The case involved whether royalties paid under a technology transfer agreement between Nestlé Argentina and Nestlé SA (Switzerland) should be added to the customs value of imported goods between 2008 and 2011.
The tax authorities argued that the royalties should be added to the customs value because the goods imported were linked to the licensed intellectual property and often purchased from related companies.
On appeal, the Tax Court revoked the assessment of the tax authorities which sought to add a portion of royalties to the declared FOB value of imported raw materials and goods. The Tax Court found that the legal criteria for such an adjustment under the WTO Valuation Agreement (Articles 1 and 8) had not been met. Specifically, it held that the royalties were not shown to be a condition of sale of the imported goods, nor were they directly related to them, nor excluded from the declared price. The royalty payments were tied instead to the use of Nestlé trademarks, patents, and know-how, and were calculated based on net sales of finished products under those trademarks—not on the imported goods themselves.
An appeal was then filed by the tax authorities with the Administrative Court of Appeal.
Judgment
The Administrative Court of Appeal dismissed the appeal and upheld the Tax Court’s decision in Nestlé’s favour.
The Court emphasized that the license agreement allowed Nestlé Argentina to choose freely whether to produce the licensed goods itself or source inputs from either related or unrelated suppliers. In practice, during the relevant years, many of the imported inputs were in fact purchased from unrelated suppliers, as shown in Nestlé’s evidence.
The Court found the reasoning of the tax authorities insufficient. It noted that there was no contractual obligation to source inputs from related entities, and that the royalties were payable regardless of the identity of the supplier. This severed the required nexus between the intangible rights and the specific imported goods.
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