Question:
The fabric supplier is an FDI enterprise operating under the export processing model. During the process of exporting fabric materials to us, there arises a situation in which a quantity of goods is supplied free of charge (FOC goods). This FOC quantity was declared under an export declaration using the payment method "no payment."
In this case, we would like to seek advice on the following issues:
1. Is the supplier required to report to the Department of Industry and Trade regarding the export of FOC goods along with commercial goods as described above?
2. Does the revenue related to these FOC goods pose any risk for us in terms of losing location-based investment incentives?
3. In the event that we are able to demonstrate that the FOC goods were disposed of (as industrial waste) in accordance with the provisions of the Customs Law, would the risk mentioned in item 2 still be applicable?
Answer
1. In essence, FOC goods are considered promotional goods. Whether the supplier is required to report to the Department of Industry and Trade depends on the exceptions to the obligation to notify promotional activities, as provided under Points a and b, Clause 1, Article 17 of Consolidated Document No. 26/VBHN-BCT dated 24 October 2024. Specifically, promotional activities that are exempt from notification include:
- Promotions conducted in the forms of giving goods or providing services free of charge; selling goods or providing services at prices lower than previously offered; selling goods or providing services with accompanying shopping vouchers or service use coupons.
- Promotions conducted in the following forms:(a) Selling goods or providing services with attached contest entry forms for customers to participate in prize draws in accordance with announced rules and prizes; (b) Organizing frequent customer programs and rewarding customers based on the quantity or value of goods/services purchased, in the form of membership cards, purchase records, or other forms, provided that the total value of prizes or gifts does not exceed VND 100 million.
2. As the nature of the FOC goods is promotional (and considered income generated from activities not directly related to the company’s core business or investment operations), the revenue derived from these FOC goods is not eligible for location-based investment incentives
