production sharing

Definition

An agreement to share the production or extraction costs between two governments, a government and a corporation, or a corporation and an individual. This can be accomplished when two countries agree to allow certain raw materials to be shipped tariff free from the first country to the second country where the materials are manufactured into a finished product. That product is then shipped back, tariff free, to the original country. In oil or mineral extraction, the company doing the extraction is paid in oil or minerals as compensation for business costs as well as a share of the profit.

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