Valentina Ionicheva, Candidate of Economics

ROYALTIES ON IMPORT OF SEEDS FOR REPRODUCTION: CHANGES IN APPROACHES IN LAW ENFORCEMENT PRACTICE

Approaches to the inclusion of royalties in the customs value when importing seeds for reproduction have changed in recent years. In judicial practice, previously established approaches are being reviewed in favor of assessing the economic and legal content of licensing relations.

First of all, we are talking about situations when parental forms of seeds are imported, which are used as initial seed material for subsequent reproduction and production of reproduced seeds in the territory of the Russian Federation.

Consider the following cases:

1. Case no. A14-2192/2022 (Syngenta LLC):
At the initial stage of the dispute, the courts proceeded from the fact that the parent forms of seeds are the raw materials for the production of finished products, and royalties are calculated from the proceeds from the sale of reproduced seeds produced in the territory of the Russian Federation. In this regard, it was concluded that royalties do not apply to imported goods.
Subsequently, the Arbitration Court of the Central District annulled the judicial acts of the lower instances, pointing out the need to take into account the relationship of contracts, group members and the actual model of seed use. The court emphasized that the key is not the procedure for calculating royalties, but the reasons for their payment and the amount of rights received by the licensee in exchange for such payments. This approach became a guideline for subsequent practice.

2. Case no. A35-4045/2022 (Kursk Agroactive LLC):
Initially, the courts concluded that the royalties were paid for the reproduction of seeds on the territory of the Russian Federation and were not related to their import, as a result of which they were not subject to inclusion in the customs value.
However, the cassation instance annulled the judicial acts and sent the case for a new hearing, pointing out that the license agreements granted the company, among other things, the right to import seeds, and without the appropriate license rights, the import and use of seed material is objectively impossible. As a result of the new review, the satisfaction of the company's claims was refused, and the Supreme Court of the Russian Federation refused to transfer the cassation appeal. The trial is currently still ongoing.

Thus, when assessing royalties paid for trademarks in relation to finished products made from imported seeds for reproduction, the content of the licensing relationship and the relationship of royalties to the supply of goods (rather than the method and basis for calculating royalties) is of key importance.

At the same time, the issue of including royalties in the customs value when importing seeds for reproduction depends on the totality of the terms of the foreign trade transaction, the content of licensing agreements, the structure of the group of companies and the actual conditions of use of the parent forms of seeds.

There is no universal approach in this category of disputes; each situation requires an individual analysis.