The use of automated facial recognition technology and supervision mechanism in UK
The use of automated facial recognition technology and supervision mechanism in UK
I. Introduction
Automatic facial recognition (AFR) technology has developed rapidly in recent years, and it can identify target people in a short time. The UK Home Office announced the "Biometrics Strategy" on June 28, 2018, saying that AFR technology will be introduced in the law enforcement, and the Home Office will also actively cooperate with other agencies to establish a new oversight and advisory board in order to maintain public trust. AFR technology can improve law enforcement work, but its use will increase the risk of intruding into individual liberty and privacy.
This article focuses on the application of AFR technology proposed by the UK Home Office. The first part of this article describes the use of AFR technology by the police. The second part focuses on the supervision mechanism proposed by the Home Office in the Biometrics Strategy. However, because the use of AFR technology is still controversial, this article will sort out the key issues of follow-up development through the opinions of the public and private sectors. The overview of the discussion of AFR technology used by police agencies would be helpful for further policy formulation.
II. Overview of the strategy of AFR technology used by the UK police
According to the Home Office’s Biometrics Strategy, the AFR technology will be used in law enforcement, passports and immigration and national security to protect the public and make these public services more efficient[1]. Since 2017 the UK police have worked with tech companies in testing the AFR technology, at public events like Notting Hill Carnival or big football matches[2].
In practice, AFR technology is deployed with mobile or fixed camera systems. When a face image is captured through the camera, it is passed to the recognition software for identification in real time. Then, the AFR system will process if there is a ‘match’ and the alarm would solicit an operator’s attention to verify the match and execute the appropriate action[3]. For example, South Wales Police have used AFR system to compare images of people in crowds attending events with pre-determined watch lists of suspected mobile phone thieves[4]. In the future, the police may also compare potential suspects against images from closed-circuit television cameras (CCTV) or mobile phone footage for evidential and investigatory purposes[5].
The AFR system may use as tools of crime prevention, more than as a form of crime detection[6]. However, the uses of AFR technology are seen as dangerous and intrusive by the UK public[7]. For one thing, it could cause serious harm to democracy and human rights if the police agency misuses AFR technology. For another, it could have a chilling effect on civil society and people may keep self-censoring lawful behavior under constant surveillance[8].
III. The supervision mechanism of AFR technology
To maintaining public trust, there must be a supervision mechanism to oversight the use of AFR technology in law enforcement. The UK Home Office indicates that the use of AFR technology is governed by a number of codes of practice including Police and Criminal Evidence Act 1984, Surveillance Camera Code of Practice and the Information Commissioner’s Office (ICO)’s Code of Practice for surveillance cameras[9].
(I) Police and Criminal Evidence Act 1984
The Police and Criminal Evidence Act (PACE) 1984 lays down police powers to obtain and use biometric data, such as collecting DNA and fingerprints from people arrested for a recordable offence. The PACE allows law enforcement agencies proceeding identification to find out people related to crime for criminal and national security purposes. Therefore, for the investigation, detection and prevention tasks related to crime and terrorist activities, the police can collect the facial image of the suspect, which can also be interpreted as the scope of authorization of the PACE.
(II) Surveillance Camera Code of Practice
The use of CCTV in public places has interfered with the rights of the people, so the Protection of Freedoms Act 2012 requires the establishment of an independent Surveillance Camera Commissioner (SCC) for supervision. The Surveillance Camera Code of Practice proposed by the SCC sets out 12 principles for guiding the operation and use of surveillance camera systems. The 12 guiding principles are as follows[10]:
A. Use of a surveillance camera system must always be for a specified purpose which is in pursuit of a legitimate aim and necessary to meet an identified pressing need.
B. The use of a surveillance camera system must take into account its effect on individuals and their privacy, with regular reviews to ensure its use remains justified.
C. There must be as much transparency in the use of a surveillance camera system as possible, including a published contact point for access to information and complaints.
D. There must be clear responsibility and accountability for all surveillance camera system activities including images and information collected, held and used.
E. Clear rules, policies and procedures must be in place before a surveillance camera system is used, and these must be communicated to all who need to comply with them.
F. No more images and information should be stored than that which is strictly required for the stated purpose of a surveillance camera system, and such images and information should be deleted once their purposes have been discharged.
G. Access to retained images and information should be restricted and there must be clearly defined rules on who can gain access and for what purpose such access is granted; the disclosure of images and information should only take place when it is necessary for such a purpose or for law enforcement purposes.
H. Surveillance camera system operators should consider any approved operational, technical and competency standards relevant to a system and its purpose and work to meet and maintain those standards.
I. Surveillance camera system images and information should be subject to appropriate security measures to safeguard against unauthorised access and use.
J. There should be effective review and audit mechanisms to ensure legal requirements, policies and standards are complied with in practice, and regular reports should be published.
K. When the use of a surveillance camera system is in pursuit of a legitimate aim, and there is a pressing need for its use, it should then be used in the most effective way to support public safety and law enforcement with the aim of processing images and information of evidential value.
L. Any information used to support a surveillance camera system which compares against a reference database for matching purposes should be accurate and kept up to date.
(III) ICO’s Code of Practice for surveillance cameras
It must need to pay attention to the personal data and privacy protection during the use of surveillance camera systems and AFR technology. The ICO issued its Code of Practice for surveillance cameras under the Data Protection Act 1998 to explain the legal requirements operators of surveillance cameras. The key points of ICO’s Code of Practice for surveillance cameras are summarized as follows[11]:
A. The use time of the surveillance camera systems should be carefully evaluated and adjusted. It is recommended to regularly evaluate whether it is necessary and proportionate to continue using it.
B. A police force should ensure an effective administration of surveillance camera systems deciding who has responsibility for the control of personal information, what is to be recorded, how the information should be used and to whom it may be disclosed.
C. Recorded material should be stored in a safe way to ensure that personal information can be used effectively for its intended purpose. In addition, the information may be considered to be encrypted if necessary.
D. Disclosure of information from surveillance systems must be controlled and consistent with the purposes for which the system was established.
E. Individuals whose information is recoded have a right to be provided with that information or view that information. The ICO recommends that information must be provided promptly and within no longer than 40 calendar days of receiving a request.
F. The minimum and maximum retention periods of recoded material is not prescribed in the Data Protection Act 1998, but it should not be kept for longer than is necessary and should be the shortest period necessary to serve the purposes for which the system was established.
(IV) A new oversight and advisory board
In addition to the aforementioned regulations and guidance, the UK Home Office mentioned that it will work closely with related authorities, including ICO, SCC, Biometrics Commissioner (BC), and Forensic Science Regulator (FSR) to establish a new oversight and advisory board to coordinate consideration of law enforcement’s use of facial images and facial recognition systems[12].
To sum up, it is estimated that the use of AFR technology by law enforcement has been abided by existing regulations and guidance. Firstly, surveillance camera systems must be used on the purposes for which the system was established. Secondly, clear responsibility and accountability mechanisms should be ensured. Thirdly, individuals whose information is recoded have the right to request access to relevant information. In the future, the new oversight and advisory board will be asked to consider issues relating to law enforcement’s use of AFR technology with greater transparency.
IV. Follow-up key issues for the use of AFR technology
Regarding to the UK Home Office’s Biometrics Strategy, members of independent agencies such as ICO, BC, SCC, as well as civil society, believe that there are still many deficiencies, the relevant discussions are summarized as follows:
(I) The necessity of using AFR technology
Elizabeth Denham, ICO Commissioner, called for looking at the use of AFR technology carefully, because AFR is an intrusive technology and can increase the risk of intruding into our privacy. Therefore, for the use of AFR technology to be legal, the UK police must have clear evidence to demonstrate that the use of AFR technology in public space is effective in resolving the problem that it aims to address[13].
The Home Office has pledged to undertake Data Protection Impact Assessments (DPIAs) before introducing AFR technology, including the purpose and legal basis, the framework applies to the organization using the biometrics, the necessity and proportionality and so on.
(II)The limitations of using facial image data
The UK police can collect, process and use personal data based on the need for crime prevention, investigation and prosecution. In order to secure the use of biometric information, the BC was established under the Protection of Freedoms Act 2012. The mission of the BC is to regulate the use of biometric information, provide protection from disproportionate enforcement action, and limit the application of surveillance and counter-terrorism powers.
However, the BC’s powers do not presently extend to other forms of biometric information other than DNA or fingerprints[14]. The BC has expressed concern that while the use of biometric data may well be in the public interest for law enforcement purposes and to support other government functions, the public benefit must be balanced against loss of privacy. Hence, legislation should be carried to decide that crucial question, instead of depending on the BC’s case feedback[15].
Because biometric data is especially sensitive and most intrusive of individual privacy, it seems that a governance framework should be required and will make decisions of the use of facial images by the police.
(III) Database management and transparency
For the application of AFR technology, the scope of biometric database is a dispute issue in the UK. It is worth mentioning that the British people feel distrust of the criminal database held by the police. When someone is arrested and detained by the police, the police will take photos of the suspect’s face. However, unlike fingerprints and DNA, even if the person is not sued, their facial images are not automatically deleted from the police biometric database[16].
South Wales Police have used AFR technology to compare facial images of people in crowds attending major public events with pre-determined watch lists of suspected mobile phone thieves in the AFR field test. Although the watch lists are created for time-limited and specific purposes, the inclusion of suspects who could possibly be innocent people still causes public panic.
Elizabeth Denham warned that there should be a transparency system about retaining facial images of those arrested but not charged for certain offences[17]. Therefore, in the future the UK Home Office may need to establish a transparent system of AFR biometric database and related supervision mechanism.
(IV) Accuracy and identification errors
In addition to worrying about infringing personal privacy, the low accuracy of AFR technology is another reason many people oppose the use of AFR technology by police agencies. Silkie Carlo, director of Big Brother Watch, said the police must immediately stop using the AFR technology and avoid mistaking thousands of innocent citizens as criminals; Paul Wiles, Biometrics Commissioner, also called for legislation to manage AFR technology because of its accuracy is too low and the use of AFR technology should be tested and passed external peer review[18].
In the Home Office’s Biometric Strategy, the scientific quality standards for AFR technology will be established jointly with the FSR, an independent agency under the Home Office. In other words, the Home Office plans to extend the existing forensics science regime to regulate AFR technology.
Therefore, the FSR has worked with the SCC to develop standards relevant to digital forensics. The UK government has not yet seen specific standards for regulating the accuracy of AFR technology at the present stage.
V. Conclusion
From the discussion of the public and private sectors in the UK, we can summarize some rules for the use of AFR technology. Firstly, before the application of AFR technology, it is necessary to complete the pre-assessment to ensure the benefits to the whole society. Secondly, there is the possibility of identifying errors in AFR technology. Therefore, in order to maintain the confidence and trust of the people, the relevant scientific standards should be set up first to test the system accuracy. Thirdly, the AFR system should be regarded as an assisting tool for police enforcement in the initial stage. In other words, the information analyzed by the AFR system should still be judged by law enforcement officials, and the police officers should take the responsibilities.
In order to balance the protection of public interest and basic human rights, the use of biometric data in the AFR technology should be regulated by a special law other than the regulations of surveillance camera and data protection. The scope of the identification database is also a key point, and it may need legislators’ approval to collect and store the facial image data of innocent people. Last but not least, the use of the AFR system should be transparent and the victims of human rights violations can seek appeal.
[1] UK Home Office, Biometrics Strategy, Jun. 28, 2018, https://www.gov.uk/government/publications/home-office-biometrics-strategy (last visited Aug. 09, 2018), at 7.
[2] Big Brother Watch, FACE OFF CAMPAIGN: STOP THE MET POLICE USING AUTHORITARIAN FACIAL RECOGNITION CAMERAS, https://bigbrotherwatch.org.uk/all-campaigns/face-off-campaign/ (last visited Aug. 16, 2018).
[3] Lucas Introna & David Wood, Picturing algorithmic surveillance: the politics of facial recognition systems, Surveillance & Society, 2(2/3), 177-198 (2004).
[4] Supra note 1, at 12.
[5] Id, at 25.
[6] Michael Bromby, Computerised Facial Recognition Systems: The Surrounding Legal Problems (Sep. 2006)(LL.M Dissertation Faculty of Law University of Edinburgh), http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.197.7339&rep=rep1&type=pdf , at 3.
[7] Owen Bowcott, Police face legal action over use of facial recognition cameras, The Guardian, Jun. 14, 2018, https://www.theguardian.com/technology/2018/jun/14/police-face-legal-action-over-use-of-facial-recognition-cameras (last visited Aug. 09, 2018).
[8] Martha Spurrier, Facial recognition is not just useless. In police hands, it is dangerous, The Guardian, May 16, 2018, https://www.theguardian.com/commentisfree/2018/may/16/facial-recognition-useless-police-dangerous-met-inaccurate (last visited Aug. 17, 2018).
[9] Supra note 1, at 12.
[10] Surveillance Camera Commissioner, Surveillance camera code of practice, Oct. 28, 2014, https://www.gov.uk/government/publications/surveillance-camera-code-of-practice (last visited Aug. 17, 2018).
[11] UK Information Commissioner’s Office, In the picture: A data protection code of practice for surveillance cameras and personal information, Jun. 09, 2017, https://ico.org.uk/for-organisations/guide-to-data-protection/encryption/scenarios/cctv/ (last visited Aug. 10, 2018).
[12] Supra note 1, at 13.
[13] Elizabeth Denham, Blog: facial recognition technology and law enforcement, Information Commissioner's Office, May 14, 2018, https://ico.org.uk/about-the-ico/news-and-events/blog-facial-recognition-technology-and-law-enforcement/ (last visited Aug. 14, 2018).
[14] Monique Mann & Marcus Smith, Automated Facial Recognition Technology: Recent Developments and Approaches to Oversight, Automated Facial Recognition Technology, 10(1), 140 (2017).
[15] Biometrics Commissioner, Biometrics Commissioner’s response to the Home Office Biometrics Strategy, Jun. 28, 2018, https://www.gov.uk/government/news/biometrics-commissioners-response-to-the-home-office-biometrics-strategy (last visited Aug. 15, 2018).
[16] Supra note 2.
[17] Supra note 13.
[18] Jon Sharman, Metropolitan Police's facial recognition technology 98% inaccurate, figures show, INDEPENDENT, May 13, 2018, https://www.independent.co.uk/news/uk/home-news/met-police-facial-recognition-success-south-wales-trial-home-office-false-positive-a8345036.html (last visited Aug. 09, 2018).
- Biometrics Strategy
- FACE OFF CAMPAIGN: STOP THE MET POLICE USING AUTHORITARIAN FACIAL RECOGNITION CAMERAS
- Police face legal action over use of facial recognition cameras
- Facial recognition is not just useless. In police hands, it is dangerous
- Surveillance camera code of practice
- In the picture: A data protection code of practice for surveillance cameras and personal information
- Blog: facial recognition technology and law enforcement
- Biometrics Commissioner’s response to the Home Office Biometrics Strategy
- Metropolitan Police
Wu, Tsai-Wei
Legal Researcher
Adopting Flexible Mechanism to Promote Public Procurement of Innovation—the Amendment of Article 27 of the Statute for Industrial Innovation I.Introduction To further industrial innovation, improve industrial environment, and enhance industrial competitiveness through a systematic long-term approach, the Statute for Industrial Innovation (hereinafter referred to as the Statute) has been formulated in Taiwan. The central government authority of this Statute is the Ministry of Economic Affairs, and the Industrial Development Bureau of the Ministry of Economic Affairs (henceforth referred to as the IDB) is the administrative body for the formulation of this Statute. Since its formulation and promulgation in 2010, the Statute has undergone four amendments. The latest amendment, passed by the Legislative Yuan on November 3, 2017, on the third reading, is a precipitate of the international industrial development trends. The government is actively encouraging the investment in industrial innovation through a combination of capital, R&D, advanced technologies and human resources to help the promotion of industrial transformation, hence this large scale amendment is conducted. The amendment, promulgated and enacted on November 22, 2017, focuses on eight key points, which include: state-owned businesses partaking in R&D (Article 9-1 of the amended provisions of the Statute), the tax concessions of the limited partnership venture capital businesses (Article 2, Article 10, Article 12-1 and Article 23-1 of the amended provisions of the Statute), the tax concessions of Angel Investors (Article 23-2 of the amended provisions of the Statute), applicable tax deferral of employees' stock compensation (Article 19-1 of the amended provisions of the Statute), tax deferral benefit of stocks given to research institution creators (Article 12-2 of the amended provisions of the Statute), the promotion of flexible mechanism for innovation procurement (Article 27 of the amended provisions of the Statute), the establishment of evaluation mechanism for intangible assets (Article 13 of the amended provisions of the Statute), and forced sale auction of idled land for industrial use (Article 46-1 of the amended provisions of the Statute). This paper focuses on the amendment of Article 27 of the Fourth Revision of the Statute, which is also one of the major focuses of this revision—promoting flexible mechanism for innovation procurement, using the mass-market purchasing power of the government as the energetic force for the development of industrial innovation. II.Explanation of the Amendment of Article 27 of the Statute 1.Purposes and Descriptions of the Amendment of Article 27 of the Statute The original intent of Article 27 (hereinafter referred to as the Article) of the Statute, prior to the latest amendment (content of the original provisions is shown in Table 1), was to encourage government agencies and enterprises to give a priority to using green products through the "priority procurement" provisions of Paragraph 2, which allow government agencies to award contracts to green product producers using special government procurement procedures, so as to increase the opportunities for government agencies to use green products, and thereby promote the sustainable development of the industry. In view of the inherent tasks of promoting the development of industrial innovation, and considering that, using the large-scale government procurement demand to guide industrial innovation activities, has become the policy instrument accepted by most advanced countries, the IDB expects that, with the latest amendment of Article 27, the procurement mechanism policy for software, innovative products and services, in addition to the original green products, may become influential, and that "innovative products and services" may be included in the scope of "Priority Procurement" of this Article namely, make “priority procurement of innovative products and services” as one of the flexible mechanisms for promoting innovation procurement. A comparison of the amended provisions and the original provisions is shown in Table 1, and an explanation of the amendment is described as follows:[1] Table 1 A Comparison of Article 27 Amendment of the Statute for Industrial Innovation Amended Provisions Original Provisions Article 27 (I) Each central government authority in charge of end enterprises of a specific industry shall encourage government organizations (agencies) and enterprises to procure software, innovative and green products or services. (II) To enhance the procurement efficiencies, as effected by supply and demand, the central government authority shall offer assistance and services to the organizations (agencies) that handle these procurements as described in the preceding paragraph; wherein, Inter-entity Supply Contracts that are required for the aforesaid procurements, the common requirements shall be decided, in accordance with policy requirements, upon consultation between the central government authority and each central government authority in charge of end enterprises of a specific industry. (III) Where the software, innovative and green products or services, as described in Paragraph 1, must be tested, audited, accredited and certified, their associated fees and charges may be reduced, exempted, or suspended. (IV) Government organizations (agencies) may specify in the tender document the priority procurement of innovative and green products or services that have been identified to meet the requirements of paragraph 1. However, such a specification shall not violate treaties or agreements that have been ratified by the Republic of China. The measures concerning specifications, categories, and identification procedures of software, innovative and green products or services as prescribed in Paragraph 1; the testing, auditing criteria, accreditation and certification as prescribed in paragraph 3; and the Priority Procurement in paragraph 4 and other relevant items, shall be established by each central government authority in charge of end-enterprises of a specific industry. Article 27 (I) Each central government authority in charge of end enterprises shall encourage government agencies and enterprises to give priority to green products that are energy/resources recyclable/renewable, energy and water saving, non-toxic, less-polluting, or able to reduce the burden on the environment. (II) Agencies may specify in the tender documents that priority is given to green products meeting the requirement set forth in the preceding Paragraph. (III) The regulations governing the specifications, categories, certification procedures, review standards, and other relevant matters relating to the green products as referred to in the preceding Paragraph shall be prescribed by the central government authorities in charge of end enterprises. Source: The Ministry of Economic Affairs (I).Paragraph 1 In order to compel each central government authority in charge of end enterprises of a specific industry to motivate industrial innovation activities and sustainable development on the basis of requirements, and to support the development of the software industry in Taiwan, the provision, that such an authority should encourage government organizations (agencies) and enterprises to procure software and innovative products and services, is added in paragraph 1. (II).Paragraph 2 This procurement, as described in paragraph 1, is different from the property or services procurement of general affairs as handled by various organizations. To enhance procurement efficiencies, as effected by supply and demand, the central government authority, i.e., the Ministry of Economic Affairs, shall provide relevant assistance and services to organizations (agencies) handling these procurements, hence the added provisions in paragraph 2. For purchases using inter-entity supply contracts, which are bound by the requirements of this Article, due to their prospective nature, and that the common demand of each organization is difficult to make an accurate estimate by using a demand survey or other method, the Ministry of Economic Affairs shall discuss the issues with each central government authority in charge of end-enterprises of a specific industry, who consult or promote policies, and are in charge of end enterprises of a specific industry, and then make decisions in accordance with the policy promotion requirements. (III).Paragraph 3 The fee schedule for testing, auditing, accrediting and certifying software, innovative and green products or services is covered by Article 7, Administrative Fees of the Charges And Fees Act. The authorities in charge should determine relevant fee standards.However, considering that the test, audit, accreditation and certification may be conducted during a trial or promotional period, or circumstances dictate that it is necessary to motivate tenderer participation, the fee may be reduced, waived or suspended; hence, paragraph 3 is added. (IV).Paragraph 4 Paragraph 2 of the original provision is moved to paragraph 4 with the revisions made to paragraph 1, accordingly, and the provision for using Priority Procurement to handle innovative products or services is added. However, for organizations covered by The Agreement on Government Procurement (GPA), due to Taiwan's accession to the WTO, ANZTEC, and ASTEP, their procurement of items covered in the aforesaid agreements with a value reaching the legislated threshold, shall be handled in accordance with the regulations stipulated in the aforesaid agreements; hence the stipulation in the proviso that the procurement must not violate the provisions of treaties or agreements ratified by the Taiwan government. (V).Paragraph 5 Paragraph 3 of the original Article is moved to paragraph 5 with the revisions made to paragraph 1, accordingly, and the provision, that authorizes each central government authority in charge of end enterprises of a specific industry to determine appropriate measures concerning the methods of defining software, innovative and green products and services, as well as matters relating to test, accreditation, certification and priority procurement, is added. 2.The Focus of the Amendment of Article 27 of the Statute—Promoting a Flexible Mechanism for Innovation Procurement As previously stated, the amendment of this Article aims to stimulate activities of industrial innovation by taking advantage of the huge demand from government agencies. With the government agencies being the users of the innovative products or services, government's procurement market potential is tapped to support the development of industrial innovation. The original intention of amendment is to incorporate the spirit of Public Procurement of Innovation[2] into this Article, and to try to introduce EU's innovation procurement mechanism[3] into our laws. So that, a procurement procedure, that is more flexible and not subject to the limitation of procurement procedures currently stipulated by the Government Procurement Act, may be adopted to facilitate government sector action in taking the lead on adopting innovative products or services that have just entered their commercial prototype stage, or utilizing the demand for innovation in the government sector to drive industry's innovative ideas or R&D (that can not be satisfied with the existing solutions in the marketplace). However, while it is assessing the relevant laws and regulations of our government procurement system and the practice of implementation, the use of the current government procurement mechanism by organizations in the public sector to achieve the targets of innovation procurement is still in its infancy. It is difficult to achieve the goal, in a short time, of establishing a variety of Public Procurement of Innovation Solutions (PPI Solutions) as disclosed in the EU's Directive 2014/24 / EU, enacted by the EU in 2014, in ways that are not subject to current government procurement legislation. Hence, the next best thing: Instead of setting up an innovative procurement mechanism in such a way that it is "not subject to the restrictions of the current government procurement law", we will focus on utilizing the flexible room available under the current system of government procurement laws and regulations, and promoting the "flexible mechanism for innovation procurement” paradigm. With the provisions now provided in Article 27 of the Statute for Industrial Innovation, the government sector is authorized to adopt the "Priority Procurement" method on innovative products and services, thus increasing the public sector's access to innovative products and services. With this amendment, in addition to the "green products" listed in the original provisions of paragraph 1 of the Statute, "software" and "innovative products or services"[4] are now incorporated into the target procurement scope and each central government authority in charge of end enterprises of a specific industry should now encourage government organizations and enterprises to implement; however, the provisions of this paragraph do not have the specific effect of law, they are declaratory provisions. Two priorities are the１ primary focus of the provisions of paragraph 2 and paragraph 4 of this Article for promoting flexible mechanism for innovation procurement: (I)The procurement of software, innovative and green products or services that uses Inter-entity Supply Contracts may rely on the "policy requirement" to establish the common demand. According to the first half of the provisions of paragraph 2 of this Article, the Ministry of Economic Affairs, being the central government authority of the Statute, may provide assistance and services to organizations dealing with the procurement of software, innovative and green products and services.This is because the procurement subjects, as pertaining to software, products or services that are innovative and green products (or services), usually have the particularities (especially in the software) of the information professions; different qualities (especially in innovative products or services), and are highly profession-specific. They are different from the general affairs goods and services procured by most government agencies. Hence, the Ministry of Economic Affairs may provide assistance and service to these procurement agencies, along with the coordination of relevant organizations, in matters relating to the aforesaid procurement process in order to improve procurement efficiency as relates to supply and demand. Pursuant to the second half of Paragraph 2 of this Article, if the inter-entity supply contract method is used to process the procurement of software, innovative products and services, green products (or services) and other related subjects, there could be "Commonly Required" by two or more organizations concerning the procurement subjects, so in accordance with the stipulations of Article 93 of the Government Procurement Act, and Article 2 of the Regulations for The Implementation of Inter-entity Supply Contracts[5], an investigation of common requirements should be conducted first. However, this type of subject is prospective and profession-specific (innovative products or services in particular), and government organizations are generally not sure whether they have demand or not, which makes it difficult to reliably estimate the demand via the traditional demand survey method[6], resulting in a major obstacle for the procurement process. Therefore, the provisions are now revised to allow the Ministry of Economic Affairs to discuss procurement with each central government authority in charge of end enterprises of a specific industry, who consult or promote policies (such as the National Development Council, or central government authority in charge of end enterprises of a specific industry relevant to the procurement subjects), and then make decisions based on the quantities of goods and services of common requirements in accordance with the demand for promoting the policy. The provisions explicitly stipulate such flexibility in adopting methods other than the "traditional demand survey" method, as is required by laws for the common demand of Inter-entity Supply Contracts. Thus, agencies currently handling procurement of prospective or innovative subjects using inter-entity supply contracts, may reduce the administrative burden typically associated with conducting their own procurement. In addition, with a larger purchase quantity demand, as generated from two or more organizations, the process can more effectively inject momentum into the industry, and achieve a win-win situation for both supply and demand. (II)Government organizations may adopt "Priority Procurement" when handling procurement of innovative and green products or services. Prior to the amendment, the original provision of paragraph 2 of this Article stipulates that organizations may specify in the tender document Priority Procurement of certified green products; Additionally, a provision of paragraph 3 of the original Article stipulates that each central government authority in charge of end enterprises of a specific industry is authorized to establish the specifications, categories and other relevant matters of the green products[7] (according to the interpretation of the original text, it should include "Priority Procurement" in paragraph 3 of the Article).After the amendment of the Article, paragraph 2 of the original Article is moved to paragraph 4. In addition to the original green products, "innovative products or services" are included in the scope of "Priority Procurement" that organizations are permitted to adopt (but, the "software" in paragraph 1 was not included[8]). However, for organizations covered by The Agreement on Government Procurement (GPA), due to Taiwan's accession to the WTO, ANZTEC, and ASTEP, their procurement of items covered by the aforesaid agreements with a value reaching the stated threshold, shall be handled in accordance with the regulations stipulated in the aforesaid agreements; hence the stipulation in the proviso that the procurement must not violate the provisions in treaties or agreements ratified by the Taiwan government. Additionally, paragraph 3 of the original Article is moved to paragraph 5. Each central government authority in charge of end enterprises of a specific industry is authorized to use their own judgment on matters concerning the specifications, categories, certification processes of software, innovative and green products or services and the method for Priority Procurement of paragraph 4. In accordance with the authorization in paragraph 5 of the amended provision of this Article, each central government authority in charge of end enterprises of a specific industry may, depending on the specific policy requirement that promotes innovation development of its supervised industry, establish methods of identification and the processes of Priority Procurement for “Specific categories of innovative products or services", especially on products or services fitting the requirements of the method of using the demands of government organizations to stimulate industrial innovation. The established "Regolations for priority procurement of Specific categories of innovative products or services" is essentially a special regulation of the government procurement legislation, which belongs to the level of regulations, that is, it allows the organizations to apply measures other than the government procurement regulations and its related measures to the procurement process, and adopt "Preferential Contract Awarding" for qualified innovative products or services. Any government agency that has the need to procure a particular category of innovative product or service may, in accordance with the provisions of paragraph 4 of this Article, specify the use of Priority Procurement in the tender document, and administer the procurement, in accordance with the process of this particular category of innovative products, or priority procurement. The agency is now enabled to follow a more flexible procurement process than that of the government procurement regulations to more smoothly award contracts for qualified innovative products or services. Citing two examples of this applied scenario: Example one, "innovative information services": The central government authority in charge of information services is IDB. Thus, IDB may, according to the authorization provided for in paragraph 5 of the Article, establish the identification methods for innovative information services (the purpose of which is to define the categories and specifications of innovative services covered in the scope of priority procurement) and priority procurement processes, pertaining to emerging information services that are more applicable to the requirements of government agencies, such as: cloud computing services, IoT services, and Big Data analysis services.Example two, "Innovative construction or engineering methods": The central government authority in charge of construction affairs is the Construction and Planning Agency of the Ministry of the Interior. Since the agency has already established the "Guidelines for Approval of Applications for New Construction Techniques, Methods, Equipment and Materials", the agency may establish a priority procurement process for new construction techniques, methods or equipment, in accordance with the stipulations in paragraph 5 of the Article. Government agencies may conduct procurement following any of these priority procurement practices, if there is a requirement for innovative information services, or new construction techniques, methods or equipment. In addition to the two aforementioned flexible mechanisms for innovation procurement, where government agencies are granted flexible procedures to handle the procurement of innovative products or services via the use of the flexible procurement mechanism, paragraph 3, concerning the incentive measures of concessionary deductions, is added to the Article to reduce the bidding costs for tenderers participating in the tender. For the Procurement of software, innovative and green products or services encouraged by each central government authority in charge of end-enterprises of a specific industry (not limited to those handled by the authorities themselves, using inter-entity supply contracts or priority procurement methods), if the procurement subjects are still required to be tested, audited, accredited and certified by the government agencies, such a process falls under the scope of administrative fees collection, pursuant to paragraph 1 Article 7 of the Charges And Fees Act. However, considering that the item subject to test, audit, accreditation and certification may be in a trial or promotional period, or that it may be necessary to motivate tenderer participation, the provisions of paragraph 3 are thusly added to the Article to reduce, waive, or suspend the collection of aforementioned fees. Executive authorities in charge of collecting administrative fees shall proceed to reduce, waive, or suspend the collection pursuant to the stipulations of paragraph 3 of the Article and Article 12 subparagraph 7 of the Charges And Fees Act.[9] III.The direction of devising supporting measures of flexible mechanism for innovation procurement The latest amendment of the Statute for Industrial Innovation was promulgated and enacted on November 22, 2017, it is imperative that supporting measures pertaining to Article 27 of the Statute be formulated. As previously stated, the flexible mechanism for innovation procurement, as promoted in this Article, is designed specifically for the products or services that are pertinent to the government procurement requirements and are capable of stimulating industrial innovation, and providing a more flexible government procurement procedure for central authorities in charge of a specific industry as a policy approach in supporting industry innovation. Thus, the premise of devising relevant supporting measures is dependent on whether the specific industry, as overseen by the particular central authority, has a policy in place for promoting the development of industrial innovation, and on whether it is suitable in promoting the flexible mechanism for innovation procurement as described in this Article. The purpose of this Article is to promote the flexible mechanism for innovation procurement. Supporting measures pertaining to this Article will focus on the promotion of devising an "Innovation Identification Method", and of the "Priority Procurement Process" of the innovative products or services of each industry that central government authorities oversee. The former will rely on each central government authority in charge of a specific industry to charter an industry-appropriate and profession-specific planning scheme; while, for the latter, the designing of a priority procurement process, in accordance with the nature of the various types of innovative products or services, does not have to be applicable to all. However, regardless what type of innovative products or services the priority procurement process is designed for, the general direction of consideration should be given to - taking the different qualities of innovative products or services as the core consideration. Additionally, the attribute of the priority procurement procedures focusing specifically on the different qualities of the innovative subjects relates to the special regulation relevant to the government procurement regulations. Thus, the procurement procedures should follow the principle that if no applicable stipulation is found in the special regulation, the provisions of the principal regulation shall apply. The so-called "Priority Procurement" process refers to the "Preferential Contract Awarding" on tenders that meet certain criteria in a government procurement procedure. The existing Government Procurement Act (GPA, for short) and its related laws that have specific stipulations on "Priority Procurement" can be found in the "Regulations for Priority Procurement of Eco-Products" (Regulations for Eco-Products Procurement, for short), and the "Regulations for Obliged Purchasing Units / Institutions to Purchase the Products and Services Provided by Disabled Welfare Institutions, Organizations or Sheltered Workshops" (Regulations for Priority Procurement of Products or Services for Disabled or Shelters, for short). After studying these two measures, the priority procurement procedures applicable to criteria-conformed subjects can be summarized into the following two types: 1.The first type: Giving preferential contract awarding to the tenderer who qualifies with "the lowest tender price”, as proposed in the tender document, and who meets a certain criteria (for example, tenderers of environmental products, disabled welfare institutions, or sheltered workshops). There are two scenarios: When a general tenderer and the criteria-conformed tenderer both submit the lowest tender price, the criteria-conformed tenderer shall obtain the right to be the "preferential winning tender" without having to go through the Price Comparison and Reduction Procedures. Additionally, if the lowest tender price is submitted by a general tenderer, then the criteria-conformed tenderers have the right to a "preferential price reduction” option, that is, the criteria-conformed tenderers can be contacted, in ascending order of the tender submitted, with a one time option to reduce their bidding prices. The first tenderer who reduces their price to the lowest amount shall win the tender. Both the Regulations for Eco-Products Procurement[10] and Regulations for Priority Procurement of Products or Services for Disabilities or Shelters[11] have such relevant stipulations. 2.The second type: It is permitted to give Preferential Contract Awarding to a criteria-conformed tenderer, when the submitted tender is within the rate of price preference. When the lowest tenderer is a general tenderer, and the tender submitted by the criteria-conformed tenderer is higher than the lowest tender price, the law permits that if the tender submitted is "within the rate of price preference ", as set by the procuring entity, the procuring entity may award the contract preferentially to "the tender submitted by the criteria-conformed tenderer." The premise for allowing this method is that the tender submitted by the criteria-conformed tenderer must be within the preferential price ratio. If the submitted tender is higher than the preferential price ratio, then the criteria-conformed tenderer does not have the right to preferential contract awarding. The contract will be awarded to theother criteria-conformed tenderer, or to a general tenderer. This method is covered in the provisions of the Regulations for Eco-Products Procurement[12]. However, the important premise for the above two priority procurement methods is that the nature of the subject matter of the tender is suitable for adopting the awarding principle of the lowest tender (Article 52, Paragraph 1, Subparagraphs 1 and 2 of the Procurement Act), that is, it is difficult to apply these methods to the subjects if they are different qualities. Pursuant to the provisions of Article 66 of the Enforcement Rules of the Government Procurement Act, the so-called "different qualities" refers to the construction work, property or services provided by different suppliers that are different in technology, quality, function, performance, characteristics, commercial terms, etc. Subjects of different qualities are essentially difficult to compare when based on the same specifications. If just looking at pricing alone it is difficult to identify the advantages and disadvantages of the subjects, hence, the awarding principle of the lowest tender is not appropriate. The innovative subjects are essentially subjects of different qualities, and under the same consideration, they are not suitable for applying the awarding principle of the lowest tender. Therefore, it is difficult to adopt the lowest-tender-based priority procurement method for the procurement of innovative subjects. In the case of innovative subjects with different qualities, the principle of the most advantageous tender should be adopted (Article 52 Paragraph 1 Subparagraph 3 of the Procurement Act) to identify the most qualified vender of the subjects through open selection. Therefore, the procedure for the priority procurement of innovative subjects with different qualities should be based on the most advantageous tender principle with focus on the "innovativeness" of the subjects, and consideration on how to give priority to tenderers, who qualify with the criteria of innovation. Pursuant to the provisions of Article 56 Paragraph 4 of the Procurement Act, the Procurement and Public Construction Commission has established the "Regulations for Evaluation of the Most Advantageous Tender". The tendering authorities adopting the most advantageous tender principle should abide by the evaluation method and procedures delineated in the method, and conduct an open selection of a winning tender. According to the Regulations for Evaluation of the Most Advantageous Tender, in addition to pricing, the tenderers' technology, quality, function, management, commercial terms, past performance of contract fulfillment, financial planning, and other matters pertaining to procurement functions or effectiveness, maybe chosen as evaluation criteria and sub-criteria. According to the three evaluation methods delineated in the provisions of Article 11 of the Regulations for Evaluation of the Most Advantageous Tender (overall evaluation score method, price per score point method, and ranking method), pricing could not been included in the scoring. That is, "the prices of the subjects" is not the absolute criterion of evaluation of the most advantageous tender process. The priority procurement procedures designed specifically for innovative subjects with different qualities may adopt an evaluation method that excludes "pricing" as part of the scoring criterion so as to give innovative subject tenderers the opportunity to be more competitive in the bidding evaluation process, and due to the extent of their innovativeness, obtain the right to preferential tenders. If it must be included in the scoring, the percentage of the total score for pricing should be reduced from its usual ratio[13], while stipulating explicitly that "innovation" must be included as part of the evaluation criteria. In addition, its weight distribution should not be less than a ratio that highlights the importance of innovation in the evaluation criteria. Furthermore, when determining how to give preference to tenderers who meet certain innovation criteria in the contract awarding procedures, care should be taken to stay on focus with the degree of innovation of the subject (the higher the degree of innovation, the higher the priority), rather than giving priority to arbitrary standards. In summary, with consideration of priority procurement procedures designed specifically for innovative subjects with different qualities, this paper proposes the following preliminary regulatory directions: 1.Adopt the awarding principle of the most advantageous tender. 2.Explicitly stipulate the inclusion of "innovation" in the evaluation criteria and sub-criteria, and its ratio, one that indicates its importance, should not be less than a certain percentage of the total score (for example 20%). 3.Reduce the distributed ratio of "price" in the scoring criteria in the open selection. 4.After the members of the evaluation committee have concluded the scoring, if more than two tenderers have attained the same highest overall evaluated score or lowest quotient of price divided by overall evaluated score, or more than two tenderers have attained the first ranking, the contract is awarded preferentially to the tenderer who scores the highest in the "innovation" criterion. 5.When multiple awards (according to Article 52 Paragraph 1 Subparagraph 4 of the Procurement Act) are adopted, that is, there is more than one final winning tender, the procuring entity may select the tenderers with higher innovation scores as the price negotiation targets for contract awarding, when there are more than two tenderers with the same ranking. Using the above method to highlight the value of innovative subjects will make these suppliers more competitive, because of their innovativeness ratings in the procurement procedures, and not confine them to the limitation of price-determination. So that, subject suppliers with a high degree of innovation, may attain the right to the preferential contract awarding that they deserve due to their innovativeness, and the procuring entity can purchase suitable innovative products in a more efficient and easy process. It also lowers the threshold for tenderers with innovation energy to enter the government procurement market, thus achieving the goal of supporting industrial innovation and creating a win-win scenario for supply and demand. [1] Cross-reference Table of Amended Provisions of the Statute for Industrial Innovation, The Ministry of Economic Affairs, https://www.moea.gov.tw/MNS/populace/news/wHandNews_File.ashx?file_id=59099 (Last viewed date: 12/08/2017). [2] According to the Guidance for public authorities on Public Procurement of Innovation issued by the Procurement of Innovation Platform in 2015, the so-called innovation procurement in essence refers to that the public sector can obtain innovative products, services, or work by using the government procurement processes, or that the public sector can administer government procurement with a new-and-better process. Either way, the implementation of innovation procurement philosophy is an important link between government procurement, R & D and innovation, which shortens the distance between the foresighted emerging technologies/processes and the public sector/users. [3] The EU's innovative procurement mechanism comprises the "Public Procurement of Innovation Solutions" (PPI Solutions) and "Pre-Commercial Procurement" (PCP). The former is one of the government procurement procedures, explicitly regulated in the new EU Public Procurement Directive (Directive 2014/24 / EU), for procuring solutions that are innovative, near or in preliminary commercial prototype; The latter is a procurement process designed to assist the public sector in obtaining technological innovative solutions that are not yet in commercial prototype, must undergo research and development process, and are not within the scope of EU Public Procurement Directive. [4] The "software, innovative and green products or services", as described in paragraph 1 of Article 27 of the amended Statute for Industrial Innovation, refers to, respectively, "software", "innovative products or services", and "green products or services" in general. There is no co-ordination or subordination relationship between the three; the same applies to "innovative and green products or services" in paragraph 4. [5] Article 93 of the Government Procurement Act stipulates: "An entity may execute an inter-entity supply contract with a supplier for the supply of property or services that are commonly needed by entities." Additionally, Article 2 of the Regulations for The Implementation of Inter-entity Supply Contracts stipulates: "The term 'property or services that are commonly needed by entities' referred to in Article 93 of the Act means property or services which are commonly required by two or more entities. The term 'inter-entity supply contract (hereinafter referred to as the “Contract”)' referred to in Article 93 of the Act means that an entity, on behalf of two or more entities, signs a contract with a supplier for property or services that are commonly needed by entities, so that the entity and other entities to which the Contract applies can utilize the Contract to conduct procurements." Therefore, according to the interpretation made by the Public Construction Commission, the Executive Yuan (PCC, for short), organizations handling inter-entity supply contracts should first conduct a demand investigation. [6] In general, organizations in charge of handling the inter-entity supply contracts will disseminate official documents to applicable organizations with an invitation to furnish information online about their interests and estimated requirement (for budget estimation) at government's e-procurement website. However, in the case of more prospective subjects (such as cloud services of the emerging industry), it may be difficult for an organization to accurately estimate the demand when filling out the survey, resulting in a mismatch of data between the demand survey and actual needs. [7] In accordance with the authorization of paragraph 3 of the Article, the IDB has established "Regulations Governing Examination and Identification of Advanced Recycled Products by Ministry of Economic Affairs" (including an appendix: Identification Specification for Resource Regenerating Green Products), except that the priority procurement process was not stipulated, because the Resource Regenerating Green Products, that meet the requirements of the Ministry of Economic Affairs, are covered by the "Category III Products" in the provisions of Article 6 of the existing "Regulations for Priority Procurement of Eco-Products", set forth by the PPC and The Environmental Protection Administration of the Executive Yuan. Hence, organizations that have the requirement to procure green products, may proceed with priority procurement by following the regulations in the "Regulations for Priority Procurement of Eco-Products". [8] After the amendment of the Article, the "software" in the provisions of paragraph 1 was excluded in paragraph 4, because the objective of paragraph 4 is to promote industry innovation and sustainable development with the use of a more flexible government procurement procedure. Thus, the subjects of the priority procurement mechanism are focused on "innovative" and "green" products or services, which exclude popular "software" that has a common standard in the market. However, if it is an "innovative software", it may be included in the "innovative products or services" in the provisions of paragraph 4. [9] According to the provisions of Article 12 of the Charges And Fees Act: "In any of the following cases, the executive authority in charge of the concerned matters may waive or reduce the amount of the charges and fees, or suspend the collection of the charges and fees: 7. Waiver, reduction, or suspension made under other applicable laws." [10] Refer to Article 12, Paragraph 1, Subparagraphs 1 and Article 13, Paragraph 1 and 2 of Regulations for Priority Procurement of Eco-Products. [11] Refer to Article 4 of Regulations for Obliged Purchasing Units / Institutions to Purchase the Products and Services Provided by Disabled Welfare Institutions, Organizations or Sheltered Workshops. [12] Refer to Article 12, Paragraph 1, Subparagraphs 2 and Article 13, Paragraph 3 of Regulations for Priority Procurement of Eco-Products. [13] The provisions of paragraph 3 Article 16 of the Regulations for Evaluation of the Most Advantageous Tender stipulates: Where price is included in scoring, its proportion of the overall score shall be not less than 20% and not more than 50%.
Legal Analysis of the U.S. BIOSECURE Act: Implications for Taiwanese Biotechnology CompaniesLegal Analysis of the U.S. BIOSECURE Act: Implications for Taiwanese Biotechnology Companies 2024/11/15 I.Introduction The U.S. BIOSECURE Act (H.R.8333)[1](hereunder, "BIOSECURE Act" or "Act") is a strategic legislative measure designed to protect U.S. biotechnology technologies and data from potential exploitation by foreign entities deemed to be threats to national security. Passed by the House of Representatives on September 9, 2024, with a vote of 306-81[2], the Act demonstrates robust bipartisan support to limit foreign influence in critical U.S. sectors. Passed during the legislative session known as "China Week[3]," the Act imposes restrictions on government contracts, funding, and technological cooperation with entities classified as "Biotechnology Companies of Concern" (hereunder, "BCCs") that are affiliated with adversarial governments. Given Taiwan's prominent role in biotechnology and its strong trade ties with the U.S., Taiwanese companies must examine the implications of the BIOSECURE Act, specifically in regard to technology acquisition from restricted foreign companies and compliance obligations for joint projects with U.S. partners. This analysis will delve into three core aspects of the BIOSECURE Act: (1) the designation and evaluation of BCCs, (2) prohibitions on transactions involving BCCs, and (3) enforcement mechanisms. Each section will evaluate potential impacts on Taiwanese companies, focusing on how the Act might influence technology transfers, compliance obligations, and partnership opportunities within the U.S. biotechnology supply chain. II.Designation and Evaluation of Biotechnology Companies of Concern A central element of the BIOSECURE Act is the process of identifying and evaluating foreign biotechnology companies considered potential threats to U.S. national security.[4] Under Section 2(f)(2) of the Act, a "Biotechnology Company of Concern" is defined as any entity associated with adversarial governments—specifically, China, Russia, North Korea, and Iran[5]—that engages in activities or partnerships posing risks to U.S. security[6]. These risks may include collaboration with foreign military or intelligence agencies, involvement in dual-use research, or access to sensitive personal or genetic information of U.S. citizens. Companies already designated as BCCs include BGI, MGI, Complete Genomics, WuXi AppTec, and WuXi Biologics, all of which have substantial ties to China and the Chinese government or military[7]. Under Section 2(f)(4) of the Act, the Office of Management and Budget (OMB) is required to continuously evaluate and update the BCC list in consultation with agencies such as the Department of Defense, Department of Commerce, and the National Intelligence Community to reflect evolving security concerns[8]. The designation process presents significant challenges for Taiwanese companies, particularly those that have connections with BCCs or rely on BCC technologies for their products, diagnostics, or research initiatives. For instance, if a Taiwanese company uses gene sequencing technology or multiomics tools sourced from one of the designated BCCs, it may face restrictions when pursuing contracts with U.S. entities or seeking federal funding. To proactively address these challenges, Taiwanese companies should establish compliance protocols that verify the origin of their technology and data sources. Moreover, developing new supply chain relationships with U.S. or European suppliers may not only reduce reliance on BCC-affiliated technology but also enhance Taiwanese companies' reputation as secure and reliable partners in the biotechnology industry. By adapting proactively to the BCC designation process, Taiwanese companies can anticipate and respond to future regulatory shifts more effectively. Diversifying their technology base away from BCCs positions these companies to better align with U.S. biosecurity standards, thereby becoming more attractive collaborators for U.S.-based biotechnology and life sciences companies. Given the rapid pace of regulatory and security developments, staying informed about changes in BCC designations will enable Taiwanese companies to operate with greater agility, adjusting suppliers and adopting new compliance measures as needed. Such proactive alignment can strengthen their resilience and reinforce their status as stable and secure participants in the global biotechnology landscape. III.Prohibition on Government Contracts and Funding A core component of the BIOSECURE Act is its stringent restrictions on contracting and funding involving entities linked to BCCs, as detailed in Section 2(a) of the act[9]. These restrictions extend beyond direct federal interactions to include any recipients of federal funds, prohibiting them from using such funds to procure biotechnology products or services from BCCs[10]. By curtailing federal support and preventing indirect financial benefits to these companies, the U.S. aims to mitigate national security risks posed by adversarial governments. The wide-reaching scope of these prohibitions makes the BIOSECURE Act one of the most comprehensive legislative efforts to secure the biotechnology sector and address concerns over foreign technologies potentially compromising U.S. security interests. For Taiwanese biotechnology companies, these prohibitions introduce substantial compliance demands, particularly for companies that utilize BCC technology within their supply chains. For example, a Taiwanese company engaged in a joint research project with a U.S. government contractor may be required to demonstrate that none of its technology or data sources originate from BCCs. Compliance could necessitate rigorous supply chain audits and operational adjustments, potentially increasing short-term costs. However, aligning with U.S. regulatory standards preemptively can position Taiwanese companies as more desirable partners for U.S. entities that are increasingly prioritizing security and regulatory adherence. The BIOSECURE Act also incentivizes Taiwanese companies to explore alternative technology providers that meet U.S. biosecurity criteria, including secure data management practices, compliance with federal regulations, and the absence of connections to adversarial governments. By sourcing technology from approved U.S. or European biotechnology companies, Taiwanese companies can enhance their market access and collaborative prospects in the U.S. biotechnology and life sciences sectors. This strategy may also foster long-term stability in partnerships and mitigate risks associated with supply chain disruptions, particularly if more companies are designated as BCCs in the future[11]. Establishing partnerships with U.S.-aligned suppliers can also provide Taiwanese companies with a competitive edge in securing government contracts and research funding, as U.S.-based entities increasingly prefer suppliers that comply with national biosecurity requirements. IV.Enforcement Mechanisms, Transition Periods, and Taiwanese Considerations The BIOSECURE Act outlines key enforcement mechanisms and transitional provisions designed to facilitate the adjustment process for companies affected by its restrictions. Specifically, Section 2(c) of the Act provides an eight-year grandfathering period for contracts established prior to the Act’s effective date involving existing BCCs, allowing these agreements to continue until January 1, 2032[12]. This provision is intended to provide companies that are dependent on BCC-supplied biotechnology ample time to transition to compliant suppliers. In addition, the Act includes a "safe harbor" provision[13], which clarifies that equipment previously produced by a BCC but now sourced from a non-BCC entity will not be restricted. This allows companies to re-source components without the risk of penalties for past procurement decisions. For Taiwanese companies, this transition period presents a critical opportunity to adapt to the new regulatory environment without facing immediate disruptions to business operations. Companies dependent on BCC technology for essential biotechnological functions can leverage the eight-year window to gradually phase out such suppliers, thereby minimizing the impact on operations while ensuring future compliance. For example, a Taiwanese company that relies on a BCC’s sequencing technology for genomic research can use this period to forge partnerships with compliant technology suppliers, thereby avoiding sudden disruptions in research or production. Additionally, the Act includes a waiver provision[14] that allows case-by-case exemptions under specific conditions, particularly when compliance is infeasible, such as in instances where critical healthcare services abroad are at risk[15]. By making strategic use of the phased enforcement and waiver provisions, Taiwanese companies can restructure their supply chains to align fully with U.S. requirements. Those that plan these transitions carefully not only ensure regulatory compliance but also enhance their appeal as resilient and trustworthy partners in the U.S. market. Exploring new collaborations with U.S.-approved biotechnology suppliers can further bolster supply chain resilience against future geopolitical or regulatory uncertainties. The transition period[16] and waiver options[17] reflect the BIOSECURE Act's balanced approach between immediate security needs and pragmatic implementation, which Taiwanese companies can capitalize on to build robust, compliant biotechnological operations. V.Conclusion The U.S. BIOSECURE Act[18] presents both significant challenges and strategic opportunities for Taiwanese biotechnology companies. The Act’s restrictions on contracts with designated BCCs and funding constraints necessitate a reassessment of technology acquisition strategies and a reinforcement of compliance practices. Taiwanese companies seeking deeper integration into U.S. and global biotechnology markets will benefit from aligning their procurement approaches with non-BCC suppliers, particularly those in the U.S. or allied countries. This proactive alignment will not only mitigate potential compliance risks but also enhance Taiwanese companies’ reputations as reliable global partners in biotechnology. The phased enforcement and waiver provisions of the BIOSECURE Act[19] provide Taiwanese companies with a clear pathway to navigate the evolving regulatory landscape, allowing them to establish stronger, more resilient supply chains that meet U.S. standards. Such alignment positions these companies as competitive players in the biotechnology sector, contributing to secure and innovative progress in an increasingly interconnected world. By actively engaging with the BIOSECURE Act’s compliance demands, Taiwanese biotechnology companies can leverage the Act's phased implementation to ensure sustained, secure access to the U.S. market and foster strategic biotechnology partnerships. Reference: [1] U.S. CONGRESS, H.R. 8333 – U.S. BIOSECURE Act (2024), https://www.congress.gov/bill/118th-congress/house-bill/8333 (last visited Nov. 1, 2024). [2] OFFICE OF THE CLERK, U.S. HOUSE OF REPRESENTATIVES, Roll Call Vote No. 402 on H.R. 8333 (Sept. 9, 2024), https://clerk.house.gov/Votes?RollCallNum=402&BillNum=H.R.8333 (last visited Nov. 1, 2024). [3] JANINE LITTLE, U.S. House Of Representatives Passes The BIOSECURE Act During “China Week”, Global Supply Chain Law Blog (Sept. 13, 2024), https://www.globalsupplychainlawblog.com/supply-chain/u-s-house-of-representatives-passes-the-biosecure-act-during-china-week/ (last visited Nov. 1, 2024). [4] SABINE NAUGÈS & SARAH L. ENGLE, BIOSECURE Act: US Target on Chinese Biotechnology Companies, NAT'L L. REV. (Sept. 13, 2024), https://natlawreview.com/article/biosecure-act-us-target-chinese-biotechnology-companies (last visited Nov. 1, 2024). [5] 10 U.S.C. § 4872(d) (2024), https://www.law.cornell.edu/uscode/text/10/4872 (last visited Nov. 1, 2024). [6] U.S. CONGRESS, H.R. 8333 – U.S. BIOSECURE Act (2024), https://www.congress.gov/bill/118th-congress/house-bill/8333 (last visited Nov. 1, 2024). [7] id. [8] id. [9] id. [10] id. [11] JANINE LITTLE, U.S. House Of Representatives Passes The BIOSECURE Act During “China Week”, Global Supply Chain Law Blog (Sept. 13, 2024), https://www.globalsupplychainlawblog.com/supply-chain/u-s-house-of-representatives-passes-the-biosecure-act-during-china-week/ (last visited Nov. 1, 2024). [12] U.S. CONGRESS, H.R. 8333 – U.S. BIOSECURE Act (2024), https://www.congress.gov/bill/118th-congress/house-bill/8333 (last visited Nov. 1, 2024). [13] id. [14] id. [15] id. [16] id. [17] id. [18] id. [19] id.
Analyzing the Framwork of the Regulation「Act For The Development of Biotech And New Pharmaceuticals Industry」in TaiwanTaiwan Government passed The「Act for the Development of Biotech and New Pharmaceuticals Industry」for supporting the biopharmaceutical industry. The purpose of the Act is solely for biopharmaceutical industry, and building the leading economic force in Taiwan. To fulfill this goal, the Act has enacted regulations concerning funding, taxation and recruitment especially for the biopharmaceutical industry. The Act has been seen as the recent important law in the arena of upgrading industry regulation on the island. It is also a rare case where single legislation took place for particular industry. After the Act came into force, the government has promulgated further regulations to supplement the Act, including Guidance for MOEA-Approved Biotech and New Pharmaceuticals Company Issuing Stock Certificate, Deductions on Investments in R&D and Personnel Training of Biotech and New Pharmaceuticals Company, Guidance for Deduction Applicable to Shareholders of Profit-Seeking Enterprises -Biotech and New Pharmaceuticals Company etc. The following discussions are going to introduce the Act along with related incentive measures from an integrated standpoint. 1 、 Scope of Application According to Article 3 of the Act, 「Biotech and New Pharmaceuticals Industry」 refers to the industry that deals in New Rugs and High-risk Medical devices used by human beings, animals, and plants; 「Biotech and New Pharmaceuticals Company」 refers to a company in the Biotech and New Pharmaceuticals Industry that is organized and incorporated in accordance with the Company Act and engages in the research, development, and manufacture of new drugs and high-risk medical devices. Thus, the Act applies to company that conducts research and manufacture product in new drug or high-risk medical devices for human and animal use. Furthermore, to become a Biotech and New Pharmaceuticals Company stipulated in the Act, the Company must receive letter of approval to establish as a Biotech and New Pharmaceuticals Company valid for five years. Consequently, company must submit application to the authority for approval by meeting the following requirements: (1) Companies that conduct any R&D activities or clinical trials must receive permission, product registration, or proof of manufacture for such activities from a competent authority. However, for those conducted these activities outside the country will not apply. (2) When applied for funding for the previous year or in the same year, the expense on R&D in the previous year exceeds 5% of the total net revenue within the same year; or the expenses exceeds 10% of the total capital of the company. (3) Hired at least five R&D personnel majored in biotechnology. For New Drug and High-Risk Medical Device are confined in specific areas. New Drug provided in the Act refers to a drug that has a new ingredient, a new therapeutic effect or a new administration method as verified by the central competent authorities. And High-Risk Medical Device refers to a type of Class III medical devices implanted into human bodies as verified by the central competent authorities. Therefore, generic drug, raw materials, unimplanted medical device, and medical device are not qualified as type III, are all not within the scope of the Act and are not the subject matter the Act intends to reward. 2 、 Tax Benefits Article 5, 6 and 7 provided in the Act has followed the footsteps of Article 6 and 8 stipulated of the Statute, amending the rules tailored to the biopharmaceutical industry, and provided tax benefits to various entities as 「Biotech and New Pharmaceuticals Company」, 「Investors of Biotech and New Pharmaceuticals Industry」, 「Professionals and Technology Investors」. (1) Biotech and New Pharmaceuticals Company In an effort to advance the biopharmaceutical industry, alleviate financial burden of the companies and strengthen their R&D capacity. The Act has provided favorable incentive measures in the sector of R&D and personnel training. According to Article 5: 「For the purpose of promoting the Biotech and New Pharmaceuticals Industry, a Biotech and New Pharmaceuticals Company may, for a period of five years from the time it is subject to profit-seeking enterprise income tax payable, enjoy a reduction in its corporate income tax payable, for up to 35% of the total funds invested in research and development (R&D) and personnel training each year.」 Consequently, company could benefit through tax deduction and relieve from the stress of business operation. Moreover, in supporting Biotech and New Pharmaceutical Company to proceed in R&D and personnel training activities, the Act has set out rewards for those participate in ongoing R&D and training activities. As Article 5 provided that」 If the R&D expenditure of a particular year exceeds the average R&D expenditure of the previous two years, or if the personnel training expenditure of a particular year exceeds the average personnel training expenditure of the pervious two years, 50% of the exceed amount in excess of the average may be used to credit against the amount of profit-seeking enterprise income tax payable. 「However, the total amount of investment credited against by the payable corporate income tax in each year shall not exceed 50% of the amount of profit-seeking enterprise income tax payable by a Biotech and New Pharmaceuticals Company in a year, yet this restriction shall not apply to the amount to be offset in the last year of the aforementioned five-year period. Lastly, Article 5 of the Act shall not apply to Biotech and New Pharmaceutical Company that set up headquarters or branches outside of Taiwan. Therefore, to be qualified for tax deduction on R&D and personnel training, the headquarters or branches of the company must be located in Taiwan. (2) Investors of Biotech and New Pharmaceuticals Company To raise funding, expand business development, and attract investor continuing making investments, Article 6 of the Act has stated that 「In order to encourage the establishment or expansion of Biotech and New Pharmaceuticals Companies, a profit-seeking enterprise that subscribes for the stock issued by a Biotech and New Pharmaceuticals Company at the time of the latter's establishment or subsequent expansion; and has been a registered shareholder of the Biotech and New Pharmaceuticals Company for a period of 3 years or more, may, for a period of five years from the time it is subject to corporate income tax, enjoy a reduction in its profit-seeking enterprise income tax payable for up to 20% of the total amount of the price paid for the subscription of shares in such Biotech and New Pharmaceuticals Company.」 Yet 「If the afore-mentioned profit-seeking enterprise is a venture capital company (「VC」), such VC corporate shareholders may, for a period of five years from the fourth anniversary year of the date on which the VC becomes a registered shareholder of the subject Biotech and New Pharmaceuticals Company, enjoy a reduction in their profit-seeking enterprise income tax payable based on the total deductible amount enjoyed by the VC under Paragraph 1 hereof and the shareholders' respective shareholdings in the VC.」 The government enacted this regulation to encourage corporations and VC to invest in biotech and new pharmaceutical company, and thus provide corporate shareholders with 20% of profit-seeking enterprise income tax payable deduction, and provide VC corporate shareholders tax deduction that proportion to its shareholdings in the VC. (3) Top Executives and Technology Investors Top Executives refer to those with biotechnology background, and has experience in serving as officer of chief executive (CEO) or manager; Technology Investors refer to those acquire shares through exchange of technology. As biopharmaceutical industry possesses a unique business model that demands intensive technology, whether top executives and technology investors are willing to participate in a high risk business and satisfy the needs of industry becomes a critical issue. Consequently, Article 7 of the Act stated that 「In order to encourage top executives and technology investors to participate in the operation of Biotech and New Pharmaceuticals Companies and R&D activities, and to share their achievements, new shares issued by a Biotech and New Pharmaceuticals Company to top executives and technology investors (in return of their knowledge and technology) shall be excluded from the amount of their consolidated income or corporate income of the then current year for taxation purposes; provided, however, that if the title to the aforesaid shares is transferred with or without consideration, or distributed as estate, the total purchase price or the market value of the shares at the time of transfer as a gift or distribution as estate shall be deemed income generated in that tax year and such income less the acquisition cost shall be reported in the relevant income tax return.」 Additionally, 「For the title transfer of shares under the preceding paragraph, the Biotech and New Pharmaceuticals Company concerned shall file a report with the local tax authorities within thirty 30 days from the following day of the title transfer.」 Purpose of this regulation is to attract top executives and technology personnel for the company in long-term through defer taxation. Moreover, the Biotech and New Pharmaceutical Company usually caught in a prolong period of losses, and has trouble financing through issuing new shares, as stipulated par value of each share cannot be less than NTD $10.Thus, in order to offer top executive and technology investors incentives and benefits under such circumstances, Article 8 has further provided that」Biotech and New Pharmaceutical Companies may issue subscription warrants to its top executives and technology investors, provided that the proposal for the issuance of the aforesaid subscription warrants shall pass resolution adopted by a majority votes of directors attended by at least two-thirds (2/3) of all the directors of the company; and be approved by the competent authorities. Holders of the subscription warrants may subscribe a specific number of shares at the stipulated price. The amount of stipulated price shall not be subject to the minimum requirement, i.e. par value of the shares, as prescribed under Article 140 of the Company Act. Subscription of the shares by exercising the subscription warrant shall be subject to income tax in accordance with Article 7 hereof. if a Biotech and New Pharmaceutical Company issue new shares pursuant to Article 7 hereof, Article 267 of the Company Act shall not apply. The top executives and technology investors shall not transfer the subscription warrant acquired to pursuant to this Article.」 These three types of tax benefits are detailed incentive measures tailor to the biopharmaceutical industry. However, what is noteworthy is the start date of the benefits provided in the Act. Different from the Statue, the Act allows company to enjoy these benefits when it begins to generate profits, while the Statute provides company tax benefits once the authority approved its application in the current year. Thus, Biotech and New Pharmaceuticals Company enjoys tax benefits as the company starts to make profit. Such approach reflects the actual business operation of the industry, and resolves the issue of tax benefits provided in the Statue is inapplicable to the biopharmaceutical industry. 3 、 Technical Assistance and Capital Investment Due to the R&D capacity and research personnel largely remains in the academic circle, in order to encourage these researchers to convert R&D efforts into commercial practice, the government intends to enhance the collaboration among industrial players, public institutions, and the research and academic sectors, to bolster the development of Biotech and New Pharmaceuticals Company. However, Article 13 of Civil Servants Service Act prohibits officials from engaging in business operation, the Act lifts the restriction on civil servants. According to Article 10 of the Act provided that」For a newly established Biotech and New Pharmaceuticals Company, if the person providing a major technology is a research member of the government research organization, such person may, with the consent of the government research organization, acquired 10% or more of the shares in the Biotech and New Pharmaceuticals Company at the time of its establishment, and act as founder, director, or technical adviser thereof. In such case, Article 13 of the Civil Servants Service Act shall not apply. And the research organization and research member referred to thereof shall be defined and identified by the Executive Yuan, in consultation with the Examination Yuan.」 This regulation was enacted because of the Civil Servants Services Act provided that public officials are not allowed to be corporate shareholders. However, under certain regulations, civil servants are allowed to be corporate shareholders in the sector of agriculture, mining, transportation or publication, as value of the shares cannot exceed 10% of the total value of the company, and the civil servant does not served in the institution. In Taiwan, official and unofficial research institution encompasses most of the biotechnology R&D capacity and research personnel. If a researcher is working for a government research institution, he would be qualified as a public servant and shall be governed by the Civil Servants Service Act. As a result of such restriction, the Act has lifted the restriction and encouraged these researchers to infuse new technologies into the industry. At last, for advancing the development of the industry, Article 11 also provided that 」R&D personnel of the academic and research sectors may, subject to the consent of their employers, served as advisors or consultants for a Biotech and New Pharmaceuticals Company.」 4 、 Other Regulations For introducing and transferring advanced technology in support of the biopharmaceutical industry, Article 9 stated that 「Organization formed with government funds to provide technical assistance shall provide appropriate technical assistance as may be necessary.」 Besides technical assistance, government streamlines the review process taken by various regulatory authorities, in order to achieve an improved product launch process result in faster time-to-market and time-to profit. As Article 12 provided that 「the review and approval of field test, clinical trials, product registration, and others, the central competent authorities shall establish an open and transparent procedure that unifies the review system.」
Taiwan Announced the Biobanks Regulations and Management PracticesTaiwan Has Passed “Statute of Human Biobank Management” to Maintain Privacy and Improve Medicine Industries Due to lack of regulations, divergent opinions abounded about the establishment of Biobanks and collection of human biological specimen. For example, a researcher in an academic research organization and a hospital-based physician collected biospecimens from native Taiwanese. Although they insisted that the collections were for research only, human rights groups, ethics researchers, and groups for natives´ benefits condemned the collections as an invasion of human rights. Consequently, the Taiwanese government recognized the need for Biobanks regulation. To investigate the relationship between disease and multiple factors and to proceed with possible prevention, The Legislative Yuan Social Welfare and Healthy Environment Committee has passed "the draft statute of human biobank management" through primary reviewing process on December 30, 2009 and subsequently passed through entire three-reading procedure on January 7, 2010. Therefore, the medical and research institute not only can set up optimal gene database for particular disease curing, but also can collect blood sample for database establishment, legally. However, the use of sample collections will be excluded from the use of judiciary purpose. In the light of to establish large scale biobank is going to face the fundamental human right issue, from the viewpoint of biobank management, it is essential not only to set up the strict ethics regulation for operational standard, but also to make the legal environment more complete. For instance, the Department of Health, Executive Yuan had committed the earlier planning of Taiwan biobank establishment to the Academic Sinica in 2006, and planned to collect bio-specimen by recruiting volunteers. However, it has been criticized by all circles that it might be considered violating the Constitution article 8 provision 1 front paragraph, and article 22 rules; moreover, it might also infringe the personal liberty or body information privacy. Therefore, the Executive Yuan has passed the draft statute of human biobank management which was drafted and reviewed by Department of Health during the 3152nd meeting, on July 16, 2009, to achieve the goal of protecting our nation’s privacy and promoting the development of medical science by management biomedical research affairs in more effective ways. Currently, the draft statute has been passed through the primary review procedure by the Legislative Yuan. About the draft statute, there are several important points as following: (1) Sample Definition: Types of collected sample include human somatic cell, tissues, body fluids, or other derivatives; (2) Biobank Establishment: It requires not only to be qualified and permitted, but also to set up the ethical reviewing mechanism to strengthen its management and application; (3)Sample Collection and Participant Protection: In accordance with the draft statute, bio-specimen collecting should respect the living ethics during the time and refer to the "Medical Law" article 64 provision 1; before sample collection, all related points of attention should be kept in written form , the participant should be notified accordingly, and samples can only be collected with the participant’s consent. Furthermore, regarding the restrained read right and setting up participants’ sample process way if there were death or lost of their capacity; (4) Biobank Management: The safety regulation, obligation of active notification, free to retreat, data destruction, confidentiality and obligation, and termination of operation handling are stipulated; and (5) Biobank Application: According to the new draft statute, that the biological data can’t be used for other purposes, for example, the use of inquisition result for the "Civil law", article 1063, provision 2, prosecution for denying the parent-child relationship law suit", or according to the "Criminal law", article 213, provision 6. This rule not only protects the participants’ body information and their privacy right, but also clearly defines application limits, as well as to set up the mechanism for inner control and avoid conflict of interests to prevent unnecessary disputes. Finally, the Department of Health noted that, as many medical researches has shown that the occurrence of diseases are mostly co-effected by various factors such as multiple genes and their living environment, rather than one single gene, developed countries have actively devoted to human biological sample collection for their national biobank establishment. The construction and usage of a large-scale human bank may bring up the critical issue such as privacy protection and ethical problems; however, to meet the equilibrium biomedical research promotion and citizen privacy issue will highly depend on the cooperation and trust between the public and private sectors. Taiwan Department of Health Announced the Human Biobanks Information Security Regulation The field of human biobanks will be governed by the Act of Human Biobanks (“Biobanks Act”) after its promulgation on February 3, 2010 in Taiwan. According to Article 13 of the Biobanks Act, a biobank owner should establish its directive rules based on the regulation of information security of biobanks announced by the competent authority. Thus the Department of Health announced the draft of the Human Biobanks Information Security Regulation (“Regulation”) for the due process requirement. According to the Biobanks Act, only the government institutes, medical institutes, academic institutes, and research institutes are competent to establish biobanks (Article 4). In terms of the collecting of organisms, the participants should be informed of the relevant matters by reasonable patterns, and the collecting of organisms may be conducted after obtaining the written consent of the participants (Article 6). The relative information including the organisms and its derivatives are not allowed to be used except for biological and medical research. After all the protection of biobanks relative information above, the most important thing is the safety regulations and directive rules of the database administration lest all the restrictions of biobanks owners and the use be in vain. The draft Regulation aims to strengthen the safety of biobanks database and assure the data, the systems, the equipments, and the web circumstances are safe for the sake of the participants’ rights. The significant aspects of the draft are described as below. At first, the regulation should refer to the ISO27001, ISO27002 and other official rules. Concerning the personnel management, the security assessment is required and the database management personnel and researchers may not serve concurrently. In case some tasks are outsourced, the contractor should be responsible for the information security; the nondisclosure agreement and auditing mechanism are required. The application system should update periodically including the anti-virus and firewall programs. The biobanks database should be separated physically form internet connection, including the prohibition of information transforming by email or any other patterns through internet. The authorizing protocol of access to the biobanks should be established and all log files should be preserved in a period. The system establishment and maintenance should avoid remote control. In case the database system is physically out of the owner’s control, the authorization of the officer in charge is required. If an information security accident occurred, the bionbanks owner should contact the competent authority immediately and inform the participants by adequate tunnel. The biobanks owner should establish annual security auditing program and the project auditing will be conducted subject to the necessity. To sum up, while the biobanks database security regulation is fully established, the biobanks owners will have the sufficient guidance in connection with the biobank information security to comply with in the future.
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