Strengthening the Taiwan-U.S. Economic Partnership through Regulatory Reform and Digitalization

The Retail Committee of the American Chamber of Commerce in Taiwan has issued a comprehensive set of recommendations aimed at bolstering the island’s business environment and deepening its economic integration with the United States. Following the momentum of the Agreement on Reciprocal Trade (ART) signed between the two nations, the Committee is calling for a significant overhaul of Taiwan’s regulatory framework, emphasizing the need for enhanced governance, transparency, and the rapid adoption of digital technologies. These proposals are designed not only to benefit the retail industry but also to increase consumer confidence and secure Taiwan’s position as a premier destination for international investment.

Advancing Trade Commitments Under the ART Framework

A primary focus of the Committee’s advocacy involves the fulfillment of trade-related commitments established under the U.S.-Taiwan Initiative on 21st-Century Trade. The first agreement under this initiative, signed in mid-2023 and followed by subsequent negotiations in early 2024, set a new standard for bilateral economic cooperation. A key milestone in this process was the conclusion of the ART in February 2024, which notably established a reduced tariff rate of 10% on dietary supplements.

To ensure these benefits reach consumers effectively, the Committee urges the Taiwan government to provide a clear timeline for the implementation of these tariff reductions. Central to this request is the need for a precise regulatory definition of "dietary supplements" that aligns with the World Customs Organization’s (WCO) Harmonized System (HS). Without a standardized classification, the Customs Administration faces difficulties in processing imports efficiently, leading to delays and inconsistent tariff applications. This alignment is viewed as essential to supporting President Lai Ching-te’s "Healthy Taiwan" and "888 Health Program" initiatives, which seek to improve the long-term health outcomes of the Taiwanese populace through better access to nutritional products.

Furthermore, the Committee addressed the delicate balance between food safety and the diversity of imported goods. A point of contention remains the Maximum Residue Limit (MRL) standards for pesticides, specifically glyphosate. In 2019, Taiwan established MRL standards for this herbicide but later rescinded them for certain applications. Under Taiwan’s "positive list" system, the absence of an established MRL results in a "non-detectable" standard, which effectively acts as a technical barrier to trade for U.S.-produced crops. The Committee recommends that the Taiwan Food and Drug Administration (TFDA) conduct new risk assessments to re-establish these limits, potentially adopting temporary standards from countries with similar dietary patterns, such as Japan, to prevent unnecessary trade interruptions.

Leveraging Artificial Intelligence and Science-Based Inspection

In a move to modernize border control, the Retail Committee has proposed the integration of Artificial Intelligence (AI) to streamline food import procedures. Currently, the food inspection process at the border is often hampered by minor clerical discrepancies in manufacturing facility names. Variations such as "Company" versus "Co." or "Limited" versus "Ltd." can trigger manual reviews that delay shipments for a week or more.

The Committee suggests that the TFDA utilize Large Language Models (LLMs) to recognize these common variations and automate the verification process. This technological leap would reduce administrative friction and ensure that the flow of goods is not interrupted by linguistic or stylistic differences. Additionally, the Committee advocates for a more flexible identification system where a company name can represent a "manufacturer" for multiple factories within the same country, rather than requiring specific production premises for every individual application.

The call for modernization extends to the management of naturally occurring substances. Products containing benzoic or salicylic acid—substances that occur naturally in many plants—often face inconsistent inspection results. The Committee recommends transitioning from a literature-only background value system to a multi-evidence, science-based approach. This would combine historical inspection data, manufacturing records, and laboratory testing to ensure that review standards are harmonized with international norms, thereby eliminating non-tariff trade barriers.

Harmonizing Regulations for Traditional Chinese Medicine and Food Additives

The Traditional Chinese Medicine (TCM) sector and the therapeutic food industry in Taiwan are also identified as areas requiring urgent regulatory updates. While the Customs-Port-Trade (CPT) Single Window has been integrated with the Department of Chinese Medicine and Pharmacy (DCMP), the Committee notes that redundant batch-by-batch notifications continue to create administrative duplication. Streamlining these clearance processes is viewed as a vital step in supporting the TCM industry’s growth.

Moreover, the "medicine-food homology" list—which dictates which ingredients can be used in both food and medicine—has seen stagnant regulatory progress. This delay has caused Taiwan’s therapeutic food sector to lag behind regional competitors like South Korea and Japan. The Committee urges the government to update these frameworks to align with global scientific trends, allowing for a more robust and competitive domestic market.

Clarity in food labeling and additive usage is another priority. The Committee points out inconsistencies in the wording used to describe usage limits for nutritional additives versus food raw materials that provide the same nutrients (such as zinc, selenium, and magnesium). To protect consumer interests and ensure regulatory certainty, the Committee proposes harmonizing these definitions and usage limits to eliminate ambiguity in interpretation.

Accelerating Digital Governance and Electronic Signatures

As the Ministry of Digital Affairs (MODA) continues to promote Taiwan’s digital transformation, the Retail Committee highlights the gap between high-level policy and practical implementation in customs processes. Despite the promotion of electronic signatures, many customs-related procedures remain heavily reliant on paper documentation.

The Committee expresses gratitude for the Ministry of Agriculture’s (MOA) plans to launch an online application portal for organic product import permits but emphasizes that more must be done. They advocate for the prioritization of digitalizing long-term customs-clearance authorizations and self-use declarations for high-dosage dietary supplements. By adopting a consistent, cross-agency application of electronic signatures and moving away from the cumbersome "Citizen Digital Certificate" requirements, the government could significantly enhance trade facilitation and the overall digital experience for businesses and consumers alike.

Ensuring Alcohol Traceability and Consumer Safety

A longstanding issue of concern for the Committee is the removal or alteration of original manufacturing lot codes on imported alcoholic beverages. Under Article 32 of the Tobacco and Alcohol Administration Act (TAAA), packaged alcoholic products must bear a lot code to ensure traceability. However, some parallel importers replace these original codes with serial numbers that do not contain necessary production data.

The Committee argues that this practice undermines public safety, as lot codes are essential for conducting targeted recalls in the event of contamination or safety concerns. They note that the UK, France, Italy, Canada, and the EU all mandate such labeling. The Committee clarifies that prohibiting the removal of these codes does not contradict free trade principles, as parallel importers can still operate as long as they maintain the original integrity of the product’s traceability data. They call on the Ministry of Finance to enforce systematic inspections and establish a robust reporting mechanism to curb this practice.

Modernizing Age Verification for Online Markets

In perhaps its most forward-looking suggestion, the Retail Committee urges the government to update "analog-era" restrictions on the online sale and delivery of alcohol and tobacco. Currently, Article 30 of the TAAA prohibits these sales due to concerns over the inability to verify the age of the purchaser effectively.

However, the Committee argues that Taiwan’s digital identity infrastructure, developed since the establishment of MODA in 2022, now allows for secure, auditable remote verification. By leveraging Japan’s model—which utilizes a licensing framework requiring age verification at the point of purchase and additional checks at delivery—Taiwan could unlock new digital markets while maintaining high standards of minor protection. The proposal suggests that digital innovation and child welfare are not competing priorities but can be integrated through multi-step verification technologies that exceed the reliability of traditional retail judgments.

Resolving Quarantine Discrepancies in Pet Food Trade

Finally, the Committee addressed trade barriers in the pet food industry. Despite dry pet food and extruded ingredients being recognized internationally as safe commodities, Taiwan continues to impose restrictions based on Avian Influenza risks. The Committee points out that as a member of the World Organization for Animal Health (WOAH), Taiwan should align its quarantine regulations with international practices, which generally do not require Avian Influenza-related conditions for extruded dry pet food regardless of the exporting country’s status. The MOA is encouraged to fulfill its commitment to revise these regulations, thereby removing unnecessary hurdles for dog and cat food imports.

Broader Economic Impact and Implications

The recommendations put forth by the Retail Committee represent a strategic roadmap for Taiwan to enhance its global economic standing. By addressing these technical and administrative barriers, Taiwan can demonstrate its commitment to high-standard trade agreements, such as those sought in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The focus on digitalization and AI integration aligns with Taiwan’s broader ambition to become a "Silicon Island" not just in hardware manufacturing, but in smart governance and digital services. Reducing the "friction of doing business" through these reforms is expected to attract more U.S. investment, diversify the consumer market, and provide Taiwanese citizens with safer, more affordable, and more varied product choices. As the U.S. and Taiwan continue to negotiate the next phases of their trade initiative, the implementation of these retail-sector reforms will serve as a critical barometer for the health and transparency of the bilateral economic relationship.