The American Institute in Taiwan (AIT) and the coordination Cou-
ncil for North American Affaire (CCNAA) agree that the following
guidelines regarding the importation, distribution and sale wit-
hin Taiwan of beer, wine and cigarettes shall be effective Janu-
ary 1, 1987 :

I Definitions
For purposes of this Agreement :
A.The "importer" of U.S. wine, beer and cigarettes shall mean
the Taiwan Tobacco and Wine Monopoly Bureau (TTWMB).
B. " Merchandise" shall mean still and sparkling grape based
wines (CCCN 2205 and 2206), coolers and other fermented bev-
erages including non--grape based wines (CCCN 2207), cigare-
ttes (CCCN 2402) and beer (CCCN 2203) produced in and expor-
ted from the United States and counted for customs statisti-
cal purposes as an export from the United States to Taiwan.
C."Commercial importer" shall mean exclusive and non-exclusive
representatives, distributors, subdistributors, agents, who-
lesalers and licensed retailers, who have a commercial rela-
tionship with U.S. suppliers of merchandise.
D."U.S. suppliers " shall mean producers, export trading com-
panies, brokers and other entities which export merdhandise.
E." Retailer" shall mean an establishment, facility or outlet
operated under a valid TTWMB license to sell TTWMB products.

II.Importation Procedures
A.Commercial importers shall be allowed to import into Taiwan
, through TTWMB, the merchandise. A commercial importer may
purchase from a number of U.S. suppliers of merchandise. A
commercial importer shall be responsible for the performan-
ce of and shall direct all functions and activities relati-
ng to the importation process, including securing an import
permit from the Board of Foreign Trade in the name of TTWMB
and letters of credit or other payment documents.
B.Upon receipt of the folllowing documents from the commerci-
al importer, TTWMB shall, within three working days, stamp
or sign the import permit application properly completed by
the commercial importer for each shipment of merchandise,
without any restriction on price, quantity, brand or style
:
(1) A valid certificate of registration of profit--seeking e-
nterprise, issued by the appropriate CCNAA authority to
the commercial importer;
(2) a pro forma invoice setting out the brand (and style, if
applicable) of the merchandise to be imported in that sh-
ipment, quantity of each brand (and each style, if appli-
cable), and price quotation of each brand (and each style
,if applicable) ;
(3) most recent certificate(s) issued by appropriate CCNAA t-
ax authorities, demonstrating that such commercial impor-
ter has paid all taxes owed in Taiwan; and
(4) a valid certificate of origin issued by the appropriate
state or federal government or semi--government bodies or
appropriate chamber of commerce of the United States cer-
tifying that all merchandise in that shipment is produced
in the United States.
C.As a condition for formal customs entry into Taiwan of the
merchandise, the commercial importer shall provide to the
customs officials one copy of a receipt issued by TTWMB co-
nfirming that the monopoly tax has been paid in full. Such
receipt shall be issued upon payment of the tax.
D.All packing, shipping, insurance, inland transportation, w-
arehousing arrangements, and customs clearance relating to
any merchandise imported to Taiwan shall be the sole respo-
nsibility of the commercial importer.
E.Import of merchandise shall be cleared through customs exp-
editiously, in accordance with the law and standard proced-
ures and rules.
F.The TTWMB shall complete any inspection within the ten--day
period provided for customs inspection under Taiwan law to
ensure compliance with :
(1) The pro forma invoice already submitted to the TTWMB ;
(2) the standards or requirements described in section VII b-
elow ;
(3) the certificate of origin already submitted to the TTWMB.
G.Upon aphlication, TTWMB shall promptly authorize on premise
establishments to import the merchandise directly from U.S.
suppliers and/ or to purchase merchandise from commercial
importers without being subject to retail markup limits.

III.Monopoly Tax
A.The TTWMB shall collect on behalf of the CCNAA authorities
the monopoly tax from the commercial importer for each sh-
ipment of merchandise imported to Taiwan in accordance wi-
th normal commercial and financial practices in Taiwan. S-
uch monopoly tax shall be in lieu of applicable import du-
ties, harbor construction fees and commodity taxes.
Notification to the Ministry of Finance on a confidential
basis by commercial importers of the selling price at all
stages throughout the marketing process shall meet the re-
quirements of Article 8, paragraph one, subparagraph 16 of
the Business Tax Act, and the Value Added Tax (VAT) shall
be exempted. No other fees may be charged by the TTWMB in
connection with the import in its name of the merchandise.
B.TTWMB shall be indemnified by commercial importers from l-
iabilities not attributable to its willfUl default or gro-
ss negligence arising from the importation of merchandise.
For merchandise which has been certified by the insurer to
be so damaged as to be unusable, the TTWMB shall, followi-
ng receipt of such certification, refund the monopoly tax
on that merchandise in cash or by bank cashier's check co-
ncurrently upon the delivery by the commercial importer to
TTWMB of the goods in question.
C.The monopoly tax shall be assessed at the following rates
:
(1) Wine,
NT $119 per liter ;
(2) Wine coolers,
NT $45 per liter;
(3) Beer,
NT $30 per liter; and
(4) Cigarettes,
NT $830 per thousand.
IV.Pricing
A.All prices for each brand or style of the merchandise shal-
l be established solely on the basis of freely competitive
market forces in Taiwan. Commercial importers may not be r-
equired to provide notification more than ten days in adva-
nce to TTWMB of the anticipated retail price at which beer,
wine, wine coolers and cigarettes shall be sold or of any
changes thereto.
B.CCNAA authorities' regulations shall stipulate the maximum
retail margin. Subesquent changes shall be publicized. All
regulations shall be applied in a non--discriminatory mann-
er to local products and U.S. merchandise.
C.Except as otherwise provided in the preceding section TV.B,
other commercial terms, fees, commisions and price to the
retailer shall be determined solely by suppliers and their
commercial importers.
V.Warehousing and Distribution
A.Commercial importers shall notify the TTWMB of the location
of the warehouses in which imported merchandise is stored w-
ithin ten days of acquiring the warehouse space.
B.Commercial importers may choose to distribute any merchandi-
se through subdistributors or wholesalers or directly to re-
tailers licensed to deal in such merchandise. No TTWMB lice-
nsing or approval may be required for thedistributors or wh-
olesalers ; provided that if any distributor, subdistributor
or wholesaler also engages in the retail of any merchandise,
it must also be a retailer licensed to deal in that merchan-
dise.
C.The treatment of imported merchandise sold in duty--free es-
tablishments operated by TTWMB shall not, under this Agreem-
ent, be any less favorable than accorded such merchandise p-
rior to January 1,1987.
D.Imported merchandise shall be permitted to be sold at all e-
stablishments at which TTWMB products are sold. No addition-
al or separate TTWMB license or authorization may be requir-
ed for imported merchandise to be sold at these establishme-
nts.

VI.Advertising and Promotion
A.Cigarette samples may be restricted to stick by stick dist-
ribution.
B.Point of sale promotions including displays, signs, posters
, samples, gifts, gifts with brands, leaflets and testings
shall be permitted at each wholesale, distribution, and re-
tail establishment at the place of business given in its c-
ertificate of registration of profit-seeking enterprise is-
sued by the appropriate authorities, including on premise
establishments.
C.Special promotions shall be permitted but commercial impor-
ters may be required to provide 30--day prior notification
to the TTWMB of the activity or event planned.
D.Advertisements in magazines and newspapers for beer and wi-
ne shall be permitted. Each manufacturer of cigarettes may
be limited to 120 advertising placements in magazines duri-
ng each calendar year.
E.Other sales promotional and advertising activities similar
to those conducted by TTWMB may be carried out for imported
merchandise.
F.TTWMB may not impose financial limits on the above activit-
ies.

VII.Labeling and Packaging
A.Cigarettes: A health warning shall appear on each pack of
cigarettes. The warning shall be in the Chinese language
on the side of the package and shall be identical to the
text of the TTWMB health warning. The typesize, typeface
and format shall be essentially equivalent to the current
TTWMB health warning. Date of packaging shall be on the i-
nside foil of each pack of cigarettes in industry accepted
nomenclature. The nomenclature key shall be given to CCNAA
.
B.Beer: The date on which the product is inserted in its co-
ntainer shall be visible on the bottom of each retail con-
tainer in industry accepted nomenclature. The nomenclature
key shall be given to CCNAA, U.S. firms may ship beer pro-
ducts to Taiwan in their containers as produced in the Un-
ited States without change.
C.Wine: Retail containers shall be labelled to provide an a-
ccurate description of the product.

VIII.Penalties
In the event of suspected noncompliance with these guideli-
nes by commercial importers, TTWMB shall notify in writing
the suspected violator of the alleged violation, the time
period within which such violation must be corrected or di-
scontinued, and the penalty to be imposed by TTWMB shouldt-
he violation not be corrected or discontinued within that
time period. A determination by TTWMB of any penalty shall
be guided by the applicable laws and regulations. CCNAA and
AIT shall consult before the imposition of any penalty whi-
ch has the effect of preventing the importation or distrib-
ution of U.S. beer, wine and cigarettes.

IX Consultations
A.AIT and CCNAA agree to consult promptly at the written req-
uest of either party on any matter relating to the sale of
U.S. merchandise in Taiwan.
B.CCNAA reserves the right to change the status of TTWMB as
well as laws and regulations governing TTWMB whenever it d-
eems appropriate. In the event that the status of TTWMB as
described in this Agreement is modified, AIT and CCNAA sha-
ll consult prior to such modifications to ensure that the
market access provided for under this Agreement is not imp-
aired and that any new laws and regulations in Taiwan shall
be applied in a nondiscriminatory manner.

Done, in duplicate, at Washington, D.C.
this 12th day of December, 1986.
[Signed]
For the Coordination
Council for North
American Affairs
Dr. Fredrick F. Chien,
Representative
[Signed]
For the American Institute
in Taiwan
David Dean, Chairman of the
Board and Manging Director