Adjustment of the “customs value” of imported goods for failure to include royalties paid by the importer marcantonio-demo 15 June 2023

Adjustment of the “customs value” of imported goods for failure to include royalties paid by the importer

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It is increasingly the case that, in determining the value of the imported goods, customs require the importer to provide any licence contracts for the intellectual property rights of the seller relating to the imported goods and that therefore, when such a contract has actually been concluded, they shall add the amounts of the related royalties to the price of the imported goods in order to determine their actual customs value.

This increase in value made by customs to determine the amount of the duties due from the importer naturally generated a dispute of considerable proportions and complexity, with conflicting outcomes.

the Court of Cassation has recently intervened on the matter with an order (n. 11194 of 27 April 2023) very thorough, that it should finally clarify the issue.

In a nutshell, the Supreme Judges have clarified that, according to the provisions of the Community Customs Code (Reg. 2913/92) and its implementing regulation (Reg. 2454/93), in establishing the customs value of imported goods, the amount of royalties relating to the use of intellectual property rights incorporated in those goods shall also be calculated only if:

1. licence fees (royalties) have not been included in the price actually paid or payable;

2. those rights actually relate to the goods to be valued; and

3. the purchaser is obliged to pay these licence fees as a condition of the sale of the goods to be valued.

In particular, where the importing purchaser pays a licence fee to a third party other than the owner of the intellectual property right, the conditions required for calculating also the amount of royalties in the determination of the customs value of the imported goods shall be deemed to have been met if the seller requests the importing buyer to pay the licence fee.

Therefore, following the same approach as the Supreme Judges, it should logically be inferred that, for example, in the case of a trademark licensing agreement for the production and marketing of the products bearing the trademark itself, where the licensor offers the licensee the possibility (but not the obligation) to purchase the products marked by his own authorised manufacturer – instead of having to assume the burden of organizing the entire production process (and quality control) of the licensed trade mark – it should not be allowed to add to the price of the imported goods the amount of royalties paid in respect of the licence agreement.

This is all the more reason why the same conclusion should be reached if the licensee, without using manufacturers authorised by the licensor, contracts the production of the branded products to third parties abroad. In fact, no different (and worse) customs treatment of the value of goods seems legitimate, compared to the case where the licensee himself produces directly in his own factories the products legitimately marked by the licensed trademark.

However, it is always a good idea to pay close attention to customs rules and to those who apply them, who are always reluctant – for obvious reasons – to follow the arguments of importers.