Expeditors International of Washington, Inc. (EXPD) Earnings Call Transcript & Summary

All I do -- while we do that, just going to over a couple of ground rules. My name is Crystal Woods. I am the Northwest Regional Sales Ops, and I am based here in the Seattle branch. So thank you so much, everybody, for joining us for our brushing up on the basic series, where we're doing Imports 101 today. So just a couple of ground rules. The webinar is going to run approximately 50 minutes. We're going to try and get a lot of material in it in an hour and leave about 10 minutes at the end for Q&A. So everybody is on mute. But please feel free to ask questions along the way by putting them in your Q&A box. We're going to try and address all of them at the end of the presentation. And if for some reason, we can't get to them, we will make sure to follow up with you. Unfortunately, we can't record this webinar, but reference materials will be sent out shortly after the webinar upon completion of a quick survey. And we're hoping that we can get your feedback. We'd love to hear how we did, find out what other webinars you would be interested in or if there's anything you missed or we missed covering that you want to cover, and then the team can reach out to you and further cover that. There's also going to be a list update Q4 webinars at the -- on the last side of the presentation. So you can see what's coming up next. So we also have an Import Compliance 101. We have an Export 101 and Export Compliance coming up as well. So feel free to look for those. So again, thank you, everybody, for joining us for the 101. I'm happy to introduce our speaker for today. So we have Rachel LeVee. She is our Northwest Regional Compliance Manager, and she's based here at our Seattle branch office. And it is Rachel's 25-year anniversary with Expeditors this year. So we're so excited to have Rachel here with us. So Rachel joined the Seattle branch in 1997. She was the brokerage customer service rep, she moved on to a supervisor, then she managed the brokerage team. And for the past 5 years, Rachel has now led our compliance teams in the Denver, Portland, San Francisco, and, of course, the Seattle office as a Northwest compliance manager. So Rachel is a licensed broker as well as she is IATA, FIATA certified. So we have great experience here with us. So with that, let's get started. I'm going to turn it over to Rachel.

Thanks, Crystal, and thanks, everyone, for joining. Like Crystal said, the topic today is basic imports, and I just want to be clear from the get-go that the primary focus today is import transportation, talking about how goods get from origin to destination in the United States. If any of you were hoping for a deeper dive on Customs compliance things, we will touch a little bit at a very high level on Customs compliance stuff, but as Crystal said, we do have some other seminars upcoming. And in 2 weeks, we will be doing one on import compliance, a deeper dive in import compliance. So if you are interested in those topics, please feel free to sign up for that. And then as she said as well, we'll have an export transportation class as well as an export compliance class. And if some of you here are actually working on the export side and think, "Oh, no, I'm in the import class", fear not, this class is import focused, but the process is pretty much the same, whether you're talking about imports or exports to and from the United States, from a transportation perspective. So a lot of what you'll hear today on the import side is also what you would find if you're working on the export side. So with that, we'll go ahead and get started. So some things before we start. The webinar should be about 50 minutes. We should have about 10 minutes at the end for questions. If we have too many questions and I can't get to them all, then I'll absolutely follow up with you all afterwards and make sure that all those questions get answered. Like Crystal said, we're not recording, but we will be able to provide a PDF document with the slides that we share at the end of the presentation. If you have any questions, please do put them in the Q&A box. We'll have a quick survey, like Crystal has said. And if anybody needs anything other than that, feel free to reach out. So the objectives for the seminar today are -- we'd like to gain a clear understanding of the basic shipment life cycle, import-wise. We'll compare and contrast ocean versus air transportation services, what are the differences? What are the things that you want to think about when choosing one or the other? We'll also talk about how shipper and buyer cost obligations are determined in an international transaction, also known as Incoterms. We'll talk about standard import documentation, also address the importers compliance obligations and responsibilities. We'll address risk, carrier liability and the role of insurance and the differences between those things, and then we'll also provide an open forum for questions and concerns. First unit is the shipment life cycle -- life cycle, excuse me. And first, we're going to talk about who are the parties to a transaction. In a typical transaction, there are many, many different parties that are involved. Probably, there will be a buyer and a seller. There'll be the entity who is selling the goods and the entity that is buying in the goods. In an import transaction, the seller is at origin, buyer is at destination. There could also be a consolidator involved. So say, for instance, you have cargo that is located in multiple cities. You might have an entity who is involved in collecting that cargo, consolidating it into one shipment. You may also need to work with a forwarder to help you with booking the goods with the master carrier to get the goods from origin to destination. In most cases, there will also be an export Customs broker involved, somebody who is helping to file export declarations at origin -- working with the Customs agency at that origin country. There will likely also be a local trucking company that is involved to move the goods from the shipper's facility to the port to get exported. Once the goods get to that port, there will also be an origin stevedore or an air cargo handling agent. So the stevedores are the folks that are working at the ocean terminals to receive those containers. And then you have also handling agents at the airlines who would be receiving goods if we were going to move something by airfreight. Then there's the steamship lines and the airlines. These are what we refer to as the master carriers that are dealing with the primary transportation from origin to destination. On the destination side, then you also have the destination stevedores and the air cargo handling agents. So similar to the origin side, these are the folks who are getting those containers off of the boats and then the air cargo handling agents that are taking the cargo off the planes. You also, on the import side, will most likely be dealing with an import Customs broker, somebody who is working with Customs and the other government agencies that might be interested in your cargo in the U.S. to arrange for Customs clearance, also working with Customs in the U.S. There also will be most likely a destination local trucking company who would be responsible for picking the goods up from the terminal either from the air [ grad ] handling agent or the ocean terminal to deliver the goods locally. You might also have a warehouse or distribution provider, who is responsible for storing the goods, potentially distributing them to the final destination. And often forgotten, partner in the supply chain is the bank or the financier. Banks are involved in the payment between the buyer and the seller, sometimes in the payment between the carriers and the buyers or the sellers. Lots of different ways for banks to get involved in a typical transaction. So now that we know who many of those partners are, we can talk about what the actual process is. And I've said this a couple of times, this is a typical shipment life cycle. There are lots of different things that can happen within a shipment life cycle, but these are the ones that usually happen in all of them. So to begin with, there is a negotiation for the price of the product. So the seller has something to sell, buyer has something they want to buy. They agree that they want to do business and they start talking about how much the seller's willing to sell for the buyer is willing to buy. Once that is done, a pro forma invoice is typically created, and that invoice will also stipulate the terms of sale. We'll talk about that a little bit more going later in the presentation. But what we're talking about is the Incoterms. Once that pro forma is created, the buyer places the order, the product is made ready for export. The shipper either produces the goods or perhaps put them into boxes, ready to ship. Maybe they have to source the materials to make the product before they can actually make it. So that could take some time, depending on what stage the seller is in once the goods are sold. Once the goods are ready, then a booking is made with a [ boarder ] or a carrier, typically the airline or the steamship line, a trucker is dispatched, shipping documents are processed. Things like the actual -- the final commercial invoice, packing list, a bill of lading. Customs is then going to be notified of the export. If a Customs declaration is necessary, then it would be done at that time. And then the cargo ships. It's on the boat for a while, it's on the plane for a while. It's in transit, going through various transshipment hubs perhaps, and then the shipment arrives at destination. Once it arrives at destination, that import clearance seems to be done. So the cargo is entered and cleared through Customs. The carrier then issues a freight release, trucker is dispatched. And then assuming all goes to plan, then that cargo gets delivered to the buyer. So as you can see, lots of steps involved in the process. And this next slide is a demonstration of all of those steps. And what I want to highlight here is that you can see from this slide that the supply chain process is long and circuitous. There are many, many entities involved, many, many steps throughout the process. Lots of places for different entities to get involved, lots of places for things to get stopped and held. So in a typical supply chain, you have parties that you're working with on a regular basis and hopefully, everything moves smoothly. But as some of you may have already experienced, there are times when we do have some bumps in the road, shall we say. And things do get held out from time to time. But that's -- those are the basics of the supply chain. All right. So next, we're talking about freight, how you choose how you want to move the goods? And the two main factors are typically, do you want speedy or do you want cheap? So we're going to go with cheap first. And when we talk about cheap, we're typically talking about ocean freight. And there have been some changes in the market recently with COVID, with the shortages that we experienced, ocean freight hasn't been so cheap as it was before them. But in a normal environment, ocean freight is, on average, about 10x cheaper than airfreight. So why might you choose ocean freight or -- sorry, what are some things to consider when choosing ocean freight? First and foremost is LCL and FCL. So LCL stands for less than container load, FCL stands for full container load. You want to determine how much freight you have and whether or not you can take up a full container, meaning the full container, or whether or not you need to consolidate your goods with other shippers in a less than container load. Another thing with ocean freight is the steamship lines require that you sign a contract. And that contract would be for moving a certain number of containers from a particular origin to a particular destination at a certain rate over a particular period of time. So if you are -- if you know that you're going to have 10 shipments moving from Shanghai that are going to each fit into a 40-foot container and your final destination is Seattle, you would sign that contract with the carrier. If you decided that you needed to actually move 11 shipments in that time frame, you -- the rate that you had agreed to might not apply. And if you only were able to ship 8 containers in that time frame, the carrier might still hold you liable to pay the ocean freight for those 2 that you didn't use. Another thing with ocean freight is transit times. Ocean freight does take quite a bit longer, depending on where it's coming from. You're looking at least a couple of weeks, potentially months to get goods from origin to destination on a boat. And another issue is forwarders. You may decide that rather than working with the steamship line direct, you want to work with a forwarder who would help you to book with the carrier to do that on your behalf. And then another thing with forwarders is typically, they don't require that you sign a contract. So it is the forwarders responsibility then to sign the contract with the carrier directly. But oftentimes, they don't, then require their customers to sign a contract with them. So that might give you a little bit more flexibility. Why ship ocean? The biggest reason that most choose to ship ocean is cost savings. It is significantly cheaper to ship ocean than it is air. Like I said earlier, it's about 10x cheaper. Another reason is space, there is significantly more space on a particular vessel than on a plane. And there are many, many more vessels with a lot more space going back and forth than there are on planes. So depending on how much freight you have, it's likely that moving in ocean, you will have much more opportunity to get all of your goods from origin to destination. Another issue is the value of your commodity. If you have very high-value goods, it may not make sense to put it on a boat that's going to take 3 weeks to 2 months to get here. So if you have very high-value goods, even though the cost of [Technical Difficulty] is more, it may make more sense for you to move it via airfreight. And then with ocean, you need to take into consideration the extra lead times. Like I said, it takes longer. So you need to make sure that the time it takes to get it over the ocean will be enough to still meet your needs for getting the goods to destination. Some things to look for when you're thinking about what carrier to use: We would recommend that you look at experience, experience is always a good thing to look for when you're choosing a provider. Also look for competitive pricing. Schedules is another big one. If you are working with a particular carrier, you would want to look at how many sailings they had out of a particular origin, do they have just one sailing a week? Do they have 2 or 3 sailings a week? Do you need that flexibility? That might be something that you take into consideration. What sort of volumes do they have? Carrier link is also a good one. There's been a lot of consolidation in the ocean market recently, where various carriers share vessels. And so if you have a carrier that's working with 2 or 3 other carriers, perhaps that's going to increase their offerings for sailings from a particular destination. And then EDI, which stands for electronic data interface, do they have the ability to provide you with electronic data regarding where your goods are at each point along the destination? Can they tell you your goods have left the terminal in Shanghai? They -- the vessel is now discharging in L.A., on its way to Seattle, that sort of information. With ocean freight, now we're going to talk about airfreight and what are the differences with airfreight. One of the main ones is that when it comes to pricing, with airfreight, you pay by weight or volume. And usually, the airline will say that you would pay based on whichever is greater. So with planes, they have very limited space and they also can carry a limited amount of weight. If you have something that is particularly heavy, the airline is going to charge you based on your weight. If you have something that is very light but takes up a lot of space, then the airline is going to charge you based on volume. One way to think of it is if you have gold bars that are very, very heavy but don't take a whole lot -- up a whole lot of room on the plane, then the airline is going to charge you for the weight of your gold bars. If instead, you're moving super light and fluffy pillows, but they take up a lot of space on the plane, then the airline is going to charge you by volume. Another consideration is transit time. Whereas with ocean, it takes a long time, airfreight is speedy. It should take you much less time to get goods from origin to destination if you're moving it on a plane. And then another factor is hazardous materials. If you're shipping hazardous materials, there are some hazardous materials that are forbidden on aircraft. Others that can only move on aircraft that is cargo only. Some hazardous materials cannot be moved on planes that carry passengers. There also are specific limits on how much of those hazardous materials can move via air. So if you have large quantities of hazardous materials, it might be better just to look at an ocean opportunity. Some reasons that you ship air time-sensitive cargo: If you have a product that is brand new that you need to get to market as soon as possible, or perhaps if you are shipping something that is seasonal, for instance, Christmas items or stuff that's necessary for back-to-school shopping, if you're looking at a deadline as to when you need to get it to your stores, then shipping at air might be a way to go. Another is cost of product, like I said earlier, if you have a particularly high-value product, you probably don't want to put it on ocean. You might want to ship it air instead. And then one thing that is perhaps counterintuitive with air is that air freight actually has lower minimums. So when we are talking about ocean freight, I mentioned LCL, a typical LCL shipment is -- the cost is based on the cubic measurement of that cargo, how much space is it going to take in the container? But there will be a minimum on that, which probably is going to be maybe $150, $250, something like that. That same small quantity on a plane might actually have a much lower minimum than what would you pay if you are going ocean. So in some rash circumstances, it actually is cheaper to ship air than with the ocean. Things to look for, very similar to the ocean side. Customer service, can they provide you with good customer service? Can they provide competitive pricing? What are their carrier relationships? And what sort of technology and tracking ability can they provide you with? All right, so we've been talking about air freight vs. ocean freight. Next, we are going to move on to Incoterms. And Crystal, I think you've got a poll for this, right?

I do. There we go. Giving everybody a few seconds to put in what their main Incoterm used is.

Anyone is thinking "Incoterm, what the heck is that?" Don't worry, we'll cover that in just a minute.

Everybody, a few more seconds. There are a couple missing on here just because Zoom does not allow us to put over 10. So we're trying to put the most popular ones on here. All right. I'm going to close it up, show everybody's results. [Voting]

Ready? All right. There we go.

All right. So it looks like our #1 is Ex Works, followed by Delivered At Place. And then close behind that is FCA Free Carrier. All right. Great. Thanks, everyone, for sharing. For any of you who did think what I said, "Incoterms, what the heck is that" and any of the rest of you, I'll be honest, Incoterms are one of the most confusing things, I think, in our business, in our industry, and it took me a really, really long time to wrap my brain around Incoterms. If any of you feel the same way, if you have questions, we'll cover this briefly at a very high level. But do be aware that we also do offer an Incoterms [ seminar ], which does do a much deeper dive into these. So if that's something that you're interested in, please let us know and we can let you know and it will be offered next. Something that was really helpful to me in understanding Incoterms was understanding that Incoterms define 3 key things and just 3 key things. They define transport obligations, meaning who is responsible to make choices about how freight moves from origin to destination; also cost, meaning who is responsible to pay for the international transportation; and risk, where risk transfers in an international shipment. So those are the things that we're going to focus on as we talk about Incoterms. Incoterms stand for international commercial terms. There are 11 of them. They were published and [ corporated ] by the International Chamber of Commerce, and they're used to avoid misunderstanding of international trading terms. International trade has been around for a very, very long time, and there are lots of cultures involved, lots of languages involved, trade is done all over the world. And so the intent of the Incoterm is to help avoid misunderstanding. They are revised every 10 years. The most recent revision was in 2020. The revisions in 2020 were very minimal. However, the revisions in 2010 were quite substantial. And we still see some of what changed in 2010, not being recognized in current shipments. However, like I said, they're meant to avoid misunderstanding. They are not contracts. They are not -- they don't define terms of payment, meaning they don't say when you have to pay your -- when the buyer needs to pay the seller for the goods, they're not a contract of sale between buyer and seller. They're not a contract of carriage, they don't define title transfers. So I think that sometimes we get hung up on what Incoterms are and what they do. Most importantly is to remember, they just define these 3 key things: transport obligations, cost and risk, and they're meant to avoid misunderstandings, not to be a contract. So for our conversation, we're going to talk about 2 terms, just 2 for the purposes of today's conversation, which is a more high-level review. So this slide shows you Ex Works, also -- so Incoterms are typically a 3-letter acronym, along with a named place. So in this case, Ex Works, EXW and its sellers Hong Kong factory, and we're using Incoterms 2020. So if you look at the slide, you can see that anything in red is for the responsibility of the seller. Anything in blue is for the responsibility of the buyer. With exports terms when it comes to carriage, and what that means is who is responsible for determining the parties that will manage the transportation, the seller is responsible for preparing the goods for pickup. That is it. The seller is responsible for sourcing the goods -- sourcing the materials to make the goods, actually making the goods and then putting them into boxes, making them ready for pickup by the buyer. Everything else from that point is for the buyer to decide, from factory all the way to final destination. The buyer is responsible for choosing a trucker to pick up the goods from the seller's facility, seller's Hong Kong factory, and all the decisions to get the goods to the final destination, say, in Seattle. In terms of risk of loss or damage, the seller is at risk as until the freight is received by the buyer's carrier. So when this buyer sends their trucker into the Hong Kong factory, risk transfers, the buyer then assumes all risk once the goods are picked up from the factory. If there is a loss or damage, it is the buyer who will need to have insurance for liability coverage to cover that risk or damage. And then as far as cost is concerned, all cost is for the buyer once the goods are picked up from the factory. So in Ex Works terms, the seller is responsible to make the goods, make them available for the buyer. They are responsible for any risk of loss or damage as long as the goods are still at their facility. And then once they are picked up, everything else is managed by the buyer. So those are Ex Works terms. On the flip side, we have DDP, which stands for Delivered Duty Paid. And in our example, we are DDP, the buyer's warehouse in Irvine, California, also using Incoterms 2020. And in this case, it is the exact opposite of what I just described. So with DDP terms, the seller is responsible for choosing all of the transportation, including customs clearance, meaning who will be the [ broker's ] destination and duties and delivery fees, all the way to the buyer's destination. The buyer has absolutely no responsibility whatsoever. The seller does everything in regards to carriage. Risk of loss or damage is also for the seller until the goods are received at the buyer's facility. And all cost is covered by the seller for everything until the goods get to the buyer's facility. I'd like to think of DDP as kind of like Christmas morning, where Santa drops the goods down the chimney and you wake up in the morning, and there the presents are right for you, like magic. It's kind of what DDP is. The buyer has no responsibility in any of this, except to receive the goods once they get there. One of the questions that I often get when we're talking about Incoterms is, what is the right term? What is the one I should choose? What one makes the most sense? And the fact is that there is no one right term. It is simply what is your scenario and what makes most sense for you in your particular transportation scenario. If you have a large transportation and logistics department within your organization, who have the authority and the resources to negotiate contracts with carriers, with brokers, with all of the various people that are involved in the transportation of your goods, if you have the ability to choose a trucker in Hong Kong, who will go and pick up those goods from the seller's facility, then maybe Ex Works terms make sense for you because that's going to give you control of all of your transportation choices. That's going to allow you to choose the most cost-effective transportation that makes the most sense for your business. If on the other hand, you are a smaller importer perhaps, maybe this -- you're not super familiar with how to import, maybe you don't have all of those resources already in-house to make all those decisions to negotiate contracts, it might actually make more sense for you to use DDP terms to rely on your seller to make all those decisions because perhaps your seller has all of that infrastructure, and they can actually get better rates or work with better carriers than you might have access to. Key here, though, is that if you have Ex Works and you are paying your cost directly, you're paying those to the steamship lines, you're writing those cheques. If you have DDP terms and your seller is paying all those charges on your behalf, they most likely are then adding in all of those costs to the cost of goods. It's not that they pay it and you don't have to. It is how you pay for it. Do you pay for it directly to the carriers that you're using? Or do you pay for it as a cost associated with the cost of goods on the invoice from your seller? So hopefully, that was a good overview. Here's a picture to kind of test your skills. In this case, we have a container that was sucked into the jet engine on a shipment headed into London, definitely don't want that to happen to you. In this particular transaction, the agreed-upon terms were DDP. So in this case, who is responsible with DDP terms, is it the seller or is a buyer? With DDP terms, it is the seller. So the seller was responsible for getting the goods all the way to destination. I'm pretty sure that whatever is in this Delta Air Lines' box here, it's not going to get safely to destination, probably going to be some loss or damage. It is for the seller to deal with that loss or damage because the risk is there in the DDP shipment. All right. Next is documentation. We're going to start with the basics of import documentation. So we're always going to need a commercial invoice, Customs in the U.S. always requires that there be a commercial invoice. On it, it should indicate the buyer and the seller as well as a complete and accurate description of the goods. Technically for customs compliance, that complete an accurate description is one that allows us to classify the goods. We also would have a unit price and quantity of each item, what the terms of sale are those Incoterms? And also the country of origin. And we always need to know the country of origin of the goods for customs purposes. We would also like to see a packing list. And whereas the commercial invoice shows prices, what the packing list shows is quantities. So the quantity, weight and measure, oftentimes, that information is also necessary for customs purposes. There would also be a bill of lading, which is the contract between the carrier and the buyer and the seller to move the goods from origin to destination. And then certain other documents that might be required, depending on your commodity, depending on the origin of the goods, depending on whether or not you're claiming a special program, and then also information that's necessary for the importer's security filing. Solid wood packing material is also a concern. Would -- if you are using solid wood packing material, that wood needs to be either heat treated or fumigated with methyl bromide. It used to be that a phytosanitary certificate was required. That is no longer the case. Instead, all goods that come in on solid wood packing material need to bear the IPPC mark that demonstrates that it has been either properly fumigated or treated with methyl bromide. And then the infamous bill of lading. So when we talk about the bill of lading, we're going to talk about it in terms of what you use it for, why do you need one, and why does the carrier need it back? So think about it from the shippers perspective. When the shipper prepares their goods, they then turn over those goods to the carrier and say goodbye and have nothing really to say for the fact that they may have just put $50,000 worth of goods onto a truck to be carted away. Because in most cases or in many cases, at least, payment is not made by the buyer to the seller until sometime after those goods leave. And the seller doesn't necessarily have anything to guarantee that the buyer is actually going to pay for those goods when the goods get there. In many cases, you have regularly established relationships between buyer and seller, and there is a trust involved. But in some cases, that's not the case. Also in some countries, in original is actually required. So in some cases, you do have other scenarios. When that ship -- or sorry, when the seller turns over those goods to the trucking company, they may want to have something that they can use to ensure that the buyer actually pays them for their goods. And that's where the bill of lading comes into play. So bill of lading is a contract between the owner of the goods and the carrier, be that for the airline, the steamship line, the trucking company, whoever that is, that there is a bill of lading created with. There are 2 basic types of bills of lading. One is referred to as an original or negotiable, and that one controls ownership. The other type is a waybill, and that is a contract of carriage only. So in those circumstances that I was talking about, where there might not be trust between the seller and the buyer, that's when that original comes into play, where the seller wants to control ownership of those goods. So you want to potentially use an original bill of lading when a seller wants to control ownership. So you can think of an original bill of lading kind of like a claim ticket for your bags when you turn over your luggage to an airline, when you go on a trip. You give your bags to the airline, they give you your claim ticket. When you get to destination, you give the airline your claim ticket, they give you your bags. Now these days, that hardly ever happens. But the idea is that the airline is responsible for your bags until they give them to you and you exchange that ticket. That's the same idea with the bill of lading. The carrier is responsible to hold on to those goods until you give them that bill of lading back, demonstrating that it is now okay for them to release the goods to the seller -- sorry, to the buyer at destination. If the carrier releases the goods to the buyer before receiving that original back, then the carrier is liable to the shipper for the value of the goods, liable to the owner of the goods for the total value of the shipment. So that's how the bill of lading comes into play. Now is everything for documentation. Now we're briefly going to touch on Customs. First of all, starting with what their mission is. As you can see, Customs does a lot of stuff. They prevent terrorism. They collect a lot of revenue in the form of duties and taxes. They're responsible for [ border ] security, for passenger screening. They're involved in fraud and smuggling enforcement, intellectual property rights protection. They help with agriculture protection. They also do trade agreement enforcement, PGA enforcement, which stands for Partner Government Agencies, entities like the Food and Drug Administration, USDA, Department of Transportation, those sorts of entities. And then they also facilitate lawful international travel and trade. So that was Customs. What about customs brokerage, and what is a customs broker? A customs broker is someone who is licensed to transact Customs' business on behalf of others. We are licensed, we are knowledgeable and experienced, and we advocate on the importer's behalf. We are their partner. What is our role? We assist with proper declaration of U.S. customs of imported goods. We also deal with the partner and government agencies for release of goods, if there are any of those that are involved, and we support the importers compliance program. We also need a few things from the importer in order to do that effectively. First and foremost, we are required by law to have a power of attorney to act on your behalf. We also need to have a clear understanding of your product and your procedures, what your expectations are, what sort of products you have, what additional information we might need. And then we also need to have healthy communication and information from the importer in order to properly assist with all of these things. As you might have heard from what I just said, I talked a lot about partnership, a lot about assistance. We're -- we -- I wanted to be very clear on what a customs broker can do in terms of partnering on your behalf. But the other really important part of this is the importer's responsibility. And Customs has been very clear about this. They made some changes to the law with the Customs Modernization Act of 1993, and what that did was make it very clear that an importer is fully responsible for any factors in a customs entry and must complete the entry using reasonable care. As envisioned in the Mod Act, when informed in voluntary compliance are not achieved, then enforced compliance is necessary. And so what the Mod Act did was it very clearly communicated that an importer is responsible for the information that is submitted in a Customs entry. The Customs' broker is responsible for taking the information and doing their own due diligence to ensure that the information that they are providing to Customs is accurate, based on what they have been provided by the importer. But ultimately, it is the importer's responsibility to ensure that, that information is correct. And they went on to say that neither Customs nor your supplier, nor your Customs broker has this responsibility. It is the importer that has the responsibility. And we say this not to take away from our own responsibility because, as I said, as a Customs broker, it is our responsibility to ensure that what we're providing to customers is accurate, based on the information that we have. But we do want to be very clear so that you all -- if you're thinking about being an importer that you understand that you are ultimately responsible for all of this. So that you know more about what the risk is, what sort of things you want to be taking into consideration. All right. So now we get to the fun picture part of the presentation. We're going to talk about liability and insurance. So that is an actual vessel that is on fire, not what you want to have happen to a ship that is carrying your goods, obviously. So first of all, we're going to talk about liability and what is liability. Liability exists only when there is a contract of carriage in place, when the loss or damage occurs, that contracted carriage is the contract between the cargo owner and the carrier and only when all obligations under that contract of carriage have been met by the shipper or the company, whoever that the owner of the cargo is, okay? So liability is very specific. It only exists when there's a contract of carriage in place, when loss or damage occurs and when all obligations under the contract of carriage have been met. So then what liability is available, assuming that there is a contract of carriage in place at the time that the loss occurs, what might the carrier be financially responsible for would be whatever that contract says. With air liability, the contract of carriage per the Warsaw Convention is $20 per kilo or the value of the goods, whichever is less. I want to be very clear about that, liability for air cargo, $20 per kilo or the value of the goods, whichever is less. And then there is also the additional 17 Special Drawing Rights, which is an International Monetary Fund definition per kilo, it's about $26 per kilo. $26 per kilo or the value of the goods, whichever is less. With ocean liability, it's $500 per customary shipping unit, and customary shipping unit is somewhat loosely defined. It could be the entire container, perhaps it is cartons within the container, but that is something that will have to be defined with whatever is in the contract. And something to be aware of with ocean liability is the 17 defenses under COGSA, which is the Carriage of Goods at Sea Act, which are all the 17 things that make the carrier not liable. We'll talk about that a little bit more. With truck liability, it varies by country and by trucker. It's usually about $50 -- I'm sorry, $0.50 per pound or $50 per lot, whichever is less. And then warehousemen liability is very similar to that. It varies by the contract. It's usually about $0.50 per pound or $50 per lot, whichever is less. So hopefully, what you're seeing here is that liability doesn't cover much, if anything at all. So here's an example. With liability, you've got 2 pieces, 100 kilos, commercial value is $20,000. One piece is lost. Is the carrier financially responsible for the last piece? If yes, why? And how much is the carrier responsible for? We can't actually answer the question because I didn't give you all the details. So the remainder of the details are that Piece 1 weighs 99 kilos in the value of $100. Piece 2, the weight is 1 kilo and the value is $19,900. So remember, liability is -- for air is $26 per kilo or the value of the goods, whichever is less. So if you lose Piece 1, or Piece 1 is damaged, you've got 99 kilos or the value of $100, whichever is less, it's going to be $100. With Piece 2, your weight is 1 kilo, but the value is $19,900. For that one, you're actually only going to get $26 because, again, you're going with whatever is less. In that case, it's $26 for that 1 kilo. So again, liabilities, if it exists, doesn't cover very much. So here are some great pictures. Something that you don't want to see when your container arrives, on fire, empty, pretty much destroyed. This is another example of a damaged container that arrived. You can see that those modules inside likely were damaged, probably don't want somebody standing on them. I mentioned earlier the 17 defenses when carriers are not liable. So carriers are not responsible for things that occur outside of their control, such as inactive nature, hijacking, an active war, consequential damage. So damage that occurred due to the carrier not meeting the terms of the contract. It's not -- they are not liable if that happens and also terrorism. Many, many things that the carriers are not responsible for, are not liable for. So here's another great example of what you don't want to happen. This was determined to be an act of God. Carrier was not liable for all the damage caused to these containers. So moving from liability now to insurance, what is insurance? It's a risk transfer tool. It allows transfer of loss from the importer to the insurance company. It's also a contract of indemnity. So it releases the importer for responsibility for loss. And who can purchase it? Anybody who would suffer the financial loss. So the importer can actually -- can absolutely purchase insurance. What are the things that it covers? It covers property in transit. So it covers the cargo while the goods are in transit. It covers against all risk -- sorry, all risks against direct physical loss or damage. There are some exclusions, but in comparison to carrier liability, very, very few. It covers door-to-door in most cases, and it does have coverage sections for international, domestic and stock [ at locations ] while in transit. One thing to be aware of, if you ask us to hold an import shipment in our warehouse, it is no longer deemed to be in transit. However, if that does happen, additional coverage can be added at that time. Why purchase insurance? Because the liability limits are minimal, we talked about that, $26 on 1 kilo of cargo valued at almost $20,000. That's probably not going to cover your loss. The carriers also limit their liability. And I think it's very easy to get mad at the carriers for doing that. But the reality is that if the carriers are responsible for all of the cargo on a vessel, they would so quickly go out of business. We need the carriers to be able to limit their liability to promote international trade. One kind of crazy thing about international transportation is this thing called general average. And so what that means is that if a vessel is damaged, if the carrier -- if the ship's Captain decides that he needs to jettison some cargo to save the vessel, meaning throw some containers overboard, once the vessel gets to port and all damages assessed, in order to get your goods off of that vessel, if -- if it is determined that there was enough damage, then a general average bond will be put into place, which requires that all parties who have cargo on that vessel have a bond, the goods -- the value is held in bond. And all of that goes to make everybody whole. So if you have insurance, it likely will cover general average and you will be able to get your goods while all of that is taken care of and settled. So you purchase insurance because you're willing to pay a known small loss, meaning a premium, to transfer an unknown large loss for the same reason that you buy car insurance. You don't buy car insurance because you think you're going to get into an accident today. You buy car insurance because you might get into an accident today, and you'd rather pay small premiums over time to cover one large cost at once. So some more crazy pictures. This is the [ Arnold ] Maersk. It came into Seattle in November of 2013. They had 18 containers go overboard and 53 were damaged. You can see, those containers aren't supposed to be in that direction. And you can also tell that those containers underneath were pretty heavily damaged. Here's an example of what you don't want to see when you open the truck, when it gets to your facility, lots of damage to those boxes. This is one of my personal favorites. This is the [ ML Comfort ]. In June of 2013, it actually split in half, and half of it sank almost immediately. They were able to get a tug out to start towing the other half to shore, thinking that they'd be able to salvage at least half of it. But while they were tugging it, they were unsuccessful, and the other half actually did sink at that point. So the entire ship was lost. Definitely not what you want to happen. All right. So those are all my crazy pictures. And that is the end of the presentation. So Crystal, are there any questions out there?

We do. We have a couple. So regarding liability for the airlines, are all airlines $26 for liability?

So that is -- those are the standard drawing rights. You definitely want to check with your contract of carriage with the carrier, but yes, that is the standard fee.

And then we have one regarding how fast or what the average time is for Expeditors to resolve claims? And we can also follow up with the claims team with [indiscernible]...