The sound of sanctions: Taiwan's quiet curbs on China-bound technology

Taiwan is not a UN member, but it has built a self-sufficient sanctions framework modeled on allied practices.

Its core legal basis is the Foreign Trade Act, which requires government export permits for a defined list of “Strategic High-Tech Commodities” (SHTCs). All other trade remains generally free, but SHTC items – ranging from high-end semiconductors and chipmaking tools to dual-use equipment and sensitive software – cannot leave Taiwan without a license.

This regime effectively serves as Taiwan’s sanctions mechanism. Exporters must apply to the Ministry of Economic Affairs’ (MOEA) Bureau of Foreign Trade (BOFT) for each SHTC transaction, specifying the exact end-user and intended use.

BOFT reviews applications (often consulting defense, intelligence, and other agencies) and may deny licenses if there are national security concerns. The permit binds the exporter to the declared end-use and consignee: any change in end-user, end-use, or routing requires re-approval.

In practice, this means that Taiwan can align with US and EU sanctions by simply not approving the export of controlled goods to certain countries or entities. For example, after Russia invaded Ukraine, Taiwan’s MOEA announced that high-tech exports to Russia and Belarus “will in principle not be approved,” adding dozens of new items (like semiconductor manufacturing equipment) to its restricted list.

Taiwan’s export controls are updated regularly to track allied lists and technologies of concern.

SHTC Licensing Regime and End-Use Controls

Taiwan’s Strategic High-Tech Commodity regime is administered by MOEA’s BOFT. Any item on the SHTC list – or any product that BOFT suspects could be used for weapons or dual-use applications – requires a license.

Exporters submit an online permit application with an end-user certificate and a sworn statement of end-use. BOFT checks that the consignee is not on a prohibited list and that the declared use is legitimate.

If there are red flags (e.g., opaque buyers or military end-use), BOFT can deny the application. Even after a license is granted, strict end-use controls apply. For example, the exporter may not re-export the item to a different country or user without approval.

Transshipment of SHTC goods through third countries also requires permission. In effect, BOFT monitors exports by matching end-use commitments to border declarations, and unauthorized diversion can lead to heavy fines or criminal penalties.

This export-permit system gives Taiwan granular control over sensitive technology. It can veto sales to persons or regions targeted by US/EU sanctions, without needing a separate “sanctions law.”

Financial Sanctions Enforcement (AML, CFT and TFRC)

Taiwan enforces financial sanctions mainly through its anti-money laundering (AML) and counter-terrorist financing (CFT) laws. The Money Laundering Control Act and Counter-Terrorism Financing Act provide the legal tools to freeze assets and penalize illicit finance, even though Taiwan has no general domestic “Russia sanctions” or “China sanctions” statute.

Under these laws, financial regulators (the Financial Supervisory Commission and Central Bank) and banks must screen customers and transactions against both domestic and international sanction lists. The Counter-Terrorism Financing Act has established an inter-agency Terrorist Financing Review Committee (TFRC) – chaired by the Justice Minister and including agencies like National Security, Foreign Affairs, Defense, MOEA, the Central Bank, and FSC – to designate domestic persons and entities involved in terrorism or proliferation.

Once designated by the TFRC, those parties are effectively added to Taiwan’s own sanction list, and all financial dealings with them are barred. In practice, Taiwan’s banks apply “know your customer” diligence and risk-based controls in line with global standards.

After the beginning of the war invasion of Ukraine, regulators explicitly warned banks to treat Russian counterparties as high-risk. Many Taiwanese banks responded by tightening screening and even suspending correspondent relationships with suspected Russian banks – a form of voluntary de-risking to avoid sanctions exposure.

In short, Taiwan uses its AML and CFT framework as an enforcement backbone. Banks must block prohibited flows and report any suspicious activity, ensuring that sanctions are implemented in the financial system, despite Taiwan not having its own sanction law.

Russia and China: Export Controls and Investment Screening

Unlike many of the country’s allies, Taiwan has not passed a single omnibus sanction law targeting Russia or China. Instead, it relies on existing export control and investment screening measures to achieve similar results.

For China, the Act Governing Relations with Mainland China, the “Cross-Strait Act,” imposes its own restrictions. Any direct investment or capital flow by a Mainland Chinese entity in Taiwan must receive advance approval from Taiwan’s authorities.

In practice, this means Chinese nationals or companies generally cannot invest in strategic Taiwanese industries (semiconductors, telecommunications, etc.) without a permit from the Mainland Affairs Council. Conversely, Taiwanese investors abroad face ordinary rules except when the destination is China.

Taiwanese outbound investment to China is governed by Cross-Strait Act provisions (with separate laws for Hong Kong and Macau). For all other destinations, Taiwan’s general investment laws apply.

Companies investing overseas must notify the Investment Commission of any transaction above a low threshold (roughly US$5 million per year), and deals in certain sensitive sectors trigger greater scrutiny.

In 2023–2024, Taiwan strengthened these outbound rules by explicitly adding national security criteria. Large investments by Taiwanese tech firms (in areas like chips, AI, aerospace, etc.) now require government notification or approval.

This allows regulators to flag and possibly halt suspicious transfers of advanced know-how abroad. However, it’s important to note that these outbound screening reforms do not cover China-bound deals (which remain under the Cross-Strait framework), and their penalties are relatively modest.

In summary, Taiwan does not label its measures as “Russia” or “China” sanctions; rather, it uses export licenses and investment vetting as tools of foreign policy. Through the Foreign Trade Act, Taiwan can effectively embargo military-use exports to any country (such as Russia), and through the Cross-Strait and investment laws, it can control critical high-tech capital flows to or from China.

Illustrative Examples of Taiwan’s Measures

• Huawei and SMIC Controls: In June 2025, Taiwan’s BOFT updated the SHTC Entity List to include China’s tech giants Huawei and SMIC. Any Taiwanese sale of chips, software, or related products to these companies now requires a Taiwan government export license.
  
  The move tracks the US and EU blacklists and was explicitly justified on national security grounds. Taiwanese exporters must now treat Huawei and SMIC as specially restricted; any deal with them must be vetted and approved by MOEA.
   
• Semiconductors to Russia: Since Russia invaded Ukraine, Taiwan has effectively halted exports of certain advanced chips to Russia. MOEA announced that export licenses for semiconductor manufacturing equipment and high-end components destined for Russia and Belarus would, in principle, be refused.
  
  Taiwanese foundries such as TSMC complied. They publicly stated that any defense or military-related chip shipments to Russia were suspended.
  
  In practice, Taiwanese-made AI processors and other bleeding-edge chips no longer reach Russian customers, in line with international controls. This happened even though Taiwan has no formal Russia embargo law – it simply applied its export control licensing rules strictly.
   
• Banking and de-risking: Taiwanese banks have proactively tightened financial controls on sanctioned jurisdictions. In response to global sanctions, regulators and the MOJ advised banks to enhance AML measures on payments involving Russia.
  
  Many Taiwanese banks responded by cutting or suspending correspondent accounts with Russian banks that could not clear these checks. Transactions involving ruble transfers are now scrutinized or rejected if any sanctioned entity is involved.
  
  This voluntary de-risking means that even routine banking flows to Russia are largely choked off, despite no new law on sanctions – a result achieved through Taiwan’s AML obligations and through Taiwan’s TFRC.
   
• Cross-Strait Investment Bans: Under the Cross-Strait Act, the government already prohibits many China-related transactions. For instance, Chinese investors are broadly barred from buying stakes in Taiwan’s semiconductor firms or media companies without government consent.
  
  Similarly, any Taiwanese attempt to transfer core technology to a Chinese partner or factory overseas triggers an interagency review. While these measures are framed as protecting Taiwan’s economy, they also serve the function of preventing strategic tech transfer to an adversary in the absence of a formal “China sanctions” law.

Recent Outbound Technology Investment Screening

Taiwan has recently enhanced its regime for overseas technology investments. Beginning in 2023, legislation introduced national-security criteria into the review of outbound deals by Taiwanese firms.

Now, sizable investments in certain high-tech fields (such as advanced semiconductors, AI, quantum computing, aerospace, and telecommunications) must be reported to MOEA’s Investment Commission. The government can examine them for security risks.

These new rules give Taiwan a chance to intervene in transactions that could transfer critical capabilities abroad. For example, a Taiwanese chipmaker seeking to invest in a foreign foundry using new semiconductor technology would be subject to scrutiny under the updated law.

However, enforcement is still evolving: penalties for unauthorized tech transfers remain relatively low, and notably these outbound provisions explicitly exclude Chinese destinations (which are governed by separate Cross-Strait regulations). In essence, Taiwan’s outbound investment screening has moved toward the norms of its allies.

Taiwan employs its existing trade and investment statutes to mirror broader sanctions policies. By updating its SHTC export list and license requirements, applying strict end-use checks, and leveraging AML and CFT laws, Taiwan aligns closely with US and EU sanctions despite not being bound by UN resolutions.

When other democracies refine their investment screening regimes for national security, Taiwan does the same, tightening the rules on outbound high-tech capital flows. These measures ensure that Taiwan’s high-tech exports and financial flows stay on the right side of allied sanctions while protecting the island’s own security and economic interests.