Potential Impact under US Customs Laws of the World Customs Organization Recent Publication of Commentary 25.1 to the WTO Valuation Agreement Relating to the Dutiable Status of Third-Party Royalties a

Abstract

The World Customs Organization Technical Committee has published Commentary 25.1 to Article 8, paragraph l(c) of the WTO Valuation Agreement. The Commentary offers significant insight into the analysis that is necessary in the determination of whether so-called third party royalty license payments are 'related' to the sale of the imported merchandise and whether the payment is a 'condition' of the sale under consideration. If both elements are satisfied, the result will generally lead to the conclusion that the payment under consideration is to be included in the dutiable value of merchandise imported into the particular territory. Although Commentary 25.1 is not controlling upon US Customs and Border Protection (CBP), the Commentary does serve as an additional tool in evaluating the status of such royalty license fee payments under US Customs laws. The Commentary also represents an important backdrop to the criteria employed by CBP in its evaluation of the status of third party royalty license fee payments.