Nataliya Shapavalova, Partner
Ravil Kassilgov, Partner
The importation of goods and the use of intellectual property (IP) by the importer may appear to be separate processes; however, under customs law, they are closely interconnected. Customs authorities often include royalties for IP in the customs value of imported goods without properly assessing whether two mandatory conditions are met:
In practice, Kazakhstan’s customs authorities tend to disregard the recommendations of the EAEU and automatically include royalties in the customs value of goods—even where the IP is used for unrelated purposes (e.g. process automation or know-how).
Key arguments typically raised by the customs authorities include:
How to minimise the risk:
Conclusion:
Although current case law is generally unfavourable to importers, carefully structured agreements can help mitigate the risk. For a detailed analysis and tailored solutions, it is advisable to consult with specialists in customs and intellectual property law.
Ravil Kassilgov, Partner
The importation of goods and the use of intellectual property (IP) by the importer may appear to be separate processes; however, under customs law, they are closely interconnected. Customs authorities often include royalties for IP in the customs value of imported goods without properly assessing whether two mandatory conditions are met:
- The royalties relate to the imported goods; and
- The royalties are paid or payable as a condition of the sale of the goods.
In practice, Kazakhstan’s customs authorities tend to disregard the recommendations of the EAEU and automatically include royalties in the customs value of goods—even where the IP is used for unrelated purposes (e.g. process automation or know-how).
Key arguments typically raised by the customs authorities include:
- The IP contributes to increased sales, and thus the royalties are deemed related to the imported goods.
- Royalties are calculated based on the value of the goods, which is interpreted as satisfying the legal conditions.
- The supplier, buyer, and IP rights holder belong to the same corporate group, which is viewed as confirming the link between the royalties and the goods.
How to minimise the risk:
- Separate the supply agreement from the IP licensing agreement.
- Clearly define the purpose of IP use in the licensing agreement.
- Avoid linking royalties to the value of the goods—fixed payments are preferable.
- Strengthen the agreement with additional provisions that preclude the automatic inclusion of royalties in the customs value.
Conclusion:
Although current case law is generally unfavourable to importers, carefully structured agreements can help mitigate the risk. For a detailed analysis and tailored solutions, it is advisable to consult with specialists in customs and intellectual property law.