China Customs Valuation:Software Exempted; E-Content and IP Royalties Still at Risk

New China Customs measures confirm that the dutiable value of imported goods excludes the value of data-processing software, but includes the value of other electronic content along with copyrights, trademarks, technology and distribution rights - even if payable through royalties. The measures also detail and standardize many customs procedures, with mixed implications for taxpayers.

By Neal A. Stender and Cliff Mok,
Orrick, Herrington & Sutcliffe, Hong Kong
Zhihua (David) Tang, Coudert Brothers LLP, Beijing and Shanghai

China customs valuation rule changes, effective from
May 1 2006, are most notable for confirming that customs import duty will not be levied on the value of most data-processing software - unlike the value of certain royalty payments related to imported tangible and intangible goods including electronic games, images, music and publications, as well as trademarks, patents, technology and distribution rights. The new rules also include fact pattern examples and more details of procedures and standard forms. Other changes promote coordination between the China Customs Administration (CA) and other government authorities, including the departments responsible for domestic taxation.