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HMRC internal manual

Guidance on the Audit of Customs Values

HM Revenue & Customs
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Royalties and licence fees: general principles

The key provisions of Article 32.1(c) of the Code are that the royalties or licence fees are to be included in the customs value where:

  • they are related to the goods being valued and
  • the buyer must pay them, either directly or indirectly, as a condition of the sale of the goods being valued.

These two conditions are of crucial importance and must always be to the forefront when royalty cases are being considered. It is essential to note that both conditions must be satisfied before any addition can be made to the price actually paid or payable for the imported goods (additional general guidance is provided in CVS Comm 3).

The payment of royalties and licence fees is likely to be encountered in connection with the importation of goods such as:

  • toys
  • fashion wear
  • active substances for manufacture of pharmaceutical preparations
  • domestic electrical appliances
  • TVs; radio hi-fi equipment
  • office machinery and
  • machine tools.

When royalties and licence fees are payable this is usually under the terms of a formal written agreement which details the responsibilities and liabilities of both licensor and licensee and sets out the requirement as to payments etc. The country of residence of the recipient of the payment of the royalty or licence fee is irrelevant (Article 162 of the CCIP refers).