Export Promotion, Incentives and Trade Facilitation

Introduction

International trade does not depend only on a firm’s ability to produce a competitive product. Exporters must also understand customs procedures, documentary requirements, market-access arrangements, taxation, logistics, regulatory controls and government-supported promotion. Export promotion and trade facilitation seek to reduce avoidable costs and uncertainty while ensuring that goods, money and information move lawfully across borders.

Export incentives can improve international competitiveness, but they are not automatically beneficial. An incentive may be conditional on domestic value addition, export performance, origin requirements, end use, documentation or compliance with international subsidy rules. A poorly controlled claim can result in recovery of benefits, interest, penalties, shipment delays, loss of licences and reputational damage. The professional export manager therefore evaluates both commercial advantage and compliance exposure.

This chapter examines export incentives, duty remission, special economic zones (SEZs), free-trade agreements (FTAs), trade fairs, export councils, single-window systems and authorised economic operator (AEO) programmes. Because legal names and rates differ by country, the discussion uses general principles. In practice, the exporter must consult the current legislation, customs notifications, tax rules and official guidance of the relevant jurisdictions.

Learning Objectives

After completing this chapter, the learner should be able to:

1. Explain the rationale, forms and limitations of export-promotion measures.
2. Distinguish duty drawback, duty remission, tax refunds and export subsidies.
3. Evaluate the operational advantages and compliance responsibilities of SEZs and FTAs.
4. Design a practical approach to trade fairs and export councils.
5. Explain the architecture and benefits of single-window systems and AEO programmes.
6. Calculate the basic commercial effect of a remission or incentive and identify costs that must not be ignored.
7. Recommend a compliant export-promotion strategy for a business.

1. Export Promotion as a Policy and Management System

Export promotion consists of public and private actions intended to increase the capability, visibility and market access of domestic firms. Governments may provide information, finance, infrastructure, tax treatment, training, diplomatic support or simplified procedures. Business associations, export councils, logistics providers, banks and technology platforms also contribute.

The policy rationale commonly includes:

• diversification of markets and foreign-exchange earnings;
• employment and industrial development;
• learning from international competition;
• integration into global value chains;
• development of small and medium-sized enterprises; and
• attraction of investment and technology.

A sound export-promotion system should be transparent, targeted, non-discriminatory where required, fiscally sustainable and compatible with international commitments. Incentives should address genuine market or coordination failures rather than permanently protecting inefficient firms. They should also avoid encouraging false invoicing, over-exporting, trans-shipment or the shipment of goods that have no sustainable market.

At firm level, export promotion is a management process rather than a search for the largest available benefit. The exporter should ask four questions:

1. Is the product eligible?
2. Is the destination and transaction structure eligible?
3. Can the firm prove eligibility through reliable records?
4. Does the benefit exceed the administrative, financial and compliance costs?

2. Major Categories of Export Incentives

2.1 Fiscal and customs-related measures

Common measures include:

• Duty drawback: repayment of customs duty paid on imported inputs that are incorporated into exported goods or consumed in producing them.
• Duty remission: relief from duties or taxes to the extent that they represent taxes on inputs used in exported products. Remission is normally intended to remove domestic taxes from exports, not to provide an excess advantage.
• Temporary admission or inward processing: imported goods enter with suspended or relieved duties for processing and subsequent re-export.
• Tax refund or zero-rating: domestic consumption taxes may be refunded or not charged on exports, subject to evidence of export.
• Export finance and credit insurance: concessional or supported finance and protection against commercial or political non-payment.
• Investment or infrastructure incentives: reduced charges, serviced land or tax treatment associated with export-oriented production.

The legal classification matters. A measure that merely neutralises duties on exported goods is treated differently from a benefit contingent on export performance. International rules, regional agreements and domestic law may restrict certain export subsidies, particularly where they distort competition.

2.2 Information, capability and market-development support

Non-fiscal measures may include product testing, standards training, market intelligence, buyer-seller meetings, branding assistance, e-commerce support, trade missions and participation in international exhibitions. These are often less controversial than direct financial incentives and can generate long-term capability if they are linked to measurable business development.

2.3 Incentive design principles

An effective incentive should have:

• a clearly defined beneficiary and eligible transaction;
• a published legal basis and validity period;
• objective eligibility criteria;
• a transparent application and appeal process;
• controls against double benefits;
• audit-ready documentation; and
• periodic evaluation of additional exports, employment, fiscal cost and compliance outcomes.

The phrase “export incentive” should never be interpreted as permission to misstate value, origin, classification or destination.

3. Evaluating the Economics of an Incentive

An incentive should be assessed on an incremental basis. The relevant question is not “How much is the benefit?” but “How much additional value remains after all costs and risks?”

A basic incremental net-benefit expression is:

where:

• NB = incremental net benefit in monetary units;
• B = expected incentive or facilitation benefit;
• C_a = application, documentation and administration cost;
• C_f = financing, logistics or operational cost caused by using the scheme; and
• C_r = expected compliance and dispute cost.

The expression is a managerial decision tool, not a statutory formula. It assumes that all terms are measured over the same period and in the same currency. Expected compliance cost can be estimated as the probability of an adverse event multiplied by its financial consequence, although reputational and operational effects may be difficult to monetise.

Worked example: remission decision

An exporter imports eligible components and pays 120,000 currency units in duty. It expects a remission of 100,000. Additional records and professional support cost 18,000, financing cost is 4,000 and the estimated expected compliance cost is 3,000.

The estimated net benefit is 75,000 currency units. The calculation does not prove eligibility. Before claiming, the firm must verify that the imported components, production process, export evidence and time limits satisfy the applicable scheme.

A broader performance assessment may compare the incentive with export sales, value added, employment or fiscal cost. Such ratios are useful for policy evaluation but must be interpreted carefully because exports may have occurred without the incentive.

4. Duty Remission, Drawback and Tax Neutrality

4.1 The principle of neutrality

In a well-designed system, exports are not burdened with domestic taxes and duties that apply to domestic consumption. This permits the exporter to compete abroad without embedding internal taxation in the export price. Neutrality does not mean that every cost is refundable. Import duties on non-exported goods, domestic income taxes, penalties and unrelated overheads are generally treated differently.

4.2 Duty drawback

Under drawback, the exporter first pays eligible import duties and later claims repayment. The claim may be based on actual input-output records or, where law permits, standard input coefficients. Actual systems may distinguish manufacturing drawback, unused-goods drawback and simplified or fixed-rate drawback.

Important controls include:

• correct tariff classification of imported and exported goods;
• proof that the goods were exported within the prescribed period;
• reconciliation of quantities and wastage;
• evidence that the claimant paid the original duty;
• avoidance of duplicate claims; and
• retention of customs, production and shipping records.

4.3 Remission and inward processing

Inward processing may suspend or relieve duties when imported materials are processed and re-exported. It can improve cash flow because duty is not paid permanently on qualifying inputs. However, diversion of goods into the domestic market may trigger duty, tax, interest and penalties. Inventory controls, authorisation conditions and discharge declarations are therefore essential.

4.4 Common failure points

Claims fail when firms:

• use an outdated rate or notification;
• confuse shipment date with export-clearance date;
• claim on inputs not actually used in the exported product;
• cannot connect purchase, production and export records;
• overlook minimum processing requirements;
• claim both remission and another incompatible benefit; or
• rely on a broker without internal review.

The exporter should maintain a benefit register showing scheme name, legal basis, eligibility, claim status, supporting evidence, responsible employee and review date.

5. Special Economic Zones

A special economic zone is a geographically defined area operating under a distinct economic, regulatory or administrative framework intended to attract investment, promote exports and develop industrial capacity. Variants include free zones, export-processing zones, technology parks, bonded zones and sector-specific zones.

5.1 Potential advantages

SEZ enterprises may receive:

• customs-controlled import and export procedures;
• duty or tax treatment for eligible transactions;
• ready infrastructure and logistics services;
• simplified licensing or approvals;
• access to clusters, suppliers and skilled labour; and
• facilitated repatriation or foreign-exchange arrangements, subject to law.

The real advantage may be operational rather than fiscal: shorter clearance time, reliable utilities, shared testing facilities and proximity to ports or airports.

5.2 Compliance architecture

Zone status normally brings additional obligations. A zone enterprise may need to control:

• entry and exit of raw materials and finished products;
• inventory by lot, quantity and value;
• waste, scrap and by-products;
• transfers between zone units;
• domestic sales and the associated duty treatment;
• security and access to premises;
• annual performance or export reports; and
• records available for customs inspection.

A zone does not automatically confer preferential origin. Goods manufactured in a zone qualify for an FTA preference only if they satisfy the agreement’s origin rules. Nor does zone status remove product-safety, labour, environmental, sanctions, tax or intellectual-property obligations.

5.3 Strategic evaluation

Management should compare total landed-cost reduction with the cost of establishing and operating in the zone. Relevant costs include lease charges, security, minimum employment, compliance staff, movement restrictions, distance from suppliers, domestic-sale duties and possible loss of flexibility. A zone is valuable when it improves the complete supply-chain proposition, not merely when its headline tax rate is attractive.

6. Free-Trade Agreements and Preferential Origin

An FTA reduces or eliminates trade barriers among participating economies. It may cover tariffs, services, investment, government procurement, intellectual property, digital trade, technical barriers, sanitary measures and dispute settlement. Preferential access is conditional: the importer receives a lower tariff only when the product meets the agreement’s rules and documentary requirements.

6.1 The origin decision

Origin is not simply the country from which goods are shipped. It concerns where the goods were wholly obtained or sufficiently produced. Typical rules include:

• wholly obtained criteria for natural products;
• change in tariff classification;
• regional value-content requirements;
• specified manufacturing processes;
• combinations of these tests; and
• product-specific rules.

A generic regional value-content calculation may be expressed as follows:

where V is the customs value of the exported product and [[M||||N]] represents the value of non-originating materials under the particular agreement’s prescribed method. Different FTAs define the variables and valuation method differently; therefore this expression must not be applied without reading the agreement. If the required threshold is 40% and the calculated value is 43%, the product may satisfy that particular test, subject to all other conditions.

The formula is dimensionless because numerator and denominator are expressed in the same currency. It may be unsuitable where the agreement requires a net-cost method, build-down method, tariff shift or specified process instead.

6.2 Practical FTA workflow

1. Identify the importing country and applicable agreement.
2. Determine the product’s HS classification accurately.
3. Read the product-specific rule of origin.
4. Map every input to its supplier, origin and value.
5. Test regional value content or tariff shift.
6. Confirm direct transport, minimal operations and consignment requirements.
7. Obtain the prescribed proof of origin or maintain an approved self-certification.
8. Monitor changes in tariff schedules and origin rules.
9. Retain records for the required period.

6.3 Commercial and compliance risks

An FTA may create a competitive advantage, but the preference may be smaller than expected if the normal tariff is already low. The exporter must also consider documentation costs, supplier declarations, origin audits, anti-circumvention rules and the risk that a preference will be denied at importation. A false certificate can expose both exporter and importer to recovery and enforcement.

7. Trade Fairs, Missions and Export Councils

Trade fairs are structured market-development environments in which exporters display products, meet distributors and gather intelligence. Their value depends on preparation and follow-up rather than the number of visitors at the stand.

7.1 The trade-fair cycle

Before the fair: define target markets, customer profiles and measurable objectives; verify buyer credentials; prepare samples, price lists, certifications and delivery terms; train staff; and protect confidential information.

During the fair: qualify leads by application, volume, destination, decision authority, required standards and purchase timetable. Record consent for follow-up and avoid unsupported claims about origin, safety, environmental performance or delivery capability.

After the fair: classify leads, send technically accurate quotations, test samples, conduct due diligence, negotiate Incoterms and payment security, and measure conversion.

Useful indicators include qualified leads, sample-to-order conversion, cost per qualified lead, expected gross margin and repeat-order rate. These measures should distinguish publicity from commercially credible opportunities.

Export councils and trade-promotion organisations may provide market intelligence, collective branding, standards guidance, trade missions, dispute support and government liaison. They may also issue or facilitate certificates, but membership does not replace the exporter’s legal responsibility. The exporter remains responsible for classification, origin, product conformity, sanctions screening and truthful documentation.

8. Single-Window Systems and Digital Trade Facilitation

A single-window system allows traders to submit standardised trade information through one entry point so that participating government agencies can process it in a coordinated manner. The system may connect customs, port authorities, standards agencies, health authorities, tax administration, banks and licensing bodies.

8.1 Core design principles

A mature single window requires:

• one-time submission and reuse of data;
• harmonised data definitions and code lists;
• electronic signatures and legally recognised records;
• interoperability among agencies;
• risk-based rather than purely manual inspection;
• status tracking and notifications;
• cybersecurity, access control and audit logs; and
• business-continuity arrangements for outages.

A single window is not merely a website. If agencies require contradictory data, duplicate certificates or manual re-entry, the system has not achieved genuine facilitation.

8.2 Benefits and limitations

Benefits may include fewer documents, lower data-entry error, faster release, better visibility and more consistent risk management. Limitations include high implementation cost, legacy systems, poor data quality, unequal access for small firms, privacy concerns and cyber risk. Automation can accelerate an incorrect declaration; it does not make the declaration truthful.

Artificial intelligence may assist in document classification, anomaly detection and risk targeting, but human accountability remains necessary. Models should be tested for false positives, discriminatory effects, explainability and data security. A trader should retain the underlying commercial evidence rather than relying solely on an automated approval message.

9. Authorised Economic Operator Programmes

An AEO programme recognises businesses that demonstrate reliable customs compliance, sound record-keeping, financial standing, supply-chain security and appropriate internal controls. The precise criteria differ by customs administration. Some programmes distinguish customs simplification, security, or combined status.

9.1 Typical eligibility domains

Authorities may assess:

• history of customs compliance;
• accounting and record systems;
• solvency and financial reliability;
• competence and training;
• premises and cargo security;
• personnel screening;
• information-technology security;
• business-partner controls; and
• crisis and incident-management procedures.

Benefits may include fewer physical inspections, priority treatment, simplified declarations, reduced guarantees, service contacts or mutual recognition with partner administrations. Benefits are conditional and can be suspended or withdrawn.

9.2 Governance implications

AEO status should be treated as a continuing control framework, not a certificate kept in a file. The firm should appoint an owner, document procedures, conduct internal audits, investigate discrepancies, control subcontractors and notify the authority of material changes. A merger, new warehouse, major software change or serious compliance incident may affect eligibility.

AEO programmes illustrate a shift from transaction-by-transaction control to trusted-trader governance. Trust is earned through evidence. A company with excellent physical security but poor tariff classification is not a reliable customs partner.

10. Integrated Compliance Management

Export incentives and facilitation programmes intersect. A firm using an SEZ, FTA preference, duty remission and AEO benefits must prevent inconsistent data across systems. An integrated control framework should include:

1. Product master data: HS code, technical description, origin, licences and valuation.
2. Supplier evidence: origin declarations, invoices, bills of materials and certifications.
3. Transaction controls: screening, terms of sale, valuation, export authorisation and document review.
4. Reconciliation: imports, production, inventory, exports and claims.
5. People and training: clear responsibilities and escalation procedures.
6. Monitoring: internal audits, exception reports and corrective action.
7. Record retention: secure, accessible and legally adequate records.

A three-lines model is useful. Operational staff perform controls; compliance or trade specialists review and advise; internal audit independently tests the system. External brokers can support filing but cannot transfer legal responsibility.

Ethical and regulatory considerations

Managers must resist pressure to obtain benefits through false origin, undervaluation, misclassification, duplicate claims or artificial routing. They should consider labour conditions, environmental effects, forced-labour restrictions, sanctions, anti-bribery rules, data protection and responsible use of public funds. Export promotion is ethically defensible when it improves legitimate productivity and market access, not when it hides exploitation or transfers risks to the public.

11. Illustrative Case: Meridian Components Ltd.

Background

Meridian Components Ltd., a fictional mid-sized manufacturer, exports electrical control units. It imports specialised sensors, operates near a customs-controlled industrial zone and sells to buyers in a country linked by an FTA. Management is considering duty remission, preferential origin, AEO application and participation in a major trade fair.

Problem

The company’s records identify imported sensors by purchase order but do not connect them consistently to production batches. Sales staff also assume that manufacturing in the zone automatically qualifies the finished units for preferential origin. Previous claims were prepared by a broker, and the company has no formal post-clearance review.

Analysis

The firm faces four risks. First, it may be unable to prove the quantity of imported inputs used in exported goods. Second, zone status does not itself establish FTA origin. Third, a preferential claim could be rejected if the product-specific rule is not met. Fourth, weak records may prevent AEO approval and expose earlier claims to audit.

Approach and solution

Meridian establishes a cross-functional trade-compliance team. It:

• confirms the HS classification and product-specific origin rule;
• maps each sensor and other input to suppliers and origin evidence;
• creates batch-level inventory and production reconciliation;
• determines whether the required tariff shift or regional value content is met;
• separates zone inventory from goods released for domestic sale;
• introduces a pre-claim checklist and independent review;
• trains the broker and retains direct management oversight;
• applies for AEO status only after testing its controls; and
• attends the trade fair with technically accurate product and compliance information.

The company also calculates the net value of each programme after staff time, software, audit and financing costs. It does not claim an FTA preference until the origin file is complete.

Outcome

In this illustrative case, Meridian reduces documentation errors, obtains faster clearance after strengthening its controls and secures qualified trade-fair leads. One product line fails the FTA origin test, so the company quotes the normal tariff rather than making an unsupported preference claim. Although this reduces the immediate marketing advantage, it avoids a potentially costly origin dispute and identifies a redesign opportunity using regional inputs.

Learning points

The case demonstrates that facilitation benefits are earned through data quality and governance. A legally available incentive may be rejected if evidence is inadequate. Commercial teams, production, procurement, logistics, finance and compliance must work from consistent product and transaction data.

12. Contemporary Developments and Best Practices

Trade facilitation is moving toward paperless trade, interoperable digital certificates, advance data analytics, electronic transferable records and mutual recognition of trusted-trader status. Supply-chain disruption has also increased interest in resilience, alternative sourcing and real-time visibility. Sustainability requirements increasingly affect market access through due-diligence rules, carbon reporting, packaging obligations and forced-labour controls.

Best practice is to:

• obtain guidance from the competent authority before relying on a scheme;
• maintain a current legal and tariff database;
• classify products using technical evidence, not sales descriptions;
• document origin at input level;
• reconcile customs declarations with enterprise-resource-planning data;
• separate eligibility review from commercial pressure;
• test controls through periodic internal audits;
• monitor brokers, freight forwarders and suppliers;
• report errors voluntarily where law permits and requires correction; and
• review whether the incentive remains economically worthwhile.

The strategic objective is not maximum claims. It is compliant landed-cost competitiveness: delivering the right product to the right market at an attractive total cost, with reliable evidence and acceptable legal risk.

Chapter Summary

Export promotion combines fiscal measures, customs arrangements, market-development support, infrastructure and trusted-trader systems. Duty drawback and remission can neutralise eligible duties and taxes, but only when input use, export evidence and claim conditions are proven. SEZs may provide infrastructure and customs advantages, yet zone status does not automatically establish preferential origin or remove wider regulatory duties.

FTAs create opportunities through lower tariffs, but preference depends on classification, product-specific origin rules, transport conditions and valid proof. Trade fairs and export councils support market intelligence and buyer development; their success depends on preparation, lead qualification and disciplined follow-up. Single-window systems reduce duplication by coordinating government data and processes, while AEO programmes reward firms with demonstrably secure and compliant supply chains.

Across all programmes, the central managerial task is to balance benefit, cost and risk. Accurate master data, traceable records, trained personnel, internal audit and ethical conduct are essential. Technology can simplify trade, but it cannot replace truthful declarations or accountable judgment.

Key Terms

Export promotion: Public and private measures designed to increase export capability, market access or competitiveness.

Duty drawback: Repayment of eligible import duties after qualifying goods or inputs are exported.

Duty remission: Relief from duties or taxes on qualifying inputs used in exported products.

Inward processing: A customs procedure allowing imported goods to be processed with suspended or relieved duties for export.

Tax refund: Repayment of eligible domestic or import taxes under prescribed conditions.

Special economic zone: A defined area with specialised economic, customs or administrative rules.

Free-trade agreement: An agreement that reduces trade barriers among participating economies.

Preferential origin: Origin status that permits use of a reduced tariff under an agreement.

Regional value content: The proportion of a product’s value attributable to qualifying regional production.

Tariff classification: Assignment of goods to codes in the Harmonized System or a national tariff.

Trade facilitation: Simplification, modernisation and harmonisation of import and export procedures.

Single window: A coordinated electronic entry point for submitting standardised trade information.

Authorised economic operator: A trusted trader meeting customs requirements for compliance and supply-chain security.

Trade fair: An organised event where firms display products and develop commercial relationships.

Export council: An organisation supporting exporters through information, representation and market development.

Compliance risk: The possibility of loss or enforcement action arising from failure to meet legal requirements.

Proof of origin: Documentary or electronic evidence supporting a product’s origin claim.

Landed cost: The total cost of delivering goods to the destination, including applicable logistics, duties and related charges.

Review Questions

Short Answer Questions

1. What is the central distinction between an export incentive and an export subsidy?
2. Why does SEZ membership not automatically establish preferential origin?
3. State four records that may support a duty-remission claim.
4. What is the purpose of a single-window system?
5. Why must AEO status be treated as a continuing control framework?

Long Answer Questions

1. Explain the main categories of export incentives and evaluate their advantages and limitations.
2. Describe the workflow for determining whether an export qualifies for an FTA preference.
3. Discuss the operational and compliance implications of operating in a special economic zone.
4. Explain how a single-window system can improve trade facilitation and identify its limitations.
5. Compare the roles of export councils, trade fairs and AEO programmes in export development.

Analytical / Application Questions

1. An exporter receives a proposed remission of 80,000 currency units but expects administration costs of 15,000, financing costs of 5,000 and expected compliance costs of 4,000. Calculate the incremental net benefit and state what additional information is needed before claiming.
2. A company manufactures in an SEZ using imported materials and sells under an FTA. Develop a compliance checklist covering zone controls, origin, customs valuation and records.
3. A firm’s broker has claimed FTA preferences for three years, but supplier origin declarations are incomplete. Recommend an immediate investigation and remediation plan.

Multiple Choice Questions with Answers

Question 1

What is the primary purpose of duty remission on inputs used in exported goods?

A. To provide an unlimited export bonus

B. To neutralise eligible duties and taxes borne by exports

C. To eliminate all domestic corporate taxes

D. To guarantee a foreign buyer’s payment

Correct Answer: B. To neutralise eligible duties and taxes borne by exports

Question 2

Which statement about a special economic zone is correct?

A. Zone status automatically confers FTA origin

B. Zone enterprises are exempt from all national laws

C. Zone status may provide customs and infrastructure advantages subject to conditions

D. Zone goods may always enter the domestic market duty-free

Correct Answer: C. Zone status may provide customs and infrastructure advantages subject to conditions

Question 3

Which factor is essential when claiming an FTA preference?

A. The goods were advertised at a trade fair

B. The goods satisfy the applicable rules of origin

C. The exporter belongs to an export council

D. The shipment used air transport

Correct Answer: B. The goods satisfy the applicable rules of origin

Question 4

In the expression NB = B − Cₐ − Cᶠ − Cᵣ, what does Cᵣ represent?

A. Expected compliance and dispute cost

B. Customs revenue collected

C. Regional value content

D. Export sales revenue

Correct Answer: A. Expected compliance and dispute cost

Question 5

Which activity is most appropriate before participating in a trade fair?

A. Avoid defining target buyers

B. Prepare buyer profiles, evidence and measurable objectives

C. Promise delivery dates without checking capacity

D. Disclose confidential product designs publicly

Correct Answer: B. Prepare buyer profiles, evidence and measurable objectives

Question 6

A single-window system is designed primarily to:

A. Replace all customs laws

B. Allow coordinated submission of standardised trade information

C. Guarantee that every shipment avoids inspection

D. Transfer legal responsibility to software

Correct Answer: B. Allow coordinated submission of standardised trade information

Question 7

Which characteristic is normally associated with an AEO programme?

A. Demonstrated customs compliance and supply-chain security

B. Automatic exemption from product standards

C. Permission to make unsupported origin claims

D. Removal of all record-keeping duties

Correct Answer: A. Demonstrated customs compliance and supply-chain security

Question 8

A product has a required regional value-content threshold of 40% and a valid calculated value of 43%. Subject to the agreement’s other conditions, what is the likely result?

A. The threshold is not met

B. The threshold is met

C. The product is automatically prohibited

D. The product must pay double duty

Correct Answer: B. The threshold is met

Question 9

Which is a common reason for rejection of a duty-remission claim?

A. Accurate reconciliation of inputs and exports

B. Complete proof that the original duty was paid

C. Failure to connect imported inputs with exported production

D. Use of an authorised electronic record

Correct Answer: C. Failure to connect imported inputs with exported production

Question 10

Why should managers calculate the net benefit of an incentive rather than consider only its headline amount?

A. Administration, financing and compliance costs may reduce or eliminate the advantage

B. Headline benefits are always illegal

C. Net benefit calculations replace origin rules

D. Incentives have no commercial effect

Correct Answer: A. Administration, financing and compliance costs may reduce or eliminate the advantage