Unimicron Origin Case Puts Taiwan’s 35 Percent Rule At The Center Of U.S. Tariff Risk

TAIPEI, Taiwan — Where a circuit board was made has become one of the most consequential questions in Taiwanese manufacturing, and it now sits at the center of a criminal case against one of the island's largest suppliers to the American chip industry.

Prosecutors in Taoyuan say Unimicron Technology, a maker of printed circuit boards and semiconductor substrates whose customers include Nvidia and Intel, shipped boards manufactured in mainland China back to Taiwan and relabeled them as locally made before export. Investigators searched the company's headquarters and a factory on Aug. 28.

On Wednesday, Taiwan's minister of economic affairs, Kung Ming-hsin, said the case was now in the hands of investigators and the courts. Then he did something less routine. At a ministry briefing, he explained precisely where the legal line falls.

Origin laundering, Kung said, typically involves goods from China or elsewhere that undergo only minor processing in Taiwan or a third country before being relabeled for export to the United States — without meeting substantial-transformation rules or a 35 percent value-added threshold.

Taiwan's standards, he added, govern Taiwan's own export controls. U.S. Customs and Border Protection makes the final determination on whether goods satisfy American rules of origin.

That distinction is the difficulty in miniature. Taipei can prosecute a company under its own criminal code and still hold no authority over what Washington concludes the goods were.

The search in Taoyuan

Investigators from the Taoyuan District Prosecutors' Office searched Unimicron's headquarters in the Guishan District and a plant in Jhongli. Fourteen executives and employees were questioned as suspects. Four others were questioned as witnesses.

Prosecutors said the suspects were believed to have violated provisions of Taiwan's criminal code covering document forgery and the false labeling of a product's origin. Detention, they said, was not necessary.

A general manager in the printed circuit board division, identified by prosecutors only by the surname Wang, was released on bail of NT$15 million, about $474,000. His deputy, identified as Wu, was released on NT$12 million. Three other suspects posted bail ranging from NT$300,000 to NT$5 million. Nine were released without bail. Prosecutors said they would continue gathering evidence.

Unimicron confirmed the search in filings to the Taiwan Stock Exchange, said it was cooperating fully with investigators and told shareholders it did not expect a material effect on operations. No one has been charged. Its shares fell sharply on Aug. 28, retreating from an intraday record set earlier in the same session.

Who would pay

Under American customs law, the party responsible for duties is the importer of record — the U.S. company that brings goods into the country, not the foreign manufacturer that made or labeled them. Were relabeled boards to reach the United States, the cost would land first on Unimicron's American customers.

How large that cost might be is unsettled. An additional 40 percent duty on goods that Customs determines were transshipped to evade tariffs was created under Section 3 of Executive Order 14326, signed in July 2025. In February, the Supreme Court held that the International Emergency Economic Powers Act did not authorize the tariffs challenged in that case. The administration has since relied on other trade authorities for import surcharges, and an order in June directed federal agencies to prioritize enforcement against illegal transshipment, misclassification and undervaluation.

The 40 percent figure that has trailed this story through the trade press therefore describes a penalty whose legal foundation shifted after it was written. As of Sept. 1, no public Customs notice, Enforce and Protect Act action, tariff reassessment or shipment detention naming Unimicron had surfaced.

Four hundred and thirteen flagged cases

Taiwan's own figures suggest the case is not an outlier.

The Customs Administration, part of the Ministry of Finance, says it has run a three-tier system against illegal transshipment since April 2025: prevention beforehand, inspection during, penalties after. By early August it had reviewed more than 43 million customs declarations and identified 413 suspected cases.

That is roughly one flagged case for every 104,000 declarations, a calculation of our own rather than an official statistic. It can be read as a filter working, or as 413 unresolved questions about goods that have already moved.

In Washington, Reuters reported that a White House assessment released last month estimated the United States loses $19 billion to $26 billion a year in tariff revenue to goods routed through third countries, most of them originating in China.

Why this company

Unimicron is among the world's largest producers of printed circuit boards and integrated circuit substrates, and a major supplier of Ajinomoto Build-up Film substrates, the material layers used in advanced semiconductor packaging for artificial intelligence, high-performance computing and smartphones. Nikkei Asia reported that its customers include Nvidia, Intel, Google and Amazon.

Much remains unknown. It has not been established whether Nvidia or Intel is connected to the products under investigation, whether the boards were exported to the United States, or whether the advanced substrates are involved at all. The products described by prosecutors appear to be conventional circuit boards, though the prosecutors' office has not confirmed that.

The bargain underneath

The timing is awkward for Taipei. The government is preparing an additional $20 billion in U.S. investment commitments from its semiconductor and AI server industries, part of a trade relationship that has already produced tariff concessions — among them, Kung said, duty-free import quotas worth 2.5 times a company's U.S. production capacity under a memorandum signed in January.

Concessions of that kind rest on the premise that Taiwanese goods are Taiwanese. Each origin case tests it, which helps explain why Taipei has been conspicuous about policing its own exporters. It is separately prosecuting nine people, including an Nvidia distribution manager, over the alleged diversion of restricted AI servers to China.

Kung said the government was weighing amendments to the Foreign Trade Act, or the addition of specific products to controlled lists, to address that second category of risk.

What to watch

Whether prosecutors describe the conduct as isolated relabeling or systematic transshipment. The first stays inside Taiwan's courts. The second opens the door to action by U.S. Customs against American importers, including retroactive duty reassessment.

Whether any American customer publicly reallocates orders. No public evidence of order-shifting has emerged. Competing substrate and board makers would be the immediate beneficiaries, and their order books will show it before any announcement does.

Whether the Foreign Trade Act amendments materialize, and how broadly they are drawn. A narrow update to controlled lists addresses server diversion. A broader rewrite would change compliance obligations for every Taiwanese exporter shipping to the United States.