US embassy cable - 04TAIPEI4066

UNCLAS SECTION 01 OF 02 TAIPEI 004066 
 
SIPDIS 
 
STATE FOR EAP/RSP/TC AND EB/TPP/IPC, STATE PASS AIT/W AND 
USTR, USTR FOR KI AND FREEMAN 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, KIPR, TW, IPR 
SUBJECT: TRAINING CUSTOMS TO TAKE OVER EXPORT MONITORING 
SYSTEM RESPONSIBILITIES 
 
 
1.  Summary: The Taiwan Intellectual Property Office (TIPO) 
announced in early 2004 their desire to abolish the Export 
Management System (EMS) and transfer those responsibilities 
to the Department of Customs in an effort to shift funds to 
more urgent intellectual property protection priorities. 
TIPO and Department of Customs held a training session for 
Taipei area Customs managers on December 15, 2004 in 
preparation for the assumption of EMS responsibilities by 
Taiwan Customs. Taiwan plans to shift EMS's USD 1 million 
annual budget to support expansion of the Integrated 
Enforcement Task Force (IETF) and a cybercrime unit. 
Industry's reaction to both the abolishment of the EMS and to 
the training was mixed, with Business Software Alliance (BSA) 
representatives generally pleased but Entertainment Software 
Association (ESA) representatives still concerned that Taiwan 
Customs lack the experience and determination to prevent 
export of counterfeit computer hardware.  End Summary. 
 
2.  Taiwan introduced the Export Monitoring System (EMS) in 
1992 under U.S. pressure in an effort to prevent export of 
counterfeit software and hardware.  The Institute for 
Information Industries (III) was tasked with establishing a 
Software Verification and Inspection Center (SVIC).  Firms 
register their products with SVIC, which then conducts 
inspections on exported goods in an attempt to identify 
counterfeit products.  Since 2001, SVIC has identified one 
case of a counterfeit product being exported.  Given the 
absence of cases over the past three years, TIPO believes 
that the EMS USD 1 million budget can be put to better use in 
the protection of intellectual property and has proposed 
terminating the EMS program. 
 
3.  According to the TIPO proposal, the EMS program 
responsibilities would be transferred to the Taiwan Customs 
office.  In order to prepare Customs to assume this 
additional responsibility, TIPO conducted training seminars 
for Customs managers in Kaohsiung, Taichung, and most 
recently at the Chiang Kai Shek Airport in Taoyuan in 
November and December.  The Taoyuan seminar was attended by 
approximately 20 senior level Customs managers, as well as 
representatives from industry associations and AIT.  TIPO 
Deputy Director General Jack Lu, SVIC's Pan Shih-ming, BSA's 
Gina Tsai, and Taiwan Customs Lin Ling-hui discussed the 
history of the EMS, methods of detecting counterfeit hardware 
and software, and procedures rightsholders can use to 
initiate inspections. 
 
4.  Following the presentations, participants went to the 
Taiwan Customs warehouse for a demonstration of Taiwan 
Customs new procedures for inspection of suspicious exports. 
Customs officials explained that exporting firms were 
classified into three categories.  Those companies with 
established track records of export activity are exempt from 
regular inspection of documents and commodities - this 
comprises eighty five percent of shippers.  Those with a less 
established track record are normally exempt from commodity 
inspection - these companies account for 10 percent of 
shippers.  Finally, those companies that are not established 
shippers or have a history of violations are required to 
undergo both document and commodity inspection - these 
companies comprise about 5 percent of shippers.  Taiwan 
Customs also employs a random check procedure that could 
target shipments from companies in any of these three 
categories. 
 
5.  Representatives from BSA and ESA had different opinions 
regarding the usefulness of the training.  BSA agrees that 
the EMS budget could be better spent to fund other 
intellectual property protection activities.  According to 
BSA, the changes in software manufacture and distribution 
since 1992 mean the EMS is no longer an effective mechanism 
for combating counterfeit software products.  Nevertheless, 
BSA remains concerned that Taiwan Customs does not have the 
experience nor the determination to provide an effective 
deterrent to export of counterfeit goods.  BSA is considering 
cooperating with the Motion Picture Association (MPA) to 
assign a representative from the industry associations to CKS 
Airport to encourage and assist Taiwan Customs to focus on 
counterfeit optical media exports.  ESA shares these 
concerns, and further does not believe Taiwan Customs 
officials have been trained well enough to assume EMS's 
duties, citing specifically the lack of operational level 
staff at the training session at CKS Airport.  ESA did not 
participate as a speaker in the training sessions in November 
and December.  ESA also believes transferring authority for 
inspection to Taiwan Customs may lead to less attention 
granted to entertainment software and hardware exports.  The 
Taiwan ESA representative told AIT that Taiwan Customs is 
reluctant to adopt technology currently used by SVIC to test 
the authenticity of counterfeit hardware. 
 
6.  Comment: Taiwan has been actively promoting the 
dissolution of the EMS, most recently at Trade and Investment 
Framework Agreement discussions with USTR in Washington 
November 29 and 30.  With only one case over the past three 
years, it appears the EMS, or at least its methodology, has 
outlived its usefulness.  Plans to use the EMS budget to 
support expansion of the IETF and cybercrime operations are 
encouraging.  But TIPO and Taiwan Customs need to do a better 
job of demonstrating to industry that continued concerns 
about counterfeit exports are not going to be ignored.  TIPO 
and Taiwan Customs have announced plans to hold larger 
training sessions for operational level Customs staff 
beginning in January.  Participation by ESA, BSA, MPA and 
other associations as trainers would be helpful in addressing 
some of the industry's legitimate concerns.  End comment. 
PAAL