Memorandum on the Unfair Trade Practices of Taiwan

Memorandum for the United States Trade Representative
Subject: Determination under Section 301 of the Trade Act of 1974

Under Section 301 of the Trade Act of 1974, as amended (19 U.S.C. 2411), I have determined that use of a duty paying system to calculate customs duties by the authorities on Taiwan violates a trade agreement and is unjustifiable and unreasonable and a burden or restriction on U.S. commerce. Under Section 301 of the Trade Act, I have determined to retaliate commensurately against Taiwan so long as it fails to meet its obligations in this regard and am directing the United States Trade Representative to propose an appropriate method for such retaliation.

Reasons for Determination

In 1979 the United States and many trading partners concluded a trade agreement, the Customs Valuation Code, specifying the way in which imports are valued for purposes of calculating customs duties. That agreement allows developing countries to delay their implementation of it for a specified time period.

Through a bilateral exchange of letters, Taiwan agreed in 1979 to observe obligations "substantially the same" under this agreement as those applicable to developing countries. This means it should have implemented those obligations effective January 1, 1986.

It did not. In February it agreed to meet this obligation by July 1, 1986. Instead, it enacted a law effective July 1 under which its customs authorities calculate duties upon the basis of a duty paying system (under which values of import items are determined administratively), rather than upon "transaction value" (ordinarily the invoice price). This practice is inconsistent with Taiwan's agreement to apply "substantially the same" obligations as set forth for developing countries in the Customs Valuation Code.

I have made these determinations and directed the United States Trade Representative to propose appropriate retaliation to enforce U.S. trade rights and to respond to the Taiwan practices in question. I would strongly prefer that Taiwan adhere to its agreement to apply the Customs Valuation Code.

This determination shall be published in the Federal Register.

RONALD REAGAN