China’s electric vehicle (EV) industry is rapidly rising, with the global market penetration of firms such as BYD Co approaching that of traditional auto manufacturers and even affecting markets in Europe and Southeast Asia.
On Tuesday last week, the Chinese-language Mirror Media magazine reported that Taiwanese lawmakers attended a banquet hosted by Taikoo Motors Ltd, which is seeking to import BYD vehicles manufactured in Thailand. This touches on issues of Taiwan’s economic security, policy direction and competitive market order.
To enter Taiwan, Chinese-made products must comply with the Act Governing Relations Between the People of the Taiwan Area and the Mainland Area (臺灣地區與大陸地區人民關係條例) and the Regulations Governing Trade Between the Taiwan Area and the Mainland Area (臺灣地區與大陸地區貿易許可辦法). Their applications must also be reviewed by the Bureau of Foreign Trade in accordance with the “consolidated list of mainland China products whose importation is prohibited.”
Direct imports of fully assembled vehicles from China are banned, and vehicles assembled locally using Chinese components must meet strict localization thresholds.
By using its Thai factories and rebranding its products under the Denza brand before importing them to Taiwan through Taikoo, BYD would be intentionally operating in a legal gray area. Determining the products’ place of “substantial transformation” — the region in where a product was substantially changed after being imported for a specific manufacturing or processing purpose — and brand ownership would test the government’s policy enforcement capabilities and trade review mechanisms.
If BYD does not build a factory or directly invest in Taiwan, the Department of Investment Review would not intervene. The Bureau of Foreign Trade would have the final say, being responsible for the review of imports and exports.
Taiwan in 1996 adopted a negative list approach to imports, so all products that are not explicitly prohibited are permitted. Chinese-made sedans and station wagons have consistently remained on the prohibited list, illustrating the government’s high sensitivity to and strategic considerations for the domestic automobile industry.
Any attempt by BYD to use transshipment to export its products to Taiwan would inevitably face complex legal scrutiny over determining their origin and brand identification — both of which are issues at the core of the bureau’s review expertise.
“Origin laundering” refers to the deceptive practice of companies misrepresenting a product’s country of origin to make it appear as though it was manufactured somewhere else to bypass tariffs or trade restrictions. It typically involves shipping products to a third country and rebranding the country of origin after repackaging or partial processing.
It is a highly controversial practice, as it often contravenes customs rules and free-trade agreements. Should BYD use Thailand as a springboard for entering Taiwan’s market, the government must decide whether “substantial transformation” occurred. According to internationally accepted standards, simply repackaging or assembling a product in a third country is not sufficient to alter its country of origin.
The bureau has previously investigated certain transshipped Chinese-made products and denied their importation based on the results. If BYD cannot prove that its products undergo a sufficient substantial change in Thailand, they might be categorized as “made in China” and thus prohibited. That means that whether the Denza brand could be sold in Taiwan would depend on highly precise legal and technical judgements.
Taiwan’s EV market is still in its early stages, with intense competition from international brands such as Tesla, Volkswagen and Hyundai. Local companies such as Foxtron Vehicle Technologies, a joint venture between Hon Hai Precision Industry Co and Yulon Motor Co, are working to expand their presence. If BYD were to enter Taiwan’s market and leverage its price advantage, it would inevitably put pressure on Taiwanese EV companies and constrict their space for growth.
From a cross-strait political perspective, the government’s management and control of “made in China” products is closely related to economic security and industrial autonomy.
If the bureau were to adopt a permissive stance on this issue, it would almost certainly spark political and social controversy and might even influence the direction of cross-strait economic and trade policy. Whether BYD can take a “detour” through Thailand and enter Taiwan’s market would ultimately be determined by a comprehensive assessment of legal, economic and political factors. The results of the bureau’s review would become an important indicator for Taiwan’s trade policy, and might affect whether other Chinese companies attempt to follow suit.
Eason Chen is an engineer.
Translated by Kyra Gustavsen
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