Customs valuation of film import royalties and licence fees, with limitation and penalty issues referred for further decision.

Royalties and licence fees paid for importing beta/digibeta film tapes were examined for inclusion in customs assessable value, with the key question being whether the payments related only to reproduction rights or to a wider bundle of exploitation rights, and whether they were a condition of supply payable before import. The panel also considered whether non-disclosure of such payments constituted suppression justifying the extended limitation period, confiscation and penalties. The Members recorded a difference of opinion and referred the matter to a Third Member, so no final determination was made on valuation, limitation, confiscation or penalty.

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Issues: (i) Whether royalties and licence fees paid for import of beta/digibeta tapes containing films were includible in the assessable value under the Customs Valuation Rules. (ii) Whether the extended period for demand and the associated penalties and confiscation were invocable on the facts.

Analysis: The dispute turned on whether the payments were for mere reproduction rights or formed part of a broader bundle of exploitation rights, including cinematic, television, video and ancillary rights, and whether such payments were required to be made before import as a condition of supply. It also arose whether non-disclosure of those payments amounted to suppression justifying extended limitation and consequential penal action.

Outcome: The Members recorded a difference of opinion and referred the issues for decision by a Third Member. No final adjudication was made on the merits of valuation, limitation, confiscation or penalty.

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