Applying Rules of Origin and FTA Benefits to Free-of-Charge (FOC) Goods and Samples Released

All goods exported free of charge, including replacement parts for after-sales service (A/S) and commercial samples, are subject to the same Rules of Origin (RoR) prescribed by the relevant FTA as commercial goods. You do not need to worry about origin determination criteria—such as Value-Added Criteria or De Minimis—being excluded or modified simply because the items are provided free of charge.

Uniform Application of Origin Determination Rules

FTA Rules of Origin focus on whether a product can be recognized as having been produced in a specific country based on its objective characteristics. This determination is centered on the following factors:

• Physical characteristics of the product
• The manufacturing and processing stages
• The origin of the raw materials used

Whether a transaction is commercial (paid) or non-commercial (free) is not a core factor in determining origin. To claim FTA benefits, the customs authorities of the importing country require proof that the goods meet the origin criteria, which necessitates the issuance of a Certificate of Origin (C/O).

Determining Value for Regional Value Content (RVC)

When applying the Regional Value Content (RVC) criteria, the "price of the goods" must be calculated using an objective and reasonable method, even for free-of-charge items. Although a Commercial Invoice may indicate a value of 'zero' for customs purposes, the RVC ratio must be calculated based on an adjusted price, such as:

• Actual manufacturing costs or standard costs
• Current market price of the goods
• Price from a previous commercial transaction

This ensures the fairness of origin rules and prevents the evasion of requirements through non-commercial transactions. It is vital to clearly document the basis for the price calculation of FOC goods when preparing origin supporting documents.

Application of the De Minimis Rule

The De Minimis rule also applies to free-of-charge goods in the same manner as commercial ones. This rule allows a product to maintain its originating status even if it contains a small percentage of non-originating materials (typically 7% or 10% of the total value). Since this threshold is based on the composition and value of the product itself, it is applied identically regardless of whether payment is made. For example, if a small amount of non-originating material in an A/S part falls within the De Minimis threshold, the part will still be considered originating.

Conclusion and Compliance Recommendation

In conclusion, all exported goods seeking FTA benefits must strictly comply with the origin determination criteria of the applicable agreement, regardless of their commercial nature. For free-of-charge goods, please remember that the actual value—not the 'zero' price on the invoice—must be reflected when calculating value-based criteria. Ensuring that supporting documents are thoroughly prepared is essential for successful FTA application and for preparing for potential origin verifications by importing customs authorities.