By: Omari Wooden
In my last post, I discussed the requirement to file exports of mass market software. Now, I’ll discuss and clarify the requirements of reporting intangible products such as customized software or products.
The Foreign Trade Regulations (FTR) recognizes customized software as software that is not sold at retail locations and is commonly designed for the specific use of the recipient. Customized software is normally transmitted over the Internet via an e-mail or download, or on a CD or DVD. Let’s take a closer look at these two scenarios.
An e-mail or download of information is not considered a physical good. You can’t touch an e-mail; you can’t place your hands on a download. What are the responsibilities of a U.S. company or individual selling an intangible product to a foreign party through an e-mail or one that is downloadable via the Internet? Based on the FTR 30.2(d)(3), “electronic transmissions and intangible transfers… shall be excluded from the EEI filing.” No EEI record is required.
What if you’re selling customized software on a CD or DVD?
The software is on a CD or DVD, which makes it a physical good that must be filed in the AES. Now you’re probably asking yourself, what value do I report? For customized software you will report the value of the media (i.e. CD, DVD, etc.).
For example, you sell customized software to a company in Germany that can only be used by this company. The software is loaded on a CD and shipped out of the U.S. You charge the German company $10,000 for this software, but the actual value of the CD is $2. What value needs to be reported in the AES? You would report $2; however, this shipment would be exempt from filing because it is less than $2,500 per Schedule B number and no license is required. In this scenario, you would provide the exemption for low value shipments, “NO EEI 30.37(a)“. On the other hand, if a license were required in this example, the CD would have to be reported in the AES.
Remember, the FTR requires the value of the physical good, whether CD or DVD. If you can’t touch it, you do not need to report the EEI in the AES.