Importing goods into a domestic market may become more complex where such goods incorporate intellectual property rights owned by entities located outside the territory. In such cases, importers are generally required to make two types of payments: the purchase price and royalties payable to the intellectual property owner.
Royalties are generally defined as payment made in consideration for the right to use intellectual property, including copyrights, patents, trademarks, trade secrets, or other similar rights. The key question, therefore, is whether such royalties should be included in the customs value of the imported goods. From a customs perspective, these payments may affect the customs value, which serves as the basis for calculating import duties. However, certain conditions must be considered in determining whether royalties form part of customs value.
Under the General Agreement on Tariffs and Trade 1964 (“GATT”), royalties may be included in the customs value of imported goods only where such payments are made by the purchaser and are a condition of the sale of imported goods. As Thailand is a GATT signatory, this principle is adopted in Thailand’s Ministerial Regulation No. 132 (1996), which provides that royalties should be included in the customs value where:
- The royalties are paid by the purchaser and relate to the imported goods;
- The payment of royalties is a condition of the sale of the imported goods; and
- The royalties are based on factual information and can be calculated on value basis.
As the classification of payments as royalties may affect the customs value declared to the customs authorities, importers are encouraged to seek for professional advice to ensure accurate customs valuation.