This study explores the hypothesis that the unresponsiveness of export pricing to exchange rate fluctuations may be partially the result of hedging activities trading agents engage in to eliminate exchange risk.  In searching for answers to the incomplete pass-through phenomenon, the “new trade theory” has incorporated an industrial organization approach into pass-through studies at the product level.  The new direction offered not only rich insight into the determination of exchange rate pass-through but has also created more puzzling results.  Therefore, we test the related party trade on the degree of exchange rate pass-through with Taiwanese data.  Due to the operational flexibility companies can avoid the expected currency conversion loss by reducing trade volume while benefiting from the expected currency conversion gain by increasing the trade volume.  One way to achieve that is to go through the related party trade which is the international trade between two parties where either party owns, directly or indirectly, 10 percent or more of the other party.  The data are collected from U.S. Census NAICS Related Party Database from 2010 to 2019.  The literature review has identified the key data to be collected on Taiwan: related party trade data, export values, nominal exchange rates, destination consumer price index, destination GDP, producer price index and productivity growth rates.  We have investigated in the literature of the related party trade on the exchange rate pass-through in Taiwan from various journal database and found the inconclusive findings about how the related party trade has affected the exchange rate pass-through.  With the presence of the related party trade, thus operational flexibility, in the international trade, the degree of exchange rate pass-through has been reduced to about 15%, meaning that the currency risk on pricing is somehow hedged.