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The World Trade Organization (WTO) Valuation Agreement Article 15 Explained: What You Need to Know
The WTO Valuation Agreement, also known as the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade (GATT) 1994, is a key component of the global trade system. It specifies the rules and methods for determining the value of imported goods for customs purposes, including the assessment of duties and taxes. Article 15 of the agreement deals with the treatment of royalties and license fees in the customs valuation process. Here`s a breakdown of what you need to know about Article 15:
What are royalties and license fees?
Royalties are payments made by an importer to a foreign owner of an intellectual property right (such as patents, trademarks, or copyrights) in exchange for the right to use that property in the importing country. License fees are payments for the right to use technology or know-how that is owned by a foreign entity.
Why are royalties and license fees relevant to customs valuation?
Customs valuation is based on the transaction value of imported goods, which is the price actually paid or payable for the goods when sold for export to the importing country. Royalties and license fees that are related to the imported goods can be included in the transaction value and increase the customs value of the goods. The question is how to determine whether and how much of these payments should be added to the price of the goods.
What does Article 15 say?
Article 15 provides guidance on how to deal with royalties and license fees in customs valuation. It states that such payments can be added to the price of the goods only if they are “paid or payable” by the buyer as a condition of sale. In other words, the buyer must be obligated to make these payments in order to obtain the right to use the intellectual property related to the goods. If the payments are not a condition of sale, they should not be included in the customs value.
Article 15 also specifies that the value of royalties and license fees should be based on objective and quantifiable data, such as invoices, contracts, or public information. If such data is not available, the customs authorities may use reasonable means to determine the value, such as a percentage of the price of the goods or a comparable transaction value.
What are the implications of Article 15 for importers and exporters?
Importers and exporters should be aware of the requirements and limitations of Article 15 when dealing with royalties and license fees. They should ensure that any such payments are clearly linked to the imported goods and are a condition of sale. They should also keep records of the relevant documents and data to support the customs valuation.
Failure to comply with the WTO Valuation Agreement, including Article 15, can result in penalties, fines, or even suspension of trading privileges. Therefore, it is important for companies to stay informed about the latest developments in customs valuation rules and to seek professional advice if needed. A copy editor can help ensure that all materials related to customs valuation are clear, concise, and accurate to avoid any potential misunderstandings or mistakes.
