Our thinking

Global opportunities for Taiwanese companies and investors

What's inside

Managing your international business risks in 2019

Executive summary

Amid global market uncertainties and shifting regulatory priorities, where the only constant is change, Taiwanese businesses still can plot strategic pathways to success.

Welcome to our fourth report on global trends and opportunities for Taiwanese companies and investors conducting business internationally.

Although disruptive forces continue to buffet markets worldwide, advantages exist for savvy business leaders who pay close attention to global trends and act accordingly.

With the United States focusing more and more on China's technology industry as a national security priority, Taiwanese companies should take specific steps to decrease their risk of becoming collateral damage in a US-China "tech war." Similarly, despite a heightening US-China trade war, careful assessments of any supply chains that include China-made parts and related actions can help protect Taiwanese companies' access to US markets.

Design patents offer increasingly useful protections for design-focused Taiwanese companies that operate in the US. In the energy sector, Taiwan's offshore wind sector demonstrates vibrant potential for growth, particularly if Taiwan successfully resolves a few key challenges.

A new dynamism in the European Union's approach to antitrust enforcement provides guidance for growth-focused Taiwanese companies. And a recent change to US antitrust enforcement policy provides a compelling incentive for Taiwanese businesses to review their internal compliance programs and controls.

We hope you find this useful, and we look forward to seeing Taiwanese businesses grow and thrive in the year ahead.


How to avoid becoming collateral damage in the US-China “tech war”

The benefits of paying close attention to details of US export controls and economic sanctions

Risks and risk management for Taiwan exporters using China-origin parts

Despite a volatile, uncertain trade environment, you can take steps to protect your US market share

Gale force momentum in Taiwan’s offshore wind sector

After many years of careful planning the Taiwan offshore wind sector is gaining traction, but challenges remain

US design patents: An increasingly useful option

How design-focused Taiwanese businesses can craft a design patent protection strategy

Taiwanese companies beware: A new dynamism in EU antitrust enforcement?

The European Commission is moving quickly in a new investigation, seeking interim measures for the first time in two decades

How to take advantage of the new US antitrust compliance credit

What a change in US criminal antitrust charging policy means for Taiwanese businesses

How to avoid becoming collateral damage in the US-China “tech war”

The benefits of paying close attention to details of US export controls and economic sanctions

5 min read

Over the past ten years, the United States has increased its focus on the Chinese technology industry as a national security matter and a key issue in trade dealings. Most recently, this focus is evident in the US-China trade negotiations and in the US government's high-profile actions against ZTE, Huawei and others on China-related issues.

The "weapons" on the US government's side of this battle include export controls, economic sanctions, foreign investment review and other trade restrictions:

  • Export controls are licensing requirements for items subject to US export jurisdiction, including certain items made outside the US, based on their destination, end user or end use. New export controls on certain "foundational" and "emerging" technologies are under development
  • Economic sanctions are prohibitions on dealings with certain targeted persons, countries and regions that have a direct or indirect connection to the US (in some cases, even without a US nexus)
  • Foreign investment review means the US government can reject or require divestment of foreign investment in US businesses on national security grounds and can impose "mitigation measures" as a condition of approving foreign investments
  • The US is locked in a protracted "trade war" with China that has resulted in numerous rounds of tariffs on Chinese goods. In addition, the US may restrict imports on telecommunications technology from "foreign adversaries"

With so much at stake, what can Taiwanese businesses do to protect themselves from US export controls, economic sanctions and similar issues?

As the US expands its playbook and takes an increasingly combative approach to trade, you can decrease your company's risk of becoming collateral damage in the US-China tech war by taking proactive steps to comply with applicable US laws. As an added benefit, it can also increase your marketability as a reliable trade partner.

Here's where to start:


Know where you stand

Companies of all industries, sizes and nationalities have been caught in the crossfire of the US-China tech war. Regardless of your location, to defend against fallout from the US-China conflict, you need to know how it can impact your business.

Start by examining the extent of your exposure to the US and Chinese markets:

  • Exposure to the US market—Is your supply chain dependent on US technology or components? Are you considering investment (direct or indirect) into the US?
  • Exposure to the Chinese market—Who are your customers? Do your customers indirectly rely on US-origin goods or technology for their products?

Undertake this evaluation before you become a casualty of the conflict: for example, by suddenly losing access to your US supply chain. A wait-and see approach to compliance with US law can be costly.


Background on the Conflict

As the US expands its playbook and takes an increasingly combative approach to trade, you can decrease your company's risk of becoming collateral damage in the US-China tech war by taking proactive steps to comply with applicable US laws.


Evaluate your risks

Once you understand your exposure to the US and Chinese markets, evaluate where you could face risks. Effective protective measures will require a full understanding of your risk profile to calibrate an appropriate compliance response. Most of the US-China tech war's "weapons" depend on a connection to the US.

Initial risk factors to consider include:

  • Whether and how you use US-origin goods or technology, including intellectual property
  • Whether your products contain US-origin components, software or technology
  • Whether your transactions are denominated in US dollars
  • Your plans for future investments into the US

The next set of risk factors to evaluate is whether your business involves Chinese counterparties subject to US scrutiny. These include Chinese counterparties that are:

  • Designated on a US restricted parties list (e.g., Huawei)
  • Involved in military or defense activities
  • Involved in drone development or manufacturing
  • Involved in artificial intelligence or surveillance technology development or manufacturing

And although US restrictions can apply regardless of your industry, consider whether you operate in any "targeted" higher-risk areas, such as:

  • Semiconductors and integrated circuits—This sector is a flashpoint of the US-China tech war
  • Telecommunications/5G—The US maintains that 5G network infrastructure poses a national security concern
  • Emerging and foundational technologies—Technology areas that pursue global research and development in particular face possible US export controls
  • Artificial intelligence
  • Quantum computing/Supercomputing
  • Drones/Unmanned aerial vehicles


Set up compliance programs as defensive measures

You can mitigate your risk exposure by implementing a US economic sanctions and export control compliance program. A properly executed compliance program could save you significant costs, such as loss of suppliers or customers, as well as possible civil and criminal penalties.

Robust corporate compliance programs that lead to fewer or less stringent US actions generally contain these key elements:

  • Management commitment
  • Policies to comply with applicable laws
  • Procedures to administer and enforce the policies, acknowledging concepts such as "Know Your Customer" diligence, export classification and licensing, and recordkeeping
  • Routine audits to identify and correct deficiencies
  • Ongoing training of relevant personnel

There is no one-size-fits-all program. Rather, you should tailor an effective compliance program to your business and risk profile, including by working with US lawyers to develop and implement appropriate compliance systems.


Proactively monitor

The US-China tech war is developing rapidly, driven by political considerations against the backdrop of a relatively unpredictable US administration.

This means that Taiwanese companies should consider a proactive approach to monitor and, as needed, engage in this shifting landscape. A few tools can provide useful support in these uncertain times:

  • Media coverage—The media, including social media, widely reports on breaking developments in the US-China tech war
  • Industry association—Members often receive real-time information and a platform for US government outreach and engagement
  • Governmental relations consultants (lobbyists)—These consultants often provide insight into US government policies and upcoming actions, as well as formal engagement with policymakers. They may be required to register publicly in the US

This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2019 White & Case LLP