In the wake of wide-ranging tariff policy changes based on the International Emergency Economic Powers Act (IEEPA) and the Trade Expansion Act of 1962 (Section 232 tariffs), the energy industry is facing a time of deep uncertainty. The Trump administration’s broad tariff plan imposing reciprocal IEEPA tariffs on imported goods from 57 different countries is currently paused until July 9 — 90 days after the pause was announced on April 9 -- and may be paused even further given the recent decisions of the U.S. Court of International Trade and U.S. District Court for the District of Columbia finding the IEEPA tariffs to be illegal. Nonetheless, the blanket “universal” 10% IEEPA tariff continues in effect for almost all goods imported from all countries until such time as the U.S. courts of appeal rule on whether the injunctions issued by the lower courts against further collection of the IEEPA tariffs remain in effect while the cases on the merits proceed – likely up to the U.S. Supreme Court.
If the tariffs are reinstated as written after the pause, they could carry significant implications for the energy industry. As such, renewable energy companies are bracing for substantial cost burdens. Although oil and gas companies’ energy commodity products were exempted from all IEEPA tariffs, secondary effects are being felt. For instance, China has raised tariffs on U.S. liquified petroleum gas in retaliation and market uncertainty stemming from global tariff hikes is impacting worldwide energy demands.
Tariff and policy uncertainty makes planning challenging, but energy companies can take immediate steps to help mitigate potential tariff impacts. Practical steps include reviewing tariff classifications and lowering customs values by revisiting their transfer pricing arrangements for related party imports.
Oil and Gas Industry Impacts
Under the current policy, oil and gas imports are exempt from the IEEPA tariffs and will remain so after the 90-day pause ends. This exemption reflects the fact that fossil fuels remain the primary source of energy for the U.S., and a spike in prices for oil and gas could carry negative downstream economic impacts.
While oil and gas can likely expect to retain their tariff-exempt status in the future giving these companies an additional cushion to weather the uncertainty, that does not mean they are completely insulated. Imports of key equipment and materials will still be subject to tariffs, meaning oil and gas companies will likely see some costs increase. For instance, oil and gas companies rely heavily on materials such as steel and steel derivative products, both currently attracting the Section 232 25% tariff, to build drilling and production infrastructure. (For derivative products, the 25% duty is assessed only on the steel content of the downstream product.) It should be noted that on May 30, 2025, President Trump announced that the tariffs on steel and aluminum would be doubled to 50% effective June 4.
Broader trade instability is also impacting oil prices and demand, with the International Energy Agency (IEA) already downgrading its oil demand forecast for 2025.
Renewable Industry Impacts
Renewables companies face an even more precarious position than their oil and gas counterparts. At the end of the 90-day pause, assuming no further changes are made, components critical to clean energy infrastructure will face steep tariffs.
For example, grid batteries, which rely heavily on lithium, will face tariffs of approximately 65%. Aluminum and derivative aluminum products, other materials critical for construction, are subject to the 25% Section 232 tariff, equal to the same tariff on steel. Additionally, many solar power components are largely manufactured in Southeast Asia, which is one of the most heavily tariffed regions under the current policy. “Safeguard” tariffs of 14% under Section 201 of the Trade Act of 1974 will also remain on imports of solar modules and cells (in addition to the IEEPA 10% universal tariff and the Normal Trade Relations duties that might apply) through February 6, 2026.
The new tariffs could compound with the Trump administration’s move to cancel existing grants for clean energy projects. While the overall impacts will not be clear until the tariff pause ends, these dual forces stand to affect both construction and operating costs for clean energy developments across the U.S.
A Wait-and-See Approach
As of now, energy companies are waiting to make long-term strategic decisions around their investments and supply chains in response to the tariffs. Given the considerable uncertainty around which tariffs will remain in place and which will change, many are reluctant to make decisions that could cost them down the line.
For example, the last time significant tariffs were enacted, in 2018, some companies moved too quickly. They shifted production lines and supply chains out of China in response to the then-new Section 301 tariffs on goods of Chinese origin - only for the U.S. government to strictly apply its “substantial transformation” standard for country-of-origin determinations and negate their efforts. Companies then had to absorb the cost of relocating their infrastructure and still pay the Section 301 tariffs they had hoped to avoid.
This time, companies are opting for a more cautious approach. But caution does not mean inaction.
What Can Energy Companies Do Now?
Energy companies should not remain passive while they wait for a clearer picture of the road ahead. Actions that companies can take now to help mitigate the impact of new tariffs include:
Reviewing Tariff Codes
Companies should verify that they are using the correct Harmonized Tariff Schedule of the United States (HTSUS) codes for all imports to help avoid unnecessary costs. If imports are classified using an incorrect code, the company could pay a higher duty than is required. Misidentified codes can also lead to compounding effects like shipping delays, compliance violations, and the reputational damage that often accompanies these types of issues.
Some companies rely on tools like automated HTSUS classification programs, but technology is not immune to errors. Given the expanded scope of the new tariffs, energy companies should proactively evaluate their HTSUS classification tools and/or procedures to ensure they are accurate and up to date as tariff changes continue to evolve.
Revisiting Transfer Pricing Arrangements
Most cross-border transactions that involve energy companies — particularly oil and gas companies — take place between related parties. In these instances, lowering the cost of goods sold via lower intercompany invoice prices offers a critical way to help companies reduce their tariff burdens. Companies will also need to assess their existing transfer pricing policies, calculations, and documentation as part of these efforts given that previous analyses and benchmarks may need to be updated in light of new economic conditions.
Under transfer pricing rules, intercompany transactions must align with the arm’s length principle. The principle states that a given transaction’s profit margins must generally fall within the interquartile range of transactions conducted by unrelated parties. Because higher tariffs can disrupt planned profit margins and harm the profitability of U.S. entities, lowering the transfer price of goods imported to the U.S. can help those entities maintain profitability.
Companies must be aware that the ensuing profit shift could carry tax implications or elicit greater scrutiny from tax authorities. To help mitigate the risk of a dispute or violation, energy companies should maintain thorough documentation when adjusting transfer prices. For additional mitigation against dispute risk from tax authorities, companies can consider advance pricing agreements with tax authorities – especially bilateral APAs between the IRS, the U.S. taxpayer, and the foreign taxing authority. These agreements specify the transfer pricing methodology/formula in advance, reduce the incidence of double taxation, and essentially eliminate costs associated with audit defense.
However, lowering invoice prices increases the level of taxable income because the inventory basis deduction is lowered. This additional corporate income tax burden can be offset by lower customs duties but the rules for customs valuation must also be considered in conjunction with any income tax transfer pricing planning in this complex area.
Analyzing Customs Valuation
Lower customs values can be a powerful and immediate method to help manage tariff burdens. A lower value usually means the tariff will be assessed on a lower basis. (Some duties are assessed by volume, weight, and/or quantity.) However, companies cannot simply choose a lower customs value at random — the lower value must be supported by dual sets of documentation.
Companies are required to maintain two sets of documentation for the valuation of U.S. imports, one for U.S. Customs and Border Protection (CBP) and one for IRS income tax purposes. Each agency uses different methods to assess value and price interparty transactions. Imports require value declarations on a shipment-by-shipment basis, so large changes in declared value must be well-documented. Because customs officials assess value declarations as shipments come in, that documentation must be accurate in real time so that any price variances that trigger a “census warning” (prompting CBP inquiries) can fully support the lowered values. Those values cannot be arbitrarily lowered and must generally follow the arm’s length principle as set forth in CBP’s so-called “circumstances of the sale” test.
As noted above, if intercompany prices and the resulting customs values are lowered (resulting in reduced tariffs), the importing entity will receive more profit on that related-party transaction, which can contribute to greater taxable income. For this reason, companies must consider both transfer pricing implications and customs valuations in tandem. Although CBP sits within the Department of Homeland Security and the IRS is under the U.S. Department of the Treasury, these agencies can still engage in joint examinations and may be more likely to do so if there is evidence that transfer pricing valuations and customs valuations do not align, such as when taxpayers report on IRS Form 5472 (question 38.a) that the inventory basis for IRS purposes is higher than that for CBP purposes.
The Role of External Knowledge
Tariff impacts and their many knock-on effects can be extremely complex, and energy companies often lack the specialized knowledge needed to respond to changes in tariff policy. Choosing the right transfer pricing method, for example, can be difficult and carries tax and customs risks if done improperly.
Many energy companies tap external advisors to help them analyze tariff impacts and manage any changes they decide to make. When selecting an advisor, energy companies should prioritize those with knowledge of both customs values and transfer pricing nuances. They should also seek out advisors who have experience in the energy industry and understand the needs and challenges unique to their business.
How BDO Can Help
For companies seeking assistance addressing tariff policy changes, BDO can help assess the landscape and determine what new cost burdens a company might be facing. In the near term, our teams can provide the transfer pricing and customs valuation expertise necessary to help mitigate tariff costs. In the longer term, as policies crystallize and companies adjust strategic plans, our professionals can help redirect investments and modify supply chains to adapt to the new trade environment.
For energy companies seeking to assess their tariff exposure, BDO can help. Contact us to learn more.