Companies have an incentive to lower the transfer prices of products they are exporting into a country to reduce the tariffs and customs duties charged on those products.

Question

Quizplus · Accepted Answer

When transfer prices are lowered, it reduces the value of the product being imported into a country, which in turn reduces the customs duties and tariffs charged on the product by the importing country, benefiting the company. Therefore, companies have an incentive to lower transfer prices of their products to decrease the cost of importing into a country.

Companies Have an Incentive to Lower the Transfer Prices of Products