Tariff Turbulence: Navigating the 2025 Trade Landscape

Organizations are establishing ‘tariff war rooms’ for good reason—the stakes have never been higher for companies navigating the intersection of global supply chains and aggressive trade enforcement. The rapidly evolving tariff landscape under the current administration presents unprecedented challenges for ethics, compliance, and HR professionals. This episode of The Ethicsverse explored the dramatic shift from traditional low-rate tariffs to aggressive trade enforcement, examining how compliance teams must adapt their risk management strategies to navigate supply chain complexities, documentation requirements, and enforcement threats. With tariff rates jumping from single digits to over 100% overnight and exemption processes eliminated, organizations face existential business risks that demand immediate cross-functional collaboration and enhanced compliance frameworks.

This week’s episode of The Ethicsverse addressed the paradigmatic shift from consensus-based trade dispute resolution to volatile, unilateral tariff implementation, analyzing how this transition creates new compliance risks analogous to the “fraud triangle” of pressure, opportunity, and rationalization. Key topics included the evolution of tariff enforcement from routine administrative functions to executive-level strategic concerns, the integration of supply chain due diligence methodologies with trade compliance requirements, and the application of False Claims Act enforcement mechanisms to customs violations. The discussion emphasized the necessity of cross-functional collaboration, robust documentation protocols, and risk-based compliance architectures to address the heightened enforcement environment. Panelists explored the intersection of traditional compliance disciplines—including anti-corruption, export controls, and human trafficking prevention—with emerging tariff compliance obligations, highlighting the transferability of due diligence frameworks and the importance of “reasonable care” standards in customs compliance.

Featuring:

• Angela Gamalski, Partner, Honigman LLP
• Michael Huneke, Co-Chair of Sanctions, Export Controls, and AML Practice Group, Hughes Hubbard & Reed
• Bobby Butler, Global Corporate Compliance Counsel, Indorama Ventures PCL
• Matt Kelly, CEO & Editor, Radical Compliance
• Nick Gallo, Chief Servant & Co-CEO, Ethico

The New Tariff Reality

• The current tariff environment represents a fundamental departure from historical norms, with rates jumping from single digits to over 125% overnight and affecting multiple countries beyond China.
• The elimination of exemption processes and administrative relief mechanisms means companies can no longer rely on traditional escape hatches that were available during previous administrations.
• Organizations now face existential business risks from tariff changes, creating unprecedented compliance challenges that require immediate strategic response and comprehensive risk management approaches.

Executive-Level Risk Management

• Tariff compliance has evolved from a routine administrative function to a board-level strategic concern requiring executive attention and dedicated resources.
• Companies are establishing “tariff war rooms” with cross-functional teams including finance, government affairs, supply chain, and legal departments to address rapid regulatory changes.
• The materiality threshold for tariff-related risks has shifted significantly, potentially triggering fiduciary duties under Delaware corporate law and similar state frameworks for boards and executives.

Cross-Functional Collaboration Requirements

• Effective tariff compliance cannot be owned by a single department but requires coordinated effort across legal, finance, procurement, supply chain, and compliance teams.
• Compliance professionals have an opportunity to leverage this volatility to demonstrate value and secure a position at the “grown folks table” by serving as the integrative force connecting different departmental perspectives.
• The de-siloing of organizational functions is essential, as tariff compliance touches on documentation, valuation, classification, supply chain management, and legal risk assessment simultaneously.

Documentation and Record-Keeping Imperatives

• Comprehensive documentation has become the cornerstone of tariff compliance, with U.S. Customs maintaining a five-year lookback period for enforcement actions.
• Organizations must maintain detailed records supporting country of origin declarations, tariff classifications, product descriptions, and valuation determinations for all imported goods.
• The responsibility for accurate documentation cannot be outsourced to customs brokers, as legal liability ultimately rests with the importing organization regardless of third-party involvement.

False Claims Act Enforcement Implications

• The Department of Justice has extensive experience with tariff-related False Claims Act prosecutions, making this a well-established enforcement mechanism rather than a new area of legal risk.
• Prosecutors are particularly focused on situations where companies make changes to their customs declarations without adequate documentation and due diligence to support those modifications.
• The “reasonable care” standard requires organizations to implement systems for identifying, assessing, and mitigating red flags in their import operations before they result in compliance violations.

Supply Chain Due Diligence Integration

• Existing supply chain due diligence capabilities developed for human trafficking, forced labor, and other compliance areas are highly transferable to tariff compliance requirements.
• The key principle that “you can’t outsource your compliance obligations to third parties” applies equally to customs brokers and other trade service providers as it does to other business partners.
• Companies must implement risk-based approaches to supply chain oversight, focusing enhanced due diligence on high-value shipments, significant suppliers, and products from countries subject to elevated tariff rates.

Technology and Risk Assessment Tools

• Manual processes are insufficient for managing the complexity and volatility of the current tariff environment, requiring investment in sophisticated compliance technology platforms.
• Organizations need dynamic risk assessment tools that can track tariff rate changes, manage complex supply chain data, and provide real-time visibility into compliance risks across their import operations.
• Companies must view technology investments as essential infrastructure for compliance effectiveness, not optional enhancements, given the scale and complexity of modern tariff obligations.

Whistleblower and Internal Reporting Considerations

• The tariff compliance environment creates new whistleblower risks, as employees with knowledge of misclassification, valuation issues, or country-of-origin problems may file False Claims Act actions.
• Organizations must ensure their internal reporting systems are equipped to handle trade compliance concerns and that employees understand the importance of speaking up about potential issues.
• Companies should treat allegations from internal or external sources regarding tariff compliance with the same seriousness as anti-corruption or other major compliance issues, implementing thorough investigation processes and appropriate corrective actions.

Reasonable Care Standards and Professional Judgment

• The “reasonable care” standard for customs compliance requires organizations to implement comprehensive systems for identifying, assessing, and responding to import-related risks beyond mere good faith efforts.
• Professional judgment cannot be outsourced to customs brokers or other third parties, requiring internal expertise and decision-making capabilities for complex tariff and trade issues.
• Organizations must develop clear policies and procedures that align with their operational capabilities and resource constraints, avoiding aspirational commitments that cannot be consistently implemented.

Cultural and Policy Alignment

• Effective tariff compliance requires alignment between written policies and actual organizational practices, as enforcement agencies scrutinize gaps between stated commitments and operational reality.
• The principle that “culture trumps compliance” applies equally to trade compliance as it does to other areas of risk management, requiring genuine organizational commitment beyond written policies.
• Organizations must ensure that their trade compliance policies are realistic, achievable, and supported by adequate resources, training programs, and regular assessment processes given the rapid pace of regulatory change.

Closing Summary