G/VAL/W/229  
 
21 June 2013  
(13-3225)  Page: 1/12  
Committee on Customs Valuation  Original: English/French/Spanish  
 
 VALUATION OF CARRIER MEDIA BEARING SOFTWARE  
FOR DATA PROCESSING EQUIPMENT 
Communication from the Chairman of the  
Technical Committee on Customs Valuation (TCCV) 
The following communication, dated 17 May 2013, was received from the Chairman of the TCCV. 
 
 
_______________ 
  
I have the pleasure of writing to you in my capacity as Chairman of the Technical Committee on 
Customs Valuation in order to inform you that, at its 36
th Session, held in Brussels from 
15 to 19 April 2013, the Technical Committee examined the question raised by Uruguay, 
"Application of WTO Decision 4.1 (Valuation of carrier media bearing software for data processing 
equipment) in those cases in which they are pres ented in "USB flash drives" or similar devices". 
To illustrate the situation, I am attaching copies of the Technical Committee's documents where 
the issues had been discussed1. 
As such, I submit the subject for the purpose of consideration, and other purposes deemed to 
correspond, leaving the Technical Committee at your disposal. 
 
_______________ 
  
                                               
1 One of such documents is WCO document VT0875E1c "Report to the Customs Cooperation Council on 
the 35th Session of the Technical Committee on Customs Valuation", which was circulated as an Annex in WTO 
document G/VAL/W/225. 
 G/VAL/W/229 
 
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  TECHNICAL COMMITTEE 
ON CUSTOMS VALUATION VT0850E1a  
(+ Annex)  
O.Eng  
34th Session  
Brussels, 20 March 2012  
 
 
QUESTIONS RAISED DURING THE INTERSESSION 
Application of WTO Decision 4.1 (Valuati on of Carrier Media Bearing Software  
for Data Processing Equipment) for Pen drives 
(Item VI (a) on the Agenda) 
SECRETARIAT COMMENTS 
1. During the intersession Uruguay has prop osed a question on the "Application of WTO 
Decision 4.1 (Valuation of Carrier Media bearing Software for data processing equipment) for Pen 
drives."  The question is reproduced in the Annex to this document. 
2. The Technical Committee is invited to examine the matter and determine whether it wishes 
to consider this issue as a Specific Technical Question at the 35th Session. G/VAL/W/229 
 
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  QUESTION BY URUGUAY 
Application of Decision 4.1 of the Committee on Valuation of the World Trade Organization when 
Carrier Media are to be Found in the Form of "Pen Drives" 
The issue 
A company buys and imports, from a supplier from abroad, software programs that are to be 
found on carriers which are "Compact Discs or CDs". 
The supplier from abroad issues the commercial invoice to his importing customer and 
distinguishes, in the total price of each software  program, the cost of the physical carrier (CDs) 
from the software itself (its data and instructions).  
The importing country has chosen to apply the second paragraph of Decision 4.1 of the WTO 
Valuation Committee.  Consequently, the Customs va lue of these software programs is determined 
solely by the price of the corresponding CDs. 
As of now, the supplier from abroad produces and sells the same software programs at the same 
price, but on another type of carrier:  a "Pen Drive".  The commercial invoice distinguishes in the 
same way between, on the one hand, the same price of the software (with the same data and 
instructions), and that of the physical carrier, which is now "Pen Drives". 
Analysis 
Application of the same Customs valuation criterion to this software on a new carrier is based on 
interpreting whether, given that these "Pen Drives " do contain "integrated circuits, semiconductors 
or similar devices", that characteristic precludes compliance with the condition laid down in the second paragraph of Decision 4.1. 
In 1984, which is when the Decision was written,  the requirement that the physical carrier not 
contain integrated circuits, semiconductors or similar devices was intended to ensure that the software was to be found in a temporary storage unit, with the sole purpose of being transported 
via that carrier to a subsequent data processing unit. 
The technology has evolved significantly up to now and "Pen Drives" can easily be interpreted as 
clearly being temporary storage units, despite ha ving "integrated circuits, semiconductors or 
similar devices" in their structure.  
Nowadays, however, that composition can be interpreted as one where the characteristic of still 
being a temporary storage unit is maintained, th ereby fully applying the second paragraph of 
Decision 4.1 of the WTO Valuation Committee. 
Proposed outcome 
That, prior to its study and analysis, the WCO Technical Committee on Customs Valuation issue an 
interpretative document on this matter for the entire global Customs community, perhaps in the 
form of a commentary or in whichever form is deemed most appropriate. 
P.S.:  The TCCV will be presented with samples of both products (the two items of software on 
their different physical carriers) so that they can be physically assessed. 
 
 G/VAL/W/229 
 
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  TECHNICAL COMMITTEE 
ON CUSTOMS VALUATION VT0887E1a  
 
O.Eng  
36th Session  
Brussels, 19 December 2012  
 
APPLICATION OF WTO DECISION 4.1 (VALUATION  OF CARRIER MEDIA BEARING SOFTWARE FOR 
DATA PROCESSING EQUIPMEN T) FOR USB FLASH DRIVES 
(Item V (f) on the Agenda) 
I. BACKGROUND 
1. At the 35th Session, the Technical Committee conducted a preliminary examination of a case 
submitted by Uruguay concerning the "Application of  WTO Decision 4.1 (Valuation of Carrier Media 
bearing Software for data processing equipment) for Pen drives."  The question is reproduced in the Annex to Doc. VT0850E1a.  The Technical Committee agreed that to be consistent with the 
terminology used in the Harmonized System, the devices in question will be referred to as "USB 
flash drives" for the purposes of the Technical Committee discussions.  
II. SECRETARIAT COMMENTS 
2. The Secretariat provided background informat ion on WTO Decision 4.1 and the classification 
aspects to this case in Doc. VT0863E1a (paragraphs 2-8).  At the 35th Session, the International 
Chamber of Commerce (ICC) offered to provide te chnical background relevant to this case.  
They have provided the following information describ ing the three main types of USB flash drives:   
1.   A blank flash drive, similar to a blan k compact disc (CD) or digital versatile disc 
(DVD).   
2.   A flash drive with pre-loaded encryption or protection functionality which serves to 
protect the "content" software that is yet to be loaded.  
3.   A flash drive containing both encryption and pre-loaded "content" software or 
applications, (similar to a recorded CD or DVD).  In some instances, the encryption 
software is not separate from the "content" software but rather built into the software 
itself.  Thus, the operating system or other software is loaded along with its encryption component onto a blank flash drive. 
The Secretariat will work further with the ICC to obtain supplementary relevant technical 
information.  
3. Following discussions at the 35
th Session, it was generally agreed that Decision 4.1 does not 
cover USB flash drives due to the presence of integrated circuitry which is explicitly excluded from 
the definition of carrier media given in the Decision .  The question is therefore what further action, 
if any, the Technical Committee wishes to ta ke regarding this apparent anomaly.    
4. The Technical Committee discussed a proposal to refer the matter to the WTO Committee on 
Customs Valuation, with a view to seeking a revi ew and possible amendment of Decision 4.1.  
Some delegates wished to consider this proposal further and the Secretariat agreed to clarify the appropriate procedure, should the Technical Committee decide to pursue this option.  
The procedure would be that the Chair of the Tech nical Committee would write to the Chair of the 
Committee on Customs Valuation, outlining the issue, providing information and possibly 
suggesting courses of action, based on the opin ions expressed by the Technical Committee.  
That Committee could then decide whether it wanted to take further action and determine if it was 
appropriate to amend the relevant provisions of the Decision.  
5. Some delegates favoured widening the scope of this case to include other devices which 
could be considered in this context.  The Secretar iat will continue to explore this aspect, together 
with the ICC, and report back accordingly.  G/VAL/W/229 
 
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  6. The Secretariat would also like to draw Members' attention to written comments provided by 
Japan, Singapore, Uruguay and Venezuela prior to the 35th Session which can be found in the 
Annexes to Doc. VT0874E1a. 
III. CONCLUSION 
7. Members are invited to submit written comments to the Secretariat not later than 
4 March 2013 , in particular indicating what course of action they think is appropriate for the 
Technical Committee to take.  Comme nts received in response to this document will be published 
and circulated to Members of the Technical Committee for consideration at the 36th Session.  
8. The Secretariat kindly requests Members to send their comments in electronic form where 
possible (Email address:  valuation@wcoomd.org ).  G/VAL/W/229 
 
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  TECHNICAL COMMITTEE 
ON CUSTOMS VALUATION VT0889E1a  
(+ Annexes I to III)  
O.Eng  
36th Session  
Brussels, 21 March 2013  
 
APPLICATION OF WTO DECISION 4.1 (VALUATION  OF CARRIER MEDIA BEARING SOFTWARE FOR 
DATA PROCESSING EQUIPMEN T) FOR USB FLASH DRIVES 
(Item V (f) on the Agenda) 
I. BACKGROUND 
1. At the 35th Session, the Technical Committee conducted a preliminary examination of a case 
submitted by Uruguay concerning the "Application of  WTO Decision 4.1 (Valuation of Carrier Media 
bearing Software for data processing equipment) for Pen drives."  The question is reproduced in the Annex to Doc. VT0850E1a.  In Doc. VT0887E1a, further information was provided (supplied by 
the ICC) describing the three main types of USB flash drives.   
II. MEMBERS COMMENTS 
2. In response to Doc. VT0887E1a, written comments have been received from Canada and 
Uruguay.  These comments are reproduced in the Annexes to this document.  The Secretariat 
would also like to draw Members' attention to earlier written comments provided by Japan, Singapore, Uruguay and Venezuela prior to the 35
th Session which can be found in the Annexes to 
Doc. VT0874E1a. 
III. SECRETARIAT COMMENTS 
3. Some delegates favoured widening the scope of this case to include other devices which 
could be considered in the context of this question.  The Secretariat has explored this aspect 
further with the ICC.  The ICC confirmed that there are a number of storage devices which 
incorporate some level of integrated circuitry in order to function.  These devices include: Peripheral Component Interconnect (PCI) cards, memory or flash cards (for electronic flash 
memory data storage) and subscriber identity module (SIM) cards (removable smart cards and 
portable memory chips used in cell phones).  However, normally these devices are not sold commercially with pre-loaded software.  The Secretariat would like to thank the ICC for their assistance.  
4. The Secretariat invites Members to consider  the written comments and additional technical 
information in readiness for further discussion at the 36
th Session.  
 
 
 G/VAL/W/229 
 
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  Annex I to Doc. VT0889E1a 
(VT/36/Apr. 2013) 
Application of WTO Decision 4.1 for USB flash drives 
Comments by Canada 
1. The Administration of Canada thanks the Secretariat for having prepared the 
above-mentioned document and wishes  to make the following comments. 
2. The Administration of Canada is of the op inion that the Technical Committee should refer 
this matter to the World Trade Organization (WTO) Committee on Customs Valuation, with a view 
to seeking a review and possible amendment in order to include or not USB flash drives in Decision 4.1. 
 
 G/VAL/W/229 
 
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  Annex II to Doc. VT0889E1a 
(VT/36/Apr. 2013) 
COMMENTS BY URUGUAY ON DOC. VT0887E1a 
1. The Administration of Uruguay is grateful to the International Chamber of Commerce (ICC) 
and to the Secretariat for the work in prepar ing the text of Doc. VT0887, relating to WTO 
Decision 4.1. 
2. Uruguay wishes to reiterate the need to have  an updated version of the content and wording 
of that Decision as current production and marketing of software have changed from the previous 
form on physical carriers – on tapes, floppy di sks, compact discs and DVDs – to the current USB 
flash drives and similar devices, giving rise to an unwanted effect when determining Customs value which is out of keeping with the spirit of the Decision. 
3. Very instructive, furthermore, is the Statement made by the Chairman of the WTO 
Committee on Customs Valuation (CCV) at the meeting prior to the adoption of Decision 4.1, which is attached.  Particular attention is drawn to its final paragraph. 
4. In view of the above, Uruguay suggests that the Technical Committee (TCCV) draft and send 
a letter to the Chair of the WTO CCV, proposing an updated interpretation of the Decision, and to 
this end submits a draft of the letter to the Technical Committee for its consideration and analysis. 
5. The Administration of Uruguay would flag that it may make additional comments at the 
36
th Session.  
  G/VAL/W/229 
 
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  Annex III to Doc. VT0889E1a 
(VT/36/Apr. 2013) 
Statement made by the Chairman at the M eeting of the Committee on Customs Valuation 
of 24 September 1984 Prior to the Adoption of  the Decision on the Valuation of Carrier 
Media Bearing Software for Data Processing Equipment 
"In the case of imported carrier media bearing data or instructions for use in data processing 
equipment (software), it is essentially the carrier media itself, e.g. the tape or the magnetic disc, 
which is liable to duty under the Customs tariff.   
However, the importer is, in fact, interested in using the instructions or data; the carrier medium 
is incidental.  Indeed, if the technical facilities are available to the Parties to the transaction, the 
software can be transmitted by wire or satellite, in which case the question of Customs duties does 
not arise.  In addition, the carrier medium is us ually a temporary means of storing the instructions 
or data; in order to use it, the buyer has to transfer or reproduce the data or instructions into the memory or data-base of his own system.  
Under the international Customs valuation practices which were superseded by the Agreement on 
Implementation of Article VII of the General Agr eement on Tariffs and Trade (the Agreement), the 
value of the software was not, as a general rule, included when valuing the carrier medium.  
Following their adoption of the Agreement, those countries which followed the previous 
international practice have either changed their rules for valuing carrier media bearing computer 
software or have maintained  their previous practice.  
The proposed decision of the Committee on Customs Valuation on the valuation of carrier media 
bearing software for data processing equipment indicates that transaction value is the primary 
basis of valuation under the Agreement and that its application with regard to software recorded on carrier media for data processing equipment is fully consistent with the Agreement.  It also 
would provide that given the "unique situation" regarding software just described and the fact that 
some Parties sought a different approach, it would also be consistent with the Agreement for those Parties which wish to do so to only take account of the cost or value of the carrier medium itself in 
determining the Customs value of imported carrier media bearing data or instructions.  
In taking this decision on the valuation of carrier media bearing software for data processing 
equipment, it is understood that should any difficulties arise in the implementation and application of the decision, it would be useful for those diffi culties to be considered by the Parties to the 
Agreement."  
 G/VAL/W/229 
 
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  Annex III to Doc. VT0889E1a 
(VT/36/Apr. 2013) 
Draft letter to the Chair of the Committee on Customs Valuation 
"Madam Chair of the Committee on Customs Valuation: 
I have the pleasure of writing to you in my capacity as Chair of the Technical Committee on 
Customs Valuation in order to inform you that at its 36th Session, held in Brussels from 
15 to 19 April 2013, the aforementioned Committee examined the question raised by Uruguay, 
"Application of WTO Decision 4.1 (Valuation of carrier media bearing software for data processing 
equipment) for USB flash drives" as it was found that, following technological advances, the Decision should be updated given that carrier me dia of the type "USB flash drives" or similar, 
which have been developed or are to be deve loped in future, are not properly covered.  
For the analysis, one should bear in mind the in structive Statement made by your predecessor at 
the meeting of the Committee on Customs Valuatio n of 24 September 1984 prior to the adoption 
of this Decision and, in particular, the final paragraph. 
In view of the provisions in paragraphs 1 and 2 of Annex II to the Agreement and of the 
precedents which exist on this matter (Procès-Verbal of Rectification of the term "entretenimiento"  
which is used in paragraph 3 (a) of the Interpretative Note to Article 1 – " Price Actually Paid or 
Payable" –  as set out in document WT/Let/147, and Decisions on the word "copyrights"  in the 
Interpretative Note to Article 8.1 (c), on the word "undertaken"  used in Article 8.1 (b) (iv) and on 
the term "creación y perfeccionamiento"  which is also in that Article), it was agreed by consensus 
to refer the matter to the Committee, which might adopt a new Decision.  The following wording is 
suggested: 
"At its XX meeting, held on XX, the Committee on Customs Valuation settled the question of 
updating the third subparagraph of paragraph 2 of WTO Decision 4.1 "Valuation of carrier media 
bearing software for data processing equipment" by inserting the following statement in the 
Minutes of the meeting, on the understanding that the original content and spirit of this provision 
will thereby be maintained, in particular, in view of the emergence of new types and versions of 
carrier media for temporary storage for soft ware following advances in technology.  
The Members of the Agreement considered that th e wording of the third subparagraph should be 
expanded so that paragraph 2 properly covers carrier media which, although containing integrated circuits, semiconductors and similar devices, take the form solely of a means of temporary storage 
for software, for subsequent transfer to data processing equipment in order to be used.  
Accordingly, the third subparagraph of paragrap h 2 of this Decision should read as follows: 
For the purpose of the Decision, the expression "carrier medium" shall not be taken to include 
integrated circuits, semiconductors and similar devices or articles incorporating such circuits or 
devices, with the exception of those which take the form solely of a means of temporary storage 
for software, for transfer to data processing equipment in order to be used; the expression "data 
or instructions" shall not be taken to incl ude sound, cinematic or video recordings." 
 
 G/VAL/W/229 
 
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  TECHNICAL COMMITTEE 
ON CUSTOMS VALUATION VT0863E1a  
 
O.Eng  
35th Session  
Brussels, xx June 2012  
 
APPLICATION OF WTO DECISION 4.1 (VALUATION  OF CARRIER MEDIA BEARING SOFTWARE FOR 
DATA PROCESSING EQUIPMEN T) FOR USB FLASH DRIVES 
(Item VI (f) on the Agenda) 
I. BACKGROUND 
1. At the 34th Session, the Technical Committee agreed to examine a case submitted by 
Uruguay concerning a question on the "Application of WTO Decision 4.1 (Valuation of Carrier Media 
bearing Software for data processing equipment) for Pen drives."  The question is reproduced in the Annex to Doc. VT0850E1a.  In order to be consistent with the terminology used in the 
Harmonized System, the devices in question are referred to in this document as "USB flash 
drives".  
II. SECRETARIAT COMMENTS 
2. WTO Decision 4.1 was adopted by the Committee on Customs Valuation (CCV) at its tenth 
meeting held on 24 September 1984.  The Decision, (available in the WCO Valuation Compendium), gives WTO members the option to only take into account the cost or value of the carrier media itself in determining the Customs value of imported carrier media bearing data or 
instructions.   
3. Decision 4.1 states that the expression "carrier medium" does not include integrated 
circuits, semiconductors and similar devices or articles incorporating such circuits or devices.  
In GATT working documents detailing CCV discussion s and Members’ comments prior to the issue 
of Decision 4.1, an opinion was given that the Decision would not apply to data processing equipment which incorporates data or instructions.  An example was given of a calculator 
containing an integrated circuit with the necessary programmes and data which should be valued 
inclusive of the value of its programming.  This is an explanation why the Decision states that the expression "carrier medium" does not include integrated circuits, etc. 
4. In the supporting statement from the Chairman of the CCV at the meeting of 
24 September 1984, it was recognised that the carrier media is incidental in such transactions as 
the prime purpose for the importer is to gain access to the software and that the carrier media is a temporary means of storing the data or instructions.  It is also noted that the software may be 
transferable via wire or satellite when the issue of Customs duties does not arise.  
5. The Decision does not define types of carrier media, however, typically, it has been applied 
to compact discs (e.g. CDs, CD-ROMs and DVDs) and magnetic tapes.  
6. Uruguay point out that a USB flash drive can be considered as a means of temporary 
storage for software.  They note, however, th at these devices contain "integrated circuits, 
semiconductors or similar devices" which are expressly excluded from this provision.   This raises a contradiction in that, on the latter point alone, the Decision would not be applicable to such 
devices.  Yet, it can be argued, a USB flash drive fulfils the description of being a temporary 
storage device. 
7. For background, the extract below, taken from the Harmonized System, 2012, provides 
information on the classification of USB flash drives.  It confirms that these devices are classified 
as semiconductor media.  It is also noted that, unlike optical media (e.g. CDs), there is no distinction between recorded and unrecorded media.  G/VAL/W/229 
 
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  Extract from Harmonized System 2012 
85.23 - Discs, tapes, solid-state non-volatile storage devices, "s mart cards" and other media for 
the recording of sound or of other phenomena, whether or not recorded, including matrices and 
masters for the production of discs, but excluding products of chapter 37. 
  -  Magnetic media: 8523.21  - - Cards incorporating a magnetic stripe 
8523.29  - - Other 
                - Optical media: 8523.41  - - Unrecorded 
8523.49  - - Other 
               - Semiconductor media: 8523.51  - - Solid-state non-volatile storage devices 
8523.52  - - "Smart cards" 8523.59  - - Other 8523.80  - Other 
(C)  Semiconductor Media 
Products of this group contain one or more electronic integrated circuits. 
Thus, this group includes: (1)    Solid-state, non-volatile data  storage devices for recording data from an external source  
(See Note 4 (a) to this chapter).  These devices (also known as "flash memory cards" or "flash electronic storage cards") are used for recording da ta from an external source, or providing data to, 
devices such as navigation and gl obal positioning systems, data collection terminals, portable 
scanners, medical monitoring appliances, audio reco rding apparatus, personal  communicators, mobile 
phones, digital cameras and automatic data processi ng machines.  Generally, the data are stored 
onto, and read from, the device once it has been co nnected to that particular  appliance, but can also 
be uploaded onto or downloaded from an  automatic data processing machine. 
The media use only power supplied from the appliances to  which they are connected, and require no battery. 
These non-volatile data storage devices are comprised of , in the same housing, one or more flash memories 
("FLASH E
2PROM/EEPROM") in the form of integrated circ uits mounted on a printed circuit board, and 
incorporate a connecting socket to a host applianc e.  They may include capacitors, resistors and a 
microcontroller in the form of an in tegrated circuit.  Example of solid state non-volatile storage devices are 
USB flash drives. 
 
8. The Secretariat notes that Decision 4.1 was issued over 28 years ago and that information technology has changed considerably over that peri od, in relation to both software and hardware 
and also the development of the internet for software transmission.   
III. CONCLUSION 
9. Members are invited to submit written comments to the Secretariat not later than 
3 September 2012 .  Comments received in response to this document will be published and 
circulated to Members of the Technical Committee for consideration at the 35th Session.  
10. The Secretariat kindly requests Members to send their comments in electronic form where 
possible (Email address:  valuation@wcoomd.org).  
 
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