WORLD TRADE  
ORGANIZATION  G/SCM/Q2/TPKM/7 
19 October 2006 
 (06-5054) 
Committee on Subsidies and 
Countervailing Measures Original:   English 
 
 
 
SUBSIDIES  
 
Replies to Questions Posed by the UNITED STATES  
Regarding the New and Full Notification of the SEPARATE  
CUSTOMS TERRITORY OF TAIWAN, PENGHU, KINMEN AND MATSU1 
 
 The following communication, dated 18 October 2006, is being circulated at the request of the Delegation of the Separate Customs Terr itory of Taiwan, Penghu, Kinmen and Matsu. 
 
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General Fisheries Questions
 
 
 Certain publicly available information indica tes that Chinese Taipei may have subsidy 
programmes that benefit its fishing industry which have not been notified.  Please explain why the programmes listed below do not qualify as notifiable under Article 25 of the SCM Agreement.  If they do qualify as notifiable , and to the extent they have not yet been 
notified, please provide the information required under Article 25 of the SCM Agreement. 
 Fish Product and Promotion  1. Establishment of omnidirectional marketing channels and promotion 
2. Management of fish markets and markets products 
3. Planning of fishery related information 4. Promotion of fisheries techniques 5. Planning and management of aquaculture  6. Establishment of marine processing brand name 
 
Refurbishment of public facilities 
 
7. Fishing port establishment and management 
8. Aquaculture facilities loan 9. The marine insurance on fishing vessels and fishermen 
10. Developing domestic markets for fisheries products 
-  Stock enhancement programmes 
11. Enhance fisheries business by fishermen’s association 12. Developing new fisheries technologies  
                                                     
 
1 G/SCM/N/123/TPKM G/SCM/Q2/TPKM/7 
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  Reply
 
 1. Omni-directional marketing channels and pr omotion is by definition a public awareness 
programme, which provides quality-oriented and/or h ealth-sensitive information to the general public. 
This programme also focuses on combining local fish ery products with folk and cultural activities in 
order to foster regional specialities. Neither pub lic educational activities nor social and regional 
cultural development should be considered as specifi c subsidies to our fishery industry. Our fishery 
industry does not enjoy a reduction in production or sales costs, or any other type of benefit from this programme. The programme is therefore not subject to the notification requirement under Article 25 
of the SCM Agreement. 
 
2. Projects related to the management of fish markets and market products – such as the construction of fish markets, and the instalment of  equipment to run and manage those markets – are 
considered general infrastructures projects. Such  projects, like the building of roads or the 
construction of seaports or airports, do not fall under the coverage of the SCM Agreement, and 
therefore no notification is required. 
 3. Projects related to the planning of fishery-re lated information – such as the establishment of 
computer networking for the distribution of inform ation on fishing activities or weather changes – is 
for general management, including general public service, purposes. It is provided for the benefit of 
many regional associations – not just fishery associat ions – and is therefore not a subsidy under the 
SCM Agreement. 
 4. The promotion of fishery techniques is a scientific research project that assists scholars – not the fishery industry – in the collection of maritime  data, navigation science and ecological information 
for the conservation of the environment and natural resources. It is therefore not a subsidy under the 
SCM Agreement. 
 5. The planning and management of aquaculture  is a broad-range project that can cover both 
subsidy and non-subsidy measures, such as the ma nagement of the environment control system 
regarding aquaculture. For those measures that fa ll into the category of notifiable subsidies, 
please refer to our previous notification G/SCM/ N/123/TPKM, dated 3 Augus t 2005. Information can 
be found under the programme title “Extension of Reuse of Pond Water Used in Aquaculture,” 
pp. 15-16, and under the progra mme title “Aqua-cultural Facilities Loan,” pp. 17-18. (See also 
Paragraph 8 of this reply.)  6. The establishment of a marine processing brand name with certified quality standards (such as 
CAS), is a non-mandatory labelling system whose pur pose is to boost public awareness of the quality 
of processed marine foods. Such labelling programm es, like “Grade AAA” beef in the United States, 
are not subsidies under the SCM Agreement.  7. Fishing port establishment and management , like the construction and management of 
highways in the United States, are considered infra structure projects, and are therefore not covered 
under the SCM Agreement. 
 8. The granting of loans for aquaculture faciliti es is considered a subsidy measure, and was 
included in our previous notification, G/SCM/ N/123/TPKM. This measure, which expired on 
1 January 2006, can be found under the programme title “Aqua-cultural Facilities Loan,” pp. 17-18. 
 
9. The provision of marine insurance on fishi ng vessels is a subsidy measure that was included 
in our previous notification, G/SCM/N/123/TPKM. It can be found under the programme title “Fishing Vessels Marine Insurance Reward,” pp. 16- 17. Marine insurance on fishermen is considered 
part of our social security system and is therefore not covered under the SCM Agreement.  G/SCM/Q2/TPKM/7 
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  10. Developing domestic markets for fisheries products – stock enhanc ement programmes – are 
measures designed to create a more stable and func tional market for fisheries products. They are one 
part of an overall scheme that was listed unde r the programme title, “Fish Products Market 
Stabilization Fund,” on pp. 18-19 of G/SCM/N/123/TPKM.  
11. The so-called “enhancement of  the fishery business by fisherme n’s associations” is meant to 
encourage those associations to provide more fisher y-related services, such as professional short-term 
and long-term classes, seminars and briefings on national policies. These are considered educational 
and/or public awareness programmes, and are not therefore considered notifiable under the 
SCM Agreement. 
 
12. The development of new fisheries technologi es is not considered a notifiable measure under 
the SCM Agreement for the reasons already st ated under Paragraph 4 of this reply. 
  Fisheries Development Fund
   
  Article 56 of the Fisheries Act states that a Fisheries Development Fund will be 
established to promote fisheries development.  Please answer the following questions.  1. What is the policy objective and purpose of the Fisheries Development Fund? 
 
2. Which government authority administers this Fund? 
 
3. What types of incentives are provided for under this Fund ( e.g., grants, low-interest rate 
loans, tax concessions)? 
 
4. Please specify which fisheries development activities are eligible for funding under the Fisheries Development Fund ( i.e. funding of vessels, training, marketing, purchase of 
equipment.) 
 
 Reply
 
 
1. The policy objective and purpose of the Fisheries Development Fund is to promote the sustainable development of our fishery industry.  2. The government authority responsible for this Fund is the Fisheries Agency, under the 
Council of Agriculture. 
 3. Incentives provided by this Fund include the payment of costs and fees related to data 
collection, health and sanitary examinations, as well as training programmes.  
4. Activities eligible for subsidies under this Fund include: 
  
 (1) internship of new graduates onboard fishing vessels; 
 (2) communication improvement and fish ery industry development (no longer a 
budgetary item); 
 (3) basic marine research, experiment and technology improvement by research 
institutes; and 
 (4) subsidies for the purchase of new fish ing equipment (no longe r a budgetary item). G/SCM/Q2/TPKM/7 
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  Import Duty Exemptions and Reductions
 
 
Under Article 58 of the Fisheries Act, fishin g vessels, fishing gear and capital goods 
imported for fisheries production purposes will be exempt from import duties or will receive import duty reductions if these goods are not ma nufactured domestically.  Please answer the 
following questions. 
 1. What is the policy objective and purpose of  the Import Duty Exemption and Reduction 
programme?  
2. Which government authority administers this programme? 
  3. What was the total amount of duties from which the fishing industry was exempt in the notification period?  
  
Reply
 
 1. It is our well-established policy that when industries need certain types of production equipment that are not available on the domestic ma rket, they can import such equipment and enjoy a 
reduction of import duties – or in some cases, even be considered exempt. Through different pieces of 
legislation, including Article 58 mentioned above, we  have established this special scheme as one that 
covers all domestic industries – including indus trial and agricultural, as well as fishery. 
 2. The Ministry of Finance is the authority that administers this overall scheme through 
Customs. 
 
3. Because of its broad coverage  and lack of specificity, we do not consider this programme 
notifiable under the SCM Agreement.   
Fuel Oil Programme
 
 
Article 59 of the Fisheries Act states that fuel for equipment used in fisheries will be 
exempt from the commodity tax.  In addition, Ar ticle 59 also states that the Executive Yuan will 
decide the standard for the preferential fuel price provided to the fisheries industry.  Please 
answer the following questions. 
 
1. What is the policy objective and purpose of these programmes?    2. Which government authority administers these programmes?   3. What was the rate of the commodity tax during the notification period?    
4. What was the total amount of commodity tax exemptions provided to the fishing 
industry during the notification period?    5. What was the preferential fuel price provided to the fishing industry during the notification period and how was this p referential fuel price determined?   
 
6. What was the market rate for fuel during the notification period?   7. Was the total amount of the subsidy provided to the fishing industry during the notification period from the preferential fuel price programme?  G/SCM/Q2/TPKM/7 
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  Reply  
  Pursuant to Article 2.1 of the ASCM, we think that our fuel subsidy programme is non-
specific and therefore no notification is required.  
 
Reduction of Tuna Fleet
 
 1. Based on publicly available information, the government will compensate the losses of 
operators of the tuna fishing vessels this ye ar and next year after their longliners are 
dismantled, and that the total amount provided under this programme is significant.  Please 
provide details regarding who the recipients of these funds are ( e.g., do the compensation 
payments go directly to the fisherman or are th ere other recipients or actors involved?).   
 2. Please provide the total amount of f unds provided under this programme during the 
notification period.   
 3. How is the payment amount decided for each recipient?   4. Are there any conditions governing the use of the payments?  
5. Is the vessel license revoked in some manner?    
Reply
 
 1. We have long been making an effort to reduce fishing capacity in response to the 
phenomenon of over-fishing worldwide, and relate d measures have already been listed under the 
programme title “Fishing Vessels Buy-back Programme,” pp. 12-13 of G/SCM/N/123/TPKM. 
Furthermore, the government is determined to ma ke more aggressive reductions, on a total of 160 
large-scale tuna fishing vessels, by the end of ne xt year. Operators whose tuna fishing vessels are 
called back and dismantled, and whose fishing perm its are withdrawn, are provided with appropriate 
compensation. 
 
2. The amount of compensation is estimated at around NT$1.83 billion for 2005, and around NT$4.4 billion for 2006.  3. The amount of compensation is decided on b asis of the value of the vessel dismantled. 
 
4. There are no conditions governing the use of that compensation money, although the recipients will not be granted any new li censes to build new fishing vessels afterwards. 
 5. All operators who receive compensation for th e dismantling of their tuna fishing vessels also 
lose both their vessel licenses and their permits for tuna fishing quotas. 
 
Reward for Reduction of Fishery Activities Programme 
 
 1. Please explain in greater detail how this programme works with regard to coverage of 
the fishing vessels.  For example: 
 
(a) How is the amount of the grant determined? (b) Is this a type of wage subsidy? (c) Is the grant provided directly to the fisherman? 
 (d) How are funds for this programme disbursed? G/SCM/Q2/TPKM/7 
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  2. How does the administering agency ensure that those individuals who received the grant 
meet the relevant criteria? 
 
  Reply
 
 
 Please refer to our previous notification under the programme title “Reward for Closing 
Fishery Season,” pp. 14-15 of G/SCM/N/123/TPKM.   Five-year tax exemption for the emergi ng, important and strategic industries 
 
 1. What are the principal industrial sec tors that benefit from this programme? 
 2. Is this programme in any way contingent upon exporting?   
 
 Reply
 
 1. Any company that qualifies as an “emerging,  important and strategic industry” may benefit 
from this programme. The scope of the “emerging,  important and strategic industries” includes the 
3Cs (computer, communication and consumer electronics), precision electronic devices, precision 
machinery equipment, aerospace, biotechnology and sp ecialty chemicals, green technology, advanced 
materials, nanotechnology and technical service industries.  2. No, this programme is not contingent upon exporting. 
 
 
Tax Credit For Investment in a Disadvantage Region 
 
 1. What are the principal industrial sec tors that benefit from this programme? 
  
Reply
 
  Any company that invests up to a specific amount of its capital, or employs a specific number of employees in a region with scant natural resourc es or slow development, may benefit from this 
programme. The beneficiaries of this programme ar e diversified; there are no principal industrial 
sectors that benefit from it.   
Medium-and-Long Term Loans for Product Mark eting and Loans for Overseas Investment and 
Construction Projects  
 
1. According to document G/SCM/Q2/TPKM/3, there is no difference between these loans 
and commercial loans.  If so, what is the benefit from acquiring a loan under this programme? 
 
2. Are benefits under this programme in any wa y contingent upon exporting or the use of 
domestic over imported goods? 
 
    G/SCM/Q2/TPKM/7 
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  Reply  
 1. The major differences between export lo ans granted by the EXIM Bank and general 
commercial loans are that: a) EXIM Bank deals main ly with emerging markets (which are associated 
with higher risk); and b) terms of EXIM Bank’s loans are generally in excess of 180 days. General 
commercial banks, by contrast, deal mainly with de veloped markets (associated with lower risk), and 
financing is generally limited to a maximum of  180 days. Both EXIM Bank and general commercial 
banks must take into consideration the applicant’s overall financial situation and the export risk, and 
both calculate interest based on either the London  Interbank Offered Rate (LIBOR) or the OECD’s 
Commercial Interest Reverence Rate (CIRR), using e ither fixed or floating rates. Loans have limited 
interest rate differences, and are helpful for companies wishing to develop emerging markets. 
 2. The goal of this export loan  programme is to help enterprises obtain financing for exports, 
and thus expand business opportunities. To obtain a lo an, an enterprise need only meet the general 
requirements set out in the “Standards for Identifyi ng Small and Medium-Sized Enterprises,” and be 
intending to use the loan for one of the specified purposes. This government loan programme is just 
one of EXIM Bank’s many sources of financing;  it is not granted as a “reward” for export 
achievements or tied to actual exports, and it do es not require the use of domestic products over 
imports. Thus, it does not fall under the category of “prohibited subsidies.”  
  Duty and tax exemptions for high-technology industries
 
 1. Could you please explain what qualifies as a "value added" and "non-value added" good? 
  
Reply
 
  According to the “Value-added and Non-valu e-added Business Tax Act,” a business tax -- 
either value-added or non-value-a dded – shall be levied on the sale of goods or services within the 
territory, and on the import of goods . A value-added business tax shall be levied on sales of products 
of high-technology industries.  Excerpts from our  legislation regarding the “Value-added and Non-
value-added Business Tax Act” and the “Statute for Upgrading Industries” are available on request.  
  
Programmes for Orchid Production
 
 
 Information from publicly available sources indicate that Chinese Taipei provides assistance to its orchid industry thro ugh the two programmes described below. 
 
 
Assistance for Construction of an I ndustrial Park for Orchid Production  
 
  
 According to public sources, the govern ment has allocated over NTD $2 billion 
(approximately US$65 million) to construct an i ndustrial park for orchid production.  The 
government’s investments in the park are expected  to exceed US$ 25 million by the end of 2004.  
This funding has been included in the govern ment’s "Challenge 2008" six-year national 
development plan.  The industrial park will se rve as a specifically designed complex for 
cultivation, production, marketing, research and overseas sales for orchids.2  
                                                      
2 "Ground broken for special Orchid Park in Taiwan."  Taipei Times .  Feb. 21, 2004; Bradsher, Keith.  
"Orchids Flourish on Taiwanese Production Line."  New York Times ,24 August, 2004 G/SCM/Q2/TPKM/7 
Page 8  
 
  Reply
 
  According to the Agricultural Development Ac t, the main subsidies to the agricultural 
biotechnology park are classified as being for infra structure services, which are subject to the green 
box. Infrastructure services – including electricity  reticulation and water supply facilities – are 
government funded and comply with the policy-specifi c criteria set out in Annex 2 of the Agreement 
on Agriculture. 
 
 
Low Interest Loans from Govern ment Funds for Orchid Growers  
 
  In addition, the government aims to attract orchid growers to use the park for their own 
production by offering low interest loans from  government funds for orchid growers.  Each 
orchid growing company can apply for a maximu m loan of NT$40 million to be repaid over ten 
years with an annual interest of 2.5 per cent.
3 
 1. Please explain why these programmes were no t notified or provide the information 
pursuant to Article 25 of the SCM Agreement.   
  
Reply
 
  Even though the low-interest loan for produ cers to construct facilities in the park can be 
considered a type of domestic support, the amount of the loan is so small that it will not cause trade 
distortion. It should be subject to de minimis exemption. We will provide more information in our 
next notification. 
  
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3 Lin, Lillian.  "Orchid Growers Enthusiastic About Orchid Project."  Central News Agency—Taiwan.    
16 April, 2003.