Companies need to keep in mind a few simple rules, according to Terence Lau, dean of the law school at Syracuse University. With many companies nationwide currently fending off proposed class action lawsuits from customers opposing tariff refund allocation plans, Lau answered CFO Dive’s email questions focused on legal considerations companies should keep in mind around tariffs. The danger lies not only in the distribution itself but in the absence of proper documentation.
If a company spent 2025 informing customers that tariffs led to price increases, then later retains the refunds without clear records, it creates legal vulnerabilities. Almost any allocation of this money is defensible. What is hard to defend is an allocation with no contemporaneous record of why, particularly if the company spent 2025 telling customers that tariffs were forcing prices up.
The issue often arises from a disconnect between who receives the refund and who actually absorbed the tariff costs. The refund follows the customs entry, not the economics. The party named on the entry is frequently not the party that felt the cost. The importer of record might be a U.S. subsidiary, a distributor, a contract manufacturer’s affiliate, or even the foreign seller.
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The cost may have been shifted three or four steps down the supply chain to a buyer with no direct customs relationship. If that buyer believes they were unfairly treated, they can pursue an unjust enrichment claim, a legal argument that varies by state but generally requires proof that the defendant benefited at the plaintiff’s expense under unfair conditions.
Some states impose an additional requirement: that no other legal remedy exists for the plaintiff. A separately itemized surcharge is the strong case and the embedded price increase is the weak one. For instance, a separately itemized tariff surcharge provides a clear paper trail. If a company charged a customer a specific amount for tariffs and later received that exact refund, the legal case becomes straightforward. However, if price increases occurred broadly-due to fluctuating freight, labor, and currency costs-the plaintiff must demonstrate causation and damages, often on a classwide basis. Weak documentation in these cases can become a significant legal weakness.
Public statements create legal exposure risks
An earnings call is a voluntary deposition. The difference is that nobody objects, and the transcript is free. Lau cites a recent lawsuit against Costco, where the plaintiff referenced remarks made by CFO Gary Millerchip about tariffs. The key takeaway is that legal risk often stems less from actions than from what companies say. Describe what you have done, not what you intend to do. Intentions get read as promises, and promises get read as contract terms and as representations.
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Legal defense hinges on documentation and intent
Lau’s perspective is rooted in decades of experience, including his time as Ford’s director for ASEAN government affairs, where he managed trade compliance, distribution strategies, and mergers. His current role as law school dean has not shifted his focus from legal structure to executive decision-making. The objective is not to eliminate lawsuits entirely but to ensure that if legal challenges arise, companies can defend their decisions with well-documented, contemporaneous records.
Lau’s recommended approach consists of three key steps:
- Document: Review all prior statements about tariffs and pricing, verify contracts to determine who is entitled to the refund, and evaluate tax implications.
- Decide: Make allocation decisions based on documented evidence rather than retroactive explanations.
- Announce: Publicize the strategy only after the decision is finalized and all necessary records are in place.
