How CFOs can stay compliant on tariffs

Tariffs have had, let’s say, a zigzag trajectory since the Trump administration took over. Every day seems to bring new uncertainty—and deals—that change what CFOs need to know and do about tariffs. But amid the shifting landscape, many companies may not have the necessary controls in place to ensure tariff compliance, experts told CFO Brew.

While some sectors, such as apparel, footwear, and glassware, have been dealing with tariffs for a long time, this is new territory for others, including toy manufacturers, businesses buying agricultural products, and producers of electronics or machinery, according to Lenny Feldman, a tariff lawyer and managing partner at Sandler, Travis and Rosenberg.

And that means a lot of companies will have to play catch-up. Board members are starting to ask how their companies ensure they’re handling duties appropriately and staying in compliance, according to Daniel Tannebaum, a partner at the Oliver Wyman consultancy and a senior fellow at the Atlantic Council think tank. Many of these companies don’t have a dedicated Customs compliance position because “there really wasn’t a need, because the tariffs were low,” he added. So now they need to get up to speed and realize how exposed their business is to tariff charges.

“They really need to understand, what is their role in their supply chain,” Feldman said. “These different ways that the supply chains are structured, a lot of people in the C-suite have not even thought about that.”

Risky business. Depending on where your company sits in the supply chain and how your products are classified, you could get caught in the crosshairs of compliance issues, even if your company isn’t the one evading tariffs.

According to Feldman, Customs holds both the consignee (the party accepting delivery) and the importer responsible for tariff compliance. That means if your company is listed as the consignee, you could be on the hook for ensuring your importer pays the required tariffs.

For example, in 2014, a company executive at Trek Leather was held personally responsible for Customs infractions, even though he didn’t act as the importer of record. In the court decision, the Federal Circuit court found that the defendant could be liable because the phrase “introduction of goods” was broad enough to cover “actions that bring goods to the threshold of the process of entry by moving goods into CBP custody in the United States.”

Feldman said that most of the time, the importer lists itself as the consignee, but it’s not always the case. These days, importers, suppliers, and the final brands are all conferring with each other to ensure everyone complies, “because the stakes are higher.”

Tricks of the tariff. But it’s not all about liability. Tariff-noob companies also are learning the tricks to bring down their tariff costs. There are legitimate ways to do this without relocating all production domestically. According to Customs and Border Protection, the first sale rule allows importers to use “the first sale in a series of transactions as the basis for calculating Customs duties,” according to law firm Cozen O’Connor. Companies can remove costs unrelated to production, such as international shipping costs, foreign inland freight prices, and security and handling costs to decrease the value of the tariffed product, according to Feldman.

“[The valuation] didn’t matter to them before,” he said. “They would just get a full price from their supplier that included all these costs, and maybe they had to pay it. It didn’t matter because their duty rate was zero.”

It is what it is? Over the years, companies have tried lots of different ways to put their products in lower-tariffed categories, sometimes riding the line between fair and fraudulent—like reclassifying their products with a few minor tweaks to incur lower tariffs—with mixed success. 

In 2015, Converse put a layer of felt on their shoes so they could be classified as slippers, to get a 70% discount from the shoe tariff. In 2003, Marvel argued that X-Men action figures were “non-human toys” instead of dolls, which have a higher tariff. Between 2003 and 2013, Ford’s tariff engineering trick was to classify its Transit Connect minivan as a car instead of a truck. That one was struck down by the DOJ, and Ford had to pay a $365 million settlement in 2024.

But Feldman said these classification sleights of hand won’t go as far now, because Trump’s tariffs are country-wide—though he still sees some companies trying to get creative. He told CFO Brew that some electronic component suppliers are trying to reclassify themselves as primarily serving the auto industry to qualify for the tariff exemptions granted to car manufacturers.

Others are trying to “originwash,” or route a product through a lower-tariffed country to get a better rate without doing any actual value add in that country. In the end, Feldman has simple advice for companies new to dealing with tariffs:

“You should be classifying properly. You should be valuing properly. You should make sure you’re declaring the proper country of origin.”

Documentation D-Day. The most effective way for companies to protect themselves and ensure compliance with tariff laws is by maintaining thorough documentation, Feldman advised. For valuation costs, businesses will need commercial invoices, purchase orders, documentation showing the costs of materials, and the flow of them into the factory. To prove origin, companies need documentation that their machinery, facility, and employees can “manufacture that merchandise and at that volume,” according to Feldman.

Companies might also need to provide lease or ownership agreements for factory facilities, employee paystubs, and in-depth records of the production process. Feldman suggests CFOs run a mock Customs review with all the documentation for origin, value, and classification—following a questionnaire similar to the one Customs uses.

But importers aren’t likely to send these documents on a weekly or monthly basis. Companies need to keep track of all that information on their own.

“You better make sure that you have all that information there,” Feldman said. “that you actually manufactured the merchandise at that time, not a year ago, and you have records from your warehouse that you're getting all the components and inputs and materials delivered at that time, so you could substantiate a production review.”