Tariff Refunds: What Role Should Comms Leaders Play?

Ivan Pollard: Hello everyone, and welcome to this episode of C-Suite Perspectives, the podcast from The Conference Board. I'm your host, Ivan Pollard, and I lead the Marketing & Communications Center. And joining me today is Davy Young, the president of The CEO Center, John Gardner, the head of Public Policy and Research at The CEO Center, and Denise Dahlhoff, the head of research at the Marketing & Communications Center. Excited to be with you here for this interesting conversation.

Let's go. When The Conference Board was founded back in 1916, it was about a bunch of business people getting together because the situation, the policy was affecting business, and business leaders realized if they got together they could actually start to affect policy. And that's what this series is all about, how businesses and policy interact. And of course, critical to that, right in the middle of it, is the communications function to both inform businesses what to say, but also inform the customers what to expect and how to interpret policy.

So the topic we're here to discuss is tariffs, refunds, and how a company needs to think about this. So if I start off by asking you, Denise, which companies really need to think about communications regarding tariffs and refunds? Denise Dahlhoff: It's actually more than you might think on the surface, because we might all think immediately of retail companies who import from other countries and then resell here, or even logistics companies, delivery companies that might charge their customers additionally for those tariffs.

But it's really also companies that produce in the US, because even ingredients that you import have carried tariffs, and even packaging and things like that. And what communicators really are getting involved with is in the response to now these potential tariff refunds - dealing with communications with the administration, but also managing expectations internally, for example, with the board or employees, as well as externally, especially with customers and investors, but also maybe with their suppliers, because they might be the importer of record, and the company has contracts with those importers of records to figure out whether they might be eligible for refunds.

So it's really way more companies than you might initially think, and that might affect really a broad section of the US economy. Ivan Pollard: John, let me ask you, so these tariffs started in April of last year. Could you fill us all on the Supreme Court decision regarding the legality of Liberation Day and fentanyl-related tariffs by the US Court of International Trade? What happened afterwards in the Court of International Trade?

John Gardner: Sure. Thanks very much. I want to walk everyone through where we are right now from a legal perspective, and apologies up front, because it can get a bit complicated. In Learning Resources v.

Trump back in February, the Supreme Court ruled that the fentanyl-related tariffs on Canada, China, and Mexico, and the so-called Liberation Day tariffs, which had all been imposed under something called the International Emergency Economic Powers Act, or IEEPA, are unconstitutional. Why? Because the court stated that these tariffs are taxes, and the power to tax lies only with the Congress, not the president. The Supreme Court's decision did not include an order or a process for refunds of the tariffs declared unconstitutional.

That disappointed some outside observers, but there was a procedural reason why they did that. And specifically, the court, the Supreme Court, reaffirmed the exclusive jurisdiction of the Court of International Trade, which is the specialized court on tariffs-related cases. That court then issued a ruling confirming that the tariffs refund process would be national, rather than limited to parties in the case. Because the uniformity clause in the Constitution provides that, quote, "All duties, imposts, and excises shall be uniform," end quote, throughout the United States, and that, of course, includes tariffs.

Following that decision, the Court of International Trade then ordered Customs and Border Protection, the agency in Homeland Security that had received the tariffs, to prepare a system for a quasi-automatic refund of tariffs paid under the now-invalidated tariffs, so that companies would not have to file special suits to obtain the refunds they are entitled. Denise said an important word or an important term earlier, it's importers of record. So the importers of record and customs brokers, in other words, those who actually paid the tariffs, have to file with Customs and Border Protection through an online claim portal they have set up called the Consolidated Administration and Processing of Entry system, the CAPE system.

But because of what the court said, they would not have to file separate lawsuits with the Court of International Trade to do so. In other words, the court intended all this to be a purely administrative process, far faster than regular litigation and much more favorable to small importers who are less able to bear the cost of litigation. I mean, this is hugely important, as up to 330,000 importers of record may have paid the tariffs. And then the Court of International Trade in late March also extended it to all tariffs paid under the IEEPA tariffs the court invalidated, including the so-called fully liquidated entries that had been paid much earlier in the process - say, the summer of last year.

Why? Because the Supreme Court had invalidated the tariffs in their entirety, and that's why there's potentially up to $166 billion of refunds at issue. Some reimporters who can directly trace tariffs to particular people, for instance, international package companies, have stated they will further refund tariffs paid to their customers. Other companies are already the subject of a class-action suit, but most importers of record and most companies that are in contract with them are simply waiting to either make filings in the system or to prepare their refunds.

Davy Young: John, thank you so much for that introductory situation report on where we currently stand with regards to the Supreme Court. Where do the tariffs and policies now lie, John? John Gardner: It's very interesting, Davy. It's quite in flux.

Right after the decision in Learning Resources, the president put on a 10% global tariff, 10% on all imports coming into the US, and he did so under the authority of Section 122 of the Trade Act. That, by statute, that tariff has to go away in July. It's only for 150 days. So quite recently, the administration has been trying to impose new tariffs that might replace that.

There was an investigation of up to 60 economies as to whether they had adequate protections against the importations of goods made with forced labor, and the administration said no. So there is a process now, they're actually accepting comments from business right now on proposed tariffs of 10% or 12.5% that are going into effect on these countries, probably at some point in July. There's a separate investigation against 16 economies, our top 15 importers and the European Union, about whether those countries have structural excess capacity.

And USTR has not announced the results of those investigations yet. They're engaging in consultations with some of the foreign countries right now. You may have seen even this morning, President Macron of France said that he was going to talk about tariffs with the president, and that's what he's talking about. So it's a complicated situation on tariff policy generally, but tariff policy will continue.

Davy Young: And John, this just goes to highlight how tariff policy and policies more widely is just impacting business operations and business strategies, which is really the underlying motivation behind today's conversation, correct? John Gardner: Oh, absolutely. I mean, even for the companies that are trying to get refunds, it's fantastically complicated because there's a phase one system of CAPE, which is basically the easier entries. Phase two might be an importer who paid some Liberation Day tariffs, maybe some other tariffs like on steel and aluminum, if they're importing car parts or something like that.

And Customs and Border Protection hadn't even announced what they were going to do on all that yet, and then on June 2, the Justice Department and Customs and Border Protection actually went back to the Court of International Trade with a policy change and said they want the court to overturn its previous decision, and they want to force companies to file specific suits to get refunds of these tariffs, unless in a few special cases where Customs says it can refund under their own authorities.

That decision has been appealed to the Federal Circuit, which is an appellate body, and we're waiting for this to happen. So it is a very fluid situation right now, and I think the administration's strategy is to try to get this heard in the Supreme Court again. Obviously, from a business perspective, the quicker this can get resolved and definitive rules on refunds can be made, the better. And hopefully the quicker Customs processes these things, it goes to Treasury, and then hopefully, treasury will process them, as well.

Davy Young: Yeah, I think, John, one of these points here, and I want to bring Ivan and Denise back into the conversation, but just you've highlighted how fluid this environment currently is and how fast-changing it is. I think the tariffs and refunds situation is fascinating, especially as I speak and engage more CEOs. Do these businesses, in terms of their strategy, do they absorb the costs? Do they potentially pass those costs of the tariffs onto consumers?

And also just how do they communicate this more widely to their stakeholders, their owners and their customers, importantly? Denise from your perspective, what is the role of communications and the role of the communications team and the marketing team in understanding and navigating this rapidly changing environment? Denise Dahlhoff: Sure. Essentially, communications leaders and their teams have two big jobs, right?

The one is explaining and educating. Obviously, as we have heard already in this conversation, it's a hugely complex situation, tariffs themselves. But add to that all the fluidity, the constantly changing legal situation of these tariffs and new tariffs coming on the scene. So the education and explanation to the various stakeholders, and there are multiple ones.

The internal ones, the board, employees, but there are also investors and customers and suppliers, not to forget the administration when it comes to tariffs. That is one job that communications teams have to think about, and that's more the traditional role. But communications teams and their leaders have really adopted a new role, which is more being a business advisor. That means really getting involved early on in business decisions to share the sentiments and expectations of the various stakeholders.

Because the comms teams know how the different stakeholders are thinking. So using that insight and that expertise with these different stakeholders to share that with senior leadership as they make decisions. For example, you mentioned, do we hand on those tariffs to our customers in the form of higher prices, for example, to weigh in on those types of decisions. Or even, going forward, what is our future pricing strategies?

What is a future production or sourcing strategy in light of all these changing positions? So essentially there are two big functions, the education and messaging, but also, getting involved in business decisions and really being a business advisor to senior leadership. Davy Young: And Denise, in that, you mentioned those two main categories there: How do they get involved in the business and then also the education and messaging. Are there certain questions that these different stakeholders should be asking, either of others or even of themselves?

Denise Dahlhoff: Yeah, sure. I mean, they all have their individual questions from their perspectives. For example, investors will wonder about what amount of refunds can we expect, and what's the timing of that? What do we anticipate, given all these changing timelines?

Customers may wonder, will there be reimbursements? They might learn from the press, oh, there, something is changing. There will be money paid back. And so they might not understand all the ins and outs, so they have many questions, including for future pricing.

There's also the general public that might wonder, so in light of all this tariff conversation, what will companies do? Will they in fact decide to produce more domestically, or will they change their supply chains? But there is a lot to explain in that even, as John mentioned, the importer of records, some consumer might think, "Oh, I've bought from a certain retailer," but it might not be that retailer that is the importer of record, so they might not even get the money back.

Although the common consumer might think that. Again, because it's so complex, it's very hard to understand. But in all of this, there's also an opportunity for companies to not just hedge or protect them from risk, but also it's an opportunity to build reputation, right? Through positive communication and being upfront and on top of things and being good communicators to the various stakeholders.

Davy Young: And in all of this, Denise, there have been some class-action lawsuits against major companies, right? Denise Dahlhoff: Yes, that's right. So those class-action lawsuits essentially are because some people are claiming that companies are double-dipping by having increased prices because of these additional tariffs, but also now requesting refunds back, which might or might not be true. It might just be a perception.

So in terms of the communications, what has to be considered are questions like, are there actually funds or tariffs being paid back? That's one. The second really important question is, did the company even raise prices because of increased tariffs when they were imposed, right? That might be a common perception, but many companies had other increasing costs, for example, labor costs, that have been rising across the board, right?

So a customer might perceive a price increase, but it might not be related to tariffs or not be entirely related to tariffs. And then there might also be questions about future pricing that have to be considered in all the communication. Ivan Pollard: So I think what we're seeing is this is a very complicated situation. It will have some of it, the tip of the iceberg, will become public, and people, customers will get to know.

As we see with customer mindset at the moment, affordability of living and the cost of goods and the latest CPI data coming out saying a 4.2 point rise, the communicators are going to have a really big role to play in this. Do they speak out? Do they stay quiet?

What are the principles that communicators should bear in mind in such a complex and very obscure and obfuscated situation? Denise Dahlhoff: Yeah, that's a really good point. And to what I said earlier, this is also an opportunity to make your mark through positive communication. So number one is being upfront, right?

Being out there and not waiting to be called out for something, right? That's always a good principle. The second one is diplomacy or coherency, I would call it, across these various stakeholders because the different stakeholders might have different objectives. For example, investors might want the refund back, while customers might want to get their, or might think they want a refund back, as well, right?

So there might be conflicting objectives. And to have a message that works pretty much for everybody, being diplomatic. And the third that we have learned is that words do matter, especially in a politically very charged environment. So, we have learned that terms such as DEI or ESG, companies don't use them anymore because they can incite or provoke negative connotations.

And for example, maybe in this context avoiding words like, I don't know, illegal tariffs or something like that. And the fourth, I would say, is for communications now. It is really a central function in companies that collaborates truly across the organization, and that has always been the case, but it's even more so. Think of this issue that touches legal, communications, marketing, finance, procurement, and many other functions.

So collaborating internally is becoming increasingly more important. Ivan Pollard: So it's vital. It's a complicated situation, and the story must be coherent, compelling, and credible. David.

Davy Young: Yeah, Ivan, and just going back to this, your point here around just how complicated it is at the moment, and some of this conversation has been looking back. So I just want to bring John back in. John, as we're looking forward now, what do you think from a policy perspective we could anticipate? John Gardner: Well, two things, Davy.

First of all, the imposition of new tariffs, which would be probably on a much more solid legal footing. So at that point, no one should expect refunds of those tariffs, although it, of course, it raises questions for companies in terms of pricing and what's passed on to consumers and all that we've been discussing. Second, just in the legal space, watch what happens with the Federal Circuit's decision on continuing the current refund process. Watch to see if the Supreme Court possibly accepts that case, or if it dismisses the case.

Obviously, the best result, I think, for business hoping to get this money back quickly would be if the Supreme Court said, simply carry on with the original process. But those are the things I'd look at right now. Davy Young: Yeah. Thank you, John.

And just closing from me, Ivan, just a couple takeaways from this conversation. I think what is certain that lies ahead is uncertainty, and as a result, it just reinforces the importance of business agility. That is, at least, what I'm hearing from the conversations I'm having with business executives and CEOs. And then just two other points I just want to emphasize here from Denise.

There's a real opportunity to make your mark here through positive communication. And the importance here of building trust across one's entire stakeholder spectrum. And then just the last words from me are, words really do genuinely matter. And it will be important for businesses and policymakers and communications teams to really you know, watch what they say, and reinforce the values, mission, and purpose of the organizations that they run.

Ivan Pollard: 100%, Davy. And folks on this podcast and this webcast, this is why we're putting this series together, cause Policy Talks is what we're calling the series because policy does affect business, but business can also affect policy. And in this highly complicated situation, when you hear John describe very briefly what's going on, and we could go on for another 45 minutes about it, it's a real job to translate for business leaders what it is that the policy means to businesses.

It's a genuine job for communicators, then, to take that translation and turn it into a cohesive story that that effects trust in the company, as you said, Davy, and builds empathy with your customers and your stakeholders over the long term. And then the third point you made, the agility, because guess what? New tariffs might come up. Actions are going to be taken.

We started thinking about this tariff issue three months ago, and we're still not seeing any credible resolution. Keep your eyes open for the next episode. Of course, the episode is dictated by what the talkers of policy are actually doing at the moment, but there are other ways to get involved in The Conference Board and at the Marketing & Communications Center. We have a roundtable coming up talking about one of those stakeholders, investors, and how reputation matters to investors.

There are other events, whether it's a webcast or a roundtable, that you can find on the website. You'll also be able to tap into what The CEO Center is going to be working on in terms of the upcoming midterm elections. So how a stable democracy 250 years in from a constitution that is admired all over the world - what does the next 250 years look like? We might not be able to predict that far, but we might be able to predict 250 hours ahead.

And then finally, we want you to think about the way that the world is working. It's not just America, it's everywhere in the world, where policies and executive actions and orders are taking place so rapidly. Again, go to the website and follow Navigating Washington. But thank you so much for everybody being here.

The next Policy Watch webcast is coming up with The CEO Center, which is why should Americans care about the national debts? Anybody who is getting over the age of 15 now needs to start thinking about this radically. So thank you for being here. Thank you, John.

Thank you, Davy. Thank you, Denise. And we're looking forward to the next Policy Talks.