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Date
Rule
802.50
Staff
Michael Verne
Response/Comments
Since the product cost is not that of a product produced by the company, but rather a core cost of the unrepaired product, it should not be included in the amount of the sale from the foreign repair facility to the US facility. Include only the value of the repair.

Question

From: [redacted]
To: mverne@ftc.gov
Date: 3/22/02
Subject: Intercompany sales question

Mike: this follows on my questions of last week regarding calculating intercompany sales under the new 802.50 exemption.

In our clients case, product is shipped to its facility out of the US, repaired and shipped back to either the US or other distribution centers other than the US. The questions involves how they book the product into the repair facility:

The cost of the product is booked in as a cost when shipped to the facility and booked as a sale when it is shipped out. So that intercompany sales reflect this wash of the cost of product, plus the repair plus a markup. The cost of the product is a large part of the intercompany sales figures. Because it is a wash, the company feels that it ought not to count towards the exemption threshold. My reading was that we dont look to the other side of the book to determine sales but I told them I would run it by you. Ill be in early Monday AM. Thanks, [redacted].

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