New regulations on royalties to be included in the dutiable value of all products WEF 1st May 16

Under the UCC, royalties and licence fees will be considered to be a condition of sale if "the goods cannot be sold to, or purchased by, the buyer without payment of the royalties or license fees to a licensor" (Art. 136 (4) (c) IA). 

As a consequence of this new wording, royalties and licence fees that are paid by the buyer of the goods to a third party are much more likely to be a condition of sale (and therefore dutiable). The nature of the relationship between the third party and the seller will likely no longer be the deciding factor. Royalties and licence fees may be dutiable even if the seller and the licensor are unrelated if the buyer cannot purchase the goods without these payments (e.g., if the goods would infringe the intellectual property rights of the third party licensor without such payments, this may be caught). 

So you need to look at all the facts and the contractual documentation to determine whether this new condition is met (and, if so, what mitigation options there might be for the company to the extent that it wishes to exclude the payments from the customs value).

There is some uncertainty as to how broadly the EU customs authorities will be interpreting the new provisions - some jurisdictions outside the EU have similar provisions and have adopted a more narrow interpretation than what we are being led to believe the EU will do. The European Commission is due to issue a paper shortly with some additional guidance and case scenarios on the valuation changes so hopefully this will address some of these issues!

Please contact your Mapcargo representative for more detailed information