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

Good morning, everyone. Thanks for joining. Welcome to Expeditors U.S. and Canada Border Solutions webinar. My name is Jessica Dorofy, I'm the Customer Retention and Development Manager for our Buffalo in U.S. Northern Border district, and I will be your facilitator today. Before we get into today's content, I just want to go over a few housekeeping items. First, everyone has been placed on mute with their videos off. We have left time at the end of the presentation for some questions. To ask them, you can submit them through the Q&A function, which should be at the bottom of your screen. To receive a copy of the material we review today, you will be prompted to complete the feedback survey at the close of our events. And lastly, we will be posting some poll questions throughout the presentation, and we do appreciate your participation in those. Our speakers today are from Expeditors U.S. and Canada Border Customs teams. They have a combined 140 years of industry experience, 100 of those are with Expeditors. From the U.S. side of the border, we have Jon Muscat, our Business Development Manager; and Jeff La Monica, U.S. Northern Border Manager as well as our Buffalo TransCon and Distribution Manager, Megan Quigley. From the Canadian side of the border, we have Steve Bunda, Business Development Manager; and Kara [indiscernible], our Customs Brokerage Manager. So going over the agenda today, we will be reviewing our Canada and U.S. border processes, our cross-border transportation options and modes, the documentation requirements, industry and market updates, our nonresident importer program and other government agencies. And at this point, we're going to launch our first poll. We have 2 questions up here, which of the following countries you import into Canada, U.S., both Canada and U.S. and then which method of transportation do you use for your imports? We'll give you guys 30 seconds to answer those. Jon, I'm going to turn it over to you.

Thanks, Jess. We can see these answers. Very interesting. Okay. Well, I was expecting to see a lopsided response as far as which countries. That's good, it's sort of up the middle, more [ truck, ] which we expected or I expected than anything else. Anyway, great. We'll go to the next slide.

Well, Jon. It's Steve. I think it's important to note that the U.S. is still Canada's largest trading partner at this point...

Absolutely. And I'm glad you said that.

Yes, let's see these numbers here.

Yes. I'm sure everyone knows that U.S., Canada, Mexico and China is in there as well, we're each other's largest trading partner. So we're right across the border one another. Everyone knows. You see the numbers here. Of course, China is [ 536 ] billion, but Mexico, Canada, sort of right up the middle with U.S. Anyway, we have every -- we have each other's best interest in mind. With that being said, we want to keep that partnership strong. Let's go to the next slide.

Jon, sorry to interrupt, but I do know you wanted to turn your camera and I'm not sure if it just didn't go.

I'm glad you said that. Thank you very much. I want to see all my beautiful locks of hair. Thanks. Okay, everyone. This is a high-level brokerage overview of Expeditors. We do about 6 million imports worldwide. We have over 3,000 brokerage employees, over 1,000 of them have their brokerage licenses. Specific to the United States, 3.2 million of those 6 million. Again, in the U.S., we're the largest traditional broker in North America actually. And what that means is the customs brokerage of pallets. So of course, FedEx and UPS have a small parcel market [indiscernible]. Expeditors is the largest traditional broker for the importation of pallets. We have over 1,000 brokerage employees in the United States and over 600 of them have their like brokerage licenses. Specific to the northern border -- U.S. Northern border, which I represent, along with my partner in crime, Jeff La Monica, who'll speak after me, we do about 360,000 entries annually. It's 30,000 entries a month. We have an average tenure of about 11 years, brokerage staff of over 60 with 5 licensed brokers in-house. Our brothers and sisters north of us in Canada, 810,000 entries, average tenure 9 years, brokerage staff of 165 with 10 licensed brokers. And our brothers and sisters on the southern border, who aren't here to represent themselves, we'll just mentioned this, so you guys get a visual. 145,000 [indiscernible], average tenure 7 years, brokerage staff of 350 with 13 brokerage licenses. Again, if you guys have any questions, feel free to throw them in the chat box. Okay. Specific to the U.S. Gorgon border, again, which is what I and my counterpart Jeff La Monica are representing, we do 360,000 imports, 30,000 a month. If you see the grayed out dots, those are all of the northern border port. There's 20-plus of them. The red dots are where we Expeditors have a physical presence. We're here on Michigan, Detroit and Buffalo. Again, our brokerage operation consists of over 60 staff members. We're open 24 hours a day, 7 days a week. We divided into 2 departments. Automotive and of the 30,000 entries a month, we -- about 20,000 of those are automotive, and the other 10,000 general merchandise. So we do a lot of alcohol, agriculture, pharmaceuticals, livestock, anything you could think of. Again, we have 5 license brokers on staff. We have 2,000-plus active customers. And if you were to work with Expeditors when we onboard new business, we have dedicated transition implementation resources. Every customer gets a single point of contact, all the visibility tools that a lot of our existing air ocean brokerage customers get, you'll get also with the truck and rail brokerage process and all the web-based visibility, detailed reporting on the analytical tools. We'll go to the next slide. We have a little bit of trivia. A lot of you might already know this, but I'm living to bet a lot do not. The -- these are the 4 largest border -- I'm sorry, the 3 largest border crossings in the United States, the Ambassador Bridge, which links Windsor, Ontario to Detroit, Michigan is the busiest port. There's 5,500 trucks going both ways, 20,000 entries daily, and this is all brokers, not just Expeditors. The bridge does not allow any hazard of shipments. The Blue Water Bridge, which is the port here on is the second largest border entry, hazardous shipments are allowed. The Peace Bridge is the third largest hazardous shipments are allowed and it's in Buffalo. And then there's a fourth bridge being built. It's about, I'd say, 2/3 -- maybe not even 2/3 done. It's supposed to be completed in 2023. It's the Gordie Howe International Bridge, which is a little south of the Ambassador Bridge still in Detroit, you see a picture of it down there. It looks a little like an escape from New York if any of you guys have ever seen that Kurt Russell flick. Anyway, the bridge stops right at the river, because they haven't gotten over the water yet. Anyway a little bit of trivia gives you guys an idea of where the shipments are crossing, but there's other -- there's another 19, 20 ports that are much smaller. A lot of them are open 24 hours a day. We got a 365 days a week like these 4 bridges will be. Okay. I'm going to turn it over to my partner in crime. We call him Maxime, get it? Mini me, Maxi me because he's bigger and older. Anyway, he's going to take it over from here. Thank you, guys.

Thanks, Jon. Well, good morning, everybody. It's been another very exciting week at the U.S. Canadian Northern Border if you know what I mean. So for the audience, what I'm going to do today is just walk through the typical U.S. Northern border entry process. It's interesting. Sometimes I get a little skewed in my thinking that everybody knows this, because it's been around since right after 9/11 back in 2007 when after 9/11, customs wanted to implement a way to ensure that goods didn't just show up at the border. That's what prior notice started at the borders. And also, it was the precursor to ISF. So a lot of people know and deal with ISF for ocean freight coming in from all over the world. And the cross borders actually started it, and that was through the prior notice system. So you're going to see that with a star next to it here on this flow. And if you get a copy of this, you can look at the sole flow in its entirety. But what I'm going to focus on, again, that makes the border crossings on both sides of the border unique is that the way that we have to provide prior notice and the carriers as well. So the way it usually starts is documents are prepared by the Canadian parties, sometimes the U.S. entity, and they're given to the carriers. The carriers are then responsible for filing an ACE electronic manifest. And when they do that, if we could advance the slide, what happens on this is that if you follow the top arrow, if you will, the carrier is going to send that information to customs, their electronic manifest, which is comprised of both carrier information, manifest data. It explains a very little amount of commercial data. And all that information is either set via the Internet, which is the most popular way, but if you're a very large importer, your carrier base might also send that via EDI. That information will flow over to CBP, customer support protection. Right after that, the carrier is done either sending it via EDI or fax or e-mail. I hope not fax anymore, but most don't. They send their documents to the broker. So you follow that bottom arrow and it ends up at a customs broker. And what the carrier is doing there is they're providing the broker with all the commercial data at that point. Not so much the immigration information. You know the carrier, the driver, where they were born and that high -- that level of information, it's more commercial when it comes to the broker. So when the broker gets that information, the key thing is, is that they have -- the carrier has to provide the PAP's number. That stands for the prearrival processing system, an old technology that really doesn't exist anymore, but the darn carriers, they still use that PAP's lingo. So we use it in its industry-wide. That PAP's number is the shipment control number in all actuality. And it's the fingerprint that locks both, this commercial data and then that top arrow immigration-type information data together, and it all ends up at CBP, okay? So that is very, very important that if you're going to import into the United States from Canada to the U.S., this has to happen. So you want to make sure that you're working with a carrier base that is educated in this process and that they make sure that they've got an active [ SKEK ] code that's registered with CBP. And believe it or not, things happen where the [ SKEK ] codes expire. We also have a lot of instances where customers will still have representatives of their company that will go over to Canada, maybe with a few things that they're going to show or a demo or maybe have looked at for evaluation purposes. And then they want to come back to the United States and they find themselves in an -- well, I'd say, a vehicle, it's usually a company vehicle or their personal vehicle. And then they have a problem entering that in the U.S. again because all commercial business has to follow this process. So if you find yourselves shipping goods in company vehicles or again, your own personal vehicles and you get put into this position where you can't enter the United States, there is a way to resolve that matter, but those days are pretty much gone. They've been going since 2007, and you really want to make sure that if you're going to have people doing that type of business, which is very, very common, they've got to use commercial carriers for that. If they're not going to do that, there's a special onetime exemption that they can receive, and they have to actually write a letter to the port director that they plan on bringing the goods back into the United States with, and they will get a one-time exemption that's taken very, very seriously. They'll get an opportunity to at least get that one shipment back in and basically learn your lesson, and then you've got to take steps to make sure that, that doesn't happen again or those goods will have to be kept in Canada. And then they'll have to be shipped over via a commercial common carrier, okay? If we could advance the slide. So the process, again, please go back and look at the entire process, if you want to look at the details of the start to finish, but that's really what makes it unique. Because once the goods get to the border, if everything is done in accordance to the process, the goods are usually either released or they're inspected by customs, and they move through the rest of the process. But that's the unique piece on the border. So then when we start looking at unique transactions from Canada to the United States, they would be return programs. There's over 200 people on this call, and I don't know all of you, of course, but if you do any business in Canada and maybe you've got a return program, maybe you don't. But there's always return goods coming back from Canada. And it's what's really unique about the U.S.-Canadian border versus air freight into the U.S., ocean freight, even southern border, there's not as much. Business from Canada to the United States is very -- it's very common to have a return program where goods are consolidated as the return to a consolidation point. And then those goods want to come back into the U.S., and they want to use the provision here in the United States, 9801.00.10 for goods being returned. Now the programs are very, very -- that special provision is very, very specific on how it works, then the definition of those programs are that if you've got goods that are made in the United States, those don't have any time limits on them, but they do have to come back to the United States with the support of a commercial invoice, a foreign shippers declaration by -- that's created by the exporter out of Canada, and then the importer themselves have to have an importer declaration. And those -- and as well, excuse me, a manufacturer's affidavit as well for U.S. goods being returned, okay? Those 3 documents will support the provision that shows that they were sent over to Canada, not advanced in value or condition. It will also provide the dates that are showing that it's been 3 years or less, and it will show the ports of entry, the ports of exit. So it's very important to have those documents. In addition, when TFTEA, the new changes with customs about, I don't know, 6 or 7 years ago now, TFTEA allowed that to open up in any country of origin can -- of goods of any country margin can be returned to the United States under 9801 as well. The conditions of those imports would just be to have the foreign shipper declaration and the importers declaration. Now those also have a 3-year condition put on them that the company that shipped them to Canada has to have them return within 3 years or less. They can't be an advanced in condition or value. And then they've got a helpful supporting documents that I just referenced. So there -- this is a real point of emphasis and enforcement with customs. There was a CSMS message that was sent out in late August of '21. And it's been highly enforced over '22 and '23. If you don't have those documents, then there are other ways to prove that the goods were exported and they're returning. This can be done through Canadian entries, some other documents that shows bills of lading and things of that nature that show that the goods were shipped out of the United States at certain dates and times. But -- or in a way you want to have those other documents, the manufacturers affidavit, foreign shippers declaration and then importers declaration because the enforcement is heavy because think about it, you're bringing those back in duty-free. So customs wants to make sure that they're calling someone to the carpet on occasion. The other thing that I wanted to talk about, cross-border business is not any different than any other import into the United States, except for the timing. We work in minutes and hours. The majority of the population in Canada is less than 4 hours away from the border. So shipments move very, very quickly. So when we work in minutes and hours, we're not like air ocean operations where you've got days, maybe hours in some occasion, but mostly, it's days. And sometimes it's a weeks if it's ocean, of course. So anyway, we work really, really quick. So to prevent delays at the border, some common mistakes are that the importer of record is not indicated on the paperwork, and that's really a big thing that we see. It should never be assumed that the U.S. party is the importer of record because as many of you may know, Canadian companies can act as a nonresident importer of record. So when you don't declare the importer of record on the documents that are prepared, we've got to hold that freight until we can confirm it, because we don't know if the shipper is the importer or if it's going to be the U.S. entity. So keep that in mind when you're doing business with Canada. The other with the advent of ACE several years ago, there are no more exceptions with partnering government agencies where if you don't have the information, you can secure that post release. It used to be a time where FDA, EPA TSCA, there was just a few things that were conditions of release as it related to PGAs, but now you have to have every government agency accounted for. So if you've got goods that are regulated by these different partnering government agencies, you have to have all that data provided to your U.S. broker to avoid delays at the border. That can be pretty substantial if it's not addressed ahead of time. So those were two things that I wanted to talk about that are sort of unique to the border, the 9801 provision and then, again, trying to prevent delays are common mistakes, okay? We can proceed on, and I'm going to actually well, I guess I'll stop real quick for any questions that you may have.

Yes, Jeff, we do have some questions that came in. The first one was: If you guys do not operate in every single port -- if we do not have a presence in every port, how you operate?

Sure, sure. And I started to answer that one, and I ran out of time. It's -- we operate under the remote location filing program that's offered by customs. So even though we reside in Detroit for our cross-border product, every one of those dots that were recognized, all commercial ports of entry that are bringing goods in by trucker rail from Canada to the United States. We can use the remote location program -- filing program, and we can act as a virtual office in all those ports of entry. So you will still only have to work with one contact as Jon mentioned. That's the great thing about our Northern border product. Your carriers deal with one office and you'll deal with one office. It's not a moving target based on the time of the day and the time zone changes.

I'll add to that, if you don't mind. It's the same for our operation in Canada. They are able to release and file B3's [indiscernible] for any of those ports from their one location.

Thank you, guys. I believe this is in reference to the special provision 9801. Can you -- Jeff, can you restate the documents needed for this?

Sure, sure. So if the goods -- and if anybody wants, I can send them a link to the CSMS message. That's very clear on what is needed. But if it's U.S. goods being returned, you want to have a foreign shippers declaration. That's completed by the Canadian entity who's shipping it back to the United States. You want to have an importer declaration by the importer of record that's basically indicating that the -- same thing, it's just from both sides of the border. You have to have accountability that everybody is in lockstep on the dates of export and then the dates of import into Canada and then vice versa. So those are the two. And then with U.S. goods, you also want to provide a manufacturer's affidavit. All forms that we can provide to you, they're also available on the Internet at www.cbp.gov. Those forms are available to you there. Now when there are other countries of origin, you can omit the manufacturer's affidavit. You just have to have the other two.

Great. And is it a best practice to keep copies of your export documents required for 9801?

Not sure how that's being positioned. So if you are exporting goods to Canada back in the olden days, there used to be a certificate of registration. It's...

We lost you, Jeff.

Form 44.55. And that document would indicate to customs that you're planning to ship these to Canada for a specific reason and that you're going to return with everything. Ever since ACE, that went away for the most part. Customs really gives the carriers at the border a difficult time some officers will be good about it, and they'll sign off on the 44.55 that their goods are going to return. And then before they leave the United States, they take that signed document, and they get it from customs. And then they tuck it away, and they make sure it travels with the goods into Canada. Then when it's time to return them to the United States, that 44.55 is used as a support document that shows that they were registered and that they would be coming back. And then that's countersigned, and it's a really great document to show that the conditions of 9801 have been met. There was always intent to bring them back into the United States, and you actually stopped and showed customs what would be leaving and what would be coming back. It's just that unfortunately, as much as they try to harmonize things, the customs officers at the various bridges they just don't -- they are harmonized. So in the port of Detroit, for those who don't know, it's a training facility, same as in Windsor. And so the Ambassador Bridge, you may have such -- you have a lot of inconsistency, because you've got new inspectors, and they might not honor the 44.55. But it is there, it's not obsolete. It's just -- it's not as common. So if you've got your export documents, great to hold on to. But when you export to Canada, there is no need for a shipper's export declaration. So your documents that you have for shipments going to Canada, they're pretty sparse. You can have whatever you have, and I would definitely keep them. It may serve as a good catch 21 for you.

Thanks, Jeff. We actually do have some more questions, but for the sake of time, we're going to move along and answer them at the end.

Sure. So that will be Megan, that I'll turn it over to.

Great. Thank you, Jeff. One additional offering that pairs well with our brokerage services is our cross-dock operation. Called out on the slide here is showcasing our Buffalo and Toronto facilities. However, we do have several offices along the northern and southern border that do offer cross-docking and warehousing solutions. One of our growing offerings in Buffalo is our ability to consolidate and linehaul parcel shipments into Canada daily. Those are then to be sorted and segregated into the Canadian parcel market. This is also known as a Skip Zone program. Our Canadian offices do also have these Skip Zone programs into the U.S. For any additional information that you do have, our contact information will be listed at the end of the presentation, and I do highly recommend that you reach out to us. Thank you very much for your time this morning, and I'll turn it over to Kara and Steve. And they'll be covering our Canadian brokerage overview.

All right. Thank you, Megan. That was great, and good morning to everyone. A brief overview of our Canadian operations. Our footprint in Canada, we have offices in Vancouver, Calgary, Toronto, Montreal and across from Detroit, Windsor, Ontario. And we provide a 24/7 hours of service, just like our colleagues, south of the border. We have a very strong and qualified customs team here. And really, we're fortunate here in Canada as we work directly with the local colleges as they have customs and enforcement programs, and we participate on their advisory committees, setting curriculums and the programs. Next point here, local expertise. So I want to bring this up, because believe it or not, CBSA, Canada Border Services Agency, allows for the offshoring of customs work to countries like India and the Philippines. We, though, we manage all aspects of our customs processes here locally. But it's a little interesting, because we're starting to see that this offshoring is actually returning to Canada. And this is really due to a quality and compliance issue. I guess at the end of the day, you actually get what you paid for here. We work very closely with our U.S. customs teams from a process and a legislative perspective, also as we see many of the U.S. CBP programs eventually make their way north of the border to Canada. A few examples, ISF in the U.S. In Canada, we have the ACE -- in Canada, we have MANIFEST, U.S., ACE portal. And in Canada, we have what's the most recent initiative by customs is the CARM program, and I'm going to get into some detail on that. And lastly, forced labor, which is a key initiative state side, but it is surely moving north to Canada. We'll probably see more details on forced labor here in Canada, January of 2024. Right now, it's been a bit of an issue with Canadian Border Services Agency trying to get the details out to the port level. But our goal is really to understand your processes, identify any potential duty savings through preferential tariff concessions and identify any areas of noncompliance. But from a release perspective, we want to assure you're taking advantage of CBSA's programs like the single window initiative, PGA requirements and are aware of other CBSA programs like the custom self-assessment program and really a goal to streamline your release and accounting processes by automating through EDI, OCR data labs and capturing and reusing existing data like the PGA data to facilitate SWI. And on that note, I am going to bring on my colleague, [ Kara Wiese, ] who is going to go into more detail and explain the Canadian release process. Kara?

Thank you, Steve, and good morning, everyone. We can definitely switch to the next slide if you don't mind. So I just want to touch base a little bit on our structure here at the border. And a couple of key points to keep in mind. So those of you who have transitioned on with expeditors know that we have a very intensive transition process. We take great pride in that transition process. And because of that process, we feel that when we bring on customers, we can do that very seamlessly. Within our structure of my branch here in Windsor, and I do sit in Windsor straight across from Jeff and Jon, we have a dedicated customer service rep as well for every single account that we handle. The way my branch is structured is that every single service rep has a team that actually surrounds them, and they are cross-trained. As we know people take vacation, they get sick. So we make sure that the teams are all very well versed on each customer's account. So that, again, if anything happens, it's a very seamless transition to the next person to make sure that is done. I know that Steve touched a little bit on our compliance program with other government departments. Most of you most likely know that single window came into play and it actually went live in mandatory in August of 2020, where that was the service option that your broker should be sending any electronic data on your behalf that incorporated a PGA. Now it was a little bit alarming, I think, for many importers when single window did come into play, because they assumed that they didn't have food products or something maybe within natural resources, they wouldn't be affected. However, we have found that 95% of the imports that enter Canada at least have Health Canada consumer PGA requirements. And those are actual shipments that are coming across where the broker is having to submit codes that advise CBSA and the PGA what those products are being imported for. So there's a lot of information on single window, and I could probably talk about that for about an hour. I'm very passionate about the project. I was very proud that we were one of the partners to test the program with CBSA and the other government agencies and assisted with that coming live. So today, in our branches here in Canada, we are submitting a 100% single window entries to CBSA. Now the one thing I do want to touch on is we do see many common cross-border challenges, and I know that in working a lot of these webinars with Jeff and Jon, that they do experience some of the same. So just wanting to highlight those so that they're in the forefront for you and you understand that these are, unfortunately, the items that can often cause a truck to be stuck at the border, which, of course, then causes extra and additional cost to the importer. There is quite often where the carrier will arrive and they do not have any documentation. CBSA officers have the right to ask for that documentation. And so unfortunately, that can become a spiral of a delay at the border. One of the things I want to touch on is inconsistent estimated time of arrivals from the carriers to the broker. So this, believe it or not, is an element that the broker must submit to CBSA to advise them what time to expect that driver at the border. And it is actually in a time and date format, and it's stamped within CBS system. So it actually, of course, puts it into time of order for CBSA to work on, but it also allows them to do a risk assessment on the carriers as they're coming over. So please keep that in mind that if your carrier is advising the broker that they're coming today at noon, because they want to be at the beginning of the queue. However, they don't show up until tomorrow. That is now 24 hours where Canada Customs is wondering where that carrier has stopped. So unfortunately, it can flag for some type of inspection or pulling the driver over when it might not have been necessary. Again, no truck bill with the cars. We always want to make sure we have a truck bill, so we can do a cross reference. Country of origin is huge. It's also an element that must be submitted. And then the other thing is LTL loads with multiple brokers. So we do often see, unfortunately, where there might be a delay because one broker has not submitted and the LTL guy is kind of stuck there, not knowing if he should take it in [ botch. ] The last point, again, goes back to the single window initiative. So during the transition when I talked about earlier, this is actually something we have incorporated into our transition here in Canada. So we do all of the hard work with our customers upfront to make sure that when they start live, all of the single window codes are discussed with them and hard-coded into their parts database. We are finding more and more that a lot of companies that are coming to us from other brokers have not been asked these questions in the past. So I do want to reiterate that all of the codes being sent to CBSA on your behalf, whether it be single window codes, a classification, a country of origin, the importer is responsible for that data. And if you're not with expeditors today and you're with another broker, I encourage you to ask why you're not having those conversations with them and who is deciding on what [indiscernible] to use on your behalf.

Kara?

Yes?

I want to put you on a spot here. So we're talking SWI single window and how important it is. Can you just give us an idea of what is the time savings with SWI from a release perspective?

Yes, that's a great question, Steve. Actually, it was fascinating to me when we started this. So I always use a meat shipment with everybody to give them just an idea. So I have been in the industry for a very long time, not showing my age, but before single window in order to clear a meat shipment into Canada, you had to fax all of the documents to CFIA, wait for a fax back. There was a procedure to get the information that was needed to any of the PGAs really. The meat shipments to clear into Canada at times would take 4 to 5 hours just to get them accepted, right, so that, that driver could cross. We were one of the very first brokers to test this timing with CBSA and CFIA. And the first shipment that we did through the single window submitted, we received their release acceptance within 4 minutes. So that savings to us is amazing and to importers as well. So great question, Steve. Thank you. The -- on the right-hand side of my slide, I just -- this is just kind of an overview of how the office is structured here in Canada. You have myself as the brokerage manager, you have an assistant manager. Each shift has team leads and then, of course, the release and support staff and readers. I am also very fortunate in the Windsor office that I have someone on each shift, which is not very common within Canada, but I have a professional licensed broker that sits on days with myself, on afternoons and on midnights. So there's always a good deal of support there if questions need to be asked by importers or CBSA. If we could go to the next slide, that would be great. So this slide, I absolutely love, because it shows a lot of importers what happens before the truck hits the border, what happens at the border and then where often people think it stops, it actually does not. So it continues after the border. So I'll quickly go through the slide, so that we can get to Steve with some important updates on CARM, et cetera. So before the carrier hits the border, that carrier is having to submit his ACI e-Manifest information. At the same time, the broker is sending all of the [ pars ] information, the SWI information, the carriers, court of entry, et cetera. At this point in time, as when the actual CBSA risk assessment is starting. So customs is looking at details to see if they match. They're looking at the carriers description of his goods compared to what the broker is sending as well. If everything looks good to CBSA and there's no red flags, they will send a notification back to both, the broker and the carrier that their information has been accepted. After that, we get a second message that says, ACI has matched. So that carrier now also gets that message, and he is able to proceed to the border. Once he gets to the border, however, it's a primary -- at the primary inspection booth, the border officer, the BSO is actually still reviewing everything when he gets there and asking that carrier a series of questions. So again, that ETA, that estimated time of arrival, you were supposed to be here 6 hours ago, where have you been? So that's when that series of questions come up. It could be immigration, anything that might hold that up before the final decision is made. Once the final decision is made, the carrier is sent on his way to release, and he goes on his way to deliver his goods to final destination. The procedure, however, does not stop. So at that point in time, CBSA is now getting their compliance checks, and they're doing their compliance management. At that point is where you often see any type of administrative monetary penalty come over. If there's an issue, there's a compliance verification. There may be questions to the broker, to the importer that need to be asked. If not, everything goes through smoothly, which is what we want, and everything is good, and the broker is charging the importer for the brokerage, and then the duty taxes will be paid off to customs. So if there are no questions or if we want to leave those questions, that is fine as well. I am going to pass it off to Steve to finish us off for Canada.

All right. Thanks so much, Kara. Very detailed explanation on the border process there. So I want to briefly address Canada Customs #1 key initiative, which is known as CARM. And it's essentially the streamlining and the way duties and taxes are collected today by Canada Border Services Agency. But today's -- today, the accounting for commercial imports and assessing the applicable duties and taxes does require extensive administration by both, importers and by Canadian customs, and the existing processes and systems in place to support these activities today are -- they're antiquated, requiring substantial paperwork, and we rely on IT systems that are more than 30 years old. So this approach is inefficient. It's costly for both, the importers and for the government. And in an effort to modernize the import process for the assessment of the duties and taxes, Canadian Customs has established the CARM program, which is the Canada Border Services Agency, Assessment and Revenue Management program. So with CARM, it will essentially redesign import information requirements, processes and systems to be simpler, easier for trade chain partners and the government alike to administer. One note though is CARM will not impact the present date release auctions with Canada Border Services Agency. It's really only the payment of duties and taxes. Program is a mandatory requirement for all importers and that's for both, Canadian resident and nonresident importers. So it is critical for all importers to be registered on the program. So essentially, if you don't register, you will not be able to import, and it's really as simple as that. Our friends and colleagues south of the border are familiar with CDP's ACE portal. And Canada's CARM program does have similarities to the ACE portal. Some have actually referred CARM to as Canada's version of ACE. But overall, CBSA's goal is to build a stronger relationship with importers and the department, Canadian customs. We can go to the next slide, please. So I would just like to make note of some key points and also some takeaways with regards to the program. Mandatory for all importers. And as I mentioned, it is required for all importers, again, resident and nonresident importers. October deadline, must register as soon as possible. Well, the first implementation phase -- I should say, the final implementation phase of CARM, which is known as R2, RELEASE 2 is, I'm going to say, scheduled for October 16 of this year. And this is when all importers must be registered. But we have been receiving some information that recent -- very recent information that there may be a potential delay to the program and pushed out to May of 2024. At this point, we have not received official notice from Canada Border Services Agency. I would expect it probably next week. But there have been some rumblings that it looks like that the program will be pushed out to May 2024. And essentially, that is due to the testing phase that they've gone through since February to June. There are some issues there, results of some issues with the application of trade chain partners. So more to come on that. And as soon as we get this info, we'll be sure to have a news flash out to all. Again, key points: No longer can an importer use their customs brokers bond. Many importers today essentially piggyback off the customs brokers bond. This will no longer be available in current release to, and importers must have a security bond in place. And as we get closer to the implementation date and be that October or May of next year, it will only take longer and longer to process the bonds. And right now, they're taking approximately 6 to 8 weeks to secure the bonds. And as we get closer to the implementation date, it will only take longer. And I will anticipate a substantial bottleneck. So I would suggest not to delay here, but please move on to the bond requirements as soon as possible. Importers must delegate authority to their customs broker. And during the registration process on the current client portal, the importer must delegate authority to their customs broker to act on their behalf. This doesn't mean that we don't need a power of attorney general agency agreement. Yes, we do still require that. Identifying payment options with Canada Border Services Agency. During the registration process in the portal, the common payment options are the following to: one, electronic funds transfer, where the importer would essentially push the funds to CBSA on a monthly basis, I'll say much like paying a credit card or a utilities bill online. But we also have what's known as PAD. And that's a preauthorization -- preauthorized debit and that is really similar to the ACH program in the U.S., where customs will essentially pull the funds from the importers' account. We've noticed that during the application process, many importers had some issues registering on the program. And the reason for that was they weren't essentially prepared with all of the information that was required for the signing up on the program. So what we prepared is a current registration checklist. And I suggest that you complete this document with all of the information required for setting up on to the CARM client portal, and we will send a copy of that out with the presentation. Register as a BAM, a business account manager. When you register on the CARM client portal, the person actually registering by default becomes what is known as a BAM, the business account manager. And they're essentially responsible for the current client portal and in turn, the BAM can also delegate another employee as an account manager, usually, say, finance department, the ones that are paying the monthly statement. So CBSA has actually said they would like to see a minimum of 2 account managers on each portal. That's in the event, the one BAM for whatever reason, leaves the company, then they must go through the full process through the registration process once again. So what we've seen is essentially the person that registers on the portal is usually from the customs and compliance side, and they also delegate somebody from their finance group that will manage the payment of the duties and taxes. So there you have the 2 business account managers. So that's really a high level of the program. I just want to emphasize that you need to register. It's a mandatory requirement. And by all means, if you have any questions, please, please don't hesitate to reach out. And if we can go to the next slide, please? All right, nonresident imported program, and I'll be pretty quick here with regards to the timeline. Another key customs initiative is a nonresident importer program, where a foreign company can take advantage of the Canadian marketplace. We've seen a bit of an uptick of U.S.-based and European-based companies looking to access the Canadian marketplace. And this is a perfect opportunity for these companies to participate in Canada's nonresident importer program. And as a nonresident, you could also take advantage of the many trade agreements that Canada has with other countries. And it's not just USMCA or CUSMA, but it's a plethora of trade agreements available. The program itself, the nonresidential importer program, for those of you who are not familiar with, it allows for foreign companies to take advantage, again, of the Canadian marketplace without the need for physical presence here in Canada, therefore, no bricks and mortar staffing, warehouse, et cetera. We've seen its growth in the e-com market, and it's also very popular with the big box stores here in Canada, like the Canadian Tire, Walmart, Home Depot. And most Canadian companies actually, they prefer their goods delivered to their facilities at a single price. And myself, as an e-com -- as myself as an e-com purchaser, the last thing I want to deal with is the duties, taxes and another customer broker when I order a product from the U.S. So in most cases, the goods are shipped to customer on DDP Incoterms, delivered duty pay, where the nonresident is responsible to get the goods to their customers' door. Set up? It's rather simple. The requirements are range for a business number, and that's similar to the U.S. IRS number. And also here in Canada, we have GST, and you also arrange for a GST registration number. GST functions similar to VAT, value-add tax in Europe and Mexico, and of course, Canadian POA and general agency agreement and the necessary bonds with CBSA. Just as a best practice, we're working with nonresident importers, where products destined to Canada move into a U.S. FTZ and subsequently shipped to Canada, taking advantage of specific trade agreements with Canada. Great example is footwear and clothing, duty rate of 18% into Canada by going through the FTZ and coming to Canada in Bonn, taking advantage of the duty-free trade agreement, saving 18 points, again, from certain countries. And it's also available under the NRI program, nonresident to facilitate a drop shipment model. So I know I've been throwing a ton of information at you. And any questions, by all means, please don't hesitate to reach out. Okay? And the market trade updates, I believe Jeff or Jon, you are going to address the U.S. side?

Steve, I wanted to make sure you had an opportunity just to speak to proposed last sale first.

Okay. Well, I'm sorry. Yes. Thank you, Jeff. Great. It's proposed last sale. For those of you that have not heard of a very recent, I'll say, initiative by Canada Border Services Agency and the Department of Finance here in Canada, it was announced that they are looking at what is known as last sale here in Canada. Last sale for value for duty for customs purposes. So essentially, today, when we purchase goods from the U.S. or overseas, it's a transaction value, and that value generated the export to Canada, and duties and taxes are assessed on that transaction value. What is proposed is customs would prefer and like to see the duty assessed on the last sale of that product. So essentially, what that would mean is you're an importer, you import a T-shirt from overseas. The value of the goods is, say, $5 for a garment. At the retail level, it would be anywhere, say, $15 to $20. Customs is looking at assessing duty on the last sale to consumer. So it's very new. It's just been released. There is a consultation period, and it was initially for up to June 26. That has now been extended as of yesterday to July 26, where importers can present their cases to Canada Border Services Agency. This is all very, very new and importers here in Canada are extremely concerned to say the least. We don't have a ton of details on this at this point, but definitely, definitely more to come on the proposed and "proposed last sale." It's not pass at this point. So that's the latest on the last sale, Jeff. Thanks.

Thanks, Steve. We're actually right off on time. So we do have a couple of questions. We're going to try to see if you could take a look and try and answer those before the end of the call. So as a reminder to everyone to receive a copy of the material, you can complete the feedback survey that will be prompted at the close of our event today. In this slide deck, you will also have a QR code that you can scan with your phone's camera app to sign up for any of Expeditors subscriptions, which include webinar invites, newsletters and regional market updates. And then if you have any follow-up questions, please don't hesitate to reach out to either your local Expeditors representatives, or we also have included the contact information for all of our speakers in the slide deck as well. Thank you, again, everyone, who joined our call today and a special thanks to our speakers for providing a great overview of the U.S. and Canada Border process.

Thank you, everyone. Have a great day.