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

Okay. As everyone continues to kind of roll in here, we are going to kind of kick things off. So again, we appreciate you joining us today. This is the Northern Border Process & Market Update. And my friends here that work with the Canadian Border always remind me that it's not the Northern Border for them. So of course, we think of that way here in America, so also think of this as the Canada-U.S. Border Process & Market Update. We appreciate you guys tuning in. My name is Samantha Hurst. I'm the Regional Sales and Marketing Operations Manager for Expeditors Mid-Atlantic Region. And I'll just be serving as host in the background today to help make sure things are running well. [Operator Instructions] Otherwise, just a few housekeeping items today that we're going to run through before I introduce our speakers. If you've not joined our webinars before, this is just kind of our standard reminder that we will typically go for about 45 to 50 minutes of content and then we'll kind of stop for some questions and answers there at the end. The webinar will be recorded. So if you happen to miss a piece of it, we will get that out to you after we get just kind of a quick survey for some feedback from all of you who attended. [Operator Instructions] And then again, we do just ask that you fill out the feedback survey that you'll get via e-mail within an hour after we complete the webinar. That just helps us understand how we can make these better for you as our customers and attendees. And you will receive the material, which would be the presentation and a link to the webinar following the completion of that survey. So now I will just introduce our speakers. So here, our speakers today that are with us, hopefully, you've heard them speak at some of our webinars in the past. But we have with us Gary Ernest, he's our Regional Manager for cross-border solutions between Canada and the U.S. And then we have Steve Bunda, who's our Manager of Business Development for Customs in Canada. So both of these gentlemen are very well versed in the process of the border. They're going to give us some updates about the market and things that you need to know to make sure that your business into or out of Canada is running smoothly. You will note that there are some QR codes here at the bottom for you. Those in the boxes are just virtual contact cards in case you think you might have questions, happy to reach out to them directly if you would like. So Gary, I will, please turn it over to you.

Thanks, Samantha. So hi, everybody. Steve and I are excited that you've chosen to join us today. I just wanted to go over a few of the things we're going to try to snuggle into this quick 45-minute update. So we are going to -- Steve and I are going to talk about the Canada market and trade updates from that perspective. Market visibility for U.S.-Canada trade and investment, we'll talk a little bit about that. We'll go through a detailed U.S.-Canada border process flow, so you can see how a shipment moves compliantly from your place to the final place in Canada, et cetera. We'll go over the CTPAT benefits review, the customs trade partnership against terrorism. A lot of people missed that there are actually benefits that can be had by being a part of CTPAT, so we'll talk about those. Steve and I are both going to talk a little bit about the nonresident importer program and how important that is and some of the initiatives that can be tied into that as well to help you, everything from save money to move things more effectively to your customers. Steve is going to talk about some initiatives, CARM and last sale, and then also logistics strategies and zone skip program. I'll go over some of the hot button kind of supply chain things that we see really for the past 1.5 years, ever since we came out of the COVID, that these things have really kind of come to the forefront. So we're going to talk about them today. Hopefully, it will help you as well. We'll do a brief Canada tax program overview. And then we'll wrap it up with some tools that you can utilize with the Canadian government to research maybe things that you're interested in, maybe going to a different province or a new province or Canada altogether. You're not sure if your product or services are being offered there and you want to check it out, it gives some good intel on that piece as well. So with that, we'd get started. And right off the bat, not fair, I know, on an early morning. We're going to hit you with a question. So the question is which country is the United States' largest export trade partner? Could be a trick question. And there should be a little box there that you can respond on. Steve, it's no fair they lock us out of being able to respond. I don't think that's fair.

Okay. I was going to say I wasn't going to respond.

Can't let you experts give it away. So we're getting some good responses here, about 60% of you so far that have participated. Just a few more seconds, and then we'll wrap it up. Okay. So I'm going to end the poll now. We've got about 77% of you participated; 78%. Okay, so I'll share results.

Excellent. So those are actually incredibly good selection because every one of them could be the answer. It depends typically time of year, et cetera. I'm going to close my poll, and I'll give you the answer. We'll keep you in suspense. So it is still Canada as the #1. It will, some months, jump over to China and/or Mexico. So you guys are an astute audience. So Steve, we're probably a little worried today. We've got a very educated audience in front of us. But this equates -- our trade with Canada equates to about $1.3 million to $1.6 million in cross-border trade every minute of every day, just to kind of blow your mind on that piece of it and how much and how lucrative it is. So good job on that, folks. And then just to reinforce that, again, how lucrative it is to trade with Canada and Mexico is from a U.S. perspective, this slide actually shows the United States' largest export and import partners by state. As a side note, if you see that Canada or Mexico is not listed as the #1, then that states, in most cases, still rank highly at like a #2, 3 or 4, et cetera. So you can see it's still a big piece of who we are and what we do from the U.S. So from a market update perspective, we'll talk a little bit about the economy. So the Canadian economy has proven itself to be extremely resilient to economic downturns. It's obviously feeling the pinch like we are in the U.S., but Canadians are still purchasing at a very high level. I'm actually going to talk a little more about what that means in more depth on an upcoming slide. The cross-border freight volumes in 2022 were up nearly 10% from '21. That was nearly $820 billion which, in itself, was a record-setting year from that perspective. Canada has also signed many free trade agreements, which has made trade with Canada even more lucrative. Steve is an excellent resource on these. So if it's not covered today, feel free to reach out to us, and we can go into some of those as well. On the regulatory front, Steve, do you want to just give a high-level one on CARM?

Yes, absolutely. Thanks, Gary. Really, CBSA, Canada Border Services Agencies, their key initiative, that is the CARM program. And that's the CBSA Assessment and Revenue Management program. And it really is the streamlining of the collection of the duties and taxes for the Canadian government. So I'm going to spend some more detail, of course, on the CARM program itself. We wanted to -- from a U.S. perspective, in dealing with our clients in the U.S., they're rather familiar with the concept because the CARM program essentially is people are saying it's Canada's version of the ACE program States side. So if you're familiar with that program, the CARM program itself should be relatively, I'll say, straightforward. But it is a mandatory requirement. And as mentioned, I will get into further detail on that throughout the presentation.

Awesome. Thanks, Steve. And then finishing up on the regulatory side of things, so ELDs or electronic log devices for commercial drivers, which has been in place for some time in the U.S., was just actually put out to enforcement in January of this year. In fact, the Canadian Trucking Alliance recently made a post that it's been advised by the Canadian Council of Motor Transport Administrators that provinces and territories were firmly committed to enforcing the ELD aka they're going to check, right? And how could this affect you? So ensuring you're using a vetted service provider is the biggest way, using caution with what we typically think of as load boards, et cetera. Just because they can show you they have a certificate of insurance, it doesn't mean that they're a compliant carrier option. So just make sure that in today's compliant world, very, very important. On the trucking side of things, so we all have been excited that the fuel prices, diesel prices, have been coming off some of the highest levels in history. Capacity is now abundant, what a change from just a little while ago. And full truckload rates are stabilizing with still some pockets of volatility depending on the lane segment. So all-in rates, so I have a question mark there. So a lot of full truckload providers provide your pricing in what they call an all-in rate, which means here's the price to go from A to B, and it includes fuel, et cetera. It seems like a really easy, kind of a really nice way to go. But look at what's happening now with fuel that's been coming down and down and down and yet your full truckload rate, in many cases, just stay in that all-in same rate. So we at Expeditors, we like to provide the fuel separately. Typically when we quote FTL or LTL, we base it off either depending on if it's domestic Canada, the Canadian index, or the Department of Energy Index in the U.S. And then that way, you're always assured that you're getting the appropriate pricing based off of fuel because they have such an impact on things. On the LTL side of things, many of you have seen like YRC and other carriers have gone out of the market, leaving some big gaps. Analysts are expecting impacts of 25% to 40% increases as consumers replace those lane segments in many areas. So just an eye on that piece of it. And I'm going to give a little brief update on how we actually handle LTL a little different way. So it might be interesting to you a little bit later. So lastly, with the outlook. The outlook for Canada for the remainder of '23 remains optimistic. However, expectations are indeed lower than they were last year. After dealing with their largest economic contraction since 1945, the economy is predicted to grow, albeit modestly, maybe 1%, 1.5%. And that is they can continue to keep a recession held off. On a positive note, like I mentioned earlier, some specific programs, e-commerce and international zone skipping programs, were one of the top supply chain programs in 2022, and we're seeing even more heat for the program offering in '23. And again, good news, we'll talk a little bit more about that in a little bit. Canada Federal government has now raised interest rates to their highest level since the recession of 2008. And it's currently at 5.25%, very similar to the U.S. That was up another 25% since July of '23, just a month or so ago. The interesting thing is how hikes in interest rates haven't affected consumer spending in Canada. And I'd say or have they, and I'll show a slide on that piece as well. So if you look at consumer spending from a Canadian perspective, it's amazing. So even with all of the things that are going on, interest rates high, a lot of different things impacting the workflow, Canadians are still buying product and buying services. And that, we have seen over many, many years, that when things get even kind of bad, the Canadian market is a great place to be selling your services and products. Just a quick look at diesel, most people don't follow it this close. So kind of look at, hey, we were on the rise. It's been coming down, down, down, down. And then look what happened in July and August, it's creeping its way back up a bit. Hopefully, they don't get back to that level, but just keep a note that, that is on the rise again. And again, with how you do your fuel with your carriers. So I said that we can have a brief look, it's not a sales thing, but just to kind of look at how we actually move LTL in our world. So during the market update slide earlier, we discussed briefly the expected impact on the supply chain by some of those larger providers moving out of the market. So one thing Expeditors has done over the years to lessen our dependence on third-party LTL providers and service our customers was to build or really enhance our existing international and domestic line haul structure. So you can imagine a lot of people thought of Expeditors for years and years as just an international or a global provider. But if you think about all the product that we move in, inland, for example, has to get through its final destination. So we were really doing this since the beginning of time. We just had never formalized it. So I don't know, about 6 or 7 years ago, we formalized that piece and grew it. So shown in this slide is our North American, what we call GNS, Ground Network Service, for the U.S., Canada and Mexico. So some of the major differences on how we build it is that we run teams on the long haul points to improve service timing. And then we do not hub-and-spoke, which is the typical LTL model, which reduces the touch points, reduces handling, reduces misroutes and, at the end of it, almost eliminates damages. So for clarity, not shown here in the slide are the local pickup and deliveries from the large and small dots, respectively. So it gets a little messy when you start adding all that, but I think you get the gist on that piece of it. So lastly, on Canada's economy, I mentioned that Canadians are still buying things despite all the things we see as indicators on the slowdown. And what I wanted to mention was that Canada's economy can help your economy, can help your company weather the storm during economic downturns. Like, I'll use an example from 2008 and 2009. You remember, we were in our real hit recession. And I remember everything slowing down, volumes going down, et cetera. And then here, again, we find ourselves in a recession in the economy. Like, any sign, make sure you have Canada in your portfolio of customers. So Canada keeps buying. They have shown that from a standpoint of economic downturns in the past and during the current one like we just saw a few minutes ago. So if you don't have Canada in your portfolio, a good time to start thinking about adding it. A quick geography lesson. So Canada is big, I think we all know that, but it's really big. And most of the product moves where you can see the colored areas, right? So high density is this yellow and red, right, and then spots of that as well. So what we're seeing though is that the footprint is growing. So you can see here it's stretching to the North. And that typically is because of the oil sands, which is, in Canada, they pull the oil out of the sand and refine it, and it creates a ton of jobs from the oil and energy sectors. And so obviously, people take those jobs and they have to live up there and then they start building, and we need infrastructure services and your products to support them, right? So yes, I think that's the biggest piece I wanted to talk about. On this side is just how we typically refer to Canada. So the territories for the Northern portion, right, we don't really call it the Pacific Coast. We just call it by province. But the ones we do in maritime, that's the regular name for all, like Nova Scotia and Prince Edward Island, Newfoundland, all of those different maritime locations, and those are called the maritime. So if you're working with customers or working with your providers, you can refer to that whole area that way.

Gary, some quick trivia about population in Canada. I think we're around the 40 million population for Canada, roughly the size of California. And 85% of our population lives approximately 1.5 to 2 hours from the Canada-U.S. border.

Which details that high level of color really close to the borders, right?

Exactly. And that thing called cross-border shopping.

Right. I've seen a few of those.

Yes. Don't forget to declare though, right?

Exactly, exactly. So we told you we'd give you a process flow of the compliant way to move freight through and across the border from origin to destination. So in this process, we'll show the events needed to approach the Canadian border and clear customs successfully and compliantly. So prior to arriving at the U.S.-Canadian border and up to 2 days in advance, the carrier has to submit their ACI, which is an abbreviation for advanced commercial information. Then the customs broker files a PARS with customs. Then the carrier, forwarder and/or the 3PL, submits their e-manifest which remember, must match ports of entry. So they have to actually match where that trucker is going to cross the border, and there are a ton of border crossing points, and other required items on the ACE manifest and then within the time frames laid out for e-manifest. One example, without going way into e-manifest is that for truck mode or the mode of truck, it's 1 hour prior to arrival. So if you think of a location like Detroit or Buffalo or somewhere like that where the border is really, really close, that doesn't give you a lot of time to make sure that that's right. And if you don't get that right, then you could receive penalties, AMPS penalties, things like that. So once that e-manifest has been approved, the carrier can then proceed to the border, present their ACE or ACI cover sheet and e-manifest information is retrieved. So after matching with the broker submission, the carrier is all set. However, Customs and Border Patrol, CBP, or a CBSA officer, depending on whether a PARS, a Pre-arrival Review System, is used; or a PAPS, which would be the other way, which would be Canada into the U.S., the border officer will either release that truck at primary or refer the truck to secondary for further processing or further inspection. So even though your paperwork may be in order, it's still the BSO, the Border Security Officer, can make a judgment. He doesn't like the way the truck looks, doesn't like the way the driver looks, maybe acting a little fishy, who knows, anything, they can pull them over for any of those reasons. And finally, after the truck's released and after the truck has cleared the border, a post audit is then completed to ensure all data elements and submissions like we talked about before, the timing, the border, crossing points, et cetera, were correct. And then if they aren't, they will ensure all the data [ requirements ] and submissions are corrected or AMPS penalties will then be issued. So these post audits are a relatively a new process, added since the induction of the e-manifest. So it's important to make sure you're doing this compliantly or be subject to paying unnecessary fees, fines and maybe the prohibition of bringing freight into Canada at all.

Gary, I've got a couple of points on the border crossing here. One particular, which many, many folks may not know, but at the border, we have what's known as the primary inspection line, and that's now referred to as the PIL booth. So coming across the bridge, you'll then go to a booth. And there, we have our Border Services Officer, CBSA Border Services Officer. And our customs officers actually wear many hats at the border from, of course, customs security and enforcement requirements, but they're also responsible for administering the PGA, the participating government agency, requirements; the other government agency requirements like Health Canada issues or Canadian Food Inspection Agency or Transport Canada. And also, very important, they administer the immigration process at the port of entry. Another important item with the actual release border process is the PGA data, the participating government agency data. And this information needs to be included with the PARS, as you referred to, Gary, the PARS package, to facilitate what's known as the SWI, which is the Single Window Initiative. And I promise you folks, we will not have a quiz on Canadian customs acronyms because we have a ton of them. I can't even keep up with them myself. So sending this SWI, single window information (sic) [ Single Window Initiative ], electronically to CBSA, actually expedites the release process. And today, we can secure customs release within minutes, which used to take hours, in many cases, in the past. So I just want to mention those points there, Gary.

No, perfect. I appreciate that, Steve, very good info. So another really important program with many included benefits we highly recommend is becoming CTPAT which, again, stands for the Customs Trade Partnership Against Terrorism. So this is a worldwide security initiative that came into effect really following the events of 9/11. Becoming CTPAT allows some very attractive benefits for you, and I'll just name a few of them, and this is from the CBSA. So they say a reduced number of inspections and reduced border wait times. I'll talk to you on the next slide about how you can reduce the wait times at the border for your carriers. Targeting what they call benefits, which CBSA refers to as credits. Exporters who have become CTPAT are less likely to have issues at the border. However, this could simply be due to their heightened awareness and greater knowledge of the entire border process that they learned while becoming CTPAT. But the targeting benefits, I remember being in front of Customs and Border Protection, and we're in like a public meeting, and I asked them what they meant by that, targeting benefits, and they wouldn't tell me. So you just have to kind of believe them. But we have seen that customers that are CTPAT, we're CTPAT, of course, have a much better time crossing the border and a better result. So you also get FAST lane access, which is how you cross the border quicker. So the photo there is what you're issued as a carrier, which is a FAST, which means Free and Secure Trade, card. What that actually does for the driver is it allows them special lane or lanes to cross the border crossings, so whether it's a bridge, et cetera, and they get to drive in that special lane, they get to go to a special entry booth only dedicated for FAST drivers. Now to get FAST, you have to have criminal background checks, et cetera. So some drivers can't qualify for that. But if they do, you have the best of the best from a driver perspective. And so with that, it's an easier crossing. Sometimes the border officers just wave you through. I actually have NEXUS, which is the noncommercial version of FAST, same thing, special lanes, et cetera, et cetera. So it's not a license to smuggle. So it doesn't mean you just get waved through without questions. I know that wholeheartedly because sometimes I think that the other lanes go quicker for some reason, with the number of questions that they ask. But again, this is really good timing. You might ask yourself, "Well, Gary, why do I care if it takes a couple of hours or 3 hours or 4 hours more to cross the border at certain times?" And the answer to that could be perhaps you're running a zone skip program or a consolidation program or you're having your third-party distributor on the other side in Canada needing to get that freight so that they can put it out to delivery for your customers today. Well, if they're stuck at the border, then you're going to miss their cutoff time and you're missing basically a whole day because of a few hours at the border where you could have gone through quicker. And that's just one example.

Gary, if I could just jump in here. We have a really unique program at the Ambassador Bridge from Detroit into Windsor, Ontario. And it's a pilot program for low-risk commodities. And the program itself is referred to as the Secure Corridor Concept. Now it's deemed for trusted traders, and trusted traders here in Canada are approved importers, drivers and carrier. And upon entry at the Ambassador Bridge, primary inspection line, PIL booth #13, lucky 13, is actually an unmanned booth. And here, when the driver arrives at lane #13, they have an RFID placard on the truck identifying the importer and carrier, and with driver biometrics, the truck doesn't even stop at the PIL booth. The driver will see a red light or a green light. A green light, he's allowed to proceed to destination. Red light, he has to pull into secondary, and that's usually an additional review due to immigration. But right now, we're in a pilot program where drivers and trucks are not even stopping. Again, this is on low-risk commodities and pre-approved importers, carriers, a trusted traders. So it's kind of neat to see the transformation of the border crossings and where they're going to with these new initiatives with the Canadian government.

It sounds like we've emulated Mexico's crossing with red light, green light, right?

Yes. Yes, exactly. Exactly.

No, that's cool. I actually have heard of that piece. I haven't seen it when I crossed the border, so I'd be interested to learn more about it so that I can educate others on it as well. So NRI, non-resident importer, program. So we get a lot of questions about whether it's worth it to become an NRI, or a non-resident importer. So Steve and I are going to do the best we can to explain this. So a non-resident importer, or NRI, it's simply a business located outside of Canada that ships goods to customers in Canada and assumes the responsibilities for customs clearance and other import-related requirements. So this allows the U.S. exporter to include all shipping, customs, clearances and duties and taxes in the shipping and handling fees charged to the customer. You can even charge in Canadian dollars. So in that way, the transaction appears to the Canadian consumer, the person buying your product, as a normal domestic purchase for them, makes it just as easy, really simplifies things. The NRI is designed to take that burden off of importing off the Canadian purchaser and allow the U.S. exporter to sell to Canada on a delivered price basis. This then makes the ordering process more transparent and stable to your Canadian customer. And a really important key to achieving market penetration and expanding export sales for you to Canada is to minimize your Canadian customer's involvement, that complexity, and to do this by making the transaction resemble like they're purchasing something from Canada to Canada, just right in Canada. I had an example. One of my colleagues that works for another company was telling me she's Canadian and she told me about her experience in buying shoes from a U.S. location. So she wanted the shoes. She bought the shoes. The shoes came, no problem. She gets the shoes. She's super happy, loves the shoes. Then she gets in the mail a tax bill, and she has to pay the tax. Her level of satisfaction just kind of went down to levels of 50%. And she's like, "Well, okay, I still like the shoes." And then she got another, about 2 weeks later, duties that she was responsible for in the mail. So she told me she was never going to purchase from that U.S. shoe manufacturer again based on her overall experience. So think of the sadness of that, loved the product, hated the process, right? Steve, I know you have some things that tie in here. Do you want me to stay at this slide?

Yes. Sure, Gary. And thanks, the non-resident importer program, I guess one of the key benefits is take advantage of the Canadian marketplace without the need for bricks, mortars, staffing, et cetera. We've actually seen an uptick of U.S.- and European-based companies taking advantage of -- we refer it to that NRI program here in Canada. And as a non-resident importer, you can take advantage of the other trade agreements Canada has aligned with, like the Canada-European trade agreement, the CPTPP, which is the Trans-Pacific Partnership agreement. It's not just the USMCA, or as we refer to USMCA as CUSMA here in Canada. There's other agreements that the non-resident can take advantage of. And I've got a pretty neat example of that program. In most cases, under the NRI program, the terms are: delivered duty paid, DDP terms, where the non-resident importer, as Gary mentioned, is responsible to get the goods to the customer's door. We can also facilitate a drop-ship program under this non-resident importer program. The setup for NRI is rather simple. A business number is required here in Canada and that's similar to the U.S. IRS number; and of course, GST here in Canada, goods and services tax, registration number, and we'll be speaking about that a little later; and also a Canadian power of attorney and the necessary bonds with Canada Customs. Presently, and as a best practice, we are working with non-resident importers where products that are destined to Canada moved into a U.S. FTZ and then subsequently ship to Canada in bond and taking advantage of the specific trade agreements with Canada. So to put that in perspective, if you import product to Canada and say it is footwear or clothing, that's the highest rate of duty at 18% duty. By bringing this product into the U.S. into an FTZ, we can then move that product from the U.S. FTZ directly to Canada, to the Canadian purchasers, and claim the preferential tariff. So in footwear and clothing, you're saving 18% duty because you can now take advantage of that trade agreement at duty-free status. So it's very important to take a look. And as I mentioned, it's more than just USMCA, CUSMA preferential tariff.

So Steve, in that example, would that be like the preferential treatment with Vietnam? So the Vietnam product is shipped into the FTZ in the U.S. and then you ship to Canada, and since it went through the FTZ process, still qualifies for preferential treatment?

Absolutely. And the key there, Gary, is it does not enter the commerce of the U.S. Basically, in an FTZ, the goods are in transit or, if they do stay in the States, of course, the U.S. duties and taxes apply. So the benefit here is the non-resident importer can take advantage of the duty-free status and also, you don't have to deal with the cumbersome U.S. duty drawback. Here's a good into the FTZ, so duty drawback, U.S. duty drawback, is not required. Again, face it, the U.S., they supply in Canada pretty much for everything. And by adding your components or products for the Canadian market with your U.S. goods entering the U.S., this is another way from a cost savings perspective. Again, it's not for everybody, but that option is absolutely there, and we are working with importers on this program. All right, which is a great segue into the next slide here, Canadian trade updates. And really the 2 key CBSA initiatives today that will absolutely impact importers into Canada: number one is CARM, as I mentioned, the CBSA Assessment and Revenue Management program; and the last one is the proposed last sale program here in Canada, and in quotes, it's "proposed." So if we could go to the next slide there, Gary? And this is the CARM. How will this impact importers? First, CBSA's Assessment and Revenue Program, as I mentioned, it's essentially Canada's version of the ACE portal States side. It's interesting to see, and it's very common to see many of the U.S. CBP initiatives make their way north of the border to Canada, and the CARM program is a perfect example of this. Basically, today, the accounting for commercial imports and assessing the applicable duties and taxes requires extensive administration by both importers and Canadian customs, and the existing processes and systems in place to support these activities are very antiquated and really requiring substantial paperwork and rely on IT systems that are more than 30 years old. The approach itself is costly for both the importers and the government. And really, in an effort to modernize the import process for the assessment of duties and taxes, the CARM initiative was introduced. And it will also provide the creation of the CARM client portal, which is much like the ACE portal, to automate and streamline the accounting process for importers and custom brokers and also have the introduction of the new commercial accounting document, which is known as the CAD, enabling an electronic submission of commercial accounting information. And the CAD is actually going to replace, which we're familiar with, is the Canadian customs entry Form B3 and the adjustment form known as the B2 document. Key component here of the program, it gives a mandatory requirement for all importers. So essentially, if you don't register, you will not be able to import into Canada, and it really is as simple as that. We've been struggling here north of the border to set a firm date of implementation. October of this year was the known final implementation date, but that has now been pushed out to May of 2024. That official notice was just released by Canada Border Services Agency last Friday. But overall, CBSA's goal is really to build a stronger relationship with the importer and the department, Canadian customs. And I believe we have a CARM poll question at this point. Samantha?

Just to let you know that should be showing up now.

Yes. We've got it. We've got it. So the question is have you registered for CBSA's Canada Border Services Agency CARM program?

They still lock me out, Steve, I couldn't answer.

Yes. For a reason, Gary.

About 45% have participated so far. Again, Gary, we can't let you give away all the right answers here. Just kidding, there's no right answer.

No, there's not. I can't even get this one right, is what you mean.

Okay. So we're at just about 60%. So I'll give you guys another few seconds, and I'll wrap up the poll and show you the results.

Okay. I like the results because in the last webinar we did, yes, we are fully registered, we only had around 30%. So it seems to be working. We're getting more and more registered. But again, it's important to be registered on a program. It's a mandatory requirement. So if we could go to the next slide, and that's really just -- and I'll keep it great, watching some time here. And these are the important takeaways. Yes, it is a mandatory requirement. You can be a resident or a non-resident importer. You must be registered on the program. Final implementation date is May of 2024. Don't wait till next year. We're starting to see bottlenecks from Canada Border Services Agency at this time, and it's only going to get busier as we get closer to the implementation date. Key component of the program. Some importers today piggyback off their customs brokers' bond that will no longer be available under the CARM program itself. Takes me to the next note here, all imports must have the security bonds in place. It is a mandatory requirement to have the bond security in place with Canada customs, and this will allow you to remit your own duties and taxes to CBSA. And I can tell you right now to set up this bond process here in Canada, it's taking approximately 6 to 8 weeks. So here again, don't wait. We need to move on because it's only going to be busier as we get closer to the time line of implementation. Importers must delegate authority to the customs broker. In the CARM client portal, there is an area there where you do delegate authority to the customs broker. We still require a power of attorney for Canadian customs. Payment options with CBSA, now during the registration process, in the portal, the common payments are the following two: one, electronic funds transfer where it is essentially, at the end of the month, you would receive your statement of account and then you, as the importer would push the funds to Canadian customs by the last business day of the month; the other option is what's known as PAD, and that's known as the pre-authorized debit, and that is very similar to the U.S. ACH where Canadian customs will go into your account and pull those funds and payment will be made in that way. We've actually created a CARM registration checklist. And Samantha, if we can also provide that when we send the presentation out. This checklist will basically -- well, the setup for the CARM online takes about 15 minutes. But you need some key information, import detail from past import history on the portal. And what we've noticed is, if you don't have that information, you're going to have a harder time to get registered on the program. So we developed a checklist, fill it out and then go on to the portal and set up on the CARM program. And lastly, as you register onto the program yourself, by default, you become what's known as a BAM, which is business account manager. You are responsible for the CARM client portal. And as a BAM, you can also delegate another employee at your company as an account manager to also have access to the portal. And customs has said we need at least 2 from each company. In the event that some person does leave the company, you don't have to go through that process once again. So that's the overview of the CARM program. And of course, any questions, please reach out. So lastly, we're talking about what's known -- and this is very recent, and this is last sale program here in Canada. Actually, May 26 of this year, Canada Border Services Agency issued a notice that it had commenced consultations on the proposed last sale rule for customs valuation. So really, what this means to an importer, if adopted, these amendments will increase the declared value for duty, drastically increasing customs duties and GST payable for imported goods. Both resident and non-resident importers will be required to use the selling price instead of the purchase price as the basis for the value for duty and, important to note here, where a sale to another customer in Canada has been arranged prior to importation. So under the current value for duty regulations, import duties are typically calculated on the transaction value of the goods, the price paid to the foreign or U.S. vendor. Under the proposed last sale -- and I keep saying proposed for a reason. Under the proposed last sale program, the value for duty will be determined by the sale price on the last sale to a person or a company here in Canada. And this will especially impact wholesalers and retailers and e-commerce sellers. The consultation period actually ended July 26. And I can tell you, CBSA has been inundated with the amount of comments from importers opposing the program. And again, it's a proposed program. Will it go through? Well, I really can't say at this point, but there will be further details on this subject. And I know I've thrown at you a fair bit of trade updates with CARM and the last sales program. And if you have any questions whatsoever, please do not hesitate to reach out to me directly. They're important changes, and we'd be pleased to go over them with you.

Great. Thanks, Steve. So for the sake of time, we're getting close on time, so we'll probably go a little fast on this last piece. But I thought it was really important to show you an example of what we talked about earlier, some of the real hot buttons or supply chain programs that are really helping customers save money, time, improve visibility and be very compliant on moving their e-commerce and their LTL across the border. So we call it the international zone skipping program. So this program allows you to zone-skip the first expensive international per shipment portion of the shipment voyage. So you can see on that front black arrow from wherever your origin is, we can either go east or west or both depending on volumes. We look at all those pieces. So it makes it easy. Say, you have 100 shipments going to 100 different businesses or end consumers throughout all of Canada. In the normal shipping process, you would ship all the couriers as individual international small parcel shipments and all the larger orders as international LTL-type quarters. In the international zone skip model, those same 100 shipments would simply consolidate together. They're not physically tied together. But they move in as one conveyance across the border. And yes, the LTL and courier can ride together, which is key. That's a unique benefit to the program and, then once cleared in Canada, would ship as 100 domestic shipments to their final destination and mode, so whether it's LTL or courier. So another cost savings frequently enjoyed in this is the ability to have what we call consolidated commercial invoice. So in that case, instead of the 100 separate invoices you would receive in our example, you would have 1. Canada does have a 999 lines max rule. So if you go over that, you would simply add another consolidated invoice, as simple as that. So this supply chain example highlights the flexibility of the zone skip model and highlights the consolidated returns program on it as well. And these returns program can get really hard to manage from the U.S. So we bundled the program on that's really simple, allows you to look like your the -- that it's your warehouse that is coming back to from your customers' eyes and manage that and, again, another consolidated return instead of sending them all individually back to you as well. So some pretty cool things there. Just another example of looking at data points and things to determine like we talked about before, should it inject all to the west, should it inject to the east? Because you think about, if I have a shipment going to Vancouver, if I inject it to the east, it's going to go, say, from Toronto all the way across the country to the west. So in the parcel type format, in the e-comm format, that would be a larger zone, so you'd pay more money for that individual shipment. So we try to minimize that and say go zone 1 to zone 1, which would be low from a domestic standpoint. I know I said that pretty quick. Again, as Samantha said, you do get a copy of this presentation. I love this slide because it's an excellent summary we have referenced that you can see the actual features and benefits one on one, some of which we just discussed with your teams to see if that makes any sense for your processes. So it shows the benefits at both the origin, through the border and to final delivery as well. And then we'll finalize with a couple of slides on GST since it's so important, how it works, and then we'll turn it over to some questions. So kind of a tax 101, so it's a 5% tax levy for all provinces, the GST, similar to a VAT in Europe, if you're familiar with that. There are exceptions for certain items like pharma and food. You do need to be GST registered to be able to recoup any amount of levy. You have to be GST registered if you do over $30,000 in sales. And then just from an acronym standpoint, PST stands for provincial sales tax like our state tax. HST is what they call harmonized sales tax, which is a combined tax rate. And then I have included a kind of handy-dandy reference of the provinces and their current format for tax, but I want to make sure that you know. This is only for reference. That's why I put example use only because this dozen has changed over the years. So the tax rates changed. They moved to and from harmonized, et cetera. So just make sure you know it, but you can use this as a quick ref. And then in some instances where you can recoup GST, so many importers actually ignore this, which is simply increasing their cost and giving money to the government where you don't need to. So an example, you pay GST. However, the distributor who is selling the final goods also charges GST to their customer. That's a perfect example where you may then be able to recoup the GST that you just paid. So I have a current client we're working with today that has never thought that this was an option. We're now working with them to recover. If you'd like to look at this for your company, reach out to your salespeople or any of us on the presentation, and we'll get you to the right context because why pay the government unnecessarily, at least in my perspective. And then lastly, just a couple of tools, we won't go into these much, but tools for intel, so that it will allow you to research. We talked earlier about maybe you don't know if your product should be sold, if it's already being sold, what provinces is it being sold to, et cetera, your commodities. So this will allow you to do some research even on other importers and what's currently being brought into the Canadian market. So this kind of shows that piece. There's also additional tools if you register so you can do all kinds of things to look into how it works for your business and where you should be concentrating. And then lastly, shows the breakdown from the search we did on the previous slide and what it actually provides. So it will show numbers. It will show the actual importers. It will allow you to actually -- I was on there this morning, it will allow you to actually go to their website and check out who they are and what they do. So there's a lot of good intel that you can use with it. And as you can see here, I have provided the link to access these Canadian government pages right at the bottom of the slide. So I know we went a little bit quick at the end there, but we wanted to make sure we had some time for you for some Q&A. And Samantha, I have not been paying attention to the box.

That's okay. No worries. We actually had several that were dropped into the chat. So I'll read those out to you and Steve. So hopefully, you can answer them, if possible. So the first one, we had a customer ask or comment that not everyone can become CTPAT certified. For example, non-residents, non-Canadian IORs are excluded. Is that correct?

Nonresident, non-IORs?

Non-resident, non-IOR. Well, I believe the answer is that is correct based on that, if I'm reading it correctly, non-resident and non-Canadian IOR. So does that mean a Canadian-based IOR cannot be CTPAT? I believe that's the question. And I believe that's correct, if I'm reading it properly.

And then I had another question about CBP providing exam rates. So have either of you seen grades on whether or not having the CTPAT actually lowers your exam rate versus a non-CTPAT customer?

We can get that information, Samantha. I know specific clients have requested that information, and we've been successful in updating that information. So we could absolutely get that information. I don't have it handy with me, but we could get that info.

Okay. Well, definitely, we will get that and provide it back to you, Linda. Thank you for asking that question. Moving on to a couple of other questions. You guys mentioned about the programs, I guess, such as like the FTZ or other things, CBSA. What documents do they typically require? And when are those documents typically provided?

And that's referring to what I mentioned about moving goods into an FTZ and then sending it to Canada, taking advantage of the preferential trade agreements. The goods are, of course, as normal, entered into the FTZ in the U.S. And to remove them from the FTZ and then move the goods in bond to the Canadian port of entry, I believe that document is a 7512, the U.S. CBP 7512, often known as the T&E, transit and exit, if I'm not mistaken. I'm a little dangerous on the U.S. side with U.S. CBP but more dangerous on CBSA. So I believe that's the document that's required.

Very good. Thank you. Yes, that's correct. So let's see. I think that was all of those that we worked through. And then we did have another question here in the Q&A box that just dropped. When registering on the CARM portal, the duty and tax information that they provided only included duty and GST on goods. The provincial taxes and GST on services could not be included or they believe their input failed. Can you provide any reason why these additional taxes would not have shown up?

We won't see provincial tax on the -- I'm sure they're referring to what's known as the SOA, the statement of the account, which is your monthly bill. You have duty, GST and any other applicable federal taxes. And that could be antidumping duties or countervailing duties or an excise tax of some sort. So whatever is required at the time of import will be reflected on your statement of account, but not necessarily provincial sales tax.

Very good. Please feel free to continue to drop any questions there in the Q&A box if you have them. I think we've addressed all the ones that have shown up so far. But in the meantime, we'll show you here on this slide. These are the other additional upcoming events that we have at least via the Americas and the Mid-Atlantic. Obviously, you can go and follow us through the Horizon Brief or subscribe to our newsletters to find out what some of our other regions are doing. But we do have a U.S. Compliance: Understanding Post Entry for those of you that work on the U.S. side in compliance. That will be September 12. And then given all of the things going on in the U.S. domestic market that we'll have another update then on that topic. That's September 14. And then nearshoring, we're going to be focusing on how to manage capital equipment moves cost effectively and efficiently. So if you are with a company that is building a new production facility, perhaps in Mexico or Canada, or if you are expanding a facility, we're going to talk about what that looks like, and our project and energy team will walk through that process for you. Again, there's plenty more events where those come from, so you can follow us to gain more information. But otherwise, I think that is -- one more question, we're going to throw out there. Have CBSA provided the date for the last sale legislation final decision?

Yes, that's a great question. And the answer is no. Will we get one soon? I believe so. The federal government and the House of Commons is actually on what's known here in Canada as summer recess and is scheduled to be back September 18. So we may see some information but probably not until mid-September with their decision. But I can assure you the comments that went back to CBSA on this proposed legislation is everyone is, of course, opposed to this program.

Excellent. Okay. We still have one more question. So we've got people's brains churning there. If you need to drop, obviously, we understand, but we'll try to address this one really quick. What new change for Canada custom valuation policy could potentially affect customers?

Well, that's what we're referring to as this proposed last sale program. It will base the duties and taxes on the last sale. So if the sale is done prior to shipping, then that's what the duties and taxes, the federal government is looking at sustaining. We have one heck of a deficit here in Canada, like many countries. So our federal government, I would assume, is just looking at a way to clean up that deficit. But I'm not going to get into any political piece because then we'll go on forever.

Yes. Let's stop you right there. Well, I think that has finally covered all the questions. We appreciate all of your participation and actively posing those questions for us. We'll make sure you get summaries in this presentation, again, following the survey. So thank you all so much for joining us today, and we hope you have a great rest of your day. Thank you.

Thanks, everybody.

Thanks, everyone. Bye for now.