Customs valuation includes franchise-linked licence, royalty and fee payments where they form part of the condition of sale.

Licence fee, franchise fee and royalty paid to a foreign supplier were treated as includible in the assessable value of imported goods under Rule 9(1)(c) of the Customs Valuation Rules, 1988, because the agreement tied the goods to the franchise arrangement. The right to use technical know-how, patent, brand name and other proprietary inputs formed part of the commercial terms governing supply, and the goods had to be procured and used according to the franchisor's specifications. Those payments were therefore regarded as amounts paid in relation to the imported goods as a condition of sale, and added to the invoice value for valuation purposes.

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Issues: Whether the licence fee, franchise fee and royalty paid to the foreign supplier were includible in the assessable value of the imported goods under Rule 9(1)(c) of the Customs Valuation Rules, 1988.

Analysis: The agreement showed that the imported goods were tied to the franchise arrangement and that the right to use technical know-how, patent, brand name and other proprietary inputs formed part of the commercial terms governing supply. The goods were to be procured and used in accordance with the franchisor's specifications, and the payments described as licence fee, franchise fee and royalty were held to be amounts paid in relation to the imported goods as a condition of sale. On that basis, the amounts were treated as additions to the invoice value for valuation purposes under Rule 9(1)(c).

Conclusion: The licence fee, franchise fee and royalty were correctly included in the assessable value of the imported goods, against the assessee.

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