
promptly and to only seek a minimum of transition periods in which to bring its economy fully intoconformity with the requirements of the WTO.  Members noted, however, that membership of the
WTO required full observance of the MFN and nation al treatment principles.  It also required the
taking of comprehensive market access commitments on goods, including agricultural products, and
services, which would be reflected in the respective schedules of concessions and commitments
annexed to the Draft Protocol of Accession.  Several members of the Working Party were of the viewthat Chinese Taipei should assume a level of obligations commensurate to that of the developed
economy original Members of the WTO, and that Chinese Taipei should apply the WTO Agreement
fully from the date of accession, without recourse to any transition periods.
IV. ECONOMIC POLICES
Foreign Exchange Policies
7. In response to requests from members of the Working Party for information on the foreign
exchange system prevailing in Chinese Taipei, the representative of Chinese Taipei stated that all
current account transactions were free from foreign exchange controls.  As for residents, any company
or individual could freely settle foreign exchange with authorized banks up to an amount of
US$50 million and US$5 million respectively per year.  As for non-residents, any non-resident couldopen a New Taiwan dollar account with local commercial banks.  However, foreign financial
institutions outside the territory of Chinese Taipei could only deposit local earned revenue of New
Taiwan dollars into their accounts.  There was no restriction when the remittance was related to an
outward/inward investment project approved by the competent authority.  The foreign exchange rate
was determined by the market, and there were no discriminatory currency practices.   In response to
further questions, he said that enterprises established under the Company Law of Chinese Taipei
could freely purchase the foreign exchange required  for imports or for invisible trade settlements
through the authorised foreign exchange banks without any restriction.  There was no restriction on
the use of foreign exchange for overseas investment provided that the investment had been approved
by the authorities.  Authorized foreign exchange banks and foreign banks were free to take part in the
Chinese Taipei foreign currency call loan market .  Since 1991, forward foreign exchange transactions
had been permitted.  The representative of Chinese Taipei said that these requirements would begradually phased out as market conditions permitted.  He expressed the view that Chinese Taipei's
currency practices were fully consistent with Article XV of the GATT 1994.WT/ACC/SPEC/TPKM/2
Page 9
8. Some members of the Working Party noted that Chinese Taipei was not a member of the
International Monetary Fund (IMF) and thus would have to enter into a Special Exchange Agreement
as provided for in Article XV:6 of the GATT 1994 incorporating obligations consistent with Fund
Article VIII.  Some members also expressed concern that elements of Chinese Taipei's foreign
exchange system provided scope for practices that distorted trade flows.  The representative of
Chinese Taipei said that in the context of acces sion to the WTO, Chinese Taipei was prepared to
comply with the provisions of Article XV of the GATT 1994 regarding its foreign exchange
restrictions.  He added that in order to comply with GATT 1994 Article XV, Chinese Taipei had
negotiated a Special Exchange Agreement with the WT O.  Chinese Taipei expected that the Special
Exchange Agreement would cease to be effective if Chinese Taipei became a member of the IMF.
9. The Special Exchange Agreement between the WTO and Chinese Taipei,  within the meaning
of Article XV:6 of the GATT 1994, which is part of the obligations of Chinese Taipei under the WTO
Agreement, including GATT 1994 is reproduced in A nnex II of the Appendix to this Draft Report.
Pricing Policies
10. Some members of the Working Party noted that Chinese Taipei had price controls for the
domestic prices of certain commodities and that there were no price controls applied exclusively to
imports, they requested a full list of the products subject to price controls, and the plans to eliminate
such price controls.  In response the representative of Chinese Taipei  stated that price controlsapplied primarily in the area of public utilities under control of the Public Utility Rate Commission.
The products specified in the list reproduced in Attachment A to this Draft Report were the only ones
subject to price controls.  In relation to the sale of tobacco and alcoholic beverages, the representative
of Chinese Taipei stated that minimum profit or  pricing of tobacco and alcohol products had been
abolished.  The regulation on the maximum retail margin would cease to be effective when themonopoly system is formally abolished.  He further added that petroleum, natural gas and liquified
gas were subject to price controls in order to maintain stability in energy prices.  Salt, sugar and
fertilizer were subject to price controls to stabilize farmers' income and production costs.  Chinese
Taipei intended to phase out price controls as soon as possible, keeping in view the objectives noted
above.  Future liberalization of price controls would take into account the timetable for privatizingstate enterprises which had been involved in exercising price controls,  such as the Taiwan Fertilizer
Company, and the Taiwan Salt Industrial Corporation.  Some members of the Working Party noted
that they could see no justification for price controls on sugar and salt.  In response, the representative
of Chinese Taipei stated that the price controls on salt were expected to be abolished by end of the
year 2001.  Domestic sugar prices were set by Taiwan Sugar Company,  which was the sole supplierof sugar.  The sugar price set by Taiwan Sugar Company took into account the price at which Taiwan
Sugar purchased sugar cane from local growers (which was set 10 years ago according to the farmers'
production cost at that time), and its own cost of production.  The domestic sugar price had been
decreasing, as the increase in import of sugar (the cost of which was  lower), helped to bring down
Taiwan Sugar's cost.  Industrial users of sugar were consulted, in order to ensure that the price control
would not seriously affect their competitiveness.   There was no discrimination between cane and beet
sugar.  The price control system would be replaced by a tariff rate quota system. It was expected thatthe oil product market would be fully liberalized by the end of the year 2002.  It was not Chinese
Taipei's policy to add to the list of products subject to price control set out in Attachment A to this
Draft Report, unless the economy or a specific sector thereof  was in serious difficulty or in a state of
emergency.
[11. The representative of Chinese Taipei stated that, from the date of accession, Chinese Taipei
would ensure that price controls applied to the products covered in the list reproduced in
Attachment A to this Draft Report, and to any other product, would be applied in a WTO-consistent
fashion, taking account of the interests of exportin g WTO Members as provided  for in Article III:9 of
the GATT 1994.  The price levels of the goods subject to price controls would be published in
accordance with Article X of GATT 1994.  The Working Party took note of these commitments.]WT/ACC/SPEC/TPKM/2
Page 10
V. FRAMEWORK FOR MAKING AND ENFORCING POLICIES
Powers of Executive, Legislative and Judiciary, Administration of Policies on WTO-related
Issues
12. In response to requests for information, the representative of Chinese Taipei stated that the
subject matter of international trade fell within th e power of the central government.  In the event that
measures taken by the sub-central government had an impact upon international trade, those measuresbecame subject to regulation by the central government.  By way of example he noted that the
procurement decisions of sub-central government were subject to the disciplines of the Government
Procurement Law made by the central government.  He further noted that all administrative decisions
affecting trade could be appealed to the Administrative Court, which conducted judicial review of
administrative decisions that affect the rights and interests of natural and legal persons.  The
Administrative Court was an independent judicial body.
13. Some members of the Working Party enquired whether international treaties were
self-executing under the law of Chinese Taipei and sought a commitment that Chinese Taipei would
bring its foreign trade laws and regulations into conformity with WTO provisions at the time of
accession.  In response, the representative of Chinese Taipei said that, under its Constitution,
international treaties enter into force after be ing duly ratified by the Legislative Yuan and
promulgated by the President.  An international treaty had the same force and effect as domestic laws.
[14. [The representative of Chinese Taipei stated that the laws and regulations that would be
amended or newly made, within six months after accession, for the purpose of implementing the
accession commitments are reproduced in Attachment E to this Draft Report.  He further stated that if,
in the future, any law or regulation was found not to be WTO consistent, Chinese Taipei would ensure
that it was brought into conformity with the requirements of the WTO Agreement.]  [Therepresentative of Chinese Taipei confirmed that Chinese Taipei would fully implement its obligations
under the WTO Agreement and its Draft Protocol of Accession upon accession to the WTO, unless
specifically provided in this Draft Report and Protocol.  A list of some of the laws that would be
amended as part of Chinese Taipei's implementation of its obligations is reproduced in Attachment E
to this Draft Report.]  The Working Party took note of this commitment.]
VI. POLICIES AFFECTING TRADE IN GOODS
15. Chinese Taipei undertook negotiations on market access in goods.  The Schedule of
Concessions reflecting the results of those negotiations  is reproduced in Part I of Annex I of the Draft
Protocol of Accession reproduced in the Appendix to this Draft Report.
Import Regulations
Registration of Importers and Exporters
16. Some members of the Working Party noted that Chinese Taipei required a registered
importer/exporter to clear all imports and exports through its customs.  Further, Chinese Taipei
conditioned registration as an importer or exporter on being an enterprise in Chinese Taipei and
meeting a NT$5 million minimum capital requirement.  These members of the Working Party stated
that they considered that the minimum capital requirement was excessive and could act as a restraint
on trade.  They requested that the minimum capital requirement be eliminated and that registrationshould be automatic, open to all individuals and enterprises interested in engaging in import/export
without regard to investment or establishment in Chinese Taipei and conform to WTO rules.WT/ACC/SPEC/TPKM/2
Page 11
17. In response, the representative of Chinese Taipei stated that the purpose of the registration
requirement was not to restrain trade, but to ensure that importers/exporters had sufficient financialresources to support their import/export operations.  The precondition of NT$5 million minimum
capital requirement had been abolished in September 1997.  With the elimination of that capital
requirement, the only condition for importer/exporter  registration was that the enterprise list import
and/or export activities in its business licence.  No fee was charged for the registration.  ChineseTaipei however would like to retain the registration system, which operated as an automatic licensing
procedure pursuant to the Agreement on Import Licensing.
18. The representative of Chinese Taipei stated that any enterprise or individual interested in
importing/exporting (whether or not invested or esta blished in Chinese Taipei) would be permitted to
register, and that the registration system would conform to WTO rules, including the automatic
licensing provisions of the Agreement on Import Licensing, and would not restrain trade. The
Working Party took note of these commitments.
Advertising and Trade in Alcohol and Tobacco Products
19. Some members of the Working Party considered that the rules applying to the advertising of
tobacco and alcohol products, which had a stronger effect on imports, should not be used todiscriminate either de facto  or de jure against imported products.  The representative of Chinese
Taipei stated that under current law, alcohol products could be advertised in newspapers and ontelevision and radio during specified times.  While beer and wine could be advertised in magazines,
spirits could not be advertised in these publications.  New spirits products could be advertised in
magazines for a period of one year following their release onto the market.  The representative of
Chinese Taipei also said that advertising of tobacco products was governed by the Tobacco Hazard
Prevention Act, which came into force on 19 September 1997.
20. The representative of Chinese Taipei confirmed that from the date of accession Chinese
Taipei would not use advertising rules to discriminate against imported tobacco and alcohol products.The one-year limitation on advertising of alcoholic beverages would be eliminated upon accession.
He also stated that, upon accession, Chinese Taipei would permit advertising for alcoholic beveragesin all media, subject to regulation in relation to the content and timing of advertising.  He further
confirmed that the advertising rules for tobacco and alcohol products and implementation of those
rules would be consistent with WTO requirements from the date of accession.  The Working Party
took note of these commitments.
21. Concerning the right to sell and trade in tobacco and alcoholic beverages, the representative
of Chinese Taipei stated that, upon accession, enterprises engaged in the distribution and/or trade of
imported alcohol and tobacco produ cts would not be required to provide information beyond that
requested of firms engaged in the distribution and/or trade of like domestic products in Chinese Taipei
concerning their business plans or corporate structures and that such information will be requested onthe same timetable as applied to the latter firms.  He also stated that taxes and other charges of
whatever character, including licensing and other administrative fees, related to trade and distribution
of imported alcohol and tobacco products would not be applied in excess of those applied to firms
dealing with like domestic products.  The Working Party took note of these commitments.
Customs Tariff
22. Several members of the Working Party requested information on the tariff structure of
Chinese Taipei, the existence of bilateral rates of duty, in particular the products covered by bilateraltrade concessions, the existence of mixed duties, whether trade measures were being adopted on a
MFN basis, the level of average effective rates of duty and the actual levels of protection in force.
Some members noted that in 1992 some 413 agricultural and 21 non-agricultural products accountingWT/ACC/SPEC/TPKM/2
Page 12
for 5.4 per cent of total tariff lines were subject to duty rates ranging from 30 per cent to 50 per cent.
In response, the representative of Chinese Taipei said that since 1 September 1980, Chinese Taipei's
tariff had two columns of duty rates.  The differential duty rates in Column II were applied to imports
from countries or areas that granted reciprocal tariff treatment to Chinese Taipei's exports.  At present,
Column II duty rates applied to products from 153 countries or areas which amounted for almost
98 per cent of the total value of imports.  Products from the following WTO Members did not fallwithin Column II: Angola, Cuba, Djibouti, Gambia, Mauritania, Mozambique, Myanmar, Romania,
Uganda and Zimbabwe.  The representative of Chinese Taipei undertook that upon accession to the
WTO, MFN treatment would be extended to all WTO Members applying the WTO to Chinese Taipei.
He added that between 1984 and 1992, the tariff had been revised across-the-board and duty rates
have been lowered by some 50 per cent.  During that same period, 668 items had become duty free,
and 13165 items had their duty rates reduced.  An additional tariff reduction in 1995 had further
reduced duty rates on 758 items, with an average duty reduction  of 2.8 per cent.  Further reductionsfor 1,130 tariff lines were pending in the Legislature.  At present, the highest nominal duty rate was
50  per cent, but this was levied only in a few agricultural product areas.  The simple average of
nominal duty rates had declined from 30.81 per cent in 1984 to 8.72 per cent in 1996.
23. In response to further questions, the representative of Chinese Taipei indicated that in 1996
out of a total of 8070 dutiable items, 40 items were subject to specific duties and 114 items weresubject to mixed duties.  The remaining 7916 dutiable items were subject to ad valorem  duties.  Some
members of the Working Party stated that, in their view, Chinese Taipei should preferably adopt an ad
valorem  approach throughout the tariff in order to increase the predictability and transparency of the
tariff régime.  The representative of Chinese Taipei said that more than 98 per cent of the tariff lines
were already subject to ad valorem  duties.  In future reviews of its tariff system, Chinese Taipei
would take into account the views of members in this respect.
[Tariff Rate Quotas
24. The representative of Chinese Taipei stated that following revision of its system of area
restrictions on certain imported products, Chinese Taipei now maintained the tariff rate quotas,
described in paragraphs [50, 54, 58, 61 and 130] below and recorded in the relevant part of theSchedule of Concessions.]
Other Fees and Charges (Article II:1(b))
25. The representative of Chinese Taipei stated  that except as provided in the Schedule of
Concessions on Goods (Part I of Annex I to the Draf t Protocol  of Accession of Chinese Taipei) all
other fees and charges covered by Article II:1(b) of the GATT 1994 would be bound at the level ofzero.
Fees and Charges for Services Rendered
26. The representative of Chinese Taipei said that there were no taxes, charges or fees levied on
imports only.  The trade promotion fee authorized by the Foreign Trade Act had a ceiling of
0.05 per cent, and was levied on all imports and exports exclusively to promote import and export
trade.  He stated that the Trade Promotion Fee was a very small charge, no more than 0.05 per cent of
customs value (currently only 0.0425 per cent), applied to both imports and exports to fund tradepromotion activities.  He added that in addition to import tariffs and taxes applied equally to imported
and domestic products (e.g., the Commodity Tax, the VAT, and the Alcohol and Tobacco Tax),  the
Harbour Construction Dues and the Trade Promotion Fee were the only charges applied to imports.
In response, some members of the Working Party stated that the Trade Promotion Fee did not appear
to be consistent with Article VIII of the GATT 1994.WT/ACC/SPEC/TPKM/2
Page 13
27. In response to questions concerning the Harbour Construction Due, the representative of
Chinese Taipei explained that the customs authorities collected a Harbour Construction Due for goods
entering Chinese Taipei through ports.  The levy,  introduced in 1948 to fund harbour expansion and
maintenance, was imposed at the fixed rate of 0.5 per cent and did not apply to inter-island trade.
28. Some members of the Working Party stated that they considered that this levy and fee were
inconsistent with Article VIII(1)(a) of the GATT 1994.  These members of the Working Partyconsidered that the levy and fee discriminated against imports because they were only applied to
imported goods and not to like domestic products and they were not in conformity with Article III of
the GATT 1994.  Some members of the Working Party pointed out that the ad valorem  nature of the
Harbour Construction Dues and the Trade Promotion Fee made it impossible for them to reflect the
approximate cost of the services rendered.  The representative of Chinese Taipei said that both the
Harbour Construction Dues and the trade promotion fee applied to imports as well as exports.  In his
view, the Harbour Construction Dues  could be treated as an internal tax or a service fee to improveport facilities and services.  Chinese Taipei considered both the Harbour Construction Dues and the
trade promotion fee to be service fees as cont emplated under Article VIII of the GATT 1994.  He
acknowledged that 25 per cent of  the Harbour Construction Dues proceeds were used to provide
financial assistance to the cities where the harbours are located.  Upon accession to the WTO, the
revised Commercial Port Law would require that any revenue generated through the HarbourConstruction dues be used exclusively for the development of commercial harbours.
29. Some members of the Working Party stated that the levy of 0.5 per cent was a revenue charge
to fund harbour up-keep and expansion based on import taxation, and was not a charge for specific
services rendered.  This levy  and the trade promotion fee should be brought into conformity with
GATT 1994 in advance of Chinese Taipei's accession.  The representative of Chinese Taipeiresponded that a transitional period would be required  to bring the levy into conformity with Article
VIII of the GATT 1994.  The representative of Chinese Taipei stated that after reviewing the
comments made by Working Party members, and subject to agreement on a transitional period,
Chinese Taipei had decided to bring the Harbour Construction Dues into conformity with Article VIII
of the GATT 1994.  He added that the Trade Prom otion Fee would not be revised because it was
considered in conformity with GATT 1994 Articles III, and VIII.  In addition, neither charge would
be increased in its level of application, or included in the taxable base of imports for the purposes of
applying domestic taxes such as the Commodity Tax.  If requested, Chinese Taipei would consult
with the Members concerning the effect of these measures on their trade.
[30. In response to the statement of the representative of Chinese Taipei regarding maintenance of
the Trade Promotion Fee, some members continued to express concern that the fee was inconsistent
with Articles II and VIII of GATT 1994 and requested that Chinese Taipei bring it into conformity
with the WTO upon accession.
31. The representative of Chinese Taipei confirmed that the Trade Promotion Fee would be
applied in conformity with WTO obligations and w ould not exceed 0.05 per cent of the customs value
of the good.  The Working Party took note of these commitments.  Some members expressly reserved
the right to pursue this issue pursuant to the WTO Understanding on Rules and Procedures Governingthe Settlement of Disputes.
32. The representative of Chinese Taipei stated that Chinese Taipei would require a transitional
period of 15 months to bring its Harbour Construction Dues levy into conformity with the
requirements of the WTO Agreement, particularly to make it a specific charge because of the need to
modify the budget plans to compensate for the anticipated revenue losses resulting from themodification of the levy.WT/ACC/SPEC/TPKM/2
Page 14
[33. The representative of Chinese Taipei stated that Chinese Taipei would bring the Harbour
Construction Dues into conformity with Articles III and VIII of the GATT 1994 within a period of
15 months from the date of accession to the WTO, and in any case by 31 December 2000 (whichever
occurred first).  Within the same time-frame Chinese Taipei would  exclude these charges from the
valuation base for the application to imports of domestic taxes, such as the Commodity Tax and the
Tobacco and Alcohol Tax.  During this transitional period, the Harbour Construction Dues would  notexceed 0.5 per cent of the taxable base.  The Working Party took note of these commitments.]
[34. The representative of Chinese Taipei stated that Chinese Taipei would bring the application of
the Harbour Construction Dues into conformity with Articles II and VIII of the GATT 1994 uponaccession and would exclude those charges from the valuation base for the application to imports of
domestic taxes, such as the Tobacco and Alcohol Tax.  Specifically, the Harbour Tax would be a
specific charge based on the cost of the services provided and not applied on an ad valorem basis.
The Working Party took note of these commitments.]
[The representative of Chinese Taipei stated that Chinese Taipei would bring the Harbour
Construction Due into conformity with Articles III and VIII of the GATT 1994 by the date of itsaccession to the WTO.  The Working Party took note of this commitment.]
Internal Taxes Applied to Imports
35. In response to questions, the representative of Chinese Taipei stated that VAT, Commodity
Tax, tobacco and alcohol monopoly tax were applied equally to imported and domestic products.
Commodity tax
36. Some Working Party members sought information from Chinese Taipei on the application of
the special commodity tax.  In response, the representative of Chinese Taipei said that the tax was
imposed on imported goods at the time of importation, and on like domestic goods upon their releasefrom the factory.  For imported goods, the amount of the commodity tax was the taxable value
established in accordance with the Customs Import Tariff, plus customs duties, plus harbour
construction dues multiplied by the tax rate.  For domestic goods, the amount of the tax was
calculated on the basis of one of two methods.  The first method applied when the manufacturer sold
products through wholesalers or if the manufacturer was paid to manufacture the products for others.
The second method considered a 12 per cent promotional expense.  The goods subject to the
commodity tax were:  rubber tires, cement, machine-ma de cool drinks, flat glass, oil and gas, certain
electric appliances and motor vehicles.  Chinese Taipei believed that many Working Party members
had similar practices.  He noted that the 12 per cent promotional expense represented a manufacturer's
typical promotion expense.  The tax allowed a deduction of 12 per cent for promotional expenseswhen goods were circulated not through an exclusive wholesaler or distributor.  Chinese Taipei
considered that it treated imported goods the same as the goods sold through distributors, and did not
discriminate against imports.  The commodity tax was a special excise tax.  The determination of the
tax base had taken into account common practices.  The 12 per cent deduction only applied if the
domestic sales were not through a sole distributor.  In response, some Working Party members noted
that a critical consideration in the application of this internal tax was consistency with national
treatment and other WTO obligations and the avoidance of subsidization.
37. Some members of the Working Party were of the view that the basis for the application of the
commodity tax to imports was artificially inflated because the tax base of domestic and imported
goods were different.  Domestic goods were assessed on an ex factory basis, excluding the cost of
delivery and transfer of the goods to the wholesale level whereas the base for imported goods was the
import value plus transportation, insurance and other customs charges and customs  duty.  They also
noted that domestic goods profited by having an additional 12 per cent deduction for promotionalWT/ACC/SPEC/TPKM/2
Page 15
expenses prior to the calculation of the tax.  These members of the Working Party considered that
Chinese Taipei should address the central issue of equal application of the tax.  The bases for
calculation of the tax were inequitable, and the incorporation of a 12 per cent differential in the
valuation of imports and domestic products based on the concept of promotional expenses could not
be justified, and should be eliminated prior to accession.  Those members considered that due to the
different tax bases, the tax was applied in a manner th at were not in conformity with Article III of the
GATT 1994.  They stated that Chinese Taipei should eliminate by the date of its accession any
domestic tax measures or methods of applying domestic taxes  whose applications vary according to
whether the items are locally manufactured or imported.
38. The representative of Chinese Taipei stated that from the time of Chinese Taipei's accession,
changes to the Commodity Tax would modify the base for the tax.  From that date, the tax would be
calculated on the basis of the sale price.  The sale price was the manufacturer's wholesale price for the
current month; if the manufacturer sold directly to retailers, wholesale profit could be deducted fromthe selling price.  Deductible wholesale profit rate was determined on an industry-by-industry basis.
Imported goods were taxed on the basis of their CIF value and therefore were not eligible for the tax
adjustment.  He further added that in order to equalise the treatment of domestic and imported
products, prices of domestic manufactured goods sold directly to retailers contained elements of
wholesale profits which were  not included in the tax base.  He further stated that the current practiceof assessing the commodity tax based upon engine displacement of automobiles and the licence plate
tax was fully consistent with Article III of the GATT 1994.
39. The representative of Chinese Taipei stated that Chinese Taipei would amend its laws to
remove the allowance of 12 per cent for promotional expenses, when goods were circulated not
through an exclusive distributor, and to use selling prices as the base for levying the commodity tax.He further stated that Chinese Taipei would eliminate by the date of its accession any domestic taxes
or tax assessment methods that resulted in the discriminatory taxation of domestic and imported
products.  [He further stated that Chinese Taipei would eliminate by the date of its accession any
domestic tax measures or method of applying domestic taxes, whose application varied according to
whether the articles are locally produced or imported.  In particular, he stated that Chinese Taipeiwould change the method of assessing the commodity tax on automobiles and the license plate tax
from one based on engine displacement to... .]  The Working Party took note of these commitments.
Gross Business Receipt Tax, General Sales Tax and VAT
40. Some members of the Working Party asked Chinese Taipei to describe the application of the
business tax, its scope and level of application, the portion of the tax revenue accounted for byimports, etc.  In response, the representative of Ch inese Taipei said that the Gross Business Receipt
Tax (GBRT) applied to the sale of goods and the rendering of services.  The tax was levied in two
forms.  The first form was a general sales tax which applied to the business of insurance, banking,
investment trusts, securities, agricultural wholesale, pawn shops and small business operators.  The
second form, a VAT business tax, applied to all other businesses.  The VAT was applied at the rate of
5 per cent, to both domestic and imported products.  All goods, both domestically manufactured and
imported, were generally taxed at the point of sale.  Revenue from both kinds of tax imposed onimported goods had represented 2.34 per cent of total tax revenue in 1996 (1 July 1995 to
30 June 1996).  Chinese Taipei considered that the imposition of the tax at the point of sale simplified
the procedure by levying the tax on the taxable goods' imported value and the importers' added value
jointly, rather than separately.  However, in some cases, to minimise tax avoidance imported goods
were subjected to business VAT at the time of importation.  The reason for this was that if  businessVAT was levied at the time of sale, it was possible that certain imported goods with particular end
uses could avoid payment of the tax, i.e. motor vehicles imported for personal use, or goods imported
by a financial institution.  He further noted that because the tax paid on inputs could be deducted from
the tax paid on outputs collected from purchases, goods imported for use and goods imported for
resale were not differentiated at the time of importation.  In relation to the tax base for calculation ofWT/ACC/SPEC/TPKM/2
Page 16
the amount of business VAT payable, the representative of Chinese Taipei noted that imported goods
were taxed on the basis of the customs duty paid value plus the commodity tax, if applicable.  The
harbour construction dues would be removed from the tax base.  If the commodity tax was payable,
the commodity tax formed part of the value added, and was counted as the tax base for the business,
whether the goods were imported or manufactured domestically.  In addition, the business importer
could deduct the input tax from the output tax and was only taxed for the value added to the goods.Therefore, there was no double counting or "tax-on-tax".  He added that Chinese Taipei, after
examining whether all goods could be taxed at the time of importation, had found that it was common
practice in those economies which imposed VAT to levy the tax at the time of importation.
Monopoly tax on tobacco and wine
41. Some members of the Working Party sought information on the monopoly tax for tobacco,
wine, spirits and beer.  In their view, there was a serious transparency problem in this sector.  In
response, the representative of Chinese Taipei confirmed that imported tobacco and wine were subjectto a Monopoly Tax, in lieu of customs duty, harbour construction fees, commodity tax and
value-added business tax.  The Monopoly Tax imposed on domestic tobacco and wine products was
assessed on an ad valorem  basis, equivalent to the operating revenue minus all relevant cost and
expenses of the Taiwan Tobacco and Wine Monopoly Bureau (TTWMB) and was considered a sales
tax.   On average, imported tobacco and wines were subject to the Monopoly Tax at the rate ofapproximately 120 per cent of the import price.  Some members of the Working Party requested that
Chinese Taipei provide information on cost of production, and indicate how the TTWMB's
methodology to determine the tax rate complied with the GATT 1994, in particular Articles I, III, X,
XI, XVI, and XVII, a list of the taxes applied to imports, their negative rates, the value basis as well
as the methodology used to determine that domestic tobacco, spirits and wine were subject to a taxrate of approximately 185 per cent of cost.  These members also requested information concerning
differences in the amount of tax payable on certain whiskies.  The representative of Chinese Taipei
stated that foreign spirits had only been permitted to be imported for a short period, and that due to
recent exchange rate fluctuations these were approximate figures.  He also noted that Scotch and Irish
whiskies were higher quality and price products, were classified as one category and subject to ahigher tax rate than other whiskies.  Some members of the Working Party recalled that this issue had
been raised in a WTO panel.  In their view, these measures appeared to be inconsistent with Article III
of the GATT 1994.
42. Some members of the Working Party reiterated their concerns in relation to the operation of
the Monopoly Tax scheme, particularly in relation to the lack of sufficient transparency in itsoperation.  Without the availability of data to calculate domestic costs, it was not possible to
accurately determine whether the Monopoly Tax was equally applied to domestic and imported
products.  In their view the Monopoly Tax appeared to have a greater impact upon imported products.
They did not consider Chinese Taipei's explanations of the methodology used to determine the
Monopoly Tax adequate, substantiated and verifiable.  It was not possible to conclude that domestic
and imported products were taxed in an equivalent manner.  As there were large discrepancies
between the rates quoted by Chinese Taipei and the information available to national authorities, italso appeared that the tax system was discriminato ry.  These members stated that no transition period
would be appropriate.  Chinese Taipei should either eliminate the Monopoly Tax on imports of wine
and distilled spirits immediately upon accession or replace the Monopoly Taxes with reasonable ad
valorem  import duties, and ensure that internal taxes applied equally to domestic and imported wine
and spirits.  These members of the Working Party disagreed with the view that a system for the ad
valorem  taxation of domestic goods based on net profits of the TTWMB could be considered as
equivalent to a specific tax on imported goods.  It appeared to these members that due to the lack of
transparency mentioned above, there were problems in assessing the consistency of the Monopoly
Tax system with the GATT 1994.  Nevertheless the Monopoly Tax for imported wine, cigarettes and
distilled spirits was significantly higher than the effective tax rate for similar domestic products inbreach of Article III of the GATT 1994.  These members requested, therefore, that the operation ofWT/ACC/SPEC/TPKM/2
Page 17
the TTWMB be altered prior to Chinese Taipei's accession, to enhance transparency and to operate in
a manner consistent with the provisions of the GATT 1994.  The official monopoly plan ought to be
liberalised and the trade impact of the plan fully  reviewed prior to accession.  The representative of
Chinese Taipei said that due to the alteration of the scheme over recent years, the Monopoly Tax on
imported products tended to be lower than the tax applied to domestic products.  In any event, the
Legislative Yuan was determined to repeal th e tobacco and wine monopoly system.  Alcohol and
tobacco products were classified according to production methods and other features, with different
tariff rates and taxes applying to different products.  Classification and tariff and tax rates were
carefully monitored in order to ensure that no discrimination occurred between domestic and imported
goods.
43. Some members of the Working Party asked that details be provided of the  scheme which
would replace the Monopoly Tax and reiterated that no transitional period was appropriate for a
situation which was in clear breach  of Article III of the GATT 1994.  The representative of Chinese
Taipei responded that public hearings had been completed, and a plan had been developed.  He
provided the Working Party with a summary of the re form plan and said that he considered that the
future regime would improve trade in alcohol and tobacco products.  The new scheme would be
implemented six months after Chinese Taipei's accession or, if the Legislature gave its approval
before accession, the new system would become effective six months after the implementation of thenew laws.
[44. The representative of Chinese Taipei stated that, [prior to accession,] [within six months after
enactment of the Tobacco and Alcohol Administration Law and the Tobacco and Alcohol Tax Law
and in any event no later than six months after Chinese Taipei's accession] the Monopoly Tax would
be abolished and that tobacco and alcohol products would be subject to (i) import duties as reflectedin Chinese Taipei's Schedule of Concessions (Part I of Annex I to the Draft Protocol of Accession) in
the same manner as other imported products and (ii) the tobacco and alcohol tax.  The representative
of Chinese Taipei also stated that [from the date of accession,]  [within six months after enactment of
the Tobacco and Alcohol Administration Law and the Tobacco and Alcohol Tax Law and in any
event no later than six months after Chinese Taipei's accession] internal taxes and charges of whatevercharacter related to trade and distribution of alcohol and tobacco products would be applied equally to
domestic and imported products, including with respect to domestic distribution and sales of these
products without regard to the ownership of the en terprise.  The Working Party took note of these
commitments.]
Quantitative Restrictions
Area restrictions
45. In the early stages of the Working Party, some members noted that discriminatory area
restrictions were imposed on many products:  (i) peaches:  limited to imports from Europe and the
United States;  (ii) lemons and limes, grapes, plums,  whole ducks, turkey cuts:  issuance of import
licenses was suspended except for imports from the United States;  (iii) oranges and other mandarins,
including tangerines and satsumas, and grapefruits:  imports from the United States were free, imports
from South Africa were limited in quantity;  (iv) apples:  imports from the United States and Canadawere free;  imports from other areas were subject to quantitative restrictions.  There were also
restrictions on cigarettes and bilateral agreements on the importation of beer, wine and cigarettes.  In
their view, the area restrictions were discriminatory trade measures inconsistent with the GATT 1994
and, in particular, the MFN principle.  Those members emphasized that there was no justification to
permit the continuation of such discrimination.  Chinese Taipei should eliminate those measures fromthe date of its accession to the WTO.WT/ACC/SPEC/TPKM/2
Page 18
46. In response the representative of Chinese Taipei said that  the area restrictions operated to
maintain the diversity in the origin of imports and to  maintain trade balances with certain areas, or to
facilitate agriculture restructure.  Only a small percentage of industrial and agricultural products were
subject to the discriminatory restrictions.  Area restrictions for alcoholic beverages and cigarettes had
been eliminated on 1 September 1994.  Area restrictions in place on the agricultural products listed in
Attachment C to this Draft Report would be liberalized.  The tariff rate quotas offered as aliberalization measure to be implemented after accession for certain agricultural products would be
distributed through a bidding procedure consistent with GATT 1994, and the Agreements on
Agriculture and Import Licensing Procedures.
47. With regard to automobiles, some members noted that Chinese Taipei's Import
Regulation 209, provided that only motor vehicles from "Europe and the American Continent" may be
imported into Chinese Taipei.  The representative of Chinese Taipei agreed that this restriction was
discriminatory.  It was imposed pursuant to the Automobile Industry Strategic Development Plan.Chinese Taipei's car industry was currently not a competitive one, as the size of the market was not
substantial enough to allow for economies of scale.  The total production value in 1992 was
US$8.2 billion, representing 5 per cent of the total production value of the whole manufacturing
sector. Workers directly employed in the car industry were in the number of 120,000. A sudden
opening of the market would result in serious economic and social problems.
48. Some members of the Working Party stated that a transitional period was not appropriate, and
that the area restrictions on automobiles should be eliminated prior to accession.  In response, the
representative of Chinese Taipei undertook to eliminate the  area restrictions on automobiles.  Up to
now the liberalisation of car imports had proceeded as follows:  (i) heavy trucks could be imported
freely from February 1994;  (ii) passenger cars could be imported without quantitative restrictionsfrom North America and Europe (excepting Eastern Europe).  Passenger cars from other areas were
currently under either quantitative or area restrictions;  (iii) light trucks and station wagons could be
imported freely from North America and Europe.  Im ports of light trucks and station wagons from
other areas were currently under either quantitative or area restrictions.  He assured the Working Party
that it was not the intention of Chinese Taipei to employ measures not permitted by the WTOAgreement, such as voluntary export restraints or other grey area measures to liberalise automobile
imports.
49. At the request of some members of the Working Party, the representative of Chinese Taipei
provided a comprehensive listing, covering both tariff and non-tariff measures, of all trade preferences
in force.  He added that once area restrictions were eliminated, there would remain no tradepreferences extended on a bilateral basis.  The representative of Chinese Taipei assured the Working
Party that area restrictions would be brought into conformity with the requirements of the WTO
Agreement.
50. The representative of Chinese Taipei undertook that area restrictions applying to imports of
certain passenger cars and certain small commercial vehicles, certain automobile chassis and
motorcycles would be eliminated upon Chinese Taipei's accession to the WTO.  Passenger cars and
light commercial vehicles were the only industrial products that would be subject to tariff-rate quotasafter WTO accession.  Tariff rate quotas would be allocated in a manner consistent with Article XIII
of the GATT 1994.  The tariff-rate quotas would be increased at the annual rate of 20 per cent.  The
tariff rate quota system would be eliminated no later than [31 December 2006].  He confirmed that
area restrictions for alcoholic beverages and cigarettes had been eliminated from 1 September 1994.
Chinese Taipei also undertook that upon its accession, area restrictions on agricultural products wouldbe eliminated.  The tariff rate quotas would be administered in a manner consistent with the
requirements of the WTO Agreement, [in particular the Agreement on Agriculture, the Agreement on
Import Licensing Procedures and GATT 1994].  The Working Party took note of these commitments.WT/ACC/SPEC/TPKM/2
Page 19
Import Licensing
51. Several members of the Working Party noted that historically Chinese Taipei had maintained
a complex network of non-tariff measures consisting of quantitative restrictions affecting some
27 items,  non-automatic import licensing affecting some 246 items, including 27 items which were
subject to quantitative restrictions and standards inspections, quarantine, labelling requirements, etc.
These members requested detailed information on the schemes.  Some members added that the banson liquid milk, rice passenger cars equipped with diesel engines and motorcycles of 150cc or more,
applied by Chinese Taipei were inconsistent with WTO obligations and would have to be eliminated.
These members requested that Chinese Taipei eliminate, prior to accession to the WTO, all import
restrictions inconsistent with the GATT 1994 and the WTO Agreements, in particular the Agreements
on Agriculture, Sanitary and Phytosanitary Measures and Technical Barriers to Trade.
52. In response, the representative of Chinese Taipei said that a system of licensing had been
operating in relation to the importation of certain products that consisted of area restrictions,discretionary licensing and import controls.  Automatic licensing operated to grant an import license
without requiring the Customs to screen the goods.  Discretionary licensing required that the Board of
Foreign Trade issued import licenses for certain products, following approval by consent letter of the
relevant agencies.  In the case of such products, the Council of Agriculture, Industrial Development
Bureau, Department of Health, Department of Environmental Protection and other agencies were
required to consent to the issue of licenses for both import controls and discretionary licensing in
respect of products falling within their respective jurisdictions.  Once the importation was approved,
the Board of Foreign Trade issued an import license.
53. The representative of Chinese Taipei stated that as a result of the concerns expressed by
members of the Working Party, Chinese Taipei had decided to establish a "Negative List" system.The Negative List system would streamline the importation process and replace all pre-existing
licensing requirements, except in cases where the product had national security, public order, cultural,
educational, public health, or environmental protection implications.  The Negative List would result
in the issuing of licenses by the relevant agencies according to an objective standard, and in a
transparent manner.  He noted, however, that some  items on the automatic license list would become
subject to quantitative restriction or import ban under the Negative List system, due to the
re-categorisation of those items.  For products subject to import monopolies, consent letters would
only be granted to importers enjoying an import monopoly.  The procurement practices of the
government agencies enjoying the import monopoly would be made consistent with Article XVII of
the GATT 1994.
54. The representative of Chinese Taipei outlined the operation of its Negative List system under
the June 1997 version as follows.  Items were listed in either Table I (Table of Commodities Subject
to Import Control) or in Table II (Table of Commodities Subject to Conditional Import).  Items listed
in Table I could not be imported unless specially approved by the Board of Foreign Trade or other
relevant authorities, which were listed in Import Regulations 111/112.  Items listed in Table II
required that an import license be issued prior to importation, by the Board of Foreign Trade or its
designated licensing banks i.e. Import Regulations 121/122.  Tables I and II constituted the NegativeList.  In respect of items that had previously required a license issued by the Board of Foreign Trade
but were not retained in the Negative List, if they  were subject to administration requirement, which
had no trade restriction effect, the Customs were required to carry out an inspection to determine that
all requirements for importation were fulfilled.  The items subject to that requirement were listed in
the "List of Commodities Entrusted to Customs for Import Examination" ("the Entrusted List").  TheEntrusted List was published together with the Negative List in a consolidated volume arranged by
HS Code number.  The Negative List and the Entrusted List each accounted for 8 per cent of tariff
lines, the remaining tariff items were free of this requirement.  Items contained in Table I were subject
to general import bans, which in respect of most products were justified under Articles XX and XXI
of the GATT 1994,  whilst others were required to protect domestic sectors.  In the case of bansWT/ACC/SPEC/TPKM/2
Page 20
necessary to protect domestic sectors, an entitlement to import the necessary quantity could be
auctioned when domestic production fell short of demand.  He stated that upon accession, the items
listed in Table I could  be moved to Table II if quotas or tariff quotas are used as transitional
measures.
55. In response to further questions from members of the Working Party, the representative of
Chinese Taipei explained that the decision whether a product should be included in the Negative Listwas taken by government agencies.  The legal basis for including items in the negative list was
Article 11 of the Foreign Trade Act, which permitted the imposition of a restriction if the restriction
was necessary to fulfil obligations under international treaties or trade agreements, or for national
defense, social security, culture, human health, environmental protection  reasons or to implement
specific policies.  After accession the inclusion of new items would be subject to a review procedure
to ensure WTO consistency.  Although the legislation did not specifically provide for interested
parties to make representations concerning the inclusion of an item in the negative list, existingpractice permitted such representations to be made to decision makers.  The practice of inviting
interested parties to express their view when considering changes to the Negative List would be
continued.  Following accession to the WTO, the number of items included in the negative list would
be substantially reduced; inclusion of new items w ould be subject to a review procedure to ensure
WTO consistency.  He also noted that the effect of the recent Foreign Trade Act was to limit the typesof considerations required to be taken into account by administrators when deciding whether items
were to be included in the Negative List as subject to new import licensing requirements.
56. Several members of the Working Party indicated that all bans and restrictions set out in the
Negative List, and the requirements for import lice nsing being issued by more than one regulatory
agency should, be brought into full conformity with the WTO Agreement, especially the Agreementon Import Licensing Procedures.  In particular, a member of the Working Party noted that some of
Chinese Taipei's stated reasons for restrictions did not appear consistent with WTO requirements, e.g.,
restrictions required to protect domestic sectors.  This member requested specific justifications for any
import restrictions maintained or imposed in the future.  A general statement that  import bans, which
in respect of most products were justified under Articles XX and XXI was insufficient to evaluate anycommitment.  In response, the representative of Chinese Taipei noted that although the Agreement on
Import Licensing Procedures allowed Members to have more than one import licensing entity,
Chinese Taipei would work towards a system that required import licenses to be obtained from one
regulatory entity only.  Some members of the Working Party said that all import bans, quantitative
restrictions  import licensing restrictions, and other non-tariff measures inconsistent with therequirements of the WTO Agreement would have to be eliminated prior to Chinese Taipei's accession.
Some members of the Working Party said that if Ch inese Taipei believed that certain of its import
bans, quantitative restrictions and administrative requirements were not inconsistent with the
provisions of the WTO, the onus was on Chinese Taipei to demonstrate this.  They requested Chinese
Taipei to modify this list to show: the precise de scription of the product affected by HS number, the
measure or measures applied to each, the specific WTO provisions which justified the maintenance of
the measure or measures and the responsible agency.  If border measures were to be justified toenforce Technical Regulations or Sanitary and Phytosanitary Measures, the table should also show the
relevant national standard(s) and any international standard(s).  The Working Party would then be in a
position to examine the matter further.  The repres entative of Chinese Taipei stated that a table
containing the justifications for placing items on the Negative List would be submitted to the Working
Party.
[57. The Consolidated List of Commodities Subject to Import Regulations and Commodities
Entrusted to Customs Import Examination is referred to in Attachment D to this Draft Report.  The
representative of Chinese Taipei undertook to notify any changes introduced to the Consolidated List
in accordance with the Agreement on Import Licensing Procedures.  The Working Party took note of
these commitments.]WT/ACC/SPEC/TPKM/2
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[58. In response to a request that Chinese Taipei produce a plan for the elimination of quantitative
or other non-tariff measures on fish, the representative of Chinese Taipei  stated that Chinese Taipei
would eliminate all quantitative restrictions on these products from the date of accession, with the sole
exception of import bans on mackerel, carangid and sardines.  As indicated in Attachment C of the
Draft Report, upon accession to the WTO Agreement, the existing import controls for mackerel,
carangid and sardines would be replaced by tariff quotas.  The Working Party took note of thesecommitments.]
59. Some members of the Working Party noted the continued application of non-tariff  measures
to imports of certain yachts and vessels for pleasure or sports and a ban on the importation of
motorcycles, including with reciprocating intern al combustion piston engines of a cylinder capacity
exceeding 800 CC.  These members of the Working Party stated that the restrictions were not justified
under the WTO Agreement.
60. The representative of Chinese Taipei stated that Chinese Taipei would eliminate the import
ban on motorcycles over 150cc [two years after] [upon] accession to the WTO.  [At that time, Chinese
Taipei would implement a licensing system for yachts  and vessels for pleasure or sports that [would
require importers to have an approved abandonment/ replacement right as applicable to domestically
built fishing boats.  These measures conformed to Article XX(g) of GATT 1994.] [conformed to the
automatic licensing provisions of the WTO Agreement on Import Licensing Procedures.]  TheWorking Party took note of these commitments.
[61. The representative of Chinese Taipei said that from the date of accession,  Chinese Taipei
would apply its import licensing and quantitative restrictions regime in strict conformity with WTO
Agreements, in particular with the Agreements on Agriculture and Import Licensing Procedures.
Chinese Taipei would also ensure that the distri bution of import licenses, quotas, tariff-rate quotas,
permits or any other means of approval for impor tation or the right of importation by central and
sub-central authorities would not be conditioned on whether competing domestic suppliers of such
products exist or on performance requirements of any kind, including but not limited to local content
or mixing requirements, the transfer of technology, the conduct of research and development,
minimum export requirements, or on the origin or nature of the enterprise, except as provided in therelevant commitments in paragraph [85] of this Draft Report.  [The representative of Chinese Taipei
also confirmed that in accordance with Article II:4 of GATT 1994 and Article 4.2 of the Agreement
on Agriculture, Chinese Taipei will ensure that no price increase in respect to imports, particularly by
State trading enterprises, will result in protection beyond that provided by the tariff in its schedule.]
The Working Party took note of these commitments.]
62. The representative of Chinese Taipei said that  Chinese Taipei also undertook to eliminate and
not reintroduce or apply  import bans, quantitative restrictions, licensing restrictions, or other
non-tariff measures having similar effect which were not justified under specific provisions of the
WTO Agreement, with the exception of those measures listed in Attachment C of the Draft Report.
Area restrictions for agricultural and industrial products would be liberalized from the time of
accession as shown therein.  He also noted that Chinese Taipei would not use measures related to
customs procedures and technical product or safety standards as disguised barriers to trade and thatany measures applied will be no more restrictive than necessary to accomplish their legitimate goals.
The Working Party took note of these commitments.
Customs Valuation
63. Some members of the Working Party requested information on the system of customs
valuation in Chinese Taipei.  In response, the representative of Chinese Taipei stated that paragraph 1of Article 12-1 of the Customs Law reflected the situations in which the transaction price would not
be used as the basis of customs value.  The transaction value would not be used when the invoice
price did not include the cost adjustments provided under Article 12 of the Customs Law and theWT/ACC/SPEC/TPKM/2
Page 22
importer failed to provide objective and quantifiable information to support the price calculation.  In
addition, if the Customs had any doubts concerning the adequacy or accuracy of an invoice, it
normally requested the importer to provide an explanation or other evidence to substantiate the
validity of the invoice.  If the importer refuse d to give explanations or the evidence provided
contradicted the facts, and further investigation proved that the invoice price was not the price
actually paid or payable, the Customs could determine that the invoice price would not be accepted asthe customs value.  In such a circumstance, Article 12-2 to 12-6 of the Customs Law provided that the
value was assessed in the following sequence:  firstly, the transaction value of identical goods;
secondly, the transaction value of similar goods;  thirdly, the deductive value;  fourthly, the computed
value;  and, fifthly, any other reasonable value.
64. Some members of the Working Party asked whether any minimum import values were used
in Chinese Taipei.  The representative of Chinese Taipei replied that although Article 12 of its
Customs Law provided for use of a duty paying value list which provided a pre-determined value forimported products, the Executive Yuan, by administrative order, had eliminated the pre-determined
values.  The discretionary power had been eliminated as the result of the April 1997 amendment to the
Customs Law.
65. Some members of the Working Party said that some aspects of the customs valuation regime
of Chinese Taipei appeared to be inconsistent with the requirements of the Agreement on theImplementation of Article VII (Customs Valuati on Agreement) in the following respects:  the
authority to use the duty paying value list or any reference price mechanisms or other arbitrary lists of
prices used for customs valuation purposes on agricultural and other imports should be eliminated;
and the selection of valuation methods outside the hierarchy provided in the Customs Valuation
Agreement, particularly in the case of valuation of leased and rented goods, should be addressed.They also noted that  precise WTO consistent rules on the determination of whether parties were
related when dealing with the customs valuation of transactions between related parties were required;
and provisions giving effect to the WTO Ministerial Decision on Customs Valuation should be
enacted.
66. Some members of the Working Party also expressed concern regarding the practice of
requiring importers to post bonds for prompt clearance of goods, in particular horticultural goods,
based on pre-determined reference prices.  These reference prices were not established in a
transparent manner, were often changed without prior notice and no opportunity was provided for
comment on the rate established.  In the view of these members, this practice had the same effect as
use of reference prices to calculate duties.  In response, the representative of Chinese Taipei statedthat its use of reference  prices in determining the amount of the bond to be posted to facilitate prompt
clearance of goods was not inconsistent with the WTO obligations, in particular, the obligation under
the Agreement on Customs Valuation.  However, Chinese Taipei would continue to improve the
current practice to make the bond amount a closer reflection of the actual value of the goods.  He
noted in this connection that any bond paid would be refunded, if a post-clearance assessment of  the
customs value of the goods was less than the bond amount.
67. Responding to comments from some members of the Working Party detailing other areas
where the customs valuation regime of Chinese Taipei did not concord with the provisions of the
Agreement, the representative of Chinese Taipei indi cated that these issues had been addressed in the
implementing legislation for WTO accession to be approved by the Legislative Yuan.
68. The representative of Chinese Taipei confirmed that amendments to bring the Customs Law
into conformity with the Customs Valuation Agreement would be made prior to accession, either byeliminating the inconsistent practices or amending current laws and regulations to bring procedures
into line with the Customs Valuation Agreement.  [He confirmed that Chinese Taipei would
implement the Customs Valuation Agreement fully upon accession.  The representative of Chinese
Taipei also committed that Chinese Taipei would, upon accession, cease using pre-established orWT/ACC/SPEC/TPKM/2
Page 23
reference prices to establish the amount of any bond that might be posted in connection with customs
clearance of horticultural products.]  He further committed that Chinese Taipei would, with a view to
resolving specific problems, upon request, provide information to WTO Members on the methods for
determination of customs valuation of specific products and consult concerning the effect of Chinese
Taipei's customs valuation procedures on their trade.  The Working Party took note of these
commitments.
Rules of Origin
69. Some members of the Working Party requested information about the elaboration of rules of
origin in Chinese Taipei whether in the context of free trade agreements or otherwise, and also
requested Chinese Taipei to confirm that its rules of origin for both preferential  and non-preferential
trade complied fully with the WTO Agreement on Rules of Origin.
70. The representative of Chinese Taipei said that the Customs Law had been amended in
April 1997 to provide a legal basis for the establishmen t of rules of origin fully consistent with the
WTO Agreement.  The Rules of Origin on Imported Goods set out the criteria for determining origin.
Preshipment Inspection
71. Some members of the Working Party requested information on whether the services of a
preshipment inspection firm were employed by Chinese Taipei.  The representative of Chinese Taipei
said that Chinese Taipei did not use pre-shipment inspection.  The representative of Chinese Taipeinoted however  that Chinese Taipei had amended the Foreign Trade Act in April 1997 to provide the
legal basis for the authority to regulate preshipment inspection activities of firms mandated by foreign
governments.
72. The representative of Chinese Taipei stated that Chinese Taipei would ensure that its laws and
regulations relating to preshipment inspection would be consistent with the relevant WTOAgreements, in particular, the Agreements on Preshipment Inspection and Customs Valuation.  The
Working Party took note of this commitment.
Anti-Dumping and Countervailing Duties
73. In response to questions from members of the Working Party the representative of Chinese
Taipei said that in 1984 Chinese Taipei had enacted "The Implementing Regulation on the Impositionof Countervailing Duties and Anti-Dumping Duties".  That Regulation provided that countervailing or
anti-dumping duties could be levied on goods found to have received subsidies or to have been
dumped and which threatened domestic industries.  In the view of Chinese Taipei the implementing
regulations had been in compliance with the requirements of the Tokyo Round Codes on
Anti-Dumping and Subsidies and Countervailing Measures.  In pursuance to the 1994 amendment tothe Customs Law, Chinese Taipei undertook to revise the Regulations to make them consistent with
the Uruguay Round Agreements prior to accession to the WTO and to submit them to the WTO.
74. The representative of Chinese Taipei stated that, Chinese Taipei would ensure that its
legislation on anti-dumping and countervailing duties was in full conformity with the requirements of
the WTO Agreement, in particular Article VI of GATT 1994 and the Agreements On the
Implementation of Article VI and Subsidies and Countervailing Measures from the date of accession.
Chinese Taipei would also ensure that any anti -dumping or countervailing duties imposed on any
product after its accession were in accordance with the requirements of Article VI of GATT 1994 and
the Agreements On the Implementation of Article VI and Subsidies and Countervailing Measures.
The Working Party took note of these commitments.WT/ACC/SPEC/TPKM/2
Page 24
Safeguards Regime
75. Some members of the Working Party noted that a provision in the Foreign Trade Act, referred
to as the "trade imbalance clause" permitted Chines e Taipei to suspend trade from specific countries
because of persistent trade deficits and did not specifically authorise the type of actions foreseen in
the Understanding on Balance of Payments Provisions of GATT 1994.  In response to requests for
justification of this provision and measures taken pursuant to it, the representative of Chinese Taipeisaid that, in his view, Articles XI, XII, and XI X of the GATT 1994 authorized the maintenance of this
particular provision of the Foreign Trade Act.  Some members of the Working Party disagreed with
this opinion and stated that the provision in question was not in conformity with the requirements of
WTO Agreement, in particular GATT 1994 Articles I, II, XI, XII, XIII, XIV and XIX.  Following
further discussions in the Working Party, the representative of Chinese Taipei agreed that certain
provisions of the Foreign Trade Act were inconsistent with the provisions of the WTO.
76. The representative of Chinese Taipei stated that in April 1997, the Foreign Trade Act had
been revised to address members' concerns about the  trade imbalance clause.  This clause had been
replaced with one that was consistent with Article XII of the GATT 1994.  The representative of
Chinese Taipei further confirmed that the provisions of the Foreign Trade Act would be implemented
from the time of accession in a manner conforming to the provisions of the WTO Agreement.
Moreover, the representative of Chinese Taipei stated that should a critical balance-of-paymentssituation develop, [Chinese Taip ei would use price-based measures] [Chinese Taipei would give
preference to those measures referred to in the Understanding on the Balance-of-Payments Provisions
of the GATT 1994 as "price-based measures"] to address the situation and would maintain such
measures only so long as necessary to restore balance of payment equilibrium.  Moreover, such
measures would not  provide import protection for specific sectors, industries or products.
77. In response to further questions the representative of Chinese Taipei informed members of the
Working Party that Chinese Taipei operated a sy stem to compensate farmers for damage caused by
competition from imports of agricultural products.  Relief was accorded if producers of major
agricultural products suffered serious injury as a result of the liberalisation of imports due to trade
negotiations or policy changes.  If the quantity of such products imported during the injury period hadincreased by 20 per cent or more compared with a reference period of the previous three years;  or the
imported products had been subsidised or had otherwise benefitted from unfair trade practices.
Serious injury was deemed to occur when the market price fell below the cost of production.  The
sixteen products eligible for relief under the Regulations were as follows:  citrus, apples, plums,
peaches, guavas, pears, wax apples, grapes, tea leaves, beef, pork, duck meat, bred shrimps,pineapples, chicken meat and clams.  Chinese Ta ipei submitted to the Working Party information
concerning the draft Plan on Special Safeguards for Agricultural Products.
78. The representative of Chinese Taipei stated that, from the time of accession, the safeguards
regime would be fully consistent with the WTO Agreement on Safeguards.  [The representative of
Chinese Taipei confirmed that safeguards on agricultural products would be included in the
calculation of Chinese Taipei's AMS calculations and AMS reduction commitments.]  The Working
Party took note of these commitments.
Export Regulations
79. In response to requests for information on any restrictions maintained on exports, the
representative of Chinese Taipei stated that no products were prohibited from export from Chinese
Taipei.  Ammunition, narcotics, protected wildlife, and strategic high-tech products were subject to
strict export controls, and could only be exported under special export permits.  As a result ofmeasures adopted by importing countries, certain other items such as textiles were subject to an
export licensing system.  He provided the Working Party with a list of all products subject to export
licensing maintained to ensure:WT/ACC/SPEC/TPKM/2
Page 25
(i) the implementation of quantitative restriction arrangements and voluntary restraint
arrangements;
(ii) national security, the security of supply of certain daily necessities and important
industrial materials, including rice and salt;
(iii) social and financial policies, including narcotics control;
(iv) protection of endangered species of wild fauna and flora, including Formosan land-
locked salmon, and white-skin sugar cane;
(v) hygiene and health, including puffer fish, turtles, prawns and pork;
(vi) agricultural development, including bananas, seedless water-melons, onions, eels, and
raw sugar.
In order to streamline the granting of an export li cence, a system to permit the grant of an automatic
electronic export licence was under development.
Export Processing Zones/Export subsidies
80. Some members of the Working Party requested information on the Export Processing Zones
(EPZ), in particular, information on the total  value of trade as well as the percentage of EPZ
production.  In response, the representative of Chinese Taipei said that the EPZ were established
pursuant to the Statute for the Establishment and Management of Export Processing Zones.  Investors
in the EPZ were entitled to the following incentives:
(a) exemption from the following duties and taxes:
(i) customs duties on imported machinery and equipment, raw materials, fuels,
commodities, components, and samples;
(ii) commodity tax on the exported or imported products, machinery and equipment, raw
materials, components, and samples;  and
(iii) deed tax on the newly built standard buildings acquired from the EPZ Administration
or the buildings legally acquired from the EPZ Administration;
(b) no business tax on exported goods and their related labour services as well as on the goods
purchased by the export enterprises;
(c) due to the exemption from taxes or duties, there was an exemption from the requirement to
keep certain documents and to pay tax deposits etc.  In addition, transfers of property to
different enterprises within an EPZ were not subject to the business tax.
81. The representative of Chinese Taipei further added that the EPZ were managed by the Export
Processing Zones Administration, Ministry of Economic Affairs.  Various products and services were
produced in the EPZ.  The representative of Chinese Taipei noted that there were three EPZ inChinese Taipei.  In 1994, 96 per cent of production in the EPZ was exported.  Under Article 5 of the
Statute for the Establishment and Management of E xport Processing Zones, most of the production of
the EPZ was required to be exported.  A certain percentage of the production could be sold on the
local market, provided that it was accorded the same treatment as imported products, and was subject
to customs duties.  The production from the EPZ sold in the domestic market was subject to customs
duty on the final product, not on inputs into the product.  If goods produced in the EPZ for local sale
were less than 50 per cent of the annual production, the EPZ Administration would automaticallyapprove the domestic sale of the goods.  If the goods produced for local sale were in excess of
50 per cent of annual production, the approval by the EPZ Administration was discretionary.
However, no such application for approval had ever been refused.  The representative of Chinese
Taipei added that there was no local content requirement for enterprises wishing to operate in the
EPZ.  In the past the subsidiaries or branches of enterprises could not be located in the EPZ.  InApril 1997 Chinese Taipei had amended the Implementing Regulation in order to permit subsidiariesWT/ACC/SPEC/TPKM/2
Page 26
or branches of enterprises to be located in the EPZ.  EPZ products which entered the domestic market
accounted for only 3-4 per cent of the value of EPZ total production in 1994 and 6-7 per cent in 1997.
In April 1997 Chinese Taipei had lifted the 50 per cent limit on local sales through amendments to the
Statute.  Domestic sales had exceeded 50 per cent of the production of crystal oscillators, electronics
testers, voice synthesizers, capacitor parts, sensors, etc.  Around 41.6 per cent of EPZ production had
benefitted from the tax exemption granted by the Statute for Upgrading Industries.
82. Some members of the Working Party noted that some of the arrangements providing for fiscal
incentives for businesses located or operating in the EPZ appeared to be in conflict with the
provisions of the SCM Agreement and the Agreement on TRIMS.  They requested further information
on the fiscal incentives offered.  In response, the representative of Chinese Taipei indicated that
investments in the Export Processing Zones were exempted from customs duties and the commodity
tax on imported machinery, raw materials, fuels, commodities, components and samples, and the deed
tax on the new buildings purchased from or otherwise acquired from the EPZ Administration.  Nobusiness tax was charged on the exported goods and their related services, nor was the business tax
levied on purchases by those enterprises.  These enterprises were also exempted from applying for tax
exemption, guarantee, relevant bookkeeping, and paying provisional tax.  He further stated that in
Chinese Taipei's view those practices complied with the requirements of the WTO Agreement and did
not constitute export subsidies.  Their trade effect, if any, was minimal:  0.185 per cent of the totalexports.
83. Some members of the Working Party noted that import duty and tax exemptions on goods
imported into the EPZ were provided for goods not directly incorporated into the exported product.
Direct taxes on the profits from the exports of those enterprises were also exempted.  In their view
these practices appeared to be in conflict with the SCM Agreement.  Those subsidies could also becountervailable. The representative of Chinese Taipei replied that the purpose of the EPZ was to
create duty-free zones for the production of exports, in order to create an environment where exports
manufactured from imported inputs need not obtain a refund of duties.  This was consistent with the
obligations contained in the WTO Agreement.  The limitation on duty refunds/exemptions on inputs
directly incorporated into exported products was applied by many developed economies, for thepurpose of administrative expediency, rather than being based on the theory that refunds/exemptions
of duties on imported inputs not directly incorporated into the exported products would unduly
increase the exporters' competitiveness and should not be allowed.  Because the products were
primarily for export, it was therefore not necessary to limit exemptions or refunds to the extent of
products directly incorporated into the products exported from the EPZ.  In fact, in Annex II of thesame Agreement, inputs consumed in the production process, for which drawback of import charges
was allowed, are defined to cover energy, fuel and oil in the production process and catalysts which
are consumed in the course of their use to obtain the exported product as well as the inputs physically
incorporated.  Because the exports from the EPZ did not receive "undue" amounts of refund or
exemption the relevant practices did not constitute a subsidy.  The representative of Chinese Taipei
added that the SCM Agreement Annex I "Illustrative List of Export Subsidies" did not contain the
requirement that the input be physically incorporated into the exported product.  He stated that theexemption from corporate income tax for EPZ ente rprises had been abolished together with the
Statute for Encouragement of Investment at the end of 1990.  The current tax exemption granted to
EPZ enterprises also applied to enterprises located outside the EPZ, whether or not they exported their
products, provided that they met the requirements set forth in the Statute for Upgrading Industries.
Consequently, the practice was neither a specific subsidy nor conditional upon export performance.
84. Some members of the Working Party reiterat ed that the incentives provided in the EPZ
appeared to be incompatible with the SCM Agreem ent.  They expected that Chinese Taipei would
ensure that sales into the market of Chinese Taipei from the EPZ would be subject to normal taxes,
tariffs, and other border measures.  In addition, these members considered that Chinese Taipei should
satisfy the Working Party that the regime of the EPZ was consistent with all the requirements of theWTO concerning the treatment of goods, services and intellectual property.  The representative ofWT/ACC/SPEC/TPKM/2
Page 27
Chinese Taipei replied that Chinese Taipei had decided to levy duties on EPZ products entering the
domestic market on the basis of ex-factory prices minus value added resulting from manufacturing or
processing activities in the EPZ, and would undertake to do so in the future.  The formula to be used
in calculating the value added by the EPZ would take into account the relevant practices of other
economies.  Chinese Taipei hoped that the changes to the system would alleviate concerns that the
current system operated as a disincentive for EPZ products entering the domestic market.  Heconsidered that all aspects of the EPZ were consistent with the WTO, particularly when the
April 1997 amendments to the Statute Governing the Administration of Export Processing Zones
takes effect after accession.  In connection with the exemption of import duties for imported
machinery used by EPZ he noted that this exemption was not conditional upon export performance
and the trade effects of this practice, in his view, were far below the threshold of 5 per cent for
actionable subsidies set out in that Agreement.
85. The representative of Chinese Taipei confirmed that, from the date of its accession, all  taxes,
charges, and measures affecting imports, including import restrictions and customs and tariff charges,
applied to imports from abroad into other parts of Chinese Taipei would be applied to EPZ products
entering the domestic market.  These taxes, charges, and measures would be applied on the basis of
ex-factory prices [minus value added resulting from manufacturing or processing activities in the
EPZs].  He further added that preferential arrangements provided to enterprises located within theEPZs would be extended [to all enterprises whether domestic or foreign and maintained in an WTO
consistent manner, in particular with regard to the principles of non-discrimination and national
treatment.] [in a WTO consistent manner].  The Working Party took note of these commitments.
Internal Policies Affecting Trade in Goods
Industrial Policies Including Subsidies
86. In response to questions about industrial subsidies maintained by Chinese Taipei, the
representative of  Chinese Taipei explained that the Statute for Upgrading Industries provided
financial assistance to industry, tax exemptions or accelerated depreciation, assistance to "Important
Technology-Based Enterprises Engaged in Manufacturing Business", and "Important Invested
Enterprises Engaged in Manufacturing Business".  He explained that  the benefits specified inArticle 5 of the Statute (conferring accelerated depreciation of assets) applied to all enterprises,
organized in the form of a company pursuant to the Company Law of Chinese Taipei, including
companies incorporated by foreign investors or entities.  He added that all industrial sectors could be
entitled to receive accelerated depreciation for investment in structural adjustment and energy saving
devices deemed eligible pursuant to sub-paragraph 2 of Article 5 (by order of the Executive Yuan).So far there had been no applications filed under sub-paragraph 2 of Article 5.  The representative of
Chinese Taipei said that in the fiscal 1996 the total value of the tax exemptions or tax reductions
granted, pursuant to the Statute, was approxim ately US$0.44 billion.  Details of the Statute for
Establishment and Administration of a Science-Based Industrial Park would be provided in the
notifications required by the SCM Agreement.
87. Some members of the Working Party noted that Article 7 of the Statute for Upgrading
Industries gave tax credits to industries in particular regions filling criteria to be determined by theExecutive Yuan, and requested more information on those criteria.  The representative of Chinese
Taipei noted that the criteria set by the Executive Yuan were whether a particular region was poor or
the economic development was stagnated relative to population, levels of employment, transportation
capacity, tax revenues, the average regular income per family, and the availability of public facilities.
For this purpose, each year the counties were ranked in a published list which determined levels ofregional assistance.  He confirmed that no industrial commodities currently benefitted from domestic
income and price supports, nor were domestic subsidies granted which might affect trade.WT/ACC/SPEC/TPKM/2
Page 28
88. Some members of the Working Party expressed concern about the transparency of the criteria
used to determine which enterprises would receive assistance under the Statute for Upgrading
Industries and requested information on the scope of application for tax benefits, whether they applied
to domestic and foreign investors, to all industrial sectors and to specific areas, as well as a
breakdown of expenditures.  In response, the representative of Chinese Taipei said that under the tax
incentive programme, any company established in the form of a company for establishing a renownedbrand and image exceeding NT$3 million expenditure in a tax year was entitled to a tax credit of
5 per cent of the tax payable;  if the expenditure exceeded NT$5 million and the company was
authorized by the Ministry of Economic Affairs to use the symbol of "excellence", the tax credit was
10 per cent of the tax payable.  Other tax benefits were allocated to all industrial sectors or to
particular industrial sectors.  In a recent period the incentives under the Statute for Upgrading
Industries related to the Business Income tax had included accelerated depreciation, corporate
investment tax credit, institutional shareholders tax credit, foreign investment loss reserves,exemptions from the mandatory distribution of profits, deferral of income tax for stock dividends, etc;
benefits had also concerned the Individuals's Investment Income Tax, Deferral of Land Value
Increment Tax, Stamp Tax, Deeds Tax, etc.
89. Some members of the Working Party enquired whether all of the criteria listed in Article 21
of the Statute for Upgrading Industries were required to be established before a business could beeligible for assistance from the Development Fund.  Those members also requested examples of how
the Executive Yuan determined when assistance should be paid for "other purposes approved by the
Executive Yuan" as prescribed by sub-paragraph 6 of that Article.  The representative of Chinese
Taipei said that only one criteria needed to be satisfied, and that sub-paragraph 6 only applied when
none of the other criteria applied.  He also explained that the value of the revolving Fund wasapproximately NT$66 billion at the end of July 1997.
90. Noting that the Statute for the Development of Medium and Small Businesses and the Statute
for Upgrading Industries provided for industrial incentives, some members of the Working Party
requested an estimate of their value in a recent period.  In response to another question, the
representative of Chinese Taipei noted that Chinese Taipei had established the Fund  for Developmentof Small and Medium Businesses in 1992, with a total value of NT$12 billion.
91. Some members of the Working Party also noted that among the measures to support new and
promising industries were tax concessions and that industrial cooperation programmes could be
applied in certain areas.  Reference was also made to the existence of two separate steel prices and the
need to ensure that the lower domestic price was not used to indirectly subsidize the export of steel.
With regard to steel, the representative of Chinese Taipei said that besides direct export price at the
world market level, Chinese Steel Corporation (CSC) maintained a two-tier pricing in the domestic
market.  The higher domestic price offered to customers whose products were sold and consumed in
the domestic market was based on the landed, duty-paid price of imported steel products.  The lower
one (i.e. indirect export price), applied to customers who manufactured steel into final products for
exports, was based on the landed, duty-free price of imported steel products.  The indirect export price
was aimed to ensure that CSC's pricing remained competitive with that of imported steel.  The
two-tier pricing system had been abolished in 1994 and China Steel Corporation had been privatized
in April of the same year.  Prices of China Steel Corporation's products since then had been
determined according to the market condition.  There had been no State intervention in the
determination of prices whatsoever   Since then the domestic steel market had been free and
competitive.
92. Some members of the Working Party asked how Chinese Taipei proposed to stimulate
development of desirable industries, particularly high-technology and high value-added industries.
The representative of Chinese Taipei said that in addition to the Statute for Upgrading Industries,
Chinese Taipei had eased the requirements rela ting to the acquisition of land used for factory
construction and had taken steps to satisfy long term demand for industrial sites.  Chinese Taipei hadWT/ACC/SPEC/TPKM/2
Page 29
also provided medium and long-ter m training programmes to highly qualified personnel in order to
upgrade skill levels, and had developed the necessary infrastructure pursuant to the Development
Plan.
93. In response to additional questions concerning the specific measures taken by Chinese Taipei
to support new and promising industries, the representative of Chinese Taipei indicated that Chinese
Taipei supported research and technological development in the areas and technologies identified aspromising and major focuses of attention.  The Mi nistry of Economic Affairs (MOEA) gave priority
to funding scientific research and development.  Such investment had increased yearly.  The MOEA
also contracted with non-profit seeking research institutes to develop "Generic Technology" required
by promising industries.  Promising industries could also enjoy tax incentives, pursuant to Article 8 of
the Statute for Upgrading Industries.  Promising industries were "Important Technology-Based
Enterprises".  Pursuant to the Statute, the scope of the words "Important Technology-Based
Enterprises" was defined by order of the Executive Yu an.  In order to support industries deemed to be
"Important Technology-Based Enterprises", the following steps were taken.  First, the relevant
authority of Chinese Taipei determined the generi c technologies to be developed for the relevant
industries.  Second, the Executive Yuan and the Legislative Yuan would review and approve the
required budget.  Third, the MOEA would enter contracts with non-profit research institutions to
execute the required research.  Fourth, private comp anies might be invited to participate in the joint
development of the required technologies, or alternatively, following development of the technology,
might be offered the technology at a market price.  Fifth, the non-profit research institutions might
sub-contract specific research tasks to private companies.  Sixth, if the private companies had the
capacity to develop the required technology by themselves, the authorities could assist them in
obtaining the necessary finance, or could provide other assistance.  The ten promising industriesspecified in the six year Development Plan were as follows:  telecommunications industry,
information industry, consumer electronics industry, semi-conductors industry, precision machinery
and automation industry, aerospace industry, advanced materials industry, specialty chemicals and
pharmaceuticals industry, medical and health care industry and pollution control industry.  The eight
key technologies to support the development of the above-mentioned new and promising industries
are:  optoelectronics, information software, industrial automation, applied materials technology,
advanced sensing technology, bio-technology,  resource development and energy conservation.
94. In response to questions from members of the Working Party concerning the incentives
allocated to the use of advanced technology and their consistency with WTO obligations, the
representative of Chinese Taipei said that in addi tion to the funding of research and development by
the MOEA, funds were also allocated for tec hnology import or "Inward Technology Transfer".
Subsidies applied to the purchase of automation equipment and pollution prevention equipment.  The
subsidy took the form of a tax credit to purchasers.  Depending on whether the equipment was
imported or of domestic manufacture, different tax credits applied.
[95. The representative of Chinese Taipei undertook to notify the above-mentioned practice to the
WTO Committee on Subsidies and Countervailing Measures, and to phase it out as required by the
WTO Agreement on Subsidies and Countervailing Measures.][The representative of Chinese Taipeistated that Chinese Taipei would eliminate all subsidies prohibited by the Agreement on Subsidies
and Countervailing Measures from the date of accession, without recourse to any transitional period.]
The Working Party took note of this commitment.
96. The representative of Chinese Taipei said that the Export/Import Bank (Ex-Imbank) was a
government owned bank which provided financing and insurance schemes.  It provided secured loansto export firms if the terms of sale provided payment terms of 181-360 days, in order to provide
working capital prior to payment.  Interest accrued on such loans at the rate of 6.375 per cent for NT$
loans, and 0.75 per cent above LIBOR for US$ loans.  The bank also provided deferred payment
"export credits" with a duration of more than one year to exporters or importers in relation to
shipments of machinery and equipment, and products including turnkey capital goods.  The amount ofWT/ACC/SPEC/TPKM/2
Page 30
the down payment was not less than 15 per cent of f.o.b. contract value.  Interest was charged at the
rate of 6.25 - 6.75 per cent for NT$ loans, and 6.5 - 7.75 per cent for US$ loans.  The Bank also
provided a fixed rate re-lending facility to overseas banks to enable the purchase of manufactured
goods of Chinese Taipei origin, at the rate of 5.5 per cent, and 5.75 per cent depending on maturity
date.  He added that the Ex-Imbank provided an ov erseas investment financing system which financed
domestic firms seeking overseas investments.  That system did not provide a more favourable interestrate than commercial loans from other banks.  Financing by the Ex-Imbank was not linked to or
conditional upon export performance.  The representative of Chinese Taipei reiterated that no export
subsidies were paid to export enterprises.
97. Some members of the Working Party said that they considered that many of the industrial
promotion plans currently being implemented by Chinese Taipei acted as disguised subsidies.  These
members requested that Chinese Taipei review these measures in light of the WTO Agreement on
Subsidies and Countervailing Measures.  The representative of Chinese Taipei recalled that ChineseTaipei had, as an observer, participated in the meetings of the GATT 1947 Committee on Subsidies
and Countervailing Measures.  He said that Chinese Taipei undertook to notify all relevant laws and
regulations in order to facilitate the Committee's discussion of the industrial promotion plans.
Moreover, Chinese Taipei undertook to notify its subsidy practices according to Articles 25 and 28 of
the WTO Agreement on Subsidies and Countervailing Measures.
98. Some members of the Working Party referred in detail to the aeronautics and space industry.
These members requested information concerning the Aeronautics and Space Industries Development
Programme, asked whether private or government owned enterprises had received assistance from the
Ministry of Defence and enquired about the use of industrial cooperation programmes in this sector.
In this connection, a member of the Working Party noted that Chinese Taipei had indicated that theMinistry of Defence would use its operating f unds, technical personnel, technology and equipment
facilities to assist government-owned and private enterprises in the development of research and the
development and the manufacturing of aeronautics and space products and their associated equipment.
These members indicated that there could be no exemption, transitional or otherwise from subsidies
disciplines for any sector or product such as the aeronautics and space industry.  The representative ofChinese Taipei said that the Aeronautics and Space Development Centre of the Chung Shan Science
Research Institute, Ministry of Defense had entered into an agreement with the Taiwan Aerospace
Corporation and the Industrial Technology Research Institute for technology transfer.  If a
government entity purchased imported aeronautics and space products, the Committee for Aviation
and Space Industry Development could enter into a technology transfer agreement, known as an"Industrial Co-operation Agreement".  If the foreign supplier entered such an agreement, the supplier
was required to provide a credit line in an amount equal to a percentage of the purchase price as a
commitment to technology transfer and the purchase of domestic aeronautics and space products.
Private companies that purchased foreign aeronautics and space products were encouraged to enter
into such "Industrial Co-operation Agreements", and if they did so were recommended to commercial
banks by the government of Chinese Taipei.  If they did not enter such agreements, no such
recommendation was made, and decisions by the banks whether to accord loans to those companieswere taken by the banks.
99. Some members of the Working Party stated th at in Chinese Taipei there were currently in
place a number of official industrial assistance prog rams that could be considered prohibited industrial
subsidies under the WTO Agreement on Subsidies and Countervailing Measures (the SCM
Agreement) were currently in place.  These practices  included all export subsidies that were of thetype contained in the illustrative list set out in Annex I to the SCM Agreement (including preferential
tax rates and other subsidies contingent upon export performance) and other subsidies contingent
upon the use of domestic over imported goods, as provided for in Article 3 of the SCM Agreement.WT/ACC/SPEC/TPKM/2
Page 31
[100. The representative of Chinese Taipei stated that, at the time of accession, Chinese Taipei
would provide a complete notification of all of its subsidies which were specific to an enterprise,industry or group thereof (within the meaning of  Articles 1 and 2 of the SCM Agreement), in
conformity with the requirements of Article 25 of the SCM Agreement.  This notification would
include, but not necessarily be limited to, the subsidies notified under Article 28.]  [The representative
of Chinese Taipei stated that, upon  accession,  Chinese Taipei would provide a complete notificationof all of its subsidies which were specific to an enterprise, industry or group thereof (within the
meaning of Articles 1 and 2 of the SCM Agreement) in conformity with Article 25 of the SCM
Agreement.  This notification would include, but not be limited to, the subsidies notified under
Article 28 as well as the Development Fund and Article 8 tax benefits of the Statute for Upgrading
Industries; tax and interest benefits under part IV, section 9 of the Aeronautics and Space Industries
Development Program; and benefits under the Statute for the Establishment and Administration of a
Science-Based Industrial Park.]  [The Working Party took note of these commitments.]
[101. The representative of Chinese Taipei stated that, as provided for in Article 28, any such
measure falling within the scope of Article 3 of the SCM Agreement granted or maintained within its
territory would be notified by Chinese Taipei.  Such notification would provide a three year period for
the elimination or modification, as appropriate, of these subsidies, during which time they would not
be subject to challenge as prohibited subsidies under Part II of the SCM Agreement, but would remain
actionable under Part III of the SCM Agreemen t.  The Working Party took note of these
commitments.]
[102. The representative of Chinese Taipei confirmed that Chinese Taipei would implement the
provisions of the SCM Agreement from the date of accession on basis of the terms set out in the twopreceding paragraphs, and would take immediate steps to bring any inconsistent laws or practices into
conformity with the SCM Agreement, in particular its obligations under Article 3 of that Agreement.The Working Party took note of these commitments.]
Technical Barriers to Trade
103. In response to requests for information, with respect to the publication of the laws,
regulations, administrative orders and technical rules and standards, invitation of comments by thepublic, inquiry points, consultation agencies and other agencies required under the Agreement, the
representative of Chinese Taipei said that, currently, only the Regulation for the Establishment of
National Standards promulgated in September 1996 contained a provision  that set forth the length of
time for soliciting comments.  There were nine laws, regulations and administrative orders relevant tothe implementation of the Agreement on TBT in Chinese Taipei.  The respective notifications should
be submitted to the WTO in due course.
104. The representative of Chinese Taipei added that Chinese Taipei had formed a national
committee to deal with and to coordinate all matters  relating to the Agreement. To ensure that the
Agreement was applied by all domestic relevant bodies, Chinese Taipei had promulgated the "Points
of Operation Concerning Enquiries under the Wo rld Trade Organization's Agreement on Technical
Barriers to Trade".  With respect to the publication of the technical regulations, standards and
procedures for assessment of conformity, and to the invitation of comments by the public, details
concerning the enquiry point and consultation agency that are required to be involved under theAgreement are as follows:
(i) notices of proposed or adopted technical regulations, standards and procedures for assessment
of conformity shall be published in the monthly Official Gazette of Standards, distributed by
the National Bureau of Standards under the Ministry of Economic Affairs;
(ii) currently, only the Regulation for the Establishment of National Standards promulgated in
September 1996 contained a provision  that set forth the length of time for solicitingcomments.  Apart from this there were no explicit rules, either at the central level or at the
local level, that set forth the length of time required for soliciting comments. In principle, allgovernment bodies shall provide a reasonable time period (generally 60 days) for presentation
comments.WT/ACC/SPEC/TPKM/2
Page 32
105. In response to questions concerning the registration and certification requirements for
imported pharmaceuticals, cosmetics and medical devices, the representative of Chinese Taipei said
that the requirements and approval standards for the importation of pharmaceuticals, cosmetics and
medical devices did not exceed the requirements applied in some advanced WTO members, and were
the same for imported and domestic goods.  The sanitary requirements for food stuffs were the same
for imported and domestic goods.  Domestic goods were also subject to inspection in order tomaintain effective quarantine in certain instances.  Goods found to be contaminated with toxigenic
vibrio cholerae  were destroyed.  The regulation on pesticide residue tolerances had been developed on
a "positive listing principle".  The same tests applied equally to domestic and imported goods.  The
CODEX standards set by FAO/WHO were one of the references used in determining the pesticide
maximum residue limits.  There were no procedures for the recognition of foreign quarantine or other
standards in Chinese Taipei.  Chinese Taipei was endeavouring to modify standards so that they
complied with international standards, except where national security, animal and plant healthconsiderations, or differences in environment, climate, geography or important technology
considerations necessitated deviations from international standards.
106. The representative of Chinese Taipei stated that recognition of foreign quarantine or other
standards would be dealt with in a manner consistent with Article 2.7 of the Agreement on Technical
Barriers to Trade.  The Working Party took note of this commitment.
107. Some members of the Working Party reaffirmed that Chinese Taipei would need to reform its
standards regime to bring it into conformity with the WTO Agreement on Technical Barriers to Trade,
particularly in the area of notification procedures.  The representative of Chinese Taipei replied that
Chinese Taipei was reviewing its standards with a vi ew to bringing them into conformity with the
TBT Agreement and had decided to incorporate notification procedures into the draft amendments toits relevant laws.
108. The representative of Chinese Taipei also provided examples of particular differences
between its standards and ISO and IEC standards, such as domestic electrical standards, Chinese
Taipei television broadcasting systems, the design ation of industrial products, and the requirement of
"weight" certificates for all imports of automobile s.  He said that Chinese Taipei was prepared to
comply with the Agreement on TBT but might need  a transitional period for the rectification of laws
or practices which did not comply with the Agreement.  In response, some members of the Working
Party stated that they considered that a transitional period of general application was not appropriate.
109. Following examination of Chinese Taipei's technical barriers to trade regime, some members
of the Working Party stated that in addition to  taking a commitment to apply the Agreement on
Technical Barriers to Trade from the date of accession, without recourse to a transitional period,
Chinese Taipei should commit itself to eliminat e the specific  problems members of the Working
Party had identified and which are listed below.  In this regard,  some members of the Working Party
stated that, as a condition of its accession,  Chinese Taipei would be required to eliminate the
mandatory conformity assessment procedures and standards for imports that were not applied to
similar domestic goods and were not based on relevant internationally recognized criteria.  Chinese
Taipei would be required to accept equivalent third country standards and regulations in particular, inthe case of automobiles and heavy-duty vehicles, concerning the safety requirements (lightening,
specification of brakes, horns), emission standard s and test procedures, fuel consumption, on board
diagnostic systems, evaporative requirements, vehicle noise).  Whenever new standards were imposed
by Chinese Taipei, enough time would have to be made available for manufacturers to adapt their
products.  Chinese Taipei would be required to abandon carry-over testing for vehicles whose modeltypes are unchanged from one year to the next and which were identical in emission-related aspects
with the previous model-year vehicles as well as additional quality control testing when
manufacturers in-house test data are made available Ch inese Taipei would be required to provide for a
simplified homologation for vehicles supplied in small volumes and to extend to CKD vehicles the
same acceptance of self certification for emissions as applied to BU imports.  The representative ofWT/ACC/SPEC/TPKM/2
Page 33
Chinese Taipei said that because of the high density of cars, Chinese Taipei has serious concerns over
pollution resulting from emissions but would nevertheless accept cars meeting the standards adopted
by the United States.  Furthermore, Chinese Taipei's  current practice was to accept the results of tests
carried out by the original car manufacturers according to the emission standards set by Chinese
Taipei.  New emission and noise standards were implemented with prior notice of three to four years.
110. Some members of the Working Party also stated that Chinese Taipei should also ensure
compliance with requirements for publication of mandatory conformity assessment procedures and
standards and ensure the establishment of a recommended comment period of 60 days prior to
finalization of such measures.  Chinese Taipei should also eliminate from the date of its accession its
requirements for performance testing of imported livestock.  Chinese Taipei should also replace the
weight certificate system for automobiles with an automobile safety certification system of general
application, which would take effect  prior to Chinese Taipei's accession.  It was also noted that the
current requirements for performance testing of imports of livestock were inconsistent with Article 2,paragraph 2.2 of the Agreement on Technical Barriers to Trade.  These members requested that all
such inconsistencies with the Agreement on T echnical Barriers to Trade be eliminated upon
accession.  They also stated that Chinese Taipei should submit its statement on implementation and
administration of the Agreement on Technical Ba rriers to Trade to the Committee on Technical
Barriers to Trade at the time of accession.
111. Some members further stated that Chinese Taipei should confirm that all relevant laws
relating to its technical regulations, standards, conformity assessment procedures, and labelling,
including product coverage, would be administered by Chinese Taipei in conformity with relevant
international standards and guidelines.  Chinese Taipei should also undertake that the controls applied
in connection with technical regulations, standards, conformity assessment procedures, and labellingwould be applied in no less favourable a manner for imported products than for like domestic
products.  Such requirements should be administered in a manner which did not unnecessarily impede
trade or create barriers to imported products, and should not be applied to imported products in an
arbitrary manner, in a way which discriminated between supplier countries where the same conditions
prevail, or as a disguised restriction on international trade.
112. The representative of Chinese Taipei stated that Chinese Taipei would  fully apply the
provisions of the Agreement on Technical Barriers to Trade from the date of its accession to the
WTO, without recourse to any transitional period.  The Working Party took note of this commitment.
Sanitary and Phytosanitary Measures
113. Some members of the Working Party asked whether the regulations regarding sanitary and
phytosanitary measures including quarantine and inspection provisions were published and readily
available to importers and exporters and whether these measures were based on sound scientific
evidence.  They also asked whether Chinese Taipei would accept the sanitary and phytosanitary
measures of other economies which offered equivalent levels of health protection.  In this connection,
information was requested on certain provisions of the Commodity Inspection Law and its
Implementation Rules concerning the inspection of imports, bilateral arrangements, inspection fees,
the inspection quantities and sample quantities, the sanitary requirements obtaining products such ascoconut and palm oil, milk, fresh fruits, poultry, bovine meat, pork.  In response, the representative of
Chinese Taipei said that the most commonly used SPS measures in the agricultural sector were set out
in the Commodities Inspection Law, the Statute for Prevention and Control of Infectious Animal
Diseases, the Plant Protection Act, the Quarantine Restrictions on the Importation of Animal and
Animal Products, the Quarantine Restrictions on th e Importation of Plants and Plant Products, the
Law Governing Food Sanitation, the Regulations Governing the Quarantine at International Port, and
the Quarantine Regulation for Cholera on Imported Fishery Products.WT/ACC/SPEC/TPKM/2
Page 34
114. In response to questions whether Chinese Taipei was prepared to apply phytosanitary
standards in a transparent manner based on scientific evidence, the representative of Chinese Taipei
stated that in developing its standards Chinese Taipei  referred to relevant international biological and
entomological publications.  It also evaluated the probability of harm resulting from the introduction
of the pests or diseases.  In addition, comments  on the proposed measures were often sought from
relevant organisations.  In order to ensure transparency in the future, when a regulation waspromulgated by the authority, it would be notified to the relevant associations and trading partners.
The representative of Chinese Taipei also provid ed the Working Party with detailed information on
various quarantine rules and import bans concerning the following products:  rice and rice products,
sugar, wheat flour, meat and offal, fish, dairy products, and fruits.  He stated that even though all
safety inspection requirements and standards applied equally to domestic goods, some phytosanitary
requirements only applied to imported goods, when only imported goods risked contamination by
particular diseases and pests.
115. The representative of Chinese Taipei added that the sanitary requirements for food were set
by the Law Governing Food Sanitation.  The standards set out in that law were developed with
reference to the CODEX standards set by the FAO/WHO.  In setting sanitary standards, Chinese
Taipei used Codex standards with modifications as necessary, to a allow higher level of protection, if
there was a scientific justification, or otherwise as set out in the relevant provisions of paragraphs 1through 8 of Article 5 of the Agreement on SPS.  He further added that imported products were
subject to mandatory inspection by the Bureau of Commodity Inspection and Quarantine (BCIQ).
The BCIQ's statutory duties were to protect product safety,  protect consumers' interests and prevent
the dissemination of plant and animal diseases and insect pests.  The BCIQ applied scientific methods
in its inspection and quarantine practices.  Quarantine  regulations were established in accordancewith disease and insect pest variations, and international trends. The BCIQ had entered into
arrangements to recognise the standards of the certification, inspection and veterinary authorities of
certain of its trading partners.  The determination and publication of infectious animal diseases had
been transferred from the BCIQ to the Council of Agriculture.  Chinese Taipei had determined that
the following were among the infectious animal diseases:  rinderpest;  foot-and-mouth disease;bovine ephemeral fever (bovine influenza);  contagious bovine pleuropneumonia;  tuberculosis
(bovine tuberculosis);  brucellosis;  blackleg (gas gangrene);  anthrax;  equine infectious anaemia;
glanders;  epizootic lymphangitis;  trypanosomiasis;  sheep pox and goat pox;  scabies of sheep;
rabies;  viral haemorrhagic septicemia;  newcastle disease;  fowl cholera;  pullorum disease;  bovine
malignant catarrh;  blue tongue;  pseudorabies (aujeszky's disease);  african swine fever;  swinevesicular disease;  trichinellosis;  bovine mastitis caused by streptococcus agalactiae;  avain infectious
laryngotracheitis;  vesicular stomatitis;  vesicular exanthemas;  duck viral enteritis;  bovine
spongiform encephalopathy (BSE);  porcine reproductive and respiratory syndrome (PRRS).  The
plant pests or diseases referred to in the Enforcement Rules concerned harmful organisms which are
fungi, slime mould, bacteria, viroids, phytoplasma, parasitic plants, nematodes, insects, mites,
molluscs, and invertebrates or vertebrates directly or indirectly causing harmful effects to plants.
116. The representative of Chinese Taipei added that the importation of fresh fruit was prohibited
from areas where infestations of  mango seed weevil, Chinese citrus fly, peach fruit fly, cucurbit fly or
guava fruit fly had occurred.  Fresh fruit could only be imported from areas which had been infested
with Mediterranean fruit fly if the BCIQ gave approval following quarantine treatment at the place of
origin.  Fresh fruit could only be imported from areas subject to codling moth, apple maggot, plum
curulio, peach twig borer, Mexican fruit fly, West  India fruit fly, South American fruit fly or
Queensland fruit fly and lethal yellowing, kaincope disease, cadang-cadang disease, bronze leaf wilt,
root (wilt) disease, Guam coconut disease, leaf scorch disease of coconuts, and arrowhead scale of
Citrus and red and black citrus leaf mixer, if imported with a certificate stating that the fruit had been
thoroughly inspected and found free of infestation.  The representative of Chinese Taipei added that
there were 449 standards applying to agricultural and processed agricultural products administered bythe Bureau of Standards.WT/ACC/SPEC/TPKM/2
Page 35
117. In response to the information presented by the representative of Chinese Taipei on the
sanitary and phytosanitary regime, some members of the Working Party requested that Chinese Taipei
enter a commitment that in implem enting the terms of the Agreement on Sanitary and Phytosanitary
Measures as follows:  Chinese Taipei would enforce its sanitary or phytosanitary measures based on
accepted scientific principles and an assessment of the risks involved;  follow the notification
procedures of the SPS Agreement;  not maintain a measure unless based on sufficient scientificevidence;  ensure that existing international st andards were applied when they exist;  accept the
sanitary and phytosanitary measures of other WTO Members as equivalent, even if these measures
differed from Chinese Taipei's measures or from those used by other countries trading in the same
product, upon demonstration that such measures achieved the appropriate level of sanitary or
phytosanitary protection; and,  ensure that sanitary and phytosanitary measures were adapted to the
sanitary or phytosanitary characteristics of the area, including areas within a country or other political
boundary, from which the product originated and to which the product was destined.  Some membersalso requested that Chinese Taipei recognize exports as being from pest or disease free areas and areas
of low pest or disease prevalence.
118. Some members of the Working Party stated that new quarantine regulations applying to
air-freighted fresh fruit, whereby inspectors were being sent to the exporting countries to inspect the
fruit prior to shipment imposed excessive burdens on importers and acted as a barrier to trade.  Therepresentative of Chinese Taipei replied that this measure was typically applied by developed
economies.  Chinese Taipei had held intensive discussions with the trading partners that had indicated
they had problems with Chinese Taipei's SPS provisions.  Some of the problems had been resolved,
and technical experts had discussed existing problems.
119. Some members of the Working Party requested that Chinese Taipei eliminate the following
practices from the date of its accession to the WTO without recourse to any transitional period:
quarantine controls applied to imported agricultural commodities without adequate notification,
consultation, or a clear scientific basis for their application;  certificates nominally granted for health
sanitation or quarantine reasons which were in fact never granted, and therefore acted as de facto  bans
on importation;  and the arbitrary denial of certification with no criteria being made available totraders to indicate under what conditions certificates can be obtained, and no explanation being given
for non-approval of certification.
120. The representative of Chinese Taipei stated that the ban on imports of live swine due to the
infestation of Porcine Reproductive and Respiratory Syndrome (PRRS) had been removed, and that
live swine which met the quarantine requirements would be allowed entry into Chinese Taipei fromthe date of accession.  The Working Party took note of this commitment.
121. The representative of Chinese Taipei stated that Chinese Taipei would fully apply the
provisions of the Agreement on Sanitary and Phytosanitary Measures from the date of its accession,
without recourse to any transitional period.
[The representative of Chinese Taipei confir med that in implementing the terms of the SPS
Agreement, Chinese Taipei would:
(a) only enforce SPS measures which were based on accepted scientific principles and an
assessment of the risks involved, and after adequate notification of the measure and the
criteria for its application;
(b) not maintain a measure without sufficient scientific evidence;
(c) apply international standards where they exist,  except as otherwise provided for in the SPS
Agreement; andWT/ACC/SPEC/TPKM/2
Page 36
(d) accept the SPS measures of other WTO Members as equivalent, even if these measures differ
from Chinese Taipei's own or from those used by other countries trading in the same product,
upon demonstration that such measures achieve the appropriate level of sanitary or
Phytosanitary protection.
(e) ensure that SPS measures are adapted to the sanitary or Phytosanitary characteristics of the
area, including areas within a country or other political boundary, from which the productoriginated and to which the product  was destined.  Chinese Taipei shall recognize pest- or
disease-free areas and areas of low pest or disease prevalence.]
He also stated that Chinese Taipei would, by the date  of entry into force of its Protocol,  notify to the
WTO all relevant laws, decrees, regulations, and administrative rulings relating to its sanitary and
phytosanitary measures, including product coverage and relevant international standards, guidelines
and recommendations.  The Working Party took note of these commitments.]
Trade Related Investment Measures
122. Some members of the Working Party requested information on the investment regime of
Chinese Taipei, in particular the local content re quirements prevailing in the automotive sector.  Some
members of the Working Party said that Chinese Taipei needed to notify its TRIMs such as the local
content requirements for motor vehicles and the mixing requirements in force for coal and cement
production, and specify a schedule for their elimination.  In response the representative of ChineseTaipei said that Chinese Taipei only maintained  local content requirements on automobiles and
motorcycles.  In the case of small automobiles, at least 50 per cent of the motor vehicle plus at least
four items from a list of fifteen designated major items were required to be of local manufacture.  For
large automobiles (3.5 to 10 tons), at least 37 per cent of the motor vehicle plus at least three items
from a list of fifteen designated major items were required to be of local manufacture.  For largeautomobiles over ten tons, at least 31 per cent of the motor vehicle plus at least two items from a list
of fifteen designated major items were required to be of local manufacture.  For motorcycles, at least
90 per cent was required to be of local manufactu re.  These local content rules applied equally to
domestic and foreign enterprises.  He added that a local content requirement on government
procurement of incinerators had been eliminated, but that a local content requirement on electriclocomotives remained.  He noted that this was an exception to national treatment permitted under
Article III of the GATT 1994, as these products were not intended for commercial resale.
123. Some members of the Working Party said that  Chinese Taipei needed to notify its TRIMs
such as the mixing requirements in force for coal and cement production, and specify a schedule for
their elimination.  The representative of Chinese Taipei said that Chinese Taipei had no mixing
requirements for cement production.  The mixing requirements for coal were imposed upon importers
of coal.  Importers of coal were required to purchase local coal which was at least 1.41 per cent of the
amount of coal that they wished to import.  Chinese Taipei planned to lower this requirement to
0.72 per cent by the end of 1998.  However, the ratio had actually been lowered to 0.55 per cent as of
the end of 1996.  Chinese Taipei was of the view that the requirement was an Article III mixing
requirement and not a TRIMs issue, and therefore this measure did not require notification under the
TRIMs Agreement.  Nevertheless, Chinese Taipei would eliminate the mixing requirements for coalwithin thirty-six months  following accession.  Some members of the Working Party indicated that the
requirement should be eliminated more rapidly.
[124. The representative of Chinese Taipei stated that Chinese Taipei would eliminate the mixing
requirement relating to the use of coal within 36 months of its accession to the WTO.  The Working
Party took note of this commitment.]WT/ACC/SPEC/TPKM/2
Page 37
[The representative of Chinese Taipei stated that Chinese Taipei undertook to eliminate the
existing local content requirements applied to the production of automobiles and motorcycles [and the
mixing requirement relating to the use of coal] upon accession to the WTO.  The Working Party took
note of this commitment.]
[125. The representative of Chinese Taipei confirmed that Chinese Taipei did not apply measures
inconsistent with the TRIMS Agreement and would not do so in the future.  The Working Party took
note of this commitment.]
State-Trading
126. Some members of the Working Party requested that Chinese Taipei provide information on
the State owned enterprises covered by Article XVII of the GATT, and the WTO Understanding on
the Interpretation of Article XVII operating in Chinese Taipei.  At the request of members of the
Working Party, the representative of Chinese Taipei supplied details of the State enterprises operating
in the energy industry, the agriculture-fertiliser industry, the metals-mining industry, heavy industry,the petrochemical industry, the paper manufacturing industry, and the tobacco products and alcoholic
beverages industry.  He noted that the provincial  government of Taiwan Province owned  the Chung
Hsin Paper Corporation, the Tang Eng Iron Works Corporation, the Taiwan Agricultural and
Industrial Development Corporation, the Kaohsiung Sulphate Corporation, and the Taiwan Tobacco
and Wine Monopoly Board (TTWMB).  He indicate d that the Chinese Petroleum Corporation had
enjoyed a monopoly to import crude oil and refined products and to export refined products which
had been abolished on 26 June 1996.  The Taiwan Sugar Corporation enjoyed a monopoly to import
and export sugar.  All liquid ammonia imports were monopolised by the Taiwan Fertiliser Company,
which also centrally administered purchase and sales, except for imports of waste acid gas.  The
Taiwan Salt Works (Taiwan Salt Industrial Corporation) held a monopoly to import salt, except forimports of industrial salt used in the production of alkali-chloro.  The TTWMB held a monopoly in
the production and trading of tobacco and alcohol products.  Taiwan Sugar Corporation supplied all
the alcohol requirements of the TTWMB.  The representative of Chinese Taipei asserted that neither
Taiwan Power Company, China Steel Corporation (b efore it was privatized) nor Aerospace Industrial
Corporation enjoyed import or export monopoly.  These enterprises did not enjoy any specialtreatment in their trade or production activities.
127. In response to further questions from some members of the Working Party, the representative
of Chinese Taipei said that the above-mentioned State-owned and the provincial enterprises were
profit oriented and operated on the basis of commercial considerations.  Purchases by State enterprises
in principle were made by public tender and the purchase decisions were based upon such factors asqualities, specifications, deliveries and prices.  Non-commercial factors did not come into play.  Area
restrictions applied to two neighbouring economies that were the only instances where purchase
decisions could deviate from commercial consid erations when the amount of the procurement
involved exceeded US$600,000 had been abolished on 1 June 1997.  These State enterprises imported
raw materials for products where production could meet the demand of the domestic market.  The
reselling price of the imported products was determined in the same way as for domestically produced
products.  There was no discrimination against imports.  The purchasing decisions of Taiwan PowerCompany and China Steel Corporation (before it was privatized) were also generally based upon
criteria such as quality, specification, delivery and price.  However, since the government of Chinese
Taipei was the largest shareholder in these enterprises, the purchasing decisions were affected by the
government's economic and trade policies.  Some members noted that the State-enterprises were not
subject to the Fair Trade Law and asked how this could be justified in light of Articles XVII and III ofthe GATT 1994.  The representative of Chinese Taipei replied that some of the practices of these
enterprises had been exempted from the provisions of the Fair Trade Law for an interim period of five
years to permit the commercial adjustment and their eventual privatization.  This temporary
exemption from the application of the Fair Trade Law had expired in February 1996.  The
procurement by these companies would be governed by the Agreement on Government Procurementonce Chinese Taipei became a signatory.WT/ACC/SPEC/TPKM/2
Page 38
128. Some members of the Working Party referred to the status and operations of the publicly
owned retail stores which offered buyers between 20 per cent and 30 per cent discounts on identical
merchandise purchased in the free market.  In their view the pricing policies of these stores were
highly irregular.  Prices were fixed in a manner which could undermine sales in the free market as
suppliers were required not to sell at a lower price to open market stores.  There were no limits on
purchases or resale of goods purchased in the publicly-owned retail stores and access was notrestricted to members only.  In response, the representative of Chinese Taipei said that there were
55 publicly owned retail stores in operation.  These stores do not discriminate against imported
products and do not create obstacles to importation and distribution of imported products.  The United
Cooperative Association (UCA) was a private entity co mmissioned by the government to supply daily
necessities to employees of the government and educational institutions.  The rules governing the
negotiation practices contemplated the determination of a base price which was 15 per cent to
30 per cent lower than the market price.  Access to  these stores was restricted to members and the
resale of merchandise was prohibited.  In the Ministry of Defense PX stores, the selling price was
2 per cent above the sourcing price to cover the operating expenses.  Some members of the Working
Party said that many privately owned stores used  the public stores as sources of supply, which
resulted in market distortions.  Some members of the Working Party also said that the UCA
requirement that suppliers not sell at lower prices to any store in the free market appeared to be in
conflict with the Fair Trade Law.  In addition, the operating practices of the UCA and the Military PX
stores harmed both manufacturers who were forced to sell at unrealistically low prices, and private
retailers who were forced to compete with subsidised publicly-owned stores.  Prices in the
publicly-owned retail stores were 15-30 per cent below retail levels, and in many cases manufacturers
were forced to supply these stores at below cost prices.  The publicly-owned retail stores appeared to
have up to 40 per cent of market volume.  This factor, combined with their prices, made it difficult for
private retailers to compete in the market place.  These members considered that the publicly-owned
retail stores should be subject to the Fair Trade Law.  The representative of Chinese Taipei responded
that the UCA and the Military PXs were not entirely exempted from the operation of the Fair Trade
Law, and that the exemption was limited to the organisation of the UCA because it fell within thedefinition of horizontal collaboration among the stores participating in the organisation of the UCA.
Otherwise, all other business practices of the UCA were subject to the Fair Trade Law.  He further
added that publicly owned businesses did not de jure or de facto discriminate against imported
products and did not create obstacles to the importation and distribution of imported products in terms
either of price or of quantity.  Some members of the Working Party asked that Chinese Taipei takesteps to control the persons allowed to gain access to the UCA and Military PX stores, the quantity of
products allowed to be purchased by the public employees, establish and publish new procurement
and product listing guidelines which reflected market dynamics, and establish a fairer price setting
procedure.  These members also asked whether the UCA and Military PX stores received any
subsidisation in their operations.  The representative of Chinese Taipei said that shopping centres,
supermarkets and discount stores in many cases offered merchandise at the same or lower prices than
those of the Military PX stores.  Because of the prices of private stores, the incidence of resale ofproducts purchased at Military PX stores was almost non-existent.  In addition the Military PX
Headquarters had made rules to prohibit the resale of products purchased in the Military PX stores.
Concerning the purchasing decisions of the Military PX stores, the representative of Chinese Taipei
noted that needs of military personnel and the condition of the market were examined.  The decision
to purchase was advertised in newspapers.  All suppliers, whether importers of foreign goods or localmanufacturers who could meet the limited purchase volume requirements of the Military PXs stores
were eligible to enter into negotiations to supply the stores.  The Fair Trade Commission, i.e. the
administrative agency responsible for enforcing the Fair Trade Law, had been monitoring very closely
the business practices of UCA. It had fined different UCA stores for their failure to prevent the entry
by individuals who did not have legal access to these stores. It had also fined several private storeswho held themselves out as UCA stores in order to deceive consumers.  The Commission was looking
into the pricing practices of suppliers of the UCA stores to see whether there was any abuse of market
power by the UCA stores.WT/ACC/SPEC/TPKM/2
Page 39
129. Some members of the Working Party stated that Chinese Taipei must agree to additional
transparency in the operation of all of its State- trading enterprises, particularly in the area of
agricultural products, e.g. by demonstrating that mark-ups on State-traded imports do not discriminate
against imported goods vis-à-vis  domestically-produced goods, and in the area of export subsidies.
The representative of Chinese Taipei said that the operations of the State-owned enterprises were
based on commercial considerations such as quantity, price, quality, supply stability and risk and thatthere was no discrimination against imports.
130. The representative of Chinese Taipei said that the following State enterprises would be
notified as State-trading enterprises under Article XVII for the purposes of the Understanding on the
Interpretation of Article XVII of the GATT 1994:  Taiwan Power Company; Chinese Petroleum
Corporation; Taiwan Sugar Corporation;  Taiwan Fertilizer Company;  Taiwan Salt Works (Taiwan
Salt Industrial Corporation);  China Shipbuilding Corporation; and Taiwan Machinery Manufacturing
Corporation.  He stated that the TTWMB, which wa s owned and managed by  provincial authorities,
upon the Working Party's decision, would also be notified under Article XVII as long as it maintains
its current nominal import/distribution monopoly and other special privileges under law and
regulation in the distribution, or trade of tobacco and alcohol products.  Private traders could import
alcohol and tobacco products using TTWMB as the nominal importer.  The statutory monopoly would
be abolished with the implementation of new laws establishing a tobacco and alcohol tax andadministration system.  The representative of Chinese Ta ipei also stated that some private trade in rice
and sugar, as reflected in Chinese Taipei's agricultural market access schedule, would be permitted
under the [tariff quota for that product] [appropriate arrangements].  He further stated that for some
time after the date of accession, importation of fertilizer would be limited to the Taiwan Provincial
Food Bureau or the Taiwan Fertilizer Compan y, firms owned and managed by the provincial
authorities, and that during this period, both entities would be notified under Article XVII as long as
they maintain this monopoly or any other special privileges under law and regulation in the
distribution, or trade of fertilizers  The Working Party took note of these commitments.
[131. The representative of Chinese Taipei said that Chinese Taipei would eliminate the import
monopoly on fertilizers within four years after accession to the WTO.  The Working Party took noteof these commitments.]
[132. The representative of Chinese Taipei stated that, upon request of any WTO Member, full
information on the pricing mechanisms of its stat e trading enterprises would be provided for both
domestic and traded goods, including, but not limited to, domestic procurement prices, contract terms
for delivery of exported and imported goods, and financing terms and conditions.  The representativeof Chinese Taipei confirmed that for all "state trading enterprises,"  Chinese Taipei would ensure that
any fees or charges assessed to importers or end-users by these state trading enterprises would not
afford protection in excess of the tariff rate prov ided for imports listed in the Schedules annexed to
Chinese Taipei's Draft Protocol of Accession, plus f ees and charges consistent with Article VIII of the
GATT.  Imports in excess of the level of the tariff quotas specified in the Schedules will not be
reserved for state-owned or state-operated enterprises, and may be imported and distributed by private
firms and other non-state-trading enterprises.  State trading enterprises would not be used as a conduitfor subsidized exports, nor would notification of these enterprises under Article XVII exempt them
from other notification requirements under WTO Agreem ents, e.g., Article 4(2) of the Agreement on
Agriculture.  He further indicated that Chinese Taipei would not take any measure to influence or
direct these enterprises as to the quantity, value, or country of origin of goods purchased.
Furthermore, Chinese Taipei would not resort to ei ther price pooling for the procurement of goods for
export or targeted discriminatory export pricing and, in particular, Chinese Taipei would not export
rice imported under its minimum access commitment.  The Working Party took note of these
commitments.]WT/ACC/SPEC/TPKM/2
Page 40
[133.  The representative of Chinese Taipei also undertook that all State-trading enterprises within
the definition of Article XVII of the GATT 1994 would operate in a transparent manner and incompliance with that Article and with the other re levant Articles of GATT 1994, in particular with
Articles I, II, III, XI and XIII.  The Working Party took note of these commitments.]
State Ownership and Privatization
134. Some members of the Working Party enquired whether State owned enterprises would be
privatized.  The representative of Chinese Taipei sa id that the policy was to privatize all State owned
enterprises, except those which involved security and defence, and certain public utilities.  The
statutory framework required to implement this policy was in place.  In 1994 - 1995 China SteelCorporation (CSC), China Petrochemical De velopment Corporation, and BES Engineering
Corporation had been privatized.  Further share issues were planned, but in order to minimise
economic dislocation and internal resistance the privatisation programme would progress cautiously.
135. In response to further requests for information, the representative of Chinese Taipei stated
that information on the privatization of State owned enterprises could be obtained through the websiteof the Council for Economic Planning and Development.  Since 1989, more than 30 offerings
(including CSC's two DR issues in 1992 and early 1997, representing 360 million shares and
203 million shares respectively), and several sales of assets had been conducted. Sales of government
owned companies had yielded total proceeds of nearly NT$ 247.2 billion, corresponding to US$8 billion (based on January 1998 data).  Seven of the targeted SOEs had been successfully privatized,
including China Insurance Co. (CIC), China Petrochemical Development Co. (CPDC), BES
Engineering Co., CSC, YangMing Marine Trans port Co. (YMTC), LP-Gas Supply Administration
and Chang Hwa Commercial Bank. In addition, 3 plants of the Taiwan Machinery Manufacturing
Corp. (TMMC) have been privatized by private placement. The details of the 7 privatized enterpriseswere as follows:
Privatized State-Owned Enterprises in Chinese Taipei
Company Date of
Privatization% Government
Shareholding
(January 1998 data)
China Insurance Co., MOF 5 May1994 36.36
China Petrochemicals Development Co., MOEA 20 June 1994 18.87
BES Engineering Co., MOEA 22 June 1994 0.0
China Steel Co., MOEA 12 April 1995 40.0
YangMing Marine Transport Co., MOTC 15 February 1996 45.04
LP-Gas Supply Administration, VAC 16 March 1996 0.0
Chang Hwa Commercial Bank, TPG 1 January 1998 40.0
Note: MOEA = Ministry of Economic Affairs
MOF = Ministry of Finance
MOTC = Ministry of Transportation and Communications
VAC = Veteran Affairs Council
TPG = Taiwan Provincial Government
Recent changes had made it easier for the shares of SOEs to be listed on the Taiwan Stock Exchange
and the OTC market.  In addition, the priority shares issued to employees of SOEs had been raised,
with each employee now entitled to purchase shares  equal in value to 48 months' pay, instead of just
24 months as before.  The timetable for the next 5 years involved the privatization of 42 SOEs,
together with the modification of legislation needed to pave the way for the privatization process.WT/ACC/SPEC/TPKM/2
Page 41
Privatization Timetable for 42 SOEs
Date Authority Company
December 1997 VAC Veterans Gas Manufactory,
Pharmaceutical Plant
June 1998 MOF Farmers Bank of China
MOEA Taiwan Fertilizer Co.,
Taiwan Machinery Manufacturing Co.
VAC Food Products Factory,
Nan-tzu Abrasives Factory,
Kang-shan Rope Factory,
Taichung Lumber Processing Factory
TPG Kaohsiung Ammonium Sulfate Co.,
Chung Hsing Paper Co.,
Agriculture & Development Co.,
Taiwan Navigation Co.,
Taiwan Film Culture Co.,
Taiwan Shin Sheng Daily News
December 1998 TPG Hua Nan Commercial Bank
First Commercial Bank,
Taiwan Business Bank,
Taiwan Fire & Marine Insurance Co.,Taiwan Development & Trust Co.,
Taiwan Life Insurance
June 1999 MOF Chiao Tung Bank
VAC Veterans Printing Works,
Plastics Works,
Taipei Iron Works,
Taipei Paper Manufactory,
Lung-chi Chemical Works,
Tao-yuan Furniture
TPG Taiwan Provincial Government Printing Factory
TCG Taipei City Government Printing House
December 1999 MOEA Aero Industry Development Co.
MOF Central Reinsurance Co.
TPG Tang Zong Iron Works
June 2000 TPG Fertilizer Sales & Transportation Department of
Food Bureau
December 2000 TPG Taiwan Tobacco & Wine Monopoly Bureau
June 2001 MOEA Salt Industrial Co.
China Shipbuilding Co.,
Chinese Petroleum Co.,
Taiwan Power Co.
MOTC Chunghwa Telecom Co.
VAC RET-SER Engineering Agency
Note: TPG = Taiwan Provincial Government
TCG = Taipei City GovernmentWT/ACC/SPEC/TPKM/2
Page 42
[136. The representative of Chinese Taipei confirmed the readiness of Chinese Taipei to ensure the
transparency of its ongoing privatization program and to keep WTO Members informed of its
progress.  He stated that [if it becomes an established WTO practice,] his authorities would provide
annual reports to WTO Members on developments in its programme of privatization as long as it was
in existence.  The Working Party took note of this commitment.]
Taiwan Tobacco and Wine Monopoly Bureau (TTWMB)
137. The representative of Chinese Taipei said that the privatisation of the TTWMB was under
review independently of the tax reform plan.  He provided information concerning the calculation
methodology, and stated that the units used by Chinese Taipei were 1000 sticks for cigarettes, and
litres for alcohol.  He explained that the prices of domestic wine and tobacco products were equal to
the sum of operating costs plus the Monopoly Tax.
138. With regard to tobacco products, some members of the Working Party said that the future
operations of the TTWMB should provide equal opportunities to all tobacco product exporters.  Therepresentative of Chinese Taipei replied that following the reforms the TTWMB would have no
regulatory function, nor a monopoly on the distribut ion of tobacco and alcohol products.  The
TTWMB would, pursuant to the draft Tobacco and Alcohol Administration Law, be restructured so
that it would only operate as a business venture.  Within the central government, the regulatory
functions would be carried out by the Ministry of Finance.  Moreover, the TTWMB would have noinfluence upon the market access of tobacco exporters.  He submitted to the Working Party the
summary of the Tobacco and Alcohol Reform Plan reproduced in Attachment B.
[139. The representative of Chinese Taipei stated that from the date of accession, TTWMB would
be reformed to bring its operations in the area of international trade and domestic distribution into
conformity with GATT 1994 and the other obligations of the WTO.  He added that Chinese Taipeiwould establish an open and equitable trade and distribution system in these products and would
ensure national treatment and non-discriminatory treatment for these products.]  [From the date of
accession][Within six months of the date of accession], TTWMB would not have a regulatory
function concerning tobacco and alcoholic beverages and would operate on a commercial basis
subject to the same laws, regulations, rules, decree s, directives, administrative guidance, policies and
measures applicable to other firms in Chinese Taipei.  Any special or monopoly privileges granted to
TTWMB in the domestic distribution and international trade of alcohol and tobacco products would
be eliminated from that date.  Both domestic and foreign firms would be eligible to participate in the
distribution and trade of these products on an equal basis, as noted in the Schedules annexed to the
Draft Protocol of Accession.]  The Working Party took note of these commitments.
[140. The representative of Chinese Taipei confirmed that from the date of accession, TTWMB
would  be a business operation without any regulatory function.  Within the central government, the
regulatory functions will be carried out by the Ministry of Finance.  All special or monopoly
privileges granted to TTWMB in the domestic distribution and international trade of alcohol and
tobacco products will be eliminated, and both domestic and foreign firms will be eligible to
participate in the distribution and trade of these products on an equal basis, as noted below and in the
Schedules attached to the Draft Protocol.  The representative of Chinese Taipei further stated that thereform of TTWMB would also include the gradual elimination of its monopoly on the production of
alcohol and tobacco products. Production of tobacco and alcohol products will be opened to other
domestic and foreign firms according to the following schedule: [Tobacco]...[date];
[wine]...[date]...[Beer]...[date];[Spirits]...[date].  Any subsidies provided for the domestic production
of tobacco and grapes would be bound and gradually reduced as provided for in the Schedule attachedto the Draft Protocol of Accession.  All firms producing tobacco or alcohol products in Chinese Taipei
would have access on an equal basis to imported and domestic inputs, including any remaining
benefits from such subsidies, for their production and processing activities consistent with the
provisions of the WTO.  He added that Chinese Taipei would begin processing applications for firmsWT/ACC/SPEC/TPKM/2
Page 43
seeking authorization to produce alcohol products six months in advance of the date when such
activities are liberalized, in order to provide new entrants with the possibility of operating under the
reform program from its inception.  He further stated that all enterprises in Chinese Taipei that
produce these products would be subject to the same protection, formalities, fees, and penalties under
law, without regard to their ownership or length of establishment.  He stated that fees charged would
not be excessive or unduly burdensome and that penalties for violation of the Tobacco and AlcoholTax and Administration Laws will not exceed in severity the penalties applied for similar violations in
other sectors.  To ensure adequate transparency after reform, Chinese Taipei would provide WTO
Members with annual reports on the volumes of tobacco and alcoholic products manufactured in
Chinese Taipei and on taxes paid by TTWMB and other domestic production enterprises by taxable
category.  This would be accompanied by an annual independent accounting review of the operations
of TTWMB and other domestic production enterprises based on standard and customary accounting
procedures, including a fiscal balance sheet that reports on costs, expenditures, and revenues ofTTWMB, and on its profits and losses.    Recognizing that sales into the domestic market of large
quantities of smuggled or counterfeit imports of alcohol and tobacco products undermined Chinese
Taipei's market for legally marketed products, and wi shing to discourage such activities in the future,
the representative of Chinese Taipei confirmed that all such contraband seized would be destroyed,
and that Chinese Taipei intends to make additional efforts to prevent such illegal imports.  In this
regard, Chinese Taipei would  ensure that certain alcoholic beverage imports would be accompanied
by a certificate of origin similar to that issued by  the regulatory authorities in the country of origin.
The Working Party took note of these commitments.]
Government Procurement
141. In response to questions concerning the Chinese Taipei's procurement policies, the
representative of Chinese Taipei stated that the Procurement Department of the Central Trust of
Chinese Taipei was a non-exclusive procurement agent for government entities and State enterprises
which solicited offers and products from foreign sources.  It did not exercise nor operate as an import
monopoly.  The Trading Department of the Central Trust of Chinese Taipei acted as a non-exclusive
import/export agent for government organisations, public and private enterprises.  The Taiwan SupplyBureau functioned as a non-exclusive tender and purchase agent for local and provincial government
organisations.
142. In response to a series of questions from members of the Working Party concerning tendering
requirements for government procurement contracts, the representative of Chinese Taipei said that
tender requirements set by the procurement agencies were based on factors such as performance,design, international standards, domestic standards, or reference brands (or equivalents to the
reference brands).  Any special tender requirements were clearly described in the tender documents.
The threshold above which open tenders were required was NT$50 million, except in circumstances
that allow for non-competitive tenders.  The division of contracts in order to avoid the tender
threshold was subject to an administrative penalty. Chinese Taipei's tender notices were required to
contain similar types of information as that required by the WTO Government Procurement
Agreement.  All unsuccessful bidders were, at their request, informed of the reasons why they did notwin a contract.  There was no provision for an unsuccessful bidder to appeal against a decision not to
award a tender.
143. In response to questions the representative of Chinese Taipei said that a bidder could be
required to submit a commitment to implement an i ndustry co-operation plan (ICP) to the amount of a
certain percentage of the contract price.  Some members of the Working Party said that the increaseduse of the requirement that tenderers agree to technology transfers was inconsistent with the
Agreement on Government Procurement.WT/ACC/SPEC/TPKM/2
Page 44
144. Some members of the Working Party said that Chinese Taipei should apply for and
commence negotiations on accession to the Agreement on Government Procurement (AGP).  Therepresentative of Chinese Taipei said that Chinese Taipei had carefully examined the request and had
decided to accede to the Government Procurement Agreement.  He added that Chinese Taipei
undertook, prior to acceding to the Government Procurement Agreement, to take steps to improve the
procedural aspects of the current practices.  The representative of Chinese Taipei said that ChineseTaipei had prepared a draft Government Procurement Law which will replace the existing
procurement requirements set by the various audit laws and regulations.  The draft Law takes full
account of the AGP requirements, including the establishment of a bid challenge procedure.  The draft
Law was currently being reviewed by the legislature.  A Government  Procurement Gazette was being
officially published from 1 November 1996 after a ten-month long trial publication. The ceiling
limitation of 49 per cent for the acquisition of interests in existing construction firms had been
abolished from 3 November 1995. Foreign experiences can be counted in the determination ofqualification for Class A construction company licenses. From 1 June 1997 the area restriction in the
procurement practices had also been lifted. The issues of the industrial cooperation program (ICP),
and the limitation on foreign suppliers' market access/lowering of the threshold were being dealt with
in the accession negotiations for the AGP.  Some members of the Working Party noted that
negotiations were continuing regarding Chinese Taipei's commitments regarding product coverageand implementation of procedures associated with the procurement process.  In particular, additional
clarity was required regarding procedures to address disputes arising in the context of the procurement
and contract performance process.  The representative of Chinese Taipei noted that the contract
performance process did not fall within the coverage of any WTO rules.
145. The representative of Chinese Taipei stated that Chinese Taipei had notified the Committee
on Government Procurement of its intention to accede to the Agreement on Government Procurement
and had initiated negotiations to that end by the submission of an offer.  The representative of Chinese
Taipei confirmed that Chinese Taipei would accede to the Agreement on Government Procurement
(GPA) within one year of its accession to the WT O.  If, however, new government procurement laws
necessary to comply with the GPA were enacted prior to Chinese Taipei's accession to the WTO,
Chinese Taipei would accede to the GPA within one year of enactment of those laws or at the time
Chinese Taipei accedes to the WTO, whichever was later.  The Working Party took note of these
commitments.
[Agreement on Trade in Textiles
146. The representative of Chinese Taipei stated that Chinese Taipei recognized that the
quantitative restrictions on imports of textiles and clothing products originating in Chinese Taipeiunder arrangements between Chinese Taipei and WTO Members that were in force on the date prior
to the date of accession of Chinese Taipei to the WTO would be notified to the Textiles Monitoring
Body (TMB) as being the base levels for the purpose of application of Articles 2 of the Agreement on
Textiles and Clothing. Thus, for the purpose of Chinese Taipei's accession to the WTO, the phrase
"day prior to the date of entry into force of the WTO Agreement" contained in Article 2.1 of the
Agreement on Textiles and Clothing would be deemed to refer to the day prior to the date ofaccession of Chinese Taipei to the WTO.  To these base levels the increase in growth rates provided
for in articles 2.13 and 2.14 and no quantitative limits of flexibility use provided for in article 2.16 of
the Agreement on Textiles and Clothing would be applied, as appropriate, from the date of accession
of Chinese Taipei to the WTO.]
Barter Trade
147. Some members of the Working Party requested information on the treatment of imports under
barter arrangements.  The representative of Chinese Taipei said that Chinese Taipei had only had
agricultural barter trade with Korea.  Since 1992 the barter of Korean apples and pears for Chinese
Taipei bananas had been stopped.  In 1997, a new agreement had been made between Korea andChinese Taipei, which provided for barter of Korean apples and pears for Chinese Taipei bananas,WT/ACC/SPEC/TPKM/2
Page 45
lychees, mangoes, garlic, onions and oranges.  Under the existing bilateral arrangement, Korea was
provided with access to the local market in respec t of apples (which were currently subject to area
restriction) and nashi pears (which were currently under import ban) up to a specified volume.  He
noted that following the elimination of the area restrictions on apples and quantity restrictions on
nashi pears, there would be no need to maintain this arrangement after Chinese Taipei's accession to
the WTO.
148. In response to further questions concerning purchase requirements, the representative of
Chinese Taipei said that no mandatory counter purchase requirements were imposed.  The current
practice of encouraging the purchase of locally manufactured components was granted to foreign
investors who had exported substantial quantities of components or parts back to their home countries
but had no monetary implications or value.  The purpose of the scheme was to encourage export of
locally made automotive parts by giving a public announcement of the Government's appreciation for
increased export volume by particular suppliers.  The scheme was not a subsidy program nor did itimpose any mandatory requirement to make local purchases.
Agricultural Policies
149. Some members of the Working Party noted that Chinese Taipei had indicated that it did not
apply subsidies to exports of agricultural products, and accordingly these members stated that Chinese
Taipei should agree to bind its export subsidies at zero in its Schedule of Concessions.  Thesemembers noted however, that Chinese Taipei exported the surpluses of rice generated by artificially
high internal price supports sustained by an import ban on competitive products.  Recently, exports
had represented some 12 per cent of production and some 145,000 tons.  These members asked that
Chinese Taipei explain how the difference between the price paid to producers and the export price
was funded as well as the meaning of the expression "a comfortable rate of self sufficiency in rice".Information was also requested on total price support expenditures of Chinese Taipei and the use of
government assisted loans as provided in the Statute for Agricultural Development.  Some members
also enquired whether the import ban on rice was of a general application and requested its
elimination.
150. The representative of Chinese Taipei stated that Chinese Taipei's policy was to liberalise the
agricultural sector.  All domestic price supports would be scaled down consistent with the outcome of
the Agriculture Agreement of the Uruguay Round.  In response to questions, the representative of
Chinese Taipei indicated that the price support mechanisms operated to purchase agricultural products
from farmers at guaranteed prices, which were set above the production cost of the product.[He noted
that all [AMS] domestic price supports would be scaled  down consistent with the requirements of the
WTO Agreement on Agriculture, i.e., phase-downs  would be completed [within six years after
accession to WTO] [by the year 2000.]  The purpose of the rice price support was to maintain a stable
food supply and to maintain farmers' income.  The rice price support mechanism consisted of two
elements:  planned purchase and supplementary purchase.  The purchase was made twice in a year
divided into two crops.  Aged rice was exported at prices lower than the production costs due to the
lower quality when compared to new rice.  The Food Bureau mandated the Central Trust to auction
off the rice with the base price taking into accoun t the international rice price.  The feed plants,
livestock farming business and aquaculture business could apply to the Food Bureau through the
Feedstuff Association for the purchase of feed rice.  The price was set at 90 per cent of the wholesale
price for imported maize at the time of purchase price payment.  The difference between the
guaranteed price paid to producers and the export price was funded by the government budget.  The
guaranteed purchase price was the only price support measure employed by Chinese Taipei.  Riceimports needed a Consent Letter of the Food Supply Bureau.  Because of overproduction consent
letters were not given and rice could not be imported.  He added that soybeans, corn and sorghum
were eligible for crop purchase under the Rice Crop Substitution Programme.  In addition, the
importation of soybeans, corn and sorghum had been liberalised, and the duties for those products
were 1.5 per cent, 1 per cent and 1 per cent, respectively.  He said that price supports would graduallybe phased out after  accession in accordance with the Schedule annexed to the Draft Protocol ofWT/ACC/SPEC/TPKM/2
Page 46
Accession.  He also stated that Chinese Taipei would gradually reduce excess rice production.  A
proposal on rice imports would be submitted to the Working Party after completion of bilateral
negotiations.  The standards for paddy, milled and brown rice were provided.  Some members of the
Working Party expressed continued concern about Chinese Taipei's practice of auctioning central rice
stocks for export only.  These members  noted that only livestock feed businesses had access to these
stocks for domestic use, and only at fixed prices.  In the view of these members, this practice was anexport subsidy.  In response, the representative of Chinese Taipei stated that in addition to livestock
feed businesses, livestock and fish farmers also had access to the rice stocks.  Chinese Taipei did not
consider that the practice amounted to an export subsidy.
151. In response to questions concerning exports of sugar, tobacco leaves and bananas, the
representative of Chinese Taipei stated that Chinese Taipei's sugar exports fluctuated with changes in
the United States import quota allocated to Chinese Taipei.  All exports of sugar were to the
United States.  The sugar supply was the monopoly of Taiwan Sugar Corporation, which was anenterprise under the supervision of the Ministry of Economic Affairs with shares partly held by
private parties.  Taiwan Sugar Corporation had its own sugar cane farms;  it also contracts with
farmers for processing the sugar cane and sharing the sugar made from sugar cane sourced from such
farmers.  The sugar cane growers could share 55 per cent of the sugar, which in turn could be
purchased by Taiwan Sugar Corporation for export or sale in the domestic market.  The purchaseprice was calculated on the basis of domestic price if the sugar was sold to the domestic market;  and
on the basis of export guaranteed price or the settlement price after payment to the Sugar Stabilization
Fund, if the sugar was to be exported.  The Sugar Stabilization Fund had been in existence since 1966
for the purpose of stabilizing sugar export and farm ers' income.  The Fund operated as follows:  when
the export price was higher than a threshold payment was made to the Fund;  the payment amount wascalculated according to the scale of the price difference and at a cumulative rate.  When the export
price was lower than the export guaranteed price, payment to the farmers for the price difference was
made out of the Fund.  Taiwan Sugar Corporation, however, had to bear the price difference all by
itself.  The export price had been lower than the export guaranteed price in recent years.  The price
difference had been paid out of the Fund contributed by the price difference resulting from the exportprice exceeding the export guaranteed price in the past.  Sugar prices were of two types:  one was for
sugar of general use, and the other was for sugar used for processing exported food products.  The
domestic price for sugar of general use was set by the Ministry of Economic Affairs;  while the prices
for sugar of export processing use was determined on the basis of London spot market price (F.O.B.)
for sugar plus importation cost.  The food processing companies applied to Taiwan Sugar Corporationfor purchase of the needed sugar and paid the domes tic price in the first instance.  When the products
were exported, the differences were settled.
152. The representative of Chinese Taipei stated that all tobacco exports were of tobacco
purchased by the Taiwan Tobacco and Wine Monopoly Board (TTWMB).  Banana exports were dealt
with by the Fruit Transportation and Marketing C ooperative.  When the export price of bananas was
lower than the export guaranteed price, the difference was covered by a fund administered by the
Cooperative;  when the export price was higher than the export guaranteed price, contributions weremade to the fund according to the scale of the difference and at a cumulative rate.  Farmers could
choose whether to sell their products to the domestic market or to the Cooperative for export.  The
prices for domestic sales and for export are determined according to the demand and supply.
Generally, export prices were higher than the domestic price.  The representative of Chinese Taipei
also stated that soybeans, maize and sorghum were purchased by the Provincial Food Bureau, andsummer vegetables were all purchased by the Department of Agriculture and Forestry of the Taipei
Agricultural Produce Marketing Company on the basi s of guaranteed minimum prices.  Guaranteed
purchases of grapes and wheat had been terminated in the first part of 1997 and 1995, respectively.WT/ACC/SPEC/TPKM/2
Page 47
153. Some members of the Working Party requested an assessment of the effect of the price
support programmes operated by Chinese Taipei on the exportation of Chinese Taipei's agricultural
products.  In response, the representative of Chinese Taipei replied that he did not consider that the
price support programme constituted a subsidy on exports.  Consistent with the requirements of the
WTO Agreement, Chinese Taipei would submit the draft schedule of AMS commitments to the
Working Party.
[154. Chinese Taipei undertook negotiations on market access concessions and domestic support
and export subsidy commitments relating to agricultural goods. As noted in paragraph  [15] above, the
Schedule of Concessions which includes the results of those negotiations, is reproduced in Part I of
Annex I of the Draft Protocol of Accession.  The representative of Chinese Taipei also provided the
Working Party the liberalization plan reproduced in Attachment C to this Draft Report.  [The
representative of Chinese Taipei and the members of the Working Party agreed that in the event of
any inconsistency between the Schedule of Concessions and Commitments annexed to the DraftProtocol  of Accession and Attachment C to this  Draft Report, the Schedule of Concessions and
Commitments annexed to the Draft Protocol  of Accession shall prevail.]  The Working Party took
note of this commitment.]
[155. The representative of Chinese Taipei indicated that upon accession, in accordance with the
provisions of the Agreement on Agriculture, Chinese Taipei would eliminate all quantitativerestrictions and bind all tariffs applied on imports of agricultural products listed in Annex I of the
Agreement.  Further, in accordance with Article 3, Part II of the Agreement on Agriculture, Chinese
Taipei would not provide export subsidies, nor support in favour of domestic producers, in excess of
the commitment levels specified in the Schedule annexed to this protocol, and confirmed that from the
date of accession, support previously granted for the production of tobacco and grapes would beeliminated.  The Working Party took note of these commitments.]
VII. TRADE RELATED INTELLECTUAL PROPERTY REGIME
156. Some members of the Working Party noted that in recent years, Chinese Taipei had
introduced a number of improvements to the protection of intellectual property rights and that Chinese
Taipei was apparently ready to assume in full  the obligations set out in the WTO Agreement on
TRIPS.  In their view the problems faced by Chines e Taipei in this area related to enforcement rather
than to the intellectual property rights legislation it self.  Information was requested with regard to the
entry into force of the Patent Law, the Trademark Law, the Integrated Circuit Protection Law and the
Industrial Design Law.  Information was also requested on the existence of bilateral agreements, the
border measures to combat counterfeiting, the procedures applicable to the infringement ofintellectual property rights, the protection accord ed to pharmaceutical inventions, the protection
accorded to geographical indications and to appellations of origin for wines and spirits.
157. In response, the representative of Chinese Taipei said that the Action Plan to
Comprehensively Protect Intellectual Property Rights approved by the Executive Yuan on
29 June 1993 had set out the following eight directions for efforts to strengthen the protection of
intellectual property rights:  (i)  improving the relevant legal framework;  (ii)  strengthening the
relevant administrative organization;  (iii)  enhancing the enforcement of the relevant laws andregulations;  (iv)  increasing education and promotion;  (v)  increasing the capability to negotiate with
other economies;  (vi)  strengthening investigation and research capabilities;  (vii)  providing
adjustment assistance to the industries concerned;  and (viii)  monitoring the implementation of the
plan.  Some members of the Working Party responded that they had noted continued high levels of
piracy of computer software in Chinese Taip ei and export of pirated software embodied in
semiconductors.  Members of the Working Party expressed concern regarding the failure to impose
penalties, in particular administrative penalties and seizure of infringing product and machinery
predominately used to produce such products, sufficient to deter piracy.  In addition, Chinese Taipei
had decided to establish the Intellectual Property Bureau whose responsibility was exclusively forWT/ACC/SPEC/TPKM/2
Page 48
dealing with intellectual property matters.  According to Article 4 of the Copyright Law, copyrights of
economies or territories which have established reciprocity with Chinese Taipei were protected by
Chinese Taipei.  Protection also extended to foreign works published for the first time in the territory
of Chinese Taipei, or foreign works which were published in Chinese Taipei within thirty days of
their first publication in territories outside of Chinese Taipei.  Chinese Taipei had been making efforts
to revise the Copyright Law to meet the requirements of TRIPS.  The proposed revision includes:(a)  amending the definitions for public broadcast and public performance;  (b)  giving explicit
protection for performers' performance;  (c)  deleting provisions concerning compulsory licenses for
translation; and (d)  affording a life-plus-50-years or 50 years term of retroactive protection in
consistency with the obligation under Article 18 of the Berne Convention.  The draft Amendment was
pending in the Legislative Yuan for approval, and was expected to complete the legislative process
before Chinese Taipei's accession to the WTO.  Under paragraph 1 of Article 42 of the 1986 Patent
Law, a patent holder had the exclusive right to make, sell, or use his invention.  Therefore, a productpatent gave protection to the product no matter which process was used in the manufacturing of the
product.  Paragraph 2 of the same Article provided that if the patented invention was a process, the
patent protection extended to the product using the process in the manufacturing.  However, if the
product was subject to another party's patent, the use of the process invention required the consent of
that other party.  The above rules applied to all inventions, including pharmaceutical inventions.  ThePatent Law, after its amendment in 1994, provides in its Article 21 statutory bars to an invention
patent. Article 56 of the amended Patent Law confers on the patentee of a patented article and
patented manufacturing process the exclusive rights to manufacture, sell, use or import. Article 80
stipulates that where the product manufactured in accordance with a patented manufacturing process
was under a product patent granted to others, the ow ner of such  process patent shall not put his
process invention into practice without the consent of the product patentee.  Currently, the Trade
Mark Law did not have specific provisions for the protection of geographic indications and
appellations of origin for wines and spirits.  However, as a general rule, if a manufacturer's use of
geographic indications as trademarks caused confusion to the general consumers as to the
geographical origin of the product concerned, the Bureau of Standards could on its initiative or uponpetition by interested parties turn down the application of trademark registration or cancel the existing
registration, as the case may be, according to Article 37, paragraph 1, sub-paragraph 6 of  the
Trademark Law.  If appellations of origin were used as trademarks, there would be a violation of
Article 37, paragraph 1, sub-paragraph 10 regarding indications of origin.  The relevant trademark
application would be turned down or the registration would be cancelled.  Chinese Taipei believedthat the above protection should meet the requirement for the protection of geographical indications
and appellations of origin contemplated in the WTO TRIPS Agreement.  In addition to the
administrative measures to be taken by the National Bureau of Standards, the Fair Trade Law and the
Commodity Labelling Law also provide rules that can be effected, when seeking protection.
Article 21(1) of the Fair Trade Law provides that enterprises (i.e. firms or individuals engaging in
trade) may not make any false or misleading marking of place of origin or manufacturing  or
distribute, export or import goods bearing such marking. Violators may be fined up to one millionNew Taiwan Dollars. Under the Commodity Labelling Law, distributors and manufacturers are
required to include information relating to the place of origin on product labels. Failure to do so was
punishable by fines, suspension or business closure. In addition, persons using false designations may
be liable under Article 339 of the Criminal Code for committing forgery.  He added that the bilateral
agreement on protection of intellectual property rights with the United States had taken effect on16 July 1993 and had been reinforced by a bilateral agreement regarding reciprocal treatment of
trademarks and patents of 10 April 1996.  The representative of Chinese Taipei welcomed any
opportunity of entering into bilateral agreements with trading partners other than the United States.
According to Article 4 of the Copyright Law, the reciprocity required for granting protection to
foreign copyrights could be established by way of (i) a treaty or agreement, (ii) unilateral action byother economies through their laws, regulations, or other legal instruments which provide protection
to Chinese Taipei's copyrights, or (iii) practices.  Chinese Taipei was willing to discuss with interested
parties to find a mutually accepted way to establish such reciprocity.  Except the bilateral agreement
with the United States, Chinese Taipei had decided to protect works originating in theWT/ACC/SPEC/TPKM/2
Page 49
United Kingdom, Hong Kong and Switzerland through unilateral administrative action in response to
those three economies actions protecting works of Chinese Taipei origin.  The amendments to the
Patent Law and the Trademark Law passed in April 1997 would enter into force upon accession.  The
draft frameworks for the Integrated Circuits Layout Protection Law had been promulgated on
11 August 1995 and entered into force on 11 February 1996.  He added that the following products
were subject to export licensing requirements in the area of intellectual property protection:8473.30.10.9.0 Computer PC board (only PC boards with  semiconductor chips and computer software
within the chip);  8473.30.10.90 Printer PC board  (only PC boards with semiconductor chips
containing computer software);  9504.10.00.10 Televi sion video game PC boards with semiconductor
chips containing computer software;  9504.10.00.10 Video games of a kind used with a television
receiver;  954.90.90.00 Other articles for funfairs, table or parlour games (palmtop electronic games
containing computer software);  954.90.90.00 Other articles for funfairs, table or parlour games
(cassettes for palmtop electronic games);  9504.10.00.20 Cassettes for television video games;8471.20.00.00 Digital automatic data processing machines (containing in the same hosing at least a
CPU and output unit, whether combined or not);  8471.92.20.10 Dot matrix printer;  8471.92.20.20
Laser printer;  8471.92.20.30 Daisy printer;  8471.92.20.90 Other printer;  8524.90.30.00 Recorded
data processing system magnetic disks (only di sks containing computer software);  8524.11.90.00
Other digital integrated circuits (used in computers,  printers or TV video games and containing chips
with computer software);  8542.19.90.00 Other monolithic integrated circuits (used in computers,
printers or TV video games and containing chips with computer software);  8542.20.00.00 Mixed
integrated circuits (used in computers, printers or TV video games and containing chips with
computer software);  8542.80.90.90 Other integrated circuits and micro assemblies (used in
computers, printers or TV video games containing chips with computer software).  CD manufacturers
in Chinese Taipei were required to inscribe the source identification code (SID) on all CD's
manufactured.  This measure aimed to deter the circulation of pirated CD's.
158. In reply to further questions concerning the laws for the protection of industrial designs,
semiconductor chips or trade secrets, the representative of Chinese Taipei stated that these laws were
along the lines of the provisions of the WTO TRIPS Agreement.  In response to a question concerningChinese Taipei's current protection for computer programs and foreign well-known marks he said that
since 1980 computer programs had been protectable as "literary works", and protectable as computer
programmes since 1985 under the Copyright Law.  The protection term was 50 years.
Article 37(1)(6) of the Trademark Law was applied to provide protection for well known foreign
marks in accordance with Article 6 bis of the Paris Convention, i.e. even when the goods were not
similar to the goods in respect of which a trademark was registered.  In response to a question
concerning the consistency of its laws with the TRIPS Agreement, the representative of Chinese
Taipei indicated that the Patent Law and the Trademark Law had adopted the relevant provisions of
the TRIPS Agreement.  He provided details of the Patent Law, and its provisions for compulsory
licensing, in particular how it complied with the TRIPS Agreement.  In his opinion, the Copyright
Law was in conformity with the Berne Convention and the TRIPS Agreement.  He provided details of
the Copyright Law provisions to the Working Party.   He said that Chinese Taipei had promulgated
seven implementing regulations:  the implementing ru les of the Copyright Law;  the regulations for
Approval of Application for Compulsory License of  Translations;  the regulations for Approval of
Application for Compulsory License of Musical Works; the standards of Royalty Rates for Use in
Public Interest Activities; the regulations for Illustration of the Contents of Various Works in
Paragraph 1 of Article 5 of the Copyright Law; the Organisational Charter of the CopyrightExamination and Mediation Committee; the regulations for Mediation of Copyright Disputes;  and the
"Certain Amount" of Items 2 and 3 of Paragraph 1 of Article 87 bis of the Copyright Law.  In addition
a Statute for the Copyright Intermediary Organisations was being prepared.
159. In response to further questions concerning the Trademark Law and the statement by a
member of the Working Party that Chinese Taipei's Bureau of Standards applied the standards fortrademark registration inconsistently with the TRI PS Agreement, the representative of Chinese Taipei
provided details of the system of protection and the respective time limits which, in his opinion, were
basically consistent with the TRIPS Agreement.  He stated that the Bureau of Standards had recentlyWT/ACC/SPEC/TPKM/2
Page 50
adopted several measures to facilitate the examinatio n process and to maintain consistency.  Statistics
revealed that in Chinese Taipei applications for trademark registration filed by foreign applicants had
a consistently high approval rate.  Concerning the question of geographic denominations of origins, he
confirmed that the Trademark Law did not deal wi th geographic denominations of origin.  However,
if an application for a trademark was made and the trademark could cause confusion as to the
geographic origin of the marked goods, the application could be rejected.  If appellations of originwere used as trademarks their use would infringe Article 37 of the Law.  He considered that these
provisions would meet the protection required by  the TRIPS Agreement.  In additional to the
Trademark Law, the Fair Trade Law, the Commodity Labelling Law and the Criminal Code also
contain provisions that provide protection to geographical indications.
160. In response to questions concerning whether Chinese Taipei protected trade secrets, the
representative of Chinese Taipei said that the Trade Secrets Law was promulgated on
17 January 1996.  He assured the Working Party that the protection of trade secrets would conformwith the requirements of the TRIPS Agreement.
161. In response to questions concerning whether pharmaceutical inventions could be the subject
of a product patent giving protection to the produ ct independently of the process with which it had
been manufactured, the representative of Chinese Taipei said that a patent was granted on the
invention, regardless of which process was used in the manufacture of the goods.  He said that theexamining authority could grant extensions of the time limits for the submission of supplementary
information supporting a patent application.
162. The representative of Chinese Taipei said that, in 1989, Chinese Taipei had initialled a
bilateral copyright agreement with the United States.  In his view, the agreement in some cases gave a
higher standard of protection than the Berne Convention.  The text of this agreement was madeavailable to the Working Party as well as the Agreement Concerning the Protection and Enforcement
of Rights in Audiovisual Works between the Coor dination Council for North American Affairs and
the American Institute in Taiwan.
163. Concerning the enforcement of intellectual property rights, the representative of Chinese
Taipei said that Chinese Taipei provided training concerning intellectual property rights (intellectualproperty rights) to judges, prosecutors and other la w enforcement officials.  Newly appointed judges
and prosecutors could not practice until they ha d completed an eighteen month training programme
which included an introduction to intellectual property rights.  In addition training was provided to
incumbent public prosecutors.  Chinese Taipei had also taken steps to co-ordinate the relevant
agencies in the enforcement of intellectual property rights.  The Public Prosecutors' Office attached tothe Chinese Taipei High Court had conducted five seminars since 1 July 1992 for representatives from
government agencies including Customs, the Gove rnment Information Office (GIO), the Board of
Foreign Trade (BOFT), and the Police Administration.  The Ministry of Justice (MOJ) had also issued
administrative directives to establish a special public prosecutor's office to deal with intellectual
property rights infringement cases.  The MOJ had also issued administrative directives to public
prosecutors to handle intellectual property rights complaints expeditiously and to press for harsh
sentences whenever the circumstances warranted.  Judgements which appeared not to have a deterrenteffect would be appealed to the Appellate Court.  The Ministry of Justice had directed to all
prosecutors that the discretion of commuting prison terms to fines should be exercised very carefully
in intellectual property rights cases.  To facilita te the investigation of intellectual property rights
infringement cases, on 31 March 1993, the Public Prosecutor's Office had integrated all intellectual
property rights agencies to form a task force.  In a letter of 20 August 1996, the MOJ had requested allprosecutors to investigate cases where Chinese Taipei residents infringe copyrights in mainland
China.  If the result of the investigation meets the requirements under Article 251 of the Criminal
Procedure Code, prosecutors should prosecute the case.  Article 94 of the Copyright Law provided
that a prosecutor could initiate an investigation and issue an indictment in the absence of a complaint.
If a complaint had initiated the investigation, Article 94 also provided that the prosecutor couldWT/ACC/SPEC/TPKM/2
Page 51
continue with the investigation or prosecution even if the injured party withdrew the complaint.
When a search warrant and the seizure of goods was considered appropriate, prosecutors were
required to proceed promptly.  In addition to the Copyright Law, the MOJ had directed that the
discretion to not prosecute a case under the Criminal Code should be exercised very carefully in
intellectual property rights criminal cases.  The Judicial Yuan had also encouraged judges to impose
the heaviest penalties possible on intellectual property rights infringers, and had establishedintellectual property rights divisions in District Courts. Special prosecutors had been designated to
deal with intellectual property rights cases.  The Public Prosecutors' Office attached to the Chinese
Taipei High Court had conducted several on-the-job seminars since 1 July 1992 for new and current
prosecutors.  The MOJ together with the Judicial Yuan will continue to hold educational seminars and
courses for new and current prosecutors and judges on a regular basis to keep them informed of the
new developments relating to intellectual property rights issues.
164. The representative of Chinese Taipei also explained that border measures had been
strengthened in relation to trade in products protec ted by intellectual property rights.  Concerning
computer software, Chinese Taipei had established a system for the control of exports of computer
software pursuant to a memorandum of understanding signed with the United States.  The Customs
had been delegated to examine packages of software consigned for export, to determine whether they
conformed to the export permit, invoice and p ackaging list or other export documents.  The
examinations were carried out at random with 30-50 per cent of such exports being examined.  All
exports of an exporter who had been previously found to have exported intellectual property rights
infringing products were subject to inspection, whether or not these exports were described as
computer software.  All exports suspected of being counterfeit were seized, unless the exporter could
provide evidence to offset such suspicion.  The seized products would be confiscated when theintellectual property rights right-holder obtained a fi nal judgment from the Courts confirming that the
products were infringing intellectual property rights.  Public Prosecutors were required to prosecute
forgers of documents including documents which were used to support the exportation of intellectual
property rights infringing products.  To further deter the export of counterfeit computer software, the
Board of Foreign Trade of the Ministry of Economic Affairs promulgated the Guidelines for HandlingCases Where the Export of Products related to Computer Programs was Suspected of Copyright
Infringement in 1996.
165. Concerning patents and trademark infringements,  the representative of Chinese Taipei stated
that the Anti-Counterfeiting Committee (ACC) under the Ministry of Economic Affairs worked
closely with the Customs and the Prosecutors Office.  The ACC had been designated as thecoordination agency to assist the effective operation of the export monitoring system.  The ACC was
responsible for the enforcement of anti-counterfeiting efforts involving trademark and patents.  The
ACC directed the work of the intellectual propert y rights Enforcement Supervisory Task Force since
July 1989.  The ACC was empowered to refer suspected counterfeiting cases directly to the Courts for
prosecution.  Following conviction, the ACC coul d request the BOFT to impose punitive measures
according to the degree of seriousness of the offence.  The BOFT could refuse to issue export permits
for a period of one year to the companies concerned.  He added that the inspection by the Customsemphasized the examination of the product name, brand names, qualities, specifications, product
serial numbers, model numbers, countries of manufacture, net weights etc.  Trademark infringement
was not within the scope of the inspection.  Trademark holders with sufficient information could file a
petition to the Court for the provisional attachment of the counterfeit goods or inform the prosecutor.
The Customs could only seize the goods when inform ed by the Court or the trademark authority.  If
Customs suspicions were aroused concerning the export of certain goods, it would refer the matter to
the ACC.  There was no such mechanism to deal with imported goods.  He also stated that
consultations with the United States on the protection for pharmaceuticals had been concluded.  On
7 July 1993, the Department of Health had issued revised public notices regarding safety monitoring
which applied to all pharmaceuticals regardless of their origin.WT/ACC/SPEC/TPKM/2
Page 52
166. In reply to questions concerning the procedures for the seizure by the Customs of infringing
products, the representative of Chinese Taipei indicated that in relation to patented goods, it was
necessary for the right holders to obtain a Court order before any seizure could be made by the
Customs.  All infringements of intellectual property rights had to be dealt with in the same manner as
patent rights.  The only exception was Article 104 of the Copyright Law, which provided that
right-holders upon the posting of an appropriate bond could petition the Customs to seize importsreasonably suspected to be infringing copies.  The goods would be confiscated upon a Court judgment
confirming the infringement.  In response to questions concerning the seizure of parts imported into
Chinese Taipei for the purpose of being assembled into infringing goods which would be exported to
a third country, the representative of Chinese Taipei replied that Chinese Taipei had never
encountered such a situation, but the goods could be seized if a Court order was obtained.
167. Some members of the Working Party asked whether any additional measures were planned in
order to combat the infringement of intellectual property rights, taking into account that existing
measures did not appear to be having a sufficient deterrent effect on certain commercial scale
counterfeiting operations, such as watches.  [Some members also noted the continued high levels of
piracy of computer software embodied in se mi-conductors.  These members expressed concern
regarding the failure to impose penalties, in particular administrative penalties and seizure of
infringing products and machinery used to produce such products, sufficient to deter piracy].  Therepresentative of Chinese Taipei replied that Chinese Taipei had issued an Action Plan for
Enforcement and Protection of Intellectual Property Rights.  The Action Plan laid down a framework
for the improvement of intellectual property protection, including the upgrading of the standards of
protection, the application of stiff administrative m easures, the strengthening of judicial enforcement
and the education of the general public to respect intellectual property rights.  An inter-agency TaskForce had been established to co-ordinate and supervise the enforcement of intellectual property
rights.  Chinese Taipei was determined to enjoy a reputation as a territory that respected intellectual
property rights.
168. In response to the assertion by some members of the Working Party that Chinese Taipei did
not appear to protect against the transmission of infringing copyright material on its cable televisionnetwork, the representative of Chinese Taipei indicated that the Government Information Office
(GIO) had determined that a priority target was a crackdown on illegal cable television networks that
transmitted illegal copyrighted television programmes without authorization.  In the event of such a
transmission being made, the GIO severed the cable connection of the broadcaster and referred the
matter to the prosecuting authorities.  After the Cable TV Law had been promulgated in 1993, theGIO had the authority to impose fines on those cable TV networks which transmitted copyrighted
televisions programmes without authorization, and refer cases to the prosecuting authorities.
[169. Recognizing that sales into the domestic market of smuggled or counterfeit imports of alcohol
and tobacco products undermine Chinese Taipei's market for legally marketed products, and wishing
to discourage such activities in the future, the representative of Chinese Taipei confirmed that all such
contraband seized would be destroyed, or otherwise disposed of, taking into account the practices of
WTO Members in a similar situation, and that Chinese Taipei intends to make additional efforts toprevent such illegal imports.  In addition, Chinese Taipei would ensure that certain alcoholic beverage
imports be accompanied by a certificate of origin in order to combat counterfeiting.  The Working
Party took note of these commitments.]
170. The representative of Chinese Taipei said that the Trademark Law, Articles 4, 5, 23, 25, 34,
37 and 61 would be amended to achieve the following objectives:
(i) to broaden the scope of reciprocal granting of the right of priority to cover the
situation where there was no formal agreement but the right of priority was granted to
Chinese Taipei's owner of trademark through practice;WT/ACC/SPEC/TPKM/2
Page 53
(ii) to include a combination of colours in the group of items that are capable of
constituting a trademark so as to be consistent with Article 15 of the
TRIPS Agreement;
(iii) to extend administrative protection to well known marks by providing that no
applications may be filed for registration of a trademark design which was identical
with or similar to another person's well-k nown trademark or mark and likely to cause
the public to form a mistaken belief.
He added that the Patent Law, Articles 21, 51, 56, 57, 78, 79, 80, 82, 88, 91, 105, 109, 117 and 122
would also be amended to achieve the following objectives:
(i) to delete the requirement of reciprocity in respect of the granting of patents for
micro-organisms, extension of patent protection terms and the granting of exclusive
import rights so as to be consistent with Articles 3 and 4 of the TRIPS Agreement;
(ii) to limit compulsory licensing in re spect of semi-conductor technology to public
non-commercial use or to remedying anti-competitive practice, so as to be consistent
with Article 31(c) of the TRIPS Agreement;
(iii) to provide patent owners and his/her exclusive licensees the right to request
destruction or other necessary disposition of the infringing goods, raw materials or
instruments used, in connection with the infringement, so as to meet the requirementof Article 46 of the TRIPS Agreement which calls for giving the judicial authority to
order disposition outside the channels of commerce;
(iv) to provide for shifting the burden of proof in respect of process patents as required by
Article 34 of the TRIPS Agreement;
(v) to provide for longer term of protection for industrial design, so as to meet the
minimum requirement of 10 ye ars of the TRIPS Agreement.
These amendments had been passed in April 1997 and would enter into force at the time of accession.
[Some members of the Working Party expressed their appreciation to the representative of Chinese
Taipei for the information on efforts to impl ement the TRIPs Agreement.  These members
reemphasized the need for effective enforcement of Chinese Taipei s intellectual property laws as partof its obligations under the TRIPs Agreement].  [The representative of Chinese Taipei said that
effective enforcement was already carried out on a continuing basis].
[171. The representative of Chinese Taipei stated that Chinese Taipei would  fully apply the
provisions of the Agreement on TRIPS by the date of accession, without recourse to any transitional
period.  [Chinese Taipei would furthermore ensure by the date of accession:
(a) full protection of geographical indications (including against trademarks which
contain or consist of such an indication), as well as of well-known marks (including
the enhanced protection pursuant to Article 16.2 and 3 of  the TRIPS Agreement);
(b) the establishment of a registration system for trademarks which incorporates all
conditions as set out in the TRIPS Agreement;
(c) the amendment of Chinese Taipei Copyright Law to comply with Article 14(1) of the
TRIPS Agreement;WT/ACC/SPEC/TPKM/2
Page 54
(d) the extension to all WTO members of advantages currently given on the basis of
reciprocity, the elimination of any reciprocity requirements;  and in particular,
(e) effective enforcement (including implementation of the special requirements related
to border measures).
The Working Party took note of these commitments.]
VIII. POLICIES AFFECTING TRADE IN SERVICES172. Several members of the Working Party stressed that Chinese Taipei must undertake a
substantial package of initial commitments in its Services Schedule with minimum exceptions from
MFN treatment.  Chinese Taipei engaged in market access negotiations on services with members of
the WTO.  The results of those negotiations are reproduced in Part II of Annex I to the Draft Protocol
of Accession.
IX. [TRANSPARENCY][PUBLICATION]
173. Some members of the Working Party noted that Article X of the GATT 1994 required that all
laws, regulations, judicial decisions and administrative rulings relating to trade be published promptly
so that governments and traders could become  acquainted with them.  [Similarly, Article III of the
GATS required prompt publication (at the latest by th e time of entry into force - except in emergency
situations) of all relevant measures of general application which pertain to or affect the operation of
the GATS Agreement.  These members also noted that transparency obligations arose from Article 63of the TRIPS Agreement.]  They also requested that such laws, regulations, judicial decisions and
administrative rulings relating to trade be systematically and immediately translated into a WTO
official language.  The representative of Chinese Taipei said that Chinese Taipei would comply with
the publication provisions of GATT 1994 and other relevant WTO Agreements but would not accept
an additional general obligation to translate legal instruments into an official WTO language.
[174. Some Working Party members emphasized the importance of prior notice of laws, regulations
and other measures affecting trade in goods, services and intellectual property rights, in particular the
right to provide comments on proposed measures prior to their enactment and implementation.  These
members of the Working Party also noted that some of the WTO Agreements expressly provided for
such a notice and prior comment process and urged Chinese Taipei to extend the coverage of thisprocess to all measures related to the WTO.]  [The representative of Chinese Taipei said that Chinese
Taipei would not accept such extension because it exceeded the obligations set out in the WTO
Agreements].
[175. The representative of Chinese Taipei stated that the following Laws and Regulations shall be
amended or newly made [within six months from] [by] the date of accession to the WTO for thepurpose of putting into effect Chinese Taipei's accession commitments:
- Foreign Trade Act
- The Commodity Inspection Law
- The Trademark Law
- The Patent Law
- Company Law
- Customs Law Articles- Statute for Commodity Tax
- Business Tax Law
- The Securities and Exchange Law
- The Certified Public Accountants' Law
- Commercial Port Law- Highway LawWT/ACC/SPEC/TPKM/2
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-L a w y e r s '  L a w
- Architects' Law
- Statute Governing Privileges and Immunities of the Foreign Missions and their Personnel in
Chinese Taipei
- Law of Pharmaceutical Affairs
- Law Governing Food Sanitation- The Publication Law
- Central Bank Act
- Banking Law
- Copyright Law
- Copyright Intermediary Organization Act
- Tobacco and Alcohol Administration Law
- Tobacco and Alcohol Tax Law- Statute Governing the Organization of Departme nt of National Treasury, Ministry of Finance
- Provincial Statute for Monopoly of Tobacco and Wine in Taiwan Province
- Customs Import Tariff and Classification of Import Export Commodity
- Statute for Establishment and Management of Export Processing Zones
- Statute for Agriculture Development- Food Management Law
- Government Procurement Law
- Statute Governing the Organization for the Public Construction Commission, Executive Yuan
- Statute for Inspection Procedure Governing Construction Works and Procurement and
Disposal of Properties by Government Agencies
- Statute for Vocational Assistance for Retired Servicemen
A summary of the amendments that will be introduced to some of the above-mentioned laws was
reproduced in Attachment E.  The representative of Chinese Taipei further stated that Chinese Taipei
would ensure that from the date of accession, all laws, regulations, judicial decisions and
administrative rulings relating to trade would be published promptly so that governments and traderscould become  acquainted with them.  The Working Party took note of these commitments].
[176. The representative of Chinese Taipei further stated that Chinese Taipei would ensure that
from the date of accession, all laws, regulations, judicial decisions and administrative rulings relating
to trade in goods, as well as measures subject to the transparency provisions of the GATS and TRIPs
Agreement would be translated and published in an official WTO language no later than  [30 calendardays] after enactment or issuance and, except in situations of extreme emergency, prior to the date
such measures are implemented or enforced.  In respect of enquiry points required to be established
under the WTO Agreement or the protocol, the representative of Chinese Taipei stated that Chinese
Taipei would establish or designate an enquiry point where, upon request of any individual or
enterprise, all information relating to the measures required to be published may be obtained.  Replies
to enquiries for information would generally be prov ided within [15 working days] after receipt of a
request.  In exceptional cases, replies may be provided within [20 working days] after receipt of arequest.  Replies would be complete and would represent the authoritative view of  Chinese Taipei.]
[177. The representative of Chinese Taipei noted the existence of requirements in some WTO
Agreements for prior notice and a reasonable time  to present comments on proposed measures.  He
stated that Chinese Taipei had an open and transparent system for adopting laws, regulations and
other measures.  Upon accession, Chinese Taipei, would provide a period for appropriate authoritiesto comment on all laws, regulations and other measures pertaining to or affecting trade in goods,
services, or TRIPs of at least [60 calendar days] before such measures are implemented.  The
Working Party took note of these commitments.]WT/ACC/SPEC/TPKM/2
Page 56
Notifications
178. The representative of Chinese Taipei said that the latest upon entry to force of the Protocol of
Accession, Chinese Taipei would submit all notifications (other than those required to be made on an
ad hoc basis) required by any Agreement constituting part of the WTO Agreement.  Any regulations
subsequently enacted by Chinese Taipei which gave  effect to the laws enacted to implement any
Agreement constituting part of the WTO Agreement would also conform to the requirements of thatAgreement.  The Working Party took note of these commitments.
X. OTHER TRADE AGREEMENTS
179. In response to questions from some members of the Working Party, the representative of
Chinese Taipei stated that Chinese Taipei was not a party any trade agreement which provided for the
granting of preferences to trade in goods and/or services.
Agreement on Trade in Civil Aircraft
180. In response to questions concerning the aerospace sector, the representative of Chinese Taipei
said that its aerospace industry did not presently have the capability to assemble civil aircraft or
compete internationally.  Chinese Taipei did not provide any subsidies specifically for the aerospace
industry.  Some members of the Working Party said that a modern and sophisticated economy such as
Chinese Taipei, which was also a major participant in the globalization of the world's aeronautics and
space industry, should accept the Agreement on Trade in Civil Aircraft upon accession to the WTO.They further added that due to the advanced state of the industrial development of Chinese Taipei and
the plans to expand the aircraft and components industry, the acceptance by Chinese Taipei of the
Agreement on Trade in Civil Aircraft was a prerequisite to accession to the WTO.
181. The representative of Chinese Taipei stated that Chinese Taipei would become a signatory to
the Agreement on Trade in Civil Aircraft at the same time that it acceded to the WTO.
XI. CONCLUSIONS
182. The Working Party took note of the explanations and statements of Chinese Taipei
concerning its foreign trade regime, as reflected in this report.  The Working Party took note of the
commitments given by Chinese Taipei in relation to certain specific matters which are reproduced in
paragraphs [11, 14, 18, 20, 21, 31, 33, 34, 39, 44, 50, 57, 58, 60, 61, 62, 68, 72, 74, 78, 85, 95, 100,101, 102, 106, 112, 120, 121, 124, 125, 130, 131, 132, 133, 136, 139, 140, 145, 154, 155, 169, 171,
175, 177 and 178] of this Draft Report and noted that these commitments had been incorporated in the
Draft Protocol of Accession.
[183. Having carried out the examination of the foreign trade regime of Chinese Taipei and in the
light of the explanations, assurances and commitments given by the Chinese Taipei representatives,the Working Party reached the conclusion that Chinese Taipei be invited to accede to the Marrakesh
Agreement Establishing the World Trade Organization on the terms set out in the draft Protocol of
Accession reproduced in the Appendix to this report, including the Annexes thereof].
[TO BE COMPLETED]WT/ACC/SPEC/TPKM/2
Page 57
APPENDIX
ACCESSION OF THE SEPARATE CUSTOMS TERRITORY
OF TAIWAN, PENGHU, KINMEN AND MATSU
Draft Decision
[The General Council,
Having regard to the results of the negotiati ons directed towards the establishment of the
terms of accession of the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu
(hereinafter referred to as "Chinese Taipei") to the Marrakesh Agreement Establishing the World
Trade Organisation and having prepared a Draft Protocol for the Accession of Chinese Taipei,
Decides, in accordance with Article XII of the Marrakesh Agreement Establishing the World
Trade Organization, that Chinese Taipei may accede to the Marrakesh Agreement Establishing the
World Trade Organization on the terms set out in the Draft Protocol for the Accession of Chinese
Taipei.]WT/ACC/SPEC/TPKM/2
Page 58
[DRAFT PROTOCOL  OF ACCESSION OF THE SEPARATE CUSTOMS TERRITORY OF
TAIWAN, PENGHU, KINMEN AND MATSU TO THE MARRAKESH AGREEMENT
ESTABLISHING THE WORLD TRADE ORGANIZATION
The World Trade Organization (hereinafter referred to as the "WTO"), pursuant to the
approval of the General Council of the WTO accorded under Article XII of the Marrakesh AgreementEstablishing the World Trade Organization (hereinafter referred to as the "WTO Agreement"), and the
Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (hereinafter referred to as
"Chinese Taipei"),
Taking note of the Report of the Working Party on the Accession of Chinese Taipei to the
WTO Agreement reproduced in document WT/ACC/...., dated ........ (hereinafter referred to as the
"Working Party Report"),
Having regard to the results of the negotiations on the accession of Chinese Taipei to the
WTO Agreement,
Agree as follows:
PART I -  GENERAL
1. Upon entry into force of this Draft Protocol pursuant to paragraph 10, Chinese Taipei accedes
to the WTO Agreement pursuant to Article XII of that Agreement and thereby becomes a Member of
the WTO.
2. The WTO Agreement to which Chinese Taipei accedes shall be the WTO Agreement as
rectified, amended or otherwise modified by such legal instruments as may have entered into forcebefore the date of entry into force of this Protocol.  This Protocol, which shall comprise the
commitments referred to in paragraph 182 of the Working Party Report, shall be an integral part of
the WTO Agreement.
3. Except as otherwise provided for in the para graphs referred to in paragraph 182 of the
Working Party Report, those obligations in the Mu ltilateral Trade Agreements annexed to the WTO
Agreement that are to be implemented over a period of time starting with the entry into force of that
Agreement shall be implemented by Chinese Taipei as if it had accepted that Agreement on the date
of its entry into force.
4. The Special Exchange Agreement between the WTO and Chinese Taipei reproduced in
Annex II to this Draft Protocol forms an integral part of this Protocol.
5. Chinese Taipei shall at the time of accession to the WTO accept the Plurilateral Trade
Agreement on Government Procurement listed in  Annex 4 of the Agreement Establishing the WTO.
6. Chinese Taipei may maintain a measure inconsistent with paragraph 1 of Article II of the
GATS provided that such a measure was recorded in the list of Article II Exemptions annexed to thisDraft Protocol and meets the conditions of the Annex to the GATS on Article II Exemptions.
PART II - SCHEDULES
7. The Schedules reproduced in Annex I to this Draft Protocol shall become the Schedule of
Concessions and Commitments annexed to the General Agreement on Tariffs and Trade 1994
(hereinafter referred to as the "GATT 1994") and the Schedule of Specific Commitments annexed to
the General Agreement on Trade in Services (hereinafter referred to as "GATS") relating to Chinese
Taipei.  The staging of the concessions and commitments listed in the Schedules shall be implementedas specified in the relevant parts of the respective Schedules.WT/ACC/SPEC/TPKM/2
Page 59
8. For the purpose of the reference in paragraph 6(a) of Article II of the GATT 1994 to the date
of that Agreement, the applicable date in respect of the Schedules of Concessions and Commitments
annexed to this Draft Protocol shall be the date of entry into force of this Draft Protocol.
PART III - FINAL PROVISIONS
9. This Draft Protocol shall be open for acceptance, by signature or otherwise, by Chinese
Taipei until .....
10. This Draft Protocol shall enter into force on the thirtieth day following the day upon which it
shall have been accepted by Chinese Taipei.
11. This Draft Protocol shall be deposited with the Director-General of the WTO.  The
Director-General of the WTO shall promptly furnish a certified copy of this Draft Protocol and a
notification of acceptance by Chinese Taipei thereto pursuant to paragraph 9 to each Member of the
WTO and to Chinese Taipei.
This Draft Protocol shall be registered in accordance with the provisions of Article 102 of the
Charter of the United Nations.
Done at Geneva, this [date] day of [month] one thousand nine hundred and ninety ....., in a
single copy in the English, French and Spanish languages, each text being authentic.]WT/ACC/SPEC/TPKM/2
Page 60
ANNEX I
SCHEDULE .... - SEPARATE CUSTOMS TERRITORY
OF TAIWAN, PENGHU, KINMEN AND MATSU
Part I - Goods
[The Schedule will be circulated in document .... ]
Part II Services
[The Schedule will be circulated in document .... ]
[TO BE COMPLETED]WT/ACC/SPEC/TPKM/2
Page 61
ANNEX II
SPECIAL EXCHANGE AGREEMENT BETWEEN THE
SEPARATE CUSTOMS TERRITORY OF TAIWAN, PENGHU, KINMEN AND
MATSU (HEREINAFTER REFERRED TO AS "CHINESE TAIPEI") AND THE
WORLD TRADE ORGANIZATION (HEREINAFTER REFERRED TO AS THE "WTO")
Whereas paragraph 6 of Article XV of the General Agreement on Tariffs and Trade 1994
(hereinafter referred to as the General Agreemen t 1994), [as indicated in the Explanatory Notes
thereof] provides that any WTO Member which is not a member of the International Monetary Fund
(hereinafter referred to as the "Fund") shall, w ithin a time to be determined by the WTO after
consultation with the Fund, become a member of the Fund, or, failing that, enter into a special
exchange agreement with the WTO;
Whereas paragraph 7 of the said Article provides that such special exchange agreement shall
provide to the satisfaction of the WTO  that the objective of the General Agreement 1994 will not be
frustrated as a result of action in exchange matters by the Member in question, and taking into accountthat the terms of such an agreement shall not impose obligations inconsistent with those imposed by
the Fund;
Whereas the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (hereinafter
referred to as "Chinese Taipei") desires to accede to the Marrakesh Agreement Establishing the World
Trade Organization (hereinafter referred to as the "WTO Agreement") in pursuance of Article XII
thereof;
The World Trade Organization
and
Chinese Taipei, acting through its representative duly authorized for this purpose,Hereby agree as follows:
ARTICLE I
Orderly Exchange Arrangements
1. Chinese Taipei shall collaborate with the WTO to promote exchange rates which reflect
underlying economic fundamentals, to maintain orderly exchange arrangements with other Membersof the WTO, to avoid competitive exchange alterations, and to assist, in accordance with Articles II
and III of this Special Exchange Agreement, in the elimination of restrictions on the making of
international payments and transfers within the multi lateral system, and to promote international trade
and investment.
2. Recognizing that the essential purpose of the international monetary system is to provide a
framework that facilitates the exchange of goods, services, and capital among countries, and that helps
sustain non-inflationary economic growth, Chinese Taipei undertakes to assure orderly exchange
arrangements and to promote a stable system of exchange rates.  In particular, Chinese Taipei shall:
(i) Endeavour to direct its economic and financial policies toward the objective of
fostering sustained, non-inflationary economic growth with macroeconomic stability;
(ii) Permit exchange rates to reflect underlying economic and financial conditions;WT/ACC/SPEC/TPKM/2
Page 62
(iii) Avoid manipulating exchange rates or the international monetary system in order to
prevent effective balance-of-payments adjustment or to gain an unfair competitive
advantage over other members; and
(iv) Follow exchange policies compatible with the undertakings under this Article.
ARTICLE II
Avoidance of Restrictions on Current Payments and Multiple Currency Practices
1. Chinese Taipei shall not, without the approval of the WTO, impose restrictions on the making
of payments and transfers related to current account transactions.
2. Chinese Taipei shall not engage in, nor permit its Ministry of Finance, Central Bank,
Stabilization Fund, or other agency, to engage in any discriminatory currency arrangements or
multiple currency practices except as approved by the WTO.
3. Exchange contracts which involve the currency of any Member or Chinese Taipei and which
are contrary to the exchange control regulations of that Member or Chinese Taipei maintained or
imposed consistently with the Articles of Agreement of the Fund or with the provisions of a special
exchange agreement entered into pursuant to paragraph 6 of Article XV of the General
Agreement 1994 or this Special Exchange Agreement, shall be unenforceable in the territories of
Chinese Taipei or in the territories of any Member.
ARTICLE IIIControls of Capital Transfers
1. Chinese Taipei undertakes that it shall seek to avoid the imposition of capital controls to
address balance-of-payments and macroeconomic objectives.  However, Chinese Taipei may exercise
such controls as are necessary to regulate international capital movements, if these movements are
destabilizing to the balance of payments or jeopardize macroeconomic stability, so long as ChineseTaipei does not exercise these controls in a manner which will restrict payments for current
transactions or which will unduly delay transfers of funds in settlement of commitments.
2. Chinese Taipei undertakes that measures affecting capital flows will be in accordance with
this Special Exchange Agreement, the General Agreement 1994, and the WTO Agreement.
3. If Chinese Taipei institutes new capital controls or tightens existing capital controls, it shall
immediately after instituting or tightenin g such controls consult with the WTO.
ARTICLE IV
Restrictions on Payments - General
1. In the event that Chinese Taipei, with the approval of the WTO, as provided in Article II, or
consistent with consultations with the WTO, as provided in Article III, as the case may be, imposes ameasure to restrict payments and transfers for balance-of-payments and macroeconomic stability
purposes, it shall:
(a) initiate good faith consultations with the WTO on economic adjustment measures to address
the fundamental underlying economic problems giving rise to the measures; andWT/ACC/SPEC/TPKM/2
Page 63
(b) adopt or maintain economic policies consistent with such consultations.
2. A measure adopted or maintained under Article II of this Special Exchange Agreement shall:
(a) avoid unnecessary damage to the commercial, economic or financial interests of another
Member;
(b) be temporary and be phased out within a clearly-specified time-frame;
(c) be the least burdensome type of action available;(d) be consistent with this Special Exchange Agreement and the economic policies adopted
pursuant to paragraph 1(b) of this Article; and
(e) be applied on a most-favoured-nation treatment basis.
3. A measure adopted or maintained under Article III of this Special Exchange Agreement shall
to the extent practicable conform to the provisions set forth in sub-paragraphs (a) through (e) of
paragraph 2 of this Article.
ARTICLE VFurnishing of Information
1. Chinese Taipei shall furnish the WTO with such information within the general scope of
section 5 of Article VIII of the Articles of Agreement of the International Monetary Fund as the WTO
may require in order to carry out its functions under the WTO Agreement.
2. Chinese Taipei shall be under no obligation to furnish information in such detail that the
affairs of individuals or corporations are disclosed.  Chinese Taipei undertakes, however, to furnish
the desired information in as detailed and accurate a manner as is practicable.
ARTICLE VI
Miscellaneous Provisions
1. For purposes of this Special Exchange Agreement, the term "Payments for current
transactions" means payments which are not for the purpose of transferring capital, as defined by the
International Monetary Fund.
2. The WTO shall at all times have the right to communicate its views informally to Chinese
Taipei on any matter arising under this Agreement.
3. Whenever the WTO consults with the Fund on exchange matters or in other appropriate cases
particularly affecting Chinese Taipei, the WTO shall take measures, as are satisfactory to the Fund, to
ensure effective presentation of Chinese Taipei's  case to the Fund, including, without limitation, the
transmission to the Fund of any views co mmunicated by Chinese Taipei to the WTO.
4. The Understanding on Rules and Procedures Governing the Settlement of Disputes of the
WTO shall apply to disputes arising under this Agreement.
5. This Agreement shall enter into force on the date of entry into force of the Protocol of
Accession of Chinese Taipei to the WTO.WT/ACC/SPEC/TPKM/2
Page 64
6. The provisions of this Agreement, entered into pursuant to Article XV of the General
Agreement 1994, shall be deemed to be included within that Article and shall constitute an integral
part of the Draft Protocol of Accession of Chinese Taipei to the WTO.
7. This Agreement shall terminate upon the mutual agreement of Chinese Taipei and the WTO.WT/ACC/SPEC/TPKM/2
Page 65
ATTACHMENT A
Price Controls List
The tariff items subject to price controls and their justification and legal basis are as follows:
1. Price Controls Mandated by Law:  Electricity and Salt;
2. Price Controls to Implement Specific Policies:  Oil:  energy policy to stabilize oil prices as
well as prices of general commodity prices (as oil is the basis input for almost all productions);  Sugarand fertilizer:  agricultural policy to stabilize farmers' income and production cost;
3. Price controls on other necessities:  Natural gas and liquified petroleum gas:  mandated by the
"Law Governing Surveillance over Privately Owned Utility Companies"; price to be determined by
the Public Utility Rate Commission of the Executive Yuan.
[(i) Electricity:  The legal basis for price controls was the Electricity Law;]
(ii) Salt:  The HS number is 2501.  The legal basis for price control was the Statute for
Salt Administration;
(iii) Petroleum:  The HS numbers are 2710.00.11, 2710.00.12, 2710.00.23, 2710.00.31 and
2710.00.33;
(iv) Sugar and fertilizers:  The HS numbers are 1701.11, 3102.10.10, 3102.21.10,
3102.30.10, 3102.70.10, 3103.10.00.  The legal basis for price control of these
commodities was the Table of Division of Work between the Ministry of EconomicAffairs and the Executive Yuan;
(v) Natural gas and liquified gas:  The HS numbers are 2711.21.00 and 2711.19.10.  The
legal basis for price control was the Statute for Monitoring Private Enterprises
Operating Public Utilities.WT/ACC/SPEC/TPKM/2
Page 66
ATTACHMENT B
Revised Summary of the Tobacco and Alcohol Reform Plan (January, 1998)
The following outlines Chinese Taipei's intentions for the tobacco and alcohol reform plan:
Tobacco and Alcohol Taxes
The TTWMB reform plan includes a classification of tobacco products and alcoholic
beverages for the purposes of internal taxes (tobacco and alcohol taxes). Tobacco products areclassified into cigarettes, pipe tobacco, cigars, and others. Cigarettes are subject to specific tax of
x dollars per 1,000 sticks;  pipe tobacco, cigars, and others are subject to specific tax of x dollars per
kilogram.
Alcohol products are classified into brewed alcoholic beverages (including beer and other
brewed alcoholic beverages), distilled alcohol be verages (including whisky, brandy, rum, gin, and
vodka), reprocessed alcohol beverages, rice wine ("Mi Chiu"), cooking wine, other alcoholic
beverages, and alcohol. The alcohol products are to be taxed as follows:
A. Brewed Alcoholic Beverages
I. Beer: specific tax of x dollars per litre.
(a) Other Brewed Alcoholic Beverages:
specific tax of x dollars per litre per degree of alcohol content.
B. Distilled Alcoholic Beverages (including, am ong others, whisky, brandy, rum, gin, vodka):
specific tax of x dollars per litre.
C. Reprocessed Alcoholic Beverages
specific tax of x dollars per litre of alcohol contents exceeding specific 20 per cent by volume,
specific tax of x dollars per litre per degree of alcohol contents less than 20 per cent by volume
D. Rice Wine ("Mi Chiu")
specific tax of x dollars per litre.
E. Cooking Wine:
specific tax of  x dollars per litre.
F. Other Alcoholic Beverages:
specific tax of x dollars per litre per degree of alcohol content.
G. Alcohol:
specific tax of x dollars per litre.WT/ACC/SPEC/TPKM/2
Page 67
The reform of the TTWMB will ensure the levy of tobacco and alcohol tax in a transparent
and non-discriminatory manner with equal treatment accorded to imported and domestic products.
The setting of the rates of tariffs and taxes has taken into account the current monopoly tax level,
Uruguay Round "zero for zero" offers, and the practices of comparable economies of the WTO
members.  The tariff rates will be incorporated into Chinese Taipei's market access schedules.
Administration of Tobacco and Alcohol Products
This section covers the various aspects of the administration of tobacco and alcohol products
with the implementation of the reform plan.
The planting and purchase of tobacco leaves are to be arranged between the manufacturers
and tobacco farmers by contracts. Production of cigarettes will not be open to the private sector within
three years after the reform.
In terms of the production of alcohol products, the manufacturing of machinery and
equipment for alcohol and tobacco production, prin ting of trademarks, and packaging paper are not
regulated in the Tobacco and Alcohol Administration Law.  Production of alcohol products will be
open to the private sector in stages within three years after the implementation of the new system.
Chinese Taipei plans to liberalize production/manufacture of wine within one year after the
implementation of the new system; liberalization of spirits and beer production will be effected two
years after the implementation of the new system.  It is the intention of Chines e Taipei to attain full
liberalization within three years.
Any person wishing to engage in the production of alcohol and tobacco products will be
require to meet certain qualifications.  First of all, permits from the authority will be required.  To do
so, the applicant must fulfil requirements including, minimum capital, organization form (companies
limited by shares only), acquiring a factory license, and no record of criminal offense or tax default.
After the implementation of the new system, tobacco and alcohol manufacturers legally
established will be permitted to import alcohol and tobacco products in bulk for repackaging,
provided, however, such manufacturers shall have authorization from the original manufacturers of
the imported products and shall be able to produce the relevant certificates of origin.
In addition, tobacco and alcohol manufacturers may contract out or accept contract
manufacturing, subject to the approval of the competent authority.
In the importation and wholesale of alcohol and tobacco products, a license is required for an
importer and a wholesaler of the products; the license bearer can not have prior record of tax default
or criminal offense within a prescribed time.  Chin ese Taipei has incorporated services related to the
distribution of tobacco and alcohol products in its draft schedule of specific commitments on trade inservices.
The legal and regulatory framework for production and distribution of alcohol and tobacco
products will not impose particular restriction on foreign firms engaging in related commercial
activities. The time table and rules for liberalizing the production/manufacture of particular tobacco
and alcohol products will apply equally to foreign as well as domestic private firms.
Labelling requirement with respect to tobacco and alcohol products is stipulated under the
Tobacco and Alcohol Administration Law. All alcohol products will be required to be labelled withthe warning "excessive drinking endangers health."WT/ACC/SPEC/TPKM/2
Page 68
Product inspection will be governed by the standards established by the health authority and
administered by that authority accordingly.
Advertising and promotion for tobacco products are subject to the Tobacco Hazards
Prevention Act (promulgated 19 March 1997). Chinese Taipei has to a large extent lifted restrictions
and allowed advertising of beer, wine and other alcohol beverages on radio and TV in specified time
period of the day. After implementation of the Tobacco and Alcohol Administration Law, advertisingof alcohol products in all media will be permitted, subject however to regulation in relation to the
content and timing of the advertising.  All advertisin g regulation will be consistent with the principle
of national treatment.  The advertisement shall not contain contents which run counter to public order
and good moral, and public interest; encourage and promote drinking; cause harm to adolescents,
pregnant women's mental or physical well-beings; include forged, exaggerated, or false facts or
misleading contents; and any other situations prohibited by the central competent authority through
public notice.
Trading order will be maintained according to the Fair Trade Law and other relevant laws and
regulations.
Contraband
Chinese Taipei has incorporated penal provisions into the draft Tobacco and Alcohol
Administration Law to serve the legal basis for enhanced efforts to protect against smuggled andcounterfeit products. The alcohol and tobacco administration agency will be given the authority to
carry out inspection on the business operations of manufacturers and traders. Inspection and
interception of contraband will be subject to the Alcohol and Tobacco Administration Law (draft),
Alcohol and Tobacco Tax  Law (draft),  Statute for Anti-smuggling Law and Statute for Interception
by the Customs, and other relevant laws and regulation. Under the new administration system,contraband and counterfeit products will be destroyed or otherwise disposed of, taking into account
the international practices.
Any violation of the Tobacco and Alcohol Administration Law will be subject to
administrative or criminal penalties, depending on the type or seriousness of the violation.WT/ACC/SPEC/TPKM/2
Page 69
ATTACHMENT C
Agriculture Liberalization Plan
1. ANNEX 5 to the Agreement on Agriculture:
Serial
NumberProduct Current
Import
RegulationCurrent
RateMinimum Access
(Percentage of
Domestic
Consumption)Out-of-Quota Tariff
Rate
lst. Year 8th. Year lst. Year 8th. Year
1 Rice and
Rice Products111 0%
17%
20%
30%
40%
45%50%Annex 5
FormulaAnnex 5
FormulaAnnex 5
FormulaAnnex 5
Formula
2. TARIFF RATE QUOTA (TRQ):
Serial
NumberProduct Current
Import
RegulationCurrent
RateQuota
(Percentage of
Domestic
Consumption)Out-of-Quota Tariff
Rate
(Percentage of Tariff
Equivalent)
Year 1  Year 6 Year 1 Year 6
1 Peanuts import ban
or consent
letter50%
40%
35%
30%
15%
10%
5%4% 8% 100% 85%
2 Fresh Pears (excl.
European Pears)import ban 50% 4% 8% 100% 85%
3 Sugar consent
letter25%
35%26% 41% 90% 76%
4 Dry Garlic Bulbs import ban 40%
45%4.2% 8% 80% 68%
5 Betel Nuts import ban 35%  4% 8% 100% 85%
6 Meat of Fowls import ban 40%
20%4% 8% 100% 85%
7 Liquid Milk* import ban 20%
32.5%
35%40%4.5% 9% 80% 68%
8 Animal Offal import ban 35%
50%4% 8% 100% 85%WT/ACC/SPEC/TPKM/2
Page 70
Serial
NumberProduct Current
Import
RegulationCurrent
RateQuota
(Percentage of
Domestic
Consumption)Out-of-Quota Tariff
Rate
(Percentage of Tariff
Equivalent)
Year 1  Year 6 Year 1 Year 6
9 Mackerel import ban 50%
NT$14/KG
or 45%
42.5%
40%
37.5%
NT$11/KG
or 37.5%
37.5%15% 25% 100% 85%
10 Red Beans import ban 20%
40%45%13% 21% 80% 68%
11 Dry Shiitake
(ForestMushroom)import ban 50% or
NT$221/KG4% 10% 80% 68%
12 Shaddocks import ban 50%  4% 10% 70% 60%
13 Dry Longans and
Longan Pulpimport ban 30% 10% 30% 80% 68%
14 Young Coconuts quota to 3
countries
only50% or
NT$3/KG17.6% 22% 50% 43%
15 Bananas import ban 25% 4% 10% 70% 60%
16 Pineapples import ban 30% 4% 10% 50% 43%
17 Mangoes import ban 50% 4% 10% 80% 68%
18 Persimmons** import ban 50% 4% 10% 80% 68%
19 Carangid import ban 40%
42.5%
50%4% 10% 80% 68%
20 Sardines import ban 37.5%
42.5%
40%
42.5% or
NT$81/KG
50%15% 30% 100% 85%
21 Dry Day Lilies import ban 45% 4% 10% 80% 68%
* Importation of sweetened condensed milk will be liberalized upon accession.
** After 6 years of implementation period, a tariff-only regime will be in place with the rate
reduced to 35 per cent.WT/ACC/SPEC/TPKM/2
Page 71
3. TO BE LIBERALIZED AFTER RAISING TARIFF RATES UPON ACCESSION:
Serial Number Product Current Import
RegulationCurrent Rate Accession Rate
Year 1 Year 6
1 Pork Bellies import ban 15% NT$18/KG
(60%)NT$15/KG
(50%)
2 Fresh Longans import ban 10% 20% 17%
3 Lychees import ban 10% 20% 17%
4. TO BE LIBERALIZED UPON ACCESSION:
Serial Number Product Current Import Regulation
1 Wheat Flour Already liberalized
2 Meslin Flour Already liberalized
3 Potatoes Import ban
4 Oranges Area restriction
5 Limes and Lemons Area restriction
6 Grapefruits Area restriction
7 Grapes Area restriction
8 Peaches Area restriction
9 Plums Area restriction
10 Apples Area restriction
11 Papayas Import ban
12 Other Mandarins Area restriction
13 Other Citrus Fruits Import ban
14 Ducks, cut into pieces Import ban
15 Whole Ducks Area restriction
16 Turkeys, cut into pieces Area restriction
17 Guavas Import ban
18 Squid Import banWT/ACC/SPEC/TPKM/2
Page 72
ATTACHMENT D
The Consolidated List of Commodities Subject to Import Restrictions and Commodities
Entrusted to Customs for Import Examination, June 1997 Edition, has been deposited with the WTO
Secretariat (Accessions Division, Room 1126)WT/ACC/SPEC/TPKM/2
Page 73
ATTACHMENT E
Summary of Law Amendments
Title of Law and Articles Amended Background of Amendment
Foreign Trade Act
Articles 6, 18, 20-1Article 6:
The amendment is to remove previous authorization to take
trade restrictive measures when encountering bilateral
imbalances of trade.  The new version changes the condition fortaking such action to imbalance in international payments.
Article 18:
The amendment deletes the words "drastic or large" in
describing the amount of increase in imports as a condition to
initiate domestic safeguard action.  This is to follow the use oflanguage in the Safeguard Agreement.
The amendment also provides a legal basis for the authority to
set rules to initiate safeguard action as contemplated in the
Agreement on Textiles and Clothing.
Article 20.1:
This is a new addition to the Law which is intended to providethe legal basis for the authority to regulate the pre-shipment
inspection activities of firms mandated by foreign governments.
It also gives binding effects of the decisions of dispute resolution
panel of the WTO Preshipment Inspection Agreement on the
private parties concerned, namely, the preshipment inspectioncompany and the exporter.
The Commodity Inspection LawArticles 1, 4, 7, 8, 10, 11, 27, 28The amendment exercise is to achieve the following three
objectives:
(i) to incorporate international standards in the domestic
standard-setting process, so as to ensure that domesticinspection standards follow international trends, the
inspection regime meets the requirements of the TBT
Agreement,
(ii) to accord national treatment to foreign products in terms
of application of simplified procedures and exemption
which were previously available only to domesticproducts,
(iii) to accept and recognize foreign inspection certificates in
order to be in line with the spirit of the TBT Agreement,
particularly that calling for mutual recognition.WT/ACC/SPEC/TPKM/2
Page 74
Title of Law and Articles Amended Background of Amendment
The Trademark Law
Articles 4, 5, 23, 25, 34, 37, 61The amendments to this Law are to achieve the following
objectives:
(i) to broaden the scope of reciprocal granting of the right
of priority to cover the situation where the there is noformal agreement but the right of priority is granted to
Chinese Taipei's owner of trademark through practice,
(ii) to include combination of colours in the group of items
that are capable of constituting a trademark so as to beconsistent with Article 15 of the TRIPS Agreement,
(iii) to extend administrative protection to well known
marks by providing that no applications may be filed for
registration of a trademark design which is identical
with or similar to another person's well-knowntrademark or mark and likely to cause the public to forma mistaken belief.
The Patent LawArticles 21, 51, 56, 57, 78, 79, 80,82, 88, 91, 105, 109, 117, 122The amendments to this Law are to achieve the following
objectives:
(i) to delete the requirement of reciprocity in respect of the
granting of patents for micro-organisms, extension of
patent protection terms and the granting of exclusive
import rights so as to be consistent with Articles 3 and 4of the TRIPS Agreement,
(ii) to limit compulsory licensing in respect of semi-
conductor technology to public non-commercial use or
to remedying anti-competitive practice, so as to beconsistent with Article 31(c) of the TRIPS Agreement,
(iii) to provide patent owners and his/her exclusive licensees
the right to request destruction or other necessary
disposition of the infringing goods, raw materials or
instruments used, in connection with the infringement,so as to meet the requirement of Article 46 of the
TRIPS Agreement which calls for giving the judicial
authority to order disposition outside the channels ofcommerce,
(iv) to provide for shifting the burden of proof in respect of
process patents as required by Article 34 of the TRIPSAgreement,
(v) to provide for longer term of protection for industrial
design, so as to meet the minimum requirement of
10 years of the TRIPS Agreement.
Company Law£Articles 373, 383The amendment is to delete the reciprocity requirement for
recognition of foreign companies and public placement of
foreign companies' shares, so as to fulfil Chinese Taipei'scommitments under the GATS.WT/ACC/SPEC/TPKM/2
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Title of Law and Articles Amended Background of Amendment
Customs Law
Articles 3-1, 4-3, 4-4, 11-1, 12,12-4, 12-5, 12-6, 27, 27-1, 46-1,46-2, 47-2, 51This set of amendments is to achieve the following objectives:
(i) to provide a legal basis for application of tariff-quotas
negotiated by Chinese Taipei as substitution measures
for existing restrictions,
(ii) to provide for a duty of secrecy on customs personnel in
respect of information submitted for assessment of
import duties, so as to meet the requirement of
Article 10 of the Agreement on Customs Valuation,
(iii) to provide a legal basis for the establishment of the rules
of origin and the authority to require the submission of
the certificates of origin,
(iv) to revise the customs valuation rules according to the
Agreement on Customs Valuation,
(v) to delete the provisions that limit the drawback of
import duties to imports of machinery by certain high-
tech or important companies whose products are solelyfor export,
(vi) to revise the provision relating to determination of
normal value for purposes of anti-dumping
administration so as to make it consistent with Article 2
of the Anti-dumping Agreement.
Statute for Commodity TaxArticles 3, 5, 13, 14, 15, 17, 18, 32The amendments are to achieve the following objectives:
(i) to delete rules relating to tobacco and alcohol products
as this part of the Law will be replaced by the newTobacco and Alcohol Tax Law, a separate body of law,
(ii) to delete allowance for deduction of 12 per cent
promotion expenses in the calculation of tax base, when
goods are not circulated through exclusive distributors,
as a reflection of Chinese Taipei's accession
commitment,
(iii) to exclude harbour construction dues from the tax base
for commodity tax.
Business Tax Law
Articles 16, 20The amendments are to exclude harbour construction dues from
the tax base of the business tax and to require that the business
tax base shall include tobacco and alcohol tax as provided in thenew Tobacco and Alcohol Tax Law.
The Securities and Exchange LawArticles 54, 95, 128Article 54: This amendment is to delete the requirement that the
certain business personnel of securities firms be Chinese Taipeiresidents.
Article 95: This amendment is to delete the limitation that onlyone stock exchange can be established in one geographical area,WT/ACC/SPEC/TPKM/2
Page 76
Title of Law and Articles Amended Background of Amendment
Article 63: This amendment is to delete the limitation that only
Chinese Taipei residents can be shareholders of a stockexchange in company form.
The Certified Public Accountants
Law
Article 47The amendment is to delete the reciprocity requirement for
foreigners to take the examination and be qualified as certified
public accountants in Chinese Taipei.
Commercial Port LawArticle 7The amendment is to subject goods, circulated internally
through international commercial ports, to the levy of the
harbour construction dues in order to be consistent with theprinciple of national treatment.  The amendment also makes
clear that the revenue of harbour construction dues shall be used
exclusively for the development of commercial harbours so as
to ensure the levy to be consistent with Article VIII of the
GATT 1994 which regulates the levy of service fees.
Highway LawArticle 35The amendment is to provide legislative mandate to the
administrative authority for the opening of the markets for rental
services of passenger cars, freight trucking and container
trucking as a reflection of Chinese Taipei's commitment underthe GATS.
Lawyers' LawArticles 20.1, 42, 45, 46, 47.1 to47.14, 48, 49, 50, 50.1This set of amendments is directed:
(i) to provide a statutory basis for allowing Chinese Taipei
lawyers to hire foreigners to work as consultants or
legal assistants,
(ii) to delete the reciprocity requirement for foreigners to
take the bar examination and become qualified to
practice Chinese Taipei law,
(iii) to provide the statutory basis and qualification standards
for allowing foreign lawyers to practice the laws of theirhome countries and international law in Chinese Taipei.
Architects' LawArticle 54The amendment is to delete the reciprocity requirement for
foreigners to take the architects' examination and becomequalified to practice in Chinese Taipei.
Statute Governing Privileges andImmunities of the ForeignMissions and their Personnel inChinese Taipei
Article 7-1This addition to the Law is to extend privileges and immunities
to WTO related personnel for purposes of Article 8 of theMarrakesh Agreement Establishing the World TradeOrganization.
Law of Pharmaceutical AffairsArticle 53This amendment is to lift the restriction on and provide rules for
regulating repackaging of imported pharmaceutical products.
Law Governing Food SanitationArticle 17The amendment is to provide the labelling of food products with
an option to use the date of manufacture or the expiry date as acode for product identification.
The Publication LawArticle 8This amendment is to delete reciprocity requirements in the
granting of publishing rights to foreign nationals.WT/ACC/SPEC/TPKM/2
Page 77
Title of Law and Articles Amended Background of Amendment
Central Bank Act
Article 23The amendment is to replace current limitation on foreign
liabilities of banks operating in Chinese Taipei with reserverequirements.
Banking LawArticle 42This amendment is to compliment the amendment of Article 23
of the Central Bank Act in respect of the authority in the setting
of the deposit reserve ratio and reserves for other liabilities
Copyright Law
-  Amended 104 articlesThe amendments to this Law are to achieve the following:
1) To strengthen protection of public performances, broadcasts
and communications by extending coverage of the Law to be
consistent with Article 11(1)(ii) of the Berne Convention and Article
14(1) of TRIPs;
2) To extend protection of public display to include re-
productions of previously unreleased artistic pieces and/orphotographic works;
3) To restore market mechanism by abolishing compulsory floor
price-setting;
4) To eliminate practices inconsistent with international treaties,
such as preferential treatment on local copyrights;
5) To extend protection to include compulsory licensing on
translated texts, to be consistent with the Berne Convention.
Copyright IntermediaryOrganization Act
-  New legislation of
46 articlesThe amendments to this Law are to promote and to facilitate the use of
copyrighted works by the general public through well-established
professional copyright intermediary organizations, following examples
from international practices.
Statute for Establishment
and Management of Export
Processing Zone
-  Amended 30 articlesThe amendments to this Statute are to promote international trade by
means of the following:
6) To replace the original policy objective of export- oriented by
international trade promotion;
7) To expand the scope and depth of business within the zone,
including trade information services, R&D and technical services;
8) To encourage investments by the elimination of restrictions on
establishing businesses within the zone;
9) To increase administrative efficiency within the zone by
simplifying the customs clearance process, consistent with theNegative List provided by Article 11 of the Foreign Trade Act.WT/ACC/SPEC/TPKM/2
Page 78
Tobacco and Alcohol
Administration Law
-  New legislation of
60 articlesFollowing the tobacco and alcohol reform plan, the new Law is to
provide legislative mandate to the administrative authorities for the
opening-up of the tobacco and alcohol products. The new Law aims to
achieve the following:
10) To provide a legal basis for the authorities to regulate the
manufacture and the distribution of tobacco and alcohol products;
11) To provide definitions of tobacco and alcohol products;
12) To forestall international trade disputes by preventing the
prevalence of counterfeit products and ensuring established standardsare implemented and enforced in the manufacture of tobacco andalcohol products;
13) To protect national health interests by including measures such
as guidelines on labelling tobacco and alcohol products and regulationson advertisements.
Statute Governing theOrganization of NationalTreasury, Ministry ofFinance
-  Amended 13 articlesThe amendments of this Statute reflect the administrative
modifications made with the reform of the tobacco and alcoholmonopoly. A department will be added to the current organizational
structure to implement administrative requirements established in the
new Tobacco and Alcohol  Administration Law.
Tobacco and Alcohol Tax
Law
-  New legislation of
24 articlesThe amendments to this Law are to achieve the following:
14) To provide definitions of tobacco and alcoholic beverages;15) To establish a new tax system in light of the reform of the
tobacco and alcohol monopoly to facilitate tax collection;
16) To establish tax collection procedures to facilitate the
enforcement of the new tax regime.
Food Management Law
-  Amended 3 articlesThe amendments to this Law are to minimize the price differential
between domestic and imported goods. Japan s "mark-up" approach to
imports of cereal, rice and processed rice products will be adopted,consistent with Article 4(2) of the WTO Agreement on Agriculture.
Statute for AgricultureDevelopment
-  Amended 25 articlesThe amendments to this Statute are to achieve the following:
17) To introduce competitive pricing system by deleting "uniform
pricing" for exported agricultural products, to complement theenforcement of the Fair Trade Law and open-market mechanisms;
18) To expand the Statute to include special safeguard provisions
consistent with the WTO Agreement on Agriculture;
19) To introduce measures to prevent the monopolization of the
market.WT/ACC/SPEC/TPKM/2
Page 79
Government Procurement
Law
-  Draft legislation has
8 chapters containing98 articlesThis draft Law has 8 chapters containing 98 articles. The Law aims to
ensure a transparent, free and fair environment in governmentprocurement projects, consistent with the GPA by the following:
20) To designate a single agency - Public Construction
Commission to be responsible for matters relating to government
procurement;
21) To promote transparency by publishing procurement notices in
the Government Procurement Gazette;
22) To include participation of foreign bidders base on
international treaties or agreements;
23) To extend procurement process to include open, selected and
limited tenders, consistent with the GPA;
24) To establish a committee to accept tender disputes raised by
contractors or potential suppliers;
25) To provide access to arbitration in settling contractual disputes.
Statute Governing the
Organization of the PublicConstruction Commission,
Executive Yuan
-  Amended and added a
total of 14 articlesThe amendments to this Statute reflect the re-structured and expanded
responsibilities of the Public Construction Commission. The changesinclude:
26) To establish a committee within the Commission to handle
complaints by suppliers on government procurement projects;
27) To establish an information office within the Commission as a
centralized information system on public construction and government
procurement projects;
28) To provide technical assistance and support to other
government agencies in matters relating to government procurement.
Statute for InspectionProcedure Governing
Properties by Government
Agencies
-  Amended 7 articles;
added 4 articles; deleted
29 articles; and maintained
1 articleThe amended Statute is formerly know as the "Statute for Inspection
Procedure Governing Construction Works and Procurement and
Disposal of Properties by Government Agencies". The amendments to
this Statute aim to simplify inspection procedures and to improve
efficiency by clarifying the sole responsible authority for government
procurement i.e. Public Construction Commission. Therefore,procedures inconsistent with the Statute are either deleted or combined
with the Government Procurement Law.
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