Export Controls and Sanctioned Countries: Where Food Machinery Can't Be Sold

Is Food Machinery Subject to Export Controls?

In most cases it isn't "named," but there are still rules to follow.

Taiwan's export controls center on Article 13 of the Foreign Trade Act (貿易法): strategic high-tech commodities (often abbreviated SHTC in the industry) may not be exported without a permit, and the types of commodities and controlled regions are announced by the Ministry of Economic Affairs. The details are in the Regulations Governing Export and Import of Strategic High-Tech Commodities (戰略性高科技貨品輸出入管理辦法) and the control lists announced by the Ministry's International Trade Administration.

The lists announced by the Trade Administration include:

• The dual-use goods and technology export control list
• The common military list
• The list of sensitive commodities exported to North Korea
• The list of sensitive commodities exported to Iran
• The list of high-tech commodities exported to Russia and Belarus

Food machinery such as encrusting machines, dividers, and bun machines (tariff heading 8438) generally isn't on the dual-use list; in the list for exports to Russia and Belarus, the Chapter 84 items controlled by tariff code don't include 8438 either. However, that list also contains items determined by technical specifications, so whether an individual machine falls under it still needs to be confirmed case by case.

Which Countries Can't You Sell To?

North Korea: Since September 25, 2017, Taiwan has banned all trade with North Korea, and nothing may be exported there, whether or not it's a strategic high-tech commodity.

Iran: Commodities on the list of sensitive commodities exported to Iran require an export permit; cases involving Iran undergo inter-agency review and take longer.

Russia, Belarus: Commodities on the list require a permit. In addition, the Trade Administration's FAQ notes that when exporting to Turkey, the UAE, Central Asia, and other regions with higher transshipment risk, there are cases where an undertaking not to transship to Russia or Belarus is required; confirm the latest rules before exporting.

Controlled regions: The export-controlled regions for strategic high-tech commodities announced by the Trade Administration include Iran, Iraq, North Korea, mainland China, Sudan, and Syria; for mainland China, the controls cover only specific semiconductor wafer fabrication equipment.

Besides Taiwan's rules, the United States, the EU, the United Nations, and others have their own sanctions lists. If a transaction involves US dollar payments, US components, or an EU buyer, it may also be affected by those rules, and banks may also hold up remittances during screening.

Catch-All Controls: Goods Not on Any List Need Attention Too

Even if the goods aren't on any list, the Trade Administration's notices also have "catch-all controls": if the exporter knows or is informed that the end use or end user of the goods may be related to nuclear, biological, or chemical weapons or missiles, the goods are treated as strategic high-tech commodities and require a permit.

The notice lists several red flags, for example:

• The buyer or consignee is on the entity list
• The buyer is unwilling to explain the product's use
• The buyer declines the installation, training, or maintenance services that are normally provided
• The consignee is a freight forwarder rather than the actual user
• Unusual payment terms

Food machinery buyers are usually happy to discuss recipes, capacity, installation, and training; if a buyer doesn't care about any of this and is only in a hurry to ship, it's worth asking a few more questions.

How to Check the Entity List

The Trade Administration has an online "entity list" search listing foreign individuals and organizations of proliferation concern. Checking the names of the buyer and consignee before exporting is the lowest-cost way to protect yourself. If you're unsure whether goods are strategic high-tech commodities, ask through the Trade Administration's strategic high-tech commodities section, or use the commodity classification consultation service supported by ITRI (Industrial Technology Research Institute).

Consequences of Violations

Under Article 27 of the Foreign Trade Act, exporting strategic high-tech commodities to controlled regions without a permit, among other situations, is punishable by up to 5 years' imprisonment, detention, and/or a fine of up to NT$3 million. Article 27-2 also provides administrative penalties: a fine of NT$60,000 to NT$3 million, and suspension of import and export of commodities for 1 month to 1 year.

Under Article 21 of the Regulations Governing Export and Import of Strategic High-Tech Commodities, related documents must be kept for 5 years.

Pre-Export Checklist

• Whether the destination country is a prohibited or controlled region
• Whether the buyer, consignee, or end user is on the entity list
• Whether the goods' code and specifications fall under any control list
• Whether there are any catch-all red flags
• Whether the payment route and banks involve other countries' sanctions rules

For how to look up tariff codes, see HS tariff codes; for the complete export process, see An Overview of the Machinery Export Process.

FAQ

Q: Which countries can't we sell to?
A: All trade with North Korea has been banned since September 25, 2017. Iran, Russia, and Belarus require permits for listed commodities, and the controlled regions for strategic high-tech commodities also include Iraq, Sudan, Syria, and others.

Q: Is food machinery subject to export controls?
A: Food machinery under heading 8438 generally isn't on the control lists, nor among the controlled codes in the Russia/Belarus list; but catch-all controls, the entity list, and the North Korea ban still apply, and items determined by technical specifications must be confirmed case by case.

Q: How do we check whether a buyer is a problem?
A: Check the buyer, consignee, and end user against the Trade Administration's online entity list; when in doubt, ask through the Trade Administration's strategic high-tech commodities section.

Q: What happens if we violate the rules?
A: Under Article 27 of the Foreign Trade Act, up to 5 years' imprisonment, detention, and/or a fine of up to NT$3 million; Article 27-2 also allows a fine of NT$60,000 to NT$3 million and suspension of import and export for 1 month to 1 year.