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

Hello, everyone, and welcome to our Mexico Customs market update. Okay. I'm going to go ahead and get started just to be respectful of everyone's time. I'm sure we'll have plenty more people joining us as everyone's calendars start to remind them what's next in their schedule today. Again, you are joining us for the Mexico Customs market update presented by Expeditors. My name is Samantha Hurst, and I will be supporting as host here in the background as David Sanchez, our speaker, gets started with content here in a bit. If you have any questions or issues, you're welcome to e-mail me through the e-mail address that you received your confirmation e-mail from, and I'll be happy to support you as best as possible. A few housekeeping items. We'll go through, David, if you can progress to the next slide. We're just going to go over a quick disclaimer here. Obviously, if you've joined one of our webinars before, you've heard us mention that these webinar content is for informational purposes only. We do not encourage you to rely on them, of course, for legal, business or financial decisions. All the information that we provide is based on information in the public domain. And so again, it's just really -- we provide this content to support you from a knowledge base in your business and your supply chain. So now for a little bit more about how this will flow, especially for those of you that maybe have not joined us for a webinar in the past. On this next slide, we'll show you information about how this will work. We have 45 minutes of content, typically with a Q&A session to follow. If you do have questions as we go throughout this webinar, you could drop those into the Q&A box that you should see on your control panel. And we will do our best to answer them most likely towards the end of today's session. One of the questions we always get is how do I receive the slides and the recording. We are recording today, as you might have noticed, and we will provide those at the end of a short feedback survey that you will receive via e-mail from myself, typically within about 2 hours of this event wrapping up. Now at the end of that survey, I've had some people ask questions about this before. At the very end, when you complete it, it will give you a new page that just says, thank you for completing the survey, and you should see a link right there on that page that will carry you to the landing page, and that's where you can find slides and today's reporting. Just wanted to clarify that as I know some people have missed that in the past. Now finally, how do I get information on future webinars. You can subscribe to our webinar invite as well as our market updates. So now just briefly, I'll introduce David and let him get started with the content. So David Sanchez is with us today as our speaker, and he is our Regional Manager for Customs for Mexico. David, I'll let you take it away.

Thank you very much. David Sanchez, I'm the -- as Sam was saying, I am the Regional Customs Manager for Mexico. I've been with Expeditors for 25 years and have already [indiscernible] 35 years in the industry and job-related activities, Mexican customs, including customs official and private sector in Mexico City originally from. I'm going to go to the agenda. We're going to review 2 main or 2 topics that are really affecting or that are really making an impact to how we used to do business and how we have to start thinking and moving towards the future. And this is not necessarily totally new, but I hope that I can explain through the presentation or give you insights through the presentation on why you have seen so many changes and things going on in Mexico. So the agenda will be -- we're going to review the current customs environment and political environment. Customs will be the national applications and how the Mexican government has been moving on and then the political environment is going to be more related to our relation -- current relation with the U.S. So on the current customs environment, what has been going on? What has happened in Mexico in, I would say, for the past maybe 3 years now. The Mexican customs, they used to fall under the umbrella of the Mexican IRS. So the Mexican government, they decided to use the military and the marine forces to handle all the customs operations and the rhetoric or the speech that the previous President pushed through in order to make this happen, it was that Mexican customs was extremely corrupt. It was like big or one of the biggest red flag within the Mexican government and within, in general, the country that Mexican customs was extremely corrupt. So by using the military, they were pushing again the idea that customs could be -- corruption could be controlled and also because of the government expense control, that will also make sense because they will have a lot of savings by using a military force that were already paid and they could avoid some expenses. So what happened, in 2021, the Mexican government established that we're going to be creating the Mexican customs agency in order for us to be able to have a bigger impact. The Mexican customs used to fall under the umbrella of the IRS, the SAT. So they said we're going to have an agency, a stand-alone agency that is going to look similar. They didn't say it, but the plan was for it to look similar to the U.S. CBP, meaning that there's going to be military, there's going to be part of what we call the National Guard, which will be the same or similar to the CBP. And then they created this stand-alone agency with military and marine -- or mainly military and the support of the Marine Force in order to control and to handle the administration of all customs activity. So what happened with this change? Keep in mind that the reason why the government switched to a military court in customs, it was because it was super corrupt. So what happened was the military, the face-to-face interactions with the actors of trade, which the importers and exporters, the maquila industry or the manufacturing industry, the Mexican brokers and the legal assessors that they -- we used to be groups that have very good interactions with customs. The face-to-face interactions pretty much they went out. They were reluctant that the military because, again, one of the initial or the main reason why they got into customs was because customs was super corrupt and then all the actors or all the groups interacting with customs, they were correct. So there was a big impact on how those interactions happened. Also, a big thing in regards to support and consistency. Support means that in the past, if there was an issue or some differences between the criteria between customs administration, let's say, on the East Coast and on the West Coast of Mexico, Manzanillo and [indiscernible] the brokers, the maquiladora or the IMMEX industries through our legal assessors, what I call legacy groups, old legacy groups, we have the door open with the authorities like 24/7. So we were able, in weekly meetings, to point out and to present this type of situation type of -- again, different criteria. So customs will issue what we call local ruling, [indiscernible]. So they were actually issuing rulings in order to provide consistency throughout the ports and applicability for whatever new law or new requirement, if there were some doubts including pushing some changes in the law, in the foreign trade rules in order for those criteria to become part of the law eventually. So that was a big support because that makes the process very clear for all parties and also will add consistency because we -- as a national broker or broker that we operate in pretty much all ports of entry, then we didn't have to guess what was going to be the criteria of each port of entry. Well, that was also because of, again, the relation and the fear of corruption, that's something that was lost through the changing process. In addition to the -- again, the legacy groups, what I call, which is the CAAAREM, the customs brokers association, legal [indiscernible] and the manufacturing maquila industry, we lost all the official [indiscernible]. So we don't have that consistency. We don't have that open door anymore. We have like -- the door is open for us to be there. However, communication-wise, it was diminish all the efforts and all the progress that those groups have made. For now, it's gone. In addition to that, what happened. The Mexican customs, again, they're thinking about that some of these groups or we have factors, mainly the brokers and the IMMEX industry, the importers and exporters who were part of the corruption. So they started a lot of investigations in order to check, confirm, review what was going on with the Mexican imports. So at the end of last year, and we're going to touch base this on the political environment also because it's like a combination of situation. The Mexican government, they actually start suspending in the process of revocation of several brokers' licenses. And if you're living and you have business in Mexico, it's very likely that you have -- it's very possible that you have had issues with the license and that you have to switch to a backup and most likely, very possible -- very probable that your process has been disrupted for a couple of weeks, maybe a couple of days at least. But the Mexican brokers, they are undergoing this scrutiny and the Mexican government is suspending licenses. As of last week, the information that we have from the brokers association is that there were 41 licenses suspended. And remember that in Mexico, because Mexican government previously or in the past and still -- the idea was why we need to interact with a couple of hundred thousands of importers and exporters. So we'd rather just work or push the law and compliance through the brokers. So there was about 800 brokers in Mexico, and they have suspended about 5%. And this week, we learned that additional brokers licenses, they have been placed in suspension. And the brokers association, we don't have a clear -- when and if those licenses are going to be able to recover, meaning that is there going to be -- the hold of the suspension is going to go away or they eventually going to be revoked because they're in that process of revocation. Also, what we've seen with the IMMEX or the maquiladora industry is that there's been a lot of cancellations of the IMMEX, the maquiladora programs for entities. So suddenly, one morning, they just wake up and they don't have a valid program anymore or they are pushing the ropes, I will say, from the VAT certification, which allows, again, the VAT certification allows the IMMEX, the maquiladora industry to import goods without 16% slab VAT or value-added tax that we have in Mexico. They require the VAT certification in order to waive or to defer those tax at the time of entry. So we've also seen a lot of movement of the VAT certification cancelation, meaning that if you import a couple of million dollars in goods or in some cases, technology, they import way more in value. Now they're subject to 16%. So that's a process killer because the flow and for the IMMEX entity, the maquiladora that are not really used to pay those type of amounts, then it makes impossible for the process to keep a certain level of volume and value. And in addition, yesterday, there was -- during the daily conference of the President Sheinbaum, she actually talked about this. It was just yesterday. They were talking about the additional investigations now to the Mexican [indiscernible], the fiscal precinct that operate -- very similar to the FDC. And they mentioned that they are under investigation because they fear or they have a clue that possibly this type of locations, service providers, they are pretty much supporting or promoting what they call the technical confidence, meaning that goods are imported into these locations without -- these are either duty-free or duty deferred. However, once in those locations, they are allowing goods to enter the national market without payment of the value-added tax and service tax, which is, again, I think it's lack of understanding how these locations are used because mainly these locations are used for -- and the IMMEX and also the RFPs, FDCs are used mainly to keep inventories for manufacturing. So really, it's raw materials are kept in these locations. So the idea that those raw materials somehow are entering the national market. We have to think that Mexico, we really don't have an industry. All the industry, it's foreign. If it's your company, foreign corporations that they establish in Mexico with their own technology, with their own resources, meaning equipment machinery and Mexico only provides the manufacturing. So again, I think that there's many things going on with the changes in government, in how the -- they're not that new government anymore, 6 years with the new party with the left. But still, I think the idea and the understanding of all the previous years of foreign trade is not there. I still have some doubts, and I think they're acting in a way that is hurting in general, the process. And again, hopefully, the things can change eventually. With this change with customs, the transition to the NAV, meaning the [indiscernible] or Mexican customs agency, previously operating under the SAT under the IRS, the system -- the custom system is owned still by the IRS. So the system was designed as a revenue generator, but revenue collection system where the main or the principal function of the system was to show duties, taxes and in general payments. So the Mexican customs is creating its own system. It was actually the second week of February. I think it was announced everywhere that it was going to be some testing in the system the first week of February, and it was moved to the second week of that month. And it was actually some tests that authorities were doing with the new custom system and also the single window. It was mainly the connectivity because the single window, Mexican customs and in general, the government agencies are fully paperless. So they had to make sure that the connectivity was working with what is going to be the new system. Still it's not the new system that we went back to the IRS one, but you can expect in the next month we're going to be transitioning. It is possible that back then in the test week, we have to use the single window in -- it was like a contingency. They prepare a special contingency to upload and to submit documents through a single window, which actually ended like in 3 days, everything was okay. So it is likely that when we have the full implementation, we may have or we may experience 1 week of some sort of delays. But the reality is that during testing in February, everything went well. And lastly, on customs, they understand that there was -- they had a lack of background in customs, which was criticized and it was openly mentioned and discussed. So the Marine Corps, the Ministry of Marine, it is a Ministry of Mexico Secretary, Secretary of Marine. They actually developed a customs and national security and foreign trade. There's 2 degrees that they implemented. It is a degree. It's more like a minor. It's a 2-year program, and they can extend the minor like to a major, like the full 4 years program for customs careers degree. So they are, let's say, that pushing and making in their vision as much as possible in order to change that reality that when we started the transition, they had 0 background on customs and now with experience now with the careers, they're trying to shift that into a more hopefully efficient and better experience with actors of the foreign trade. Just a few pictures on the system. Also, there is a system -- new operation system from customs from [indiscernible] is more focused on operations and security. So the SAT was fully tax duties, fiscalization, monetary, revenue -- not generation, but revenue, safekeeping. Now the system -- Mexican custom system is more focused on security and the operations side. So we're going to move on to the political environment. And I will split the current situation in 2 stages. The U.S. pre-election and then post-election. So what happened during the pre-election, and we're going to go in the next slide in more detail. So during the pre-election, what the Mexican government was doing and listening, it was that Mexico was supporting or helping or not controlling Chinese goods coming into the U.S. So the Mexican -- pretty much Mexico was facilitating this triangulation of goods coming from China. So what Mexican government, they want -- and I think this is something that it's doing in a correct way, the government, there's an obvious alignment of Mexico with the U.S. trade wars, not today, not this year. It's been going on, I would say, for quite some time now. And it was made more obvious previous the election with -- during the maybe a couple of past years that Mexico was really making us, again, many actions in order to safeguard and to keep a good relation showing support with the trade wars against China. And again, we're going to go in more detail in the following slide. Then the post-election, meaning post-election is going to be the tariffs, right? So what is going on in Mexico and what is really happening with the tariffs in Mexico. And it's important because if I've been part of several, I would say, maybe 3, 4, maybe 5 conferences and presentations in regards to how the tariffs apply in Mexico. And most of them, after April 2 conference, they say or [indiscernible] and comments are Mexico was not part of the tariffs. So we have -- Mexico has a second chance. So [indiscernible] it is the U.S. law. I don't understand this very well. I can talk about this because we have a huge [indiscernible] team finding entries every day, and they actually support me and help me out to understand this. So the Mexican -- or most of the Mexican area is kind of. So we do have rates in Mexico, steel and aluminum. You all know that they do apply. We have the vehicles and auto parts at 25% USMCA or not. Steel and aluminum is the same USMCA or not, it is irrelevant because, of course, the portion for USMCA, the portion of U.S.A. national production, regardless if it's USMCA or not can be subject -- they can be -- they're not subject to the duty or they can be deducted from the price. And then we have the fentanyl and immigration tax at 25% except for USMCA, that's where we do have an exception. And if Mexico complies with U.S. or meets U.S. expectations on reducing filing both the fentanyl and immigration, we will get a 13% reduction. So the best case scenario as of now is that Mexico will be at 12% on the IEEPA rate. And then the IEEPA is not applicable to Mexico because it's already inclusive in the other. So this is what Mexico is leaving. I think that in general, the market and the actors, not government, but the actors, there's still lack of understanding and then it's complicated because there's 2 sections and there's the IEEPA. So it is hard to understand the difference if you're not part of it. The government, I think they do have an idea, a clear idea of what is going on. And again, there's actions that are being followed and taken in order to, let's say, attack the current situation. Number one, the most important is that Mexico decided and I would say, later in February, Mexico decided not to retaliate against the U.S. because initially, the first maybe a couple of comments or comments on Mexican government, both from the President Sheinbaum and Minister of Economy, Ebrard. In both cases, they were saying that they will be looking to retaliate and they were looking to -- they will be applying rates and they were still figuring it out. However, now and since -- I would say, a couple of months now, the Mexican government has been clear that there's no reason and there's no case and just keep fighting and increasing and the rates is not going to be good for anyone. So no retaliation from Mexico as of now. So what happened the pre-election? As I mentioned, the Mexican government, it was obvious that this was aligned with everything that Mexico was doing with increasing rates and applying additional restrictions to Chinese product countervailing duties. It was obvious that, that was the direction. So we had finally, let's say, something tangible, something more objective. On July 10, the White House present this communication saying that both President Biden and President [indiscernible], they made an agreement to protect mainly the steel and aluminum market. So this was like -- now we have the picture clear that Mexico was really supporting the U.S. and it's in Mexico, definitely in Mexico's best interest, and this was, I would say, a very good tactic and a very good step that Mexican government took. Because normally, Mexico and I'm from Mexico, Mexico City originally, we don't like to be manhandled. So also in politics, it is hard for us and our pride, it is hard to say, okay, we're aligned, we're going to support, we're going to help. We always try to present ourselves as we're fully independent and that is not the case. The reality is that we depend, again, very much on the U.S. market, but not only the market because we are not producers. We're just maquila owners. We're just attenders of materials, and we transfer materials, we transfer assembly to assemblies or parts that we get from the U.S. companies mainly and that we end up sending back to the U.S. where they actually belong. So again, this is a good step in my opinion for Mexican government in order to just to make sure that we understand where we're sitting and that we act and we create activities based on those facts. So still during the pre-election and the items that I mentioned that Mexican government took to go by the trade wars is there was a duty -- a decree for -- Mexican government increased the duty rate for over 500 [indiscernible], mainly affecting Chinese origin goods. So even though it was general and the Mexican duties are not triggered -- the duty rates, the general duty rates, I mean, they're not triggered to specific countries like the U.S. rates are. It was obvious that because of statistical information, they were affecting mainly goods coming from China and also mainly the steel and aluminum products. So we were, again, aligned with the U.S. We started restriction to the Rule 8. Rule 8 is a special operation that allows the import of several goods for transformation through a special operation, Chapter 98, meaning that all the imports as far as for manufacturing, all the possible import requirements are not -- these products are not subject to. So the Mexican Ministry of Economy through the, let's say, the very, very light years of the Mexican trade, they open the option to import steel -- mainly steel products under this Rule 8, meaning that they don't have -- companies do not have to declare the actual quantities. They just have to declare like lots of products. And because they have -- the entities that are allowed to import under this special program, they are considered trustworthy and they're not going to be using steel to sell in Mexico. And that's the reality, who sells steel in Mexico. Actually, who consumes the steel in Mexico other than these manufacturing facilities. So in order to be aligned with the U.S., and this was unfortunate because not everything has unfortunate. This was very unfortunate. Mexican Minister of Economy said we're going to remove that option, that benefit. So manufacturing industries, they can no longer obtain -- just a few of them, they can obtain the Rule 8 or this special benefit. But pretty much what I've heard or what we have heard from customers in Mexico is that even though they can apply or you can still apply to obtain the benefit, there's no response from the Ministry of Economy. So pretty much you cannot use the benefit, you have to complete the full process to obtain the steel import permit, which is -- it can be very, very long and hard to take. Like you need now to register your mill test. In order to obtain the permits, you need a mill test certificate and those mill test certifies, they have to be registered now through a single window with -- well, not the single window, but through the Ministry of Economy and Ministry of Economy can take all the time they want and pretty much that's how they are enforcing or making sure they not are giving out additional permit certification. But once you have your mill test certificate in the Ministry of Economy, it really facilitates because now it's there for good, so you can use that approved document for any amount of steel imports that you might need. And then the countervailing duties or antidumping duties, this is a screenshot that I used in late October last year in order to -- this same topic presentation. We were explaining that there was a lot of movement to counter ratings against China. And you can see a lot of steel, a lot of plastic that is used in the auto industry. And there were about 10, 11 in late October, early November. And this is the new one. Just from starting this year, we moved or we increased the countervailing duties to China and revisions investigations from about 10, 11 to 36. So again, the Mexican government is really pushing and aligning with the U.S. trade wars and making sure that it's visible. And just additional restrictions for IMMEX. I already mentioned this, and it's always that all the actors, meaning the brokers, the IMMEX, imports and exporters, we are subject to both the local environment and also the political international environment. So again, also the politically alignment, the reason why they started the investigations against the maquiladoras, the RFPs and the brokers; it was actually because they were thought by the government to be the ones supporting the triangulation of Chinese goods into the U.S. So we have the 3. We already discussed these 3 situations with the bad certifications and the broker license suspensions. And again, in this one, I will say, make sure that you're dealing with Mexico that you have a really formal business continuity plan that you have backup licenses because unfortunately, it's not unlikely that you may suffer some sort of disruption. In our case, we work -- Expeditors, meaning we work in Mexico with 25 licenses. And 3 of them, they have been affected. Fortunately, we have a formal business continuity plan. So we have backups in all our locations. So again, the transition was, I won't to say easy, but it was there. We just need to provide additional step. But if you're not prepared with the backup, then pretty much there's no way you can import through those ports. The licenses have been completely suspended there on operational. And then on also the U.S. tariffs, and this is going to be very short because the Mexican government in early January, they presented what is considered like the long-term development plan for the country. It's called the Plan Mexico. And it was in the news and they presented -- I'm not sure if people recall, but in Mexico in the past, we used to have H1 made in Mexico stamp with an Eagle. So they revamped the eagle and they revamped that program to make sure that -- you don't have a long-term plan. I will call it, the Make Mexico Great Again plan because it really is based on increasing and moving manufacturing into Mexico, making sure there's plans not only for the manufacturing [indiscernible], but also simplification of processes. I'm going to go very quick through this information because as you said, this is a screenshot of the official document, and it's a first draft. So it's not really the final plan. It is public. It is available in Internet, but still the document shows that this is a first draft. It's not the plan and the document shows estimate date that they have not been met, obviously, because there are some other issues like the rates and other priorities. But we're going to go very quickly through the plan because eventually, this is going to be, I would say, hard and the Mexican government is going to pursue most of these elements. So what they want to do is they want to promote relocation to Mexico. They need to increase or they want to increase the regional content, Mexican content. They don't talk about regional value for USMCA because Mexico has plenty of preferred agreements. So they just want to increase the regional value by substitution, import substitution, meaning they don't want to import, we want to produce in Mexico. This is the relaunch of the Made in Mexico program, that's the [indiscernible] that I mentioned that it's going to be like the signed or the standard is going to be used and it's going to be like the diagram of this entire plan. Create more jobs in multiple manufacturing sectors. The manufacturing sectors are very, very specific. Those are very specific in the draft. Increase the level of domestic procurement, meaning that plants and also buying efforts from the Mexican government, they want to do it domestic, promote regional development in certain areas and also specialization, they will talk about specialization and increase the level of education in middle and superior, meaning the minor and major level. They want to focus more on engineering and more on -- instead of social sciences, more on technology to have, again, increase the Mexican participation, including intellectual property. So these are the main like the objectives. Economy, they want to -- government, they want to be within the top 10 globally in GDP, increase investments in order to make sure that we can have a development because still locally, we don't have the resources to create 1.5 million. And this plan is until 2030. I forgot to mention. The plan is for the next 5 years, accomplished by 2030, create 1.5 million of jobs, increase the national production or national content in 50% with Made in Mexico and then increase the content also on export goods in mainly these 5 industries, automotive, aerospace, electronics, semiconductors and pharma; increase public acquisition, 50% to everything national; create vaccine; something again, [indiscernible] mentioned a few days ago that we need to -- U.S. is looking to create some vaccines, Mexico, I'm not sure if it is related because they're from different cycles. Again, it's very similar to U.S. [indiscernible] reduced bureaucracy. So everything, I would say, Mexico is almost really paperless through a single window. So all the current requirements in order to establish an entity in Mexico, some of them, they are still -- they require presence of a person in front of the authority. Everything is going to be -- well, for this plan, everything is going to be moving to an electronic environment. And just a few details in that document that I was mentioning the Mexico plan, there's very clear information on, again, the industries. And in automotive and electromobility, they want to increase production by 10%, the national content by 15% and Mexico wants to -- they have the plan that we would like to start building our own brand. It's called the Olinia. It's a fully electric vehicle. In order to promote this, they're going to put back the Rule 8. Remember the benefit that I mentioned that no one can use it today. Well, here, they are acknowledging that in order for this to happen, they have to implement or make available some benefits that are really -- it's a must have in order to have a correct flow of operation. Aerospace, be within the top 10 in production globally, increase the national content by 10% and then some -- sorry, some dreams about going to space, which at times -- hopefully, they remove this from the plan, meaning that it's not that objective in my opinion. On semiconductors, we want to double -- we already have semiconductor manufacturing in New Mexico, want to double by 2030, the supply to the manufacturing sectors, reduce the dependency in 10% only. I found that point, I think it's more -- reduced dependency should be grow the original content, but I think 10%, it's low. But again, it is part of the initial draft. Collaborate with the U.S. It's clear that there was some questions on the collaboration. It is collaboration with the U.S. only to mention that the document -- the draft Plan Mexico actually mentions to collaborate with the U.S., and they do mention several U.S. agencies, including USAID. And then finally, chemical and oil industries. Also the Mexican President established a few months ago that they think that there's not going to be -- or most of the oil is going to be used in Mexico. There's not going to be exports of oil because they're going to be using and they want to develop the secondary and third industries of conversion of oil into plastic and other type of products. So they expect that after 3 years, growth is going to be at 10% because still they have to put things in the ground, making sure that the manufacturing and oil processing is there. And just make sure that they need investment. They want to bring investment in order to be able to promote this expectation, this goal. In summary, there's many changes going on still with Mexican customs, both in still getting the last, let's say, impact from the change to a military customs to have its own agency. Still, the relations are not very good. At the end of last year, they looked or maybe half 2024, the relationships, they looked like they were going in a good way and suddenly with the new President, like everything, we just went backwards. So we don't have the best relation, uncertainty to environment, we don't know what is going to happen, both with Mexican customs internal process with customs agency and then with the tariffs, we don't really know. It is really -- we do know that there's been going on several issues with brokers to make sure that you have a contingency plan, 1, maybe 2 additional brokers within your current provider that everything is ready just to switch, right? And then there's a national plan focus or that it's still a draft, but looks like it's going to be focusing on relocating, bringing more investment and production to Mexico. And Mexico is really looking to promote specialization of technology and also education. And that's it. And I think I'm a few minutes over. I'm sorry for that, but I hope you find this information interesting and helpful.

Absolutely. Thank you, David, so much for all that content. We know there's a lot of changes, obviously, going on in Mexico customs as well as here in the U.S. So we appreciate all that insight.

We do have a couple of questions. We've got about 5 more minutes left. So we'll try to hit as many of those as we can. There was one question that came in, David, about the steel and aluminum product, and they basically were looking for a clarification if you were referencing finished steel and aluminum or specifically raw product.

Well, in Mexico, one of the very good things about the Mexican requirements is that they are identified by the Mexican HTS and that's by the foreign trade law. So in order for you to know what your product is subject to requirements or also benefit, that's why always in Mexico, we're going to ask, what is the HTS, so we can figure it out. That's the reason why. So these are -- still it's more in the raw forms, meaning that flat, flat shapes. There's a couple of requirements, but mainly it's going to be raw or primary products. And then there's a couple of secondary products, maybe some bolts, nuts and some other type of articles that are also subject to it, but mainly they are in their primary forms.

And I don't know if you touched on this one. Someone asked for an update on textiles and IMMEX. I'm not sure that's clear enough...

One of the also actions that they've taken to IMMEX is not really textiles. I think that there's -- again, in the industry, I think that people that -- or information there, they said textiles cannot be imported by IMMEX entity, and that is not true. It's upper, which is not the same as textile. So Chapter 61, 62 and 63 of the tariff meaning 61 and some of the 94. And I'm telling you what, 61 is knitted goods; 62 is non-knitted or non-woven goods, meaning apparel, jackets, pants; 63 is accessories made of textile and Chapter 94 is bedding [indiscernible]. Those are the ones that are restricted to be imported through the IMMEX, only those. And it makes sense. Manufacturing industry-wide, they will be importing maybe uniforms or maybe clothing for the employees. But other than that, those are the restrictions. It's not textiles. It has to be apparel and articles of textiles for bedding, perhaps in general.

And I think we have time for one more at least, and this may be one that several people are curious about. We had a question about the current time line from start to approval. Basically, how long should people expect it to be taking for a USMCA paperwork? And I believe this is probably related to paperwork for USMCA qualifying good, if I'm guessing correctly.

Yes. That is going to be -- again, with the tariffs, this is going to be moved. It depends. It is to qualify good, definitely, there's a huge analysis that involves the enterprise system, meaning that what is your bill of material to understand if the products qualified, meaning the tariff switch and also tariff change and the regional value content. I would say it's not really once you have that information, which should be available in the Mexican -- in part of the IMMEX and the maquiladora control. You should have that information, let's say, ready available. I think it's more in the amount of parts. When I started working for Expeditors, I used to be a senior consultant at Detroit, I was actually in Detroid and for auto industry and we used to classify. And having all the information, all the product information in a single place, the estimate was only to classify 50 parts per day. So if you add the revision of the origin from the bill of material and the rule of origin, I would say that it will take maybe a couple of hours, I would say, my estimate. It's a couple of hours for each SKU for each part in order to confirm if it qualifies.

So definitely a lengthy process and probably even more companies working to try to get that qualification, correct?

Yes, resources will be likely needed and required in order to [indiscernible].

Absolutely makes sense. So definitely expect delays there...

[indiscernible].

I think it's the message, right? Definitely expect delays.

Yes. Yes. I mean the past, maybe not qualifying a good would represent 2%. Maybe it was, let's say, cheaper or least expensive to bring goods into the U.S. paying 2%. Now at 25%, it's different.

Absolutely. Well, David, thank you so much. And I do want to acknowledge that we see we have several questions left that we have not been able to get to, but we want to be respectful of everyone's time.

My way, please, and make sure...

Well, absolutely, David. Yes. We'll get them to you, and David, we'll make sure to get your answers back to you all. So thank you so much for joining us. Again, you will receive a survey just to get your feedback on today's webinar. And at the end of that, you will get a link to the landing page where you can find the slide deck and recording. So thank you all again for joining us. We hope you have a great day.

Thank you very much.