Global trade conditions have been swept by a storm triggered by the United States’ new tariff regime, from which hardly any country could be spared. As we can foresee, at the moment tariff rates are announced, some will be happy while others lament. However, regardless of whether tariffs are increased or reduced, countries engaging in trade with the United States must now squarely face up to the core issue underlying post-tariff-adjustment policies: the origin of goods.

With respect to many countries that maintain trade surpluses with the United States, or based on considerations of differing trade policies toward specific countries, the United States has imposed reciprocal tariffs on certain goods exported to the U.S. in order to protect domestic industrial development and prevent domestically produced goods from losing competitiveness due to dumping of low-priced imports by other countries.

At the same time, in order to clearly implement a country-specific reciprocal tariff regime, the United States has adopted a series of measures aimed at preventing the practice of routing goods through third countries for re-export in order to reduce tariff burdens under globalized trade—commonly referred to as “origin laundering.”

In response to these novel changes in the U.S. tariff system, Taiwan’s Ministry of Economic Affairs, through the Trade Administration, previously announced that for certain categories of trade—including the export of goods manufactured in Taiwan to the United States (with six other trade categories, such as re-export of foreign goods and exports of goods from free trade zones, detailed in separate announcements of the Trade Administration, MOEA)—exporters are required, at the time of export customs declaration, to additionally submit a “Certificate of Origin Declaration for Goods Exported to the United States.” This measure is intended to effectively deter unlawful transshipment activities by implementing the “three strict measures” of strict prevention before the act, strict inspection during the process, and strict penalties after the act.

In parallel, the Department of Navigation and Aviation of the Ministry of Transportation and Communications has proposed amendments to the Act for the Establishment and Management of Free Trade Zones in response to the U.S. tariff regime, focusing on the obligations of free trade zone enterprises with respect to goods origin labeling and reporting. The proposed amendments include the following key points:

The addition of Article 17-1 of the proposed amendment expressly requires free trade zone enterprises to comply with applicable obligations regarding goods origin labeling. Goods reported as entering, exiting, or being stored in a free trade zone shall not conduct false origin labeling activities. In addition, goods manufactured in Taiwan and exported abroad shall not fail to or untruthfully label the country of origin as required (i.e., the circumstances provided in Article 17, Paragraph 2 of the Foreign Trade Act, among others).

To strengthen the accuracy of origin information reported by free trade zone enterprises and to prevent unlawful transshipment of foreign goods through Taiwan’s free trade zones, Article 38 of the proposed amendment increases the amount of administrative penalty for false origin reporting. In reference to the penalty framework provided in Article 28 of the Foreign Trade Act, violators shall be fined, on a per-violation basis, between NT$30,000 and NT$3,000,000.

To further reinforce control over goods origin labeling and prevent unlawful transshipment through Taiwan’s free trade zones, Article 38-1 is added in this proposed amendment, stipulating that where a free trade zone enterprise violates its obligation to truthfully label the origin of goods, it shall be subject to fines of between NT$30,000 and NT$3,000,000 per violation, and, in serious cases, the competent free trade zone authority may also order suspension of the enterprise’s cargo storage operations for up to six months or revoke its operating permit.

Accordingly, in response to the U.S. tariff regime, Taiwan proposes the above amendments to strengthen the obligations of free trade zone enterprises regarding goods origin labeling and reporting. These measures are intended to ensure that foreign goods are not unlawfully transshipped through Taiwan’s free trade zones for export in order to evade high tariffs, while also adjusting relevant penalty provisions and increasing fine amounts. If the proposed amendments are enacted in the future, parties engaged in related operations should exercise particular caution to avoid violations of the law.

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This article was published in the Expert’s Commentary Column of the Commercial Times. https://www.ctee.com.tw/news/20250924700124-431303

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