Xerox’s using of arm’s length market price method for foreign transfers seems fair.The method conforms to the US tax laws and to the OECD guidelines, which are alsoadopted by many non-OECD governments, too. OECD has 30 member countries,while Xerox operates in more than 160 countries worldwide. Therefore, that wouldmean such a transfer pricing strategy carries a greater taxation risk than solutionstailored to each country. Xerox could suffer double taxation or penalties in somecountries. Also, there are many different ways of calculating the arm’s length price.We can see three traditional methods introduced in the textbook: Comparableuncontrolled price method, Resale price method, and Cost-plus method. There aresome other non-traditional methods that are based on OECD guidelines and may beaccepted by US or some other foreign governments. For examples, the Profit Splitmethod, the Transactional Net Margin method, or APA, Advance Pricing Agreement.Xerox may want to explore all the possible alternatives and choose the best method indetermining the arm’s length price. We also suggest Xerox can use some outsideconsultants in dealing with the transfer pricing and regulation issues. Many bigaccounting firms, such as Deloitte and KPMG, provide these services. Xerox mayconsider using the transfer pricing softwares developed by these accounting firms.Some enterprise system providers, like Oracle, also have good transfer pricingsoftware that may be very helpful for the companies.