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

Hello, and good afternoon, everybody. Thank you so much for joining in on our Imports 101 Webinar. We're going to give it just a couple more minutes to let everybody else trickle in probably from lunch, and then we will get started. All right. Let's get going. I'll make a couple housekeeping announcements before. So this is about a 50-minute webinar with a 10-minute time for Q&A at the end. This webinar is not going to be recorded. But if you would like the slides, please let me know, and we can send that to you. If you have any questions throughout the survey -- throughout the webinar, there is a Q&A box that you will be able to type out your question, and our participant or panelists will get to your question either during the webinar or during the Q&A session. And then be on the lookout for an e-mail coming that will just be asking for your feedback for how well you think everybody did during the webinar. And the reference materials, like I said, will be sent to you. Cool. Well, we'll start with some introductions, starting with Ashley.

All right. Hi, everyone. Good afternoon. My name is Ashley Lara. I'm the Customs Brokerage Manager here in Houston for Expeditors. I have been with Expeditors 14 years. I'm licensed Customs Broker. It's nice to chat with you guys today.

Hey, everyone. I'm Gary Koegler. I'm the Import Transportation and Order Management Manager here for Expeditors in Houston. I've been with Expeditors for 14 years and excited to be in front of you all today.

Hey, good afternoon, everyone. My name is Ryan Fanning. I'm the Ocean Import Manager here for our Expeditors DFW office. May will be my 10th year with the company. Had a few other roles before this but definitely excited to talk imports today with you, guys.

Good afternoon. My name is Zack Wingen. I am the Air Import Manager here in Dallas. I have been with the company going on my ninth year, and I look forward to talking with you this afternoon.

All right. Well, I'm going to lead us out today. So first off, thank you for taking the time here. We know everyone has busy schedules these days as new budgets ramp up and you get going on your supply chain for 2023. For some of you, perhaps this is a good intro course to some of the concepts that we'll go through. For some of you others, maybe it's a nice refresher course on some key items that we deal with every single day. So want to start off with a couple of the objectives that we're going to talk through. One, we want to make sure that we just go through a very basic shipment life cycle from start to finish. To make sure that you do have an understanding, you can kind of picture that image in your head. We're going to look at both ocean and air services from an import perspective and really compare and contrast the reasons you might select one mode versus another. We're then going to determine shipper and buyer cost obligations in a transaction, so Incoterms, what that means for you, what that means from a cost and liability standpoint. We're going to walk you through some of the most familiar documentation that you will be either dealing with directly or it is being dealt with by your teams in the supply chain. We'll then go through some of the obligations from a compliance perspective that you have likely as an importer. And then we'll definitely take a look at understanding risk in the things that can happen in the supply chain every now and again. Certainly, our thoughts and prayers are with the people in Turkey right now, but things happen, and we want to be sure that you understand things that can happen in the supply chain. And then really at the end, provide that open forum for questions and concerns. All right. So first, when we look at the kind of shipment life cycle, we need to start with who the parties are that we're going to be dealing with, that either you're dealing with directly or that someone on your team is going to be dealing with. And as you can see from the list here, there's quite a few people that are involved in the supply chain. Really, when we think about the supply chains, we're touching every facet of an organization. And so we want to be sure that you understand the key parties that are involved. So one of the first ones to think about is a more simple concept, but there needs to be a buyer of a good or a service, and there needs to be a seller of that good and service. And so the buyer is going to be negotiating that price with the seller in order to make any type of supply chain transaction occur. So they're going to be key people in your organization that are dealing with the numbers, dealing with those, maybe a procurement role or to someone finding new suppliers of goods and then hopefully negotiating some of those terms. You may be dealing with a consolidator. This is going to be someone that might be taking your freight that doesn't fill up an entire ocean container or entire conveyance and actually combining that with other loads to make sure that you're getting the best price, even though you can't fill up maybe an entire conveyance. You're likely dealing with a forwarder of some sort, someone that is controlling your bookings, helping you say, "Hey, I need a container from Point A to Point B, or I need a shipment from Point A to Point B," and then helping arrange that, helping do a lot of the front-end booking of new shipment and arrangement with the steamship clients. You might also have an export customs broker, someone that likely your supplier overseas is going to be dealing with in order to clear export customs on their side. So that might be a third party. They might be using someone like Expeditors that they can handle those services as well. You certainly need some type of local trucking company on the origin side or the supply side of the supply chain in order to move those goods from the warehouse to the airline, from the warehouse into the container to get to a port. You're definitely going to have the origin stevedores or air cargo handling agents that, once that cargo is arriving, they're going to be dealing with that freight physically. And then you're going to have the actual carriers, the ones that own the vessels and the planes, the steamship lines and the airlines that are actually can -- own the assets to move the cargo from Point A to Point B. Then once that cargo is transiting, you're going to have your destination folks that are unloading that cargo, dealing with that cargo and preparing it to be recovered. Through all that process and certainly, hopefully, before that freight is arriving to the port, you're going to be heavily engaged with an import customs broker that's going to be making sure that when your freight arrives, it can seamlessly flow into the country as commerce or perhaps flow into a free trade zone of some sort. There's likely going to be customs interactions. And hopefully, your import customs broker is dealing with a lot of that activity. But depending on the type of product that you're importing, there could be more engagement with customs directly. They should [ wildlife ] through FDA, things like that. Then you're going to have that ultimate destination local trucking company that's going to get the cargo to your door. You might have distribution or warehouse providers that, once that cargo's there, they're the ones handling that ultimate navigation to the final point of delivery. And then, of course, through all of it, all of this costs money in some way, shape or form. So there's likely going to be some banker or financier that's going to be [indiscernible] as well. All right. So now that you kind of understand a little bit on some of the parties, we'll walk through a quick shipment life cycle and then really give you guys a visual of all this. So the first piece is going to be, one, even likely before a step like this, you're going to be sourcing that product, figuring out what suppliers that you need. But for us, talking on shipping and importing, your buyer is likely going to be negotiating that price of product with the supplier, making sure they get the best price possible for your company but also making sure that the product quality and things like that are up to par with what you're wanting to deliver. So there's going to be some type of negotiation that takes place. And then once that takes place, they're likely going to be sending a pro forma invoice over to the supplier that's stipulating the cost, the terms of sale, the Incoterms that are there, who's going to pay for what, who's responsible for what, so that there can be a negotiation and an ultimate signoff, so that a purchase order can take place. So once those terms have been negotiated and you understand, hey, it's going to cost me X, and I expect that you need to have your product ready at this point, a buyer will likely place that formal purchase order with your supplier. That may be an e-mail of a PDF that you guys have. That may be a system functionality that you have, the suppliers logging into to review the purchase order and accept that on their end. Then that product, by the supplier, is going to be ready -- be made ready for exports. So their lead time might be only 30 days for your product. It might be 120 days or 150 days. So there might be varying lead times in the moment that, that order is placed to when the product is ready. But certainly, once that product is ready, either a forwarder perhaps on that end or your team directly with a key partner is going to be making that booking, so reserving the space on the vessel, on the airline, on the time line that you need to get that product into destination when you need it. Then ultimately, in most cases, it's either going to be your supplier directly dealing with their local trucking partner or the forwarder on the front end, helping dispatch the trucker to physically go pick up that freight. There's likely going to then be some exchange of e-mail documents in order to clear those export customs and also make sure that we have the right shipping instruction s to the steamship line to the airline for what they're going to be carrying and making sure that there's -- the time lines are met. So in all of these, the shipment life cycle, there's going to be key points throughout that they have to hit, what you'll hear about a document cutoff or a freight cutoff. So all of this is taking place to make sure that those checkpoints are met. Think of it as when you're going to the airport, you need to be there a minimum of 45 minutes early, preferably before, if you're going to check a bag, very similar time lines here. So once that custom has been notified that this product is going to be exported, it's really setting it up for kind of the next phase here of the shipment life cycle. So once they set that up, everything is good with an export customs. That empty container is going to be either positioned at the supplier facility for them to load the cargo in, or perhaps, if it's that less than container load or LTL-type shipment, that freight might be delivered to the consolidator to build and build those other loads to ship a full container out on that end. At this point, once the freight is kind of being made ready for export to the carrier, that cargo could be inspected by the local government there just based on random checks. Hopefully not. Hopefully, cargo flows through swimmingly. And then ultimately, that cargo is going to get either loaded onto the vessel, loaded on to the airline by those origin handling agents. And that cargo is going to depart physically from its point of origin. And then once that cargo's in transit, that's where key parties in your supply chain are tracking and making sure you understand that, if there are any delays due to weather issues or other concerns, that you're made aware of that. And if there are any deviations in the estimated time of arrival, again, that that's being updated and made available for you to review. Once that cargo then arrives at the destination, it's going to be either unloaded from the vessel again or unloaded from the airline. And hopefully then, cargo entering clear through customs. So your import customs group, whether that's a third party again, or you're doing that in-house, they're clearing that entry with customs and making sure that it can be entered into U.S. commerce in order to be brought in. And if not, there can be some delays during this phase if all of your ducks aren't in a row, so to speak. Ultimately, that freight will be released by the carrier and the trucker dispatch. And hopefully, that freight arrives at your dock timely and that cargo can then be unloaded. And then the cycle will continue after that. So I know that's a lot of words. So we thought we would help with a nice visual here. And the reason we wanted to show you guys this and talk about all the steps, talk about all the different parties that are involved is that when you look at a visual like this, you understand that there are so many components that have to be working kind of perfectly in concert for things to go smoothly. And even a small delay on Step 1 or Step 2 or Step 3 can cause those ripple effects throughout the supply chain. And it's difficult when there's so many parties involved with strict deadlines, strict schedules to kind of make up that time during transit. So as things become delayed, it's important that you're being made aware of those, that you're be made of the reasons. And if there is an opportunity, once it reaches the final destination to kind of expedite that transit, that you're working with your key freight partner like an Expeditors or someone else to make sure that you do all you can to make sure that cargo gets there on time. But we really just wanted to show this, so you can kind of see a good visual. I love the pictures in this too. I think it's a helpful visual, especially for those of you who maybe are just starting in your supply chain careers to take a look from Point A to Point B, from Step 1 to 15 here and really understand the parties. So as we move forward and the other presenters kind of go through some of the details, keep this visual in mind as we go through

Great. Thanks, Ryan. So now we're going to go ahead and take a look at the differences between ocean and air freight, and we'll start off with the ocean freight. And so as we look at the ocean freight, there's going to be 2 main types we have here, which is going to be LCL and FCL. So LCL is going to be less than container load. That's what it stands for, and FCL stands for full container load. There's a big difference in that. And some of them would be for LCL shipments, there's going to be multiple importers freights contained in that -- inside that container. So when that container arrives at the destination port, that's going to need to be deconsolidated at a CFS location. It's important to note that because there could be a -- there will be additional transit time as that container is deconsolidated and prepared to be ready to be picked up by one of our truckers. So there is extended transit time. While with the FCL, full container load, those containers, once they arrive at the port and are made available at a rail yard, they can be delivered directly to your warehouse. So there is a bit of time savings in that. And also, if there were to be any types of holds or another government agency might a hold on another importer's shipment that's contained within that container of yours, your shipment will be subject to the same examination. So extended transit time delays are potential. So it's always important to keep that in mind. And then there's going to be different forwarders working with Expeditors or any others. And then there's going to be contracts that can be set up for individual importers. So depending on those contracts, a lot could change with that. So why ship ocean? Cost savings. It is a cheaper routing option. But when we look at that, we got to be careful because sometimes, we got to look at how much are we actually moving. Because if the shipment is very small, air could be potentially a cheaper option. So it's important to understand the differences. And once we move on to air, I'll talk a little bit more about that. But if you're looking at moving both cargo in general, ocean is definitely the more cost-efficient way to move. There's also more space available in a container than there is inside of an aircraft, and there's much more possibilities to move cargo via ocean than air. And then commodity value as well. Having your commodity values very high, it's much riskier to have it in transit for an extended period of time. And so if you are concerned about that, air freight would probably be the best option for you to go. And kind of like I talked about LCL earlier, there's going to be extra lead times, especially on the LCL side as there's times -- there's going to be time spent getting that container's stuff at the origin location. There's going to be time spent at the destination side unloading that out of the CFS and making it available for pickup, what they'll look for when you are booking ocean freight experience. And so you want to have someone who is experienced in booking your cargo and handling it in the most efficient and best way possible. Competitive pricing, reaching out for quotes, RFPs and understanding what is your cost going to be on these moves. Also schedules. Some carriers might only be moving out 1, 2 days a week as a certain origin on a certain lane. So you want to be careful because if you're looking for consistent service. You want to make sure that the schedules are in line with what your expectations are and also how much volume do you have available to you. Can you only get 10 FCLs in a week when really, you need 30? So it's something to be very mindful of. And then just kind of EDI as well, making sure we have -- that you have the connectivity you need to be able to focus on your transit times and be able to forecast when your shipments are going to arrive. And then we look at the air freight side of things. Something to first note here is pay by weight or volume, which is something that a lot of newer inquiries can get tripped up on sometimes because if you were to think, okay, I'm going to ship 100 kilograms of my cargo. I'm going to be charged that rate per kilogram on 100. But we got to look at the difference in volume metric cargo to actual weight cargo. So a good example of that would be if you were to ship 100 kilograms of foam in comparison to 100 kilograms of steel. So if you were to be shipping 100 kilograms in the foam that's super lightweight, a little -- I want to say, fluffy, but more volume, that's going to take up more space on the aircraft, which is essentially going to be more expensive. So we do a comparison when we do the rating for air between actual weight and the chargeable weight, which looks at the volume metric weight. And so if anyone has any questions on that, we can provide that after this call. And also, there are certain restrictions on aircraft for hazardous material. We can't ship everything in the air as we would on different modes of transportation. So there are certain limitations on that. And as we look at airfreight, we know that it is overall going to be a much faster transit time. Most of our lanes coming out of Asia, we're looking between 5 to 9 days on transit time. Could be a little more, could be a little less, depending on the service level that's being requested but definitely a much faster option than ocean. So why ship air? Like we just said, time-sensitive cargo. So if you have something -- we handle shipments for dry ice all the time. So if you have something that needs to be at a destination or you have to make a cut off by the end of the quarter or for whatever reason, air shipments are definitely going to be the best way to handle time-sensitive cargo. Cost of product, same thing. I have very expensive material. You don't want out in transit for that one. Air freight is going to be the way to go. And lower minimums. And so there's going to be minimum costs in both air and ocean. For an example, airfreight. A minimum cost on air freight could be between $60 and $110. But for ocean, the minimum rate is typically 1 CBM, which you would maybe go in between $150 to $200, give or take. So if you do have a shipment that maybe isn't time sensitive, but it's very small, you might actually be paying more to ship in ocean than you would be air once you look at it altogether. So be mindful of that when you are looking at the difference between air and ocean. Kind of the same things we look for, for airfreight. What is it you want, right? Customer service, that's going to be a key. Especially when you're moving time-sensitive cargo, you're going to need quick updates to where your cargo is at and when is it going to be at the final destination. And so you're going to need something able to respond to you quickly and give you those updates. Competitive pricing. The air -- past few years, the air market has been pretty volatile. And so competitive pricing is a key, making sure that the rates are adjusted to the current market. And then also carrier relationships. Expeditors has amazing relationships with all of our top air carriers, and we have direct lines of communication with all of them in case something does come up that we need to address with them and also technology and tracking ability. You want to be able to not even have to e-mail sometimes the customer service, right? You want that information at your fingertips to be able to go back to your customers or internally provide updates. So you're going to make sure that you have that technology available to you to track your shipments.

All right. So we'll talk a little bit about some of the documents that Ryan and Zack spoke on and also just kicking it off with Incoterms. So Cherokee just put in the chat, a document, kind of a takeaway handout for you guys. It is an overview of all of the Incoterms. So what do I mean when I say an Incoterm? So it's an acronym. It stands for International Commercial terms, but it's essentially an agreement. So when Ryan talked about placing that purchase order and you guys agreeing on a term, so when a buyer and a seller agree on a purchase price, maybe they're going to charge someone $0.99 per widget, what does that $0.99 include? Does it include me making the widget and then handing it to you? Or does it include me making the widget and then packing it and then putting it in a box and then shipping it and delivering it to your door? Because the price is going to be a little bit different for that widget based off of what I have to include in that price. So an Incoterm is a great way, it's an internationally standardized way for companies to communicate about what is included in that price. So what does it do for us? So it kind of defines who's responsible for the transportation obligations, meaning who has to arrange it, which ironically might be different from who has to pay for it. So it governs the cost, and then also it governs the risk, or basically, if something happens along the way, who's responsible for that or who's at risk there? What it doesn't cover? So it's not going to be a contract. It is not your term of payment or sale, and it doesn't govern title transfers, okay? So the terms mean specific things and who's responsible for paying the cost and who's responsible for setting up the services. And if your company is going to deviate outside of that, one thing that most people recommend is to make sure that's written into the purchase order written into the contract. So that it's like, hey, if you're going to say it's DDP, but that's not really what you mean, you better put that in your purchase order because DDP implicates a certain thing. So 11 terms. They are published every 10 years by the International Chamber of Commerce. So the most current version, RV 2020 Incoterms, which is what that handout is. I am not going to go through all of them with you, but I will give you a little flavor. So on each of them, so Cherokee, will you set all the animation on the side? So there's kind of a band. So on each of them, you're going to see kind of a red line and a blue line on who owns which piece. So the red is for the seller, blue for the buyer and on Ex Works, that is kind of one end of the spectrum. That is the most collect or the seller has to include the least amount of stuff in an Ex Works situation. So you can see in this example on the screen, Ex Works, the factory in Hong Kong, the seller makes it available, and then the buyer has to pick it up and do all of the transportation pieces from that point forward. And then on the flip side of that, the most prepaid or the most advantageous or most included would be DDP or delivered duty paid. So again, here, you see kind of the reverse. You see a lot of that responsibility falling on the seller side, where they are responsible for everything up to the buyer's door, including customs duties and taxes. So again, the Incoterms, the framework of them defines what they are and who's responsible for your organization. That's where you're going to have to decide what terms make sense, and there are definitely positives and negatives and advantages for each of them. What I'll at least leave you with in terms of these 2. So with Ex Works and with DDP, again, the most -- the 2 extreme ends of the spectrum, both of those have customs considerations. So in an Ex Works situation, technically, the seller has to make it available, but they don't have to pay your export customs. So that's something for you to be considerate of, how hard is that going to be for them to do or for you to do? And the flip side on DDP, especially if you are the seller in that transaction, if you're the seller in DDP, you need to consider that destination country, maybe you sit here in the U.S. and you're selling to Germany, how are you going to fulfill your import obligations inside Germany? Do they allow foreign importers of record? Can your U.S. company even do that? Do you need to have a sister company? So those are some of the considerations that the Incoterm also obligates you to. If you're obligated to fulfill the customs activity under DDP, that's not just the financial aspect. It's not just that you'll pay for it. It's that you are the importer. And that can be kind of tricky, especially if you don't have adequate representation in the country where you're trying to transact that custom's activity. So just a couple things to be aware of when you're choosing a term, but yes. So, documents. Lots of fun documents. The 2 gentlemen before me spoke about several of them. There will be a quiz later. So just make sure you're taking notes. So kicking it off, why I'm talking about documents a little bit. So they really relate to the customs side as well. But from a documentation standpoint, you're always going to need a couple of different documents, or there will be a few key documents in every transaction. On the international side, a commercial invoice is going to be one of them. So it's what it sounds like. It's the invoice between the seller and the buyer. And there are some specific requirements that need to be on that document in order to facilitate customs on both ends of the spectrum. A couple of them are listed here. So within the regulations, the '19 CFR, there's actually like a breakdown of everything that's required. This is a nice high-level summary. But essentially, where it's going, what it is, the currency, how much it costs, all those things, right? A packing list isn't necessarily required in all instances, if you represent how the goods are packed on your commercial invoice. So packing list kind of is an optional document in a lot of cases, but you do need things like net weight. So if you're not going to provide that level of detail on your commercial invoice, that's where you might end up needing a packing list. A bill of lading. That is the actual contract of carriage or how something moves from Point A to Point B. That's going to be an absolute in every single transaction. And I think I've got a different slide, but we'll talk about a couple different kinds of those. And then other than that, there might be some special documents, but that would really be based on what type of commodity that you're bringing in into a country or if you're trying to do some kind of special tax advantages, maybe like free trade agreements. So you might have some specialized documents, but every transaction is going to have that bill of lading and that commercial invoice, sometimes a packing list. All right. Solid wood packing. So in the United States, we regulate and require that all wood packing be heat-treated when it comes in. We're not really a big fan of other countries' bugs. We feel like we've got enough of our own, and we don't like to share. So we require all of our wood packing to be heat treated, and this is how they enforce that. So it used to be like a piece paper that you had to turn in. That's not a thing anymore. Now we require this stamp. It's an actual visible stamp on all wood items. That's what it looks like. It's beautiful. All right. Last thing on the bill of lading. So I said it's that contract of carriage between the -- not the seller and the buyer, the shipper and the consignee. And in an ocean environment, we specifically want to call out that you're going to be asked about what kind of bill of lading that you want. And someone is going to ask you if you want an original or if you want an express release. Or sometimes, someone will say a Telex Release. So we want to talk a little bit about what that means. Think of it like a title to the car. So the original bill of lading, when issued, acts as a title. So if you say that you want an original, usually that means that the seller and the buyer maybe aren't on the best of terms or the seller wants to hold on to that bill of lading to affect payment. They want to make sure they get paid before they say, "Yes, you can have these goods." So the seller gets an original bill of lading issued. And then the carrier on the destination side isn't going to release those goods until they get that piece of paper back signed by both parties. So on your end, it's a way to affect payment. It can also be an administrative challenge to make sure that, that original piece of paper gets passed from person to person and that those manual signatures get done. Kind of a medium ground is something called the Telex Release. So a Telex release is when the shipper has an original bill of lading issued. They then get paid, and they are satisfied. They sign it, and they turn it back into the carrier at origin and instruct the destination to Telex Release it, which means essentially almost kind of turn it into an express release or a not original bill of lading at destination. Whereas on the flip side, you can elect to not ever have an original issued, and you can go with a waybill or an express release at destination and not have to deal with any of this. So a couple of options there, and it really just depends on what makes sense for the transaction and your organization. So I think we covered that. Great. So diving into the customs piece. So here in the U.S., you can't bring anything in without telling customs about it. So how do you do that? So who's the customs broker? What is it? So basically, you're going to hire a customs broker in most cases, think about it like you hire someone to do your taxes in some cases. They're licensed to transact that customer's business. We're familiar with all of the regulations. What is our role? We act as that liaison between the importer and the government to explain the requirements, gather the necessary information and funnel that information in a compliant manner to the government so that those goods can come into commerce. We are responsible for kind of that. We take all the data from all these different people that we've talked about in the supply chain. We conglomerate all that together and then push all of that information to the government. And what do we need in order to do that? Well, you got to tell me it's okay. So I need power of attorney. So power of attorney just gives us the authority to act in a limited capacity on an importer's behalf to file that import customs declaration. We also need a clear understanding of that importer's product and procedures. So there's a saying, you date your freight forwarder and you marry your broker, but there's a bit of a setup process that goes along with getting your customers brokers set it for the first time because they're going to want to know what you're bringing in. So you're going to need an HTS code, which we're not going to get super into the details today, but they're going to have some questions about what are the commodities, what are they made of, that type of thing to help them file compliant declarations. And then you're going to want good communication and information around that. So our other job is to make sure that we're supplying you with great information and helping to answer any question along the way. There's a reason that you hire a customs broker, and it is so that we can act as that liaison, and so that we can provide all of that training assistance, research help at the end. So what are you on the hook for? So we got to help you get the information, but you're ultimately responsible for it. So this is actually written into the law. I'll let you read this beautiful slide, full of words, but there's something called the MOD Act, but the MOD Act really placed all of the legal obligation and legal requirement on the importer for all of the information that's filed. So even though when we as a custom's broker file 2 different forms and like 27 different datapoints with customs about what's coming in, the importer is ultimately responsible for the accuracy of that information. So it's purely on the importer, and that's where you want to make good choices around hiring a broker that has a good compliance program in place and then also having your own checks and balances in place to ensure that it's accurate.

Hey, everyone. So my turn to talk about some of the things that can go wrong and who's responsible for it. So we started off by putting out a few slides with pictures. You can see here, there's a 53-foot trailer that look like it caught on fire, an ocean container that took some damage with some goods inside that look like they are pretty valuable, containers falling off of an ocean vessel. Unfortunately, that does happen. And then some examples of how cargo can be offloaded from a container and things can happen. Cargo can get damaged. And then just a few more examples of just things that can happen in the industry. Some of you may have seen things like this happen, sometimes see it on the news. But it's always interesting to see what could happen and what the impact can be. So let's talk a little bit about freight carrier legal liabilities. So what is it? There are a set of standards that are put out there internationally that limit the amount of liability that a carrier may have. The standard is across all modes of transportation. There's different units of measure that are used. The intention is to provide a simplistic way of calculating what that liability may be. It does define some defenses that carrier has that limits the liability that they can be held to in the event that something happens. And even in all these cases, and I'll speak a little bit more about it, they must be found negligent to even be held liable. So some examples below. And Cherokee, you can go back one. Some examples below here are in international ocean, I'll talk a little bit more about this in our future slide, but it's limited to $500 per customary freight units. There's can be a number of things. But most of the time, it's the piece count that's listed on the bill of lading. International Air is limited to 22 special drawing rights. That's what SDR stands for. But basically, it's a calculation that's out there that accounts for things like currency, value. And right now, if you think about it, it's probably close to about $30 per kilogram. And then trucking and warehousing is another example of when they make $0.50 per pound. One key point here is the value and type of goods has no impact on the freight charges or the carriers liability. That's an important point here to understand, especially if you're new to the industry that, just because something went wrong, it doesn't necessarily mean that the carriers can be liable for the value of the goods. All right. So this is intended to be an exercise, but we're going to go through these examples pretty quick. So Cherokee, you can move forward with the examples. So in this example, we're going to take a sample shipment of a $10,000 invoice value for 1 pallet, weighing 100 pounds. And across these different modes of transportation, this is what that limited liability would be for the carrier if they're found liable and negligent. So for ocean, the limit is $500 per CSU and not being defined as 1 pallet, the maximum amount of liability a carrier can be responsible for would be $500. So keep in perspective the invoice value being $10,000 for the goods. For air, that SDR of about $30 per kilogram, at 45 kilograms, which is the weight of the shipment, the amount that the carrier could be held liable to is $1,350. For a trucking, at $0.50 per pound, that would be $50 maximum liability, and for warehousing, $50 per lot. In this case, defined also as a pallet would be $50 maximum liability. So we talked about some of those defenses. Here's a list of what they might be. So if the carrier can explain or prove that any one of these conditions occurred in the circumstances of a shipment, they will not be held liable to pay any of that. So those calculations on the previous slide would actually be 0 for the carrier. So acts of god, acts of nature, acts of war, so on. And you guys can kind of read through the slides. But generally, there's a pretty comprehensive list of reasons why a carrier would be absolved from liability when something goes wrong with the shipment. So what options are there out there to mitigate that if you think about the value of goods and how do you protect yourselves as an importer or as an organization. There's insurance available. There's 2 different types of insurance. I'll touch on them a little bit. But certainly, if there's something on this that appeals to you and you wish to know more, you can certainly reach out to us, and we can go into much further detail. One example of insurance would be transactional insurance. And the other one, which I'll talk about on the next slide, will be an annual policy. So for transactional insurance, this one is typically done on a shipment-by-shipment basis or within a series of shipments. It can be something that can be quoted transactionally. The quote is, and the rate for it, is generally based around the value of the shipment. And it can even be used if you already have a global policy in place. And one of the main reasons why that might be favorable to do is if you have a global insurance policy in place, but your deductible is pretty high. You may find that it would be a benefit to have transactional insurance to be able to cover you without having to lean on that global policy that may be intended for more disastrous scenarios. This one will be a little bit more transactional and help protect you for those specific transactions. Annual insurance policies. This is generally for all-risk cargo warehouse-to-warehouse coverage. It's intended to be somewhat comprehensive, ensures protections of your shipments from start to finish. This is an annual policy regardless of whatever freight provider might be used. Typically, you'll go through people who will evaluate the value of the goods. They'll understand the commodities. It's somewhat customized to your particular commodities, the value of the goods. And then it's -- the rate there will be determined, and it looks much like other insurance policies that you may or may not be familiar with.

Great. Thanks, guys. All right. Well, if you have any questions, we're going to give you all some time to type them out, and our wonderful panelists will answer them as they come. And to clarify, yes, you will be receiving the slide deck and the Incoterms file in your e-mail within a couple of days. And if you want to hear more about events that we are hosting, you can scan this QR code to subscribe to our newsletter, which also sends out upcoming webinars, in-person events that we have plus just great industry news. Does someone want to tackle the one that's in the Q&A?

Yes. [ Joanna ], air rate is calculated by volume and weight. How does that differ from ocean rates? And so good question. Ocean rates, there is a calculation based on a density where, if it does reach a certain limit, I think it's somewhere around 333 kilograms per CBM. There is an increase in that ocean rate charge. So essentially it would be charged -- ocean is typically on the LCL side is charged by CBM. Now once it goes past that 333 kilograms per CBM, it would be -- instead of CBM, it would be every 333 kilograms would be the equivalent unit for replacing CBMs. Hopefully, that makes sense.

And if it does not, here are the QR codes for their e-mails, if you want to reach out to them and ask any more questions or get any further clarification. And there was another question in the chat.

Ashley, you maybe want to take that one?

Absolutely. Yes. So I think you can absolutely ship DDP to a country that you're not in -- physically located in, as long as that destination country allows for like for an importer of record and you can get set up to clear customs there. That's absolutely the key. So if you can get all that set up then, yes. But yes, import customs is included in DDP. So that's the thing you need to be aware of, is whether or not you're actually legally able to transact customs clearance in that country.

Okay. We have another question out there for what insurance should you buy for ocean in case of a lost ship or lost ship shared loss. It really depends. It depends on the circumstances. Insurance typically has to be in place before the shipment. So it doesn't -- it's not something you can get after the fact. But based on your business and the circumstances, they might have the value of your goods. Transactional insurance or policy both could be viable options for you.

Ryan, I'm not sure if I understood the CIF + 10. Does anyone else on the call?

Are you talking about when you insure plus 10%? So yes, I think that's an important distinction that like, when you purchase insurance versus like a claim, when you make a liability claim, it's got to go through a process, and a carrier gets to dispute it. It may be approved. Whereas in an insurance scenario, typically, yes, to your point, that standard insurance is going to cover the cost of the goods, insurance rate plus 10%, essentially for your pain and trouble.

And then -- and how quickly can I expect to receive air or ocean quotes for import shipments? That's a great question. I would say within 24 hours is our goal. A lot of times on air shipments, what has to be done is we get rates from our origin office if you're shipping inbound. And so we have to receive some information back overnight. So sometimes, it can be quicker but within 24 hours.

And part of that just comes into the complexity of the quote too. If it's something that's standard but if it's, let's say, dangerous goods or the product dimensions are a bit different, that's where we want to check and just be sure that it can be moved in a similar fashion. There was another one about how much freight can fit in a 20-foot versus a 40-foot? Going to depend on how your product is packaged in many cases, whether you're using pallets or not to load the container. So in an ocean freight shipment, you might be actually floor-loading that to maximize the amount of cargo you can stuff in. But if you're using pallets or other slip sheets, you might not be able to put as much in there. But depending on your product and then the weight, it's kind of that balance. Typically, on a 20-foot container, we see anywhere from 20 cubic meters up through kind of the upper 20s. And on a 40-foot, you might see something in the upper 40s, the low- to mid-50 cubic meters that could fit in there from a volume standpoint. Those are some general averages. But again, it would really depend on how your product is packaged, the shape, size and then the weight as well.