The potential trade barriers that will arise from the current faceoff between China and Taiwan is prompting multinational companies in the island to take precautionary measures.
US phone maker Apple has asked suppliers to ensure that shipments from Taiwan to China strictly comply with Chinese customs regulations, and also to brand products with “Made in China” labels.
Sources familiar with the matter told Nikkei Asia that the Cupertino giant told suppliers on Friday that China has started strictly enforcing a long-standing rule that Taiwanese-made parts and components must be labeled as being made either in “Taiwan, China” or “Chinese Taipei.”
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The tension between China and Taiwan escalated following the controversial visit of the US House Speaker Nancy Pelosi to the island last week, which defied China’s warnings.
According to the people, Apple has urged suppliers to treat the matter with urgency to avoid possible disruptions caused by goods and components being held for scrutiny.
Nikkei noted that the timing is sensitive for Apple, as its suppliers are preparing components that will go into its next iPhones and other new products set to launch this autumn.
A clever plan to avoid a potential hindrance in shipment is using “Taiwan, China” or “Chinese Taipei,” which indicates that Taiwan is part of China.
China is strongly laying claim on Taiwan as its territory and has vowed to reunite the island even if it means using military power. Pelosi’s visit ignited a wave of responses from Beijing that included military drills around Taiwan and economic sanctions.
For multinational companies caught in the conflict, the economic sanctions mean new rules that must be followed. But it presents a dilemma for suppliers in Taiwan.
The sources said using the phrase “Made in Taiwan” on any import declaration forms, documents or cartons could cause shipments to be held and checked by Chinese customs. Penalties for violating such a rule is a fine of up to 4,000 yuan ($592) or, in the worst-case scenario, the shipment being rejected, one of the sources said.
On the other hand, suppliers who need to ship materials, components or parts from Taiwan to China, are also required by the island to label all exports with product of origin, which means they must carry the words “Taiwan” or “Republic of China,” the island’s official name, according to suppliers and logistics companies.
The report said Apple’s warning comes after shipments from Taiwan to one of iPhone assembler Pegatron’s facilities in China were held for review on Thursday to see if the import declaration form or cartons are labeled with “Taiwan” or “Republic of China.”
To avoid any shipping chaos and further supply chain disruptions, Apple has also told suppliers to form contingency plans or quickly review and amend their labels on cartons and forms for shipments from Taiwan to China, if necessary, the people added.
With both countries calling the shots and not likely going to back down on whose label products bear, suppliers in Taiwan have inadvertently been caught in a controversy that will disrupt their exports.