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Petitioners’ expert opined that DHLI delivery costs are
greater than DHL’s because of the higher airport costs,
complication of delivery in foreign countries, and the greater
distances. He concludes that the difference in delivery costs is
so great that, without considering the excess shipments or
imbalance, DHL should owe DHLI. The magnitude of the expert’s
approach is illustrated by the difference in a single year. For
the 1990 year, under DHL and DHLI’s agreement, DHL handled more
shipments for DHLI than the reverse, and DHLI owed about $10.1
million, including the weighted cost and a 2-percent markup.
Under petitioners’ expert’s approach, DHL would owe DHLI about
$32.3 million, a difference of over $42 million or four times the
amount agreed to by DHL and DHLI for a single year.
We cannot accept the premise or reasoning advanced by
petitioners’ expert for a “gross up” of the parties’ reciprocal
costs as representing an arm’s-length relationship. Petitioners’
expert seems to be contending that his approach is appropriate
for controlled corporations, but he has not explained why it is
representative of an arm’s-length approach. Additionally,
respondent has not questioned the cost approach used by
petitioners for the imbalance, only the markup rate that was
used.
The record here does not support petitioners’ expert’s
supposition. The parties to the agreement did not intend or
expect that one party or the other would always suffer the
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