Taiwan on Friday said it was disappointed that director Ang Lee`s spy thriller "Lust, Caution" was disqualified from competing for a Best Foreign Language Film Oscar. "We regretted that the film was disqualified by the Academy as it would have had a fairly good chance of being nominated and even won an award," said Yeh Chien-chao, chief of Taiwan`s Foreign Language Film Award Selection Committee. Academy Awards organisers announced this week that a record 63 countries have entered the race for Oscars glory in next year`s Best Foreign Language Film category. But Taiwan authorities were informed by the Academy that not enough of the "Lust, Caution" production and crew were from the island for the film to compete on behalf of Taiwan. "We do require that artists of the submitting nation hold at least some of the key creative positions on a picture," the Academy said in a letter to Yeh. Taiwan film authorities have decided to replaced Lee`s movie with director Chen Huai-en`s "Island Etude." But some in the island questioned the decision, saying that Lee`s "Crouching Tiger, Hidden Dragon," which also had few Taiwanese in the cast and crew, was allowed to represent Taiwan and went on to win the Oscar for best foreign film. "I think the Academy made its decision on a case-by-case basis and it was doing so by the book so we accepted the result," Yeh said. "Lust, Caution" earned Lee his second Venice Film Festival Golden Lion for best picture last month on behalf of Taiwan. The film has become a box office hit, netting more than 266 million Taiwan dollars (8.2 million US), according to reports. The movie, called "Se, Jie," in Chinese, is a tense drama set in Japanese-occupied Shanghai in the 1940s.