China is moving to tighten label rules on goods from Taiwan

China is moving to tighten the enforcement of existing rules on imports from Taiwan, according to people familiar with the matter, as tensions rise in the aftermath of US House Speaker Nancy Pelosi’s visit to the island. 

Products labeled as originated from the R.O.C., or the “Republic of China,” won’t be allowed entry to the mainland China market, the people said, asking not to be identified discussing sensitive matters. Beijing objects to Taiwan’s use of “Republic of China” as its official designation because it considers the self-governing democracy part of its territory.

One of the people said China’s labeling rules for Taiwanese imports were first announced in 2015 but had not been strictly enforced until this week. That risk is that products are confiscated unless companies change their labeling to comply with the regulations, the person said, although they expected the overall impact to be modest for now as firms were likely to adjust their packaging quickly.

An official from Taiwan’s Ministry of Economic Affairs said while there is a growing of number of companies flagging the labeling issue to the island’s authorities this week, the government is not aware of any Taiwanese exports confiscated by the Chinese customs related to it. A call to the main line of China’s customs office was unanswered outside of regular business hours.

China this week suspended some fish and fruit imports from Taiwan, citing excessive pesticide residue detected on products since last year and some frozen fish packages that tested positive for coronavirus in June. Exports of natural sand, used in construction, were also banned. 

Alongside trade measures, China dramatically increased its military presence near Taiwan with a series of drills and missile tests after Pelosi defied Beijing’s protests and became the highest-ranking US official in a quarter century to visit the island. On Friday, China sanctioned Pelosi and her immediate family, and cut off defense talks with the US, further ramping up tensions in the region. 

Taiwan’s agricultural exports accounted for only 0.6% of total shipments last year, according to DBS Group Holdings Ltd., and China’s sand sales to the island amounted to just over $1 million last year, suggesting the trade bans imposed so far are likely to have only a marginal impact on Taiwan’s economy. 

Still, China is Taiwan’s largest trading partner, with bilateral trade rising 26% on year to $328.3 billion in 2021. Taiwan held a sizable surplus against China, with exports from the island exceeding imports by $172 billion, according to Chinese customs data. While Beijing could leverage that advantage by sanctioning exporters, China also relies on Taiwan for semiconductor supplies.

Nikkei Asia reported earlier Friday that shipments to Apple Inc. supplier Pegatron Corp.’s campus in Suzhou in southern China were disrupted as they were being checked for potential violation of the labeling regulations. The company said their operations remain normal and there have been no production halts or shipment disruptions.