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What are royalties and licensing fees

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The Basics of Royalties and Licensing Fees

What are Royalties?

Royalties refer to payments for the use of intellectual property. This includes patents, trademarks, and copyrighted works. How are royalties determined?

  • Based on the frequency of property use
  • Linked to revenue generated

What are Licensing Fees?

Licensing fees involve payments for the right to use intellectual property. They are part of licensing agreements. What are the common payment structures for licensing fees?

  • Flat rate or percentage of revenue

Applicability to Intellectual Property

How are royalties and licensing fees applied to various forms of intellectual property?

  • Trademarks, copyrights, patents
  • Imported products containing intellectual property

Customs and Border Protection (CBP) and Duties

When importing into the United States, how does CBP assess duties on royalties and licensing fees?

  • Preferential method: Transaction value
  • Inclusion in enumerated additions

Factors Influencing Duties

What factors does CBP consider in determining whether royalties and licensing fees are dutiable?

  • Manufacture under a patent
  • Direct relevance to production or sale
  • Conditional purchase of the product

Examples of Dutiable Situations

When are royalties and licensing fees typically dutiable?

  • Right to manufacture or export
  • Part of the product's price
  • Right to sell in the destination country

Examples of Non-Dutiable Situations

When are royalties and licensing fees usually not subject to duties?

  • Reproduction rights in the US
  • Payments to unrelated third parties for exportation

Case-by-Case Determination

Why is it essential to understand that the dutiability of royalties and licensing fees is assessed on a case-by-case basis?

  • CBP requires copies of all agreements

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