The Risks Associated With the Development of SME Operations via E-Commerce

A. Ignored Risks and Dangers

Undoubtedly, collaborations between states at both multilateral and regional levels have reduced the burden for SMEs to operate internationally. The TFA itself was reported to reduce members’ trade cost by 14% and import and export time by an average of 1—2 days.^[210] However, while the ongoing negotia­tion agenda focuses on streamlining import procedures and expediting customs processes, the negative impacts associated with these changes seem neglected.

Indeed, sophisticated customs requirements prevent SMEs from actively par­ticipating in international trade. But excluding those imposed for trade pro­tection purposes, most customs procedures and import requirements are set to protect certain legitimate objectives. For instance, a labeling requirement may be imposed to ensure that consumers acquire sufficient information about the product and thus preserve their “right to know”; standards and technical requirements may also be set to ensure the safety of the product and the protec­tion of other people’s legitimate objectives. When it comes to the trade of food and agricultural products, the SPS measures, which are sometimes abusively used and often viewed as non-tariff trade barriers, also play a critical role in preventing the entrance of unwanted pests and diseases. As the current trend pushes to reduce regulatory requirements and burdens on imports to support the operation of SMEs, we are left with the question of whether the simplified measures and procedures are still capable of maintaining the expected level of protection that the states aim to achieve.

In the following section, by studying the difficulties that Taiwan faced when combatting and preventing the cross-border spread of African swine fever (ASF), this chapter highlights how the development of SMEs, especially those conducting cross-border operations via e-commerce, weakens states’ protection over their subjects.

B. Taiwan's Experience in Preventing the Outbreak of African

Swine Fever

ASF is prevalent and endemic in the sub-Saharan Africa region. Historically, outbreaks have also occurred in Europe, some Caribbean countries, and South America. Since 2007, ASF has been reported in multiple countries across Africa, Asia, and the European continents.^[211] A significant increase in the number of outbreaks has been identified since 2016, with the disease being found in Moldova, Czech Republic, Romania, Hungary, Bulgaria, Belgium, and reported for the first time in the Peoples’ Republic of China (PRC) in August 2018. According to the World Organisation for Animal Health (OIE), a severe outbreak has occurred in Asia, especially in the Peoples’ Republic of China. Although the PRC reported nearly 55% of the world’s losses,^[212] it is speculated that the losses have been underreported, and the actual outbreak is much more severe than disclosed.^[213]

The mortality rate of ASF can be as high as 100%. However, the mortality for moderately virulent forms of ASF still ranges from 30—70%. As there are no known treatments or vaccines for ASF, prevention relies entirely on import restrictions and enforcement. Also, the ASF virus may remain active after the host is deceased. Therefore, disease-free countries must ensure that neither infected pig livestock nor pork products are introduced into ASF-free areas via processed products.

Noticing the devastating impact of ASF and the ongoing epidemic outbreaks in the region, Taiwan quickly imposed importation bans on all pig livestock and processed pork products from ASF-affected areas, including those from the PRC. It is hoped that the strict importation restrictions can help Taiwan pre­vent the entrance of ASF and protect Taiwan’s local animal husbandry, which has just started to revive from the destructive foot-and-mouth disease outbreak that happened almost 21 years ago. But despite the strict importation bans imposed, there are still numerous reports of processed pork products found in Taiwan carrying ASF from the PRC.

Although most of the processed pork products found in Taiwan carrying ASF from the PRC were brought by travelers and were intercepted at the border, many prohibited products unexpectedly entered into Taiwan via postal and express carrier packages. Consumers also reported that they received pork sausages and meat products as gifts when they made purchases from Taobao sellers.^[214] Some consumers even disregard the prohibition rules and order pork products from individual vendors on Taobao and request to ship the products to Taiwan.^[215] As of March 31, 2019, 71 instances of illegal mailed-in pork products (some carrying the ASF virus) have been detected at the postal service examination points.

The number of detected illegal pork products mailed in from the PRC may seem small; it nevertheless reveals the tip of the iceberg. With Taobao itself claiming to create more than one billion U.S. dollars of trade flow from PRC to Taiwan, it is hard to imagine the number of illegal goods that went through the customs and border control without being detected.⁴¹ Taiwanese Customs also admits that given the number of shipments that came through customs, it is impossible to conduct inspections on all packages. The customs authority does not have enough resources to complete such tasks.⁴² Furthermore, compared to traditional cargo shipments, which are required to follow a complete list of obligations and provide customs pre-arrival documents declaring the content, volume, and origin of the goods, postal and carrier packages are only required to follow a simplified process. Thus, to the customs authorities, shipments sent via postal and courier packages are more challenging to inspect since Customs lacks information about the packages’ risk factors, thus preventing them from using algorithms to evaluate the degrees of risk and identify shipments that require additional attention. This is not to mention that small-scale operators may lack knowledge about the exportation process and their declaration obligations or may even intentionally provide false declarations to avoid their goods being subjected to inspections that may prolong the time for goods to pass through customs.

Currently, Taiwan customs authorities impose intensive inspection proce­dures to prevent the spread of ASF. After learning that pork products have pene­trated through the quarantine defense line through postal and courier packages, more stringent rules and regulations were imposed. It is now required that all incoming mail packages go through x-ray scanning. Packages that are detected or suspected of carrying food products will be further manually inspected. Teams of quarantine detector dogs are also deployed at the ports to help detect meat products. Packages shipped from ASF-infected areas are separated and are subjected to more intensive inspections.

Meanwhile, the Taiwanese government also has requested Taobao prohibit its sellers from selling or shipping pork-related products to Taiwan. In addition, some merchants’ web pages are also blocked to prevent cross-border transac­tions of pork products. According to the most recent statistics, the number of illegal packages has gradually decreased.⁴³

C. Balancing Between Trade Facilitation and the Need to Protect

Although the Taiwanese government can temporarily strengthen the intensity of its inspections to prevent the import of goods that are potentially carrying

Sept. 26, 2018, available at www.cw.com.tw/article/article.action?id=5092274 (last accessed Apr. 21, 2019).

42 Ibid.

43 available at www.post.gov.tw/post/internet/ Group/index.jsp?ID=1548202358478 (last accessed Apr. 21, 2019).

ASF, these emergency measures are not the feasible final solutions to fix the problem.^[216] As we have previously cited, only 3—5% of cargo shipments will be examined and inspected under the current practices. Furthermore, because intensive inspections require a massive amount of human and material resources, it is hard to imagine that the customs authorities and postal services are capable of bearing the burden if we decide to double or triple the inspection ratio, not to mention if we choose to increase the level of protection further.

Of course, there are numerous ways that the current regulatory system can be revised to mitigate the arising challenges. For instance, states may require e-commerce platforms to bear joint responsibility to ensure the safety of the listed products. Digital sales platforms may also be required to remove or block the listing of prohibited and restricted goods. In order to ensure that the shipment of goods is duly declared following the rules and regulations, e-commerce platforms may also help generate uniform declaration forms for their users. E-commerce platforms may also require packages to be shipped by registered carriers to help shippers comply with all importation require­ments. In addition to public and private collaboration, noticing that the roles of postal services have changed rapidly, and the shipment of letters and low- value personal belongings are no longer the mainstream of their business, states may also want to modify the current international postal agreements and the clearance procedures for express carrier packages to better meet the needs of modern society. In multilateral and regional trade agreements, states may also incorporate provisions marking the need and necessity for states to cooperate and mitigate the risks associated with SMEs and e-commerce development. The SPS chapters may also adopt separate mechanisms for these matters.

V.