Transfer Pricing Adjustments and Differential Products
The Chinese company is a wholly foreign-owned enterprise, producing and selling chemical products. It obtained 8% of its raw materials from, and sold 60% of its finished products to, related foreign companies. All product orders were placed by the parent foreign company. In addition, the company paid 5% royalty fees to the parent company based on its sales revenue. Of that payment, 3% was for a technical fee, and 3% for a trademark fee, as depicted in Fig. 30.1.