An organization that sells products to a foreign subsidiary wants to charge a price that will decrease import tariffs. Which of the following is the best course of action for the organization?
Per CFI: Transfer pricing helps in reducing duty costs by shipping goods into countries with high tariff rates by using low transfer prices so that the duty base of such transactions is lowered.
So maybe it's A. I don't see how charging them the market price (arm's length) LOWERS the tariffs. A tariff is a percentage of whatever you sell at any price. So if it's 10% of $100, it's $10 - but if you LOWER the sale price to $50, it's 10% of $50, which is $5, ergo: Decreasing the transfer/sale price will also LOWER/DECREASE the tariffs.
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