WORLD TRADE  
ORGANIZATION   
G/SCM/Q2/TPKM/17 
11 April 2012 
 (12-1879) 
Committee on Subsidies and 
Countervailing Measures Original:   English 
 
 
 
SUBSIDIES  
 
Replies to Questions Posed by the UNITED STATES1 Regarding the New and  
Full Notification of the SEPARATE CUSTOMS TERRITORY OF  
TAIWAN, PENGHU, KINMEN AND MATSU2 
   The following communication, dated 10 April 2012,  is being circulated at the request of the 
Delegation of the Separate Customs Territory  of Taiwan, Penghu, Kinmen and Matsu.   
 
_______________ 
 
 
1. Interest Subsidy 
 
 Chinese Taipei notes that preferential loans are provided to businesses that move into an 
"agricultural technology park."  Are there additional  benefits provided to entities that locate in 
agricultural technology parks?  If so, please describe.    Please explain whether the programmes li sted below are included under the reported 
programme "Funds Granted For Development of Pr oducts of the New Lending Industries".  If 
not, please explain why these programmes have no t been notified or provide the information 
required under Article 25 of the SCM Agreement.  
 R&D Assistance and Investment in Nanot echnology and Chip Design Industry 
 R&D Biotechnology Industry Inv estment Incentive Programme 
 R&D National Si-Soft Project. 
 Reply 
 
 According to the " Act of Establishment and Administration of Agricultural Technology 
Parks ", all entities that move into an agricultural t echnology park are entitled to apply for preferential 
loans.  No additional benefits are provided to  entities that locate in an agriculture park. 
  In our revised new and full notification G/SCM/N/220/TPKM/Rev.1, the programme "FUNDS GRANTED FOR DEVELOPMENT OF PRODUCTS OF THE NEW LEADING 
INDUSTRIES", as mentioned by the United States,  has been re-named "FUNDS GRANTED FOR 
DEVELOPMENT OF NEW LEADING INDUSTRIES".  This re-named programme does not include R&D Assistance and Investment in Nanotechnolog y and the Chip Design Industry, the R&D 
Biotechnology Industry Investment Incentive Prog ram, and the R&D National Si-Soft Project.  
Although we have promoted simila r programmes, called National Priority Programmes (NPPs), their 
                                                      
1 G/SCM/Q2/TPKM/12. 
2 G/SCM/N/220/TPKM. G/SCM/Q2/TPKM/17 
Page 2  
 
  objectives are to encourage academic research, ther efore they are policy tools needed to promote 
technological and scientific development.  The high-t ech industry is not an eligible applicant for these 
programmes.  The NPPs are not subject to the SCM Agreement, therefore no notification is required. 
 
2. Fuel Oil Programme 
 
 Previously, the United States asked several questions regarding Chinese Taipei's Fuel Oil Programme, which exempts fuel used in the fisheries sector from the commodity tax, in accordance with Article 59 of the Fisheries Act.   In response, it was stated that the fuel 
programme is not specific and therefore no noti fication was required.  Please explain further 
why this programme does not qualify as a specific subsidy pursuant to Article 2 of the 
SCM Agreement.   
 
Reply 
 
 Article 59 of the Fisheries Act, which provid es that fishing boat fuel is exempted from the 
commodity tax, is enacted in accordance with Artic le 3 of the Commodity Tax Act.  Under Article 3 
of the Commodity Tax Act, commodities which m eet any of the following conditions shall be 
exempted from commodity tax:   I. Raw materials used for manuf acturing other taxable commodities; 
 II. Export goods; 
 III. Goods for exhibition but not for sale;  IV. Goods supplied for troop-cheering;  or  V. Goods supplied directly for military use w ith the approval of the Ministry of National 
Defence. 
 
 Accordingly, the commodity tax on the fuels so ld to domestic flagged cargo carriers, foreign 
flagged fishing vessels (including both domestic a nd foreign owned), and foreign flagged commercial 
and cargo carriers shall all be exempted.  As such  tax exemption applies to all sectors and does not 
constitute "specificity" under Article 2 of the SCM Agreement, they do not qualify as notifiable under 
Article 25 of the SCM Agreement. 
 
3. Fisheries Development Fund 
  Article 56 of the Fisheries Act states that a Fisheries Development Fund will be 
established to promote fisheries development.  Previously, Chinese Taipei listed various 
activities that were eligible for assistance under the Fund, but noted that some were no longer 
budgetary items.  Please provide an updated list of activities eligible for support under the Fund and explain whether any funds or other assistance was provided under the Fund during the period covered by the submitted notification.  
 
Reply 
  According to our replies to questions from th e United States regarding the new and full 
notification in 2006 (G/SCM/Q2/TPKM/7), the subsidy programmes funded by the Fisheries 
Development Fund included the followings four items:  
 (1) Internship of new graduates on board fishing vessels;  
 (2) Communication improvement and fishery industry development;   (3) Basic marine research, experiment  and technology improvement by research 
institutes;  and  
 (4) Subsidies for the purchase of new fishing equipment.  G/SCM/Q2/TPKM/17 
 Page 3 
 
 
   Items (2) to (4) were removed from the list of programmes covered by the Fund after the 
amendment of the " Regulations for Revenues, Expenditures,  Safeguards and Utilization of the 
Fisheries Development Fund " (the 'Regulations') in 2006, and therefore they are not included in the 
period covered by the notification submitted.  
 In the amended Regulations, the activities eligible for support from the Fund during the 
period covered by the submitted notification are as follows:   1. Subsidising fisheries cultural activities: subsidising outstanding fisheries publications, 
helping publishers to produce outstanding periodicals;  and, 
 2. Encouraging graduates of marine and fish ery colleges to acquire practical training on 
vessels and to enhance the quality of their training. 
 
4. Low-Interest Loans for Orchid Growers 
 
 Chinese Taipei previously noted that it pl anned to provide more information in its next 
notification on low-interest loans provided to or chid growers to build facilities in an Industrial 
Park for orchid production.
3  Please provide the referenced additional information or provide a 
complete notification of this programme pursuant to Article 25 of the SCM Agreement. 
 
Reply 
  The low-interest loans provided to orchid gr owers to build facilities in an agricultural 
technology park for orchid production also belong to the " preferential loans extended to those 
businesses that move into an agricultural technology park ".  We already provided a notification in the 
section "Interest Subsidy" ( see G/SCM/N/220/TPKM/Rev.1, note 4, page  9).  Statistical data relating 
to the preferential loans extended to those businesses  that move into an agricultural technology park 
fall into the category of "Loans for accelerating rura l construction" and further details are as follows: 
 
Interest subsidy for loans granted in 2007, 2008 and 2009 
  Unit:  1,000 NT$ 
Name of Project  2007 2008 2009 
Preferential loans extended to those businesses that move 
into the agricultural technology park 2,000 2,900 6,300 
 
5. Previously Notified Programmes   Previously, Chinese Taipei notified the pr ogrammes listed below; however, the latest 
notification no longer includes them.  Plea se explain why these programmes have not been 
notified or provide the information requi red under Article 25 of the SCM Agreement. 
 
 Extension of Re-Use of Pond Water Used in Aquaculture 
 Fishing Vessels Reduction Programme 
 Fish Products Market Stabilization Fund 
 Five-Year Tax Exemption for the Emergin g, Important and Strategic Industries 
 Tax Credit for Investment in a Disadvantaged Region 
                                                      
3 G/SCM/Q2/TPKM/7. G/SCM/Q2/TPKM/17 
Page 4  
 
  Reply 
 
 The "Extension of Re-Use of Pond Water Used in Aquaculture" programme includes 
subsidies on workshops and subsidies on facilities.   In 2008, having reached a milestone in 
technology training, the programme was suspended.  It resumed in November 2010, but with 
no subsidies on facilities, therefore no notification was submitted. 
 
 Regarding the "Fishing Vessels Reduction Progra mme", when we submitted our notification 
in 2009, the final settlement of the subsidy pa yment in 2008 had not yet been completed, so 
the total amount was not submitted at that time. 
  An update on the status of this programme is as follows: 
 
 In 2007, the total number of ships purchased was 23, with payments under the programme 
totalling NT$ 451.26 million.  In 2008, a total of  32 ships were purchased with payments under the 
programme of NT$325.084 million.    
 This programme was terminated at the end of 2008 due to the number of our tuna longline 
fishing vessels having reached the quota limit fo r Taiwan, and was no longer in place in 2009 
and 2010.    
 Regarding the "Fishing Products Market Stabilization Fund", the new and full 
notification submitted in 2007 reported th e programme on warehouse rent subsidies 
implemented during 2005-2006.  As no subsidi es were granted or maintained during 2007-
2010, no further notification was submitted. 
 
 We are grateful to the United States for remindi ng us of the lack of data for the programmes 
entitled "Five-Year Tax Exemption for the Emergi ng, Important and Stra tegic Industries" and 
"Tax Credit for Investment in a Disadvantaged Region". 
 
 The updated data as follows: 
 
 Five-year tax exemption for the emergi ng, important and strategic industries 
 
 2. Period covered by the notification 
 
  Fiscal years 2008-2009.   
  6. Amount 
 
  Unit:  thousand NT$. 
Fiscal Year 2008 Fiscal Year 2009 
37,352,016 50,533,705 
 
 Tax credit for investment in a disadvantaged region 
 
2. Period covered by the notification 
   Fiscal years 2008-2009.    G/SCM/Q2/TPKM/17 
 Page 5 
 
 
  7. Amount 
 
  Unit:  thousand NT$. 
Fiscal Year 2008 Fiscal Year 2009 
12,772,438 6,631,585 
 
 Certain publicly available information i ndicates that there may be other support 
programmes which have not been notified.  Fo r the two programmes listed below, please 
explain why they have not been notified or pr ovide the information required under Article 25 of 
the SCM Agreement.  6. DRAMS Industry Consolidation  
 In 2009, the Government of Chinese Taip ei announced plans to consolidate six 
producers of dynamic random a ccess memory (DRAM) into one new company.  According to 
public reports at the time, the government had te ntative plans to provide investments from its 
Development Fund in the consolidated company to  help Chinese Taipei's ailing memory chip 
industry.  To the extent the government provided assistance to the DRAM industry as part of 
the consolidation process, please describe th e nature of the assistance or provide the 
information required under Article 25 of the SCM Agreement.  
Reply 
  Regarding the report in the media of governme nt plans to support a consolidated DRAMS 
company with investment provided from the Nati onal Development Fund (NDF), the programme was 
not adopted by the Legislature, and therefore was not implemented.  Thus, no such investment has 
been made in any consolidation of the DRAMS industries.  
 
7. "Excellent" Importer/Exporter Business   Page 36, Paragraph 13 of Chinese Taipei's  Trade Policy Report WT/TPR/S/232/Rev.1, 
states that exporters or importers, including public ly-owned firms, that reach a certain level of 
trade performance may qualify as an "excellent " importing/exporting business.  The benefits 
include service fee exemptions, preferential t reatment for "special-case" services from the 
government, higher lines of credit, awards for expo rt growth in "designated focal markets for 
export growth," among other incentives. 
 
 To the extent that incentives under this programme are contingent on export 
performance, please provide more inform ation on the programme in light of 
Chinese Taipei's obligations under Article 3 of the SCM Agreement. 
 
Reply 
 
 The "Regulations Governing the Commendati on of Excellent Exporte rs/Importers" ('The 
Regulations') were not introduced with the purpose of promoting export performance. Rather, they are 
intended to encourage all Taiwanese companies to e ngage positively in international trade activities, 
which includes both importing and exporting.  This being a legitimate policy objective, all firms 
eligible to receive benefits c onferred by the Regulations have to  contribute to Taiwanese economic 
development, and more importantly, to engage in  importing/exporting business in accordance with the 
relevant trade legislation. 
  The amount of the loans is dete rmined in accordance with the " Guidelines on Loans for 
Enterprises to Promote their Brands in Overseas Markets " ('The Guidelines').  The objective of the G/SCM/Q2/TPKM/17 
Page 6  
 
  Guidelines is to facilitate Taiw anese companies legally engaging in importing/exporting business to 
develop their own brands. It is not for the prom otion of export growth.  As for financing loans 
conferred under the Guidelines, the loans are ag reed by the commercial banks providing such 
services, based on the conditions of the applican ts' financial performance.  In other words, no 
preferential loans are provided by our government.   
 In summary, neither the relevant incentiv es under the two programmes, nor the related 
legislation, are contingent upon export performance and thus do not constitute prohibited subsidies 
under Article 3 of the SCM Agreement. 
 
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