Maggie Wu (吳詩敏)[1] and Tzu-Ching Lin(林子靖)[2]
Except for Article 4, the Act for Strengthening National Defense Self-Reliance and Promoting the Unmanned Vehicle Industry (強化國防自主暨無人載具產業發展條例; unofficial translation) will take effect on March 11, 2027. The Act includes design in the calculation of the domestic content ratio. It also provides for revocation of eligibility, recovery of funds already disbursed, and administrative fines where the origin of key components, software, or firmware is misrepresented or falls within a high-risk category. This article examines the Act’s provisions on country-of-origin requirements and their enforcement. Drawing comparisons with the case discussed in Part One, it explains how origin disputes may give rise to administrative consequences in addition to civil liability between contracting parties.
Background
In the case discussed in Part One, the supplier lost its claim for the purchase price and was ordered to pay the system integrator NT$1,296,306 because the UAV motor and flight control board failed to comply with the procurement specifications’ country-of-origin requirements. The case concerned civil liability between the contracting parties.[3]
The Act for Strengthening National Defense Self-Reliance and Promoting the Unmanned Vehicle Industry was promulgated on September 11, 2026. Article 4, which addresses budgetary matters, took effect upon promulgation; the remaining provisions will take effect on March 11, 2027. Once those provisions take effect, origin-related violations covered by the Act may also result in administrative fines and disqualification from government procurement. The potential consequences therefore extend beyond civil liability between contracting parties.
Provisions relevant to country-of-origin liability
(1) Domestic content ratio and supply chain requirements
The Act defines the “domestic content ratio” (國產化比例) as the proportion of an unmanned vehicle’s output value attributable to domestic suppliers of design, manufacturing, assembly, and key components. It requires contracts for public-sector use of unmanned vehicles to expressly prohibit participation by companies from the PRC, Hong Kong, or Macau and to exclude individuals from those jurisdictions from the team performing the contract. The Act also establishes a tiered certification system for trusted supply chains (可信任供應鏈分級認證制度).[4]
As discussed in Part One, NCSIST examined the origin of individual components and traced the source of the circuit design. The Act similarly includes design in the calculation of the domestic content ratio, while Article 19 expressly covers software and firmware alongside key components. These provisions reflect a similar concern: scrutiny extends beyond the finished product to its underlying components and technology. The Act gives that broader scrutiny an express statutory basis within its scope.
(2) Penalties under Article 19
Article 19, paragraph 1 applies to anyone who obtains incentives, subsidies, investment, financing, credit guarantees, or eligibility to participate in government procurement under the Act by using key components, software, firmware, systems, or services that are uncertified, whose origin is misrepresented, that originate from a high-risk source, or that are substantially controlled by such a source. It provides for revocation or annulment of the relevant eligibility, recovery of funds already received, and an administrative fine of one to three times the amount received.[5]
Article 19 also provides for the following penalties and enforcement measures: [6]
- Providing false information. Anyone who provides false information during an eligibility review, certification, procurement, contract performance, acceptance inspection, or a procedure relating to subsidies, incentives, investment, financing, or credit guarantees is subject to a fine of NT$1 million to NT$5 million.
- Obstructing inspections. Anyone who evades, obstructs, or refuses an audit, test, sampling, or re-inspection lawfully conducted by the competent authority, the procuring agency, or an engaged professional institution is subject to a fine of NT$500,000 to NT$3 million. Fines may be imposed repeatedly for successive violations.
- Referral for criminal investigation. Under paragraph 4, conduct covered by the preceding three paragraphs that involves criminal liability must be referred to the prosecutor’s office.
The events discussed in Part One occurred in 2020, before the Act was enacted. If similar conduct were to occur on or after March 11, 2027 and meet the requirements of Article 19, the consequences could extend beyond contractual penalties and civil damages to revocation or annulment of eligibility, recovery of funds received, and administrative fines. Providing a false certificate of origin or bill of materials could also trigger the provision on false information.
(3) The trusted supply chain certification system
The tiered certification system divides certification responsibilities between two ministries. The Ministry of National Defense is responsible for certifying military unmanned vehicle systems, military goods, and key components, while the Ministry of Economic Affairs is responsible for certifying commercial, public-service, and other non-military unmanned vehicle systems. To avoid duplicate testing, the system must also include a testing mechanism for product series that share the same specifications and architecture.[7]
The competent authority must establish the tiered certification system within six months after the Act comes into force.[8] The Ministry of National Defense must also update its list of trusted supply chain and key-component certifications monthly.[9] Businesses should begin reviewing the origin of their components and preparing the supporting documentation needed for certification.
(4) The definition of “unmanned vehicle business”
The Act’s definition of an “unmanned vehicle business” expressly excludes businesses primarily engaged in sales agency, importing, assembly, resale, or bidding for government contracts without other substantive business activities.[10] A company’s business model is therefore a threshold consideration in determining its eligibility for trusted supply chain certification, tax incentives, and investment tax credits.[11] Companies entering the industry should first assess whether their activities fall within the statutory definition.
(5) Exclusion from tax incentives
Under Article 22, an unmanned vehicle business is ineligible to apply for tax incentives under Article 21 if, within the preceding three years, it has committed a serious violation of laws relating to national security, environmental protection, labor, cybersecurity, or flight safety, as determined by the central authority responsible for the relevant industry. Any tax incentives granted for the year in which the violation occurred will be withdrawn, and any resulting tax benefits recovered. Once a decision to withdraw the incentives or recover the tax benefits becomes final, the Ministry of Finance must publish the business’s name on its website.[12]
Environmental protection, labor, and cybersecurity are established concerns in corporate sustainability governance. Article 22 makes compliance in these areas directly relevant to eligibility for tax incentives. For businesses operating internationally, country-of-origin issues may also have implications for export controls and procurement restrictions, depending on the rules of the relevant overseas market.
Conclusion
The Act gives express statutory recognition to the origin of components and underlying technology, including design and firmware. Where its provisions apply, origin-related violations may lead to administrative fines and loss of eligibility, in addition to civil liability between contracting parties. Contractual arrangements can allocate financial responsibility, but compensation alone may not repair the reputational harm associated with disqualification or public disclosure of a violation. Businesses should therefore clarify the applicable origin requirements, verify their suppliers’ claims, and obtain supporting documentation before committing to a product or design.
The next article in this series considers how to allocate these origin requirements between the system integrator and its upstream suppliers through contract terms.
[1] Maggie Wu (吳詩敏) is the Managing Partner of Stellex Law Firm (有澤法律事務所). LL.M., Soochow University; LL.M., Indiana University Robert H. McKinney School of Law.
[2] Tzu-Ching Lin(林子靖) is the Managing Partner of Pan & Lin, Attorneys-at-Law (則誠法律事務所). LL.M., Graduate Institute of Law and Interdisciplinary Studies, National Chengchi University; LL.M. in Environmental and Energy Law, Georgetown University Law Center.
[3] Taiwan High Court Civil Judgment 113-Shang-Zi-66 (Oct. 29, 2025), appeal dismissed, Supreme Court Civil Ruling 115-Tai-Shang-Zi-424 (June 10, 2026).
[4] Article 3, subparagraph 4; Article 6; and Article 13, paragraph 1 of the Act.
[5] Article 19, paragraph 1 of the Act: “Anyone who uses key components, software, firmware, systems, or services that are uncertified, of false origin, of high-risk origin, or substantially controlled by a high-risk source, and thereby obtains an incentive, subsidy, investment, financing, or credit guarantee provided for under this Act, or eligibility to participate in government procurement, shall have such eligibility revoked or annulled, shall have the amounts already received recovered, and shall be fined not less than one nor more than three times the amounts already received.”
[6] Article 19, paragraphs 2 through 4 of the Act.
[7] Article 13, paragraphs 2 and 3 of the Act.
[8] Article 20, paragraph 2 of the Act.
[9] Article 17, paragraph 4 of the Act.
[10] Article 3, subparagraph 6 of the Act.
[11] Articles 9 and 21 of the Act.
[12] Article 22 of the Act.