Set up an Asia Logistics Hub in Taiwan with Taiwan's International Logistics Center

For logistics operation model, there is no one-size-fits-all logistics solution. There is a constant debating on the use of centralization and decentralization of distribution centers. The globalization and the internationalization of business trades, the rise of E-commerce, cross-border commerce have speed up the development of the logistics sector worldwide. The potential market of regional supply chain logistics has received more attention. With consideration of timely access to the markets, increasing demanding on the tight lead-time of last mile delivery, reduction and improvement of operation costs, etc., coupling with the development and application of IoT technology, the regional logistics hub operation plays an important role as a fulfillment center for a geographical region that covers several countries. In this regard, the choose of a location of the logistics is significantly important. However, making the decision of the location choice has to consider many aspects, not only the physical location on the distance to the markets, but also other aspects, including the regulation, local infrastructure, operation costs, etc.

In recent years, due to the economy rise of China and South Asia, the global production system has begun a new round of industrial agglomeration or migration, especially in Asia. For a long time, Taiwan has attracted attention because of its inherent geographical advantage as a strategic location in East Asia. Taiwan government has also proposed many policies to attract business setting up Asia logistics hub operation in Taiwan. With the on-going U.S.-China trade war, and political unrest in Hong Kong, many multinational businesses have started to rethink their business operation strategies in the Asia Pacific. In supply chain perspective, it gave prominence to Taiwan serving as an Asia logistics hub. In addition, with current Covid-19 outbreak, causing Chinese production and supply chain disruption, China’s actions on the pandemic control has shaken the confidence of businesses on China’s risk management capabilities. This has further catalyzed speed of manufacturers moving out of supply chain from China triggered by US-China trade war and the continuous increase of operation costs. Taiwan’s proximity to China is also home to many high-tech industries and electronics companies. The results of the epidemic control efforts have also strengthened Taiwan’s opportunities in this wave of Asia-Pacific hub competition.

ILC, standing for International Logistics Center, a special type of bonded warehouse serves similar functions as warehouses in free-trade zone. CTW logistics possesses 4 ILCs around Taiwan providing customers total solution for Asia logistics hub. With the ILC certificate, CTW can import and export bonded cargo on behalf of overseas cargo owner who does not have legal entity in Taiwan. This gives great operation flexibility and convenience in which cargo owners do not spend efforts on setting legal entity just for logistics operation. Combined with stable political environment, transparency customs regulations and procedures, easy access of airfreight/ocean freight service, efficient port operation, relatively low labor costs but high operation quality, many international businesses turn to using Taiwan ILC to establish its Asia Logistics Hub in Taiwan.

Below is an example.

Cargo owner: American well-known fitness equipment brand
Products: indoor bike trainers, GPS bike computers, heart rate monitors, apps, and sensors for cyclists, runners
Suppliers: USA, China, Taiwan, Vietnam, Malaysia, etc.
Asia Hub location: CTW ILC, in Yangmei, Taoyuan, Taiwan
Markets covered: Japan, South Korea, Taiwan, Singapore, Malaysia, Australia, New Zealand, South Africa, Dubai, USA, etc.

The products will be shipped to Taiwan and stored in CTW ILC. CTW fulfills the orders and ship out again via sea freight, air freight, as well as international couriers to the sales dealers and end customers, mainly out of Taiwan.

Diagram A: the logistics flow without an Asia Hub

Diagram B: the logistics flow with an Asia Hub

As the Hub is established in the Taiwan ILC, a bonded warehouse, it can enjoy many tax benefits. For example, only products which is sold to Taiwan domestic market will need to pay import taxes. The bonded cargo and non-bonded cargo which is from the suppliers in Taiwan, can be loaded into one container in ILC and be processed in the same shipment for the re-export. ILC can perform light VAS for bonded cargo, including, kitting, labeling, and apply the VAS outside of ILC. Under such operation, the cargo owner can save the operation costs on the customs operation, bypassing of tax refund process, and reduction of shipments. It has great flexibility on cash management. The ILC can perform customs operation in 24 hrs., have high rate on C1 procedure and perform the monthly consolidation customs report. It considerably improves operation efficiency, and cut down costs. With the Hub location near target markets, it significantly shortens the fulfillment lead time to gain great global logistics agility.

CTW is the first 3PL to obtain ILC certificate for its warehouse in 2001. With nearly 20 years in logistics hub operation, now 4 of its warehouses that are located across Taiwan in Taoyuan, Hsinchu and Kaohsiung, are granted the certificates to provide logistics hub operation. The industries served covers high-tech, consumer electronics, chemicals, etc.

In combination of strategic ocean/air freight location, strong IoT technology and infrastructure, high quality but relatively low cost of labour, stable and transparent regulations, we are confident that Taiwan is in a good position in this competition of Asia Hub among all other well-known candidates, such as Hongkong, Singapore, Shanghai, etc.