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

Good morning? Can you hear me? If you can hear me a, you can give me a thumbs up, please? Perfect. Thank you. So good morning, everyone. My name is PengLei Zhao. I'm Route and Network Development Manager for Europe-Asia. I'm based in Dublin, Ireland, but originally from China. I've been working and living in Ireland in the last 23 years. And welcome to today's webinar on China customs. And some housekeeping stuff on Zoom webinar function. Star, if you can go on to the next slide, please. So upon entry, all attendees, your audio is muted and camera is turned off. If you have any questions, please type them into the Q&A box just right at the -- besides your chat box. We will answer as many questions as we can and at the end of each segment. And if you have any -- if you do not have -- if we do not answer your questions during the call, we will follow up afterwards. And after webinar, we will have some questions on today's event with options of requesting for today's presentation material as well. Star, please go on to the next slide as well, please. So the next topic, China customs is a vital institution of China's -- Republic of China's Government. It has reached an enduring history and tracks back thousands of years. From ancient times to present days, it has played a crucial role in facilitating trade protecting borders and promoting economic growth. In recent decades, China has emerged a global economy powerhouse and its customs authorities has kept pace with this growth, implementing advanced technologies, streamlined processes. China customs has become a model of efficiency and effectiveness. Contributing to China's integration to the global economy, thus the Chinese customs has been evolving. So navigating China's customs, navigating customs is not a simple task, especially navigating internal customs. So today, we have -- we're delighted to have Alex Chen, Director of Customs, Expeditors, North Asia; Star Xu, Regional Manager, Customs China; and Jeffrey Nie, China Customs -- Regional Manager for Customs and Compliance, to take us through how China customs has been evolving in the recent years. Some highlights of import and export customs processes and how Expeditors can assist you with a compliant and efficient custom services in China. We also have our very own, Alan Owen, Director, Customs Europe and David Brumby, our Regional Customs Manager, Northwest Europe, to assist in answering any of your questions related to today's topic. Now, thank you, and enjoy your webinar. I will pass on to Alex to start the webinar now. Thank you.

Yes. Thank you, Peng. Good morning, everyone. So it's my pleasure to present on behalf of Expeditors in China. So, I'm Alex Chen. I have been working for the company for more than 22 years. So, I took the different roles, but start from 2020 January, I'm the North Asia Customs Director. So, we start probably in next slide. Yes. So, I'd like to start today's presentation with this slide. Actually, I just quoted the President of the China PRC, Xi Jinping, what he said back to, I think, 2 or 3 years ago. So, we know that we are in very tough economic situation globally. So, we have the geopolitics challenges. We have the highest inventory, low demand challenges around the world. And we also have all kinds of -- they are talking about our economy -- how the global economic globalization versus the regionalization, those challenges. But when we are talking about China customs, I'd like to start talking about the certain facts. The number one fact is that China's a middle-class population at over 400 million. I think this data is kind of in the 2020. But now I think it's more than 400 million people. So, based on these facts, actually, it definitely leads to the consumption potential. It's not only about the domestic product. You know that China actually manufacture a lot of good product and export to the world. But at the same time, China people also has a strong desire to have import more good quality product from the world. So, that creates a lot of the opportunity for both import and export. So, I'd like to say that although the economy is challenged, but if we pull the time a little bit longer, so I think that we should be carrying on those positive attitude, especially if you or your company are producing good product and also you are seeking some opportunities in China, I think it's the right time. Next slide. Yes. So when you see this slide, actually, we just use some of the GACC's data to give you a high level demonstration, understanding about the customers lead time. So, I think when we talk about a lot of the customers, I think a lot of the customers, they have impression that whether China's customs is so complicated and how is their efficiency and what is average lead time. Okay. And the most customer will compare with their home market, compared to EU market, compared to United States market. But from this slide, you can see that the improvement significantly have been made from 2017 to 2020. So especially you see that from the inbound data about 2017, the average import lead time is probably close to 100 hours, but till 2020 is having been reduced by, I think, more than 40 or 60% is waiting 2 days. Okay. And the reason I didn't show that actually after 2020 is because certain of COVID issues, right? But based on the real fact is that the import lead time now is stabilized there. And also, China customers, they have internal KPIs is a request that the shipments should be cleared within 48 hours, which means that shipment arrive in China with everything ready, that you got to clear shipments within 48 hours. And talking about the export, I think export is really kind of -- has been squeezed there. It's pretty, pretty convenient, pretty fast. So, China is also kind of the -- is an export-oriented country at all or rather 30 years. So, you'll see that continue to improve their export lead time, but now with more focus on improvement on their import lead time. The reason is because we want to more balance the trade, both export and import. So, China government and the customs authority have done a lot of things to support this initiative. And also my colleagues were also -- will also share with you that how China customs are doing through kind of their pre-clearance and 2-step clearance. They will share this in later slides. Okay. Next slide. This slides is theory about that. You may know that China always have kind of this 5-year plan, okay, since, I think, it is 1955. So now we're talking about the 14th 5-year plan, is covering 2021 to 2025. And this is about China's port or modernization. And they pretty much focus on the safe environment, efficiency, green concept, and become more compliant environment and they're more smart. So when we're talking about safe, it's about that. The customs authority is determined to build a more safe environment. It's not only about that, the mechanism to build up more safe and true mechanism, also have built more, kind of safe information exchange system from the top and also to build up the mechanism to respond to those emergency cases. Then regarding the smart environment. So, we all know that we are now living in the digital -- the society. So for the customs part, for the port part is same. So, we are providing that visibility, but the ways are more port data, customer data, digitalization is part of the customs GACC's goal as well. And also integrated the function of the single window, those trade function, a port function, customs functions integrated on the single window port is something that is happening nowadays. When we look at the compliance, I think some years ago, customers will leave kind of the impression to a lot of their import records that it's not that compliant. It sometimes is without kind of consistent rules and regulations, and operate differently in the different China port or airports. And definitely, those kind of situations have been observed, acknowledged by the China government, customs authority. So under this 5-years plan, they're more focused on the law-based management over different ports. And they highlight that the rule and the regulation consistency must be implemented in different port and airport. Also, they focused on the integrated law enforcement, and they have their internal team to fly to different ports to do some internal check and also listen to customers and the brokers comments upon their performance. Then with more imports, goods import into China and the China government also somewhat straightforward is focused on that more green, which means that we have deployed the more strict regulation and the laws upon those wastes and endangered cargo, okay? Prohibition cargo cannot be imported, and focus on the eco-friendly ports. So someone you may hear that in Shanghai, we have kind of the Yangshan port, one of the partly kind of automation port without any human operating there, okay? And the last is about efficiency. So efficiency-wise, so this basically highlighted that deepened the reform of inspection procedure. So sometimes, we are seeing that the shipment have been released, but the inspection process is too redundant. So then it took a long time to have our customer to receive this cargo. So, this reform is pretty much focused on the reform of the inspection procedure and also simplify the document requirements, okay? So, we just opened more transparency requirements upon the cargo import and also help our customs to low down their compliance costs, yes. So basically, this is the 5 areas, the China customs and the China government are focused now and they're also seeking that improvement. Next slide. Regarding the AEO program, actually, since I think last November -- so I feel that the China's AEO program becomes much straightforward and they're much understandable. So at this moment, in China, enterprises actually helps 3-tier credit management. So, we have the Advanced Certified Enterprise, which means the China's AEO. We call it Advanced AEO Certified in China. Then we also have the Regulated Enterprises, okay? So then the -- at the bottom are those unreliable enterprises. So just all the enterprises, import, export enterprises are under this mechanism, the credit management mechanism. So if you are AEO certified, advanced AEO certified, you're going to have a lot of benefits. I just list a few of the benefits, but not all because there's a lot of documents there. So such as that, this could be -- enjoy low customs inspection rate and the less customs first audit and also our priority in processing requests such as maybe in holiday and the urgent inspection request and the customs on duty application for certain urgent cargo, okay? Then also you have the reduction of the customs' compliance relative to the costs are based on a few other Advanced AEO Certified Broker. So, I think when compared to previous, China's a little bit complicated credit management system. This is pretty straightforward. Under this 3-tier credit management system is announced, I think has evolved from the last November. Next slide. Yes. At the same time, China customer actually is really kind of in line with WCO. So one of the initiatives that WCO is encouraging around the world is about the AEO mutual recognition as we call it kind of the MRA, mutual recognition arrangement. So, I think so far China already have agreements with 22 economies and covering 48 countries and regions, including European, I think Great Britain as main economic entities. So WCO has designed this recognition mechanism program in order to facilitate the global trade to enjoy that low inspection rate, simplify the document review and fast channel and have also dedicated customs coordinators to support you in and out customs process. Also, when you have the priority to recover from the internal trade and the interruption. But I think this is still under process, under development. So, I also had a chance to discuss with counterpart in EU, Alan. So seems certain of the benefits, has not kind of the directive reflect in their business, if we have the AEO usage by the custom export to the EU, whether the inspection ratio has improved a lot. So far, we still need to observe. But I think that this is more about that initiative. The chain is about the WCO's ambition and WCO's plan to promote the AEO mutual recognition. As well as, this is also GACC, China customs authorities ambition and their plan. So I think last year, in June, we just had a regular meeting with the China customs in Beijing, and they pretty much are focused on this area and they also ask a lot of questions in Expeditors, how is the situation in EU? Anything that we can give them feedback? And they can also collect this feedback from different forwarders, brokers, customs and to give some feedback to the, I think the WCO and for the future development of this mutual recognitions, okay? So basically, I think this is -- these are all my slides, present about that macro things about the China customs, the involvement in recent years. And the following slides will be presented by my colleague, Star, more focused under import process. So if you have any questions, feel free to let us know through the chat box. Thank you.

Thank you, Alex. Good morning and good afternoon, guys. My name is Star. I'm in charge of the customs brokerages, operation and business development in China. I'm going to company with you for the coming 2 topics about the import process and the expenses -- customs brokerage services in China, okay? Before I start with some brief instruction about -- currently our import custom process, allow me to give you some briefly or generally ideas about how would you start import and export business in China, okay? I think before the process enhancement, if you want to become like a China legal entity or become a qualified IOR, EORs and you needed to complete the registrations at the government GACC's administration for industry and commerce, tax bureau [ cousins ] and the State Administration of Foreign Exchange, we call it SAFE here. And trust me, it's a very long-term process when you're dealing with those government agencies. But, our China government did some process enhancement. So, you can see from this slide. So now the process of the registering is quite shortened. So when you complete the business license applications at, we call it Administration for Industry and Commerce, you will be granted with unique social credit numbers. And these credit numbers also can be acknowledged by the China customs and tax bureau. So here is we call like the one-stop registration or one-step registrations for our business entities registrations, okay? And as you know, since China is allowed to have a free port now, so to complete the registration of filing at SAFE is still very necessary. And after that IOR, EORs became the legal entities who is entitled to collect or remit common values from the overseas traders through the bank. So, I will not spend too much time giving you some briefing about the SAFE. So, I just copy the linkage in bilinguals, if you are interested in the SAFE, then you can access to and know it more, okay? And some briefing of like how to start to import, export business in China. I just give you some brief ideas about those basic documents requirement for the China customs importations purpose, okay? For these are 3 lens and POAs for customs declarations in commercial invoice, packing lists, bill of ladings, the carrier or the forwarders documents, sales contract, purchase order. Those are very basic documents for the importations. And for some of the special or certain commodities like used items, food, pharmaceutical, cosmetics or the some permitted requirements like for certain machinery and electronic products, we needed to apply into license, import of the record and the private import license as such. And of course, if your manufacturers are locating the free trade agreement members with China and you may apply us certificate of origin. Another name is called preferential COs because for TS claims. For other certificates like CCCs and you needed -- for certain commodities, you need to achieve from the shipper importer or even the manufacturers to complete importations into China. And if there is other very special commodities, we need to abide with the China specific requirement to get the necessary documents as supplementary, okay? That is a very basic documents requirement. And after that, let's move on this page. And this slide will give you some general ideas. We call it customs declarations models, development in the past year and until now. And also, that will give you some like general ideas about these fundamentals, like activities by the China customs to support these declaration models development, okay? So let's focus on the customs declarations model. All right. This green one, we call it the general declarations models, and I believe everyone know it. We practice it from very beginning, actually not. And based on which -- I started from the year 2015, there is a conception and China customs brokers and flexibility. That's why there's a new declarations model. It integrated that customs declarations with promoted and started from that moment. And until now, became a very, very mature model throughout all China. And in these models, I think it's giving a lot of flexibility or more choice for the import of the record and export of the record to choose these entry submission either at home customs or customs house as part of the entries. And with the time pass and started from the year 2018 and year 2019, I think another conception of the [ license ] to shorten the customs inquiry times, that became the China customs another focus. So there is a 2 conception or 2 declarations models pop up. We call it pre-declaration and a 2-step declarations shoot up. And I will give you more details in the coming slides about the those import floor, and hope to give you some brief idea and the difference among these 3 declaration models. So let's take a look about these customs fundamental activities, okay? And without these fundamental customs activities, we cannot -- China customs cannot support those declarations models change or the development during the past years. First is about the one declarations, 2 steps disposal, okay? China customs have assigned different custom centers upon the different commodities, which shorten the documents audit process internally. At the same time, with the risk management center set up at Shanghai, Yingkou, Guangzhou and Qingdao, which also strengthen the risk management throughout whole China, especially for the inspection side. And for the IOR and the EOR social credit system update, as my previous slide introduced, that is in shorten whole, China legal entities registration process here in China. And for the single windows implementation, I think that's a very big step for China government is they combined CIQ and customs declarations into custom declarations only. That means you don't need to do a CIQ declaration and the customs declaration forward entries, okay? And after that, reform the faster release and tight control and experience on the post audit. I think if you are in China, I think you may have the same feelings like I am now. Because especially during the past years, our feeling is the circle times of import clearance is very, very shortened. But however, the scenario or the frequency of the customs post entries audit is very high. That is another -- we call it like a fundamentals activity. They focus much more on the post-audit, but still for the purpose like us to shorten forward import customs lead times. So summarization to this page is about these models, declarations and models development are for the purpose of granting more flexibility to IOR and EOR, and also for the purpose of the shortened import custom declaration lead times. And for the China customs, those are like fundamental activities are listed on the bottom of this slide, are very -- for those activities, implementations, also consistently and continuously to chase the goal of the WCO of the smart board, okay. So that's kind of just a world map. And then I'm going to move to the import clearance process introductions, and that will be focused on the general process, pre-declarations and 2-step declaration process. And I'm going to use the air import shipments flows as examples, okay? First slide is about the general process, okay? That is a very general process of import shipments, which include like proceed the booking and origin, flight departure, confirm onboard at origin, arrive at the China destiny airports, complete a toll at cargo already at forwarders warehouse and customs' entries filing started and release inspection or we can proceed with the delivery. So here, I want to highlight about the key customs import activities. We can upstream the documents, data verifications and use the custom systems to do something like data filings. The customs entries filings, or we call it the customs entry submission still happened after cargoes are ready at like a forwarders warehouse. And then proceed duty and duty payment. That is 1 day after a vessel or even the carriers arrived at the destination ports, okay? So, this one general process eventually will be considered by China customs like -- that's too long, I mean, the whole import lead times. That's why there are the 2 new conceptions mentioned. It's pre-declaration and 2-step declaration are popped up. So, here is some very general briefings to these 2 declarations model. One is pre-declaration and the other is 2-steps declarations, okay? And the free -- for the pre-declarations model briefing and the entries can be submit prior to the vessel or even the air carriers arrival at the destination airport when original manifest is ready. And inspection or release can be automatically triggered once the vessel or air carriers arrive at the destination port. For 2-step declaration models, which is from my perspective, which is quite suitable for the scenarios like import of the record cannot get declaration details at the first time. But however, it's very urgency or it's -- they don't want to spend too much time to check with the origin for those declaration details. And then you can proceed like a 2-step declaration. For the first step declarations that you can just declare those basic information with the customs. And once after the China customs release the cargo and you receive the cargoes in your warehouse after your accounting and then you can do the second-step declarations to make up those declaration details. Here comes this import floor. I'll give you more details, okay? First is about the pre-declarations. So, I don't want to go through very details here. I just want to highlight that those import declaration activities here. As you can see, we used to have like declarations, verifications here, at least like 1 day before the arrival or we encourage even when the original supplier proceeds booking with our teams. So, we are encouraged and even it's kind of a trend of the China customs to encourage like customs filings, data verifications, entry submissions can be done before the vessel or even the flight arrival and once after manifest is available on the China customs website. And once you can settle the import duty and VAT there before the vessel arrivals, so once the vessels arrive here, it automatically checks the inspection of release information. So that means after toll is completed, the cargo is ready at the forwarders warehouse that you can complete the delivery or you can complete -- you can proceed with the inspections reservation with the China customs. So compared with, we call it a general process, so there is at least 1 day savings, okay? So next is about the 2-step declarations process. So just somewhat different to the pre-declaration. The similar part is you still need to do like submit the entries once after original manifest is ready, and this is before the prior arrivals. And you need to deposit -- customs deposit, okay? And the releases -- customs release is on the deposit first. And once the customs release your cargoes, you pick up the cargo from forwarders warehouse and the return those to deliver it to your own warehouse and complete those detailed accounting and you'll get those declaration steps. And with that, you can do the second-step declaration or we call it like a make-up declaration. But this is needed to complete within 14 days after prior arrival and paid duty and VATs accordingly. So still compared with the general process, it's still at least like one to 10 days saving, okay? So after I move to the section of custom service in China's introductions, allow me to give some recap to the previous page. So, I just go through the -- how to begin import and export business in China, basic documents or custom documents requirements. The history of the China customs declarations models change and the fundamental activities accordingly. And give you some like brief ideas about those 3 process. We call it the general process, pre-declaration process and 2-step declaration process. Okay. Then let's move to the customs service in China, okay? First, on the left of this slide, that is the -- a lot of the red dot. That is the experienced China's branch and also recorded our footprint in China. On the right side is our AEO brokerage certification. That's the top level awarded by the China customs, okay? And for the trailer, our trailer strategists divided into 3 regions. First is we call it North Trailers. And in the North Trailers, we have our Beijing branch, Tianjin branch and Qingdao branch to use these AEO certifications to do the customs activities. And for Central Trailers, we have 4 branches which include Shanghai, Ningbo, Nanjing and Suzhou, use this certificate to do the customs entry submissions. And for the South trailers, we have Shenzhen, Guangzhou and Xiamen awarded this certifications as well. So as you may read, so we didn't granted all the branches there with this AEO certification. But however, for examples, like a Beijing, Tianjin and Shanghai and Guangzhou and Shenzhen, those are very major airports and seaports there. So, we call it like a gateway. So it can majorly cover most of the entries throughout the whole of China. So when the other like inland customs like the customs located in the Wuhan and even in the Chengdu-Chongqing that we can do the like integrated customs declaration as I just explained to you, which is quite natural now to use these teams, 10 branches teams to do the remote or integrated customs entry or leverage our local party sources to complete custom service requirements accordingly. And for this page, I'm going to spend more times on this page to give you some briefing ideas about the custom systems here, experienced custom systems in China. For China customs, it's quite unique. So far, she does not allow a broker system or even forwarder systems to have a direct connect with China's custom system. The China custom system now, we call it a single window. So if you want to complete the customs entries here in the China, there's a 2 way. First way is you complete the custom's entry on China custom system. We call it a single window or you can purchase third-party customs entry systems. But this software is also developed by the China customs, and we expect the China team to choose the network, okay? We purchase the customs entry systems. This system, we call it [indiscernible], which is under deploying now throughout whole Expeditors globally. And the conception is we hope our branch is there. And as long as they are in assistance, we hope our brokerage teams are to use the [indiscernible] to do the entries, okay? And sometimes, the [ export casting ] systems is interface and contact window with our customs. So, our customers can transmit those custom documents through the EDS linkage or use a traditional turnover process like send e-mails and attach the documents are very welcome, okay? And we can use our tools like a raft, CP [indiscernible] and PSMs to capture those data for entry teams processing. And after that, those datas are going to be transferred to the China's customs single contact window through these customs entry systems. Just like I mentioned, for this custom entry systems, it is also authorized by electronic customs. So it's not -- it cannot just with the function of the entry submissions, but also can exchange the entry status in the details with the China customs together. So when you're talking about those entries details and the details that include like a key milestone, key timings, like when we submit the entries, when the customs inspection left, when the China customs release the cargo, et cetera, can be exchanged and captured from the China customs website. And at the same time, those declaration details include like a, we call declaration elements. And of course, those are supporting documents. We submit to the China customs systems, also can be captured and saved. For those, we call it entry details. That will be returned back to the CDB. CDB here stand for the Centralized Database center, which is owned by the traders. For those entry status details that we can -- after processing, we can show those details. The details means like interested traders, okay, documents details and of course, for more than 31 countries, those declaration details and also can be showed to the export entry system. And the export system is accessible and opened to our customers. And as I mentioned, for the entry details, include those key milestones, key timing of the entries also can be captured after those office stores that we can do some basic customs analysis, such as like the [indiscernible] for the dashboard demos, okay? And now, more and more customers have the requirement because after we have the EDR linkage, they require us during after or before the entry submissions return like a draft or a complete custom declaration for the double verifications or like software copy savings. So with the EDR linkage, this kind of service also can be fulfilled. And for the other functions like for the customs entry systems here, like database preinstalls like, for some of the customs, especially for the customs in the automotive industries, like -- they have like a very completed commodities database, which is verified or classified by the compliance teams already. So after our teams verification, then we can pre-install these commodities database into these customs entry systems. So definitely, it's going to enhance the entry productivities. And also that we can set up some comprised check-in ports. For example, like a unit price, like a renters, and COOs, country of the origin fix. And also for some larger commercial values with a certain amount, we can set up the bar in the systems. We can request like at least 3 auditors review, and then we can proceed with the entry submissions. Okay. There is a very basic briefing about the export customs systems in China. Okay. Here comes about the sustaining ability strategies. I think it's a very popular topic here. And to fulfil China customs regulation locally to apply systems, to improve our productivities and to provide a satisfactory service to our customers, our brokerage teams focus, but at the same time, to chase for a clean and green world and supporting our customers, our sustainability strategies are all also one of our responsibility and focus now, okay? So for the standards, sustainability strategies are aligned 6 pillars, which is covering the involvement, social responsibility, security, health and safety programs and the governance. So for the custom brokerage teams, we are quite focused on the involvement like paper reductions. And for the POA, especially in the trailers, we are fighting to fulfill the China customs requirement and encourage our customers to complete pure assignment on the net instead of like a paper POA. And for the documents exchanges, we encourage them. They can exchange with us through the system tours instead of like couriers with the paper copies. And for the carbon reductions and for some of the customs requirements, we can use the EV cars to complete the final door deliveries. And also for the social, like our focus is to protecting our people, our systems, data and also our customs data is our focus. And as an asset company, we always can see that our people is our most valuable asset. And we offer a very safe working environment that attracts the best of the best in these logistic industries. And for the governance, our code of the business conductor is a cornerstone of governance framework. And also, we believe our core cultural attributes like integrated excellence and confidence, those cannot just help us to be the best people, but also to help us to achieve our mission of being the excellence in the global logistics. After we take a look about the expanders, sustainability strategy, let's go to these pages. We call it like our differentiator, or now we think like a wire partner with trailers, China's custom teams, okay? So for these pages, allow me to use one last sheet to give you some briefing for our key advantage. First is about the certifications, just like I showed you with the China map. We have 10 branches certified with AEO, which is the top level of the China customs certifications. And the collector will be China customs in 9 locations already. And besides the AEO certification, we also are ISO 9001 certified company already. And for the peoples, we have 65 CCBA defined brokers throughout whole China. So here, CCBA stand for China Customs Brokers Association. And talking about the volumes, we are over 40,000 import entry volumes, exclude entry volumes which is under our own brokerage license achieved in the last years. And besides those key elements, I also want to share is no doubt, right, China Customs brokerage service is kind of like a knowledge-based service. So I know [Technical Difficulty]. So among our whole China branches, we have 81 staffed, served for custom storage teams. And the minimal tenure for them is 5 years. okay? And for the global infrastructure and the local expertise and cost -- among these are any one employees, not just fulfil our company's requirements globally, but also they are very well knowledge with the local China customs practice. And the focus on the compliance and our compliance is like a bottom line. As broker, we'd like to work with you to defend costs as long as you want to continuously grow your business in and out China. So the compliance is kind of a bottom line, we would like to defend with you together. And last is about the values to the customs. I think just as I mentioned, especially in China, we're not just like brokers but we can provide final deliveries after customs release. And we can help you to do the certain license applications and also that we can do some like custom process management through our systems. Those are the value-added services now we are providing that to our customers. Okay. And last, I think allow me to use the one page about our observations to close my presentation today. And the following bullets are collected by our team's daily engagement with China customs, our customers and local practice. And first one is about the more compliant environment in China market, okay? That's a tender and why China customs is setting up and doing a lot of criteria upgrades for AEO enterprise, if you want to be an AEO enterprise or if you want to maintain your AEO's grade. But, however, still the tender is being more a compliant environment, but should not be the hinder or even the barrier for your import and export business development throughout all China. So do not forget as like we are in China as AEO-graded broker, one of our responsibility is to help you to engage and communicate with the customers when there is like a complaint topics needed to fulfil with the customs, okay? Second one is about the more regional free trade agreements. As you know, China has transformed from one of the biggest manufacturer countries into very big countries, with very, very large consuming demanding. So for the purpose of doing a trade with overseas, especially with those developing countries, I think we foresee there could be a more free-trade agreement, will be signed soon just like a recently newly implemented regional comprehensive economic partnership or shortly, we call it like a RCEPs, okay. And so this one is about continuously promoting AEO programs. okay? And I believe there could be like some adjustment to the criteria, such as like an auditable period changed from 3 years to 5 years to fulfil the requirements like with the process of the China customs promoting and also the outside safe environment. And the compliance and facilitations, okay, again is kind of a trend. And compliance is our focus. But however, it should not be like a hinder or even a barrier for the business development. On the digitalization, data privacy and security, I don't know how the situation is in Europe. But trust me, it's kind of like a slogan called like a data is asset. It becomes very popular here in China. So now how to keep the data privacy and security are becoming very, very focused by our customers and China customs as well. And for the last bullet is about the broker numbers reductions, but with more enhanced strategic relationships and service providers with integrated custom service. So whether centralized brokerage service and when qualified service providers who can provide an integrated service, which include international transportation, plus China inbound service like customs brokerage and the final mile delivery service, could benefit your compliance management to help you to achieve the goal of supply chain optimization. I may leave it for you and your teams. And of course, we will be more than happy to have those topics to discuss with you, if you have needs because you know we will always be here, okay? That's pretty much about my presentation today. So, I'm not sure whether my Director, Alex, have any supplementary or we maybe turn over back to PengLei for the Q&A sessions.

Yes. Thank you, Star. So actually, we are seeing and we are replying a lot of the questions. But let's turn over back to PengLei, so in case if you do have questions. So yes.

So turn it back to you, Peng.

Thank you, Star, and thank you, Alex. Thank you, Star, for your time. And we are undated with questions, a lot of good questions, and our team have been answering all those questions as well. So now it's question and answers. So, I know there are couple of questions we're going to answer live. So Alex, would you please answer Igor's question. Is it possible to share the process of requests?

Yes. Yes, because I see imports [Technical Difficulty] zone in China. Actually, this is also -- this is not only the question about the customs process. This is also about that free zone process. So, my suggestion, Igor, probably you drop us an email, about details, about the current situation. So then we do have the internal distribution team. Actually, we work with the distribution team very much closely. So then we will figure out the process. We have the standard process there. But if you can be more specific to us, then we can map in the process for you based on your questions.

Thank you. Roberto is asking about sustainability, something about the new CBAM regulations. Could you talk also about that? Thanks. Alan?

Yes. Good morning, everybody. And it's so nice to see so many things on this call. So nice to talk to you. I didn't really anticipate CBAM questions coming to our Asian partners or our Asian colleagues. So, I jumped in on the question box as to help them. As we know, this is the Carbon Border Adjustment Mechanism. It's a regulation that has been put in place by the EU to combat what they call carbon emission circumvention policies, if I can call that. Specifically carbon leakage, where the goal of CBAM is to encourage manufacturers in countries outside of EU to control and measure their carbon emissions. To do that, they're asking manufacturers and particularly, importers to work with their manufacturers, the producers, the suppliers from countries all over the world and that includes the UK, for example, from the European perspective, that are -- to be able to provide specific information around the carbon emissions that are embedded directly or indirectly within products. There's been a lot of speculation as to exactly how this mechanism is going to work and how importers are going to be able to obtain this information. We still -- from an Expeditors' perspective, are very close at really finalizing our position as to how we will be working with our customers and supporting our customers with regard to CBAM. And I think within the next couple of weeks, you will see an invitation for a webinar specifically on CBAM, possibly giving a lot more information on the legislation and how the EU envisages the implementation. From an origin perspective, there's not really much that Chinese customs or any other customs organizations have to do with CBAM. CBAM is primarily the relationship between the importer in the EU and their suppliers, their manufacturers or their producers. They have to work with those producers to be able to get very, very detailed information with regards to the carbon emissions that are embedded in the manufacturing of the products that they are exporting to the EU. We must remember that the range of CBAM products or the range of products that qualify for CBAM are limited, primarily if I'm just thinking off my head, it's fertilizers, it's iron and steel products, it's aluminum products, some chemicals, hydrogen, electricity, et cetera. So just watch the space. We'll definitely be out there with more detailed information if you want to know more about CBAM. Thank you for giving me the opportunity to taking this [indiscernible]. Thank you.

Thank you, Alan. I think [ thus related ] also answered Payton's question as well on CBAM related. We have a question from Martina. Do you have any info about antidumping duty on stainless steel products from China to EU? Is it always applicable. Thanks. I think this is more towards Europe. So Alan, do you think you'll be able to take this one?

I would encourage the person that asked the question to address an email to us so that we can answer the question more directly. There's definitely some additional information that we would require to be able to give them more detail in response to that question. In general, antidumping legislation is sometimes very difficult to analyze, particularly when it comes down to the specific product and the specific manufacturers that are involved in it. So to provide a broad answer on a webinar like this is actually very, very difficult because one question leads to maybe 10 more questions. So please address an email, you can address it to me if you want to, alan.owen@expeditors.com, and I will definitely get back to you on more detail regarding your question and hopefully, we will be able to satisfy you in that way.

So Martina, we're going to reach out to you later and we can have a little bit more detailed discussion on what your requirement is, and Alan can give you a little bit more insight. Thank you. Just looking at 2 boxes here. So, I know a few people are putting the questions into the chat box. So, I just want to see if there's any questions there. Andre is asking a question. Hello. I have a fiscal question. Does China have a VAT or equivalent system? I know I can answer that, but I'm going to give it to my team in China to answer that. Probably, Alex.

Yes. We definitely will have VAT. Yes. Just the VAT. So the typical example is that so -- if you export to overseas, then the exporter is going to claim back those VAT because you not sell domestically. So yes, we will definitely have this kind of mechanism. Yes. And if you import into the free trade zone, not domestically yet, so then the duty and VAT can be delayed. It could be postponed. Yes. So yes, fiscal, yes. Although I'm not a fiscal guy, but from a customs perspective, we have this VAT mechanism in China.