General Counsel Checklist: Tariffs and SEC Disclosures

As global trade tensions escalate following the Trump administration’s proposed sweeping tariffs on imports, public companies face renewed pressure to ensure that securities disclosures adequately capture evolving risks. The unpredictability of these developments, combined with their potentially material impact, requires careful evaluation of disclosure practices — particularly in the risk factors and forward-looking statements sections in their quarterly and annual reports.

Although many calendar year issuers updated their Form 10-Ks to address tariff concerns earlier this year, the scope and detail of the administration’s tariff plans have sharpened since then.  Companies directly exposed to global supply chains or importing significant product volumes should assess whether subsequent quarterly reports on Form 10-Q merit further updates. This includes not only risk factors disclosures, but also disclosures in the Management’s Discussion and Analysis (MD&A) section, where known trends and uncertainties must be discussed.

Private companies planning initial public offerings or public companies contemplating equity financing issuances should anticipate similar challenges, as registration statements will be scrutinized for sufficient disclosure regarding tariff exposure and the potential impact on the results of operations and financial position. General Counsel and Investor Relations teams should also prepare for heightened investor and analyst focus on tariffs during earnings calls, which may demand careful messaging to avoid misstatements and mitigate litigation risks.

While the SEC has not issued specific guidance on tariff-related disclosure to date, prior guidance on recent macroeconomic events, including guidance on COVID-19 and Russia’s invasion of Ukraine, have stressed the importance of reliance on robust disclosure controls and candid communication about all relevant risks, both actual and potential. Companies are well-advised to avoid innovating or minimizing these risks and instead adhere to established disclosure frameworks designed for volatile and uncertain conditions.

Below is a “mini-checklist” that General Counsel and CFOs can use to begin thinking about how to frame risk exposure to tariffs in their upcoming SEC filings:

• Risk Factors:
  • Assess Material Changes: How have tariffs impacted your existing risk factors?  If there are material changes to any of the existing disclosures, revise them to reflect the new post-tariff commercial landscape.
  • Avoid Hypothetical Language: Have tariffs already impacted the company?  If so, frame your disclosures around actual, materialized events rather than potential risks.
  • Tailor Disclosures: Ensure risk factors are specific to the company’s circumstances, detailing how tariffs affect operations, supply chains, or financial performance.
  • Consider Indirect Impact: Other than direct risk exposure, what types of indirect or “second-level” impact could tariffs have on the company’s operations, employees, assets, or other investments in the affected countries?
  • Don’t Forget About Governance: Separate and apart from financial disclosures, how might new and future tariff policies impact governance and management processes?  Has the board’s role in risk oversight changed? Have new committees of the board of directors been formed? Have new management positions been created and, if so, how might that impact your exposure to key employee retention risk?
• Management’s Discussion and Analysis (MD&A):
  • Discuss Known Trends: Address how tariffs have impacted or are expected to impact the company’s financial condition, results of operations, and cash flows.
  • Operational Adjustments: What changes have been implemented in sourcing, manufacturing, or pricing strategies in response to tariffs?
  • Forward-Looking Information: What are management’s expectations regarding how tariffs will affect future performance, including potential mitigation strategies?
• Financial Statements:
  • Evaluate Accounting Implications: Consider whether tariffs have led to impairments, changes in inventory valuation, or other accounting adjustments that should be reflected in the financial statements.
  • Subsequent Events: Determine if tariff-related events occurring after the balance sheet date require disclosure as subsequent events.
• Earnings Releases and Calls:
  • Consistent Messaging: Ensure that public statements about the impact of tariffs are consistent with prior disclosures in SEC filings to avoid misleading investors.
  • Cautionary Language: Use appropriate cautionary statements when discussing forward-looking information related to tariffs.  How should your safe harbor language in the forward-looking statements disclaimer be updated to reflect tariff-related risks?  To the extent possible, ensure consistency in these disclaimers across previously filed 10-Qs, 10-Ks, and investor presentations.

We are assisting our clients across industries to evaluate disclosure adequacy, develop risk disclosure language, and prepare for stakeholder communications. Feel free to reach out to us if you need help developing customized, tailored disclosures for your SEC reports.