Braxton Consulting

A company (we can call it Clean Company, CC) is in the business of manufacturing and selling a line of
clean products to industrial users. Its products are not patented and the manufacturing process is long-established and well-known. It sells to industrial customers who rely on DSAG for technical assistance and advice regarding difficult cleaning problems. CC’s salesmen are on 24-hour call to assist customers within
30 minutes of a request. DSAG has developed training programmes and a service manual that it provides to its sales force.

CC has decided to establish a wholly-owned subsidiary in Argentina. The subsidiary will purchase products manufactured by CC (in Spain) and will be responsible for sales and services in the Argentinan market. CC intends to train the Argentinian subsidiary’s sales force and to provide a copy of the service manual for each
member of its Argentinian sales force.

From an inter-company pricing standpoint, the intangible of value is the ability to provide service to the customer. The transfer of this intangible to the Argentinian subsidiary should be accompanied by an arm’s length payment to the Spanish parent.