Taiwan Denies Transshipment of Chinese Goods, Assures Preventive Measures in Place

By Frank Fang
Frank Fang
Frank Fang
Frank Fang is a Taiwan-based journalist. He covers news in China and Taiwan. He holds a Master's degree in materials science from Tsinghua University in Taiwan.
June 3, 2019 Updated: June 3, 2019

TAIPEI, Taiwan—The Taiwanese government recently announced that it has taken up important measures to prevent the island from being used as an intermediate destination for illegal transshipment of Chinese-manufactured products.

Chinese exporters have previously engaged in transshipment, or disguising the true origin of goods by first transferring them to another country, via Southeast Asia in order to avoid paying U.S. tariffs imposed amid the U.S.–China trade row.

On June 1, Japanese media outlet Nikkei claimed in a report that Chinese goods were being transhipped to Vietnam, Mexico, and Taiwan before arriving in the U.S. market. The publication didn’t cite specific evidence or sources. Rather, Nikkei made the extrapolation based on data from the U.S. International Trade Commission and the Geneva-based International Trade Center.

Nikkei analyzed goods in five categories: machinery and parts; electrical equipment and parts; furniture; toys; and automotive equipment and parts. All except toys are currently subjected to U.S. tariffs.

The U.S. Trade Representative’s office has drafted a list of additional Chinese goods, worth about $300 billion, to be subject to 25 percent tariffs, including toys, sneakers, shirts, and alarm clocks. A public hearing has been scheduled for June 17.

Nikkei analyzed that while Chinese exports to the United States in the aforementioned five categories plunged by 16 percent during the first three months of this year compared to a year earlier, or a decrease of $12.2 billion, exports of goods in those categories from China to the aforementioned three countries increased. Shipments of similar goods from the three countries to the United States also climbed.

For Taiwan, in the first three months of this year, exports of those items from China to Taiwan increased by 23 percent compared to a year earlier, or by $1.4 billion. During the same period, Taiwanese exports of those goods to the United States increased by 31 percent, or by $2 billion.

In response to the Nikkei report, Taiwan’s Ministry of Economic Affairs (MOEA) explained on June 2 why those figures increased—and that it wasn’t due to transshipments. On its website, the Ministry also detailed measures already in place to prevent Chinese transshipment via Taiwan.

The MOEA said that the island’s exports to the United States, in all categories, increased significantly for the first four months this year.

However, the increase was driven in part by sharp growth in exports belonging to the information, communication, and audio and visual product categories, including routers, servers, and computer components. These goods totaled an export value of $4.26 billion, or an increase of 56.3 percent from a year earlier.

The MOEA said these categories saw such growth due to the healthy U.S. economy, resulting in U.S. consumers spending more money on high-end goods.

Also, the Taiwan government has successfully drawn high-tech manufacturers to operate back at home, after launching a “welcome back” program that provides incentives for Taiwanese companies operating in China to return home.

According to MOEA’s announcement, 66 Taiwanese companies have pledged to invest on the island, with a total investment value of more than NT$330 billion (about $10.5 billion), from the beginning of this year to May 30.

These investments have led to increased production capabilities in Taiwan, which have led to increasing exports to the United States—and it has nothing to do with transshipment through Taiwan, the MOEA said.

The Ministry also announced that it has been working with the Ministry of Finance and the Ministry of Transportation and Communications to strengthen the management of imports and exports, including by requiring Taiwanese customs agents to carry out tighter inspections of origin-labeling on goods that belong to categories on the U.S. tariff list.

MOEA also pointed out that Taiwan’s Cabinet offered a draft amendment to the Foreign Trade Act earlier this month, which would increase the punishment for anyone who intentionally mislabels “Made in China” products with “Made in Taiwan.”

On May 16, Taiwan’s English-language daily newspaper Taiwan News reported that one of the clauses in the amendment is to increase the monetary fine for offending companies, to NT$60,000 to NT$3 million ($19,098 to $95,490), from the current range of NT$30,000 to NT$300,000 ($955 to $9,550).

The amendment also includes a new “whistleblower clause,” which would provide incentive awards for people to report to authorities products that have been mislabeled.

According to Taiwan News, the bill has been sent to Taiwan’s Parliament, also known as the Legislative Yuan, for deliberation.

Frank Fang
Frank Fang
Frank Fang is a Taiwan-based journalist. He covers news in China and Taiwan. He holds a Master's degree in materials science from Tsinghua University in Taiwan.