Kaohsiung Customs (KHC) stated that recently some business have imported electronic components from Mainland China and declared these products as domestic exports to the United States. Based on Customs’ examination and a review of the import declarations provided by the exporters, the exported goods were found to have not undergone substantial transformation, constituting false country of origin labeling. The International Trade Administration, Ministry of Economic Affairs (TITA) ruled that the exporters engaged in false labeling and disrupted trade order through undue means, in violation of Article 17, Subparagraph 2 and 6 of Foreign Trade Act. A fine of NT$600,000 was imposed in accordance with Article 28, Paragraph 1, Subparagraph 6 of the same Act.

KHC further explained that pursuant to Article 3 of the Regulations Governing Certificate of Origin and Certificate of Processing, imported materials processed for export shall be deemed to originate from the ROC only if they undergo substantial transformation within the country. Under Article 5, Paragraph 1 of the same Regulations, substantial transformation refers to either: (1) After a raw material is processed or manufactured, the first six digits of the tariff number of the product are different from those of the raw material. (2) No change of the tariff number, but after a raw material is processed or applied to produce a product, the added value exceeds 35% or the product is produced through a specific production process that the TITA has announced as a significant production process. However, simple operations such as packaging or re-labelling shall not be recognized as substantial transformation under paragraph 3 of the same Article.

KHC urges that for goods exported to the U.S., businesses must provide the Declaration of Origin for Goods Exported to the U.S. and comply with origin labeling regulations. Manufacturers with inquiries about whether their operations meet the criteria for substantial transformation should proactively consult the TITA to avoid legal penalties and damage to their corporate reputation.

Division: Xiagang Branch
Contact: Zhang, Cheng Zhong
Tel: 07-8237356