WORLD CUSTOMS ORGANIZATION ‘ORGANISATION MONDIRLE DES DOURNES. ‘ORGANIZACION MUNDIAL DE ADUANAS TECHNCAL COMMITTEE GN vrorases ‘CUSTOMS VALUATION 11" Session viose 41 July 2000. uNG EXPRESSIONS “RELATED TO THEGOODS BEING VALUED" (BL CONNE: ARTICLE 84 (tem Vi(@) on Agenda) DRAFT COMMENTARY |INEORMATION DOCUMENT. Reference Documents 1 tits 9 Session tho Technical Commitee on Customs Vakiation instructed the ‘Secretariat to produce a summary document on this item wih proposals on possible options sa way forward. 2 In undertaking this task the Secretariat reviewed the woik ofthe Technical Comittee {rem 1880 to date. Comments anda biblography ofthe Techical Commite's work on this subject wore subsequently circulated to Membae In Dee. VICOB2E a tthe 10° Session the Technical Commitee instructed he Secretarlat to develop an Information document in respect of the expression ‘related to he goods being valved” Using Doc. 41.872 as a basis, as this proves the Technical Commttec’s last stetament on thie Speci iseue, and taking ito account written comments receved in response to that document, the Secretariat has developed a further information document which is hereto. 4 Administrations ae invited to submat thet further comments onthe appended document by 4 September 2000 If possible. Any comments toeived wil be published and ‘ulated tothe Technical Commitee for decussion atthe 11° Session, Fares tec, erin ae pts dbs Oe enya ob cof oeetngs ant Youn eaten ops.Annexto Doe. Vrorase1 DRAFT COMMENTARY IEANING OF THE EXPRESSION "RELATED TO THE GOODS [BEING VALUED" IN CONNECTION WITH ARTICLE 8.1 (c) Among the criteria forthe inclusion of yates and lcences fee in the transaction value ofimportad goods under Article 8.1 (is he requirement that the royalty or cence ee be “telate to the Goods being value” (ernphacis added). The Interpretative Note to ‘Aste 8.1 (0) eserves royalties and licence fee, among othe things. as payment 0 respect to pants, ademarks and copyright” “The Note to Article 1 also provides that “the plea actualy paid or payable forthe Imported goods i the total payment made oo be made by the buyer ta or forthe benef of the sefer’, Royals and cence fees included inthe traction value of imported goods under Article 8.1 (care, therefore, payments for intelectual and other rights elated fo the ‘Goods, which ae nvolced separaily from the price actualy paid or payable for the imported ‘ods. ‘A royal or ioence ve may be related to Imported goods in two principal ways. Fits. the roy or leence foe payment may be related t the imported goods, tis calelated on the basis ofthe ravenue derived rom the sale or uss of tha imported goods, In euch ease 's important to know why the payments are being made and for what purse. ‘Seconsty the ights fr which the payment is mace may be related tothe imported \geeds. This wil be the case where the royalty o cence fee fs forthe right to use a particular |rademark. or copyright, that is attschod fo the imported goods; or design, that may be ‘eflecte inthe imported goods; or patent, or know how, that may be inherent within the Imported goods. For example, a royalty orlcence fee woul be related tothe imporied ‘goods If itis pd forthe use of a radomark thats attached tothe goods. A royaly or licence fee pall for a patented process used by an imparted machine to manufacture goods. in the country of importation would aso be related te the imported goods (eee Advisory ‘Opinien 43). In these examples the royalty payment is reated because the imported goods ‘are, orhave contained within them the intelectual propery ofthe hoensor. Quesions about the relationship between the imported goods and the royaky or cence fee often arise when the imported goods are subject to further processing ater importation. Where the imported goods undergo, subsequent to thot portation, minor processing, he royally or lcerice foe could, notwithstanding, be related tothe imported“Annexto Doe VTo126e1 ‘@ machine vch, for ease of transportation, is Imported unassembled and assembled after Importation would also be related tothe import goods, 7 Where the imported good undergo significant processing or where they are used a components in the manufacture of ther goods hs necessary 1 closely examine why the royalty or teence fee is paid. 1 the imported goods are a minor componentinthe fing. redut, the royalty a cence fe wil genorally be relat to the final produit anid not to the Imported goods. For example, a royalty paid forthe use ofa trademark n connection with the sale o shoes wl not be related to an importation of ordinary shoelaces which, after ‘importation, are packaged and soi wih those shoes, if, however, the tse ofthe unpered Pods the manufacture of other goods is the bass for he obligation 1» pay the royalty or cence feo, that payment wil be related to the imported goods. For example, a royaty for ‘Re use ofa particular trademark on cookware wth a nor stick” surface reacting forthe use of patented compound would be related othe patented compound. 8 In considering the question of yaies and lence fees and the issues raised in {eragraphs 6 and 7, regard must be ha to Article 83 and ts Interpretive Note. fee the INTO Valuation Agreement requires that adltons tothe price actualy ald or pavatia sreier ‘ticle 0 re to be mde on the basis oF objoctve and quaiiable dat, 8 {n conctusion, there are many diferent crcumstances under whic obligations to pay ‘oyates and iconce fees can arse. In determining whether a parbeulatroyaky ox wosane {be relates tothe imported goods forthe purposes ofthe Article 8-1 (9), what needs to be «examined fs not how the royalty or cence fee i calculated, or when tis pai. but whys eid, Where te payment Ifo intelectual rights wich ate attached to, elected n'y. !nherent fo the imported goods, wil be related to those goods forthe jurpases of Article 8.1 (6),