The Trump Administration's renewed focus on tariffs has created novel and interrelated issues for businesses' tax and trade functions. Businesses are now faced with a changing landscape and are exploring strategies to effectively manage tax and tariff exposure. As faculty for ALI CLE's webcast Tariffs and Taxes: Navigating Complexities of Cross-Border Commerce, we discussed some of these issues and strategies. Our slides from the webcast are available here.
In the past few months, tariffs have been in the headlines daily, and the landscape is constantly changing, from rate changes to revocations. For example, at the end of May, in consolidated cases brought against the Trump Administration by five private companies and twelve U.S. States, the U.S. Court of International Trade ruled that the White House exceeded its authority under the International Emergency Economic Powers Act ("IEEPA") in imposing the so-called "reciprocal" tariffs against nearly all countries and issued a permanent injunction prohibiting their enforcement, V.O.S. Selections, Inc. v. Trump, No. 25-CV-00066 (Ct. Int'l Trade May 28, 2025); the U.S. District Court for the District of Columbia issued a similar opinion the next day. See Learning Resources, Inc. v. Trump, No. 25-CV-01248 (D.D.C. May 29, 2025). Copies of those opinions can be found here and here. The Trump Administration has appealed both orders, and the U.S. Court of Appeals for the Federal Circuit has already issued a stay on the Court of International Trade's injunction pending the outcome of that appeal. See V.O.S. Selections, Inc. v. Trump, No. 2025-1812 (Fed. Cir. May 29, 2025). Likewise, the D.C. District Court has also stayed its own injunction pending the outcome of the appeal in that case. Learning Resources, Inc., No. 25-CV-01248 (D.D.C. Jun. 3, 2025).
Practice Point
Businesses with international supply chains are seeking to mitigate the effect of the increased tariffs and understand how supply chain changes can affect income taxes in addition to tariffs. Now, most multinational businesses must navigate the intersection of trade law and tax. This new tariff environment poses numerous - questions like whether tariffs and the costs of compliance are deductible for U.S. tax law purposes, and how changes to import reporting to U.S. Customs and Border Protection affect tax transfer pricing. For example, do you have to commission new transfer pricing documentation? What information must be maintained in case of a dispute? In grappling with these issues, we recommend that businesses take a coordinated, holistic view. Obtaining the best results and understanding the impact that tariffs may have on your operations as well as your effective tax rate will require an analysis of your business's specific circumstances. If you face these new challenges, consult with your professional advisors.
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This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.
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