Your process_refund tool returns two types of errors: technical errors (“503 Service Unavailable”, “Connection timeout”) that are transient (5% of calls), and business errors (“Order exceeds 30 day return window”, “Item already refunded”) that are permanent (12% of calls). Monitoring shows the agent wastes 3-4 turns retrying business errors that can never succeed. Currently, both error types return only a plain text message to Claude.

What’s the most effective way to reduce wasted retries while improving customer-facing response quality?