The Court’s conclusion
Two conditions must be met in order for royalty payments to be included in the customs value of imported goods:Condition 1.
The royalty payments are related to the imported goods:
To determine whether or not Condition 1 was met, the Court ordered a computer forensic analysis, which produced the following findings:
- The software is not related to the imported Goods but can be installed on any physical server
- The software is not tied to specific brands or models of computers
- The modification and integration of software into an existing system are standard procedures in the software lifecycle
Based on these findings, the Court decided that Condition 1 was not met owing to the fact that, contrary to the customs authority’s contentions, the Goods were not of a specialised nature, i.e., they were not developed specifically to run the software.
In this regard, the Court emphasised that what mattered in legal terms was not simply whether the Goods were needed for use with the licensed software, but whether the Goods were designed
specifically to run that software.
The Court also concluded that the Goods imported by the Company were general-purpose goods, citing the written explanations given by the seller (and licensor) of the Goods and a letter from an independent certification body.Condition 2.
The royalty payments are a condition of sale of the imported goods for shipment to the customs territory of the EAEU:
In addressing the matter of whether or not Condition 2 was met, the Court observed that the customs authority’s inspection report only contained a general assertion that the payment of royalties was a condition of sale of the imported Goods but did not provide any documentary evidence to support that conclusion.
At the same time, the Court established that the Contract contained no provisions making the licence fee a condition of sale of the Goods and no provisions to the effect that the Contract would be terminated insofar as the supply of the Goods was concerned if the Company failed to pay royalties.
It was additionally observed that the Company had purchased identical and similar goods not only from the rights holder under the Contract but also from other suppliers.
Based on the above considerations, the Court ruled as unlawful the customs authority’s decisions to require goods declarations to be amended so as to include software royalties in the custom value of imported Goods.