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

Okay. Hello, everyone, and welcome to Expeditors Import [ basics ] webinar. My name is Nicole, and I'm going to be your host for the webinar today. And before we get started, I'm just going to go through a few ground rules. You are on mute, and your cameras are turned off. But if you have a questions throughout the webinar, please put them into the Q&A window, you'll see that at the bottom of your screen. And we will get through those questions towards the end of today's session. If we do not answer your question during the webinar, we will reach out via e-mail to get back to your question sometime later this week or early next week. We will be sending out a copy of the presentation upon completion of a short feedback survey following the webinar today. You will receive the feedback survey from my e-mail address after the webinar is ended. So please look out for that e-mail. Upon completion, you will receive -- you will be directed to another landing page where you can download and save the presentation material. So now I will go ahead and introduce our speakers on the webinar today. We have Madeleine Veigel, Director of Custom to the Americas at Expeditors, Stephanie Holloway, Regional Manager for custom for the Americas; Rick Catalani, Director of Custom to the United States; and Ted Henderson, Senior Adviser for Customs. So without further ado, we do have a lot of material to cover. I will pass it along to our speakers to kick us off with the content.

All right. Thank you, Nicole, and thank you, everybody, for joining. I see folks are still coming on. So we will have a slow and leisurely discussion about the agenda that allows folks to keep joining the webinar as we go. Really, it's fantastic to see that so many people signed up for the webinar and joined the webinar today, really, quite frankly, impressed that so many folks did sign up for it. I personally have been doing this import compliance thing for over 30 years, and I have to admit that it maybe is not the most interesting topic. But I'd have to think -- I really do say that now more than ever, as we've seen things change in the U.S. import environment, and we've kind of seen government agencies move from a facilitation mindset to more of an enforcement mindset that really this is an important topic for companies that are importing goods in the United States. So thank you for joining, and I do hope you find this to be valuable. Again, as a reminder, as Nicole pointed out, you will be receiving a copy of the presentation, so you don't have to do panic notes about the slides as we're moving along. As you look at the agenda, you can see we're going to cover a fair amount of subject matter in really a fairly short period of time. But I do want to remind you that you do have local customs experts in your backyard that can spend some more time with you and talk through things in more detail. So please reach out to your Expeditors contacts and get connected with one of our customs and our compliance managers that are in our local branches. And that way, you can discuss any of this material in greater detail. This webinar content is really based on the collective experience of our team, the folks that you have on this call and our larger team. In my own incidents, like I said, I've been doing this for over 30 years. I started in this industry at the U.S. custom service, went to work in a role like many of you on this call as an importer as their compliance manager and then ultimately have been a customs broker for a number of years. And our team has different collective experiences. And so we pulled this together over time to put together the content on this webinar. Really, we can devote 8 hours on this overall overview topic, and we could spend 8 hours on a number of the subtopics that we're going to cover today. But really, our goal is just to highlight the core areas during this discussion, communicate the main concepts and give you an idea of really what the most important things that importers need to be thinking about. So with that, I think although people are still joining, let's get started on things. So we're going to lead off with some quick background information as to why you need to care about the content today, why U.S. import compliance basics are important. And really, I think I'll start with the fact that U.S. Customs has been around collecting duties, managing the imports of goods since 1789. It's the first government agency. But it really wasn't until the NAFTA was passed that importers had some real obligations and had to step up their game, if you will, in the area of compliance. As part of the NAFTA, the North American Free Trade Agreement, there's something called the Customs Modernization Act and that was implemented in 1993 with NAFTA, and it shifted responsibility in key areas from customs to the importer. Pre-1993, pretty much your customs broker really did all the work for importers because the ultimate responsibility for determining the classification, the valuation, all that good stuff about imported merchandise, all of that really sat with U.S. Customs. It didn't sit with the importer. The importer didn't have a statutory responsibility. However, again, when the Modernization Act, the MOD Act was passed as part of the NAFTA, there was an effort to shift responsibility from customs legally to importers. And so what we saw was a rewrite, as you see on the screen of 19 U.S. Code 1500. And the verbiage was a subtle change, but basically, we've highlighted here that the custom service is going to fix the final appraisement, they'll fix the final classification. It's is up to the importer to do all the work ahead of that, where in the past, it was up to customs to determine and establish the classification. So subtle change in legal language, but what that did is that it did effectively shift that responsibility to importers. It really was customs looking at basically what we as taxpayers are familiar with the IRS, it's up to us to make a correct statement about our taxes and with custom. So again, since 1993, that responsibility has fallen over to importers to take care of their compliance responsibilities with respect to imports in the United States. So let's get a little deeper into your obligations and take a look at the next slide. As we go into -- we're going to bombard us with some more legal language here. But as part of the rewrite of 19 USC 1500, there were rewrites of other statutes around there. So as part of this idea that the responsibility for imports and managing the import declaration, all that was being shifted to -- from the government to the importer. The government did give responsibility on their own. So they have an obligation of what's called informed compliance. They're supposed to inform us on how we are supposed to act in a compliant manner. But one of the key pieces of verbiage that was inserted into the statute was the idea of reasonable care. And right now, on the screen, we've got highlighted the actual statute 19 USC 1484. And in there, there's a statement that it is that when an importer is importing goods into the U.S., they will exercise reasonable care when making a declaration and the declared value of the goods and all that's going to go along with it. So it really -- this minor statement of using reasonable care is what got us to the point of the obligation that we're talking about here. We've already started hitting you with a number of statutes. We're not going to spin this webinar filling you with all sorts of citations. It really is just to point out that our responsibilities as an importer, they're not just arbitrarily set by U.S. Customs and Border Protection. They're established by law. And I think also as a follow-up, quick reminder, I'll say, we use -- sometimes use statute, regulation, law interchangeably. They're not interchangeable. Basically, Congress passes legislation, sends it to the President who signs it. That signed legislation then becomes permanent law and has moved into the code of laws for the United States of America, AKA, the USC. So you'll see USC up here, the U.S. code. Things in the U.S. code are organized by subject matter. Typically, anything starting with in 19 in U.S. code ends up in a corresponding regulation that's also under 19. So really the conversation that we're -- I just want to point out to you is to understand that if you hear the word -- if you hear 19 being used in U.S. Code or 19 CFR, the idea is that typically is a customs related piece of law. So again, U.S. code is established, that's law and then it is up to the appropriate federal agency to create the implementing regulations, and that's the code of federal regulation. So you're going to see things, the statutory reference here of 19 USC 1484 ends up in 19 CFR 141? So anyway, bottom line after that little tangent is -- these are our obligations as importers, not as customs brokers, but as importers, we have an obligation that when importing goods in the U.S. we're obligated to complete a customs entry, declare value. We have to file the appropriate information required by other partner government agencies and basically provide all of the necessary information that CBP and any other government agency needs in order to effectively do their duty and establish that your declaration was filed appropriately. You're goods are sort of admissible and things like that, all right? So again, our core responsibility as an importer is the idea that we're going to exercise reasonable care and we find this, like I said, both in the law and in the regulations. So let's talk a little bit beyond just filing a declaration. What are some of the other things that we need to care about? First and foremost, we care about reasonable care is how we are obligated to act as an importer. And do keep in mind, reasonable care doesn't mean perfect. It means reasonable. It's the care that a reasonable person would exercise under the circumstances. And this is actually a common phrase that you do see in a number of statutes that there's an idea of reasonableness in U.S. law. And again, reasonable doesn't mean perfect. And we all tried to have the immaculate import compliance program and you're not going to get there. The point is to do your best effort, act in a reasonable manner. So some of the other things that we certainly care about and as importers and the government definitely cares about is the idea of timely payment of duties. That's been the core responsibility of U.S. Customs since 1789, is to collect duties. And so that's always first and foremost, on the government's mind, and we need to make sure we pay our duties timely. We are obligated as importers to have a bond where we're not obligated, but it makes a lot easier, that way we can exercise deferred duty payment and do some other things. But really, it's a common practice for all of us to maintain bonds as opposed to try to deal in a [ cash world ]. We're supposed to avoid doing business with bad people. And whether those are denied parties, restricted folks. We're supposed to be aware of the sanctions and embargoes that are going on. We're very much aware in the U.S., the Russia-Ukraine situation. And the U.S. continues to impose sanctions as other countries do on certain Russian entities. And so we need to be aware of those folks and make sure we're not doing business with them. We need to be cognizant. It's not really a customs requirement to manage dangerous goods, but it's their other government agencies that care about dangerous goods. And we want to be careful about how we're dealing with the imports of that. Like anything, we need to maintain records. We need to document our actions. We need to maintain those documents, and we'll talk a little bit about record retention a little bit later in the conversation. And really, the best thing that we can do is implement a multilayered approach to trade compliance, and that's really what we're going to kind of dig into for the next couple of slides. So let's take a look at -- really take this a little bit further and look at what our main responsibilities are. So we have here a house. The house is really filled up with most of the operational activities that you get to be responsible for as an importer of record. And that's built on a base of the framework of internal controls. So these operational activities we're not going to go through bullet by bullet by bullet. But a little later, we will spend some time talking about the most important parts of these operational activities, things like classification, valuation, admissibility. Those things that we do want to spend a little bit of time on today. But all of those activities, again, they sit on this base of a framework of internal control, so let's dig a little bit deeper into what we're talking about internal controls. This is really, again, as I said, that's the base of your house. This is the basis for your import compliance program. And I really like to highlight this, that a compliance program, it's not a manual that sits on your shelf, it really is the total ecosystem of compliance that you have in your organization, again, built around these framework of internal controls. When customs audits an importer, they will want to see your compliance program and invariably folks show off this really cool manual. And I will tell you as a former customs person in my time in the industry, I have seen some really impressive manuals, things that look like the Encyclopedia Britannica that mom used to bring home for us before we all went digital. That's not really what customs is looking for. They appreciate that you put the effort into that. But really, they want to see this framework of internal controls and how you've integrated it throughout your company and your importing processes. And this framework of internal controls, this is really a recognized framework that we have here. These 5 elements -- this comes from COSO, the committee of sponsoring organizations that really is made up of 5 associations that are folks that are auditors and CPAs and related management auditors, et cetera. This was a private sector organization that back in 1992 started putting together this framework. Over time, this framework has been enhanced, grown whatever. But this framework is embraced across not just our customs area, but in the financial world. CBP, U.S. Customs Border Protection specifically calls out this framework as part of its CT Pat trade compliance program. So this is -- this isn't something that the expeditors made up. This is a recognized idea, but it's made up of these 5 elements. First, the control environment. What's that tone from the top? What's your commitment to compliance? Do you have policies? Do you have standards? Is there an awareness within the company of this total environment? Have you done a risk assessment? Have you identified and analyzed your risk? You've developed some goals to manage that and mitigate it? Are you doing ongoing assessments? Control activities? So these are the detective controls and preventative controls that you have in place to do your best to ensure that things don't go off the rails and somebody doesn't deal with, for example, a sanctioned party or something along that way. In information, communication, your compliance program isn't you and your team, if you're fortunate to have a team is your whole company. Are you -- how are you informing your company about that program? What do you -- what training do you have in place? How are you disseminating information? Are you working with government agencies? Do you have a protocol to engage with CBP, your account manager or your local import specialists on a regular basis? And then finally, it's the monitoring activities. That's that ongoing cost and evaluation, internal reviews, where are we right now? What do we want to work on for the next year? What do we need to immediately address? Maybe you work with some outside expertise in this area. This is the stuff that keeps the -- it's the circle. You just constantly are working to see where you're at now and see if you can take it up a step higher. But this is the basic concept of framework of internal controls and the way you should be building your import compliance program. So with that, let's dig in a little deeper into the operational activities that we talked about earlier.

Thank you, Ted. So as Ted said, he just covered the foundation, and I'm going to pick a few of the highlighted activities from the house. But as you can see, the house is full. And many of you guys probably feel that as you're looking at that picture and getting a little overwhelmed at how much there is going on in the world and how much there is for you to consume and then try to move throughout your organization. The pieces we're going to highlight are the 6 kind of middle -- I don't know what these tier drops. And these are really the heavy hitters. So when you hear about responsibility as an importer, these are things that a lot of times you're thinking about immediately. The one I'm going to highlight on this screen is Origin. So country of origin is a pretty common term that you'll hear pretty quickly being in the importing community, and it really means 2 things. One is, what is the actual origin of the product. Sometimes that's super easy depending on your product. It's all sourced. It's made in China, it's made in China. That's it. That's your country of origin. But I know an importer here where we have a spice kit, right? So one of those carousels that spins and has a whole bunch of different spice charts. Every spice is imported from -- or source from a different country. The jars are sourced from somewhere else and then it's all put together. What's that country of origin, right? That's a lot more complex. And there's a lot of specific rules, especially for textiles to help you determine that. And that country of origin is going to become very important, especially when it's paired with your classification, which we're going to talk about in a minute. The other thing is marking. So I'm sure if you're looking around your desk or wherever you're sitting right now, you can start picking things up and start seeing that -- those labels made in. And you might not know if you're really new to the community, you can't just put made in CN. That's actually not an acceptable way to mark your goods. So not only do we need to make sure the determination of that country is accurate and follows all the rules but we also need to make sure it's marked. And is it okay to put it on the packaging? Does it need to be on the product, right? There's lots of nuances there that you might need to work out with your internal folks who are making those decisions. So I'm going to go from origin out to classification, okay? So classification is really the bread and butter back in the -- really back in the day with customs brokers and still can be. But as Ted was commenting on and as it's called out in #1 here, the responsibility of classification and making sure that there reasonable care was shifted to the importer with the MoD act. So that Customs Modernization Act is often shortened to the MoD Act. And classification really allows for customs, some of the bullets and #2 to assess for correct duties, collect accurate statistics and determine if all the requirements are met. So when you -- I'm going to pause at that. Let's keep going. And to do that, you really need to be familiar with the harmonized tariff schedule. So that is this picture here that you see. Hopefully, many of you guys have seen a tariff book before in real life or the online version. Now I sound, Ted like, I'm all back in the day. It was kind of like one of those we would put them all in this binder thing, very similar to what you'd see in an auto parts store. I don't hang out those hang out there very often. But it would all flip there, and there would be lots and pages that you've flipped there. Most of us now would look at ones online. But this is a visual of what it looks like. Over on the far left, is a numbering system. So kind of a fun fact, if you're a customs nerd, the first 6 digits of a classification are actually set by the World Customs Organization, or the WCO. So that means every country -- and I admit I cannot remember for the life of me right now, how many countries subscribe to the WCO's nomenclature. But all of them that do, and there's a lot. We all use the first 6 digits. That is kind of fun in like a weird global trade sort of way. And then after the 6 digits, countries are free to do what they want. So in the U.S., we typically apply 4 more digits. Some countries just apply 2 more or some countries like Argentina, just go nuts and have lots of extra digits. So from there, we're breaking it down. So as I said, the first 6 digits are controlled by the WCO. Those are those descriptions and then things are further broken down. if you've used the HCS book for any sort of period of time, some things are really specific. This example that we're looking at about fishing rods, wow, we're really in the weeds. Other things like a cell phone case, that's not called out very specifically. They're not -- they don't have a header for iPhone 12 and up, if your case is over this amount. That doesn't exist. Those fall into a more generic category. Next to the description is the unit of quantity. So as brokers when we are making entry, we need to declare this unit of measure. And this is a really big piece for statistics for U.S. Census as their understanding what is being imported and exported back out. So with that, on this picture here, we can see both no, which is not no, it stands for number and kilograms. So depending on the classification you're choosing, we would need to get that information. So sometimes as your broker, we might come back to you and ask you kind of a weird question, like how many tons is that? Or how many jewels are in there for watches. This is not because we're just out to lunch, it's because we actually need to give this to customs. And then they pass it internally so that we can understand what the trade environment looks like in the U.S. And then the last 3 columns are really the place where I feel like a lot of importers are immediately looking, and that's the rate of duty, right? We all want to know how much it's going to cost. So under one there, there is a general and a special so that one column is all for the rates for most favored nation status. So if you have that, you're going to be in 1 of those 2 categories. Typically general, but if you're using a free trade agreement or a special trade program as we would call them, you're going to be able to use that duty rate in the special column, okay? Duty rates can be both percentages. And as you can see, they're about halfway down the screen. There's also an example of one that's not a percentage, and it's based on most of the time based on the unit of quantity. So it's really important to give that unit of quantity, right? Otherwise, it will affect the amount you pay for duty. Column 2 there, which are really high duty rates are used to feel that way before we are dealing with Section duty or Section 301 duties. Those are for countries that have not most favored nation status, which most of the time, there's going to be sanctions or embargoes or things like that on those countries in either way. So that's a super high-level overview of what that book looks like if you are not familiar with what's in it? So why? Why learn, why understand how to classify? So in that octopus over on the left-hand side, there's lots of reasons why. One of the first and foremost, is it impacts the duty rate. And that's a really big deal, especially right now, many of you guys are paying the highest amounts of duties that you've ever paid before with Section 301 or 232 duties, and that's a big impact to your company. So really making sure that it's classified correctly, then you can understand whether or not additional duties might be owed at this point. As I've mentioned, statistical trade purposes. So when you hear about trade deficits, all of that is coming from data that we're submitting on entries, which is kind of wild to think about. Also, classifications help drive, I'll say, the interest or the attention of other jurisdictions and agencies that need to be looking over those imported goods. And we're going to talk about additional agencies on a later slide. Ultimately, though, the most important reason is because the regulations require it, okay? It says that classification is really important. It needs to be done correctly. And this is ultimately to avoid any penalties, okay? On the right-hand side, this is some general, we call it key components of classification, but things we really need to be aware of or work with to make a good classification. So first of all, there's rules of how you apply and read that book, there's 6 that the WCO kind of lays out that every country looks at. And then the U.S., of course, adds on some of our own rules. Also within the book, there's chapter in section notes, there's explanatory notes. And then you can't just read the book, a lot of times you're going to need, especially for super technical items, you're going to need to look at blueprints or drawings or things like that, that your company has so that you can start to match them up. Customs also has a lot of information about classification. One of the best resources is our website called [ CROSS ] that I'm sure many of you guys are aware of. But this is where it's a public website that shows anybody who is sent in for a ruling, we call them binding rulings, and you send your product in or send a letter describing your product and customs gives you kind of the ultimate classifications, classification for that product. You can get these. So if you're really stumped on a classification, you can write -- I don't know if it's really writing, I'm sure there's a website option. But get your pen and paper out and write a letter about your product to customs and send it off and then they will send you back a classification. But that database has been public and is able to be accessed. If you're getting stumped on an iPhone case, you can start reading different binding rulings and customs puts in their methodology or how they're applying some of these different things for how -- why that classification is the one they chose. And then lastly, there's an idea of essential character. So the attribute, which strongly marks and serves to distinguish what an article is. So if you import all the parts to a bicycle, but it's not all assembled. Does that mean that you get to import or clear as parts of a bicycle? Or is it still a bicycle? So there's different concepts like that, that customs has introduced, obviously, in an effort to not let us skirt our duties and our responsibility. This is one of my favorite slides about classification, and it really shows who is responsible? Because I'm sure if you're sitting there, you're like, well, I don't know all of this stuff, right? And you're probably right. And I'm sitting here as a broker saying, "I don't know, especially for technical things, maybe all of your stuff either." So this really tries to show to take a throwback phrase, it takes a village to do proper classification well. And especially, it depends on the products you have. Some products obviously are not that complex and are not going to be that in the weeds but some of them are and especially now really making sure you have the right product or the right classification can really drive the amount of duty that you're paying or not paying. So there are some highlights on here. But ultimately, at the end of the day, it really takes a lot of people together to do this well, especially for certain products that might be more complex. Now we made it through classification. That was a whirlwind. We're going to move on to valuation. So valuation is not something that I think many people love even if you're really in the weeds with customs. But the box at the top is really the key point that you need to take away. And it's that the commercial invoice price does not always equal the value that needs to be declared to customs. Okay. So Ted used the analogy of an accountant, and I love that or thinking about your taxes. It's a very similar concept. So just because you get your W-2 and it says you made this amount of money, that doesn't necessarily mean that's the amount of money that you're going to pay taxes on. Sometimes there's more to be added. Sometimes you get deductions. Same thing with an import entry, okay? So on the left here, we have 5 different -- we didn't make these up. They're actually in the regs, good news. There's different valuation methods. I start transaction value because that is the 1 that is used so much, I would say 99%, but it's up there a lot. And this is really nice actually that there are laid out valuation methods because that makes it so that customs can't just come and say, "I think you're valuing your product wrong, here's the amount that we think it is." You really have to follow methods. Just like with our own taxes, you just don't get to make up your taxable income. There are rules at how that is determined and calculated. On the right-hand side for transaction value, at a high level, you take your paid -- price paid or payable when it's sold for export. Then you need to add in any statutory additions, if it's not already included. And there's examples there of what might need to be added in. And then you're able to take out any nondutiable cost, common ones in the U.S. are international freight and insurance. And as just kind of a fun little tidbit, in other countries, those often international freight and insurance are actually had to be part of the price paid or payable. So every country kind of gets its own formula, I would say for how something is valued, which ultimately then would drive duty. Okay. So I think that was fun, Madeleine. I nailed valuation, everyone is excited to go look at how their product is valuated, that's not price. We'll just go with price. Okay. I will hand it over to you, Madeleine, and you can talk about admissibility.

All right. Thank you, Stephanie. That was great. Yes. So everyone, as you heard from Stephanie, there are some very key and important areas, obviously, of the -- of what makes up a custom declaration that are key and that you absolutely need to get right and have a good compliance program in place to make sure that these areas are declared correctly. Of course, also so that your goods will be released in the commerce of the U.S. And I am going to talk about some other areas that affect the release of your goods into the U.S. on visibility. And these are 4 very key areas that could affect the release of goods into the United States. So the first one there on the left-hand side is forced labor and forced labor is the topic of the day. Let me tell you, I'm sure you have heard of this, if you open any trade publication, you will read about forced labor. Customs is also issuing a ton of information on this topic. It's a very, very important topic. I mean, forced labor in a nutshell is basically slave labor, child labor, ventured labor, labor -- force labor being used to manufacture or produce a product overseas. And so -- and in the past, there was a little -- there was a small just going back a few years, there was a small loophole, so to speak, in the regulations that allowed for a very small amount of goods that were made by forced labor to come into the U.S., especially if that product could not be found or produced or was not produced in the U.S. But that loophole was closed with the Trade Facilitation Trade Enforcement Act back in 2015, which was signed in the law under the Obama administration in 2016. So it shut down that loophole. And basically, at that point, as of -- once that law was put -- went into effect in February 2016, nothing, no product made with any forced labor can be imported into the United States. So that shifted things. And so slowly, over the last several years, this has had or there's been just a lot more attention on this. It's one of the -- one areas that the U.S. government, the Republicans and the Democrats can actually agree on -- so there is a -- there's actually a lot of bipartisan support on this issue. But customs, they exercised the authority under 19 USC 1307 and a few other statutes to actually enforce and prevent the entry of any goods produced by forced labor into the United States. So this is really important to note, they will implement this and the way the CBP enforces us enforces this is through a couple of different areas. One is called a withhold release order and many of you have maybe heard of those, literally, a withhold release order is that customs will withhold release from that item coming into the United States until you can prove or provide some kind of proof that your goods were not manufactured with forced labor. And if you can't do that, you're going to have to re-export or destroy the goods. Withhold release orders are usually issued against an entity or company overseas, not always, but that's normally the case. There are also bindings. Bindings are also normally issued against an entity or a company overseas. The difference is the level of proof that customs have that forced labor is involved. With hold release orders, there is some level of proof that customs has with findings they have a lot more proof that force labor was actually used to create those goods overseas within that particular company. And then there is also the Uyghur Force Labor Prevention Act, the UFLPA. That was -- that established a rebuttable presumption that any goods coming out of the Xinjiang Uyghur autonomous region of China were created or made by some type of forced labor. So the Xinjiang Uyghur autonomous region is kind of that northwestern region of China. And the Uyghurs are an ethnic minority and the U.S. government has found that those -- this ethnic minority has been especially involved and under has been under the duress of first labor or been working under forced labor conditions to create or manufacture different products. So that, too, under UFLPA the tension notices issued and many of you have probably heard or have seen maybe even experienced something like this. So the bottom line is that you really need to be not -- you really need to be aware of for labor. And what this means is for importers is that you really have to do your due diligence and review your supply chain. And you really have to review your entire supply chain to ensure that the products you're purchasing overseas have not been manufactured by forced labor. And you really can't just look at the products themselves. You have to look at what they are made out of. So the actual source, the raw materials that were used to create that product, where did that come from? So it's really, really difficult. This is not easy to do. I think everyone, the trade in general, has really been struggling with this, but it is very important that you go back and look and check within your companies do are we mapping out our supply chain? Are we double checking and making sure that the products we're purchasing aren't made with forced labor? Because if they are more than likely they're not going to get -- they're not going to be able to get into the U.S. So that's really important to do. The only other thing I would say about this is this topic, there is so much information on forced labor. So much so that we are going to be doing a webinar just dedicated to forced labor. We did one last year. I'll give a quick plug. We're doing one on April 4, and there'll be more information coming out about that, but we will be talking 1.5 hours on this topic. So there's a ton of information on it. So if you want to learn more, please look out for our webinar next month on this topic.

Madeleine, just to add to that, I did throw the link into the chat window.

Thank you, Nicole that's great. Yes. And customs will be joining us, too, everyone. So anyway, it should be good. So thank you. So the other areas that you really need to look at in terms of admissibility are intellectual property rights, counterfeit and pirated goods are especially targeted by customs to protect, of course, the intellectual property rights of the American business. So that's a priority trade issue for customs as well as import safety. So of course, CBP is looking to make sure they're working with other agencies such as the Food and Drug Administration, the Environmental Protection Agency, Consumer Product Safety Commission to prevent foods that may be unsafe for us here in the U.S. to make sure that those unsafe goods do not get into the commerce of the U.S. In many cases too CBP has full authority on behalf of some of our partner and government agencies. And the partner government agencies will talk a little bit -- or Stephanie will actually talk a little bit more about those a little bit later on in the presentation. If you're not sure whether your goods are subject to a partner government agency, there are flags that dangle from those tariff numbers. Stephanie was showing that indicate whether your good possibly does is -- whether a partner government agency is applicable. And then this last area is block and denied entity. So Ted talked about restricted or denied parties. This is really important too. You have to make sure as you're going through your supply chain and looking to see if, hopefully, you're not -- you don't have any products made by forced labor, you also want to make sure that you're not doing business with any entities that are on any blacklist. So many of the government agencies have what are considered blacklist or bad party, bad people's list that you don't want to be doing business with. Companies that are subject to sanctions, have been suspended or debarred. And so this is something to check as well. Now we -- if we're handling your brokerage or really if we're handling any transaction for new transportation or any part of the supply chain, anytime we enter a party into our system, we run -- we scream that party using software to make sure that the party is not on a bad -- it's not a denied party or a bad entity that you can't do -- you don't want to do business with. However, as an importer, you really need to do your own due diligence. So really making sure that any party that you're doing business with is not on one of these bad entity list. And there are lots of software programs that can help with that. And if you have more questions about that, you could certainly reach out to us, and we will be happy to talk to you about it more. Okay. So besides those 4 areas on visibility, you also need to be aware of trade remedies. Trade remedies has become -- has really evolved over the last few years, but this is very, very important to know about because as Stephanie was pointing out and showing you a page of the tariff book with the fishing rod, there's obviously a duty associated with that fishing rod. But there may also be trade remedies associated with that item. And that could be any item you're importing into the United States. And those additional duties obviously will really impact the cost of those goods. And so that's why it's very important to know, hey, is it just the duty rate that I'm going to be paying or are there additional tariffs? So the most common are antidumping duties and countervailing duties. Antidumping duties or additional duties that are put on an item that the U.S. government feels that item has been dumped into the U.S. market for a very, very low price. Such a low price that any domestic companies that here in the United States that make that same product, they cannot sell their product for this -- for the same amount. So there's a very unfair -- there's an unfair advantage that this foreign company has by dumping their product here into the United States. And this is done after the U.S. government has done an investigation, et cetera. And if they determine that's the case, they will add what's called antidumping duties, additional duties on to that item. Countervailing duties is very similar. The goods are being basically sold in the United States for a very, very low price. But the reason for that is because the foreign entity that company is getting an advantage, some kind of subsidy from the foreign government. So the foreign government is providing a direct transfer of additional funds. They're giving a tax advantage. They're providing that foreign company with discounted loans. And that's how that foreign company is able to sell the product here in the United States for a very, very low price. Obviously an unfair advantage as well. So when the -- once U.S. government has done their investigations and they've determined that that's the case, then they will address this, say, "Hey, these are unfair trade practices. We need to be at a -- the goal is to get to a level playing field. So we're going to add additional duties onto the product with countervailing duties for antidumping, sometimes both of them apply." This is also important to note that the antidumping and countervailing duty is also a priority trade issue for U.S. customs. This has been a priority trade issue for a very, very long time. So Congress really beats on U.S. customs to make sure that they collect what they need to collect in antidumping and countervailing duty tariffs, and there's a lot of pressure on customs to do that. So they're called up to the hill and they have to explain and they have to report back to Congress. And so there's a lot of focus from U.S. Customs to make sure they're collecting those amounts properly. So the -- there's a lot of enforcement around it, and I'm ensuring that they collect the correct amount. So one thing to note about this too, is that there are flags that dangle from the tariff numbers. So if you're not sure and have no idea whether antidumping or countervailing duty applies, the tariff number is an indicator, and it will tell you if and or antidumping or countervailing duties possibly apply. And then there's a scope that you have to look at, et cetera, but we're able to tell you that if you're not sure, definitely reach out to us, and we can help you with that. And then the other area are trade remedy tariffs. And of course, those became very popular, and we learned a lot about that during the former administration during the Trump administration. They use these heavily. Biden administration has continued to use trade remedy tariffs. Most popular under what's called Section 232 and Section 301. So Section 301 is part of the Trade Act of 1974 and what happened, especially in the former administration is that the government conducted some investigations under Section 301. And if they found that foreign government was impeding our ability to do trade as per the investigation, then the U.S. government could take action. And in the former administration, the action was to add additional tariffs on the many different items, especially from China. Section 232 is part of the trade expansion act of 1962, but that focuses on national security. So that's -- those investigations are done by the commerce department. And again, if we -- the government finds that there's some national security risk, then additional -- and then in the former administration case, they added additional tariffs. And actually, the current administration has continued to do so. So there's lots of these additional tariffs, trade remedy tariffs still in place. If you are not sure about any of those, you can also reach out to us, and we can tell you those also are pegged or tied to a tariff number and so we can help identify which one of -- which if there's a trade remedy tariff that may -- or additional tariffs that may apply. And it could have a big difference. Some of these are additional 25%. So on top of your original duty rate that can really add up. And then lastly, there's quota. So there's some goods that only a certain amount of those goods can be imported into the U.S. for a certain tariff amount or -- and only a certain number can actually be admitted into the U.S. So there's tariff rate quotas, which means you can imported goods for under a certain duty amount as per the tariff. But once that quota hits, then you can continue to import that good, but you're going to pay an additional or a much higher duty rate. And then with absolute quota, you can import that good up until the time that quota hits. Once you -- the quota is hit, you cannot import that goods into the United States at all, then the quota is filled until it opens back up, which may not be until the following year. So again, if you're not sure whether that quota may apply, you can reach out to us and we can help you with that. But it's very important to understand are their additional tariffs that may apply to my goods? So those are trade remedies in the nutshell. And then Ted earlier talked about document retention and record keeping. So that is something as an importer, you absolutely need to have a good documentation, recordkeeping program in place. And this is much like, again, I think Stephanie mentioned it, Ted mentioned it, this is like paying your taxes. When you pay your taxes, you've got to retain those records. So this is the same kind of thing. You're filing declarations into the U.S., you must retain those records. So those regulations are found in 19 CFR 163, and there's an appendix, kind of a famous appendix that's referred to the A1A list. It lists all the documents that you must retain as an importer. You normally have to retain them 5 years from the date of entry. There's some entry activities such as drawback that have a longer recordkeeping requirement or different recordkeeping requirement periods, but mostly it's 5 years. And really, on the right-hand side there, it shows all the parties that are responsible to ensure and actions that require record-keeping of some sort, importing merchandise into the U.S. commerce, filing a drawback claim, transporting merchandise that is under bond. All of those there require you to retain your records. So if you're an importer into the U.S., you've got to make sure you've got a record-keeping program and that you're retaining those records. It's not enough for us. We have to retain our records to as a broker, but as a customs broker here in the United States, but you as an importer have the legal responsibility to also retain your records. And just as a note, you want to try to figure out a way if you haven't set up a program already, of course, where you can easily pull records and cross reference them. So many times, importers will set up a program where they can retain or pull their records, I should say, by a purchase order member or by an entry member or by another reference number, so it's easy to pull. So you want to make sure that you get a record-keeping program set up if you don't have one thus far. So if -- and lastly, what I will -- what I will touch on are some of the consequences if you don't have a good record-keeping program in place or you're not doing things that you're supposed to do. You don't have a compliance program in place. So there are consequences, unfortunately. And those consequences are normally monetary and result in a penalty. And there's lots of things to -- well, there's more than just the monetary amount to consider here. And those monetary amounts can be actually quite high, but it's also your reputation, of course. You don't want to subject your company, your company name and all of a sudden end up in the news because of a horrible large penalty or penalties that were assessed. So you have to make sure you do your due diligence and really understand again, what we're trying to cover here, what are my obligations as an importer and making sure that you're putting the proper controls in place so that these sorts of consequences don't hit. But just it's kind of -- this shows almost like a ladder in terms of the degree of the consequence. We have here on the lower left-hand corner record-keeping. And those violations could be $100,000 per willful violation. So this is if you will fully -- you're willfully saying, "Hey, I'm not going to keep any of my records." that would be a more -- much more severe violation. But if you -- you're negligent and you just have been careless, the violation could be $10,000. And of course, these things can add up. Negligence really is that you're more careless, it's -- you've just made a mistake. You were not paying attention. So if customs determines that you were negligent and you merely made a mistake, you weren't paying attention, you were negligent. The penalty could be twice the revenue loss to the U.S. government or if there's no revenue loss. It's 20% of the goods dutiable value. And so that could be -- especially if it's a high dutiable value, that could be a rather high amount. Gross negligence is you're being -- you're starting to be reckless at this point. You have no regard for safety. You -- and that you're purposely being indifferent. So gross negligence, the penalty is 4x the revenue loss to the U.S. government, and if there's no revenue loss it's 40% of the goods dutiable value. So again, we begin to see that the penalty amounts become higher and higher. And then fraud, well, in that case, the goods are just going to be seized. You're not even going to be able to get the goods and the penalty will be the market of resell value of the goods. And fraud means you're breaking laws, right, that were established by the government and you're doing so purposely. And then, of course, criminal act. Well, then you're probably going to prison for 5 years and plus a $500,000 fine, and of course, the goods will be seized. So you see the level of consequences here. But it's just -- it's really important to make sure you're doing your due diligence and you're doing -- taking reasonable care, as Ted talked about in the beginning of the presentation, and you're putting the proper processes and controls in place, so you don't run into these issues. So now Ted, I will pass it on to you. I know you're going to talk more about customs and your former life.

All right. And yes, the fine agency that dispenses a number of those penalties and consequences, so to speak. So as we have been talking about U.S. Customs and Border Protection as throughout the 45 minutes, 50 minutes of this presentation so far. So we really want to get into a little bit, who is CBP and what do they do? So U.S. Customs and Border Protection is a relatively new agency in and of itself. It's the result of 9/11, quite frankly. And the recognition here in the U.S. is we had a number of government agencies who are concerned about our borders, people crossing our borders, goods crossing our borders. And perhaps they weren't working well together. And so the idea is, let's consolidate and have a single agency that controls our borders in all aspects. So the legacy U.S. custom service was brought together with components of the old immigration and naturalization service, Border Patrol was rolled in. And then also agricultural inspectors from USDA were brought into this group. So for those of us who crossed borders pre-9/11, we often saw people with different colored uniforms wanting to talk to us as we entered the United States. You had U.S. custom service officers in the blue uniforms, you had I&S, the immigration naturalization service folks in green uniforms, border control also is concerned about the area between the ports and then you had [ Egg inspectors from USDA ]. All of those would be what you might run through as you were coming back in the United States. So 20 years ago, in fact, the Department of Homeland Security, the agency that the overall department that U.S. customs reports to just celebrated their 20th anniversary last week. Anyway, these 4 organizations were brought together and then other parts were spun off. And anyway, we created a new alignment within the government to protect our borders. So here are kind of some of the key things, particularly from a trade aspect that customs cares about. I mean, again, at the end of the day, they are the one face at the border. They are the -- all borders of the United States, land, air, ocean and not just ports of entry but the borders in between ports of entry. Their goal is to protect the general welfare and security of the United States. And they have different elements that exist to this day. They have air elements. They have sea elements that are out there beyond the borders and above the borders, if you will, that are involved in that. Still a critical function for them is collecting duties, taxes, fees and penalties. This is days back, and this is still a key part of their responsibility. As Madeleine talked about some of the things that are not admissible and folks who tried to get away with bringing bad things in the U.S., that's customs' responsibility to go after those folks and keep counterfeit goods out of our country or keep bad medications that might harm people out of the country. So -- and then also certainly watching for terrorists that might want to come into the country. So they have a broad responsibility in that. Stephanie talked about the importance of statistics, and I know that may seem silly, but this is how the U.S. interacts with other countries based on the knowledge of imports and exports around the United States. So this is how we negotiate trade agreements with other countries. This is how we look at the health of the country. How are we doing? And so that statistics role as an important part. Customs is an enforcement agency and Madeleine pointed this out that they actually have the -- customs has the authority, CBP has the authority to act on behalf of 49 partner government agencies. So they -- they actually are the badge, if you will, the enforcement arm for folks, other agencies who don't necessarily have enforcement authority. It i0s US CBP that does the actual detention of goods and stopping of goods or stopping of people on as it goes. But they also have a critical role while trying to control all of this is to facilitate the flow of legitimate trade. And CBP talks about this. They recognize the importance to the overall economy of not just stopping everything, our economy comes to a standstill if CBP gets too heavy into the enforcement world. So they do have a very important responsibility about keeping things flowing, and they do make every effort to try to do that. And that's challenging sometime. And the final point I'll bring up here is this idea of adapting to the changing landscape of trade. For imports in the United States, e-commerce has completely changed the way U.S. customs and border protection looks at imports because suddenly, there's this flow of low-value goods that don't follow a traditional import process. And again, customs is very concerned to make sure that elicit or dangerous goods aren't being imported in the United States through this e-commerce possibility. And so now customs has had to shift the way they work and they're changing different protocols for how goods come in so that they can specifically address how things change. So we'll go on to the next slide and look a little bit about the responsibilities of CBP. And again, I've mentioned this before, Customs itself was really the first government agency, if you will. It was our founding fathers put this idea out there in 1789 that there would be this government agency that would be responsible for collecting duties and tariffs on goods coming into the United States. It really -- our founding fathers were struggling with something that hasn't changed in 200 years, and that's how do you fund this country. And it was customs duties that by and large, did that up until 1913. It's the legacy of U.S. customs, and it's still a very important part of U.S. Customs and Border Protection. So it really, like I said, 1913, somebody very cleverly came up with the 16th amendment to our constitution and developed the idea that we the people should pay taxes. And from that point on to today, the Internal Revenue Service has far eclipsed customs and what they collect for taxes. But still CBP is #2 of collection agencies. And last fiscal year, they collected over $100 billion in revenue on -- based on duties, taxes and fees. So they have a very important role as we talked about, all the things we talked about that as importers, we have important roles of establishing, exercising reasonable care and making sure we're perfectly declaring and valuing our goods. They're the ones at CBP who make that final decision, that we did the right thing as importers. They are the one who have the red pen, who make the decision, yes or no, that classification is correct, the duty rate is correct. Yes, your goods are eligible for the special trade program, the USMCA or what other free trade agreement. And the fact, like Madeleine talked about that there's no forced labor, that your goods are free of that. So they're admissible into the country. So that's really what they look at. We've talked about a couple of the key areas that CBP focuses on in trade. We talked about import safety, IPR, anti-dumping. Those -- all of the 7 elements on the right-hand side of your screen, are there priority trade initiatives. Those are the named areas where they specifically focus and you can look at those, and they all -- they make sense. Forced labor is not on this list, but it's definitely a focus area for customs and Board protection. Madeleine spent quite a bit of time talking about the importance of force labor enforcement. The final thing I will leave you with is CBP is an enforcement agency. They don't set policy. They don't even set duty rates. Their job is strictly to implement the policy and the law set by others, and they don't, they're not the ones, if you will, the bad guys who are determining your goods, the duty rate for fishing rod should be 38% or something. That comes -- that's a different mechanism. Customs job is to enforce their laws, other folks, like I talked about other agency laws, even though they're an enforcement agency, it's important to think about how you engage with them in a positive manner. That should be part of your import program is to develop a relationship with your customs folks. I will say this as a former Customs officer, the importers who engaged with me and took the time to talk and explained their import program and allowed me to understand things, their life at the end of the day was probably easier because I knew they were okay and I can focus on other areas. And that's part of customs overall mindset. They want to facilitate legitimate trade. That's what they care about. And then they really want to be able to focus their time and resources, which are as limited as anybody's on the bad guys. And so there -- as you can help them understand that you're a good guy, so to speak, that will make your life easier and it makes -- it allows them to focus where they need to go. So on that, I'll pass to Stephanie to talk a little bit about our partner in government agencies as well.

Thank you, Ted. So yes, what about those other government agencies that sometimes it feels like we're dealing more with them than customs. So coming into the U.S., there are 40-plus partner government agencies or will often say, PGAs or the old, old name was OGAs. So if you hear people say, OGA, that stood for other government agencies, the new name is partner government agencies, but they essentially are applying and pointing to the same group. And it's this group of additional agencies in the U.S. government that have jurisdiction over imports, okay? So I have, what, 5 listed here. There are 40. These 5 though, really do account for a lot of the responsibility. Some of them are very like a national marine fishery service, right? They're looking specifically at a certain species of fish that is being caught, FDA has a much broader scope. So I'm going to hit on a few of these. But ultimately, what's important to take away is that these agencies are just as important as customs for making sure that your goods are being declared to them properly so that the freight can continue to move and that you're meeting the obligations that you have as an importer. So FDA, I think most of us would know. I mean, food and drug are in the name, but they cover a lot of different areas, cosmetics, food contact, so like plates and cups, dishes serving ware, things like that. Medical devices is a big one they cover and then radiation emitting products. So things like -- that had CD ROMs in them. That's still a thing, who knows. But any type of radiation emitting product they also cover. So it can be a much larger scope than what people know of. For Expeditors; to give you an example, 25%, so 1/4 of the lines that we prepare to send to customs, we are either claiming or disclaiming FDA. So that is a lot. That's 25% of our lines. We need to tell FDA specifically, "Hey, no, FDA doesn't apply or yes, it does apply. Here's your additional information. And the other thing that you've got to know is we have data elements that we submit on for customs declaration, all of these agencies have their own data elements, too. and the amount of work in getting this stuff situated depending on the agency can almost be as much work as a customs agent or a customs agency as a customs declaration, okay? So FDA is a great example of that. There is a lot of different codes depending on what you're bringing in, a drug, you're going to need the drug listing number, you're going to need the percentage amount like the active ingredient and the percentage, you need dosage, all these different things, then they're going to match up on their side to their databases to see if all of that was preregistered and good to go. EPA is another one. EPA actually got really let's say, popular, that's not the right word, with the pandemic. So first of all, [ TUSCA stuff ] in terms of all the different PPE products, but then also pesticides. So pesticides, I think a lot of us think of like rodent killer but it's actually anything that is killing anything in the air. So if you are making a claim to kill something. That is like antibacterial wipes, right? If it's like it kills viruses. All of a sudden now, you're under the jurisdiction of EPA pesticides. So that has become a really big deal for folks, and we saw a lot of different holds in EPA inquiring further about products making claims about killing viruses or bacteria. They also cover motor vehicles and engines. Most of the time, it's like on and off-road recreation type of things. But they cover a lot, hopefully, you see that with the description there. Consumer Product Safety Commission, CPSC. They have not been as in the fold per se in terms of when we submit our entry electronically, they're a little bit over on the side. They're actively working with customs to get more information, and we are going to be starting to submit more data to them directly. So this fall, they're going to be running their beta pilot. And we over -- a bit of a slow-moving agency for various reasons. But I would expect that we'll continue to see us giving them more electronic data over the next coming years. APHIS also covers a lot. Lacey Act is an area that a lot of us know them for, which is protected plant products. So that might even impact your wooden picture frame that you're importing from Thailand. All of a sudden now you're making a declaration to APHIS. Of course, fruits, vegetables, those all seem fairly obvious, but byproducts to animal byproducts are really common that we would need to declare. Last one is [ NHTSA ]. We do a lot of automotive at Expeditors. So we see this one a lot. But this is motor vehicles, of course, but then also equipment. So if you're importing tires or seatbelts or windshields, making sure that you're meeting their requirements. Okay. So with that, Rick, I'm going to give it to you to wrap up any other considerations because at this point, everybody has a lot of capacity. They want to hear about what else do they consider.

Yes, if you're not overwhelmed already. So clearly, it's a lot of work to run a compliance program and protect your company. Compliance programs take time. Time is money. So we want to share a couple of slides on, okay, on what can compliance do to actually save your company money? What can we do to actually add value, add something positive to what some of these things may be considered negative or lots of extra hoops to jump through? So what can compliance do to help reduce cost? So each of these 8 bullets, each of them, as Ted said earlier, could probably be a 1-hour presentation under themselves. So I'm going to hit them pretty quick. But if they do resonate, please do reach out, and we can jump deeper into them and talk about them at greater length. But we just want to put a few samples up here, compliance group can actually save the company money in the process as well. So trade preference programs -- what we're talking about here is a sourcing manufacturing in a country or a region that has a lower or reduced or no duty rate for importing to the U.S., be that Canada, Mexico, the Caribbean, Africa. Is there another sourcing origin that you could ship to save money on duty and again, lower your overall costs. Duty drawback has been around for decades. So if you're bringing in something, you're paying duty but you're re-exporting it or you're using that material to produce a U.S.-made commodity. You're able to request a refund for those duties that were paid in those particular circumstances. We can talk to you more about that. So again, kind of reclaiming money that had been paid out. It is a good -- everybody have a refund from the government, and duty drawback is just that. First, sale valuation. This isn't a situation where you're buying from a middleman who then goes to a factory and they pay the factory for those goods and in turn, bill you under certain circumstances, that first sale price -- that price from the factory to your middleman or buying agent could be the invoice that we use to calculate duties under the right circumstances. This is probably the fastest growing that I've seen personally of these 8, the last few years. 15 years ago, only 3% of imports in the U.S. were under first sale. So this has been obviously popular and growing quickly. So if you do have that scenario where you have a buying agent or a middleman is doing the buying for you, this is worth a look and further conversation discussion if we could be using that lower value. Duty and tax minimization, NPF management. What we're talking about here is customs has a cap of how much they can charge for merchandise processing on a particular entry. And so once you reach that cap, every dollar of value add after that is not -- they don't charge for that fee. So is there a way that we can consolidate more conveyances under 1 entry, so you're paying that cap, but you're fitting more actual cargo under that cap with each entry. Foreign trade zone. This is probably an 8-hour presentation. But are there ways to either defer duty or pay no duty at all by bringing goods into a foreign trade zone and either reexporting them, so you don't pay duty at all or deferring the duty payment and you actually pull those goods out of the foreign trade zone and then put into U.S. commerce. Much bigger conversation, but again, a way to defer payment or have no duty came at all if you're reexporting. For CFOs out there or accounting controllers, you're managing your cash flow. So duties of customs are typically transactional. You pay duty, 10 working days after your cargo is released. But customs does offer a periodic monthly statement where they float you interest-free for 1 payment per month. So instead of paying per transaction, you pay them once, you get that float interest free from the government, but you do have to pay them directly [ ACH ] and it's something we can help you set up as well, real popular with any accounting department and definitely something you want to look at. Tariff engineering is a little more complex because Stephanie showed you the HTS book earlier. This is really understanding your product and understanding the HTS. And are there ways to change the content, the materials, features of your product that changed the tariff classification within the book. So is there a lower duty rate if you change that content or those materials just slightly. Is there a way to engineer the product so you can come out with that lower duty rate. We have trade when our consulting group works on this as well. But if you are an expert in your HTS and an expert of your own product, you can use those skills to find ways to potentially find a lower duty rate. Sourcing management, this is a tool Expeditors has and it's available for our customers. But essentially, we can take your HTS number and look at what other countries is that HTS being shipped from. What other countries it is being imported out of, so that maybe you can find, you can near source, you can move that production to some place closer to the U.S. to save on transportation costs or just looking at maybe a lower cost provider in a different region with lower labor cost. But a way of looking at under Section 301, we spent a lot of time on this, if you're sourcing out of China for particularly HTS, where else in the world was that particular HTS coming out of. And would that be worth some research with your sourcing group. And the last piece on here is this compliance is hard. It is difficult. But the last thing we also want to do is slow down the movement of your goods and slow down the productivity and the sales and the flow. So one thing we do is manage those exceptions and how can we help you identify all those little obstacles that may slow down a shipment, be it at the port, be it with CBP, be it with a government agency. But how can we get ahead of those so that doesn't happen again, and your cargo frees quickly and freely to where it needs to be, incurring no extra cost; delays is money and how can we help to make sure there are no delays. The customs trade partnership against terrorism, Ted mentioned 9/11 earlier. This was also another new organization built from 9/11. Again, the partnership is the real word here. It's how can the government work with importers to make sure our borders are secure, but also our cargo is secure, all cargo is secure for all global transportation. So they want to work with importers. If you have not signed up with CTPAT, we are an advocate. There are benefits as listed there. But the intent here is customs want you to work with them? How can you work with them to help keep us secure? And in return, how can they help you give you some benefits or features to help you as an importer. We're seeing these really kick into play with the detentions currently, as Madeleine mentioned, on the forced labor situations. CTPAT Level 3 importers are getting at least 3 benefits that other companies are not getting. Should cargo be held up due to a detention, which is basically a front-of-line type situation, both on the document review stage as well as any physical examinations or if your cargo is detained, there's a little more flexibility in working with the importer. So if you're not CTPAT, we greatly encourage you to look at it. If you're seeing a lot of exams and you're not CTPAT, that is definitely one of the drivers that's probably creating your exam situation. I think the last statistic I saw was 81% of cargo is held for exam is for non-CTPAT participants. On the right side of the screen here, what was formerly known as the importer self-assessment. This is a way for importance to avoid a friendly government audit. Nobody wants an audit, nobody enjoys an audit. Customs can come, audit you at any time. But if you sign up for a CTPAT trade compliance, you're basically volunteering to proactively give customs your self-audit information based upon their standards, based upon their data elements, but you're proactively sending that to them. But at the end, you're avoiding them coming to your office, sitting in your office and going through your records themselves. Unfortunately, at this moment, they're not taking any new applicants but with the growth and enforcement that we're seeing from CBP, we do want to keep this on the radar as a potential way of avoiding more intrusion by customs into our work. And I think my last slide is some of the best practices and most of these have been mentioned along the way in the last hour and 20 minutes. But be sure there is a central point of contact within your company. Compliance is everybody's business from the top on down, but every importer should have a single point of contact to make sure all government communication is funneled to them. And we're getting back to any government agency as quickly as possible. That is being measured now. They are measuring how quickly we're getting back to them if they send us a request. So be sure your name is listed, be sure your contact information is updated. Ted mentioned earlier about a compliance manual, compliance program. We've seen great ones. And they're like an SOP or any other manual, sometimes they end up collecting dust and they are not updated. It needs to be a live document. It needs to be a living document and needs to be updated and showing what you're doing each day. The way we do our audits if we can walk up to an operator, ask them what they're doing and they need to be able to refer exactly within the manual, what they're doing and why they are doing it, but something to keep consideration for you guys, too. Customs loves their manuals, but more importantly, they've got to be a living document as well. And the last piece here is to stay engaged and stay informed. As you've seen in the last 2 administrations, there's been quicker action than we've ever seen. And we got to be basically on the balls of our feet and ready to react to what the government comes up with. So understanding your supply chain, understanding your product and then be able to anticipate and see what customs or any other government agency is coming down with and how quickly we can adjust to those moves. The government is moving a lot faster than these too. So we all need to be prepared and be flexible and be ready at the same time. As with every presentation or webinar we do, we do want to give you guys resources. So this presentation will go out with these links. Expeditors also has a new flash if you're not signed up for that. But again, we encourage that you could get multiple feeds of information so that you can keep up to date on all that's happening and it's all that is constantly changing. If you don't belong to any industry groups, associations, compliance groups, again, we suggest you join those as well. The more information, the more input, the more dialogue that we can create, the better for all of us, and we highly encourage everyone here to definitely jump in and stay into and stay in touch with what's happening. And with that, I think I'll pass back to Ted.

All right. Thank you, Rick. So just a quick note on one of our initiatives is to work with the National Customs Broker Freight Forward Association of America and their educational institute to get accreditation for our webinars to support you if you are a certified custom specialist there somewhere in the -- within their program. This program. This has not yet received final accreditation. We are still waiting for that from NCBFAA, but we expect it to be worth 1.5 CCS credits when it comes. And we will send out a message as soon as the NEI gives us that completion code that we can share with you. So again, you certainly will be getting a copy of this presentation, as Nicole has pointed out as just in a general sense, but we will also follow up once we hear our accreditation code that you will need to get your credit. So thank you for that. And we're officially at a Q&A point, I believe.

And we've done I thought we were doing good on our questions and people just blew us up here at the end. So one thing I want to call out because lots of questions about classification and PGAs, which I'm excited about, because that is one of my favorite topics. Expeditors has a really good resource for you guys. So first of all, when we onboard you as our customer, a lot of times what we'll do is we'll take your parts database and do a bounce. And then we proactively try to work with you upstream. So it's not just a shipment-by-shipment thing we're like, what about this FDA product code or do you have a document for this? So hopefully, we did that. But even if we do do that, of course, all of us get new products. This is not a stagnant period of time. Or if you do work at an importer where you don't get new products, I think we're all jealous of you. So we can always give you an extract of the HS book. We are happy to do this. It comes in a really nice excel format. It has the PGA codes. Even as a bonus, it has the old, old, old OGA code still on there, but it has duty rates on there. It has lots of information, and it's really easy for you to do bounces and view lookups against your databases. So please feel free to reach out to your brokers and ask them for that on even a regular basis, it's very easy for them to pull. And I will remind them all of how to do that even though they should already know. So please do that. There's no issues we are happy to provide that to you as a broker, and that will give you all of your [ flags ]. Okay. So let me see here. One other thing for classification. I don't know Ted or Madeleine or Rick. One thing that we didn't talk about, but is a really hot topic right now is the use of AI for classification. Do you guys want to say anything on that? Or what we're watching or looking for or what some of our thoughts are?

So I'll start first on this. CBP has expressed ambivalence. I would say about AI that they have not directly spoken to the fact that they think that's acceptable as a means to get to the final classification. It really goes back to that fundamental idea of exercising reasonable care in your work as an importer. And I think CBP is still of the belief that the only way that a correct classification can be arrived at is the idea that a human being, those all of the attributes, the things that Stephanie talked about, all of the very specific details of the individual good. And then works through the general rules of interpretation, work through all the necessary components, the explanatory notes had nauseam to get to the -- to arrive to an appropriate classification. No question. There are some interesting tools out there. There are some companies that are very actively working on tools that are built around machine learning and AI and start to understand your products and bring -- get you to the right spot. I will tell you that if you were to tell U.S. customs and border protection that, that is how you arrive at classification, I do not believe they would find that acceptable. They -- but it can get you there. There's nothing wrong with using that as a tool to help get you where you need to go.

Yes. I think that's a good point. It's a great starting place, right? But saying, "Hey, I'm just letting AI do it for me" is probably not going to win you point, at least at this point right now in 2023, who knows how fast that will change. Let's see here. Lots of conversation or comments, of course, around the CTPAT trade compliance versus security and just being clear about the 2 differences. I will say that on customs website and I put links in there, they're still saying that the CTPAT trade compliance is on pause or on -- they're not accepting new applicants. That does not apply for CTPAT security, so it's just the trade compliance program. Madeleine, do you want to give any other comments that there was a pretty extensive session at the trade facilitation in July there?

The Trade Summit.

The Trade Summit that custom hosted, where they talked extensively about the program and where they're going with it. Do you want to highlight anything else on it that importers want to be aware of?

Yes. I do -- this is -- the trade compliance program of CTPAT is the former ISA program. So if you had heard possibly the -- it was the importer self-assessment program from customs and it didn't have a ton of participation, but that is now rolled into and has become the CTPAT trade compliance program. And yes, customs did talk a lot about it at their trade summit. And for those of you who want to hear more, there is another trade summit coming up in Boston in the middle of April, April 17 through the April 19. And part of that Trade Summit will be dedicated to CTPAT in general. So I'm sure they'll cover security and trade compliance. So anyway, if you want to learn more about it, I would definitely -- there is a virtual option to attend the trade Summit in Boston, but I would definitely look at that.

Absolutely. We will be there, virtually and in person. If you want to see us, yes, watch for that. And that is always a really good. I would say, actually, just to end on that note. Customs put the really nice presentation on. Usually, it's in the summertime, as Madeleine said, it's in April. I should grab the link or at least have Nicole send it out so we can help promote that for customs, but a couple of people saying, "Hey, I'm new to custom, I'm new to the world of importing. That's a great thing to attend and understand." And you just hear from customs directly what's important to them. And last year, there was about 8 sessions on forced labor. So if you couldn't deduce that, that wasn't important to them, that would have been pretty challenging. So it really gives you insight into what they're watching and what they're looking at. And I guess I'll end on that one -- that note, actually, somebody asked about audits, what is customs looking at in auditing. I'm trying to remember, I think they maybe had a session on that. I can't quite remember. But really, they will share things like that, and I feel like they're sharing more than they've ever really shared before in terms of what they're looking at and what they're trying to partner with importers on to make sure that they can mutually meet goals. So with that said, I think we are out of time. So Nicole, any last thoughts.

Yes. And we are out of time. I will be quick here. If we did not answer your question during the webinar, we will get back to you via e-mail. So stay tuned for that e-mail to answer any open questions. You will also be receiving an email for me today with a survey upon completion of the survey, you will be directed to download a presentation, a copy of the PDF that you've seen today in this webinar. So with that, we will let you get back to your day, and thank you for attending and joining and thank you to the speakers for presenting a great webinar today.

Thank you, everybody.

Thank you. Take care. Bye.