Customs duties on royalties and licence fees

The December 2007 issue of Global Intellectual Property Asset Management Report, (published by WorldTrade Executive), carries a brief article by Ben Goodger and Stefanie Slapke (both of Rouse & Co. International), "Are New Customs Duties on Royalties and License Fees Relating to Imported Goods on the Way? The authors write:

"Recent World Customs Organization (WCO) deliberations are likely to lead to major changes in the way trade mark royalties and licence fees relating to imported goods are currently being dealt with by Customs offices around the world. The changes look set to have a serious financial impact on both brand owners and licensees.

Although precise details of the changes are not yet available, IP owners should be aware, at least in general terms, of what is being proposed.

Background

How trademark royalties and license fees should be dealt with by Customs authorities has been the subject of ongoing debate within the WCO for some time. The issue is both complex and contentious.

Two years ago, a sub-committee of the WCO Technical Committee on Customs Valuation was established to examine the various national authorities’ current practice. We understand that at a recent meeting, this sub-committee decided that certain royalty payments that are not currently regarded as part of the dutiable value of imported goods should in future be included in the dutiable value.

Many of the WCO’s earlier conclusions on this subject have already been taken up by the European Commission’s Valuation Committee in its Commentary No. 11, issued earlier this year, which deals specifically with royalties and licence fees paid to a third party. It is likely that the Commission will also take up the proposed further changes.

Proposed Changes

The outcome of the most recent WCO Customs Valuation sub-committee deliberations is expected to be documented in April 2008. Although the precise content of the changes being proposed will not be known until April, it is clear that many trade mark royalties and licence fees that relate to imported goods and are not currently included in the dutiable value for Customs purposes will begin to be so included".

The authors then add that brand owners and trade mark licensees are well advised to keep a close watch on things. They expect the latest changes to be adopted promptly by Customs authorities, at least in Europe and suggest that, if European authorities are seen to be raising significant amounts of revenue from the imposition of additional duties, other countries will probably be quick to follow.