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

Good afternoon, everyone, and thank you for joining us. You, of course, are logging on to Expeditors webinar focused on trade changes, impacts on the aviation and aerospace industry. So we appreciate you joining today. Just some quick introductions and a little bit of housekeeping before we get started with our content. So my name is Samantha Hurst, and I'm one of our managers for marketing and bids for the Americas region of Expeditors. And I will be supporting in the background. You should have e-mails from me that included your webinar confirmation. So should you have any technical issues on this webinar, you are welcome to e-mail me directly, and I'll do my best to support. We'll talk a little bit about some housekeeping items, and then I'll introduce our speakers before we get started. So here, just a quick disclaimer for you all. If you've not joined these webinars before, we just want to make sure that everyone understands that the information we're presenting here today is all based on what's out in the public domain, and this is for educational purposes. We encourage you not to look at this as something that you're going to base financial or business legal decisions on. So again, we're presenting this in an effort to keep you as informed as possible if you are customers or potential customers. And we just want to make sure that we're clear on how we're going to support that. And everything is changing so quickly with trade changes right now. So all the information we present today is also good as of, well, this very hour. So you will have 45 minutes of content that we will go over today. And typically, we'll have about 10 to 15 minutes at the end to answer any Q&A. So we encourage you to drop your questions in the Q&A box. Now we have a couple of speakers today. So as we go through, all of our speakers will be working to answer your questions as best as possible. We do want to remind you that if you have any hyper-specific questions related to your specific business, it's possible we may not be able to get to those on this call and may need to set up a separate call with you, but we'll be sure to do so that you do get your questions answered. One of the first questions we get for all of these webinars is how do I receive the slides and the recording? So we just want to make sure that you get this content. We're glad that you find it valuable. And what will happen is you will get a survey via e-mail from myself, typically within about 2 hours of the webinar wrapping up. If you don't receive that by the end of the day, you are welcome to e-mail me, and I will make sure that gets to you. Once you complete the survey, a new landing page or page will pop up that will have a link toward the bottom, and that will take you to the materials and the recording. And then finally, I do just always encourage everyone, scan this QR code. If you are not subscribed to get our market updates and invites for all of our future events, subscribing to that communication will get you connected. Okay. So now I'm going to introduce our speakers and let them get started with the key content. So we have with us [ Oscar Stiles]. He's the Regional Manager for Aviation and Aerospace for the Americas. We have Madeleine Veigel, who's our Senior Director of Customs for the Americas; and Fernanda Kroup, who's our Vice President and Head of Onyx Strategic Insights. So you all are in for a great 45 minutes of content, and I will turn it over to Oscar to talk about our agenda and get us started. Oscar?

Hi. Thanks, Samantha. Good afternoon, good morning, good evening to everyone on the call. As Samantha said, my name is Oscar Stiles. I run the Aerospace and Aviation vertical for Expeditors over the Americas. And so just to give you a quick background on what that means. At Expeditors, we work with all industries, but there's 3 specific industries that we've identified that need an additional layer of kind of subject matter expertise. We have health care, we have automotive, and we have aviation and aerospace. And so as part of the aviation and aerospace team, my colleagues and I, we are responsible for working directly with our customers to help provide more industry-specific solutions for them and to also, at the same time, educate internally our operations or sales teams so that they understand better how to interact with our aviation and aerospace customers. So to start us off here, I'm just going to really give a give a bit of a baseline and a reminder for everyone about where we see things, how they ended at the end of 2024 and a little bit of what we've seen with the aviation and aerospace industry kind of to start off in the first quarter of 2025. So as you could see over here, I mean, there's a few things. And again, none of this should really be news to any of us, right? But it's kind of painting this picture. Net orders for aircraft were much lower than we all anticipated and there's a few key factors related to that. The FAA obviously came in. They capped some of the narrow-body production from some of these airframers. So that's kind of one of those things that's occurring where new aircraft are not entering the market at the rate or at the pace that was maybe originally anticipated at the beginning of 2024. There was also a lot of groundings due to some engine troubles that were going on with one of the main narrow-body engine providers. These groundings, as they continue to happen, they were causing obviously a lot of backlog within the MRO industry specifically. And so as that's going on, these airlines, right, from -- at least in the commercial aerospace side of things, the airlines are having to fly older aircraft longer. Their aircraft are being left in MRO status much longer than originally anticipated. So it's causing this massive backlog, right? And as these things are occurring, they're trying to find alternate sources to get new parts, new engines, whatever that might be, new interiors, right, all to service the aircraft and keep their fleets moving and obviously turning and getting additional revenue. So it's interesting, right? The demand for air travel at the beginning of 2025 looked kind of good. The growth was slowing, but it was still better than it was looking like how it ended in 2024. And then as this is all very fluid as we saw yesterday, most at least U.S. airlines, their stock values were all down yesterday due to impending changes within some of the tariffs and other things that might be coming up. There's a lot of uncertainty right now. And so there's, again, still a lot of fluidity with that. Can you go to the next slide? Thank you. So again, that's kind of commercial aerospace. To start talking a little bit about air cargo because air cargo does impact a lot of this, right? Within aerospace, we are our own best customer. We fly most of our stuff everywhere. It's not like several other industries that rely heavily on ocean freight, for instance, right? And these 2 kind of stories that have been going on very recently have been causing a lot of constraints, right? The Airbus is postponing their freighter option a few more years. So that's going to take longer to hit the market than originally anticipated. And similarly for Boeing on the other side, there -- this is forcing current freight aircraft operators to rely on their older fleets much longer than they were hoping to. And again, so this is just causing additional constraints. Now they're trying to, again, sourcing parts for the existing fleets that are out there. Sending their other parts into MRO, it's just causing backlogs. It's all exacerbating this kind of supply chain situation that's going on. And so when you look at the global air cargo capacity, a lot of what we're seeing is there's additional capacity coming in or that has been predicted to come in, and there's still pretty high demand going on, right? Now again, this call in many ways is about tariffs. It's not about like the state of the air cargo market. But we're demonstrating this, and we're showing this to you all because, again, as these flights are having to go from moving cargo, right, again, that's just more hours on these airframes, more hours on these engines. They're having to hit their repair cycles much sooner than originally anticipated, and a lot of that is being driven by fewer aircraft that are coming into the market. So again, starting to get into it, right? What's the current landscape look like? And kind of why are we all here and what are we all trying to learn with it? There's a lot of things going on right now. We're still trying to figure out what travel is going to look like for this year. It started off a little bit better than last year. It's tanking off right now because we don't know what our buying power is going to be like in whatever countries we're looking to travel into, right? There's markets overseas that are growing and their infrastructure is having to grow as well, but they still depend a lot on the U.S. for a lot of their supply chain needs, whether it's parts, whether it's MRO, whether it's the actual aircraft. And so even though these foreign markets are starting to stand up and grow within the aviation sector, they're still very heavily dependent on the United States. And then more locally, you start -- you see some of these bullet points that I have on here, right? $8 billion worth of aerospace products are moving back and forth from Mexico to the U.S. every year, right? $2 billion of that is coming from China. And so we're all wanting to know what the impacts are going to be like, right? These global supply chains are just -- we've already been pushed to the limit. And of course, now what we have going on this week is we just have these tariffs now that we're trying to figure out what's going on, right? So again, these are just some of the challenges that we have and some of the other things that are causing and what are adding the strains to all of this for us. There you go. So again, just looking at the outlook, the shifting trade policy and the next couple of speakers, right, now, they're going to speak more to that. I suspect that most of you want to hear more from them than me anyway, and that's fine. But shifting trade policy, what's going to happen, right? Is it going to be long term? Is it going to be short term? We don't know. We're going to find out what the capacity is looking like. Again, it's not so much about the air cargo market that we necessarily care about. But as we see these flights moving back and forth, it's a good indicator of how these supply chains are going to continue to stay constrained because those aircraft are having to get maintained more often. And so far, it was -- again, it was predicted that there's going to be moderate growth still in aviation and aerospace. So how are we going to reconcile the growth that we're all anticipating with now all of these additional tariffs and constraints within the supply chain. And so now to help move us forward and start looking at some of the other topics and points that are going to be influencing a lot of this, I'm going to hand it over to Fernanda. Fernanda is part of our Onyx team, and she'll be able to take us into this next portion of the presentation. Thank you so much for your time.

Thank you, Oscar. So yes, on that note, so I'm here to talk a little bit about the trade environment, and the geopolitical environment and then a little bit on economic impact with what we know today. So we are about to sort of a few hours before the big review around the reciprocal tariffs this afternoon, should be at 4:00 p.m., EST, 1 p.m. PST. But what do we know so far? And the administration has been very tight-lipped about what to expect. But let me say that coming into today, there are 2 main proposals that we've seen floating around. The first is a universal tariff. We've heard anywhere between 10% and 20% for every country and every good in an effort to establish reciprocal tariffs. The other proposal that we've heard is an individual number for either every country or for a group of countries to start with. There are still no answers about whether it will be immediate. We've heard more often than not that it will be whether it will be faced, whether it will be every country, you can see there's quite a lot of uncertainty here. But the consistent signal that we've seen from the administration is twofold. The first is to sort of set the scales, and also address the deficit and the perceived unfairness of differences in tariffs as they apply to merchandise and then also an offer to start negotiating, and creating leverage with different countries around the world. The 2 main constraints and concerns of the administration regarding those 2 options that I was talking about is that if you have an individualized number for each country, then you might have folks trying to use transshipment or find a loophole or go through countries where you have a lower rate and then there's also this desire to have a policy that is easy to communicate. So communication is very important to the Trump administration. So go big, but also simple. And so that seems to tilt the scales a little bit towards a universal tariff where pretty much everybody is on the same page here. No country has an advantage and it's relatively easy to explain. 20% [for everyone]. So a lot of uncertainty here. And I also wanted to draw your attention to some of the other initiatives that are floating around. Yesterday was the deadline for the America First Memo studies. And what they have in common is this scrutiny around unfair practices and the deficit and the creation of an external revenue service and then also zooming in on China. A review of the Phase 1 agreement if you remember, Section 301, PNTR, so Permanent Normal Trade Relations. So essentially creating an entirely new tariff schedule for China away from MFN. So a lot happening. Tomorrow on auto, for vehicles, May 3 for parts, the implementation of tariffs on Canada and Mexico 2 days from now. And then a number of other things that have been floating around shipbuilding in China, action on Taiwan semiconductors, chips, pharma, metals beyond steel and aluminum, Venezuela oil importers, there's quite a lot. So it all points into the direction of an increase in tariffs and for at least the medium run. And the thing with tariffs is that the longer they stay, the harder it is to remove them because you create a constituency behind them. And politically, it's very hard to remove tariffs without saying that things have improved if they haven't, depending on what you said at the outset. So if, for example, the deficit doesn't improve meaningfully, then it would be very hard to remove these tariffs. And all pointing into the direction of this reciprocity initiative, that I was talking about. Now we don't know what will be. We've heard 20%, 25%. It is something that Trump himself has said. I talked about this on the campaign trail. I've talked about 20%. This shouldn't be a surprise. In this slide, you see on the right-hand side, our estimates of what exactly -- how could you think about, for example, what reciprocal tariffs could look like for Vietnam, for Canada, Japan and a number of other countries? This is tariffs, plus taxes, including VAT plus non-tariff barriers plus currency manipulation and any other structural impediments. Two of those can be very sort of arbitrary to actually calculate. They're open to a lot of subjective interpretation, especially in non-tariff barriers and currency manipulation. But here, you see an estimate. But we don't know exactly. Now, there's -- I see a question in the Q&A box. Let me just start addressing some of those, and please feel free to write your questions there as well.

Whether we would have a blanket 20% tariff on top of the current 25% for steel and aluminum products? All indications is that yes, that because these tariffs address different grievances that the Trump administration has different questions, the blanket 20% tariff is to sort of even the playing field on the tariff side, so it's the reciprocity idea. Steel and aluminum products is based on unfair -- perceived unfair trade practices. So it would -- these -- all indications so far is that these tariffs would be stacked one on top of the other. Much like what we've seen with Mexico and Canada and China so far. So you have an additional 25% in Mexico and Canada so far for non-USMCA products. On top -- and so it would be on top of that, but we will see. Similarly, for China, you have an additional 20% related to Fentanyl. Most importantly, those come on top of 301 and on top of other action. And so -- it is a sharp increase in tariffs, but we'll find out more this afternoon. And so now, we have a unclear time line for adoption here. In many ways, you have the American First Trade Memo studies today is the announcement. We don't know what the implementation will be. So to put some questions or issues to follow on and to monitor on your end. What is the time frame for implementation? What is the retaliation to look like? Is there going to be a negotiation? There can be new investigations announced. There are some constraints around -- concerns about agricultural products, automotive, digital, services, taxes, energy. So -- it is a little bit unclear at this point. We hope there will be more clarity today. And then there are some very practical constraints. Technical implementation, we're already seeing a lot of questions, what is CBP likely to do? Do they have the capacity to do this? Is this going to -- so we can expect delays. The scale of the economic impact and the backlash, especially domestically, potential for broad retaliation? The strength of the legal foundation, all indications that -- it is on some solid legal foundation because the courts are unlikely to try and curb executive power or try to dictate what an economic emergency is, for example, or what national security means? And the scale of circumvention. So a lot of uncertainty here that we need to continuously monitor. Now I see a question here on -- can we talk about tariff exemptions on the U.S. Canada trade agreement? The new -- this new crop of tariffs is unlikely to have exemptions, unless there's significant pressure in the background. As we saw, for example, with de minimis, no exceptions, no drawbacks. That's what we've seen so far. You may see, for example, here is complete speculation, some effort to delay or to suspend for a bit of time so that people can be ready for this, so that -- especially on the technical side. But I'll also let Madeleine address the question around -- from a custom standpoint. But from a policy standpoint, we're not seeing any effort to build exemptions. Now a lot of this, a lot of this, please -- the previous slide. A lot of this is also preparing the ground for pressure on the USMCA renegotiation, right? So on the left-hand side here, you see what the normal time line would have looked like. But we know that the administration is trying to increase pressure to have an early renegotiation by creating leverage. And some of the goals here you see sort of emerging of tariff and trade cost durations, but also national security cost durations. And it changes the political and technical makeover of the USMCA. So bear with me. One of the proposals floating around in Washington that we've heard is this idea that we need to contain Chinese trade diversion and investment in Mexico and to some extent, in Canada. So could the United States have a veto on investments in these countries, right? And could there be a harmonization of tariffs regarding China? Now with the reciprocal tariffs, there will be a new level playing field here. So -- but that's one of the top concerns here, right? Strengthening U.S.-based manufacturing, right? The whole point of this is for everybody to start producing in the United States and with that, to reduce the deficit, right? So there will be a lot of questions around currency devaluation, the digital services tax, auto, agriculture and chemicals and environmental restrictions to energy in critical minerals. Aerospace and Defense have not yet come up as a top concern in the negotiations, but it's one of the most vulnerable, as we all know, sectors here. And then revising rules of origin in strategic industries. And here is where it becomes much more painful for aerospace as well. Now Canada and Mexico have adopted completely different status here. Canada, much more on the retaliation side and Mexico much more on, let's find an accommodation here. So far, they both had the same results, right? Whether Mexico is more pro conciliation stance will be -- will win the day is still up for discussion. So let's go to the next slide, please. Thank you. I also wanted to bring to your attention just a little bit more on Chinese built vessels. That's another proposal that's sort of under the radar at this point, but with a lot of impacts on industry in general, but it does put a lot of supply chains in question here, perhaps less so for aerospace and defense. But thinking about the sort of broader impact that this can have by impact to ocean indirectly impacting air as well by increasing the cost of ocean shipping. If we can go to the next slide, please. Now I talked about how countries are adopting different stances. And you sort of have 2 groups? You have the more Canada and the EU is in that group. And so is China, to some extent, really retaliating dollar for dollar? So an eye for an eye here. The EU is threatening to expand its retaliation into trading services. And if you include trading services where the U.S. actually runs a surplus, with the EU, it becomes much more painful for the U.S. economy. And then you have Mexico with a more conciliatory stance but at the same time, we see a similar pattern with Southeast Asia. Now India, Modi and Trump enjoy sort of close relationship here, but that has not exempted India from being part of the conversation in terms of leveling the playing fields on reciprocal tariffs. We don't expect an eye for an eye from India. India is not yet a large export base, but it's much more geared towards the Indian economy. So we're seeing a little bit less impact here. But you have these 2 schools of thought, right? So if we go to the next slide, please. What the U.S. does will dictate what the EU does. And so the Europeans have made it very clear that they're ready to use a tit-for-tat type of tactic here. What impacts the question of is what the relationship between the EU and China will be if and if that brings them closer or not, right? The EU still sees China as a strategic rival, but -- and there's a lot -- there are lots of fears within the EU about a flood of Chinese exports into the EU since these volumes have to go somewhere. For aerospace and defense, I think here is really one of the most vulnerable aspects, right? Because there's so much integration between the U.S. and the EU. So in many ways, what this does is to deny an opportunity for U.S. manufacturers. If we look at aerospace and defense, this picture poses a considerable vulnerability on commercial, and I'll talk about that in a second, but it opens up a lot of opportunities in defense. European defense spending is set to increase significantly, especially within Germany. But given the stance from the Trump administration, basically the EU wants to close the door to any company that's non-European in terms of participation in this defense spending and really prioritizing domestic industry. So everybody is turning a little bit more protectionist here. Now, that also talks -- that also speaks to sort of an extended concept of West. So the EU and Canada are coming together much more closely. Canada is actively exploring ways to diversify away from the United States and the EU is a primary target also in terms of sort of defense -- collective defense mechanisms. That's sort of a little bit away from NATO, right? The same is true of -- now if you start thinking about the U.K., Australia, sort of a broader coalition, that doesn't necessarily include the United States. Can we go to the next slide, please? With China, it's a little bit of also a tit-for-tat, but much more surgical. China has been very measured so far in terms of how it's reacting to the stacking up of tariffs on Chinese goods. There's a lot of concern about the fact that the Chinese economy is still pretty vulnerable. But -- and a lot of overtures particularly to Japan and South Korea in terms of forming a coordinated response to the United States. But meanwhile, this is the interesting part in the next slide, please. Under the radar, a lot of developing economies are actually raising tariffs on China because of the excess capacity concern, right? So in many ways, it's becoming more expensive and tariffs are rising everywhere and not just between the United States and its trade partners. So what we're looking at is a systemic increase in costs for the aerospace industry. Now everybody is hoping for Chinese investments, especially in Southeast Asia, not so much in Europe, in Brazil and Latin America. And so there's quite a lot here in terms of, okay, we want your investment, but we don't want your intermediates. We don't want imports from you. So it's a systemic growth in tariffs. Now let me just take you through a couple of macroeconomic considerations and geopolitical considerations. So this always on growth. And we're not exactly yet expecting a recession in the United States, but GDP growth equates consumption, and consumer confidence, and that means travel, that means spending, that means volumes coming into the U.S., right? So we do expect some macroeconomic impact on demand for travel in particular. So a bit more of a -- more concerning picture for commercial aviation. If we go to the next slide, please. If we add a few scenarios, on impact on GDP, scenarios 1 through 3 are just the tariffs and then including all the way to 3, including a much more measured -- or much more sharp retaliation that has a real impact on GDP for everybody. Now we don't know what will be announced today, but today is a really important day for all of us. When we think about GDP, again think about volumes, think about demand for travel, think about spend, think about how that impacts also the volumes that you yourself are managing. Now meanwhile, in the next slide, all these conflicts are becoming much -- are -- is escalating essentially, which also creates sort of kind of concerning picture, for supply chains around the world, especially South China Sea and China, Taiwan, we see a lot of escalation there right now already. There's a question whether this will provide an incentive for China too in the next couple of years, make good on its plans of expansion in the South China Sea and then bringing in Taiwan. So -- and this has also more of a short-term impact on shipping. Air and Ocean, still a continuation of Russia-Ukraine, we don't expect an improvement in Red Sea as a result of the escalation between Israel-Hamas. So a picture that actually means that we need to get going with a number of initiatives that we're seeing across the board, and that's in the next slide, please. What are we seeing from companies across the board? Inventory propositioning, everybody is doing that, right? Everybody sort of doing immediate, medium and long term already. But this idea of strategic compliance, trying to find loopholes, but also trying to find ways to outrun the regulator, if you will, unusual region-to-region volumes, network designs and routes. But with bigger long-term implications, what we're seeing is a sharp increase in considerations around reshoring. And this means that essentially, you're going to have 3 distinct almost parallel and decoupled broad supply chain regions, self-contained. You're going to have the United States, you're going to have Europe, you're going to have Asia and sort of diminishing connections from a trade perspective, right? So trying to really insulate supply chains across those 3. For aerospace, that is a really tough proposition because the industry was built, as we all know, on duty-free and integration across thousands of suppliers in the supply chain. So there will be a period of extreme adjustment here coming up. Now let me pass on to Madeleine, and thank you all.

Thank you so much, Fernanda. All right, everybody. I'm going to give just an update on tariffs and the countries involved. The one thing I can tell you all is we should have news, of course, this afternoon based on President Trump's announcement this afternoon at the Rose Garden, as Fernanda mentioned, it's at 1 p.m. Pacific, 4 p.m. Eastern. So we will have a lot more updates at that point. I would also tell you that we have another broad-scale webinar next week on April 9, and that one will include all the updates that are announced this afternoon. We did get one small update on aluminum derivatives and I'll get into that when I cover steel and aluminum. So not good news for those who enjoy their beer. So anyway. But we'll get into that in a moment. But just to level set and really just kind of a recap of where we are. So IEEPA, remember, this is that International Emergency Economic Powers Act. And this is the first time we've seen this being used in regards to tariffs. And this is where President Trump has declared a national emergency on 2 fronts. One on fentanyl, and as a result, there have been -- and there's a total now of a 20% tariff, which has been put on all goods from China and Hong Kong, started originally at 10% with an Executive Order that was issued February 1, went into effect on the 4th of February. And this was a result of a national emergency declared by President Trump for fentanyl. Basically, he was saying, hey, China is not doing enough to curb the influx or the inflow of fentanyl into the United States. And he reissued another Executive Order on March 3 that went into effect for an additional 10% tariff on all goods from China and Hong Kong on March 4. So as a result, a 20% tariff. And then for Canada and Mexico, as we know, this was kind of a real back and forth. It was difficult to keep up with at the beginning of March. But same thing in the sense that President Trump declared a national emergency in regards to fentanyl, both on the Canadian and Mexican border saying that there was too much fentanyl coming into the U.S. Mexico and Canada were not doing enough and also in regards to illegal immigration. So those executive orders were issued also on February 3, but both at the time, Prime Minister Trudeau and President Sheinbaum had discussions with President Trump said, hey, we are going to do more in regards to immigration and fentanyl. We're adding more troops to our borders. And President Trump said, okay, that sounds good. I'm going to pause and not implement these tariffs. However, he did come back around on March 3, where there was a customs message issued to the trade. And on March 4, those tariffs were put into effect. 25% for all goods from Canada and Mexico, 10% for all energy resources coming from Canada. That was short-lived. It was only a few days. It caused a lot of chaos though along the borders but there was an additional Executive Order issued on March 6. That was based on the 3 -- the big 3 automotive companies, U.S. automotive companies that talked to President Trump. They said, hey, we really need you to reconsider this. This is really going to be a detriment to the automotive industry. We have USMCA in place. And a follow-up conversation by President Trump and President Sheinbaum from Mexico and after those conversations, there was an Executive Order issued saying that, hey, all goods that were qualifying for USMCA are exempt from the 25%. So currently, until maybe this afternoon, we have 0% on all USMCA qualifying goods from Canada and Mexico, 25% on all non-USMCA goods from Canada and Mexico, 10% for all energy goods or energy resources from Canada and a 10% tariff on potash from Canada and Mexico, and that's an ingredient used in fertilizer, I had to look it up. But I think the important thing to remember everyone is what's going to happen this afternoon because that pause on all goods qualifying for USMCA, it was not really clear. I think in the Executive Order, there wasn't a final date provided, though I think in statements from the Trump administration, it was supposed to end in a month. So we'll see if there's more clarity that comes out this afternoon in the update provided by the administration. So everyone's on the edge of their seat watching their phones and news like crazy to see what will happen. But that's still the current state of affairs. And then if we go to the next slide, please. The other thing that's still open that's confusing and that we don't have a real clear answer on from the Trump administration is whether if you're crossing goods into the United States, products of Canada or Mexico, you're not able at the moment of crossing to claim USMCA. But later, you are able to qualify your goods for USMCA. Normally, we can file what's called a 5.20(d) and reclaim the duties that you had paid when the goods first entered into the United States. The one thing that's not real clear, and it was based off of some comments from a law firm is, can you reclaim also the IEEPA duties, the International Emergency Economic Powers Act that the duties assessed of 25%. And that is not completely clear. We have also reached out to customs headquarters for guidance on that. We have not seen any guidance on that. So it's still a little unclear on whether the IEEPA duties can be claimed under a 5.20(d) post-entry process. So more to come on that. We hope that there will be more guidance provided, but that's still an open question. Go to the next slide, please. So the international response on these IEEPA duties. Canada was very quick to respond. They had responded initially in the beginning of February. They, of course, did not implement anything at that point because there was a pause put on those duties. But as of March 4, they implemented 25% tariff on $30 billion worth of U.S. goods. Those include food, household items, tools, tires, tobacco, alcohol, you see the list there. And Canada also lodged a complaint with the World Trade Organization on March 5. They do have an entirely -- an entire additional list of $125 billion worth of goods from the U.S. that are slated to go into effect, possibly even maybe later today or tomorrow depends on what President Trump announces this afternoon, but they do have a big list of other items that they will implement a tariff on U.S. goods depending on the information shared this afternoon. President Sheinbaum, she also has a list. It was called Plan B of tariffs that they will implement on U.S. goods. Again, we don't know what's on that list. Again, depending on what's announced this afternoon that Mexico maybe, will or may implement retaliatory tariffs. They also have a list of nontariff actions that they will take. And again, it depends on what comes out this afternoon. So we're all on the edge of our seats. China/Hong Kong, they did respond with retaliatory tariffs, both on February 10 and March 10, and they also implemented non-tariff actions. So on the tariff front, they implemented a 15% tariff on coal and liquefied natural gas and a 10% tariff on crude oil, agriculture machinery, large displacement automobiles and pickup trucks from the United States. As a nontariff action, they started an antitrust investigation into Google, and they launched a WTO dispute over these additional tariffs that we implemented on our side. And then they implemented more tariffs on March 10, 15% tariff on agricultural products and a 10% tariff on sorghum, soybeans pork, beef, food items. And they, in terms of nontariff actions, they added 10 U.S. entities to the nonreliable entity list and 15 U.S. entities to the export control list. They revoked some U.S. soybean import -- for import U.S. soybean exporters. They're licensed into the -- into China, and they stopped -- they were stopping U.S. lumber shipments looking for insects, et cetera. So they have implemented all of that. I -- we assume they will implement more if -- depending on what retaliatory or what tariffs, reciprocal tariffs President Trump announces this afternoon. And China has also retaliated against Canada. Canada implemented a 100% tariff on electric vehicles from China. So in response to that, China has implemented 100% tariff on Canadian rapeseed oil, which went into effect 20th of March and a 25% tariff on aquatic products and pork. So you see the list of items there. So it's a lot of back and forth. And if we truly implement all these reciprocal tariffs as Fernanda talked about, this afternoon, we will see, I'm sure, a much broader international response. And we can go to the next slide, please. So the big news, and I think this obviously affected the aerospace industry quite a bit is the steel and aluminum tariffs. Those went into effect on March 12, including derivatives. This was big news, and it caused a lot of chaos as well. These tariffs though were implemented under Section 232 of the Trade Expansion Act of 1962 which has to do with National Security. President Trump implemented steel and aluminum tariffs back under his first administration. And the Commerce Department did an investigation at that time and said, hey, we don't have enough steel, domestic steel and domestic aluminum to be able to -- for our military to ensure that our military is able to acquire enough of that -- of aluminum and steel to create additional -- build additional tanks, et cetera. So when President Trump came back into office, he believes that we still don't have enough domestic steel and aluminum. And so as a result, he issued 2 Memorandums, one on February 10 and one on February 11. And he said, hey, across the board, we're doing a 25% tariff on all articles of steel and aluminum, exclusion is Russia, where it's 200%. There's no exemptions this time for certain countries. There's also no product exclusions and the administration also instructed CBP, Customs and Border Protection, to prioritize misclassification issues on steel and aluminum. So there is going to be a lot of focus on steel and aluminum entries by Customs and Border Protection. No drawback is allowed on these duties, and there is no -- even if your goods were admitted into under privileged foreign, there's no date protection, your goods are subject to these additional tariffs. So pretty strict. The thing that I think really made things more difficult are the derivatives. So if we go to the next slide, please. This just shows kind of a time line of the original steel and aluminum list that were put into effect in 2018 and 2019, where we had steel and aluminum 25% on full value. And then the original steel and aluminum derivative list where it was a 25% on full value. But then we got into the recent notifications, where, we do have steel and aluminum derivative list within chapter 73 and 76. And there, the 25% is assessed on the full value. But where it gets very tricky is the derivative list outside of Chapter 73 and 76. And for those, the 25% is only assessed on the steel and aluminum content. So you have to know the steel and aluminum content as well as the country of origin for melt and pour if it's steel, and smelt and cast if it's aluminum. And this is where it gets very, very tricky. And then FTZ, of course, it's 25% on the full value. This is just showing the different tariff numbers that were implemented for each of these lists. So these are -- it's very tricky, and it's getting to be a lot more complicated to keep track of this. In addition, and we can go to the next slide, please. There's a -- what they call a Section 232 on steel and aluminum FAQ that is posted by CBP. And it's on their website. I would just say the first 2 points here are the most important. If you don't know for derivatives, if you don't know the melts and pour country or the steel derivative, it's okay to claim other. You can instruct your customs broker to claim other. But the tricky one was if you didn't know your smelt and cast country on aluminum derivatives and originally, the guidance from CBP was claim Russia and paid the 200% and then later when you find out what the actual country is for smelting cast, come back and file post entry. But they've changed that guidance as of last week. And now you can report any country, but the U.S. as your country of smelt and cast on aluminum derivatives. So that's important to note. Luckily, that change was made, so you no longer have to claim Russia on this if you don't know. There's some other good information, which is listed here on the slide, but I recommend that you check this out -- in interest of time, check this out on CBP's website, and we will send you the link. And of course, you'll get a copy of the presentation. So if we go to the next slide, please, this was just the response on the steel and aluminum from Europe and Canada. Europe is postponing again, depending on what happens this afternoon, they're postponing retaliatory tariffs until mid-April. They're, again, waiting to see what happens this afternoon. Canada did put in a 25% tariff on $30 billion worth of U.S. goods targeting steel and aluminum. That went into effect March 13. And they have another $155 billion worth of U.S. goods targeted on a list depending on what happens this afternoon. The one other thing I meant to mention on the steel and aluminum specifically, on aluminum derivatives. This morning, there was a federal register notice issued on imported beer and empty aluminum cans. Those are now subject to an additional 25%. Those derivative lifts are going to continue to change. So if you're a beer fan, I would suggest going out tonight and purchasing maybe an extra supply. So anyway, that did come out this morning. But again, we'll see what else happens this afternoon. So -- that's just a quick update. And then something, I know this is not on aerospace, but it's important to note what happened last week on automobiles and automobile parts. Again, on April 3, we're going to see 25% tariff on all imported automobiles. Automobile parts, we don't know if that will be implemented on April 3, but it can be as late as May 3. The interesting thing about autos and auto parts is that the 25% will not apply to just pure U.S. content, which means our automotive friends will need to break out the U.S. content from the non-U.S. content for USMCA qualifying autos and automobile parts. So that will be tricky. We should see more. Hopefully, we don't even have the Annex of tariff numbers unless it's being released right now. But as of last night, we don't even have the Annex of tariff numbers. So hopefully, we will see that also today, but that was also a big change. And here, I'm just showing the complexity of how these tariffs are growing in complexity. January 1, if you were importing an aluminum widget from China, these are the additional duties that you would be paying. Section 301 is still an effect that went into effect under President Trump's first administration, President Biden maintained those tariffs. They are administered by the U.S. Trade Representative's office and they're still in place. Then you had Section 232, which was in place at the time. It was only 10% on aluminum on January 1 and then, of course, the general -- the general duty rate for that item. You see how that changed March 12 with the steel and aluminum going to 25% and then the IEEPA tariff from China at 20%. And then to the right, under April 9, it's April 9 because that's when our next webinar is taking place. Please note, this is purely hypothetical on the right. But potentially, if we have a reciprocal tariff on China announced this afternoon. Potentially, let's say, 23%, and we're just grabbing that out of the air, and if the Venezuelan secondary tariff goes into effect, this is on countries that are purchasing oil from Venezuela. China is a fairly large purchaser of oil from Venezuela. So if that goes into effect, and it truly is 25%, this is what an aluminum widget would look like from China potentially in duties of $81. Again, purely hypothetical under April 9. So we have it highlighted here in red, just so that you know, this is purely hypothetical, but could look that way. We have to await news this afternoon. So key takeaways, everyone. I think the biggest thing to note is just to track all these developments. We're all trying to as best we can. There are several different new sources that are out there are government sites. We do issue news flashes and issue blogs and information as fast as we can, but there's all kinds of new sources from law firms, from the government itself, general trade updates, news updates like International Trade Today, World Trade Online. So there's a plethora of information out there that you can choose from. And really, I guess, on the right there, there's some other points to note, really look at your country of origin. There are several different things that you can do at this point to get ready or handle, manage as best as possible, all these changes. And then since we're coming to the end here, just lastly, for those of you who are licensed brokers, there is the certification from the -- that we did get this particular presentation certified from the NCBFAA certification number there in the middle of the screen. Again, you'll get a copy of this presentation, so you can record your continuing education credit hours. Sorry, that was very fast at the end, Samantha?

I know a proverbial hook, I guess, Madeleine. Unfortunately, we are closing in on time here, and I -- do we have a second? Do you see any questions in the chat or in the Q&A box that you feel like are really important for the whole group? I know we've got some questions about aluminum, derivatives, whether or not they apply to even items that they don't, maybe don't contain aluminum. And then just questions as well about steel and aluminum, country of smelt. So I don't know if you see any of those you want to address really quickly. We've got about a minute left, unfortunately.

Gosh, I have to read them. Yes...

We can also -- just to let you all know, we can also address these on the side and make sure that you get answers to these are connected with your Expeditors representative.

Yes. I think that's maybe what we should do, Samantha, is we can get them back the answers to these, as we normally do. That would be great since we only have a minute.

So much to cover in so little time, right? I will just put up this page really quick. So as you guys do have 1 minute left, these QR codes will take you to the registration pages for each of our upcoming events in April. As Madeleine mentioned, we will have U.S. Customs market update again next week and then Mexico Customs market update and then another U.S. customers market update at the very end of the month. So lots of options for you all to stay up to date. We do hope that you found the content presented today valuable and we appreciate you guys joining us. Madeleine, Fernanda, Oscar. Thank you all.

Yes. Thanks so much, everybody.

Thank you, everybody.

Last question. Thank you.

Thank you.