WORLD TRADE  
ORGANIZATION  G/SCM/Q2/TPKM/5 
30 March 2006 
 (06-1458) 
Committee on Subsidies and 
Countervailing Measures Original:   English 
 
 
 
SUBSIDIES  
 
Replies to Questions from the EUROPEAN COMMUNITIES1 
Regarding the New and Full Notification of the SEPARATE  
CUSTOMS TERRITORY OF TAIWAN, PENGHU, KINMEN AND MATSU2 
 
  The following communication, dated 28 March 2006, is being circulated at the request of the Delegation of the Separate Customs Territo ry of Taiwan, Penghu, Kinmen and Matsu. 
 
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1.  Fishing Vessel Buy Back Programme 
 
 Can the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu please 
explain the conditions for beneficiaries of this programme?    
Reply
 
 
 Beneficiaries must be owners of fishing vessels with valid fishing licenses or valid ship 
replacement qualifications, or whose fishing licenses have been extended or who have been approved 
for retirement.  These conditions apply only to th ose fishing vessel owners who are within their 
deadlines for license extension or retirement.   When vessels are bought back do sellers also have to commit to abstain from the 
acquisition of new vessels?    
Reply
 
 
 Yes, once a fishing license has been confiscat ed for a boat that has been bought back, the 
owner's right to build a new boat is dissolved.  
 Is the withdrawal of the vessel linked with the withdrawal of a fishing license or a 
fishing permit?   
 Reply
 
  Yes, once a boat has been bought back, the corresponding fishing license and operational permit are declared null and void.  
                                                     
 
1 G/SCM/Q2/TPKM/4 
2 G/SCM/N/123/TPKM G/SCM/Q2/TPKM/5 
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 What happens with the vessels that are wi thdrawn, are they scrapped?  If negative, 
what is the final destination of the vessels?  
 
Reply
 
 
 Yes, boats that are bought back are demolished for parts or are sunk to create artificial reefs to 
contribute to the fishing industry.  
2.  Fishing Vessel Marine Insurance Reward 
 
 Can the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu please 
explain the eligibility criteria for this programme?    
Reply
 
 
 We are actively encouraging owners of small fishing vessels that weigh less than 100 tons to insure such vessels, so as to enha nce the social security of local wo rkers in the fishing industries.  
Government subsidies are provided to partially offset  insurance costs; small-sized vessels are eligible 
for higher subsidies.  The government will subsidize the following  insurance costs: 
 
(1) For vessels under 20 tons, a subsidy coveri ng 60-70 per cent of annual insurance fees is 
offered; 
 (2) For vessels weighing over 20 tons but less than 50 tons, a subsidy covering annual 
insurance fees of 50 per cent  is offered; 
 
(3) For vessels weighing over 50 tons but less th an 80 tons, a subsidy covering 40 per cent of 
annual insurance fees is offered; 
 (4) For vessels weighing over 80 tons but less th an 100 tons, a subsidy covering 20-40 per 
cent of annual insurance fees is offered. 
 
 Are there any limits in regard to the num ber of vessels one owner can apply for under 
this programme? 
 
Reply
 
 
 No, there are no limits regarding the number of vessels for which one owner can apply. 
 
3.  Five year tax exemption for the em erging, important and strategic industry 
 
 Can the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu please 
explain which industries fall under the definition of this programme? 
 
Reply  
 
 The scope of "emerging, important and st rategic industries" includes "3C" (computer, 
communication and consumer electronics), precision electronic devices, precision machinery equipment, aerospace, biotechnology and specialty ch emicals, green technology, advanced materials, 
nanotechnology, and technical service industries. 
   G/SCM/Q2/TPKM/5 
 Page 3 
 
 
   The third condition mentioned in the eligibility criteria states that the funds available 
for the purchase of brand new ma chinery and equipment should be  in excess of NT$100 million.  
Does this new equipment have to be purchased in the Separate Customs Territory of Taiwan, 
Penghu, Kinmen and Matsu? 
 Reply
 
  No, new equipment doesn't have to be pur chased in our country, and both foreign and 
domestic equipment may be  considered eligible. 
 
4.  Medium and long term loans for produc t marketing and loans for overseas investment 
and construction projects  
  Can the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu please 
indicate how many companies benefited from this programme over each reporting year and 
what was the average amount attributed.    
Reply
 
 
 In the period of 2002 to 2004, the Small a nd Medium-sized Enterprise (SME) Development 
Fund (SMEDF) approved 131 such cases in 2002,  171 in 2003, and 43 in 2004, worth 
NT$1,200 million, NT$1,413 million,  and NT$342 million respectively.  Loans averaged less than 
NT$8.6 million for each case.   Are there special favourable condition s for these loans and how does the SME 
Development Fund ensure the repayment of these loans?    
Reply
 
  No, there are no favourable conditions for th ese loans.  The Exim Bank, based on the 
financial situation of the applicant, decides the amount of the loan to be granted.  The loan's rate of 
interest is decided on by the Exim Bank accordin g to the financial circumstances of the applying 
SME.  The interest mark-up is calculated according to LIBOR and OECD's CIRR for the loan item in 
question.  This loan's interest is no more favourable  than the prevailing market rates. Final rates are 
negotiated after taking into consid eration the applying SME's overall financial situation.  The SMEDF 
is only the provider of the loan, increasing the financial input of the Exim Bank.  The Exim Bank, 
while operating the fund, assumes any financial risk asso ciated with the loan.  On the other hand, the 
SMEDF collects interest from Exim Bank accord ing to the inter-bank rate of interest.  
 
 What is the difference with the Loans at Lower Market Interest Rates for SME 
Programme? 
 Reply
 
  The SMEDF loans are very different from the "Loans at Lower Market Interest Rates for 
SME and Private Enterprises" loan programme, especia lly with regard to  financial sources, loan 
objectives, governing regulations and authorities, and qualifications for application.  For example, 
applicants of SMEDF loans are limited to SMEs.  "Loans at Lower Market Interest Rates for SMEs 
and Private Enterprises" are granted to general enterprises and SMEs.  Additionally, SMEDF loans 
provide financial assistance in purchasing machin ery and equipment for SME's overseas investment, 
and "Loans at Lower Market Interest Rates fo r SMEs and Private Enterprises" aim to improve 
production technology of enterprises, promote industr ial upgrading, and environment protection.  We 
believe that this misunderstanding was caused by the misleading title of the later programme, which G/SCM/Q2/TPKM/5 
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  was used to notify fellow members during our accessi on to the WTO in 2002.  Irrespective of its 
original intention, the interest rates of the loans in question are not lower than the prevailing market 
rates because the interest rates are calculated according to LIBOR and OECD's CIRR, and the loans 
are not granted merely to SMEs.  We will notify th e WTO of the corrected title of that programme at 
the earliest date.  
 
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