Cross-border Tax Talks Podcast | TARIFF STRIKE ZONE: REFUNDS, AUDITS AND FRAGMENTS | Chris Desmond

Doug McHoney (PwC’s International Tax Services Global Leader) is joined by Chris Desmond, leader of PwC’s US Global Trade Services practice and, as Doug notes, a ‘reformed transfer pricing partner.’ Doug and Chris discuss the current fragmented trade environment, why tariffs may remain a lasting feature rather than a short cycle, rising customs enforcement, the Supreme Court’s IEEPA decision and the operational complexity of securing refunds, and how companies should assess gross-versus-net refund exposure across suppliers and customers. They also cover why the tariff environment is forcing customs, tax, and transfer pricing teams to work more closely together, how first sale operates and why it remains under scrutiny, and practical steps tax leaders should take on coordination, data, and documentation. [01:35] Baseball opener: AI-assisted ABS challenges and the strategy behind using only two. [06:00] Chris describes the current global trade environment in one word: fragmented. [07:40] Temporary tariff cycle or lasting structural trade realignment? [10:05] Does the long-term CBO tariff forecast assume post-IEEPA replacement mechanisms? [11:35] Customs enforcement trends and the sharp rise in audit adjustments. [14:45] What is fundamentally different about today’s tariff landscape versus 5 to 10 years ago? Why tariffs are changing manufacturing location decisions. [16:45] What is IEEPA and why was it such a powerful tariff tool? [18:45] What the Supreme Court decided on IEEPA tariffs. [20:10] Why the refund process is more complicated than simply returning cash. [21:40] ACE, CAPE, and how the new refund claims process may work. [24:35] What companies should be doing now to prepare refund claims. [26:50] Gross-versus-net refund analysis and whether refunds may need to be passed through. [30:50] Why refunds and tariffs matter for tax and transfer pricing professionals. [33:35] What ‘first sale’ is, how it can reduce tariff exposure, and why it appears to remain viable. [37:40] Practical advice for heads of tax in the current tariff environment: Coordinate transfer pricing and customs adjustments in both directions. Treat refunds as taxable income and plan for the tax impact. Use customs data alongside tax data for a fuller picture. Build documentation as if the audit is already on its way. [41:10] Closing and a Cubs – Cardinals wager?