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Tariff Refunds: What Role Should Comms Leaders Play? · C-Suite Perspectives

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Ivan Pollard: Hello everyone, and welcome to this episode of C-Suite Perspectives,
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the podcast from The Conference Board.
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I'm your host, Ivan Pollard, and I lead the Marketing & Communications Center.
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And joining me today is Davy Young, the president of The CEO Center, John
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Gardner, the head of Public Policy and Research at The CEO Center, and Denise
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Dahlhoff, the head of research at the Marketing & Communications Center.
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Excited to be with you here for this interesting conversation.
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Let's go.
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When The Conference Board was founded back in 1916, it was about a bunch
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of business people getting together because the situation, the policy was
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affecting business, and business leaders realized if they got together they
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could actually start to affect policy.
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And that's what this series is all about, how businesses and policy interact.
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And of course, critical to that, right in the middle of it, is the communications
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function to both inform businesses what to say, but also inform the customers what
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to expect and how to interpret policy.
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So the topic we're here to discuss is tariffs, refunds, and how a
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company needs to think about this.
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So if I start off by asking you, Denise, which companies really
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need to think about communications regarding tariffs and refunds?
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Denise Dahlhoff: It's actually more than you might think on the surface,
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because we might all think immediately of retail companies who import from
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other countries and then resell here, or even logistics companies, delivery
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companies that might charge their customers additionally for those tariffs.
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But it's really also companies that produce in the US, because
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even ingredients that you import have carried tariffs, and even
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packaging and things like that.
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And what communicators really are getting involved with is in the
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response to now these potential tariff refunds—dealing with communications
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with the administration, but also managing expectations internally, for
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example, with the board or employees, as well as externally, especially with
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customers and investors, but also maybe with their suppliers, because they
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might be the importer of record, and the company has contracts with those
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importers of records to figure out whether they might be eligible for refunds.
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So it's really way more companies than you might initially think,
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and that might affect really a broad section of the US economy.
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Ivan Pollard: John, let me ask you, so these tariffs
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started in April of last year.
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Could you fill us all on the Supreme Court decision regarding
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the legality of Liberation Day and fentanyl-related tariffs by the
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US Court of International Trade?
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What happened afterwards in the Court of International Trade?
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John Gardner: Sure.
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Thanks very much.
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I want to walk everyone through where we are right now from a legal
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perspective, and apologies up front, because it can get a bit complicated.
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In Learning Resources v. Trump back in February, the Supreme Court ruled that
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the fentanyl-related tariffs on Canada, China, and Mexico, and the so-called
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Liberation Day tariffs, which had all been imposed under something called the
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International Emergency Economic Powers Act, or IEEPA, are unconstitutional.
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Why?
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Because the court stated that these tariffs are taxes, and
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the power to tax lies only with the Congress, not the president.
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The Supreme Court's decision did not include an order or a process for refunds
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of the tariffs declared unconstitutional.
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That disappointed some outside observers, but there was a
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procedural reason why they did that.
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And specifically, the court, the Supreme Court, reaffirmed the exclusive
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jurisdiction of the Court of International Trade, which is the specialized
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court on tariffs-related cases.
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That court then issued a ruling confirming that the tariffs refund
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process would be national, rather than limited to parties in the case.
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Because the uniformity clause in the Constitution provides that,
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quote, "All duties, imposts, and excises shall be uniform," end quote,
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throughout the United States, and that, of course, includes tariffs.
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Following that decision, the Court of International Trade then ordered
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Customs and Border Protection, the agency in Homeland Security that had
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received the tariffs, to prepare a system for a quasi-automatic refund of
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tariffs paid under the now-invalidated tariffs, so that companies would
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not have to file special suits to obtain the refunds they are entitled.
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Denise said an important word or an important term earlier,
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it's importers of record.
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So the importers of record and customs brokers, in other words, those who
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actually paid the tariffs, have to file with Customs and Border Protection
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through an online claim portal they have set up called the Consolidated
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Administration and Processing of Entry system, the CAPE system.
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But because of what the court said, they would not have to file
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separate lawsuits with the Court of International Trade to do so.
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In other words, the court intended all this to be a purely administrative
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process, far faster than regular litigation and much more favorable
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to small importers who are less able to bear the cost of litigation.
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I mean, this is hugely important, as up to 330,000 importers of
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record may have paid the tariffs.
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And then the Court of International Trade in late March also extended it
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to all tariffs paid under the IEEPA tariffs the court invalidated, including
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the so-called fully liquidated entries that had been paid much earlier in the
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process—say, the summer of last year.
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Why?
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Because the Supreme Court had invalidated the tariffs in their entirety, and
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that's why there's potentially up to $166 billion of refunds at issue.
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Some reimporters who can directly trace tariffs to particular people,
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for instance, international package companies, have stated they will further
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refund tariffs paid to their customers.
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Other companies are already the subject of a class-action suit, but most
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importers of record and most companies that are in contract with them are simply
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waiting to either make filings in the system or to prepare their refunds.
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Davy Young: John, thank you so much for that introductory situation
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report on where we currently stand with regards to the Supreme Court.
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Where do the tariffs and policies now lie, John?
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John Gardner: It's very interesting, Davy.
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It's quite in flux.
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Right after the decision in Learning Resources, the president put on a 10%
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global tariff, 10% on all imports coming into the US, and he did so under the
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authority of Section 122 of the Trade Act.
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That, by statute, that tariff has to go away in July.
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It's only for 150 days.
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So quite recently, the administration has been trying to impose new
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tariffs that might replace that.
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There was an investigation of up to 60 economies as to whether they had
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adequate protections against the importations of goods made with forced
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labor, and the administration said no.
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So there is a process now, they're actually accepting comments from business
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right now on proposed tariffs of 10% or 12.5% that are going into effect on these
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countries, probably at some point in July.
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There's a separate investigation against 16 economies, our top 15 importers and
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the European Union, about whether those countries have structural excess capacity.
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And USTR has not announced the results of those investigations yet.
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They're engaging in consultations with some of the foreign countries right now.
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You may have seen even this morning, President Macron of France said
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that he was going to talk about tariffs with the president, and
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that's what he's talking about.
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So it's a complicated situation on tariff policy generally, but
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tariff policy will continue.
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Davy Young: And John, this just goes to highlight how tariff policy and policies
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more widely is just impacting business operations and business strategies,
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which is really the underlying motivation behind today's conversation, correct?
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John Gardner: Oh, absolutely.
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I mean, even for the companies that are trying to get refunds, it's
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fantastically complicated because there's a phase one system of CAPE,
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which is basically the easier entries.
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Phase two might be an importer who paid some Liberation Day tariffs,
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maybe some other tariffs like on steel and aluminum, if they're importing
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car parts or something like that.
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And Customs and Border Protection hadn't even announced what they were
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going to do on all that yet, and then on June 2, the Justice Department and
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Customs and Border Protection actually went back to the Court of International
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Trade with a policy change and said they want the court to overturn its
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previous decision, and they want to force companies to file specific suits to get
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refunds of these tariffs, unless in a few special cases where Customs says it
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can refund under their own authorities.
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That decision has been appealed to the Federal Circuit, which
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is an appellate body, and we're waiting for this to happen.
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So it is a very fluid situation right now, and I think the administration's
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strategy is to try to get this heard in the Supreme Court again.
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Obviously, from a business perspective, the quicker this can
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get resolved and definitive rules on refunds can be made, the better.
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And hopefully the quicker Customs processes these things, it goes
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to Treasury, and then hopefully, treasury will process them, as well.
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Davy Young: Yeah, I think, John, one of these points here, and I want to
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bring Ivan and Denise back into the conversation, but just you've highlighted
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how fluid this environment currently is and how fast-changing it is.
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I think the tariffs and refunds situation is fascinating, especially
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as I speak and engage more CEOs.
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Do these businesses, in terms of their strategy, do they absorb the costs?
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Do they potentially pass those costs of the tariffs onto consumers?
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And also just how do they communicate this more widely to their stakeholders, their
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owners and their customers, importantly?
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Denise from your perspective, what is the role of communications and the role of
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the communications team and the marketing team in understanding and navigating
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this rapidly changing environment?
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Denise Dahlhoff: Sure.
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Essentially, communications leaders and their teams have two big jobs, right?
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The one is explaining and educating.
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Obviously, as we have heard already in this conversation, it's a hugely
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complex situation, tariffs themselves.
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But add to that all the fluidity, the constantly changing legal
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situation of these tariffs and new tariffs coming on the scene.
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So the education and explanation to the various stakeholders,
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and there are multiple ones.
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The internal ones, the board, employees, but there are also investors and
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customers and suppliers, not to forget the administration when it comes to tariffs.
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That is one job that communications teams have to think about, and
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that's more the traditional role.
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But communications teams and their leaders have really adopted a new role,
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which is more being a business advisor.
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That means really getting involved early on in business decisions to
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share the sentiments and expectations of the various stakeholders.
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Because the comms teams know how the different stakeholders are thinking.
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So using that insight and that expertise with these different
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stakeholders to share that with senior leadership as they make decisions.
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For example, you mentioned, do we hand on those tariffs to our customers in the
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form of higher prices, for example, to weigh in on those types of decisions.
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Or even, going forward, what is our future pricing strategies?
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What is a future production or sourcing strategy in light of
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all these changing positions?
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So essentially there are two big functions, the education and messaging,
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but also, getting involved in business decisions and really being a
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business advisor to senior leadership.
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Davy Young: And Denise, in that, you mentioned those two main categories there:
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How do they get involved in the business and then also the education and messaging.
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Are there certain questions that these different stakeholders should be asking,
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either of others or even of themselves?
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Denise Dahlhoff: Yeah, sure.
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I mean, they all have their individual questions from their perspectives.
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For example, investors will wonder about what amount of refunds can we
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expect, and what's the timing of that?
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What do we anticipate, given all these changing timelines?
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Customers may wonder, will there be reimbursements?
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They might learn from the press, oh, there, something is changing.
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There will be money paid back.
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And so they might not understand all the ins and outs, so they have many
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questions, including for future pricing.
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There's also the general public that might wonder, so in light of all this tariff
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conversation, what will companies do?
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Will they in fact decide to produce more domestically, or will
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they change their supply chains?
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But there is a lot to explain in that even, as John mentioned, the importer of
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records, some consumer might think, "Oh, I've bought from a certain retailer,"
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but it might not be that retailer that is the importer of record, so they
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might not even get the money back.
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Although the common consumer might think that.
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Again, because it's so complex, it's very hard to understand.
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But in all of this, there's also an opportunity for companies to
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not just hedge or protect them from risk, but also it's an opportunity
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to build reputation, right?
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Through positive communication and being upfront and on top of
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things and being good communicators to the various stakeholders.
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Davy Young: And in all of this, Denise, there have been some class-action
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lawsuits against major companies, right?
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Denise Dahlhoff: Yes, that's right.
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So those class-action lawsuits essentially are because some people are claiming
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that companies are double-dipping by having increased prices because
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of these additional tariffs, but also now requesting refunds back,
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which might or might not be true.
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It might just be a perception.
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So in terms of the communications, what has to be considered are
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questions like, are there actually funds or tariffs being paid back?
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That's one.
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The second really important question is, did the company even raise
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prices because of increased tariffs when they were imposed, right?
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That might be a common perception, but many companies had other increasing
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costs, for example, labor costs, that have been rising across the board, right?
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So a customer might perceive a price increase, but it might
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not be related to tariffs or not be entirely related to tariffs.
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And then there might also be questions about future pricing that have to be
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considered in all the communication.
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Ivan Pollard: So I think what we're seeing is this is a very complicated situation.
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It will have some of it, the tip of the iceberg, will become public, and
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people, customers will get to know.
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As we see with customer mindset at the moment, affordability of living
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and the cost of goods and the latest CPI data coming out saying a 4.2 point
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rise, the communicators are going to have a really big role to play in this.
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Do they speak out?
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Do they stay quiet?
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What are the principles that communicators should bear in mind in such a complex and
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very obscure and obfuscated situation?
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Denise Dahlhoff: Yeah, that's a really good point.
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And to what I said earlier, this is also an opportunity to make your
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mark through positive communication.
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So number one is being upfront, right?
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Being out there and not waiting to be called out for something, right?
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That's always a good principle.
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The second one is diplomacy or coherency, I would call it,
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across these various stakeholders because the different stakeholders
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might have different objectives.
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For example, investors might want the refund back, while customers might
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want to get their, or might think they want a refund back, as well, right?
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So there might be conflicting objectives.
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And to have a message that works pretty much for everybody, being diplomatic.
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And the third that we have learned is that words do matter, especially in a
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politically very charged environment.
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So, we have learned that terms such as DEI or ESG, companies don't use
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them anymore because they can incite or provoke negative connotations.
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And for example, maybe in this context avoiding words like, I don't know,
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illegal tariffs or something like that.
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And the fourth, I would say, is for communications now.
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It is really a central function in companies that collaborates truly across
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the organization, and that has always been the case, but it's even more so.
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Think of this issue that touches legal, communications, marketing, finance,
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procurement, and many other functions.
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So collaborating internally is becoming increasingly more important.
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Ivan Pollard: So it's vital.
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It's a complicated situation, and the story must be coherent,
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compelling, and credible.
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David.
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Davy Young: Yeah, Ivan, and just going back to this, your point here
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around just how complicated it is at the moment, and some of this
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conversation has been looking back.
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So I just want to bring John back in.
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John, as we're looking forward now, what do you think from a policy
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perspective we could anticipate?
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John Gardner: Well, two things, Davy.
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First of all, the imposition of new tariffs, which would be probably
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on a much more solid legal footing.
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So at that point, no one should expect refunds of those tariffs, although
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it, of course, it raises questions for companies in terms of pricing
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and what's passed on to consumers and all that we've been discussing.
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Second, just in the legal space, watch what happens with the Federal
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Circuit's decision on continuing the current refund process.
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Watch to see if the Supreme Court possibly accepts that case,
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or if it dismisses the case.
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Obviously, the best result, I think, for business hoping to get
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this money back quickly would be if the Supreme Court said, simply
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carry on with the original process.
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But those are the things I'd look at right now.
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Davy Young: Yeah.
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Thank you, John.
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And just closing from me, Ivan, just a couple takeaways from this conversation.
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I think what is certain that lies ahead is uncertainty, and as a
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result, it just reinforces the importance of business agility.
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That is, at least, what I'm hearing from the conversations I'm having
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with business executives and CEOs.
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And then just two other points I just want to emphasize here from Denise.
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There's a real opportunity to make your mark here through positive communication.
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And the importance here of building trust across one's entire stakeholder spectrum.
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And then just the last words from me are, words really do genuinely matter.
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And it will be important for businesses and policymakers and communications
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teams to really you know, watch what they say, and reinforce the
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values, mission, and purpose of the organizations that they run.
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Ivan Pollard: 100%, Davy.
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And folks on this podcast and this webcast, this is why we're putting
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this series together, cause Policy Talks is what we're calling the series
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because policy does affect business, but business can also affect policy.
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And in this highly complicated situation, when you hear John describe very briefly
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what's going on, and we could go on for another 45 minutes about it, it's a real
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job to translate for business leaders what it is that the policy means to businesses.
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It's a genuine job for communicators, then, to take that translation and turn
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it into a cohesive story that that effects trust in the company, as you said, Davy,
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and builds empathy with your customers and your stakeholders over the long term.
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And then the third point you made, the agility, because guess what?
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New tariffs might come up.
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Actions are going to be taken.
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We started thinking about this tariff issue three months ago, and we're still
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not seeing any credible resolution.
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Keep your eyes open for the next episode.
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Of course, the episode is dictated by what the talkers of policy are actually doing
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at the moment, but there are other ways to get involved in The Conference Board and
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at the Marketing & Communications Center.
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We have a roundtable coming up talking about one of those
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stakeholders, investors, and how reputation matters to investors.
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There are other events, whether it's a webcast or a roundtable,
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that you can find on the website.
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You'll also be able to tap into what The CEO Center is going to be working on in
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terms of the upcoming midterm elections.
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So how a stable democracy 250 years in from a constitution that
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is admired all over the world—what does the next 250 years look like?
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We might not be able to predict that far, but we might be able
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to predict 250 hours ahead.
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And then finally, we want you to think about the way that the world is working.
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It's not just America, it's everywhere in the world, where
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policies and executive actions and orders are taking place so rapidly.
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Again, go to the website and follow Navigating Washington.
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But thank you so much for everybody being here.
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The next Policy Watch webcast is coming up with The CEO Center, which is why should
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Americans care about the national debts?
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Anybody who is getting over the age of 15 now needs to start
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thinking about this radically.
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So thank you for being here.
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Thank you, John.
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Thank you, Davy.
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Thank you, Denise.
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And we're looking forward to the next Policy Talks.
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You've been listening to C-Suite Perspectives, and this series has been
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brought to you by The Conference Board