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

Good morning, everyone, and welcome to the U.S. Customs Market Update. My name is Nicole Gallanis. I'm the Marketing Manager for the Americas at Expeditors, and I'm going to be your host today. The format of the webinar will have about 45 minutes of content and material and then about 15 or 10 minutes at the end to go through questions. [Operator Instructions] Our team on the call will address any questions that come through during the presentation. And again, if we have time at the end, we will certainly cover those out loud and pitch them out to the whole group. Upon the webinar ending, we will be sending out a short feedback survey, and that's how you will receive a copy of the material that was presented today via PDF. So you'll get that e-mail shortly after the webinar. So now I'm going to go ahead and introduce our speakers. We have with us Madeleine Veigel. She's the Director of Customs for the Americas. Ted Henderson. He's the Director of Customs for the U.S. Rick -- I'm sorry, Rick Catalani, is the Director of Customs for the U.S.; and Ted is our Senior Custom Advisor. So without further ado, I will go ahead and kick it off to the group to start the webinar.

All right. Thanks, Nicole. And apologies to our West Coast customers out there. We know it's early 8:00 O'clock. It's early time to get started on customs and compliance. And if you let me, I'm not really going to 9:00. So we apologize for early start. This was the time frame that seemed to fit best for everyone. So for our June seminar -- on webinar, each time we do this, we kind of base them upon what we're hearing the feedback we're getting from the U.S., from the field, from customers. And so this month, it's a bit of a catch-all of trade actions from CBP pilots, rollouts, kind of a basket of everything that we've been hearing recently and it's what most of the inquiries we've been receiving from customers as well. So we've broken it up, as you can see here in 5 areas. I'm going to take the first slide on trade remedy updates. Madeleine is going to hit 21st Century Customs Framework as well as ACE 2.0 updates. Stephanie is going to come in with the CBP/PGA rollouts and pilots and where those are. One of our -- everyone's very favorite forced labor updates, Ted will take as well as the items that we're watching on the horizon from CBP. So without further ado, we'll get rolling. And again, as Nicole said, please pop your questions in the Q&A, we'll answer them the best we can as we go along. And then hopefully, if we have time at the end, we can answer some questions as well. So on the trade remedy updates, really talking about Section 301 and Section 232. So as of January, the 4-year review ended -- or sorry, excuse me, the 4-year review concluded in January this year. As a result of that, the 352 exclusions were continued under Section 301. Most recently, we heard at the 77 medical care or COVID exclusions were also extended through September this year. At this point, we haven't heard whether those will be further extended or whether they will expire. So we look forward to more advice on those exclusions. We have been hearing a lot of questions that we've been hearing updates recently at this point, no updates on extensions to that particular piece. In regards to the lawsuit, as you would imagine, this will go on for months, if not years. At this point, there's almost 4,000 importers who have joined the lawsuit, and no word yet still from the Trade Court on this one. But again, we'll be following this one closely. And anybody wanting more information, it will be included in one of our links as always, at the end of the seminar. In regards to Section 232, there's the suspension of steel, Ukraine does continue -- will continue through the middle of next year. Most recently, there was some updates on handling [ Aluminium ] of Russia that came out last April as well as the programming changes in May. So those were the latest changes on that front. So those are really the Section 301 and Section 232 updates we have for you. And we'll move on to Madeleine and the 21 CCF.

Thank you so much, Rick, and hello, everyone. Well, anyway, thank you for joining our webinar. We appreciate it. So I'm going to talk about the 21st Century Customs Framework. Hopefully, you've heard about this huge initiative that customs launched actually several years ago. So it was back when Kevin McAleenan was the Deputy Commissioner of Customs, and he was the Deputy Commissioner of Customs from 2014 to 2017, and then he became the Commissioner for a couple of years. And while he was in that role, he announced and said -- well, he said, "Listen, we announced it as well, that we need to modernize, the trade is evolving, it's becoming more complex, freight is working differently as it did many years ago. And U.S. Customs, we need to revamp our processes really to come into the 21st century to move along with trade." And U.S. Customs has some challenges definitely in terms of their process and in terms of how trade is evolving. So we need to address, we need to address this, and we need to revamp the entire import as well as looking at export process into the United States and bring this into the 21st century. And as many of you know or as all of you know, the last really major Customs Modernization Act was back in the early '90s with the Mod Act. And then we did have the Trade Facilitation Trade Enforcement Act which was passed in 2015 and went to affect 2016. And there were some big changes there. But really, there hasn't been anything as major as the Mod Act, but this is it. This is the next really big fundamental change in terms of how customs does business. So when customs kicks off a big initiative like this or wants to get input on anything that's changing, they will normally approach the COAC. And the COAC for those of you who don't know, is the commercial operations Advisory Committee. It's a group of 20 folks from the trade, and they represent all different areas of the trade. So you have customs brokers, you have carriers, both air, ocean, truck, you have surety companies, you have importers, you have exporters, you have software providers. They represent all aspects of the trade. And those 20 folks provide recommendations to customs based on any new initiatives or any changes. So when Kevin McAleenan announced this, it's his big revamp or 21st century customs framework legislative pack at a revamp of the customs process, it -- of course, it came to the COAC. And customs decided this was such a big initiative that it merits a task force. So 21 CCF task force was set up. It started off as 20 people and then it grew to 80. And because of the size of the task force, there was also a 20-member focus group that was set up as part of the task force, and they acted as kind of the liaison between the task force and customs. We're part of that task force. I was actually -- I'm actually a member of the task force, and so this was set up. And for the last few years, the COAC task force has been bringing recommendations to customs on this initiative. The first couple of years were really focused more on the challenge areas that customs has and around enforcement, and so this task force made some recommendations in terms of what customs challenge areas were. And then the last couple of years in order to balance this out, the focus really has been on trade facilitation because, of course, it can't only be focused on the areas that customs is interested in, but it's also got to focus on a revamp of the process and making some better enhanced processes that really focus directly on trade facilitation. So -- and just a quick note here, too, what you're looking at right now on this slide is directly on its CBP's website. So if you type in 21 CCF, 21st Century Customs Framework, this page will pop up, and there's a video and a bunch of -- and an overview of the entire initiative as well as a bunch of documents. So to get yourself familiar with this initiative, if you're not so already recommend going to CBP's website and starting at least with this page, but we can now go to the next slide. So back to the Commercial Operations Advisory Committee, COAC. So as I mentioned, the last few years, they've been providing recommendations on this initiative. And as a matter of fact, today, there is a public COAC meeting in Washington, D.C. and the COAC -- and these 2 images you see here are the documents that have been made public that will be discussed at today's COAC meeting. The document on the left is the 21st Century Customs Framework White Paper. So really, it's a 30-page paper, but if you're not really familiar with the 21st Century Customs Framework initiative, I do recommend looking at this white paper, it is 30 pages, but it gives the entire history with 2 appendixes, Appendix A and Appendix B, which talk about the challenge areas, both from a trade perspective and from a customs perspective and all of the back and forth between the COAC recommendation, the statutes, what customs position, et cetera. The document on the right are the most recent recommendations that are getting released today, there are a total of 16 and they're all focused on trade -- trade facilitation. So just to give you an example on the -- and you will see this if you review the document on the left, to give you an example. So from a trade perspective, 2 examples of things that the trade would like to see. One of them is realizing a true 1 U.S. government. And all of us, I think, realize and know, when you're importing into the U.S., you have to deal with U.S. customs, of course, transmitting information, getting a release, and then you're dealing with all the partnering government agencies. And all of those processes are slightly different. Oftentimes, we're transmitting the same data, both the customs and to the PGA, the release and disposition codes and messages are all very different. They come at different times. The timing is all very different. And so really, at a high level, the trade wants to see a true one USG process, one that's completely harmonized, timings are the same, and there's much more -- it's much more streamlined and we're sending -- we're not sending duplicate data to different agencies. So at a very high level, that's one example. As part of that, one of the things that trade would love to see as well is a trusted trader program with the PGAs. I mean we have trusted trader through C-TPAT on the custom side. But wouldn't it be great if we have trusted trader with the partner government agencies and actually realize true benefits. So that's one example. Another example is just to streamline the entire process. Customs with the 21st Century Customs Framework, Customs does want to see data earlier on in the supply chain. But if we're going to be providing customs data earlier on in the supply chain, then the trade would love to see disposition or messages coming back much earlier, maybe even getting a release of cargo when the cargo is still at the origin, especially in an ocean mode, so can we get messages early on? Can they be consistent? Can this process also apply to the PGAs and another example of this might be, if I'm an importer and I'm importing the same product over and over and over again, customs has its information on file. Do I really need to send the data over and over and over again every time that I bring this product into the U.S. So there's all kinds of good ideas at a very high level. These are just 2 examples. There are several others within the document. So I really recommend you going into the document and looking at what some of these recommendations are. On the customs side, what customs is challenged with is a limited access to data and visibility. And this is most especially in the area and mostly focused on the area of e-commerce. So with the e-commerce, we all know that has exploded over the years, there's a lot of e-commerce shipments and custom still feels that's a black hole to them. They want to receive data. Custom wants to receive data from other parties within the supply chain. An example of this would be the e-commerce platform providers, and they just want to have more visibility so they can do better targeting. So that's an example of a challenge area that customs -- that's highlighted in the document. And there are other challenges that customs is trying to mitigate as well. So definitely recommend that you look at these documents to familiarize yourself with them, if you haven't reviewed them already. And the links will be part of the presentation when that gets sent out to you. So COAC is not the only organization group committee that is providing feedback to customs on this very important initiative. There are other groups as well. So here's an example from the U.S. Chamber of Commerce. They put this document together with 12 other import and export associations. And these are all recommendations from a trade facilitation standpoint, and they're very good ones. Most of them are aligned with the recommendations that COAC made. But there are some other areas that this particular document addresses such as sharing data in regards to forced labor as an example. But this too, if you're not familiar with what some of these associations and groups are recommending in terms of trade facilitation, it's -- I really -- I highly recommend that you review this and take a look at it and see what's being recommended in regards to that. And so really, with all of these recommendations, right, from the COAC, from the group such as the U.S. Chamber, from all the different associations, what this really results in is hopefully a legislative packet that will get passed by Congress because basically, with the last recommendations today from COAC, customs will turn around, put this legislative packet together, and go to the Hill and try to get this -- let all these statutes that have been highlighted within the documents to be amended, passed, really a revamped import process, which is -- makes up really a large legislative packet. And this has to be passed by Congress. Hopefully, that could still happen this year. However, as all of you know and all of you see, things don't move that quickly through Congress these days. So we really hope we may see this legislative packet changed or passed this year, if it doesn't, it will go into 2024, which will be very challenging as that will be -- that is an election year. But that's the goal, is to get this legislative packet changed or passed so that the statutes are changed, new regulations can be written, and then an entire new system can be developed, which will be done in ACE 2.0. So ACE 2.0 is going to be the revamped 21st Century Customs Framework process. So again, once the legislation is passed, CBP can begin working on the actual system, and that will be ACE 2.0. Of course, we have ACE 2.1, and there are still changes rolling out in ACE 2.1. But ACE 2.0 will be the revamped process. We don't know what technology is going to be used yet. Customs is currently running some pilots using different technology, and we assume that if any of these pilots are successful and the technology works, that technology may be used as the foundation for ACE 2.0. But in any case, this is not going to be happening. This new ACE 2.0, of course, will not have to be happening this year or even next year. Again, this is still probably several years out. But it's really important to be following this to get engaged, I recommend, if you haven't heard about this initiative to read up on it and begin working with trade associations, reach out to COAC, so that we can hear your voice and make sure that they're -- there will be a good sound process eventually implemented. So I will now pass it on to my colleague, Stephanie, and she can talk about other CBP and PGA upcoming rollouts and pilots. So Stephanie.

Thank you, Madeleine. Yes, everybody's stay to the topic of coming rollouts and pilots. So let's jump in. I'm going to cover 3 on this webinar, and they were just the 3 that are most pressing or most pressing, maybe what we deem most important right now to highlight. So the first one is CPSC. I think that's an acronym that most people know, but it's the Consumer Product Safety Commission. So these are all the folks that regulate honestly, a huge amount of products. But looking for making sure that they are safe, often times in relation to products that children use. So as you can see in the title, this is a beta pilot, which implies that there was an alpha pilot at some time, at some point. And there was -- it was way back in 2016, I actually had to look that up and then had to spend a minute reflecting on all the changes that our world has gone through between 2016 and 2023. So you all can do that for a half minute as well. But with this beta, they actually did not pivot all that much from the alpha. So CPSC came out with the initial idea that they really wanted to have 2 filing models, and you can see that Option 1 and Option 2. The first filing model is unique. No other PGA has this option. And when I'm saying PGA, Madeleine also said that it's these other government agencies. We call them partner government agencies. So this model that CPSC put forth was this product registry where importers would be able to put data into this registry that CPSC would host, and that registry then could -- it would be issued a reference number. And then that reference number would be used on the entry, okay? It's a point back to that information that CPSC already has access to. So with this beta pilot, they've kind of up the ante on this product registry, importers that are participating will be able to load data to it either via a spreadsheet upload or via an API. You are going to be able to update your certificates. And then as I mentioned, you'll get that reference number, and then the broker will reference both the reference number with the version because they've realized now that, of course, this testing gets updated and things like that, we need to reference this version number. So that's the first model. As I mentioned, very unique. We don't have a model like that really with any other PGA right now. The second model is the model that we traditionally have seen. This is what if we file FDA or NTSA or USDA, anything like that, we follow the second module, which is filing a full data set at the time of import and then you kind of rinse and repeat that. So the data elements that you can see there, CPSC wants the product name, a citation on what regulation rule is being followed, where was this item manufactured, entity information, that's address, contact information, very similar to what we see with other PGAs, especially like FDA, where was it manufactured, testing information, who's holding the records? And then they did add 2 new data elements the manufacturer date and the test date. With that said, you can see this time line. So right now, we're in summer of 2023. I know time is hard for many of us now. So we are actually on weekly calls with CPSC because we have a number of importers that are participating in the beta. We will start filing data for them in the fall of 2023 and it's going to last about 6 months? Right now, CPSC can accept up to about 50 participants in their beta. And as of a couple weeks ago, they actually did have a couple spots open, and I will give CPSC a nice little plug here. They are a really good organization to work with. They are very open, very collaborative, and they've been very clear that if you want a seat at the table in terms of what does this look like and what this will -- what they're collecting and the timing and how that will work, please participate in the beta. So if that's of interest to you, you can reach out to CPSC. There's a link there on this prezo that we're going to send out, and see if they have spots. If you don't have expeditors as your broker, you can't just participate alone as an importer. You need to make sure that your broker and then their subsequent software provider are all working with CPSC already or are willing to, so that you can meet that fall deadline. But as I just mentioned, we are participating and we look forward to seeing what this looks like because this is a PGA that's going to impact a lot of our customers. I think that's all I have to say about CPSC, and I'll watch if you have any questions, throw them in that question-and-answer box and I'll watch for those. The next pilot I want to touch on is a customs pilot, and it's called the Global Business Identifier or GBI. And as you can see in that gray box there, the intent of this pilot is to replace the mid or the manufacturer ID, that just to refresh your memory, is this kind of code, I guess, that was developed, I think, in the early '80s. We have a directive from 1986. So if anyone can tell me when the MID got kicked off, I would love that. But it's this code where we use the first 2 digits of the country, the first 3 digits of the supplier or manufacturer depending on the commodity, the second 3, any numbers than the first 3 of the country. It's a very long code that actually doesn't work all that well, especially in 2023. Customs, of course, is eager to replace this. And they've been working on this for about 5 years to figure out what can they do. And the first thing that they did decide was, hey, we don't actually want to make our own code again. We've got down that path, and it was not great. We want to use organizations who are already working in the space to help identify parties and entities, maybe not specifically within the supply chain, but that's what they do. So they zeroed in on these 3 companies, and you can see them in these boxes, the colored boxes. The first one is Dun & Bradstreet. The second 1 is GS1, and the third 1 is the Global Legal Entity Identifier Foundation. At least for me, the one that was most common or most well known is the Dun & Bradstreet number. But for your -- for your industry or your experience, you might recognize one of the other ones. So what customs wanted to do was partner with these agencies to use their reference numbers. And customs really wanted to look at all 3 because they felt like these 3 provided different -- they brought different things to the table. So let's say, one of them was really good at identifying parent-child relationships. Another one was really good at understanding actually geographically where those entities were located. So when they originally pitched this, they were really trying to get people to use all 3 -- you had to provide all 3 numbers. Customs have since relaxed that, and you can just provide up to 1. So what that pilot is doing right now is you're sending at least one of these identifiers on 3 different parties that bullet point 4 over on the right side, it's specifically looking for certain HS numbers from specific countries. Okay. So this pilot from what we can tell -- customs is having a little bit of a hard time getting people to participate. I think there's lots of reasons behind that, and I'm sure you're thinking of a few, as I explained the pilot. We are currently kind of in a watch and see mode, but we are going to become more active in this space and try to identify some customers that want to start playing in this and start getting customs data. So if that is something that's of interest to you, by all means, reach out to me and we would love to chat. And as I pointed out, there's the requirements over on the right-hand side. So we'll have to make sure, first of all, that you even have commodities that could qualify. So with that said, if you go to the next slide, Customs has been making these placards, I guess, place cards. I don't know what we want to call them, really trying to explain some of their pilots. There's a lot of words on here, but it's definitely worth looking through and can see kind of the vision and where they're trying to go with this pilot. On the bottom here, you can see -- and this is on many of the slides, we just haven't highlighted it. When you get the PDF, all of these will be clickable links, and you can just bounce in and out of all of the things we're referencing. So that yellow box will hyperlink all of that for you. So with that said, I'm going to jump to the last pilot I want to highlight. And that is the Ocean House Bill release. So this one, I think many of you guys on the call are importers. So this is really just going to be a bit of an informational thing. But because it's going to impact how freight is released, I think it's really important that folks understand what's happening. So this pilot has been in the works also for years. And what customs goal is, this is in that red box, is that they're trying to move ocean freight to release at the House Bill level, and this is similar to how airfreight already releases, okay? So if you move freight via ocean like the mode of ocean, if you put freight on boats, then you should listen up. So if your freight moves and it's only on a master bill, if you're booking direct to steamship lines, the release process for your freight will not be impacted by this release, okay? But if you move freight with any freight forwarders, such as Expeditors or one of the other billion out there, and you have both a master bill and then a House Bill that's issued, this will impact you, because, as I said, they're moving to releasing ocean freight at that House Bill level. So if you look in the shaded box, I have a lot of different visual things that I'm trying to highlight here. But what's going to happen is that the boxes on the left here, they are either inbound, a PTT or an entry or a hold for that matter, will need to be posted at the individual House Bill level. And once all of those House Bills on that master bill are claimed, then there will be what is this AMS code, it's called the 1Z will be posted. At that point, Usually, it's going to be the terminal operator will allow the freight to leave the terminal, okay? So this is important. It's important to realize -- it already was kind of working this way, but it's going to be much more explicit. And I think with any change, there's always coding issues. So customs has actually had many different dates that they were going to deploy this, and have pulled them back. So the last one was June 5, and I really think the reason why it keeps getting pulled is because it is really complex. So even when it gets deployed. I think we would all be a little naive to think it's going to work flawlessly. I think it's going to be really close. But once they put it out there, I think there will be issues and just people getting used to a new process, right? Even if custom side is flawless and you can tell that they're very committed to that, it's still a new change for many terminal operators that are having to release freight. A couple of other things to highlight is this release actually for folks who cut permitted to transfers or PTTs they actually are going to need to start arriving them. So this is a very similar concept that we follow with inbounds. And CBP is making AMS codes available to see in the ACE portal. So for -- I mean, most terminal operators would be shocked if they didn't have AMS connectivity. But for a lot of CFS stations and so forth, this will be good for them to be able to get visibility to AMS that were maybe still working in a paper environment. So like I said, not a direct impact. But any time we make any changes around releasing freight, there is always impact. So customs does not have a new date for this. We would anticipate seeing a new one released in the next couple of weeks. So just kind of keep an eye on this, nothing to get nervous about, but just change is change. So we will work through it together. With that said, I'm going to turn it over to my colleague, Ted, and he is going to touch on forced labor. Ted, take it away.

All right. Thank you, Stephanie. We've spent a fair amount of time in our team talking about forced labor and recently conducted a forced labor webinar with a colleague from U.S. Customs and Border Protection. So I'll spend probably 5, 10 minutes on this, but we won't dig into it too deeply today. The first thing that I'm leading off with is this process flow slide. A number of customers have asked if CBP has a basic process flow. Is there some indication that we can see a picture of how things work. And unfortunately, CBP does not have a process flow, and how things work if your shipments are detained under a suspicion of forced labor. So basically, our team created this. What we've tried to do is encapsulate as simply as possible what happens once goods are targeted by CBP and found to be under suspicion for forced labor. So you can see there are 3 swim lanes here. The bottom are CBP activities, the middle are importer activities, and then the top are customs broker activities. And so it starts on the bottom left with CBP targeting high-risk commodities, and starting to figure out if goods would be subject to detention under either the UFLPA, the Uyghur Forced Labor Prevention Act, or the legacy 19 U.S.C. 1307 Forced Labor Enforcement, under -- with the WRO withhold release order, et cetera. So the key thing that I really want to highlight in this process flow is the middle box with the decide to destroy export or contest with the little clock there. This is really the key point in this process that folks need to be aware of. Under UFLPA, when customs detains a shipment you have 30 days to contest that detention under the legacy 19 U.S.C. 1307 detentions, under WRO you have 90 days. But either way, it's a very short period of time. So if you're waiting until this window to ponder about doing some due diligence and trying to dig back in your supply chain and convince customs that you do have a good argument as your goods not having forced labor, it's probably too late by here. Your goods, like I said, particularly on 30-day of UFLPA, you really need to have that stuff in advance. So do you be thinking about if you have goods that are potentially high risk, somehow perhaps have a connection to the Xinjiang Uyghur Autonomous Region in China, along that line, you need to be looking upfront as to what you might do if your goods are being detained. Quite frankly, what we see a lot of folks do is simply export. They're either not comfortable or haven't had the opportunity to really dig in and look at a particular area of the supply chain and just decide it's easier and faster and cheaper to turn the goods around and export them because seasonal allergies are [ wearing their ugly head ] here in Pacific Northwest, not only do you have the window of trying 30 days of being able to get your paperwork together for CBP, then CBP is going to take their time to review all that. And all that time is detention and demurrage. So do be aware of the process, please, think about what needs to be done and think in advance, all right. Next thing to talk about is the UFLPA Enforcement Statistics Dashboard, this is a dashboard that CBP put together to try to give the trade a view as to what they're detaining in certain sectors. It's actually, it's kind of handy in the sense that it's interactive, it's dynamic, if you're used to working with something like Microsoft Power BI, you'll be able to click into certain sections and understand detentions by industry, detentions by country, things along that line. So what I do recommend is that you do take the time, if you haven't looked at this, we have the link on this slide, read the data dictionary so you understand the terminology that customs is using and take a hard look at that. So the next thing to really kind of hone in here is what does the data look like? So again, like I said, this is really interactive. You can -- if you're in the electronics sector, you can kind of -- you can click on the electronics bar. And all the data will manipulate and change and give you a view as to the country of origin, specific to electronic goods that have been detained, the numbers will change, the shipment values will change. You'll get a really nice view that's particular to your industry. And one of the things I do want to point out, as you can see, the total number of detentions, the country of origin of the goods, the primary country is not China. So this is the most recent data that customs is updated as of May. They update this every quarter. They would like to do it faster. They acknowledge that. But basically, it takes them -- they need to finish an entire quarter before they have an opportunity to really dredge in, pull the numbers together, and then make them available on the dashboard. So the next update we won't see until July or August. But again, this does give you a view as to what's being detained and at least some understanding of where CBP is working right now when it comes to detentions. One of the things we're all trying to do is get an understanding of what customs is looking at, how they are digging into supply chains and you're doing due diligence on your sourcing providers, the company you're buying from the manufacturer, maybe going a tier down even. But CBP is clearly going 5 tiers back to the origin of the goods. So for example, cotton textile garments or bedsheets or things like that. CBP is not only going back to the -- whoever wove the fabric or cut, make so operations, they're going all the way back to who spun the thread, where did the cotton come from, and they're using technology tools to get there. And some of those technology folks are -- many of them are private sector companies that are also quite frankly, pitching their services to the private sector besides the CBP. So CBP put together a forced labor tech expo in March, and basically invited all of those private sector companies, academics, other folks like that to spend a couple of days saying, look, here's what we do. Here's how we do it. Here is what we can trace in your supply chain. Here are the solutions that we might be able to help offer to you. Quite frankly, there really is not a single solution that answers all your needs. I think the initial consensus is that maybe a suite of these tools might support your social compliance framework. But the other thing to keep in mind is that none of these tools are inexpensive. So I'm sure a number of you on this call have talked to a couple of -- maybe a couple of the companies who were at the Forced Labor Technical Expo. We talk to them as well. If nothing else, I would suggest that you do check with -- maybe a couple of these companies, see what they have to offer, and see how they might be able to support you and figure out how you might be able to deploy them. But again, do keep in mind that CBP is working with a number of these folks already and they're using them in their targeting center, and they are doing supply chain mapping and data graphing and things along that line to already doing that with CBP. So you do need to keep that in mind, that's how customs is digging back into individual supply chains to try to find a link to the Xinjiang Uyghur Autonomous Region, either directly or that there were workers somehow associated with the Xinjiang region who've been relocated under a reeducation program in China and perhaps they are working in Shanghai or Shenzhen or some other places like that. So again, keep this in mind, this -- the recordings are all available. We have the link again on the presentation, so you can go back and look at some of the recordings. And if you're not familiar with these technology companies take a look at what they're offering. CBP to their credit is trying to help folks understand and navigate UFLPA specifically, recognizing that it is an ugly task. And so they put together a couple of documents. If you have not seen these, they dropped these about a month or so ago. Their -- CBP's idea of what best practices are when it comes to putting together your argument, your documentation, contesting of detention. And if under UFLPA, really, there are 2 ways you can contest a detention. One way is to request an exception where you are saying that, yes, my goods might be connected to the Xinjiang Uyghur Autonomous Region, but there's no connection to forced labor. That is an incredibly difficult thing to prove. I think right now, there are a handful of importers who are trying to take this route with CBP to date. None of those have been successful. The bar that you have to reach in order to prove the presumption -- to overcome that presumption of forced labor is incredibly high. The other alternative which is the route most people try to take is to request an applicability review, where basically you are saying my detained goods are not subject to UFLPA because there is absolutely no connection to either the Xinjiang Uyghur Autonomous Region, workers from the region or anything else about forced labor. And this is the route that most importers do take if they're trying to make an argument for detained goods and contesting it. And this is -- the 2 documents we've highlighted here are CBP's recommendations for how to approach those applicability reviews. So a couple of good things to understand here. The best practices document, the one we've highlighted on the left does highlight some key actions that importers should do prior to importing goods. So there is some due diligence prep work that CBP recommends in that document. We also see other recommendations on how you should interact with CBP, the document on executive summary table of content, it's basically what CBP is trying to encourage is folks to not just throw a big pile of paper at them, to have a structure, to have a road map to explain what the documents are that you're providing, and annotate, align things up, make it easy for CBP to understand what you're trying to convince them of, all right? So these are couple of useful documents. If you haven't had a chance to look at them to give you a little bit more of a flavor. One thing that we do like to remind folks is when you are doing your due diligence and you're trying to trace back into your supply chain, seek out original documents from your sourcing, your manufacturers, your China-based entities, don't ask them to send a certification that the goods are not made under forced labor or that the goods are not subject to UFLPA. China recently enacted Anti-Espionage Act, which basically establishes a legal right for China to take action on any Chinese individual or entity that somehow is trying to work with the U.S. on the UFLPA issue, so be cautious. China has arrested people and put them in prison for violating the Anti-Espionage Act because they were -- the individual was clearly working in China to try to prove that a factory was not somehow connected to forced labor and things like that. China vehemently states that there is no forced labor going on in China. So consequently, there's -- in the eyes of China government the PRC there should be no need to conduct these activities. And so you do need to be careful in how you are interacting with your suppliers in China as part of your own due diligence. Don't basically compromise your suppliers in China as you're trying to work through and meet your requirements here in the U.S. The final thing just to touch on here is, there are ways that you can -- there are resources out there to support your due diligence and understand where the U.S. government is going next. Certainly, you want to not only pay attention to U.S. Customs and Border Protection, but you want to look at the Department of Homeland Security. DHS, the Department Homeland Security, they are the Head of the U.S. Government Forced Labor Enforcement task force. So you need to pay attention to what DHS is talking about. So for example, DHS just announced this week that 2 more Chinese entities have been added to the larger entity list that is maintained by the government. Unfortunately, that is a very small list, it's of limited use if you're trying to check and see if there are entities that you should avoid, but nonetheless, DHS has added a couple of more Chinese organizations to that list. Beyond the U.S. government or international organizations do pay attention to the NGOs, the non-government organizations, civil society organizations, and academia, particularly we highlight here, Sheffield Hallam University. They have a very active team that manages their Forced Labor Lab. This is a U.K. University. And they put out quite a bit of information, regular blogs, check out their site, Sheffield Hallam has put out a number of documents that clearly the U.S. government has looked at, and has decided to conduct investigations based on allegations from Sheffield Hallam. So if you want to know where CBP is going next, and detentions, it would be worthwhile to take a look at some of the documentation notably from Sheffield Hallam, but look -- check out other things that pop-up in the media as well. And so clearly, NGOs, academics, et cetera, have figured out that the government is paying attention and acting on allegations. And so there are folks that are very eager to put forward allegations of forced labor and have the government act on that. Just to close, there are a couple of other things that we are keeping an eye on things. If you're not aware of this, U.S. Customs and Border Protection released a Green Trade Strategy in June of 2022. They're now really actively moving forward on implementing that strategy. It really is this idea of a more sustainable future for trade and how CBP and the trade can get involved in that. CBP is hosting a Green Trade Innovation and Incentives Forum on the 11th of July. It's in the DC area in Alexandria, Virginia. It's an in-person forum and a virtual forum. So if you're interested in paying attention to that, but don't necessarily -- not in the DC area and can't get there, you might want to take a look at the virtual forum. Carbon tax, Carbon Border Adjustment Tax, that keeps floating around in U.S. Congress. If you haven't seen the EU already has a Carbon Border Adjustment Mechanism that they've started the implementation on, we see pieces of legislation pop up in either House of Congress talking about Carbon Border. Just this last week, the group in the Senate put forward a piece of legislation that would direct the Department of Energy to do a comprehensive study on emissions from certain industries that are known to be energy intensive. It looks like -- if this legislation goes through and DOE Energy starts doing their study, this likely would support future congressional action here in the U.S. on creating a carbon border adjustment mechanism. So do be aware of the impact of sustainability and green customs on your supply chain potentially in the future. On supply chain resilience, we've just seen a lot more interaction from the government, CBP, notably, trying to understand and help how the government can. But just in general, we're all reacting to what's going on, certainly COVID changed things, cyber events, geopolitical threats like the Russia-Ukraine thing, new countries popping up as power brokers in the global economy, immigration challenges, all of that's guiding companies to kind of reconsider where they make things, where they buy things. So we hear things like nearshoring, [ twin shoring ], building resiliency, all of these things. So that's guiding government actions also as well as private sector action. And the final question that we were kind of hoping we might be able to provide more guidance on. And I know there have been a number of questions on this. What's happening with GSP and MTB, quite frankly, this time last year, I was pretty confident that GSP would make it through both the House and the Senate, it hasn't. Congress still speaks positively that they would like to take action on this. The U.S. trade rep, has outwardly stated that we need to read new GSP. So you have the U.S. Trade Rep works for the White House, so she representing the President has stated that we need to renew GSP. The Senate leadership has talked about absolutely, House the same thing, the problem is there's not alignment between the Democrats and the Republicans on the conditions for renewing both GSP and MTB. The Democrats would like to see that trade adjustment assistance re-included in a GSP renewal, [ Africans ] don't necessarily want that, and I'm speaking broadly, so it's -- honestly, it's quite tough to see where this is going to go. There's no question, Congress agrees that we need to renew it. It's just we can't seem to come to an alignment on what are those conditions for renewal. So the best thing that we can say is just stand by and continue to watch the news, quite frankly, we don't have any more inside information than anyone else does. I genuinely have to believe that this gets done this year. It makes sense for a lot of folks from a political perspective, as we are going into an election year. So I would like to think that we actually will see some traction on GSP. It appears that GSP and MTB will move together. So hopefully, both of them do get renewed before year-end. So one of the things that we have done through our webinars this year is work with the National Customs Broker Freight Forward Association to support folks those of you out there who are part of their various certification programs, whether you're a certified custom specialist or whatever, so this webinar has been approved by the NEI, the NCBFA, Educational Institute for 1 CCS credit. As noted at the beginning, you will be getting a copy of this presentation and so you can just use this completion code, for those of you who are involved in that program to get your 1-hour credit and maintain your certification for this year. So at this point, we can move on to Q&A. And I know my colleagues have been frantically trying to answer things. But Rick, I'll turn it over to you to highlight things that we need to address on the call right now.

Okay Thanks, Ted. The question I'm going to grab is in regards to the port situation on the West Coast. There was a question about labor and the ongoing negotiations and disputes. So as everyone knows, I think at this point, the West Coast ILWU has been operating [ without ] a contract and hitting their 1-year anniversary in July as far as how long this has been outstanding. It is getting more tense, there is different reports coming out daily. Our suggestion on those is to verify some of the stories you hear. For example, here in Seattle last weekend, there was a report on Saturday that the ports were closed. The ILWU came back quickly and said, no, they're not. We're operating. We're working but the terminal operator, the PMA who represents the terminal operators was stating that they were closed. So like any news, I would just make sure we're validating what's happening, whether you have a person on the ground or contacted Expeditors were happy to help in those areas. At this point, again, as everyone knows, volumes aren't what they have in the last couple of years. So it's a difficult negotiation time for the ILWU, the volumes and the congestion aren't there to create the leverage maybe they had a year ago. So it is a tense situation and everybody wants to get this resolved. There was a report last night that the backlog in L.A. was 9 containers. And again, those of you who've been around the last few years, 9 doesn't sound like a whole bunch, really isn't a whole bunch. The highest number we've seen in the last couple of weeks has been 20. Again, nothing like the plus 100, 200 ships that were sitting out there in the last couple of years. So yes, there are issues, there are spotty delays. There's a lot of rumor and gossip. But at this point, no progress, no decision. The Biden administration has gotten involved. The Labor Secretary has begun talking to both sides, part of the good news on that is she is the former Labor Secretary of California. So she has lots of experience working with the ILWU and the ports in the state. So I think that's a bit of good news. This isn't a new arena for her and she will be pushing the negotiation and hopefully trying to draw some more cooperation from both sides. One other piece to add that I haven't seen a whole lot of articles on, but the ILWU in British Columbia over the weekend, they also voted to go on strike. The vote by the labor -- by the labor is over 90 -- over 99.5%, yes, to go on strike, Prince Rupert and Vancouver. That could be as soon as June 24th, if that proceeds. In the past in Canada, they've had similar votes, but the strikes did not occur. The leadership of the ILWU overruled in the past, and the strike didn't happen. But as you can see on the West Coast, there's definitely a building tension and a big push on the labor side to get their negotiations addressed. The main remaining factor, as you may know, at this point, is paying benefits for the ILWU. The automation issues have been addressed, but the other issues have mainly been addressed. Now it's just about pay, which is probably the hardest one, as you would imagine. So that's where we stand. We're providing updates as we can from our Ocean Group as much as possible each day. Our Ocean Group actually has a webinar scheduled on June 28th. Nicole, maybe we can include that in our updates here as well. So this is still going on by the 28th of June, we'll definitely have it on our agenda with -- for our Ocean Group. But otherwise, please keep talking, please keep asking questions. We're pushing up the information as quick as we can and happy to answer any questions you guys may have.

Yes. And Rick, that's a good segue. I did draw the link into the chat window, but we'll be sure to include that on our slide, so that when you receive it, you can register as well.

Awesome. Thank you. Stephanie, Madeleine anything else we're missing before we sign off for today.

No, I don't think so. I was just looking at our questions, and I think we got through most of them. I will reiterate just one point that Ted already hit on, but it's one that I think is hard for a lot of people to grasp. Most, I'm going to revert back to forced labor real quick. Most of the holes we are seeing, it doesn't matter what your country of origin is. Many, many people kind of keep asking questions like my items are made in Mexico. My items are being made in Malaysia. What we're seeing from custom stats is that the countries that are being targeted are actually not country of origin China. It doesn't matter what your country of origin is. It's where were those components sourced from that are being made. And that is what -- that is a common trend. So don't feel like you're safe, if your items are being made in other countries, it's just not true. Customs is looking at the components and where those came from. So just kind of keep that in mind. And I know that's a little bit tricky to think about. Ted, anything else on that?

Yes, I'll build on that. I actually added on a couple of comments to Stephanie typed in responses to a couple of you. So you saw the big pile of detentions associated with Malaysia, most of those are related to solar panels and things along that line, which do fall under the electronics category as far as customs is concerned for the statistics dashboard. But the point about that is the silica is alleged to originate in the Xinjiang Uyghur Autonomous Region. The region is a highly extractive region. More and more manufacturing is being done there, but it's heavy on extractive and agriculture. So Silica is one of the main things that is mined out of the Xinjiang Uyghur Autonomous Region, and that ends up in polysilicon, which ends up in solar panels and it also ends up in a ton of other electronic items. So to Stephanie's point, don't just think about country of origin China, that's not what you need to look for, you need to be looking about the components and the originating material in your goods. And is there some connection not specifically to the Xinjiang Uyghur Autonomous Region, but also somewhere in China where perhaps workers from the region have been relocated.

It is complex. That is true. Okay. Nicole, I think we are good and we're at time, do you want to remind people how to get the slide deck if they need it.

Absolutely. So I will be sending out an e-mail shortly with a link to the survey, upon completion of that survey. Just a quick 5 question, basic questions. You'll be directed to a new landing page where you may download a copy of the presentation. in PDF format. So don't close out of the survey too quick because then you'll lose the landing page and the ability to download it. With that, I will let everyone get back to their day. But thank you again for joining us, and thank you to all of our panelists for the great information. We hope to see you at the next webinar. Thank you.

Thank you, everybody.

Thank you, bye.