Analysis
Many people like to point out the fact that Taiwan has a distinct international personality, quite different from the People’s Republic of China (PRC), and therefore should be allowed to participate in world affairs on an equal basis with other nations.

Indeed, according to the logic of Taiwan officialdom, Taiwan has never been under the jurisdiction of the PRC, and therefore it is clearly an independent nation. After all, didn’t Taiwan join the World Trade Organization as an independent entity?

However, a close review of the historical record shows that Taiwan joined the WTO as an independent customs territory, not as a sovereign state. Many Taiwanese people would argue that such semantic differences are simply due to international political squabbles and pressure from the PRC, however in reality there is a much deeper significance in Taiwan’s WTO membership nomenclature.

Specifically, the terminology of “independent customs territory” arises from the law of military occupation. Has Taiwan ever been under military occupation? The answer is clearly yes. This is because none of the Allies recognized any transfer of the territorial sovereignty of Taiwan to the Republic of China upon the Oct. 25, 1945, surrender ceremonies for Japanese troops on the island. That date only marked the beginning of the military occupation of Taiwan.

International law specifies that military occupation does not transfer sovereignty. Hence, the territorial sovereignty of the occupied territory remains with the "original sovereign" until such time as alternative arrangements are formally specified in a peace treaty. Military occupation is conducted under military government, and it is certainly true that military personnel do exercise a high degree of control over occupied territory. This includes the collection of all types of revenue, including import duties.

This was the situation during the Mexican-American War when U.S. troops captured the east coast Mexican city of Tampico, and local Mexican troops surrendered. The U.S. flag was raised on November 14, 1846, and the military occupation of Tampico began. During this period, Tampico formed an independent customs territory under the United States Military Government (USMG) on Mexican soil. The U.S. Supreme Court later reviewed the legal details of this entire situation in the famous case of Fleming v. Page (1850).

By comparison we can quickly realize that after the Oct. 25, 1945, surrender ceremonies, Taiwan formed an independent customs territory under USMG on Japanese soil, with administrative authority for the military occupation delegated to the Chinese Nationalists ("Republic of China"). The United States of America is the principal occupying power. The Republic of China is fulfilling the role of proxy occupying forces.

Further References and Links
Lessons from the Mexican American War

Taiwan's Legal Status: Taiwan's Legal Status: An Overview of the San Francisco Peace Treaty

Areas Conquered by U.S. Military Forces and therefore under USMG Jurisdiction -- with later "new disposition" by peace treaty