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KPMG report: Tariff effect of intellectual property payments

Tariff effect of intellectual property payments

Most importers recognize that tariffs are generally assessed against the dutiable value of imported merchandise.

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What is not well known, however, is that tariffs may also be assessed against intellectual property payments for imported goods, such as royalties and license fees.

What makes that a major concern in today’s trade environment is that for many products, especially goods from China, the Trump Administration has assessed tariffs of up to 25% against the transaction value of imported merchandise. As a result, if a royalty payment were to be considered dutiable by U.S. Customs and Border Protection (CBP), the value of the royalty would be subject to the same duty rate as the imported product. Also, CBP could retroactively recover five years’ worth of duties, fees, penalties, and interest. Therefore, the overall liability associated with those payments could be considerable.

Understanding when royalty payments are dutiable and proactively managing them will help control that hidden compliance risk.


Read a July 2020 report* [PDF 250 KB] prepared by KPMG Trade & Customs professionals


For more information on this topic or to learn more about KPMG’s Trade & Customs Services, contact:

Andy Siciliano | +1 (631) 425-6057 | asiciliano@kpmg.com

*This report originally appeared in Tax Notes International l (20 July 2020) and is provided with permission of the publisher.

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