Question

A US company wants to outsource software development to India. Will the US company have to pay import duties on the software? If so, what is the tax or range?

Answer

Electronic transmission and data exchange have evolved at an alarming rate in the last ten years. Mulit-million dollar projects are outsourced and completed overseas with the final result often delivered simply by email or FTP. The US International Trade Commission addresses the import of data in a some what archaic manner by exempting electronic tele-communications under General Note 16(b) of the HTSUS. Data imported in a physical form (on CD or diskette), however, is dutiable under the classification of the physical media itself. It is important to realize that value of the data contained in physical media may directly influence the value of the media itself. An importer importing a $0.50 cent compact disc containing a $30,000 software bundle may be liable for paying import duties as a percentage of the $30,000.

Importers considering outsourced software projects should also note that imports and exports of cryptographic hardware and software are regulated by the Bureau of Industry and Security.

Please note: This article is intended for informational purposes only and is not specific legal advice. As