RESTRICTEDWORLD TRADE
ORGANIZATIONWT/ACC/SPEC/TPKM/2/Rev.2
23 July 1999
(99-3121)
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
Revision
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 applica tion of the Separate Customs Territory of Taiwan,
Penghu, Kinmen and Matsu (hereinafter referred to as "Chinese Taipei") to accede to the General
Agreement  1947 under Article XXXIII, and to submit to the Council recommendations which mayinclude a Draft Protocol of Accession [on the basis of the terms set out in an understanding] [as reflectedin the respective Minutes (document C/M/259)].  Me mbership of the Working Party was open to all
contracting parties wishing to serve on it.  Followi ng the request of Chinese Taipei, circulated in
document WT/ACC/TPKM/1, and pursuant to the d ecision of the General Council of 31 January 1995,
the Working Party was transformed into a Wo rld 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, 15 April 1993, 28 June 1993, 12 October 1993,
17 May 1994, 26 July 1994, 21 December 1994, 28 February 1997, 8 May 1998, 12 May 1999, and[..............] under the Chairmanship of H.E. Mr. M. Morl and (United Kingdom).   The terms of reference
and the membership of the Working Part y 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 Chinese Taipei
authorities thereto (L/7089/Rev .1, L/7429 and Add.1), and documents Spec(94)28 (Newly Promulgated
or Revised Laws and Regulations ), Spec(94)30 (Description of Serv ice Sectors), Sp ec(94)31 and Add.1
(Special Exchange Agreement), Spec(94)41 (Status Report of the Bilateral Negotiations),  Spec(95)1WT/ACC/SPEC/TPKM/2/Rev.2
Page 2
and Corr.1 (Checklist of Accession Issues - Prelim inary Responses Provided by Chinese Taipei),
Spec(95)8 (Laws and regulations regarding agricu ltural products), WT/ACC/TPKM/2 (Tariff reductions
for 758 tariff lines effected as from 14 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);  WT/ACC/TPKM/8/Rev.1 andWT/ACC/TPKM/9/Rev.1 (Information on Industria l Subsidies);  WT/ACC/TPKM/10 (Adoption of
Codex Standards);  WT/ACC/TPKM/12 (Standards for Agricultural and Processed Agricultural
Products);  WT/ACC/TPKM/13 (List of Commodities Subject to Export Restriction and List of
Commodities);  WT/ACC/TPKM/14 and Corr.1 (Additional Questions and Replies ConcerningDomestic Support and Export Subsidies).  In add ition, the representative of Chinese Taipei made
available to the Working Party the following material:
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.
Trade Regime:
General:
- Foreign Trade Act;
- Enforcement Rules of the Foreign Trade Act;
- Regulations Governing the Process of  Objections 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 1997Edition);
- Regulations Governing Import of Commodities by Business Firms;
- Regulations Governing Registration a nd Administration of Exporters and
Importers;
- Regulations Governing Revenue, Expe nditure, Custody, and Use of Trade
Promotion Fund;
- Rules for Handling Import Relief Cases;
- Import Regulations Codes.WT/ACC/SPEC/TPKM/2/Rev.2
Page 3
Industrial Goods:
- Regulations Governing Export and Import of High-Tech Commodities;
- Operating Rules for Screening Applica tions to Import Fishing Vessels Using
New Fishing Methods;
- Requirements for Imported Drug Registration;
- Veterinary Drugs Control Act;
- Agro-Pesticide Act;
- Guidelines Governing the Applica tion 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 Pu rsuant to the Montreal Protocol.
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 Companie s 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 App lications to Import Wheat Flour and
Operation of the Stabilization Fund;
- Feeds Control Act;
- Guidelines Governing Applications to Import Aduki Beans;
- Screening Procedures and Criteria Governing the Issuance of Written Approval
for the Importation of Dried Betel Nuts (Ta-Fu-Tzu).
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.
Other Texts Affecting Trade:
General:
- Income Tax Law;
- Business Tax Law;
- Statute for Commodity Tax;
- Statute for Foreign Exchange Regulation;WT/ACC/SPEC/TPKM/2/Rev.2
Page 4
- Fair Trade Law.
Intellectual Property Rights:
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 Approv al of Compulsory License of Musical
Works;
- Organic Charter of the Copyright Ex amination and Mediation Committee of
the Ministry of Interior;
- Agreement for the Protection of Copy right between the Coordination Council
for North American Affairs and the American Institute in Taiwan;
- Agreement Concerning the Protecti on and Enforcement of Rights in
Audiovisual Works betw een the Coordination Council for North American
Affairs and the American Institute in Taiwan;
- Publication Law.
Trademark:
- Trademark Law.
Patent:
- Patent Law.
Standards, Quarantine, Inspection:
Standards:
- Provisional Standard for Hi-Fi and Stereo Equipment.
Quarantine:
- Quarantine Requirements for the Importa tion of Animal and Animal Products;
- Quarantine Regulations on Imported Fishery Products;
- Quarantine Restrictions on the Importa tion of Plants and Plant Products;
- Statute for Prevention and Control of Infectious Animals Diseases;
- Implementation Rules of the Statute fo r Prevention and Control of Infectious
Animals Diseases;
- Regulations Governing the Quarantine at International Ports.WT/ACC/SPEC/TPKM/2/Rev.2
Page 5
Inspection:
- Commodity Inspection Law;
- Enforcement Rules for the Commodity Inspection Law (Implementation Rules
of the Commodity Inspection Act).
Others:
- Commodity Labelling Law;
- Law Governing Food Sanitation;
- Enforcement Rules of the Law Governing Food Sanitation;
- Law for the Control of Cosmetic Hygiene.
Government Procurement:
- Law of Audit;
- Rules Governing Procuring Goods of Foreign Origin;
- Ordinance Concerning In spection Procedure Governing Construction Work,
Procurement and Dispos al of Properties by Government Agencies.
Others:
- Guidelines for Screening Applications fo r 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.
Trade in services:
Schedule of Commitments:
- Draft Schedule of the Separate Customs Territory of Taiwan, Penghu, Kinmen
and Matsu Concerning Initial Commitments on Trade in Services
(WT/ACC/SPEC/TPKM/3/Rev.3).
Banking:
- Banking Law;
- Guidelines for the Screening and Approv al of the Establishment of Branches
and Representative Offices by Foreign Banks.
Insurance:
- Insurance Law;
- Insurance Company Establishment Criteria;
- Criteria for Approving Foreign Insurance Enterprises and the Governing
Regulation;
- Central Reinsurance Corporation Act.WT/ACC/SPEC/TPKM/2/Rev.2
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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.
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 economicindicators were as follows:WT/ACC/SPEC/TPKM/2/Rev.2
Page 7Chinese Taipei’s Main Economic Indicators
Annual Changes in Prices Year GNP
(Billion US$)GNP per
Capita
(US$)*Annual Final Budget of
Central Government
(Billion US$)Consumer price
(%)Wholesale price
(%)Unemployment
Rate (%)Foreign
Exchange
(Billion US$)Export Statistics
(Billion US$)Import
Statistics
(Billion US$)
1993 226.2 10,852 42.7 2.9 2.5 1.5 83.6 85.1 77.1
1994 243.9 11,597 39.6 4.1 2.2 1.6   92.5 93.0 85.3
1995 263.0 12,396 42.9 3.7 7.4 1.8 90.3 111.7 103.6
1996 274.6 12,872 40.9 3.1 -1.0 2.6 88.0 115.9 102.4
1997 284.8 13.198 44.8 0.9 -0.5 2.7 83.5 122.1 114.4
- 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 des ignated  year.  The item excludes repayment of
government debt.WT/ACC/SPEC/TPKM/2/Rev.2
Page 8Chinese Taipei’s Expenditure on Gross National Product
Unit: Billion US$
Year Gross National
ProductGross Domestic
Product- Private
Consumption-Government
Expenditure- Gross Fixed
Capital Formation- Increase in
Inventory-Export of Goods &
ServicesImports of Goods &
Services
1993 226.2 222.6 126.8 35.6 52.7 3.3  98.5 94.3
1994 243.9 241.0 142.6 36.3 55.2 2.3 106.3 101.7
1995 263.0 260.2 155.7 37.8 59.7 1.9 126.9 121.8
1996 275.1 272.3 164.6 39.4 57.0 0.8 132.2 121.7
1997 284.8 283.3 172.1 41.0 59.4 3.0 139.5 131.7WT/ACC/SPEC/TPKM/2/Rev.2
Page 9
Chinese Taipei’s Employment Population by Sectors
Unit: 1000 Persons
Year Agriculture Sector Indust rial Sector Se rvices 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
1997 878 3,502 4,795
Chinese Taipei’s Balance of Payments
Year Current Account Capital Account Financial Account Reserves
1993 6,714 -328 -4,629 -1,541
1994 6,154 -344 -1,397 -4,622
1995 4,824 -650 -8,190 3,931
1996 10,481 -653 -8,802 -1,102
1997 7,776 -314 -8,154 728
5. He added that government policies had restructured the economy from agriculture towards
basic and heavy industries.  As part of an import substitution and integration process, intermediategoods industries were established.  Transportation was streamlined and large investments were madein new ports, airports and highways.  The Chinese Taipei authorities had also intensified ruraldevelopment and supported the moves to improve farm income.  More recently, industrial
restructuring was further promoted.  Educational institutions placed greater emphasis on science and
technology in order to provide a highly trained workforce.  In the 1990's, economic liberalization andthe internationalization of the economy had continued.  Infrastructure investments, the regulation ofpollution and the privatization of the economy had accelerated.  Employment had shifted from theagricultural sector to the industrial and service sectors.  The representative of Chinese Taipei alsostated that when Chinese Taipei initiated its import-substitution strategy, exports were mostlycomposed of sugar, rice, bananas, tea and processed agricultural products.  Few industrial productswere sufficiently competitive for export.  Gradually the import substitution industries became capableof 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 itemsWT/ACC/SPEC/TPKM/2/Rev.2
Page 10
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 1997
TOTAL 85,091,458 93,048,783 111,658,800 115,942,064 122,080,673
Recent total imports value in US$000 was as follows:
YEAR 1993 1994 1995 1996 1997
TOTAL 77,061,203 85,349,194 103,550,044 102,370,021 114,424,665
6. Referring to the direction of the future economic policies, the representative of ChineseTaipei said that overall global economy expanded steadily in 1997, in contrast, Chinese Taipei’seconomy reached its slowest growth rate that year at 6.8 per cent, the highest in six years.  Economic
growth for 1995 and 1996 had been 6.0 per cent and 5.7 per cent respectively.  The upturn in Chinese
Taipei’s economy could be attributed to strong private investment and consumption.  In 1997 inflationwas low at the rate of 0.9 per cent, compared with 3.7 and 3.1 in 1995 and 1996.  Trade surplus in1997 was US$7.7 billion.  For 1998, the economy of Chinese Taipei was expected to grow 5.3 percent, with per capita GNP expected to reach almost US$12,030 and consumer prices to rise 1.9 percent.  Nevertheless, these expectations would 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 strength in private consumption, steady improvement in the investment climate and greaterprivate investment in public projects.  In his statements he also outlined the sectors where Chinese
Taipei would need transition periods to bring sp ecific measures into full conformity with WTO
obligations and said that Chinese Taipei was re ady to assume obligations comparable to those
undertaken by WTO Members with a comparable level of economic development.  The representative
of Chinese Taipei stated that his government would not claim any right granted under WTOAgreements to developing country Members or to a Member in the process of transforming itseconomy from a centrally-planned into a market, free-enterprise economy.
7. 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 ofthe economy, Chinese Taipei had transformed itself into one of the world's most dynamic tradecentres.  Chinese Taipei's membership of the WTO would strengthen the multilateral trading system.WT/ACC/SPEC/TPKM/2/Rev.2
Page 11
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 theWTO required full observance of the MFN and nati onal treatment principles, in particular, GATT
1994 required the grant of any advantage, favour, privilege or immunity granted by any contractingparty to any product originating in or destined fo r any other country, whether or not a contracting
party, to products originating in or destined for the territories of all other contracting parties.  Similar
MFN requirements applied in respect of the General Agreement on Trade in Services (GATS) and the
Agreement on Trade-Related Aspects of Intellectual Property (TRIPS).  It also required the taking ofcomprehensive market access commitments on goods, including agricultural products, and services,which would be reflected in the respective schedules of concessions and commitments annexed to theDraft Protocol of Accession.  Several members of the Working Party were of the view that ChineseTaipei should assume a level of obligations commensurate to that of the developed economy originalMembers of the WTO, and that Chinese Taipei should apply the WTO Agreement fully from the dateof accession, without recourse to any transition periods.
8. The representative of Chinese Taipei acknowledged the importance of observing the
principles of MFN and national treatment in the WTO and the broad scope of that obligation.  Hestated that upon accession Chinese Taipei would fully observe its MFN and national treatmentobligations in respect of any advantage, favour, privilege or immunity granted to WTO Members orother countries or separate customs territories, unless specifically exempted from its GATScommitments.
IV. ECONOMIC POLICIES
Foreign Exchange Policies
9. 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 companyor individual could freely settle foreign exchange with authorized banks up to an amount ofUS$50 million and US$5 million respectively per year.  As for non-residents, any non-resident couldopen a NT dollar account with local commercial banks.  However, foreign financial institutionsoutside the territory of Chinese Taipei could only deposit locally earned revenue of NT 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 determinedWT/ACC/SPEC/TPKM/2/Rev.2
Page 12
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 purchasethe 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 foreignexchange 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 Taipeiforeign currency call loan market.  Since 1991, forward foreign exchange transactions had been
permitted.  The representative of Chinese Taipei said that these requirements would be gradually
phased out as market conditions permitted.  He expressed the view that Chinese Taipei's foreignexchange practices were fully consistent with Article XV of the GATT 1994.
10. 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 Agreementas provided for in Article XV:6 of the GATT 1994 incorporating obligations consistent with FundArticle VIII.  Some members also expressed concern that elements of Chinese Taipei's foreignexchange system provided scope for practices that distorted trade flows.  The representative ofChinese 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 hadnegotiated 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.
Pricing Policies
11. 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 toimports, they requested a full list of the products subject to price controls, and the plans to eliminatesuch price controls.  In response the representative of Chinese Taipei stated that price controls applied
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 onessubject to price controls.  In relation to the sale of tobacco and alcoholic beverages, the representativeof 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 liquefiedgas were subject to price controls in order to maintain stability in energy prices.  Salt, sugar andfertilizer were subject to price controls to stabilize farmers' income and production costs.  ChineseWT/ACC/SPEC/TPKM/2/Rev.2
Page 13
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 FertilizerCompany, and the Taiwan Salt Industrial Corporation.  Some members of the Working Party notedthat they could see no justification for price controls on sugar and salt.  In response, the representativeof Chinese Taipei stated that the price controls on salt were expected to be abolished by end of theyear 2001.   Domestic sugar prices were set by Taiwan Sugar Corporation, which was the sole
supplier of sugar.  The sugar price set by Taiwan Sugar Corporation took into account the price at
which Taiwan Sugar purchased sugar cane from local growers (which was set 10 years ago accordingto the farmers' production cost at that time), and its own cost of production.   The domestic sugar pricehad been decreasing, as the increase in import of sugar (the cost of which was lower), helped to bringdown Taiwan Sugar's cost.  Industrial users of sugar we re consulted, in order to ensure that the price
control would not seriously affect their competitiveness.  There was no discrimination between caneand beet sugar.  The price control system would be replaced by the implementation of a tariff ratequota system.  The private sector would be free to import sugar at out-quota tariff rates.  Moreover, acertain percentage of the tariff quota would be allocated to private sectors.  Therefore, importation of
sugar would not be subject to monopoly.  It was expected that the oil product market would be fully
liberalized by the end of June 2000.  It was not Chinese Taipei's policy to add to the list of productssubject to price control set out in Attachment A to this Draft Report, unless the economy or a specificsector thereof was in serious difficulty or in a state of emergency.
12. 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 inAttachment A to this Draft Report, and to any other product, would be applied in a WTO-consistentfashion, taking account of the interests of exporting WTO Members as provided for in Article III:9 ofthe 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.
V. FRAMEWORK FOR MAKING AND ENFORCING POLICIES
Powers of Executive, Legislative and Judiciary, Administration of Policies on WTO-related 
Issues
13. In response to requests for information, the representative of Chinese Taipei stated that the
subject matter of international trade, including all matters covered by the WTO Agreements fellwithin the power of the central government.  In the event that measures taken by the sub-centralWT/ACC/SPEC/TPKM/2/Rev.2
Page 14
government had an impact upon international trade, those measures became subject to regulation by
the central government and the central government could overrule or invalidate measures of sub-central governments.  By way of example, he noted that the procurement decisions of sub-centralgovernment were subject to the disciplines of the Government Procurement Law made by thecentral government.  He further noted that a natural or juridical person whose rights and interests ina matter relating to issues covered by the WTO Agreements are impaired by an administrativeaction in Chinese Taipei is permitted to appeal such action.  In cases of administrative actionallegedly contrary to law, such appeal would be to the Administrative Court.  In cases of anadministrative action that is allegedly improper, but not illegal, an appeal committee, organised by ahigher administrative level, drawn from government officials not involved in the enforcement of thematter at issue, experts from academia and other experts, would review the matter and recommenda correction to the administrative action.
14. 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 wouldbring its foreign trade laws and regulations into conformity with WTO provisions at the time ofaccession.  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.
15. The representative 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 theWTO, unless specifically provided in this Draft Report and Protocol.   Further, central authorities
would eliminate or nullify measures taken by sub-central authorities in Chinese Taipei that areinconsistent with WTO provisions from the date of accession. A list of some of the laws that wouldbe amended as part of Chinese Taipei's implementation of its obligations is reproduced inAttachment E to this Draft Report.  The Working Party took note of this commitment.
VI. POLICIES AFFECTING TRADE IN GOODS
16. 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.WT/ACC/SPEC/TPKM/2/Rev.2
Page 15
Import Regulations
Registration of Importers and Exporters
17. 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 Taipeiconditioned registration as an importer or exporter on being an enterprise in Chinese Taipei andmeeting a NT$5 million minimum capital requirement.  These members of the Working Party statedthat 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 registration
should be automatic, open to all individuals and enterprises interested in engaging in import/exportwithout regard to investment or establishment in Chinese Taipei and conform to WTO rules.
18. 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 minimumcapital requirement had been abolished in September 1997.  With the elimination of that capitalrequirement, the only condition for importer/exporter  registration was that the enterprise list import
and/or export activities in its profit-seeking enterprise registration certificate.  No fee was charged for
the registration.  Chinese Taipei however would like to retain the registration system, which operated
as an automatic licensing procedure pursuant to the Agreement on Import Licensing
19. The representative of Chinese Taipei stated that any enterprise including sole
proprietorships,  interested in importing and/or exporting and having included in its profit-seeking
enterprise registration certificate export/import or buying/selling as a business item, would bepermitted to register as an importer/exporter.  Registration as a profit-seeking enterprise requiredmaintenance of an address in Chinese Taipei, but did not impose minimum investment or similarrequirements.  The registration system to become an importer/exporter would conform to WTOrules, including the automatic licensing provisions of the Agreement on Import Licensing, andwould not restrain trade.  The Working Party took note of these commitments.
Advertising and Trade in Alcohol and Tobacco Products
20. 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 on television and radioWT/ACC/SPEC/TPKM/2/Rev.2
Page 16
during specified times.  While beer and wine could be advertised in magazines and newspapers, spirits
could not be advertised in these publications.  New spirits products could be advertised in magazinesfor a period of one year following their release onto the market.  The representative of Chinese Taipeialso said that advertising of tobacco products was governed by the Tobacco Hazard Prevention Act,which came into force on 19 September 1997.   The rules on the advertising of tobacco products areprovided in Article 9 and 10 of the Tobacco Hazard Prevention Act.  The rules set out in these twoarticles prohibit the use of certain methods for the promotion or advertising of tobacco products,
restrict the use of periodicals as a medium for the promotion or advertising of tobacco products to 120
items per year in periodicals, the types of activities or sponsorship permitted under the name of atobacco company, and the display of tobacco products.
21. 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 furtherconfirmed 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.
22. 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 ofimported 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 Taipeiconcerning 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 ofwhatever 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
23. 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 aMFN 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/Rev.2
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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'stariff had two columns of duty rates.  The differential duty rates in Column II were applied to importsfrom 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 almost98 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, Zimbabwe and The Kyrgyz Republic. The representative of Chinese Taipei undertook that
upon accession to the WTO, MFN treatment would be extended to all WTO Members applying theWTO rules to Chinese Taipei. He added that between 1984 and 1992, the tariff had been revisedacross-the-board and duty rates have been lowered by some 50 per cent.  During that same period, 668items had become duty free, and 13165 items had their duty rates reduced. An additional tariffreduction in 1995 had further reduced duty rates on 758 items, with an average duty reduction of 2.8per cent.  Besides, the duty rates of 1,358 items had been further reduced in 1998 including 289 itemsin accordance with the WTO Ministerial Declaration on Trade in Information Technology products onDecember 1996.  Further reductions for 750 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 8.25 percent in 1998.
24. In response to further questions, the representative of Chinese Taipei indicated that in 1998
out of a total of 8,399 dutiable items, 42 items were subject to specific duties and 114 items weresubject to mixed duties.  The remaining 8,243 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
25. Members of the Working Party requested information on Chinese Taipei's proposed new tariff
rate quota system.  In response, the representative of Chinese Taipei stated that following revision ofits system of import restrictions on certain imported products, Chinese Taipei had decided tointroduce a system of tariff rate quotas as described in paragraphs 27-35 below. The representative ofChinese Taipei provided further information on that scheme in documentWT/ACC/SPEC/TPKM/2/Rev.2
Page 18
WT/ACC/SPEC/TPKM/5/Rev.1 and Corr.1-3. and WT/A CC/SPEC/TPKM/7 and Corr.1.  He further
noted that each tariff rate quota would be  recorded in the relevant part of Chinese Taipei's  Scheduleof Concessions (Part I of the Annex to  the Draft Protocol of Accession ).
26. The representative of Chinese Taipei stated that for the agricultural and fish products that
were subject to a tariff rate quota regime after Chinese Taipei accedes to the WTO, the quota wouldbe allocated according to the following methods described in paragraphs 27-35 below, which wouldbe implemented  consistently with relevant WTO rules.
27. The representative of Chinese Taipei stat ed that Tariff Rate Quota (TRQ) allocation
certificates, as import licences, would be in compliance with the Agreement on Import LicensingProcedures. All commercial terms of trade, including product specifications, origin, pricing,packaging, etc. would be at the sole determination of the parties engaged in the transaction.  Partial
shipments against a single allocation will be permitted.  Traders would be allowed to import anyproduct or mixture of products subject to the same TRQ as noted in the tariff schedule.  All productsimported under the TRQ could be distributed freely within Chinese Taipei without further trade-basedrestrictions.  Allocation certificates will be freely transferable and tradable, and certificate holderscould have certificates reissued to combine or divide allocations.
28. The representative of Chinese Taipei stated that all applications for allocation of TRQ
quantities would be submitted to the Ministry of Finance (MOF).  Any enterprise registered as animporter/exporter in Chinese Taipei would be eligible to apply for certificates under each of the quoteallocations systems.  Any domestic or foreign enterprise, including sole-proprietorship, meeting therequirements set out in paragraph 27 would be permitted to register as an importer/exporter in ChineseTaipei.  Specific conditions for applying for a TRQ allocation would be published in the officialjournal sixty days in advance of the start of the application period.  The application period for initialallocations should be closed by 30 November of the previous year, unless the timing of accessionnecessitated a change in schedule for the first year.  The application period for reallocations of unused
quotas would be closed by 1 September.  The MOF would grant allocations and publish and notify the
names of recipients and allocations within two weeks of the close of the application period for thepurpose of transfer.
System 1
29. The representative of Chinese Taipei stated that the allocation of tariff quotas would be made
as follows.  System 1 (for quotas of chicken meat, pork offal, poultry offal, deer velvet, fresh pears(excluding European pears), bananas, and pork belly under System 1), the initial distribution ofWT/ACC/SPEC/TPKM/2/Rev.2
Page 19
allocations for the first two years, certificates would be issued on a first-come, first-served basis.
Allocations would be established for commercially viable shipping quantities, but a ceiling of no morethan 20 per cent of the total in-quota quantity would be established in advance and published as partof the allocation notification procedures.  Allocation certificates would be valid for product arrivingbetween 1 January and 1 September.  The date of arrival would be defined in accordance withArticle 5 of the implementing regulations of the Customs Law of Chinese Taipei as currently in place.Upon request and proof of signed contract before 1 September, MOF would automatically extend the
validity date of the certificate to cover products arriving on or before 31 December.
30. With respect to the reallocation of unused allocations under System 1, the representative of
Chinese Taipei stated that in any year, if the holder of a quota allocation certificate had not contractedfor import of the holder’s total allocation by 1 September, the unused portion of the allocation wouldbe reallocated on a first-come, first-served basis.  The date of re-issue would be no later than 15September.  The re-issued allocation certificates would be valid for products arriving on or before 31December.
31. The representative of Chinese Taipei stated that  after the first two years, and in each year  in
which allocations were made under System 1, applicants for an allocation of the quota would receive
an allocation at least as large as the average of the amount actually imported by the applicant in the
prior two years.  Any remaining quota amounts or increases in the quota amount would be allocatedon a first-come, first-served basis. any and all fees, charges, deposits, duties, etc. associated with theallocation process would be made explicit in the advance public notification process, and with theexception of ordinary customs duties, would be commensurate with the cost of the services rendered.A performance bond would be required to ensure complete utilization of the allocations.  The bondwould be returned to the applicant after the app licant imports its allocation before its allocation
certificate expires.  The bond would  not be set at a level which could deter full utilization of the TRQor otherwise restrict trade.
System 2
32. In relation to quotas of red bean, liquid milk and peanuts, under System 2, the representative
of Chinese Taipei stated that the initial distribution of allocations would be distributed once a year.Allocations would be established for commercially viable shipping quantities, but a ceiling of no morethan 20 per cent of the total in-quota quantity woul d be established in advance and published as part
of the allocation notification procedures.  The re-allocation process would commence immediatelyafter a period of twenty-one days for notification.  Allocations would be made through a competitiveprocess.  An applicant would need to bid by mail in order to obtain its allocation.  Bids submittedWT/ACC/SPEC/TPKM/2/Rev.2
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would be arranged in a priority order according to the premium of the bid, which is the amount a
bidder is willing to pay for each unit of the allocati on it bids for.  Quota would be allocated in this
order until filled.  In situations where some bids offer the same amount of premium and the quotaavailable were not sufficient to fill each of such bids, the quota would be allocated on a pro rata  basis.
Successful bidders for allocations would be required to obtain their allocation certificates by paying anon-refundable premium within thirty days.  The MOF would re-allocate the allocations of those
failing to pay the premium accordingly.  Such reallocation process would commence immediately
after a period of twenty-one days for notification.
33. Concerning the reallocation of unused allocations under System 2, the representative of
Chinese Taipei stated that  except otherwise provided for in the preceding paragraph, by 1 September,the unused portion of the allocation,  would be reallocated through a competitive process.  The date ofre-issue would be no later than 15 September. The re-issued allocations would be valid for productsarriving on or before 31 December.
System 3
34. Concerning quotas of garlic bulbs, dried shiitake, dried day lily, young coconut, betel nuts,
pineapples, mangoes, shaddocks, persimmons, dried longans and longan pulp, sugar (private sector),
mackerel, carangid, and sardine (herrings)), under System 3, the representative of Chinese Taipei
stated that the annual distribution of allocation would be divided into one to four segments fordistribution.  Allocations would be established for commercially viable shipping quantities, but aceiling of no more than 20 per cent of each segment would be established in advance and published aspart of the allocation notification procedures.  In addition to the announcement made in the previousyear on the number of segments and the quantity of each quota segment announcements would bemade twenty-one days in advance of the start of the application period for each segment amount.
Allocations would be made through a competitive process.  An applicant would be required to to bidby mail in order to obtain its allocation.  Bids submitted would be arranged in a priority order
according to the premium of the bid, which is the amount a bidder would be willing to pay for each
unit of the allocation it bids for.  Each segment of the quota would be allocated in this order untilfilled. In situations where some bids offer the same amount of premium and the segment of quotaavailable were not sufficient to fill each of such bids, the segment of quota would be allocated on apro rata  basis.  Successful bidders for allocations are required to obtain their allocation certificates by
paying the non-refundable premium within thirty da ys.  The MOF would re-allocate the allocations of
those failing to pay the premium accordingly.   Such re-allocation process would commence
immediately after a period of twenty-one days for notification.WT/ACC/SPEC/TPKM/2/Rev.2
Page 21
35. The representative of Chinese Taipei noted that except as otherwise provided for in the
preceding paragraph, by 1 September, the unused portion of the allocation would be reallocatedthrough a competitive process.  The date of re-issue would be no later than 15 September. The re-issued allocations would be valid for products arriving on or before 31 December.
36. The representative of Chinese Taipei stated that the new Tariff Rate Quota system described
in paragraphs 27-35 above would be implemented by the date of Chinese Taipei's accession to theWTO.  The Working Party took note of this commitment.
37. The representative of Chinese Taipei stated th at with a view to maintaining a transparent and
open TRQ administration system, upon request from any WTO Member, Chinese Taipei wouldconsult with the Member on the administration of TRQ to ensure that the quota would be allocated ina transparent, equitable, and non-discriminatory manner and the quota would be fully utilized.  TheWorking Party took note of this commitment.
38. Some Members of the Working Party expressed concern that Chinese Taipei’s intention to
allocate tariff quota access by competitive processes may not be consistent with Chinese Taipei’stariff commitments.  While acknowledging that there was discussion taking place within the WTO onthe legality of auctioning or tendering of market access entitlements, these Members were of the view
that premiums associated with this method of allocation represented charges imposed on or in
connection with imports that were inconsistent with commitments undertaken by Members underArticle II:1(b) of GATT 1994.  These Members soug ht assurances that Chinese Taipei would modify
its tariff quota allocation system should it be demonstrated in the WTO that charges associated withallocation by competitive processes were WTO inconsistent.
39. The representative of Chinese Taipei stated that should it be demonstrated in the WTO that
charges associated with allocation by competitive processes were WTO inconsistent Chinese Taipeiwould promptly modify its tariff quota allocation system to bring it into conformity with WTO
requirements.  The Working Party took note of these commitments.
Other Fees and Charges (Article II:1(b))
40. 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.WT/ACC/SPEC/TPKM/2/Rev.2
Page 22
Fees and Charges for Services Rendered
41. 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 of0.05 per cent, and was levied on all imports and exports exclusively to promote import and exporttrade.  He stated that the Trade Promotion Fee was a very small charge, no more than 0.05 per cent ofcustoms 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 appearto be consistent with Article VIII of the GATT 1994.  In response to questions concerning theHarbour Construction Due, the representative of Chinese Taipei explained that the customs authoritiescollected 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 0.4per cent and did not apply to inter-island trade.
42. 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 Party
considered that the levy and fee discriminated against imports because they were only applied toimported goods and not to like domestic products and they were not in conformity with Article III ofthe 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 theapproximate cost of the services rendered.  The representative of Chinese Taipei said that both theHarbour Construction Dues and the trade promotion fee applied to imports as well as exports.  In hisview, 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 providefinancial assistance to the cities where the harbours are located.  Upon accession to the WTO, therevised Commercial Port Law would require that any revenue generated through the HarbourConstruction dues be used exclusively for the development of commercial harbours.
43. Some members of the Working Party stated that the levy of 0.4 per cent was a revenue charge
to fund harbour up-keep and expansion based on import taxation, and was not a charge for specificservices rendered.  This levy and the trade promo tion fee should be brought into conformity withWT/ACC/SPEC/TPKM/2/Rev.2
Page 23
GATT 1994 in advance of Chinese Taipei's accession.  The representative of Chinese Taipei
responded 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 thecomments 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 VIIIof 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 consultwith the Members concerning the effect of these measures on their trade.
44. 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.
45. Some members expressly reserved the right to pursue this issue pursuant to the WTO
Understanding on Rules and Procedures Governing the Settlement of Disputes.
46. The representative of Chinese Taipei stated that Chinese Taipei would require a transitional
period until 1 January 2001 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 tomodify the budget plans to compensate for the anticipated revenue losses resulting from themodification of the levy.
47. 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 by 1 January 2001.The Harbor Construction Dues would be based on the cost of the services provided and not appliedon an ad valorem  basis.  The Harbour Construction Dues would also be applied to all trade,
including inter-island trade.  Within the same time-frame Chinese Taipei would exclude thesecharges from the valuation base for the application to imports of domestic taxes, such as theCommodity Tax and the Tobacco and Alcohol Tax.  During this transitional period, the HarbourConstruction Dues would not exceed 0.4 per cent of the taxable base.  The Working Party took noteof these commitments.WT/ACC/SPEC/TPKM/2/Rev.2
Page 24
Internal Taxes Applied to Imports
48. 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
49. 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 wasimposed on imported goods at the time of importation, and on like domestic goods upon their release
from 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 harbourconstruction dues multiplied by the tax rate.  For domestic goods, the amount of the tax wascalculated on the basis of one of two methods.  The first method applied when the manufacturer soldproducts 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 thecommodity tax were: rubber tires, cement, machine-made cool drinks, flat glass, oil and gas, certainelectric appliances and motor vehicles.  Chinese Taipei believed that many Working Party membershad 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 expenses
when goods were circulated not through an exclusive wholesaler or distributor.  Chinese Taipeiconsidered that it treated imported goods the same as the goods sold through distributors, and did notdiscriminate against imports.  The commodity tax was a special excise tax.  The determination of thetax base had taken into account common practices.  The 12 per cent deduction only applied if thedomestic sales were not through a sole distributor.  In response, some Working Party members notedthat a critical consideration in the application of this internal tax was consistency with nationaltreatment and other WTO obligations and the avoidance of subsidization.
50. 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 ofdelivery and transfer of the goods to the wholesale level whereas the base for imported goods was theimport value plus transportation, insurance and other customs charges and customs duty.  They alsonoted that domestic goods profited by having an additional 12 per cent deduction for promotionalexpenses prior to the calculation of the tax.  These members of the Working Party considered thatChinese Taipei should address the central issue of equal application of the tax.  The bases forcalculation of the tax were inequitable, and the incorporation of a 12 per cent differential in theWT/ACC/SPEC/TPKM/2/Rev.2
Page 25
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 thedifferent 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 anydomestic tax measures or methods of applying domestic taxes whose applications vary according towhether the items are locally manufactured or imported.
51. 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, thetax would be calculated on the basis of the sale price.  The sale price was the manufacturer'swholesale price for the current month; if the manufacturer sold directly to retailers, wholesale profitcould be deducted from the selling price.  Deductible wholesale profit rate was determined on anindustry-by-industry basis.  Imported goods were taxed on the basis of their CIF value and thereforewere 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 statedthat the current practice of assessing the commodity tax based upon engine displacement ofautomobiles and the licence plate tax was fully consistent with Article III of the GATT 1994.  Somemembers of the Working Party were of the view, however, that application of a tax based oncharacteristics such as engine displacement could de facto discriminate against imports.
52. The representative of Chinese Taipei stated that Chinese Taipei would amend its laws to
remove the 12 per cent allowance provided when goods were circulated not through an exclusivedistributor, and would use selling prices as the base for levying the commodity tax.  He further statedthat Chinese Taipei would eliminate by the date of its accession any domestic taxes, tax assessmentmethods or application of them which was inconsistent with Article III of the GATT 1994.  TheWorking Party took note of these commitments.
Business Tax:  Gross Business Receipt Tax and VAT
53. 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 Chinese Taipei said that Business Tax applied to thesale of goods and the rendering of services.  The tax was levied in two forms.  The first form was ageneral 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 businessWT/ACC/SPEC/TPKM/2/Rev.2
Page 26
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 generallytaxed at the point of sale.  Revenue from both kinds of tax imposed on imported goods had
represented 1.98 per cent of total tax revenue in 1997 (1 July 1996 to 30 June 1997).  Chinese Taipeiconsidered that the imposition of the tax at the point of sale simplified the procedure by levying thetax 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 business VAT 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 furthernoted that because the tax paid on inputs could be deducted from the tax paid on outputs collectedfrom purchases, goods imported for use and goods imported for resale were not differentiated at thetime of importation.  In relation to the tax base for calculation of the amount of business VATpayable, the representative of Chinese Taipei noted that imported goods were taxed on the basis of thecustoms duty paid value plus the commodity tax, if applicable.  The harbour construction dues wouldbe 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 busines s 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 doublecounting or "tax-on-tax".  He added that Chinese Taipei, after examining whether all goods could betaxed at the time of importation, had found that it was common practice in those economies whichimposed VAT to levy the tax at the time of importation.
Monopoly tax on tobacco and wine
54. 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 subject
to a Monopoly Tax, in lieu of customs duty, harbour construction fees, commodity tax andvalue-added business tax.  The Monopoly Tax imposed on domestic tobacco and wine products wasassessed 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 salestax.  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 thatChinese Taipei provide information on cost of production, and indicate how the TTWMB'smethodology to determine the tax rate complied with the GATT 1994, in particular Articles I, III, X,WT/ACC/SPEC/TPKM/2/Rev.2
Page 27
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.
55. 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 toaccurately 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 theMonopoly Tax adequate, substantiated and verifiable.  It was not possible to conclude that domesticand imported products were taxed in an equivalent manner.  As there were large discrepanciesbetween 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 wineand 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 oftransparency mentioned above, there were problems in assessing the consistency of the MonopolyTax system with the GATT 1994.  Nevertheless the Monopoly Tax for imported wine, cigarettes anddistilled 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 ofthe TTWMB be altered prior to Chinese Taipei's accession, to enhance transparency and to operate ina 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 onimported products tended to be lower than the tax applied to domestic products.  In any event, theLegislative Yuan was determined to repeal the tobacco and wine monopoly system.  Alcohol andtobacco products were classified according to production methods and other features, with differenttariff rates and taxes applying to different products.  Classification and tariff and tax rates werecarefully monitored in order to ensure that no discrimination occurred between domestic and importedgoods.WT/ACC/SPEC/TPKM/2/Rev.2
Page 28
56. 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 asituation 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.  Heprovided 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 beimplemented 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 the
new laws.
57. The representative of Chinese Taipei stated that, upon accession, the Monopoly Tax would be
abolished and that tobacco and alcohol products would be subject to (i) import duties as reflected inChinese Taipei's Schedule of Concessions (Part I of A nnex I to the Draft Protocol of Accession) in the
same manner as other imported products, (ii) the tobacco and alcohol tax, and (iii) business tax.  Therepresentative of Chinese Taipei also stated that from the date of accession internal taxes and chargesof whatever character related to trade and dist ribution 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 ow nership of the enterprise.  The Working Party took
note of these commitments.
Quantitative Restrictions
Area restrictions
58. 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 theUnited States; (ii) lemons and limes, grapes, plums, whole ducks, turkey cuts: issuance of importlicenses 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 Canada
were free; imports from other areas were subject to quantitative restrictions.  In response to requestsfrom Members for updated information on area restrictions, the representative of Chinese Taipeistated that as of May 1999, (i) peaches: limited to imports from Europe and the United States, importsfrom Australia and New Zealand were limited in quantity; (ii) lemons and limes: limited to importsfrom the United States; imports from Argentina, Australia and European Union were limited inquantity; (iii) grapes: limited to imports from the United States; imports from Chile were limited in
quantity; (iv) plums: limited to imports from the United States; imports from Australia, Chile andWT/ACC/SPEC/TPKM/2/Rev.2
Page 29
New Zealand were limited in quantity; (v) whole ducks, turkey cuts: issuance of import licenses was
suspended except for imports from the United States; (vi) oranges: imports from the United Stateswere free, imports from Australia, European Union and South Africa were limited in quantity; (vii)other mandarins, including tangerines and satsumas: imports from the United States were free,imports from European Union and Japan were limited in quantity; (viii) grapefruits: imports from theUnited States were free, imports from Argentina, Australia and South Africa were limited in quantity;(ix) apples: imports from the United States and Canada were free; imports from Argentina, Australia,
Chile, European Union, France, Japan, New Zealand and South Africa were limited in quantity.
There were also restrictions on cigarettes and bilateral agreements on the importation of beer, wineand cigarettes.  In the view of some Members, the area restrictions and similar exclusive accessaccorded for additional agricultural products were discriminatory trade measures inconsistent with theGATT 1994 and, in particular, the MFN principle.  Those members emphasized that there was nojustification to permit the continuation of such disc rimination.  Chinese Taipei should eliminate those
measures from the date of its accession to the WTO.
59. In response the representative of Chinese Taipei said that the area restrictions and similar
measures operated to maintain the diversity in the origin of imports and to maintain trade balanceswith certain areas, or to facilitate agriculture restructuring. Only a small percentage of industrialand agricultural products were subject to the discriminatory restrictions. Area restrictions foralcoholic beverages and cigarettes had been eliminated on 1 September 1994.  The tariff rate quotasoffered as a liberalization measure to be implemented after accession for certain agriculturalproducts and certain fish products would be distributed as described in paragraphs 27-35 throughprocedures consistent with the relevant provisions of GATT 1994 and the Agreements onAgriculture and Import Licensing Procedures.
60. 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 beimported into Chinese Taipei.  The representative of Chinese Taipei agreed that this restriction wasdiscriminatory.  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 notsubstantial enough to allow for economies of scale.  The total production value in 1992 was US$8.2billion, 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 ofthe market would result in serious economic and social problems.WT/ACC/SPEC/TPKM/2/Rev.2
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61. 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, therepresentative of Chinese Taipei undertook to eliminate the area restrictions on automobiles.  Up tonow the liberalisation of car imports had proceeded as follows:  (i) heavy trucks could be importedfreely from February 1994;  (ii) passenger cars could be imported without quantitative restrictionsfrom North America and Europe (excepting Eastern Europe).  Passenger cars from other areas werecurrently 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 Partythat 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 automobileimports.
62. 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 preferencesin 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. He confirmed that area restrictions for alcoholic beverages and cigarettes had beeneliminated from 1 September 1994.
63. The representative of Chinese Taipei stated that area restrictions applying to imports of
certain passenger cars and certain small commercial vehicles, certain automobile chassis andmotorcycles would be eliminated upon Chinese Taipei's accession to the WTO.  Passenger cars,  light
commercial vehicles and certain fish products were  the only industrial products that would be subject
to tariff-rate quotas after WTO accession.  For passenger cars and light commercial vehicles, the tariffrate quotas would be increased at the annual rate of 20 percent.  If Chinese Taipei became a WTO
Member before or on 31 December 1999, the tariff rate quota system would be eliminated no later
than 31 December 2006.  If Chinese Taipei acceded to the WTO on or after 1 January 2000, thetransition period of the tariff rate quota system w ould  be eight years after the accession year. Chinese
Taipei also undertook that upon its accession, area restrictions on agricultural products, except youngcoconut which will be subject to tariff rate quotas, would be eliminated.  These tariff rate quotaswould be administered in a manner consistent with the requirements of the WTO Agreement, inparticular the Agreement on Agriculture, the Agreement on Import Licensing Procedures and GATT1994.  The Working Party took note of these commitments.WT/ACC/SPEC/TPKM/2/Rev.2
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Import Licensing
64. 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 27items, non-automatic import licensing affecting some 246 items, including 27 items which weresubject 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 importrestrictions inconsistent with the GATT 1994 and the WTO Agreements, in particular the Agreementson Agriculture, Sanitary and Phytosanitary Measures and Technical Barriers to Trade.
65. 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 licensewithout 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 inrespect of products falling within their respective jurisdictions.  Once the importation was approved,the Board of Foreign Trade issued an import license.
66. 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-existinglicensing requirements, except in cases where the product had national security, public order, publichealth, or environmental protection implications.  The Negative List would result in the issuing oflicenses 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 toquantitative restriction or import ban under the Negative List system, due to the re-categorisation ofthose items.  For products subject to import monopolies, consent letters would only be granted toimporters enjoying an import monopoly.  The procurement practices of the government agenciesenjoying the import monopoly would be made consistent with Article XVII of the GATT 1994.WT/ACC/SPEC/TPKM/2/Rev.2
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67. 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 Subjectto Import Control) or in Table II (Table of Commodities Subject to Conditional Import).  Items listedin Table I could not be imported unless specially approved by the Board of Foreign Trade or otherrelevant authorities, which were listed in Import Regulations 111/112.  Items listed in Table IIrequired that an import license be issued prior to importation, by the Board of Foreign Trade or itsdesignated licensing banks i.e. Import Regulations 121/122.  Tables I and II constituted the Negative
List.  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 thatall requirements for importation were fulfilled.  The items subject to that requirement were listed inthe "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 byHS Code number.  The Negative List and the Entrusted List each accounted for 8 per cent of tarifflines, the remaining tariff items were free of this requirement.  Items contained in Table I were subjectto 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 bans
necessary to protect domestic sectors, an entitlement to import the necessary quantity could beauctioned when domestic production fell short of demand.  He stated that upon accession, the itemslisted in Table I could be moved to Table II if quotas or tariff quotas are used as transitional measures.
68. 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 wasArticle 11 of the Foreign Trade Act, which permitted the imposition of a restriction if the restrictionwas necessary to fulfil obligations under international treaties or trade agreements, or for national
defence, 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 procedureto ensure WTO consistency.  Although the legislation did not specifically provide for interestedparties 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 invitinginterested parties to express their view when considering changes to the Negative List would becontinued.  Following accession to the WTO, the number of items included in the negative list wouldbe 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 typesWT/ACC/SPEC/TPKM/2/Rev.2
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of 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.
69. 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, whichin 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 onImport 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 oneregulatory entity only.  Some members of the Working Party said that all import bans, quantitativerestrictions 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 theprovisions of the WTO, the onus was on Chinese Taipei to demonstrate this.  They requested ChineseTaipei 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 ofthe 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 therelevant national standard(s) and any international standard(s).  The Working Party would then be in aposition 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.
70. 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.  Therepresentative of Chinese Taipei undertook to notify any changes introduced to the Consolidated Listin accordance with the Agreement on Import Licensing Procedures.  The Working Party took note ofthese commitments.WT/ACC/SPEC/TPKM/2/Rev.2
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71. 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 thatChinese Taipei would eliminate all quantitative restrictions on these products from the date ofaccession, with the sole exception of import bans on mackerel, carangid and sardines.  The existingimport controls for mackerel, carangid and sardines would be replaced by tariff quotas which wouldbe distributed, as indicated in paragraphs 27-35, through procedures consistent with GATT 1994and the Agreements on Agriculture and Import Licensing Procedures.   The Working Party took
note of these commitments.
72. Some members of the Working Party noted the continued application of non-tariff measures
to imports of certain yachts and recreational fishing vessels and a ban on the importation ofmotorcycles, including those with reciprocating internal combustion piston engines of a cylindercapacity exceeding 150cc.  These members of the Working Party stated that the restrictions werenot justified under the WTO Agreement.  In addition, some members noted that Chinese Taipei hadnot developed appropriate emission standards for motorcycles over 150cc which in itself couldpreclude effective market access even if the formal ban was eliminated.  Finally, those membersnoted that Chinese Taipei restricted motorcycle access on certain major highways in Chinese Taipei.These issues would need to be addressed at the time the ban was eliminated to ensure effectivemarket access for these products.
73. The representative of Chinese Taipei stated that upon accession, Chinese Taipei would
implement a licensing system for recreational fishing vessels that conformed to the automaticlicensing provisions of the WTO Agreement on Import Licensing Procedures and would require
importers to have an approved abandonment/replacement right as applicable to domestically built
fishing boats.  He also stated that Chinese Taipei would eliminate the import ban on motorcycles over150cc six months after accession to the WTO and would permit their import.  At that time, ChineseTaipei would implement emission standards for motorcycles over 700cc comparable to internationalstandards.  The representative of Chinese Taipei al so stated that the restrictions on motorcycle access
to roads would generally apply only to the two major cross-island motorways in Chinese Taipei.  Hestated that restrictions on motorcycle access to roads would not be barriers to market access and thatChinese Taipei would consult, upon request of a WTO member, regarding road access restrictions andtheir effects.  The representative of Chinese Taipei further stated that Chinese Taipei would eliminate
the import ban on passenger cars equipped with diesel engines two years after accession to the WTO.
The Working Party took note of these commitments.WT/ACC/SPEC/TPKM/2/Rev.2
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74. 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 WTOAgreements, in particular with the Agreements on Agriculture and Import Licensing Procedures.Chinese Taipei would also ensure that the distribution of import licenses, quotas, tariff-rate quotas,permits or any other means of approval for importation or the right of importation by central andsub-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 localcontent or mixing requirements, the transfer of technology, the conduct of research anddevelopment, minimum export requirements, or on the origin or nature of the enterprise.  ChineseTaipei would ensure that price increases, if any, in respect of imports by state trading enterpriseswould be imposed in a manner consistent with the requirements of Article II:4 of GATT 1994 andArticle 4.2 of the Agreement on Agriculture.  The Working Party took note of these commitments.
75. 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 othernon-tariff measures having similar effect which were not justified under specific provisions of theWTO Agreement. He also noted that Chinese Taipei would not use measures related to customsprocedures and technical product or safety standards and sanitary and phytosanitary measures asdisguised barriers to trade and th at any measures applied will be no more restrictive than necessary
to accomplish their legitimate goals.  The Working Party took note of these commitments.
Customs Valuation
76. 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 1
of 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 invoiceprice did not include the cost adjustments provided under Article 12 of the Customs Law and theimporter failed to provide objective and quantifiable information to support the price calculation.  Inaddition, if the Customs had any doubts concerning the adequacy or accuracy of an invoice, itnormally requested the importer to provide an explanation or other evidence to substantiate thevalidity 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 priceactually paid or payable, the Customs could determine that the invoice price would not be accepted as
the customs value.  In such a circumstance, Article 12-2 to 12-6 of the Customs Law provided that theWT/ACC/SPEC/TPKM/2/Rev.2
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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 computedvalue; and, fifthly, any other reasonable value.
77. 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 itsCustoms 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.
78. 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 ofprices 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 ValuationAgreement, 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 beenacted.
79. 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 atransparent manner, were often changed without prior notice and no opportunity was provided forcomment on the rate established.  In the view of these members, this practice had the same effect asuse 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, theobligation under the Agreement on Customs Valuation.
80. The representative of Chinese Taipei stated that Chinese Taipei would continue to improve
its current practice of requiring importers to post bonds for prompt clearance of goods in order tomake the bond amount a closer reflection of the actual value of the goods.  Any bond paid would beWT/ACC/SPEC/TPKM/2/Rev.2
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refunded, if a post-clearance assessment of the customs value of the goods was less than the bond
amount.  Chinese Taipei would, by the date of accession, adopt an equitable, transparent Customsbonding system for any perishable fruits and vegetables subject to such requirements that allows forpotentially frequent adjustment to the bond value to  take account of preva iling market forces.  The
representative of Chinese Taipei stated that the Customs bonding system would have the thefollowing characteristics:
(i) specific bond values would be fixed for each supplier country.  Upon request,
Chinese Taipei Customs authorities will make available to any domestic or foreigninterested party the data, the data source, and the methodology used in formulating thereference price upon which the value of the bond is based.
(ii) Adjustments would be made to the specific bond values, as frequently as  necessary,
to take account of prevailing international market prices, and seasonal quality consideration.
(iii) Alternative data sources would be considered, should representatives of an
exporting country believe that more appropriate and accurate data exist beyond that beingemployed by Chinese Taipei in setting the bond values.
(iv) A mechanism  would be established to provide, at the request of either an exporting
country or Chinese Taipei authorities, for prom pt consultations should a question or concern
arise relative to an established bond value.
The Working Party took note of these commitments.
81. 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 theAgreement, the representative of Chinese Taipei in dicated that these issues were addressed in the
implementing legislation for WTO accession.
82. 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 proceduresinto line with the Customs Valuation Agreement.  He confirmed that Chinese Taipei wouldimplement the Customs Valuation Agreement fully upon accession, without recourse to anytransition period.  He further committed that Chinese Taipei would, with a view to resolvingspecific problems, upon request, provide information to WTO Members on the methods forWT/ACC/SPEC/TPKM/2/Rev.2
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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 thesecommitments.
Rules of Origin
83. 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 alsorequested Chinese Taipei to confirm that its rules of origin for both preferential and non-preferentialtrade complied fully with the WTO Agreement on Rules of Origin.
84. 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.
The representative of Chinese Taipei stated that  Chinese Taipei would ensure that its laws and
regulations relating to rules of origin are consistent with the relevant WTO Agreements uponaccession.  The Working Party took note of this commitment.
Preshipment Inspection
85. 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 Taipeisaid 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.
86. 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.  TheWorking Party took note of this commitment.
Anti-Dumping and Countervailing Duties
87. 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 Imposition
of Countervailing Duties and Anti-Dumping Duties".  That Regulation provided that countervailing oranti-dumping duties could be levied on goods found to have received subsidies or to have beenWT/ACC/SPEC/TPKM/2/Rev.2
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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 onAnti-Dumping and Subsidies and Countervailing Measures. In pursuance to the 1997 amendment tothe Customs Law, Chinese Taipei undertook to revise the Regulations to make them consistent withthe Uruguay Round Agreements prior to accession to the WTO and to submit them to the WTO.
88. 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 andthe 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/Rev.2
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Safeguards Regime
89. 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 inthe Understanding on Balance of Payments Provisions of GATT 1994.  In response to requests forjustification 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 ofWTO Agreement, in particular GATT 1994 Articles I, II, XI, XII, XIII, XIV and XIX.  Followingfurther discussions in the Working Party, the representative of Chinese Taipei agreed that certainprovisions of the Foreign Trade Act were inconsistent with the provisions of the WTO.
90. 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 beenreplaced with one that was consistent with Article XII of the GATT 1994.  The representative ofChinese Taipei further confirmed that the provisions of the Foreign Trade Act would beimplemented from the time of accession in a manner conforming to the provisions of the WTOAgreement. Moreover, the representative of Chinese Taipei stated that should a critical balance ofpayment situation develop, Chinese Taipei would give preference to those measures referred to inthe Understanding on the Balance of Payments Provisions of GATT 1994 as price-based measuresto address the situation and would maintain any measures only so long as necessary.  In thecircumstance that Chinese Taipei must resort to measures that are not price-based, Chinese Taipeiwill transform these measures into price-based measures within 6 months after implementing theinitial measures.  Moreover, any measures taken for balance-of-payment reasons would not be usedto provide import protection for specific sectors, industries or products.
91. 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 Working Partytook note of these commitments.
Export Regulations
92. 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 ChineseWT/ACC/SPEC/TPKM/2/Rev.2
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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 anexport licensing system.  In document WT/ACC/T PKM/13 the representative of Chinese Taipei
provided the Working Party with a list of all pr oducts subject to export licensing maintained to
ensure:
(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 and turtles;(vi) agricultural development, including bananas, and onions.
93. In order to streamline the granting of an export licence, a system to permit the grant of an
automatic electronic export licence was under development. .
Export Processing Zones/Export subsidies
94. Some members of the Working Party requested information on the Export Processing Zones
(EPZs), in particular, information on the total value of trade as well as the percentage of EPZsproduction.  In response, the representative of Chinese Taipei said that the EPZs were establishedpursuant to the Statute for the Establishment and Management of Export Processing Zones.  TheStatute was amended in 1999 and thereafter renamed as the Statute for the Establishment andManagement of Economic Processing Zones.  As  a result, Export Processing Zones were also
renamed as Economic Processing Zones.  Investors in the EPZs were entitled to the following
incentives:
(a) exemption from the following duties and taxes:WT/ACC/SPEC/TPKM/2/Rev.2
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(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 EPZs
Administration or the buildings legally acquired from the EPZs 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 todifferent enterprises within an EPZ were not subject to the business tax.
95. The representative of Chinese Taipei further added that the EPZs were managed by the
Economic Processing Zones Administration, Ministry  of Economic Affairs.  Various products and
services were produced in the EPZs.  The representative of Chinese Taipei noted that there were fourEPZs in Chinese Taipei.  In 1994, 96 per cent of production in the EPZs was exported.  UnderArticle 5 of the Statute for the Establishment and Management of Export Processing Zones, most of
the production of the EPZs 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 EPZs sold in the domestic market wassubject to customs duty on the final product, not on inputs into the product.  If goods produced in theEPZs for local sale were less than 50 per cent of the annual production, the EPZs Administrationwould automatically approve the domestic sale of the goods.  If the goods produced for local salewere in excess of 50 per cent of annual production, the approval by the EPZs Administration wasdiscretionary.  However, no such application for approval had ever been refused.  The representativeof Chinese Taipei added that there was no local cont ent requirement for enterprises wishing to operate
in the EPZs.  In the past the subsidiaries or branch es of enterprises could not be located in the EPZs.
In January 1990 Chinese Taipei had amended the Implementing Regulation in order to permitsubsidiaries or branches of enterprises to be located in the EPZs.  EPZs products which entered thedomestic market accounted for only 3-4 per cent of the value of EPZs total production in 1994,6-7 per cent in 1997 and 8.19 per cent in 1998.  In May 1997 Chinese Taipei had lifted the 50 per centlimit on local sales through amendments to the Statute.  Domestic sales had exceeded 50 per cent ofthe production of crystal oscillators, electronics testers, voice synthesizers, capacitor parts, sensors,WT/ACC/SPEC/TPKM/2/Rev.2
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etc.  Around 41.6 per cent of EPZs production had benefited from the tax exemption granted by the
Statute for Upgrading Industries.
96. Some members of the Working Party noted that some of the arrangements providing for fiscal
incentives for businesses located or operating in th e EPZs appeared to be in conflict with the
provisions of the SCM Agreement and the Agreement on TRIMS.  They requested further informationon the fiscal incentives offered.  In response, the representative of Chinese Taipei indicated thatinvestments in the Economic 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 EPZsAdministration.  No business tax was charged on the exported goods and their related services, norwas the business tax levied on purchases by those enterprises.  These enterprises were also exemptedfrom applying for tax exemption, guarantee, relevant bookkeeping, and paying provisional tax.  Hefurther stated that in Chinese Taipei's view those practices complied with the requirements of theWTO Agreement and did not constitute export subsidies.  Their trade effect, if any, was minimal:0.185 per cent of the total exports.
97. Some members of the Working Party noted that import duty and tax exemptions on goods
imported into the EPZs 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 viewthese 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 EPZs was tocreate duty-free zones for the production of exports, in order to create an environment where exportsmanufactured from imported inputs need not obtain a refund of duties.  This was consistent with theobligations contained in the WTO Agreement.  The limitation on duty refunds/exemptions on inputsdirectly 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 wereprimarily for export, it was therefore not necessary to limit exemptions or refunds to the extent ofproducts directly incorporated into the products exported from the EPZs.  In fact, in Annex II of thesame Agreement, inputs consumed in the production process, for which drawback of import chargeswas allowed, are defined to cover energy, fuel and oil in the production process and catalysts whichare consumed in the course of their use to obtain the exported product as well as the inputs physicallyincorporated.  Because the exports from the EPZs did not receive "undue" amounts of refund orexemption the relevant practices did not constitute a subsidy.  The representative of Chinese TaipeiWT/ACC/SPEC/TPKM/2/Rev.2
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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 EPZs ente rprises had been abolished together with the
Statute for Encouragement of Investment at the end of 1990.  The current tax exemption granted toEPZs enterprises also applied to enterprises loca ted outside the EPZs, whether or not they exported
their products, provided that they met the requ irements set forth in the Statute for Upgrading
Industries.  Consequently, the practice was neither a specific subsidy nor conditional upon export
performance.
98. Some members of the Working Party reiterated that the incentives provided in the EPZ
appeared to be incompatible with the SCM Agreement.  They expected that Chinese Taipei wouldensure 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 Taipeishould satisfy the Working Party that the regime of the EPZ was consistent with all therequirements of the WTO concerning the treatment of goods, services and intellectual property.The representative of Chinese Taipei replied that Chinese Taipei had decided to levy duties on EPZproducts entering the domestic market on the basis of ex-factory prices minus value added resultingfrom 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 therelevant practices of other economies.  Chinese Taipei hoped that the changes to the system wouldalleviate concerns that the current system operated as a disincentive for EPZ products entering thedomestic market.  In May 1997 the Statute was amended and after the amendment, it was renamedthe Statute for the Establishment and Management of Economic Processing Zones.  In the interim,elimination of the limits on sale of products into the domestic economy had removed therequirement to export products from an EPZ and the proportion of goods exported from the zoneshad declined over the first six months of 1998.  While the fiscal incentives previously providedunder the EPZ statute could be considered by some members to constitute su bsidies, elimination of
the export requirement, in Chinese Taipei’s view, resolved this issue.
99. 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 tariffcharges, applied to imports from abroad into other parts of Chinese Taipei would be applied to EPZproducts entering the domestic market.  While customs duties would be applied on the basis ofex-factory prices minus value added resulting from manufacturing or processing activities in theEPZs, other taxes, charges and measures would be based on the ex-factory price.  He further addedWT/ACC/SPEC/TPKM/2/Rev.2
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that preferential arrangements provided to enterprises located within the EPZs would be extended to
all enterprises whether domestic or foreign and maintained in a WTO consistent manner, inparticular with regard to the principles of non-discrimination and national treatment.  Furthermore,export requirements or incentives would not be reintroduced.  The Working Party took note of thesecommitments.
Internal Policies Affecting Trade in Goods
Industrial Policies Including Subsidies
100. Some members of the Working Party stated that 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 SCMAgreement) were currently in place.  These practices included all export subsidies that were of the
type 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 contingentupon the use of domestic over imported goods, as provided for in Article 3 of the SCM Agreement.
101. 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.  Thesemembers requested that Chinese Taipei review these measures in light of the WTO Agreement onSubsidies 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 Subsidiesand 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 ofthe WTO Agreement on Subsidies and Countervailing Measures.  In document WT/ACC/TPKM/8Rev.2, the representative of Chinese Taipei submitted to members of the Working Party a draftNotification Pursuant to Article XVI.1 of the GATT 1994 and Article 28.1 of the Agreement on
Subsidies and Countervailing Measures.  In document WT/ACC/TPKM/9/Rev.2, the representative ofChinese Taipei submitted to the Working Party a draft Notification Pursuant to Article XVI.1 of theGATT 1994 and Article 25 of the Agreement on Subsidies and Countervailing Measures.
102. In response to questions about industrial subsidies maintained by Chinese Taipei, the
representative of Chinese Taipei explained that the Statute for Upgrading Industries providedfinancial assistance to industry, tax exemptions or accelerated depreciation, assistance to "ImportantTechnology-Based Enterprises Engaged in Manufacturing Business", and "Important InvestedWT/ACC/SPEC/TPKM/2/Rev.2
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Enterprises Engaged in Manufacturing Business".  The representative of Chinese Taipei explained
that to qualify as an “important technology-based enterprise,” the following three criteria must bemet: (1) products to be produced under the investment plan should belong to the ten emergingindustries: (2) the paid-in or increased paid-in capital for the investment plan should be overNT$200 million; and (3) the amount of the fund available for the purchase of brand-new
machinery/equipment in the investment plan shoul d be over NT$100 million. “Important invested
enterprises” include enterprises in the manufacturing as well as services industries.  In other words,the products to be produced under the investment plan are not limited to those of the ten emergingindustries.  The criteria for paid-in or increased paid-in capital and the amount of funds forpurchasing brand-new equipment/machinery are different from industry to industry.  He furtherexplained that the benefits specified in Article 5 of the Statute (conferring accelerated depreciationof assets) applied to all enterprises, organized in the form of a company pursuant to the CompanyLaw of Chinese Taipei, including companies incorporated by foreign investors or entities.  Headded that all industrial sectors could be entitled to receive accelerated depreciation for investmentin structural adjustment and energy saving devices deemed eligible pursuant to subparagraph 2 ofArticle 5 (by order of the Executive Yuan.)  So far there had been no applications filed undersubparagraph 2 of Article 5.  The representative of Chinese Taipei said that in the fiscal 1996 thetotal value of the tax exemptions or tax reductions granted, pursuant to the Statute, wasapproximately US$0.44 billion.
103. Some members of the Working Party expressed concern that Article 18 of the Statute for
the Establishment and Administration of a Science-Based Industrial Park (“SSP”) constituted aprohibited subsidy because the business tax was exempted from sales of domestically producedmachinery and equipment sold to enterprises inside such an industrial park, but was imposed onimported machinery and equipment sold to enterprises inside a park.  In their view, this constitutedan import substitution subsidy.  Some members of the Working Party pointed out that a similarprovision could be found in Article 17 of the Statute for the Establishment and Management ofEconomic Processing Zones (Amended Edition) (“EPZ law”).  The representative of ChineseTaipei explained that the business tax was not included in the scope of either Article 18 of the SSPor Article 17 of the EPZ law, that business tax was, in fact, exempted on machinery and equipmentthat was imported for non-resale.  Such imports were covered by the very broad exemption frombusiness tax under Article 41 of the Business Tax law for goods imported by businesses for“business operations purposes.”  Some members asked the Chinese Taipei representative why, if
this was the case, was there a need for the preceding article of the SSP, Article 17, which refersWT/ACC/SPEC/TPKM/2/Rev.2
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specifically to the business tax and exempts from such tax imports of machinery and equipment into
a park.  The representative of Chinese Taipei explained that the provisions of Article 18 of the SSPand Article 17 of the EPZ Law were redundant to Article 41 paragraph 2 of the Business Tax Lawin respect of the business tax.  The representative of Chinese Taipei stated that the details of theStatute for Establishment and Administration of a Science-Based Industrial Park would be providedin the notification required by the SCM Agreement.  In light of these concerns, however, therepresentative of Chinese Taipei stated that the details of Article 18 of the Statute for Establishmentand Administration of a Science-Based Industrial Park and Article 17 of the EPZ law would beprovided in the notification pursuant to Article 28 of the SCM Agreement and eliminated uponaccession.
104. Some members of the Working Party noted that Article 7 of the Statute for Upgrading
Industries (SUI) gave tax credits to industries investing in particular regions filling criteria to bedetermined by the Executive Yuan, and requested more information on those criteria.  Therepresentative of Chinese Taipei noted that the criteria set by the Executive Yuan were whether aparticular region was poor or the economic development was stagnated relative to population, levelsof employment, transportation capacity, tax revenues, the average regular income per family, andthe availability of public facilities.  For this purpose, each year the counties were ranked in apublished list which determined levels of regional assistance.  Chinese Taipei submitted a draftnotification of  the investment tax credit provided under Article 7 of the SUI in Annex III ofdocument WT/ACC/SPEC/TPKM/8.
105. 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 abreakdown of expenditures.  In response, the representative of Chinese Taipei said that under the taxincentive programme, any company for establishing a renowned brand and image exceeding NT$3million expenditure in a tax year was entitled to a tax credit of 10 per cent of the tax payable in 1993;if the expenditure exceeded NT$5 million and the company was authorized by the Ministry ofEconomic Affairs to use the symbol of "excellence", the tax credit was 15 per cent of the tax payable.Other tax benefits were allocated to all industrial sectors or to particular industrial sectors.  In a recentperiod 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,WT/ACC/SPEC/TPKM/2/Rev.2
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deferral of income tax for stock dividends, etc; benefits had also concerned the Individuals'
Investment Income Tax, Deferral of Land Value Increment Tax, Stamp Tax, Deeds Tax, etc.
106. 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 howthe Executive Yuan determined when assistance should be paid for "other purposes approved by theExecutive 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.
107. 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 Partyrequested an estimate of their set-up amount in a recent period.   In response to another question, therepresentative 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.  Until March 1998, theallocated amount of the Fund is NT$9.1 billion.  Furt hermore, almost all enterprises could qualify as
small or medium sized enterprises.
108. Some members expressed concerns that the tax credit provided in connection with the
creation of internationally recognized brands constitutes an export subsidy and thus prohibited underthe SCM Agreement.  Article 4 of the implementing regulations for the relevant law lists coveredexpenses, which include, in part, “expenses for international market investigation for thedevelopment of new products.”  The representative of Chinese Taipei stated that the Regulation onCreation of International Brands will be amended to be consistent with WTO requirements, uponaccession, without any recourse to a transition peri od. Any future programme in this area would be
consistent with WTO requirements and would not reintroduce prohibited subsidies.  The WorkingParty took note of these commitments.
109. 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 theneed 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 theworld market level, China Steel Corporation (CSC) maintained a two-tier pricing in the domesticWT/ACC/SPEC/TPKM/2/Rev.2
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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 lowerone (i.e. indirect export price), applied to customers who manufactured steel into final products forexports, was based on the landed, duty-free price of imported steel products.  The indirect export pricewas 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 andcompetitive.
110. 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 hadalso 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.
111. 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 ChineseTaipei 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 MOEAalso 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-BasedEnterprises" 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 relevantauthority 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 therequired budget.  Third, the MOEA would enter contracts with non-profit research institutions toexecute 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,WT/ACC/SPEC/TPKM/2/Rev.2
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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 thecapacity to develop the required technology by themselves, the authorities could assist them inobtaining 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.
112. 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, therepresentative 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.
113. S ome members of the Working Party expressed continued concern regarding the assistance
granted for the purpose of developing the “Top-Ten Emerging Industries.” In their view, suchassistance included practices that constituted import substitution and export subsidies and a widerange of R&D funding.  These members sought assurances that Chinese Taipei had included allsuch assistance in its subsidy notifications, emphasizing that such notifications would be withoutprejudice to the legal status of such assistance.  The representative of Chinese Taipei assured theconcerned members and the Working Party that (1) the top-ten emerging industries did not now,and would not in the future, benefit from any measure meeting the definition of a “prohibitedsubsidy” under Article 3 of the SCM Agreement, other than those notified, and (2) Chinese Taipeihas notified all domestic subsides that the top-ten emerging industries currently benefit from,namely, (i) R&D grants provided under Article 10 of “Measures for Assistance in the Developmentof New Leading Products”; (ii) low-interest loan granted under Article 21 of the SUI and (iii) taxcredits granted under SUI Article 6,7,8-1.
114. The representative of Chinese Taipei confirmed that the “Program for the Development of
Critical Components and Parts” was nothing more than an illustrative list of the goods/productsWT/ACC/SPEC/TPKM/2/Rev.2
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covered by Top Ten Emerging Industries and that the Program involves support or assistance
measures only under the “Measures for Assistance in the Development of New Leading Products.”With respect to low interest loans under Article 21 of the SUI, the representative of Chinese Taipeiconfirmed that the loans that Chinese Taipei maintained were not given to a specific enterprise,industry or group of enterprises or industries within the meaning of Article 2 of the SCMAgreement, did not require the purchase of domestically produced goods or services, and did notconstitute an incentive or inducement to purchase domestically produced goods or services overimported goods or services. With respect to Article 6 tax credits, the representative of ChineseTaipei explained that under Article 6 of the SUI, enterprises that purchased domestically producedautomation machinery and equipment, including “automatic machine equipment,” received a largertax credit than if they purchased imported automation machinery and equipment.
115. The representative of Chinese Taipei confirmed that Chinese Taipei would eliminate the
Article 6 tax credit differential upon accession and would not in the future reintroduce it or anyother tax credit differential that favours domestically produced automation machinery andequipment, including “automatic machine equipment.” The Working Party took note of thiscommitment.
116. 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 0.75 per cent above
LIBOR for US$ loans in August 1997.  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 machineryand equipment, and products including turnkey capital goods.  The amount of the down payment wasnot less than 15 per cent of f.o.b. contract value.  Interest was charged at the rate of 6.5 - 7.75 per centfor US$ loans.  Meanwhile the Bank also provided a fixed rate re-lending facility to overseas banks toenable the purchase of manufactured goods of Chinese Taipei origin, at the rate of 8 per cent, and 8.25per cent depending on maturity date.  He added that the Ex-Imbank provided an overseas investmentfinancing system which financed domestic firms seek ing overseas investments.  That system did not
provide a more favourable interest rate than commercial loans from other banks.  Financing by the
Ex-Imbank was not linked to or conditional upon export performance.  The representative of ChineseTaipei reiterated that no export subsidies were paid to export enterprises.
117. 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 DevelopmentWT/ACC/SPEC/TPKM/2/Rev.2
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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 thedevelopment 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 of
Chinese Taipei said that the Aeronautics and Space Development Centre of the Chung Shan ScienceResearch Institute, Ministry of Defense had entered into an agreement with the Taiwan AerospaceCorporation and the Industrial Technology Research Institute for technology transfer.  If agovernment entity purchased imported aeronautics and space products, the Committee for Aviationand Space Industry Development could enter into a technology transfer agreement without penaltyclauses, known as an "Industrial Co-operation Agreem ent".  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 thepurchase 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 wererecommended to commercial banks by the government of Chinese Taipei.  If they did not enter suchagreements, no such recommendation was made, and decisions by the banks whether to accord loansto those companies were taken by the banks.
118. 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 itsterritory would be notified by Chinese Taipei.  Such subsidies, with the exception of those providedunder Article 12 of the Statute for Commodity Tax, would be repealed upon accession and subsidies
provided to manufacturers of automobiles and motorcycles using domestically developed and
designed parts would cease no later than 3 years after Chinese Taipei's accession to the WTO.  TheWorking Party took note of these commitments.
119. The representative of Chinese Taipei stated that, upon accession, Chinese Taipei would
provide a complete notification of all of its subsidies which were specific to an enterprise, industryor group thereof (within the meaning of Articles 1 and 2 of the SCM Agreement) in conformitywith Article 25 of the SCM Agreement.  The Working Party took note of this commitment.
Technical Barriers to TradeWT/ACC/SPEC/TPKM/2/Rev.2
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120. 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, therepresentative of Chinese Taipei said that, currently, only the Regulation for the Establishment ofNational Standards promulgated in September 1996 contained a provision  that set forth the length oftime 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.
121. 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 "Pointsof 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 andprocedures for assessment of conformity, and to the invitation of comments by the public, detailsconcerning 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 ofStandards, distributed by the Bureau of Standards, Metrology and Inspection(previously the National Bureau of Standards) under the Ministry of EconomicAffairs;
(ii) currently, only the Regulation for the Establishment of National Standards
promulgated in September 1996 contained a provision  that set forth the length oftime for soliciting comments.  Apart from this there were no explicit rules, either atthe central level or at the local level, that  set forth the length of time required for
soliciting comments. In principle, all government bodies shall provide a reasonable
time period (generally 60 days) for presentation comments.
122. In response to questions concerning the registration and certification requirements for
imported pharmaceuticals, cosmetics and medical devices, the representative of Chinese Taipei saidthat the requirements and approval standards for the importation of pharmaceuticals, cosmetics andmedical devices did not exceed the requirements applied in some advanced WTO members, and werethe same for imported and domestic goods.WT/ACC/SPEC/TPKM/2/Rev.2
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123. 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 TechnicalBarriers to Trade.  The Working Party took note of this commitment.
124. 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 thatChinese 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 to
its relevant laws.
125. The representative of Chinese Taipei also provided examples of particular differences
between its standards and ISO and IEC standards, such as domestic electrical standards, ChineseTaipei 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 lawsor practices which did not comply with the Agreement.  In response, some members of the WorkingParty stated that they considered that a transitional period of general application was not appropriate.
126. 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 eliminate the specific problems members of the Working Party
had identified and which are listed below.  In this regard, some members of the Working Party statedthat, as a condition of its accession, Chinese Taipei would be required to eliminate the mandatoryconformity assessment procedures and standards for imports that were not applied to similar domesticgoods and were not based on relevant internationally recognized criteria.  Chinese Taipei would berequired to accept equivalent third country standards and regulations in particular, in the case of
automobiles and heavy-duty vehicles, concerning the safety requirements (lightening, specification of
brakes, horns), emission standards and test procedures, fuel consumption, on board diagnosticsystems, evaporative requirements, vehicle noise).  Whenever new standards were imposed byChinese Taipei, enough time would have to be ma de 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 aspectswith the previous model-year vehicles as well as additional quality control testing when manufacturersin-house test data are made available Chinese Taipei would be required to provide for a simplifiedWT/ACC/SPEC/TPKM/2/Rev.2
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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 of ChineseTaipei said that because of the high density of cars, Chinese Taipei had serious concerns overpollution resulting from emissions.  Furthermore, Chinese Taipei's current practice was to accept theresults of tests carried out by the original car manufacturers according to the emission standards set byChinese Taipei.  New emission and noise standards were implemented with prior notice of three tofour years.
127. Some members of the Working Party also stated that Chinese Taipei should ensure
compliance with requirements for publication of mandatory conformity assessment procedures andstandards and ensure the establishment of a recommended comment period of 60 days prior tofinalization of such measures.   Chinese Taipei should also eliminate from the date of its accession itsrequirements for performance testing of imported livestock.  Chinese Taipei should also replace theweight certificate system for automobiles with an automobile safety certification system of generalapplication, which would take effect prior to Chinese Taipei's accession.  It was also noted that thecurrent 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 andadministration of the Agreement on Technical Barriers to Trade to the Committee on TechnicalBarriers to Trade at the time of accession.
128. Some members of the Working Party further stated that Chinese Taipei should confirm that
all relevant laws relating to its technical regulati ons, standards, conformity assessment procedures,
and labelling, including product coverage, would be administered by Chinese Taipei in conformitywith relevant international standards and guidelines .  Chinese Taipei should also undertake that the
controls applied in connection with technical regulations, standards, conformity assessment
procedures, and labelling would 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 notunnecessarily impede trade or create barriers to imported products, and should not be applied toimported products in an arbitrary manner, in a way which discriminated between supplier countrieswhere the same conditions prevail, or as a disguised restriction on international trade.
129. 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 theWTO, without recourse to any transitional period.  The Working Party took note of this commitment.WT/ACC/SPEC/TPKM/2/Rev.2
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Sanitary and Phytosanitary Measures
130. Some members of the Working Party asked whether the regulations regarding sanitary and
phytosanitary measures including quarantine and inspection provisions were published and readilyavailable to importers and exporters and whether these measures were based on sound scientificevidence.  They also asked whether Chinese Taipei would accept the sanitary and phytosanitarymeasures 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 ofChinese Taipei said that the most commonly used SPS measures in the agricultural sector were set outin the Commodities Inspection Law, the Statute for Prevention and Control of Infectious AnimalDiseases, the Plant Protection and Quarantine Act, the Quarantine Requirements on the Importation ofAnimal and Animal Products, the Quarantine Restri ctions on the Importation of Plants and Plant
Products, the Law Governing Food Sanitation, the Regulations Governing the Quarantine atInternational Port, and the Quarantine Regulation for Cholera on Imported Fishery Products.
131. 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 Taipeistated 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 fromrelevant 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.  The sanitary requirements for food
stuffs were the same for imported and domestic goods.  Domestic goods were also subject toinspection in order to maintain effective quara ntine 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 todomestic and imported goods.  The CODEX standards set by FAO/WHO were one of the referencesused in determining the pesticide maximum residue limits.  There were no procedures for therecognition of foreign quarantine or other standards in Chinese Taipei.  Chinese Taipei wasendeavouring to modify standards so that they co mplied with international standards, except whereWT/ACC/SPEC/TPKM/2/Rev.2
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national security, animal and plant health considerations, or differences in environment, climate,
geography or important technology considerations necessitated deviations from internationalstandards.  He stated that even though all safety inspection requirements and standards applied equallyto domestic goods, some phytosanitary requirements only applied to imported goods, when onlyimported goods risked contamination by particular diseases and pests.
132. 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 a 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 weresubject 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 preventthe dissemination of plant and animal diseases and insect pests.  The BCIQ applied scientific methodsin its inspection and quarantine practices.  Quarantine regulations were established in accordance withdisease and insect pest variations, and international trends. The BCIQ had entered into arrangements
to recognise the certification,
 issued by inspection and veterinary authorities of certain of its trading
partners.  The determination and publication of infectious animal diseases had been transferred fromthe BCIQ to the Council of Agriculture.  Chinese Taip ei had determined that in addition to the List A
and List B animal diseases of the Office International des Epizooties, the following were also amongthe infectious animal diseases: Vesicular exanthem a, Erysipelas, Scabies, Bovine ephemeral fever
(Bovine influenza), Gas gangrene, Streptococcal mastitis, Infectious pancreatic necrosis, Wirlingdisease and Bacterial Kidney disease.  The plant pests or diseases referred to in the EnforcementRules 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 and plant products.
133. The representative of Chinese Taipei added that the importation of fresh fruit was prohibited
from areas where infestations of mango seed weevil, mango weevil, Chinese citrus fly, peach fruit fly,cucurbit fly or guava fruit fly had occurred.  Fresh fruit could only be imported from areas underquarantine for Mediterranean fruit fly if the BCIQ approved the quarantine treatment at the place oforigin.  Fresh fruit could only be imported from areas subject to codling moth, apple maggot, plum
curulio, peach twig borer, Mexican fruit fly, West  Indian fruit fly, South American fruit fly or
Queensland fruit fly and lethal yellowing, kaincoper disease, cadang-cadang disease, bronze leaf wilt,root (wilt) disease, Guam coconut disease, leaf scorch disease of coconuts, and arrowhead scale ofWT/ACC/SPEC/TPKM/2/Rev.2
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Citrus and red and black citrus leafminer, if imported with a certificate stating that the fruit had been
thoroughly inspected and found free of infestation or has been treated with an appropriate treatmentprior to shipment.  The representative of Chinese Taipei added that there were 449 standards applyingto agricultural and processed agricultural products administered by the Bureau of Standards.
134. 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 Taipeienter 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 notificationprocedures 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 measuresdiffered from Chinese Taipei's measures or from those used by other countries trading in the sameproduct, upon demonstration that such measures achieved the appropriate level of sanitary orphytosanitary protection; and,  ensure that sanitary and phytosanitary measures were adapted to thesanitary 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 members
also requested that Chinese Taipei recognize exports as being from pest or disease free areas and areasof low pest or disease prevalence.
135. 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 thefruit 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 developedeconomies.  Chinese Taipei had held intensive discussions with the trading partners that had indicatedthey had problems with Chinese Taipei's SPS provisions.  Some of the problems had been resolved,
and technical experts had discussed existing problems.
136. 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 healthsanitation 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 to tradersWT/ACC/SPEC/TPKM/2/Rev.2
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to indicate under what conditions certificates can be obtained, and no explanation being given for
non-approval of certification.
137. 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 thatlive 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.
138. Some members of the Working Party raised various concerns regarding Chinese Taipei’s
practices with respect to application of SPS measures.  In their view, Chinese Taipei had, in thepast, adopted SPS measures without providing notice of the action and the criteria for its applicationto traders and often bases quarantine areas on political geographical regions, rather thanscientifically justified areas.  In addition, Chinese Taipei had at times failed to base its SPSmeasures on international guidelines or recommendations and had in some cases adopted andmaintained measures without sufficient scientific evidence.  In particular, scientific risk assessments
that take into account assessment techniques developed by international organizations had not been
provided in some cases.  The representative of Chinese Taipei stated that Chinese Taipei wouldfully apply the provisions of the Agreement on Sanitary and Phytosanitary Measures from the dateof its accession, without recourse to any transitional period and would address the concerns raisedby members.  He also stated that Chinese Taipei would, from the date of its accession, notify to theWTO all relevant laws, decrees, regulations, and administrative rulings of general applicationrelating to its sanitary and phytosanitary measures, including product coverage and relevantinternational standards, guidelines and recommendations.  The Working Party took note of thesecommitments.
Trade Related Investment Measures
139. 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 trade-related investmentmeasures such as the local content requirements for motor vehicles and the mixing requirements inforce for coal and cement production, and specify a schedule for their elimination.   In response the
representative of Chinese Taipei said that Chinese Taipei only maintained local content requirements
on automobiles and motorcycles.  In the case of sm all 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 oflocal manufacture.  For large automobiles (3.5 to 10 tons), at least 37 per cent of the motor vehicleWT/ACC/SPEC/TPKM/2/Rev.2
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plus at least three items from a list of fifteen designated major items were required to be of local
manufacture.  For large automobiles over ten tons, at least 31 per cent of the motor vehicle plus atleast 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 manufacture.  These local contentrules applied equally to domestic and foreign enterprises.  He added that a local content requirementon government procurement of incinerators had been eliminated, but that a local content requirementon electric locomotives 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.
140. Some members of the Working Party said that Chinese Taipei needed to notify its trade
related investment measures such as the mixing requirements in force for coal and cement production,and specify a schedule for their elimination.  The repr esentative of Chinese Taipei said that Chinese
Taipei had no mixing requirements for cement production.  The mixing requirements for coal wereimposed upon importers of coal.  Importers of coal were required to purchase local coal which was atleast 1.41 per cent of the amount of coal that they wished to import.  Chinese Taipei planned to lowerthis requirement to 0.72 per cent by the end of 1998.  However, the ratio had actually been lowered to0.55 per cent as of the end of 1996.  Chinese Taipei  would eliminate the mixing requirements for coal
within thirty-six months  following accession.  Some members of the Working Party indicated that the
requirement should be eliminated more rapidly.
141. The representative of Chinese Taipei stated that Chinese Taipei undertook to eliminate the
existing local content and sourcing requirements applied to the production of automobiles andmotorcycles and the mixing requirement relating to the use of coal upon accession to the WTO.The Working Party took note of this commitment.
142. The representative of Chinese Taipei confirmed that Chinese Taipei did not apply any other
measures inconsistent with the Agreement on Trad e-Related Investment Measures  and would not do
so in the future.  The Working Party took note of this commitment.
State-Trading
143. 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 operatingin 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 alcoholicWT/ACC/SPEC/TPKM/2/Rev.2
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beverages industry.  He noted that the provincial  government of Taiwan Province owned the Taiwan
Chung Hsin Paper Corporation, the Tang Zong Iron Works Co. Ltd, the Agricultural and IndustrialEnterprise Co. Ltd, the Kao-Hsiung Ammonium Su lphate Co. Ltd, and the Taiwan Tobacco and Wine
Monopoly Board (TTWMB).  He indicated that the Chinese Petroleum Corporation had enjoyed amonopoly to import crude oil and refined products and to export refined products which had beenabolished on 26 June 1996.  The Taiwan Sugar Corporation enjoyed a monopoly to import and exportsugar.  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 for imports ofindustrial salt used in the production of alkali-chloro.  The TTWMB held a monopoly in theproduction and trading of tobacco and alcohol products.  Taiwan Sugar Corporation supplied all thealcohol requirements of the TTWMB.  The representative of Chinese Taipei asserted that neitherTaiwan Power Company, China Steel Corporation (b efore it was privatized) nor Aerospace Industrial
Development Corporation enjoyed import or export monopoly.  These enterprises did not enjoy any
special treatment in their trade or production activities.  Private traders could import alcohol and
tobacco products using TTWMB as the nominal importer.
144. 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.  Arearestrictions applied to two neighbouring economies that were the only instances where purchasedecisions 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 importedraw materials for products where production could meet the demand of the domestic market.  Thereselling price of the imported products was determined in the same way as for domestically producedproducts.  There was no discrimination against impor ts.  The purchasing decisions of Taiwan Power
Company 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 ChineseTaipei was the largest shareholder in these enterpri ses, the purchasing decisions were affected by the
government's economic and trade policies.   Some members noted that the State-enterprises were notsubject 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 theseenterprises had been exempted from the provisions of the Fair Trade Law for an interim period of fiveWT/ACC/SPEC/TPKM/2/Rev.2
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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.  Theprocurement by these companies would be governed by the Agreement on Government Procurementonce Chinese Taipei became a signatory.
145. 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 identicalmerchandise 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 onpurchases 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 55publicly owned retail stores in operation.  These stores do not discriminate against imported productsand do not create obstacles to importation and distribution of imported products.  The UnitedCooperative 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 thenegotiation 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 2per cent above the sourcing price to cover the operating expenses.  Some members of the WorkingParty 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 UCArequirement 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 PXstores harmed both manufacturers who were forced to sell at unrealistically low prices, and privateretailers 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 forprivate retailers to compete in the market place.  These members considered that the publicly-ownedretail stores should be subject to the Fair Trade Law.
146. 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 theorganisation of the UCA because it fell within the definition of horizontal collaboration among thestores participating in the organisation of the UCA.   Otherwise, all other business practices of theWT/ACC/SPEC/TPKM/2/Rev.2
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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 importationand distribution of imported products in terms either of price or of quantity.  Some members of theWorking Party asked that Chinese Taipei take steps to control the persons allowed to gain access tothe UCA and Military PX stores, the quantity of products allowed to be purchased by the publicemployees, establish and publish new procurement and product listing guidelines which reflected
market dynamics, and establish a fairer price setti ng 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 offeredmerchandise at the same or lower prices than those of the Military PX stores.  Because of the prices ofprivate stores, the incidence of resale of products purchased at Military PX stores was almostnon-existent.  In addition the Military PX Headquarters had made rules to prohibit the resale ofproducts purchased in the Military PX stores.  Concerning the purchasing decisions of the Military PXstores, the representative of Chinese Taipei noted that needs of military personnel and the condition ofthe market were examined.  The decision to purchase was advertised in newspapers.  All suppliers,whether importers of foreign goods or local manufacturers 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 FairTrade Law, had been monitoring very closely the business practices of UCA. It had fined differentUCA stores for their failure to prevent the entry by individuals who did not have legal access to thesestores.  It had also fined several private stores who held themselves out as UCA stores in order todeceive consumers.  The Fair Trade Commission had looked into the pricing practices of suppliers ofthe UCA stores to see whether there was any abuse of market power by the UCA stores.  As a resultof the Fair Trade Commission's investigati on, the Fair Trade Commission launched a business
correction campaign requiring large-scale marketing entities including, among others, UCAs, to
eliminate as of 1 July 1995 the practice of imposing contractual obligations on suppliers to offer the
most favorable pricing.
147. 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 discriminateagainst 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 werebased on commercial considerations such as quantity, price, quality, supply stability and risk and thatthere was no discrimination against imports.WT/ACC/SPEC/TPKM/2/Rev.2
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148. The representative of Chinese Taipei said that the following State or Provincial enterprises
would be notified as State-trading enterprises under Article XVII for the purposes of theUnderstanding on the Interpretation of Article XVII of the GATT 1994: Chinese PetroleumCorporation; Taiwan Sugar Corporation; Taiwan Fertilizer Company; Taiwan Salt Works (TaiwanSalt Industrial Corporation); Taiwan Tobacco and Wine Monopoly Bureau; China Engraving andPrinting Works; Taiwan Provincial Food Bureau; and Taiwan Provincial Fruit MarketingCooperative.  The Working Party took note of that commitment.
149. He stated that the TTWMB, which was owned and managed by provincial authorities, upon
the Working Party's decision, would also be notified under Article XVII as long as it maintains itscurrent nominal import/distribution monopoly and other special privileges under law and regulationin the distribution, or trade of tobacco and alcohol products.  The Working Party took note of thatcommitment.
150. The representative of Chinese Taipei stated that the statutory import/distribution monopoly
would be abolished with the implementation of new laws establishing a tobacco and alcohol tax andadministration system.  The representative of Chinese Taipei also stated that some private trade inrice and sugar, as reflected in Chinese Taipei's agricultural market access schedule, would bepermitted.  He further stated that for four years after the date of accession, importation of fertilizerwould be limited to the Taiwan Provincial Food Bu reau or the Taiwan Fe rtilizer Comp any and that
during this period, both entities would be notified under Article XVII as long as they maintainedthis monopoly or any other special privileges under law and regulation in the distribution, or tradeof fertilizers.  The Working Party took note of these commitments.
151. The representative of Chinese Taipei said that upon the end fo the fourth year folloiwng
accession to theWTO, Chinese Taipei would eliminate the import monopoly on fertilizers held by
Taiwan Provincial Food Bureau or the Taiwan Fertilizer Company .  The Working Party took note of
this commitments.
152. The representative of Chinese Taipei stated that upon accession to the WTO, import and
export procedures of state trading enterprises would  be fully transparent and in compliance with the
WTO Agreement.  In this regard, Chinese Taipei would  provide complete information for any suchactivities as required in WTO questionnaire G/STR/N/3.  In addition, to assist in monitoringimplementation of its commitments, Chinese Taipei would  provide, upon the request of a WTOMember, specific information, which shall be maintained on a confidential basis and not disclosed tothe public, on all elements of particular import transactions by the following state trading enterprises:WT/ACC/SPEC/TPKM/2/Rev.2
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the Taiwan Provincial Food Bureau, the Taiwan Pr ovincial Fruit Marketing Cooperative, the Taiwan
Tobacco and Wine Monopoly and the Taiwan Sugar Corporation, for so long as those enterprises metthe definition of  state trading enterprises within  the meaning of the WTO Agreement.  He further
stated that such information would  include all el ements affecting the price, such as the product,
quality, grade, contract price, terms of delivery, financing provisions, discounts, governmentassistance, transportation, and insurance rates, but may exclude the name of the other party to thetransaction.  The Working Party took note of these commitments.
153. The representative of Chinese Taipei stated that for all state trading enterprises within the
definition of Article XVII of the GATT 1994, Chinese Taipei would ensure that any fees or charges
assessed to importers or end-users by these enterprises would not afford protection in excess of thetariff rate provided for imports listed in the Sche dules annexed to Chinese Taipei's Draft Protocol of
Accession, plus fees and charges consistent with Ar ticle VIII of the GATT.  Imports in excess of the
level of the tariff quotas specified in the Schedules annexed to Chinese Taipei's Draft Protocol ofAccession would  not be reserved for state-owned or state-operated enterprises, and would be able tobe imported and distributed by private firms and other non-state-trading enterprises.  He stated thatstate trading enterprises within the definition of Article XVII of the GATT 1994 would not be used as
a conduit for subsidized exports, nor would notification of these enterprises under Article XVII
exempt them from other requirements under WTO Agr eements, such as Article 4(2) of the Agreement
on Agriculture.  He further stated that Chinese Taipei would not take any measure to influence ordirect 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 exportrice imported under its minimum access commitment.  The Working Party took note of thesecommitments.
154. 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 in
compliance 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
155. Some members of the Working Party enquired whether State owned enterprises would be
privatized.  The representative of Chinese Taipei said that the policy was to privatize most State
owned enterprises. The statutory framework required to implement this policy was in place.WT/ACC/SPEC/TPKM/2/Rev.2
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156. 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 40 offerings(including CSC's two DR issues in 1992 and early 1997, representing 360 million shares and 203million shares respectively), and several sales of assets had been conducted. Sales of governmentowned companies had yielded total proceeds of nearly NT$ 349 billion, corresponding to US$ 10.2billion (based on July 1998 data).  Sixteen of the targeted SOEs had been successfully privatized,
including Chung Kuo Insurance Co. Ltd. (CIC), China Petrochemical Development Corporation
(CPDC), BES Engineering Corporation, CSC, Yang Ming Marine Transport Corporation (YMTC),
Liquefied Petroleum Gas Supply Administ ration, Veterans Gas Manufactory, Chang Hwa
Commercial Bank, First Commercial Bank, Hua Nan Commercial Bank, Taiwan Business Bank,
Taiwan Fire and Marine Insurance Co. Ltd., Taiwan Navigation Co. Ltd., Taiwan Life Insurance Co.Ltd., Kang Ropery Factory and Taiwan Developmen t & Trust Corporation.  In addition, 3 plants of
the Taiwan Machinery Manufacturing Corporation (TMMC) have been privatized by privateplacement. The details of the 16 privatized enterprises were as follows:
Privatized State-Owned Enterprises in Chinese Taipei
Company Date of
Privatization% Government
Shareholding
(1998 data)
Chung Kuo Insurance Co. Ltd., MOF 5 May1994 30.66
China Petrochemical Development Co., MOEA 20 June 1994 16.23
BES Engineering Corporation, MOEA 22 June 1994 0.0
China Steel Corporation, MOEA 12 April 1995 40.69
YangMing Marine Transport Co rporation, MOTC 15 February 1996 43.53
Liquefied Petroleum Gas Supply Administration,
VAC16 March 1996 0.0
Veterans Gas Manufactory, VAC 1 January 1998 40.00
Chang Hwa Commercial Bank, TPG 1 January 1998 30.72
First Commercial Bank, TPG 22 January 1998 40.85
Hua Nan Commercial Bank, TPG 22 January 1998 41.36
Taiwan Business Bank, TPG 22 January 1998 40.96
Taiwan Fire and Marine Insurance Co. Ltd., TPG 22 January 1998 30.05
Taiwan Navigation Co. Ltd., TPG 20 June 1998 39.08
Taiwan Life Insurance Co. Ltd., TPG 30 June 1998 31.89
Kang Ropery Factory 1 July 1998 0.0
Taiwan Development & Trust Corporation 8 January 1999 37.76
- Note: MOEA = Ministry of Economic Affairs
- MOF = Ministry of FinanceWT/ACC/SPEC/TPKM/2/Rev.2
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- 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 up to 48 months' pay, instead of
just 24 months as before.  The timetable for the next 5 years involved the privatization of 36 SOEs,
together with the modification of legislation needed to pave the way for the privatization process.WT/ACC/SPEC/TPKM/2/Rev.2
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Privatization Timetable for 36 SOEs
Date Authority Company
December 1997 VAC *Veterans Pharmaceutical Plant
June 1998 MOF *The Farmers Bank of China
VAC *Veterans Food Products Factory,
*Tai-chung Lumber Pr ocessing Factory
TPG *Kao-Hsiung Ammonium  Sulphate Corporation,
*Taiwan Chung Hsing Paper Corporation,
December 1998 TPG *Agricultural and Industrial Enterprise Co. Ltd.
*Taiwan Film Culture Co. Ltd.,
*Taiwan Bookstore
June 1999 MOF Chiao Tung Bank
MOEA Taiwan Fertilizer Corporation,
Taiwan Machinery Manufacturing Corporation
VAC Veterans Printing Works,
Veterans Plastics Works,
Taipei Iron Works,
Taipei Paper Manufactory,
Lung-Chi Chemical Plant,
Tao-Yuan Furniture Factory
TPG Taiwan Provincial Gove rnment Printing Factory
TCG Taipei City Government Printing House
December 1999 MOEA Aerospace Industrial Development Corporation
MOF Central Reinsurance Corporation
TPG Tang Zong Iron Works Co. Ltd.
June 2000 TPG Taipei Bank
December 2000 TPG Taiwan Tobacco & Wine Monopoly Bureau
June 2001 MOEA Taiwan Salt Industrial Corporation
China Shipbuilding Corporation,
Chinese Petroleum Corporation,
Taiwan Power Corporation.
MOTC Chunghwa Telecom Co. Ltd.
VAC RET-SER Engineering Agency
TPG Taiwan Motor Transport Co. Ltd.
Hsin Sheng Press Co. Ltd.
KCG Bank of Kao-Hsiung
June 2002 TPG Taiwan Railway Administration
Taiwan Railway Freight Co. Ltd.
- Note: TPG = Taiwan Provincial Government
- TCG = Taipei City Government
- KCG = Kao-Hsiung City Government
- *Behind the privatization timetable and the process is still incomplete
157. 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.WT/ACC/SPEC/TPKM/2/Rev.2
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He stated that 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)
158. 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 domes tic wine and tobacco products were equal to the sum
of operating costs plus the Monopoly Tax.
159. With regard to tobacco products, some member s 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 noregulatory function, nor a monopoly on the distribu tion of tobacco and alcohol products.  The TTWMB
would, pursuant to the draft Tobacco and Alcohol Admini stration Law, be restructured so that it would
only operate as a business venture.  Within the cen tral government, the regulatory functions would be
carried out by the Ministry of Finance.  Mo reover, the TTWMB would have no influence 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 to this Draft Report.
160. 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 dist ribution system in these products and would ensure
national treatment and non-discriminatory treatment for these products.  From the date of accession,
TTWMB would not have a regulatory function concer ning tobacco and alcoholic beverages and would
operate on a commercial basis subject to the same  laws, regulations, rules, decrees, directives,
administrative guidance, policies and measures applicab le to other firms in Chinese Taipei.  Any special
or monopoly privileges granted to TTWMB in the domestic distribution and international trade ofalcohol and tobacco products would be eliminated from that date.  Both domestic and foreign firms
would be eligible to participate in the distribution a nd 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.WT/ACC/SPEC/TPKM/2/Rev.2
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161. The representative of Chinese Taipei confirmed that from the date of accession, TTWMB
would  be a business operation without any regulato ry function.  Within the central government, the
regulatory functions will be carried out by the Mini stry 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 would be eligible to participate in thedistribution and trade of these products on an equal ba sis, as noted below and in the Schedules annexed
to the Draft Protocol.   The representative of Chin ese Taipei further stated that the reform of TTWMB
would also include the gradual elimination of its monopoly on the production of alcohol and tobacco
products. Production of tobacco and al cohol products will be opened to other domestic and foreign firms
according to the following schedule:
Time Schedule Category
Stage 1 X fruit-brewed alcoholic beveragesStage 2 X+1 year brewed alcoholic beverages except beerStage 3 X+2 year distilled alcoholic beverage , reprocessed alcoholic beverages, alcohol
Stage 4 X+3 year beer
Note: X = Accession Year
162. The representative of Chinese Taipei stated  that any subsidies provided for the domestic
production of tobacco and grapes w ould be bound and gradually reduced as provided for in the Schedule
attached to the Draft Protocol of Accession.  All fi rms producing tobacco or alcohol products in Chinese
Taipei would have access on an equal basis to impor ted 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, on the implementation date of the Tobacco andAlcohol Administration Law, begin processing applications fo r firms seeking authorization to produce
alcohol products liberalized in the first stage, and fo r other alcohol products liberalized at other stages,
six months in advance of the date when such activiti es are liberalized, in order to provide new entrants
with the possibility of operating unde r 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 ex cessive or unduly burdensome and that penalties for
violation of the Tobacco and Alcohol Tax and Admi nistration Laws will not exceed in severity the
penalties applied for similar violations in other sector s.  To ensure adequate transparency after reform,
Chinese Taipei would provide WTO Members with annual reports on the volumes of tobacco andalcoholic products manufactured in Chinese Taipei and on taxes paid by TTWMB by taxable category.
Until TTWMB was privatized , this report would be accompanied by an annual independent accounting
review of the operations of TTWMB based on sta ndard and customary accounting procedures, includingWT/ACC/SPEC/TPKM/2/Rev.2
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a fiscal balance sheet that reports on costs, expe nditures, and revenues of TTWMB, and on its profits
and losses. Realizing that sales into the domestic ma rket of large quantities of smuggled or counterfeit
imports of alcohol and tobacco products undermined  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 contraband smuggled or counterfe it imports of alcohol and tobacco products seized
would be destroyed or otherwise di sposed of, taking into account the practices of WTO Members in a
similar situation, and that Chinese Taipei would take  additional efforts to prev ent such illegal imports.
In this regard, Chinese Taipei would ensure th at 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
163. In response to questions concerning the Chinese Taipei's procurement policies, the
representative of Chinese Taipei stated that the Proc urement Department of the Central Trust of Chinese
Taipei was a non-exclusive procurement agent for government entities and State enterprises whichsolicited 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 Supply
Bureau functioned as a non-exclusive tender and purchase agent for local and provincial governmentorganisations.
164. In response to a series of questions from me mbers 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 refere nce brands (or equivalents to the reference brands).
Any special tender requirements were clearly described in the tender documents.  The threshold abovewhich open tenders were required was NT$50 million, except in circumstances that allowed 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 no tices were required to contain similar types of
information as that required by the WTO Govern ment Procurement Agreement.  All unsuccessful
bidders were, at their request, informed of the reas ons why they did not win a contract.  There was no
provision for an unsuccessful bidder to appeal  against a decision not to award a tender.
165. In response to questions the representative of Chinese Taipei said that a bidder could be
required to submit a commitment to implement an indus trial co-operation plan (ICP) to the amount of a
certain percentage of the contract price.  Some memb ers of the Working Party said that the increased useWT/ACC/SPEC/TPKM/2/Rev.2
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of the requirement that tenderers agree to technolo gy transfers was inconsistent with the Agreement on
Government Procurement.
166. 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).  The representative ofChinese Taipei said that Chinese Taipei had careful ly examined the request and had decided to accede to
the Government Procurement Agreement.  He a dded that  prior to acceding to the Government
Procurement Agreement would  take steps to improv e the procedural aspects of the current practices.
The representative of Chinese Taipei said that Chinese Taipei had prepared a draft Government
Procurement Law which will replace the existing procurement requirements set by the various auditlaws and regulations.  The draft Law took  fu ll account of the AGP requirements, including the
establishment of a bid challenge procedure.  The Government Procurement Law will take effect May 27,1999.  A Government Procurement Gazette was being officially published from 1 November 1996 after
a ten-month long trial publication.  The ceiling limitati on of 49 per cent for the acquisition of interests in
existing construction firms had been abolished from 3 November 1995. Foreign experiences can becounted in the determination of qualification fo r Class A construction company licenses.  From
1 June 1997 the area restriction in the procurement pract ices 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.
167. Some members of the Working Party noted that negotiations were continuing regarding Chinese
Taipei's commitments regarding product coverage and implementation of procedures associated with the
procurement process.  In particular, additional cl arity was required regarding procedures to address
disputes arising in the context of the procurement a nd contract performance process.  The representative
of Chinese Taipei noted that the contract performan ce process did not fall within the coverage of any
WTO rules.
168. 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 ChineseTaipei confirmed that Chinese Taipei would accede to the Agreement on Government Procurement(GPA) within one year of its accession to the WTO.   If, however, new government procurement lawsnecessary 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 wa s later.  The Working Party took note of these
commitments.WT/ACC/SPEC/TPKM/2/Rev.2
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Agreement on Textiles and Clothing
169. The representative of Chinese Taipei stated that the quantitative restrictions on imports of
textiles and clothing products originating in Chin ese Taipei under arrangements between Chinese Taipei
and WTO Members that were in force on the date prio r to the date of accession of Chinese Taipei to the
WTO would be notified to the Textiles Monitoring Bo dy (TMB) as being the base levels for the purpose
of application of Articles 2 of the Agreement on Textiles and Clothing. The representative of ChineseTaipei stated that 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 prio r to the date of accession of Chinese Taipei to the
WTO.  To these base levels the increase in growth rates provided for in articles 2.13 and 2.14 of theAgreement on Textiles and Clothing would be applied, in stages, from the date of accession ofChinese Taipei to the WTO.  The Working Party took note of these commitments.
Barter Trade
170. 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 hadagricultural barter trade with Korea.  Since 1992 th e barter of Korean apples and pears for Chinese
Taipei bananas had been stopped.  In 1997, a new agreement had been made between Korea and
Chinese Taipei, which provided for barter of Korean apples and pears for Chinese Taipei bananas,lychees, mangoes, garlic, onions and oranges.  Unde r the existing bilateral arrangement, Korea was
provided with access to the local market in respect 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 restricti ons on apples and quantity restrictions on nashi pears,
there would be no need to maintain this arrangemen t after Chinese Taipei's accession to the WTO.  The
barter trade arrangement had been terminated from 1 October 1997.
171. 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.  Th e purpose of the scheme was to encourage export of
locally made automotive parts by giving a public announcement of the Government's appreciation forincreased export volume by particular suppliers.  The scheme was not a subsidy program nor did it
impose any mandatory requirement to make local purchases.WT/ACC/SPEC/TPKM/2/Rev.2
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Agricultural Policies
172. Some members of the Working Party noted that  Chinese Taipei had indicated that it did not
apply subsidies to exports of  products, and accordingly these members stated that Chinese Taipeishould agree to bind its export subsidies at zero in its Schedule of Concessions.  In response, Chinese
Taipei agreed that its schedules would include a commitment to bind export subsidies at zero.  These
members 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.  On average from 1990 to
1992, exports had represented some 10 per cent of  production and some 160,000 tons.  These members
asked that Chinese Taipei explain how the differen ce between the price paid to producers and the export
price was funded as well as the meaning of the expressi on "a comfortable rate of self sufficiency in rice".
Information was also requested on total price support expenditures of Chinese Taipei and the use ofgovernment assisted loans as provided in the Stat ute for Agricultural Development.  Some members also
enquired whether the import ban on rice was of a ge neral application and requested its elimination.
173. The representative of Chinese Taipei stated th at Chinese Taipei's policy was to liberalise the
agricultural sector.  In response to questions, the repr esentative 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.  In response to further questions the representative of
Chinese Taipei informed members of the Working Party that Chinese Taipei operated a system to
compensate farmers for damage caused by competition from imports of agricultural products.  Reliefwas accorded if producers of major agricultural products suffered serious injury as a result of theliberalisation of imports due to trade negotiations or policy changes.  If the quantity of such productsimported during the injury period had increased by 20 per cent or more compared with a referenceperiod of the previous three years; or the imported products had been subsidised or had otherwisebenefited from unfair trade practices.  Serious injury was deemed to occur when the market price fellbelow 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.  In 1995, the legislation was amended to the“Rules for Redressing Damage to Farmers Caused by Agricultural Imports.”  It broadened the eligibleproducts to all agricultural products.  The representative of Chinese Taipei also submitted to the
Working Party information concerning the draft Plan on implementation of this program.  The
representative of Chinese Taipei confirmed that measures taken to redress damage to farmers causedby agricultural imports would be included in the calculation of Chinese Taipei's AMS calculationsand AMS reduction commitments according to the Agreement on Agriculture.WT/ACC/SPEC/TPKM/2/Rev.2
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174. The representative of Chinese Taipei also submitted Information Concerning Domestic
Support and Export Subsidies in documents WT/ACC/SPEC/TPKM/4/Rev.2 andWT/ACC/SPEC/TPKM/10/Rev.1.
175. In response to questions, the representative of Chinese Taipei noted that the AMS would be
scaled down consistent with the requirements of  the WTO Agreement on Agriculture, i.e., phase-downs
would be completed by the year 2000.  The purpose of the rice price support was to maintain a stablefood supply and to maintain farmers' income.  The rice price support mechanism consisted of twoelements: planned purchase and supplementary purch ase.  The purchase was made twice in a year
divided into two crops.  Aged ri ce 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 account the in ternational rice price.  The feed plants, livestock
farming business and aquaculture business could ap ply to the Food Bureau through the Feedstuff
Association for the purchase of feed rice.  The pri ce was set at 90 per cent of the wholesale price for
imported maize at the time of purchase price paymen t.  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.  Rice imports needed a Consent
Letter of the Food Supply Bureau.  Because of over production 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 Production and Ricefields Diversification 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 also stat ed that Chinese Taipei would gradually reduce excess
rice production.  A proposal on rice im ports would be submitted to the Working Party after completion
of bilateral negotiations.  Chinese Taipei's standards for paddy, milled and brown rice were provided tomembers of the Working Party.
176. Some members of the Working Party expre ssed 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 an export subsidy.  In re sponse, 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.  However, in order to
alleviate members from the concern, the representative of Chinese Taipei stated that purchasers ofrice from the central stock would not be required to export the purchased rice.  Chinese Taipei alsostated that upon accession, anyone having the right to trade in rice in Chinese Taipei would haveWT/ACC/SPEC/TPKM/2/Rev.2
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access to aged rice from central stocks on the same terms offered to exporters, and that no further
trade-based restrictions would be imposed.  The Working Party took note of these commitments.
177. The representative of Chinese Taipei stated that the ban on imported rice would be lifted upon
Chinese Taipei’s accession to the WTO. Chinese Taipei intended to structure market access for riceimports along the lines of Annex 5 of the Agreement on Agriculture, calculated on a brown rice basis.The rice import quota would be increased in equal annual increments, growing to 144,720 metric tonsin the year 2000. If Chinese Taipei accedes to the WTO in 2000, the size of the rice quota in the firstyear of access will be 144,720 metric tons. With a view to maintaining a transparent rice importarrangement, Chinese Taipei would consult with any WTO Member upon request.  The representative
of Chinese Taipei further stated that 1990-92 would be used as the base period in the calculation of
rice imports and for any calculations under paragraph 6 of Section A referred to above as 1990-92 wasused concurrently as the base period in tariff negotiations, as well as the calculations for AMS andSSG trigger price.  In response to further requests for information on its proposed SSG system, therepresentative of Chinese Taipei provided members of the Working Party with a detailed descriptionof the proposed program in doc ument WT/ACC/SPEC/TPKM/9/Rev.1.
178. In response to questions concerning exports of sugar, tobacco leaves and bananas, the
representative of Chinese Taipei stated that Chinese Ta ipei's sugar exports fluctu ated 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 an enterprise 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 sour ced 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 purchas e price 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 Stab ilization Fund, if the sugar was to be exported.
179. The representative of Chinese Taipei stated that the Sugar Stabilization Fund had been in
existence since 1966 for the purpose of stabilizing sugar export and farmers' income.  The Fund operated
as follows: when the export price was higher than  a threshold payment was made to the Fund; the
payment amount was calculated according to the scale of  the price difference and at a cumulative rate.
When the export price was lower than the export guaran teed price, payment to the farmers for the price
difference was made out of the Fund.  Taiwan Su gar Corporation, however, had to bear the price
difference all by itself.  The export price had been lo wer than the export guaranteed price in recent years.WT/ACC/SPEC/TPKM/2/Rev.2
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The price difference had been paid out of the Fund contributed by the price difference resulting from the
export price 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.  Thedomestic 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 th e basis of London spot mark et price (F.O.B.) for
sugar plus importation cost.  The food processing co mpanies applied to Taiwan Sugar Corporation for
purchase of the needed sugar and paid the domestic pr ice in the first instance.  When the products were
exported, the differences were settled Since 1 July 1994, the Fund has stopped operating.
180. The representative of Chinese Taipei stated that all tobacco exports were of tobacco purchased
by the Taiwan Tobacco and Wine Monopoly Bureau (TTW MB).  Banana exports were dealt with by the
Fruit Transportation and Marketing Cooperative.  When  the export price of bananas was lower than the
export guaranteed price, the difference was covere d by a fund administered by the Cooperative; when
the export price was higher than the export guarant eed price, contributions were made to the fund
according to the scale of the difference and at a cu mulative rate.  Farmers could choose whether to sell
their products to the domestic market or to the Coopera tive 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 Chin ese Taipei also stated that soybeans, maize and
sorghum were purchased by the Provincial Food Bur eau, and summer vegetables were mostly purchased
by the Taipei Agricultural Produce Marketing Comp any on the basis of guaranteed minimum prices.
Guaranteed purchases of wine grap es and wheat had been terminated in the first part of 1997 and 1995,
respectively.
181. 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.  Inresponse, the representative of Chinese Taipei rep lied that he did not consider that the price support
programme constituted a subsidy on exports..
182. The representative of Chinese Taipei stated that upon accession, in accordance with the
provisions of the Agreement on Agriculture, Chinese Taipei would eliminate all quantitative restrictions
and bind all tariffs applied on imports of agricultu ral 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 pr otocol, and confirmed that from the date of accession,
support previously granted for the production of tobacco  and grapes would be calculated into AMS.  The
Working Party took note of these commitments.WT/ACC/SPEC/TPKM/2/Rev.2
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183. Chinese Taipei's commitments on agricultural tariffs, on domestic support and export subsidies
for agricultural products are reproduced in the Sche dule of Concessions and Commitments of the Annex
to the Protocol of Accession of Chinese Taipei to  the WTO.  The Working Party took note of these
commitments.
VII. TRADE RELATED INTELLECTUAL PROPERTY REGIME
184. Some members of the Working Party noted that  in recent years, Chinese Taipei had introduced
a number of improvements to the protection of intell ectual 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 Chinese Taipei in this area related to enforcement rather than to the
intellectual property rights legislation itself.  Info rmation 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 bordermeasures to combat counterfeiting, the procedures a pplicable to the infringement of intellectual property
rights, the protection accorded to pharmaceutical in ventions, the protection accorded to geographical
indications and to appellations of origin for wines and spirits.
185. In response, the representative of Chinese Taipei said that the Action Plan to Comprehensively
Protect Intellectual Property Righ ts approved by the Executive Yuan on 29 June 1993 had set out the
following eight directions for efforts to strength en the protection of intellectual property rights:
(i) improving the relevant legal framework;  (ii) st rengthening the relevant administrative organization;
(iii) enhancing the enforcement of the relevant la ws and regulations;  (iv) increasing education and
promotion; (v)  increasing the capability to nego tiate with other economies; (vi) strengthening
investigation and research capabilities; (vii)  provid ing adjustment assistance to the industries concerned;
and (viii)  monitoring the implementation of the plan.  Some members of the Working Party respondedthat they had noted continued high le vels of piracy of com puter software in Chinese Taipei and export of
pirated software embodied in semiconductors.  Me mbers of the Working Party expressed concern
regarding the failure to impose penalties, in particul ar administrative penalties and seizure of infringing
product and machinery predominately used to produ ce such products, sufficient to deter piracy.
186. The representative of Chinese Taipei stated that Chinese Taipei had decided to establish the
Intellectual Property Bureau whose responsibility was exclusively for dealing w ith intellectual property
matters.WT/ACC/SPEC/TPKM/2/Rev.2
Page 79
Copyright and related rights
187. Concerning copyrights, the representative of Ch inese Taipei noted that according to Article 4 of
the Copyright Law, copyrights of economies or territories which have established reciprocity withChinese Taipei were protected by Chinese Taipei.  Protection also extended to foreign works publishedfor 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 revised the Copyright Law to meet the requi rements of TRIPS.  The main revision includes:
(a)  amending the definitions for public broadcast and public performance;  (b)  giving explicit
protection for performers' performance;  (c)  deletin g provisions concerning compulsory licenses for
translation; and (d)  affording a life-plus-50-years or 50 years term of retroactive protection inconsistency with the obligation under Article 18 of the Berne Convention.  The Amendment had been
promulgated since 21 January 1998, and effective since 23 January 1998, except the retroactiveprotection provisions which will not take effe ct until Chinese Taipei's accession to the WTO.
188. In response to a question concerning Chinese Ta ipei's current protection for computer programs
and foreign well-known marks he said that sin ce 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.
189. The representative of Chinese Taipe stated that in his opinion, the Copyright Law was in
conformity with the Berne Convention and the TRIPS Ag reement.  He provided details of the Copyright
Law provisions to the Working Party.  He said th at Chinese Taipei had promulgated one Act and eight
implementing regulations: Copyright Intermediary Organization Act; The Illustrated Contents of EachKind of Works in Paragraph 1 of Article 5 of the Copyright Law; The Certain Amount in Item 2 and 3of Paragraph 1 of Article 87bis of the Copyri ght Law; Regulations Governing Application for
Approval of Compulsory License of Musical Works and Royalties for Use Thereof; Standards forCompensation for Fair Use of Works in Paragra ph 4, Article 47 of Copyright Law; Regulations
Governing Registration of Plate Rights; Implementation Regulations for Suspension of Release of
Goods Infringing on Copyright or Plate Right by Customs Authorities; Regulations of Copyright
Dispute Mediation; Organic Charter of the Copy right Examination and Mediation Committee of the
Ministry of Interior.
190. In response to the assertion by some members of the Working Party that Chinese Taipei did not
appear to protect against the transmission of infr inging copyright material on its cable television
network, the representative of Chinese Taipei indi cated that the Government Information Office (GIO)WT/ACC/SPEC/TPKM/2/Rev.2
Page 80
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 thematter to the prosecuting authorities.  After the Cable TV Law had been promulgated in 1993, the GIOhad the authority to impose fines on those cable TV networks which transmitted copyrighted televisionsprogrammes without authorization, and refe r cases to the prosecuting authorities.
191. The representative of Chinese Taipei also noted that a bilateral agreement on protection of
copyright with the United States had taken effect on 16 July 1993 and had been reinforced by a bilateral
agreement regarding reciprocal treatment on the priority rights of trademarks and patents of
10 April 1996.  In his view, the agreement in some cases  gave a higher standard of protection than the
Berne Convention.  The text of this agreement was ma de available to the Working Party as well as the
Agreement Concerning the Protection and Enforcemen t of Rights in Audiovisual Works between the
Coordination Council for North American Affairs and the American Institute in Taiwan.  The
representative of Chinese Taipei welcomed any opportun ity of entering into bilateral agreements on the
enforcement and recognition of intellectual prope rty rights with its other trading partners.
192. In this connection, the representative of Chines e Taipei noted that Article 4 of the Copyright
Law provided that copyright protec tion for works created outside Chinese Taipei could be granted on the
basis of reciprocity.  The reciprocity required for granting protection to foreign copyrights could be
established by way of (i) a treaty or agreement, (ii) unilateral action by other economies through their
laws, regulations, or other legal instruments which pr ovide protection to Chinese Taipei's copyrights, or
(iii) customary practices.  Chinese Taipei was willing to discuss with interested parties to find a mutually
accepted way to establish such reciprocity.  In addition to the reciprocity established with the UnitedStates, Chinese Taipei had decided to protect work s originating in the United Kingdom, Hong Kong and
Switzerland through unilateral administrative action following those three economies actions protecting
works of Chinese Taipei origin.
Trademarks
193. In response to questions, the representative of Chinese Taipei stated that Article 37(1)(7) of the
Trademark Law was applied to provide protecti on 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.
194. 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 for trademarkWT/ACC/SPEC/TPKM/2/Rev.2
Page 81
registration in a manner that was not consisty w ith the requirements of the TRIPS 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 recently adopted several m easures to facilitate the examination 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 with geographic
denominations of origin.  However, if an applica tion 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 origin were used as trademarks  their use would violat e Article 37 of the Law.
195. The representative of Chinese Taipei said that the Trademark Law, Articles 4, 5, 23, 25, 34, 37
and 61 had been  amended to achieve:
(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 ChineseTaipei's owner of trademark through practice;
(ii) to include a combination of colours in the gr oup of items that are capable of constituting
a trademark so as to be consistent with Article 15 of the TRIPS Agreement;  and
(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 identicalwith or similar to another person's well- known trademark or mark and likely to cause
the public to form a mistaken belief..  This amendment had been passed in April 1997and has come into force on 1 November 1998.
Geographic indications
196. On geographic indications, he noted that curre ntly, the Trademark Law did not have specific
provisions for the protection of ge ographic indications and appellations of origin for wines and spirits.
However, as a general rule, if a manufacturer's us e of geographic indications as trademarks caused
confusion to the general consumers as to the geogra phical origin of the product concerned, the Bureau of
Standards could on its initiative or upon petition by interested parties turn down the application oftrademark registration or cancel the existing regist ration, 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.WT/ACC/SPEC/TPKM/2/Rev.2
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The relevant trademark application would be tu rned down or the registration would be cancelled.
Chinese Taipei believed that the above protection should meet the requirement for the protection of
geographical indications and appellations of orig in contemplated in the WTO TRIPS Agreement.
Patents
197. Concerning patents, the representative of Chinese Taipei noted that under paragraph 1 of
Article 42 of the 1986 Patent Law, a patent holder ha d the exclusive right to make, sell, or use his
invention.  Therefore, a product patent gave protec tion 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 ex tended 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.  The Patent Law, (as amended in 1994) provided statutory bars to an
invention patent in Article 21.  Article 56 of th e amended Patent Law confered 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 patentedmanufacturing process was under a product patent grante d to others, the owner of such process patent
shall not put his process invention into pract ice without the consent of the product patentee.
198. In response to questions concerning whether pha rmaceutical inventions could be the subject of a
product patent giving protection to the product independently of the process with which it had beenmanufactured, 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 the examiningauthority could grant extensions of the time limits  for the submission of supplementary information
supporting a patent application.
199. He added that the Patent Law, Articles 21, 51, 56, 57, 78, 79, 80, 82, 88, 91, 105, 109, 117
and 122 had been 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 prot ection terms and the granting of exclusive
import rights so as to be consistent with  Articles 3 and 4 of the TRIPS Agreement;
(iii) to limit compulsory licensing in resp ect of semi-conductor technology to public
non-commercial use or to remedying anti-comp etitive practice, so as to be consistent
with Article 31(c) of the TRIPS Agreement;WT/ACC/SPEC/TPKM/2/Rev.2
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(iv) to provide patent owners and his/her exclusiv e licensees the right to request destruction
or other necessary disposition of the infr inging 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 gi ving the judicial authority to order
disposition outside the channels of commerce;
(v) to provide for shifting the burden of proof in  respect of process patents as required by
Article 34 of the TRIPS Agreement;  and
(vi) to provide for longer term of protecti on for industrial design, so as to meet the
minimum requirement of 10 years of the TRIPS Agreement.
These amendments had been passed in April 1997 and would enter into force at the time of
accession.
Protection of undisclosed information
200. 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 conform with the requirements
of the TRIPS Agreement.
Enforcement
201. Concerning enforcement of intellectual prope rty laws, the representative of Chinese Taipei
noted that 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 provided for the protection of intellectual
property.  Article 21(1) of the Fair Trade Law pr ovided that enterprises (i.e. firms or individuals
engaging in trade) could not make any false or mi sleading marking of place of origin or manufacturing
or distribute, export or import goods bearing such marking.  Violators could be fined up to one million
NT Dollars.  The fine had been raised to NT$25 million as a result of the amended Fair Trade Lawwhich had been promulgated on 3 February 1999.  Under the Commodity Labelling Law, importers and
manufacturers were required to include information re lating to the name and address of the manufacturer
on product labels.  An offender found guilty of violatin g this law and failing to rectify the impropriety
within a prescribed time-limit would be punished by a fine of  5,000 to 50,000 yuan (equivalent to
NT$15,000 to NT$150,000).  In the case of grievous offen ce, the violator may also be subject to such
disciplinary action as suspension or cessation of bus iness operations.  In addition, persons using falseWT/ACC/SPEC/TPKM/2/Rev.2
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designations could be liable under Article 339 of the Criminal Code as having committed the offence of
forgery.
202. Concerning the enforcement of intellectual prope rty rights, the representative of Chinese Taipei
said that Chinese Taipei provided training concerni ng intellectual property rights (intellectual property
rights) to judges, prosecutors and other law enfo rcement officials.  Newly appointed judges and
prosecutors could not practice until they had comple ted an eighteen month training programme which
included an introduction to intellectual property rights .  Additional 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 P ublic Prosecutors' Office attached to the Chinese
Taipei High Court had conducted five seminars since 1 July 1992 for representatives from governmentagencies including Customs, the Government Info rmation Office (GIO), the Board of Foreign Trade
(BOFT), and the Police Administration.  The Ministry of Justice (MOJ) had also issued administrative
directives appoint specific public prosecutors in the 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 wheneverthe circumstances warranted.  Judgements which a ppeared not to have a deterrent effect would be
appealed to the High Court.  The Ministry of Justi ce had directed to all prosecutors that the discretion of
commuting prison terms to fines should be exercised very carefully in intellectual property rights cases.
203. To facilitate the investigation of intellectual property rights infringement cases, on
31 March 1993, the Public Prosecutor's Office had integr ated all intellectual property rights agencies to
form a task force.  In a letter of 20 August 1996, the MOJ had requested all prosecutors to investigate
cases where Chinese Taipei residents infringe copy rights 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 100 of the Copyrigh t 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 100 also provided that the pr osecutor could continue with the investigation or
prosecution even if the injured party withdrew the co mplaint.  When a search warrant and the seizure of
goods was considered appropriate, prosecutors were required to proceed promptly.  In addition to theCopyright Law, the MOJ had directed that the di scretion to not prosecute a case under the Criminal
Code should be exercised very carefully in intellectua l property rights criminal cases.  The Judicial Yuan
had also encouraged judges to impose the heaviest penalties possible on intellectual property rightsinfringers, and had established intellectual property rights divisions in District Courts.  Specific
prosecutors had been designated to deal with intell ectual property rights cases.  The Public Prosecutors'
Office attached to the Chinese Ta ipei High Court had conducted several on-the-job seminars sinceWT/ACC/SPEC/TPKM/2/Rev.2
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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 tokeep them informed of the new developments relating to intellectual property rights issues.
204. To further deter the export of counterfeit computer software, the Board of Foreign Trade of the
Ministry of Economic Affairs promulgated the Gu idelines for Handling Cases Where the Export of
Products related to Computer Programs was Susp ected of Copyright Infringement in 1996.  In this
connection, the represenative of Chinese Taipei  noted that in November 1992, export licensing
requirements were introduced for the following products  in order to control the export of infringing
goods:
8473.30.10.00 Computer PC board (only PC boards with semiconductor chips and computer
software within the chip);  8473.30.10.00 Printer PC board (only PC boards with semiconductor
chips containing computer software); 9504.10.00.10 Television video game PC boards with
semiconductor chips containing computer software; 9504.10.00.10 Video games of a kind used
with a television receiver;  9504.90.90.00 Other artic les for funfairs, table or parlour games
(palmtop electronic games c ontaining computer softwa re); 9504.90.90.00 Other articles for
funfairs, table or parlour games (ca ssettes for palmtop el ectronic games); 9504.10.00.20
Cassettes for television video games; 8471.20.00.00 Dig ital automatic data processing machines
(containing in the same hosing at least a CP U 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 disks containing comput er software); 8524.11.90.00 Other digita l integrated circuits (used
in computers, printers or TV video games a nd 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 game s and containing chips with computer software);
8542.80.90.90 Other integrated circuits and micro a ssemblies (used in computers, printers or
TV video games containing chips with computer software).
205. He noted that the export licensing requireme nts on the above computer-related products were
eliminated on 15 July 1998.  Since that date (and pursuant to a memorandum of understanding signed
with the United States) the Customs had been delegate d to examine packages of software consigned for
export, to determine whether they conformed to th e export permit, invoice and packaging list or other
export documents.  The examinations were carried out at random with 30-50 per cent of such exportsbeing examined.  All exports of an exporter who had been previously found to have exported intellectualWT/ACC/SPEC/TPKM/2/Rev.2
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property rights infringing products were subject to inspection, whether or not these exports were
described as computer software.  All exports susp ected of being counterfeit were seized, unless the
exporter could provide evidence to offset such susp icion.  The seized products would be confiscated
when the intellectual property rights right-holder obtained a final judgment from the Courts confirming
that the products were infringing intellectual prope rty rights.  Public Prosecutors were required to
prosecute forgers of documents including documen ts which were used to support the exportation of
intellectual property rights infringing products.  In response to further questions, the representative of
Chinese Taipei noted that  CD and VCD manufacturers in Chinese Taipei were required to inscribe the
source identification code (SID) on all CD's and VCD's manufactured.  This measure was aimed to
further deter the circulation of pirated CD's and VC D's.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 the coordination agency to assist the effective operation of the export monitoring
system.  The ACC was responsible for the enfor cement of anti-counterfeiting efforts involving
trademark and patents.  The ACC directed the work  of the intellectual property rights Enforcement
Supervisory Task Force since July 1989.  The ACC was empowered to refer suspected counterfeiting
cases directly to the Courts for prosecution.  Foll owing conviction, the ACC could request the BOFT to
impose punitive measures according to the degree of seriousness of the offence.  The BOFT could refuseto issue export permits for a period of one year to the companies concerned.  He added that theinspection by the Customs emphasized the examination of the product name, brand names, qualities,specifications, product serial numbers, model number s, countries of manufact ure, net weights etc.
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 informed by the Court or the trademark author ity.  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 consu ltations 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.
206. In reply to questions concerning border m easures and the 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 theCustoms.  All infringements of intellectual property rights had to be dealt with in the same manner as
patent rights.  The only exception was Article 90 bis of the Copyright Law, which provided that
right-holders upon the posting of an appropriate bond could petition the Customs to seize importsWT/ACC/SPEC/TPKM/2/Rev.2
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reasonably 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 intoChinese Taipei for the purpose of being assembled in to infringing goods which would be exported to a
third country, the representative of Chinese Taipei replied that Chinese Taipei had never encounteredsuch a situation, but the goods could be  seized if a Court order was obtained.
207. 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 suffici ent deterrent effect on certain commercial scale
counterfeiting operations, such as watches.  Some members also noted the continued high levels ofpiracy of computer software embodied in se mi-conductors.  These members expressed concern
regarding the failure to impose penalties, in particul ar administrative penalties and seizure of infringing
products and machinery used to produce such products, sufficient to deter piracy.  The representative ofChinese Taipei replied that Chinese Taipei had issu ed 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, includi ng the upgrading of the standards of protection, the application of
stiff administrative measures, the strengthening of j udicial enforcement and the education of the general
public to respect intellectual property rights.  An inter-agency Task Force had been established to
co-ordinate and supervise the enforcement of in tellectual property rights.  Chinese Taipei was
determined to enjoy a reputation as a territory  that respected intellectual property rights.
208. The representative of Chinese Taipei noted that  efforts to ensure fully conformity with the
Agreement on TRIPS were ongoing.  Amendments to the Trademark Law passed in April 1997 hadentered into force on 1 November 1998.  The amendments to the Patent Law passed in April 1997 wouldenter 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. Some membersof the Working Party expressed their appreciation to the representative of Chinese Taipei for the
information on efforts to implement the TRIPS Agreem ent.  These members re-emphasized the need for
effective enforcement of Chinese Taipei s intellectua l property laws as part of its obligations under the
TRIPS Agreement.  The Working Party took note of these commitments.
209. 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 todiscourage such activities in the future, the repr esentative of Chinese Taipei confirmed that all
contraband smuggled or counterfeit imports of alcohol  and tobacco products seized would be destroyed,
or otherwise disposed of, taking into account the pr actices of WTO Members in a similar situation, andWT/ACC/SPEC/TPKM/2/Rev.2
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that Chinese Taipei would take  additional efforts to prevent such illegal imports.  In this regard, Chinese
Taipei would ensure that certain alcoholic bevera ge imports would be accompanied by a certificate of
origin similar to that issued by the regulatory authorities in the country of origin.in order to combat
counterfeiting.  The Working Party took note of these commitments.
210. The representative of Chinese Taipei stated that  Chinese Taipei would fully apply the provisions
of the Agreement on TRIPS by the date of accessi on, 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 theenhanced 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 Copyrigh t Law to comply with Article 14(1) of the
TRIPS Agreement;
(d) the extension to all WTO members of advantages currently given on the basis of
reciprocity, the elimination of any recipr ocity requirements;  and in particular,
(e) effective enforcement (including implemen tation of the special requirements related to
border measures).
The Working Party took note of these commitments.
VII. POLICIES AFFECTING TRADE IN SERVICES
211. Several members of the Working Party stre ssed 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.  The representative of Chinese Taipei stated  that an enquiry point would be established as of
the date of accession.
212. The representative of Chinese Taipei confirmed that MOTC would license additional
facilities-based operators effective from July 2001; and, consistent with Chinese Taipei’scommitments under the GATS, there would be no limitations on the numbers of licenses afterWT/ACC/SPEC/TPKM/2/Rev.2
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Chinese Taipei becomes a member of the WTO. In addition, MOTC will deregulate international
voice simple resale service from July 2001. From that time, market access to services-basedcompetition will be fully open. The Worki ng Party took note of these commitments.
213. Some members of the Working Party welcomed Chinese Taipei’s commitment to permit
attorneys of foreign legal affairs (AFLA) to establish a partnership with or employ a lawyer licensedin Chinese Taipei upon Chinese Taipei’s accession to the WTO.  They also noted that ChineseTaipei will grant AFLA status to all foreign lawyers who are employed in Chinese Taipei by thedate of Chinese Taipei's accession and who complete a two-year employment period, in accordancewith the "Regulation Concerning Chinese Taipei Lawyers' Employment of Foreigners andAdministration" thereof.  The cooperative arrangements between a Chinese Taipei lawyer and anAFLA shall note constitute a violation of provision of Article 50 of the Lawyers' Law.
IX. TRANSPARENCY
214. 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 GATSrequired prompt publication (at the latest by the time of entry into force - except in emergency
situations) of all relevant measures of general applic ation which pertain to or affect the operation of the
GATS Agreement.  These members also noted that tr ansparency obligations arose from Article 63 of the
TRIPS Agreement.  They also requested that such laws, regulations, judicial decisions andadministrative rulings relating to tr ade be systematically and immediately translated into a WTO official
language.
215. 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 theright to provide comments on proposed measures prio r 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 this
process to all measures related to the WTO.
216. The representative of Chinese Taipei stated that the following Laws shall be repealed, amended
or newly made by the date of accession to the WTO for the purpose of putting into effect ChineseTaipei's accession commitments:
- Foreign Trade Act
- The Commodity Inspection LawWT/ACC/SPEC/TPKM/2/Rev.2
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- 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
- Lawyers' Law
- 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 Organi zation of Department of Na tional Treasury, Ministry of
Finance
- Provincial Statute for Monopoly of T obacco and Wine in Taiwan Province
- Customs Import Tariff and Classifi cation of Import Export Commodity
- Statute for Establishment and Management of Export Processing Zones
- Statute for Agriculture Development
- Food Management Law
- Statute for Inspection Procedure Governin g Construction Works and Procurement and
Disposal of Properties by Government Agencies
- Statute for Vocational Assistance for Retired Servicemen
- Law for the Administration of National Enterprises
217. A summary of the amendments that will be introduced to some of the above-mentioned laws
was reproduced in Attachment E to this Draft Report.   The representative of Chinese Taipei further
stated that Chinese Taipei would ensure that fro m the date of accession, all laws, regulations, judicial
decisions and administrative rulings relating to trad e would be published promptly so that governments
and traders could become acquainted with them.  The Working Party took note of these commitments.
218. The representative of Chinese Taipei further stat ed that Chinese Taipei would ensure that from
the date of accession, all laws, regulations, judicial  decisions and administrative rulings of general
application relating to trade in goods, as well as meas ures subject to the transparency provisions of the
GATS and TRIPS Agreement would be translated and published in an official WTO language no later
than 90 days after enactment or issuance.  Such measures would, however, be published in the official
language of Chinese Taipei prior to the date such measures are to be implemented or enforced except in
cases of extreme emergency publication would be done on an expedited basis thereafter.  In respect ofWT/ACC/SPEC/TPKM/2/Rev.2
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enquiry points required to be established under the WTO Agreement or the Protocol, the representative
of Chinese Taipei stated that Chinese Taipei woul d establish or designate an  enquiry point where, upon
request of any individual or enterprise, all information relating to the measures required to be publishedmay be obtained.  Replies to enquiries for informa tion would generally be provided within 30 calendar
days after receipt of a request.  In exceptional cas es, replies may be provided within 45 calendar days
after receipt of a request.  Replies would be complete and would represent the authoritative view ofChinese Taipei.
219. 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 transpar ent system for adopting laws, regulations and other
measures.
220. The representative of Chinese Taipei stated  that upon accession, Chinese Taipei, would provide,
except in cases of extreme emergency, a period for appropriate authorities, including those of other
WTO members, to comment on all laws, regulations and other measures pertaining to or affecting tradein goods, services, or TRIPS of at least 60 calendar days before such measures are implemented.   If
prior comment is not possible in such cases of emergency, comments will be accepted and considered
immediately after implementation.  The Work ing Party took note of these commitments.
Notifications
221. 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 regulationssubsequently 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 that
Agreement.  The Working Party took note of these commitments.
X. OTHER TRADE AGREEMENTS
222. 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.WT/ACC/SPEC/TPKM/2/Rev.2
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Agreement on Trade in Civil Aircraft
223. 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 ChineseTaipei, which was also a major participant in the globalization of the world's aeronautics and spaceindustry, should accept the Agreement on Trade in Civil Aircraft upon accession to the WTO.  They
further added that due to the advanced state of th e industrial development of Chinese Taipei and the
plans to expand the aircraft and components industry, the acceptance by Chinese Taipei of theAgreement on Trade in Civil Aircraft was a prerequisite to accession to the WTO.
224. The representative of Chinese Taipei stated th at 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
225. The Working Party took note of the explanations  and statements of Chinese Taipei concerning
its foreign trade regime, as reflected in this repor t.  The Working Party took note of the commitments
given by Chinese Taipei in relation to certain spec ific matters which are reproduced in paragraphs 12,
15, 19, 21, 22, 36, 37, 39, 44, 47, 52, 57, 63, 70, 71, 73, 74, 75, 80, 82, 84, 86, 89, 91, 99, 108, 115, 118,
119, 123, 129, 137, 138, 141, 142, 148, 149, 150, 151, 152, 153, 154, 157, 160, 162, 168, 169, 176, 182,183, 208, 209, 210, 212, 217, 220 and 221 of this Draft Repor t and noted that these commitments had
been incorporated in the Draft Protocol of Accession.
226. Having carried out the examination of the fore ign trade regime of Chinese Taipei and in the
light of the explanations, assurances and commitment s 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 Organizati on 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/Rev.2
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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 negotiations 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 th e 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/Rev.2
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[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 Agreement
Establishing 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 negotiatio ns 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 force
before the date of entry into force of this Protocol .  This Protocol, which shall include the commitments
referred to in [paragraph 225] of the Working Part y Report, shall be an integral part of the WTO
Agreement.
3. Except as otherwise provided for in the para graphs referred to in [paragraph 225] 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 thatWT/ACC/SPEC/TPKM/2/Rev.2
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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 its accessi on to the Marrakesh Agreement Establishing the
World Trade Organization (WTO Agreement) accept the Plurilateral Trade Agreement on Trade in Civil
Aircraft listed in Annex 4 of the WTO Agreement.
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 li st of Article II Exemptions  annexed to this Draft
Protocol and meets the conditi ons 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 th e 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 implemented asspecified in the relevant parts of the respective Schedules.
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.WT/ACC/SPEC/TPKM/2/Rev.2
Page 96
11. This Draft Protocol shall be deposited with  the Director-General of the WTO.  The
Director-General of the WTO shall promptly furnis h a certified copy of this Draft Protocol and a
notification of acceptance by Chinese Taipei thereto pursuant to paragraph 9 to each Member of theWTO 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/Rev.2
Page 97
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/Rev.2
Page 98
[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 Agreement 1994), [as indicated in the Explanatory Notes thereof]
provides that any WTO Member which is not a memb er of the International Monetary Fund (hereinafter
referred to as the "Fund") shall, within a time to be determined by the WTO after consultation with the
Fund, become a member of the Fund, or, failing that, en ter into a special exchan ge 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 account
that 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:WT/ACC/SPEC/TPKM/2/Rev.2
Page 99
ARTICLE IOrderly Exchange Arrangements
1. Chinese Taipei shall collaborate with the WTO to promote exchange rates which reflect
underlying economic fundamentals, to maintain orde rly exchange arrangements with other Members of
the WTO, to avoid competitive exchange alterations, a nd 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 multilateral sy stem, and to promote international trade and
investment.
2. Recognizing that the essential purpose of the in ternational monetary system is to provide a
framework that facilitates the exchange of goods, services, and capital among countries, and that helpssustain non-inflationary economic growth, Chinese Taipei undertakes to assure orderly exchange
arrangements and to promote a stable system of exch ange 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;(iii) Avoid manipulating exchange rates or th e international monetary system in order to
prevent effective balance-of-payments adju stment or to gain an unfair competitive
advantage over other members; and
(iv) Follow exchange policies compatible with the undertakings under this Article.
ARTICLE IIAvoidance 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.WT/ACC/SPEC/TPKM/2/Rev.2
Page 100
2. Chinese Taipei shall not engage in, nor pe rmit its Ministry of Finance, Central Bank,
Stabilization Fund, or other agency, to engage in an y 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 Agreemen t of the Fund or with the provisions of a special
exchange agreement entered into pursuant to paragr aph 6 of Article XV of the General Agreement 1994
or this Special Exchange Agreement, shall be unenforceab le 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 internat ional capital movements, if these movements are
destabilizing to the balance of payments or jeopa rdize macroeconomic stability, so long as Chinese
Taipei 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 affec ting 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 contro ls or tightens existing capital controls, it shall
immediately after instituting or tightenin g such controls consult with the WTO.
ARTICLE IVRestrictions 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 aWT/ACC/SPEC/TPKM/2/Rev.2
Page 101
measure to restrict payments and transfers fo r 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; and
(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 V
Furnishing of Information
1. Chinese Taipei shall furnish th e WTO with such information with in the general scope of section
5 of Article VIII of the Articles of Agreement of the International Monetary Fund as the WTO mayrequire in order to carry out its functions under the WTO Agreement.WT/ACC/SPEC/TPKM/2/Rev.2
Page 102
2. Chinese Taipei shall be under no obligation to furn ish information in such detail that the affairs
of individuals or corporations ar e disclosed.  Chinese Taipei undertakes, however, to furnish the desired
+information in as detailed and accurate a manner as is practicable.
ARTICLE VIMiscellaneous Provisions
1. For purposes of this Special Exchange Agreemen t, the term "Payments for current transactions"
means payments which are not for the purpose of tran sferring 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 sha ll 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 comm unicated 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/Rev.2
Page 103
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); Sugar and
fertilizer: agricultural policy to stabilize farmers' income and production cost;
3. Price controls on other necessities: Natural gas and liquefied petroleum gas: mandated by the
"Statute for Monitoring Private Enterprises Operating Public Utilities"; 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 3102.10.10, 3102.21.10, 3102.30.10,
3102.70.10, 3103.10.00 and sugar sold by the Taiwan Sugar Corporation in Chinese
Taipei.  The legal basis for price control of these commodities was the Table ofDivision of Work between the Ministry of  Economic Affairs and the Executive Yuan;
(v) Natural gas and liquefied gas: The HS numbers are 2711.21.00 and 2711.19.10.  The
legal basis for price control was the Stat ute for Monitoring Private Enterprises
Operating Public Utilities.WT/ACC/SPEC/TPKM/2/Rev.2
Page 104
ATTACHMENT B
Revised Summary of the Tobacco and Alcohol Reform Plan (January, 1998)
The following outlines Chinese Taipei's intentio ns for the tobacco and alcohol reform plan:
Tobacco and Alcohol Taxes
The TTWMB reform plan includes a classificati on of tobacco products and alcoholic beverages
for the purposes of internal taxes (tobacco and alcohol taxes). Tobacco products are classified intocigarettes, pipe tobacco, cigars, and others. Cigare ttes 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 al coholic 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 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. Thesetting of the rates of tariffs and taxes has taken into account the current monopoly tax level, UruguayRound "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 th e administration of tob acco 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 wi ll not be open to the private sector within three
years after the reform.WT/ACC/SPEC/TPKM/2/Rev.2
Page 105
In terms of the production of alcohol products, the manufacturing of machinery and equipment
for alcohol and tobacco production, printing of tradem arks, 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/ma nufacture 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, perm its from the authority will be required. To do so, the
applicant must fulfil requirements including, mini mum capital, organization form (companies limited by
shares only), acquiring a factor y license, and no record of criminal offence or tax default.
After the implementation of the new system , tobacco and alcohol manufacturers legally
established will be permitted to import alcohol and t obacco products in bulk for repackaging, provided,
however, such manufacturers shall have authorizati on from the original manufacturers of the imported
products and shall be able to produce the relevant certificates of origin.
In addition, tobacco and alcohol manufactur ers may contract out or accept contract
manufacturing, subject to the appr oval of the competent authority.
In the importation and wholesale of alcohol a nd 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 offence within a prescrib ed time. Chinese Taipei has incor porated services related to the
distribution of tobacco and alcohol  products in its draft schedule of specific commitments on trade in
services.
The legal and regulatory framework for produc tion 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.WT/ACC/SPEC/TPKM/2/Rev.2
Page 106
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 with thewarning "excessive drinking endangers health."
Product inspection will be governed by the sta ndards 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 beverage s on radio and TV in specified time period of the
day. After implementation of the Tobacco and Al cohol Administration Law,  advertising of alcohol
products in all media will be permitted, subject howev er to regulation in relation to the content and
timing of the advertising. All advertising regulation will be consistent with the principle of national
treatment. The advertisement shall not contain cont ents which run counter to public order and good
moral, and public interest; encourage and promote drinking; cause harm to adolescents, pregnantwomen's mental or physical well-beings; include fo rged, 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 th e 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 and
counterfeit products. The alcohol and tobacco administ ration agency will be given the authority to carry
out inspection on the business operations of manufact urers and traders. Inspection and interception of
contraband will be subject to the Alcohol and Tobacco Administration Law (passed 4 June 1999),
Alcohol and Tobacco Tax Law (draft), Statute for Anti-smuggling Law and Statute for Interception by
the Customs, and other relevant laws and regula tion. Under the new administ ration system, contraband
and counterfeit products will be destroyed or otherwis e disposed of, taking into account the international
practices.
Any violation of the Tobacco and Alcohol Admini stration Law will be subject to administrative
or criminal penalties, depending on th e type or seriousness of the violation.WT/ACC/SPEC/TPKM/2/Rev.2
Page 107
ATTACHMENT C
DeletedWT/ACC/SPEC/TPKM/2/Rev.2
Page 108
ATTACHMENT D
The Consolidated List of Commodities Subject to Import Restrictions and Commodities
Entrusted to Customs for Import Examination, J une 1997 Edition, has been deposited with the WTO
Secretariat (Accessions Division, Room 1126)WT/ACC/SPEC/TPKM/2/Rev.2
Page 109
ATTACHMENT E
Summary of Law Amendments
Title of Law and Articles
AmendedBackground 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
for taking such action to imbalance in international payments.
Article 18:
The amendment deletes the wo rds "drastic or large" in
describing the amount of increase in imports as a condition to
initiate domestic safeguard action.  This is to follow the useof language in the Safeguard Agreement.The amendment also provides a legal basis for the authorityto set rules to initiate safeguard action as contemplated in theAgreement on Textiles and Clothing.
Article 20.1:
This is a new addition to the Law which is intended toprovide the legal basis for the authority to regulate the pre-
shipment inspection activities of firms mandated by foreigngovernments.  It also gives binding effects of the decisions ofdispute resolution panel of the WTO Preshipment Inspection
Agreement on the private parties concerned, namely, the
preshipment inspection company and the exporter.WT/ACC/SPEC/TPKM/2/Rev.2
Page 110
Title of Law and Articles
AmendedBackground of Amendment
The Commodity Inspection
LawArticles 1, 4, 7, 8, 10, 11, 27,
28, 38The amendment exercise is to achieve the following three
objectives:(i) to incorporate international standards in the domesticstandard-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 domestic products,
(iii) to accept and recognize foreign inspection certificatesin order to be in line with th e spirit of the TBT Agreement,
particularly that calling for mutual recognition.
The Trademark LawArticles 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 no formal
agreement but the right of priority is granted to ChineseTaipei's owner of trademark through practice,
(ii) to include combination of colours in the group of itemsthat 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 orsimilar to another person's well-known trademark or markand likely to cause the public to form a mistaken belief.WT/ACC/SPEC/TPKM/2/Rev.2
Page 111
Title of Law and Articles
AmendedBackground of Amendment
The Patent Law
Articles 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 thegranting of patents for micro-organisms, extension of patentprotection 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 respect of semi-
conductor technology to public non-commercial use or to
remedying anti-competitive practice, so as to be consistentwith 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, inconnection with the infringement, so as to meet therequirement of Article 46 of the TRIPS Agreement whichcalls for giving the judicial authority to order dispositionoutside the channels of commerce,
(iv) to provide for shifting the burden of proof in respect ofprocess patents as required by Article 34 of the TRIPSAgreement,
(v) to provide for longer term of protection for industrialdesign, so as to meet the mi nimum requirement of 10 years of
the TRIPS Agreement.
Company LawArticles 373, 383The amendment is to delete the reciprocity requirement for
recognition of foreign companies and public placement offoreign companies' shares, so as to fulfil Chinese Taipei'scommitments under the GATS.WT/ACC/SPEC/TPKM/2/Rev.2
Page 112
Title of Law and Articles
AmendedBackground 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-quotasnegotiated 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 importduties, 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 valu ation 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 solely for export,
(vi) to revise the provision relating to determination of
normal value for purposes of anti-dumping administration soas to make it consistent with Article 2 of the Anti-dumping
Agreement.
Statute for Commodity Tax
Articles 3, 5, 13, 14, 15, 17,18, 32The amendments are to achieve the following objectives:
(i) to delete rules relating to tobacco and alcohol productsas this part of the Law will be replaced by the new Tobacco
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, whengoods are not circulated throug h exclusive distributors, as a
reflection of Chinese Taipei's accession commitment,
(iii) to exclude harbour construction dues from the tax base
for commodity tax.WT/ACC/SPEC/TPKM/2/Rev.2
Page 113
Title of Law and Articles
AmendedBackground of Amendment
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 thebusiness tax base shall include tobacco and alcohol tax as
provided in the new Tobacco and Alcohol Tax Law.
The Securities and Exchange
Law
Articles 54, 95, 128Article 54: This amendment is to delete the requirement that
the certain business personnel of securities firms be Chinese
Taipei residents.
Article 95: This amendment is  to delete the limitation that
only one stock exchange can be established in one
geographical area,
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 PublicAccountants LawArticle 47The amendment is to delete the reciprocity requirement for
foreigners to take the examination and be qualified ascertified public accountants in Chinese Taipei.
Commercial Port LawArticle 7The amendment is to subject goods, circulated internally
through international commercial ports, to the levy of theharbour construction dues in order to be consistent with theprinciple of national treatment.  The amendment also makesclear that the revenue of harbour construction dues shall beused exclusively for the devel opment 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.
Lawyers' Law
Articles 20.1, 42, 45, 46, 47.1
to 47.14, 48, 49, 50, 50.1This set of amendments is directed:
(i) to provide a statutory basis for allowing Chinese Taipeilawyers 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,WT/ACC/SPEC/TPKM/2/Rev.2
Page 114
Title of Law and Articles
AmendedBackground of Amendment
(iii) to provide the statutory basis and qualification
standards for allowing foreign lawyers to practice the laws of
their home countries and international law in Chinese Taipei.
Architects' Law
Article 54The amendment is to delete the reciprocity requirement for
foreigners to take the architects' examination and become
qualified to practice in Chinese Taipei.
Statute Governing Privileges
and Immunities of the ForeignMissions and their Personnelin Chinese Taipei
Article 7-1This addition to the Law is to extend privileges and
immunities to WTO related personnel for purposes ofArticle 8 of the Marrakesh Agreement Establishing the World
Trade Organization.
Law of Pharmaceutical Affairs
Article 53This amendment is to lift the restriction on and provide rules
for regulating repackaging of imported pharmaceutical
products.
Law Governing Food
Sanitation
Article 17The amendment is to provide the labelling of food products
with an option to use the date of manufacture or the expiry
date as a code for product identification.
The Publication Law
Article 8This amendment is to delete reciprocity requirements in the
granting of publishing rights to foreign nationals.
Central Bank ActArticle 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 authorityin the setting of the deposit reserve ratio and reserves forother liabilities
Copyright Law
- Amended 104 articlesThe amendments to this Law are to achieve the following
objectives:WT/ACC/SPEC/TPKM/2/Rev.2
Page 115
Title of Law and Articles
AmendedBackground of Amendment
1) To amend the definitions for public broadcast and
public performance;2) To include explicit protection for performances;3) To revise the provisions regarding the ownership ofworks created in the course of employment or under
commission. These revisions are aimed at reducing tension
which have existed between the employers and employeesunder the old law;4) To revise the provisions regarding the moral right ofintegrity in order to accommodate the use and circulationof works;5) To expand the subject matter of works protected bythe public display rights;6) To delete provisions mandating the competent
authority to set the minimum prices for the transfer of
economic rights of works and the royalties for the use ofsuch works. This change is made because that marketmechanism should be allowed to determine these prices;7) The delete provisions concerning compulsorylicenses for translations in accordance with TRIPS and theBerne Convention;8) To amend provisions regarding compulsory
mechanical licensing for musical works. This is based on
the ideal of promoting the circulation of musical works;9) To abolish the copyright registration system;10) To afford a life plus 50 years or 50 years term ofretroactive protection for works not protected prior toChinese Taipei's accession to the WTO.WT/ACC/SPEC/TPKM/2/Rev.2
Page 116
Title of Law and Articles
AmendedBackground of Amendment
Copyright Intermediary
Organization Act
- New legislation of 46
articlesThe new legislation is to promote and to facilitate the use of
copyrighted works by the general public throughwell-established professional copyright intermediaryorganizations, 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:
1) To replace the original policy objective of export-
oriented by international trade promotion;2) To expand the scope and depth of business within thezone, including trade information services, R&D andtechnical services;3) To encourage investments by the elimination ofrestrictions on establishing businesses within the zone;4) To increase administrative efficiency within the zoneby simplifying the customs clearance process, consistent
with the Negative List provided by Article 11 of the Foreign
Trade Act.WT/ACC/SPEC/TPKM/2/Rev.2
Page 117
Title of Law and Articles
AmendedBackground of Amendment
Tobacco and Alcohol
Administration Law
- New legislation of 63
articlesFollowing the tobacco and alcohol reform plan, the new
Law is to provide legislative mandate to the administrativeauthorities for the opening-up of the tobacco and alcoholproducts. The new Law aims to achieve the following:5) To provide a legal basis for the authorities to regulate
the manufacture and the distri bution of tobacco and alcohol
products;6) To provide definitions of tobacco and alcoholproducts;7) To forestall international trade disputes by preventingthe prevalence of counterfeit products and ensuringestablished standards are implemented and enforced in themanufacture of tobacco and alcohol products;
8) To protect national health interests by including
measures such as guidelines on labelling tobacco and
alcohol products and regulations on advertisements.
Statute Governing the
Organization of National
Treasury, Ministry ofFinance
- Amended 13 articlesThe amendments of this Statute reflect the administrative
modifications made with the reform of the tobacco and
alcohol monopoly. A department will be added to thecurrent organizational structure to implement administrativerequirements established in the new Tobacco and AlcoholAdministration Law.
Tobacco and Alcohol TaxLaw
- New legislation of 21
articlesThe new legislation is to achieve the following:
9) To provide definitions of tobacco and alcoholicbeverages;10) To establish a new tax system in light of the reform ofthe tobacco and alcohol monopoly to facilitate taxcollection;11) To establish tax collection procedures to facilitate the
enforcement of the new tax regime.WT/ACC/SPEC/TPKM/2/Rev.2
Page 118
Title of Law and Articles
AmendedBackground of Amendment
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 processedrice products will be adopted, consistent with Article 4(2) of
the WTO Agreement on Agriculture.
Statute for Agriculture
Development
- Amended 25 articlesThe amendments to this Statute are to achieve the
following:12) To introduce competitive pricing system by deleting
"uniform pricing" for exported agricultural products, to
complement the enforcement of the Fair Trade Law andopen-market mechanisms;13) To expand the Statute to include special safeguardprovisions consistent with the WTO Agreement onAgriculture;14) To introduce measures to prevent the monopolization
of the market.
Statute Governing the
Organization of the PublicConstruction Commission,Executive Yuan
- Amended and added a total
of 14 articlesThe amendments to this Statut e reflect the re-structured and
expanded responsibilities of the Public ConstructionCommission. The changes include:15) To establish a committee within the Commission tohandle complaints by suppliers on government procurement
projects;
16) To establish an information office within theCommission as a centralized information system on publicconstruction and government procurement projects;17) To provide technical assistance and support to othergovernment agencies in matters relating to government
procurement.WT/ACC/SPEC/TPKM/2/Rev.2
Page 119
Title of Law and Articles
AmendedBackground of Amendment
Statute for Inspection
Procedure GoverningProperties by GovernmentAgencies
- 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 andProcurement and Disposal of Properties by GovernmentAgencies". The amendments to this Statute aim to simplifyinspection 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 areeither deleted or combined with the GovernmentProcurement Law.WT/ACC/SPEC/TPKM/2/Rev.2
Page 120
Title of Law and Articles
AmendedBackground of Amendment
Fair Trade Law
Article 41The amendment is to achieve the following objectives:
[1] To increase the pecuniary burden on persons and
enterprises that violate the Fair Trade Law.
[2] To enhance the Commission’s ability to impose more
significant fines on enterprises that do not comply with
Commission directives and dispositions.
[3] To conform with the principle of “disposing cases
through administrative channels before resorting to thejudicial system”.
Article 41
With respect to enterprises that violate the provisions of this
Law, the Fair Trade Commission may specify a time periodwithin which the enterprise is required to cease or rectify itsconduct or within which it must adopt corrective measures;
in addition, the Fair Trade Commission may impose a fine
of between fifty thousand and twenty-five million NTDollars. If within the specified time period the enterprisefails to cease or rectify its conduct, or to take correctivemeasures, the Fair Trade Commission may continue tospecify a time period within which the required to cease orrectify its conduct or within which it must adopt correctivemeasures, and may impose successive fines of between onehundred thousand and fifty million  NT Dollars until the
acts in question cease or are rectified or until the corrective
measures are adopted.
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