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

Good morning, and hello, everyone. We welcome you to Expeditors U.S. Customs Market Update. We appreciate you joining us this morning. We are going to go ahead and get started with some of our housekeeping items as people start to log on. So my name is Samantha Hurst, and I'm one of our managers for marketing and bids here with the Expeditors Americas region. And I will be supporting in the background as well as a few of my colleagues if you have any issues during today's webinar. Today's content will be about 55 minutes that we're going to try to answer questions as we go. So if you will submit your questions in the Q&A window. We will answer them as we can. As I said, we typically have quite a few of our Americas customs team members on to support this. One question we always get is how do we receive the slides in the recording. So as typical, you will receive a short feedback survey after the event today, it typically will go out within 2 hours of the event wrapping up. And once you complete that, you will be given a link to the landing page where you can find the recording, it's passcode and the slides. So finally, also people ask how do we get more information. Maybe this is your first time joining a webinar with Expeditors. You can subscribe to receive all of our invites through this QR code as well as global market updates. So now I will introduce our speakers. These people are certainly no stranger to many of you who have joined our customs market updates throughout this year. We have with us Madeleine Veigel. She's our Senior Director of Customs for the Americas. Brenda Smith, who is our Global Director for Government outreach; Ted Henderson, who's our Senior Adviser for Customs; and Stephanie Holloway, who's our Regional Manager for customs in the Americas. And I will pass it on to them. Ted, take us away.

Thank you so much. And thanks again, everyone, for joining the call today. Just a real quick reminder that we are not a law firm. We are a global logistics company and -- as Samantha pointed out, the people who are leading this webinar today were all from our customs product team. And our goal is to provide information. We're not legal or financial advice. Hopefully, you appreciate this information, and you do find it helpful. Let's take a quick look at the agenda as we get a feel how we're going. Typical flow of our webinars for those of you who've been on before, it's really just the major topics that we want to highlight, most recent trade actions to start. We'll spend some time looking at what's on the horizon. And then we're going to really try to spend some time speaking on a couple of our frequently asked questions that pop up in the course of probably the last month or 2. There were a couple of announcements from President Trump yesterday, one with potential for future relief for -- those of you who are related to the auto sector and then certainly one for potential refunds for a number of folks, and we will be discussing those as well. We work critically afternoon and evening to try to distill out the key information from those announcements for you. So we can speak to that today. Again, just remember, we're speaking to information that's based on public announcements, either from President Trump, U.S. government agencies, other government agencies around the globe. We're not -- we try not to offer our opinions, our speculations. We try not to be the Magic 8 Ball and think, hey, this is really where things are going. We just try to focus on the facts in front of us. And definitely, we try not to speak to any political issues. We're just, again, trying to inform you with facts. And hopefully, you can make better decisions about your business. Real just quick reminder, if you're coming on now. Please post your questions in the Q&A box, and we will do our best to get through them as we go. And one of the common questions that we always answer is, how do I get the slides and you will get an opportunity to receive them after this presentation. All right. Snapshot of what's going on in the world right now with our current trade actions. The first bullet point on this slide is not necessarily a tariff action in and of itself, but perhaps giving us some guidance on future tariff actions. And this is about the America First trade policy reports that President Trump, one of his first executive orders was an issuance to a number of government agencies to do reporting about certain key issues that are relevant to U.S. trade, import and export from a variety of areas. Those reports were due in earlier this month. Those reports are in. An executive summary has been published on whitehouse.gov and a little bit later in this discussion Brenda will be talking about it and some key points from that. Beyond that, then we do speak to the major tariffs. So whether that's the IEEPA tariffs for China, Hong Kong, Canada, Mexico. And then the Section 232 tariffs that are in place right now, we'll speak to those specifically in the auto later. And then, of course, the reciprocal tariffs and we'll have a little discussion about that as it goes. Just next slide shows us a view of things that have happened in April and things that we see coming up in the next few days and then certainly later in the summer. So the Section 232 tariffs on automobiles, light passenger vehicles, things like that, light trucks. That went into effect at the beginning of April. At the beginning of May, we're going to see the counterpart to that related to automotive parts. So we'll talk a little bit about that in a bit. You see a cluster in kind of the left middle of this graph that speaks to the reciprocal tariff actions. And how they were at one point, just a basic 10%, then we saw a bespoke rate for certain countries coming in. And then we saw most countries go back to 10%. And China, of course, went up to 125%. So we'll touch on this a little bit as it goes. But really, the things to think about, which we are going to spend some time on are the actions that are coming up at the end of this week, Friday and Saturday, the de minimis removal for China and Hong Kong and then again, the auto parts tariffs that comes in. Other key thing to just keep in mind, and we will certainly speak to the reciprocal tariffs is in July, that's the end of the 90-day pause. So we're expecting a lot of activity and with a number of other countries in the U.S. to sort out where those reciprocal tariffs end up. All right. Speaking of reciprocal tariffs, let's take a quick look at where we're at. For those of you who are on our webinar 2 weeks ago, I said this was the big darn deal. And then, of course, in the middle of our webinar, President Trump made an announcement on Truth Social that made it an even bigger deal at the time, and we're still in the midst of this as it goes. So right now, we are in a position, as I said, where reciprocal tariffs are in place. They are in place under the International Emergency Economic Powers Act and it's based to the national emergency declared by President Trump related to deficits with other countries, trade deficits primarily. So the tariffs that are in place, by and large, are 10% for all countries, kind of a universal tariff, if you will. And then for imports from China, Hong Kong, Macau, we're at 125%. And -- there is some good news, if you will, within these tariffs that there are a number of granted exemptions. And those are on the right side of the screen, as you look at it, we see that there are certainly kind of that basic idea that materials that are being donated or information materials are generally exempted under these tariffs. And then we don't see the stacking, the cumulative approach on reciprocal tariffs in certain areas. So steel and aluminum auto parts, there's a whole annex to generally is how we speak to it. That's related to the executive order that identifies a number of items that are accepted from exempted, if you will, from the reciprocal tariffs. Canada and Mexico in the eyes of President Trump stand on its own, and he doesn't lunt them into the reciprocal tariff activity that all other countries are facing. So the IEEPA tariffs that Canada and Mexico are subject to those stand on their own and are not cumulative with the other reciprocal tariff actions. Then you've got some other things that are in there and that really are not quite as significant things like the countries that are under column 2 duty rates already. So the thing that we really -- we're just -- I think the easiest thing to continue to say is we're incredibly uncertain as to where things are and where they will go right now. We certainly know these are incredibly impactful staggering financial hit to importers, particularly with goods from China. We've seen that with our top importers into the United States. The jump in duty payments has really just been staggering. People now are into the billions annually of duty payments based on these tariffs. We do not know specifically how long these 10% tariffs will be in place. We just know that there's a 90 day pause that we talked about until July. Brenda in a bit is going to talk about where we see the path forward on reciprocal tariffs. But I just keep reminding folks about this, that there's a couple of key things we have to think about just because the U.S. ultimately will come to an agreement with a certain country on what that final reciprocal tariff will be. Don't expect that the duty rate will automatically go to zero. We have to keep in mind that the U.S. already started out with a specific rate for a country. If you remember for that brief 1 day of April 9, there were specific rates for a number of countries, 60 countries out there and the EU. So let's take Vietnam as an easy example. The specific rate for Vietnam that's suspended right now is 46%. So we have to anticipate that at the conclusion of the negotiations between the U.S. and Vietnam we might see a duty rate from anything from 0 to 46%. And then honestly, if the negotiations don't go well, we might see a duty rate greater than 46%. So don't just think that our starting point, if you will, for negotiation is 10% and things can only go down. That's not necessarily the point. And then the other thing is, and I think Brenda might touch on this is -- we really don't know how the administration will implement these duty rates. We don't know if they're going to be on a country-by-country basis. Multiple countries dropped at 1 time or if we're just going to wait till the end of the 90-day suspension period, and then we'll see the new country rates. So again, lots of uncertainty around this. Things continue to change in this area. We see exemptions expanded a little bit just recently on this. So the best we can say is hanging there on this one. As your customs broker, a logistics partner, we're doing all we can to provide information and impact analysis and trying to help as we can. But honestly, we're all in this together. We're all facing the same amount of uncertainty. And quite frankly, the stresses of managing imports of goods in this environment that honestly is 10x more complex than any us have ever operated in. So hang in there and watch for some new announcements. I just mentioned that we saw an expansion of the exemptions, and I want to talk about that whether it comes to the semiconductor exemption that came up. So if we look on the next slide, I want to highlight the fact that there was a presidential memorandum that came up on the 11th of April, that clarified the specific -- the print from whitehouse.gov. It's a clarification of the exceptions under the EO that basically applies to reciprocal tariffs and the -- there was an exception already under Annex II that spoke to semiconductors. Well, on the 11th of April, we saw a new definition, if you will, of semiconductors provided by the White House. And that new definition of semiconductors encompass things like smartphones, computers, things, smart watches, things along that line. So there was an increased list of harmonized tariff schedule numbers that came out as part of this. So just again to highlight in this particular instance, -- the president's orders related to tariffs, they can be modified on short notice. It's absolutely critical to stay informed, seek out expert assistance, make sure you understand how each of these actions might impact your business and, quite frankly, be ready to pivot rather quickly as things go. Next thing I want to touch on is the de minimis exception that will be going away for goods from China and Hong Kong here in a day or 2 days, I guess. So this is -- we've talked about de minimis for a long time. It's in the public news quite a bit. Congress talks about it. The President talks about it. Number of companies are certainly built around the e-commerce business. This idea that low-value goods, goods valued at less than $800 can be brought into the U.S. without any type of formal entry duty payment. They also get to avoid the trade remedy tariffs, things like that. So we saw earlier in the original order from President Trump on the related to the IEEPA tariffs based on the fentanyl emergency, there was an effort to block the exemption for goods from China and Hong Kong that the de minimis exemption would take that away. That ban was in effect for basically a few days. The system that deals with the total process and the system from the government to the logistics providers to everybody, we're overwhelmed because as I remind folks, there are about 4-plus million goods that come in daily under the de minimis exemption right now. About 70% of them come from China and Hong Kong. They come through the postal network. They come through couriers, they come through heavyweight freight forwarders and different providers. So there are a number of mechanisms that how these goods come in the U.S. But again to suddenly take away the opportunity for the de minimis exemption was a bit too much for the system to handle. So after a couple of days, the President Trump amended his order, which allowed goods to use that de minimis exemption until there was a point where the Secretary of Commerce could certify that the government was ready to manage this. The government is now ready to manage this. We have the new order that goes into effect on the second of May. And that order does stipulate that no goods from China and Hong Kong may use the de minimis exemption. They will have to be entered. If they're not moving through the postal network, they will have to be entered by a party that qualified to make entry in ACE. ACE is the automated commercial environment that CBP operates. We as a customs broker, transmit our declarations, all brokers do through ACE. So it has to be entered through the system. That means no paper declarations. If you -- as customs has interpreted this, goods are going to be subject to all applicable duties. So that's trade remedy duties, the basic most favored nation rate, all of that sort of stuff. And customs did make it a little bit easier, if you will, for everyone to process it under this and expanded the use of informal entries to allow anything and everything, if you will, to -- even if the goods are subject to trade remedy tariffs to be entered into -- under the informal process if they're valued at $2500 or less. The postal network has their own rules and ways that have to be managed, and that is really just due to the fact that the postal service operates under their own -- posted under the international postal codes, plus they have to operate under Customs tariff codes. Bottom line on this one, we do not anticipate this one to be walked back or suspended. The government and customs has made it very clear. I was on the call with CBP last week as part of the working group in this area, and they state they are firmly prepared to move forward on this. So I would anticipate that we will not see another suspension on this. And I think Brendan will mention, we potentially will see an expansion of this de minimis exemption or expansion of the ban, if you will, to other countries. With that, I will pass it along to my colleagues to talk about some of the interesting things that did come up yesterday. So Stephanie, a way you go.

Thank you, Ted. Okay. So a lot of questions are coming in that are directly related to things that happened yesterday. So let's shake ourselves off and see if we can follow this. So first of all, we have what we're labeling sector tariffs because these are certain industries that the Trump administration is targeting to apply additional tariffs. And President Trump himself has been very clear about different sectors. He is honing in on, and I'll be showing some of those in a future slide as well. This is just kind of the first one that they have done outside of steel and aluminum. So at the end of March, and I think it was an executive order was issued on automotive or that covered the automotive sector. And it broken into 2 parts. It was autos and auto parts, and autos is passenger vehicles and light trucks. And what that did was put a 25% tariff on all of those specified HTS numbers, okay? And that started April 3. There were 2 exemptions that were given. First of all, if there was an HTS that you were using that didn't actually meet this criteria. You can use an exemption or if the vehicle was manufactured 25 years ago, okay? They also, in that said, "Hey, we do want to exempt the U.S. content portion from being tariffed or taxed at 25%. But at this point, the Department of Commerce has not given us that process. So for all practical purposes, anyone who's importing a passenger vehicle or a light truck right now is paying that 25%. So we are standing by, and that was one of the things that Ted showed on that time line slide. We are waiting for a way to handle this U.S. content in vehicles that are being imported, okay?. Secondly, this Saturday is May 3. And May 3 is when auto parts are going to go on, okay? So auto parts are going to be at 25% as well. They also have some exemptions that were given in that original executive order at the end of March. And that was an exemption for goods that don't meet their criteria, which is fine, and an exemption for USMCA qualifying auto parts, okay? But that was until the Department of Commerce gives a process for the U.S. content portion, okay? So as of right now, we will be able to not pay the 25% on anything that is USMCA qualifying, okay? This was the big twist that came out yesterday. So there was a proclamation issued. There is a link here. And if one of my team members can throw that into the webinar chat that through, like I said, a bit of a twist. This was covered extensively in the news yesterday, leading up to the proclamation being published, but essentially in a very small nutshell, automakers who build cars in the U.S. are going to be able to seek an import adjustment offset amount. That's the technical way that the administration defined it, but essentially, people keep using just the word credit, okay? And the -- however many vehicles you're producing in the U.S., you will be able to request it's a percentage portion of the sales value that will decrease over time. But then you can use that credit to apply it to your auto parts, right? In the proclamation, you can see there's going to be a number of different things that automakers will need to provide to the Department of Commerce. But right now, the Department of Commerce needs to put that process together, okay? And that is not done, this proclamation just came out yesterday, okay? So this is going to be something that all of us should be watching very closely, especially if you're in the auto parts business. The other twist that hadn't been reported in the news before the proclamation came out, is that automakers who build cars are light trucks in the U.S. could offer those credits to their suppliers if they import, okay? So this is something if you import auto parts and you're selling them to automakers. This is something that I'm sure your legal teams were already jumping on and trying to figure out how those allocations are seeing if your company can get some of that credit. I have no idea how this is going to shake out. This is less than however many hours old at this point. So we will see. But if you're in the auto parts business, you absolutely should take the time to read that proclamation because it is going to be of utmost importance for you to understand that. We also learned not from this proclamation executive order, but I will just make the statement. Steel and aluminum derivative duties are not going to stack on auto parts. So that was a big open question that people had, and we got that answered yesterday. So those will not stack together, okay? The auto parts, 25% will win, okay? We don't know how we're going to do that operationally yet, but we did get that question answered. FTZ products, these are kind of the standard things that we typically have been seeing in the executive orders. FTZs need to come in as privileged foreign, and then no drawback is available, okay? So a lot's happened in this space, but also not a lot because it was a lot of words. We don't have the process from commerce. We don't know how we're going to operationally apply this. It's just really saying this is the direction the administration wants to go, and there's a lot of pieces that still need to come together, okay? So with that said, this, I think, is hopefully kind of a basic way to look at it or think about it if you're in the auto parts space. So we have certain automobile parts in that box gives what the exact definition was in that original executive order. I also have the link to the Federal Register notice on this. So when you get this slide deck, you'll be able to go look at that yourself, okay? So on May 3, although we don't have the HTS numbers available, this is what we've been told that we will use and how the breakouts will occur. So we'll have 1 classification for qualifying auto parts. We have another 1 that's an exemption. It's essentially a 99 number we're going to use that has a free duty rate associated with it. But it's saying the -- I have goods that are in this HTS list, but they're not auto parts. And then there's another one. It's actually the same [ HTS ] number, but it's saying these are USMCA qualifying, okay? So that will give you that 0% for USMCA qualifying parts for now. Okay? That bottom box or those boxes down there, I'm trying to show at a future date, I have no idea if that will be Saturday or 5 weeks from now or 5 years from now, I have no idea. But USMCA auto parts eventually will not be exempt from tariffs, okay? And you will need to pay 25% on the non-U.S. content, okay? Like I said, again, we don't have a process for this. The Department of Commerce has not put out a process for this yet. Once that happens, we will have to pivot and adjust. So I can only imagine how many questions are in there about auto parts. The other executive order -- well, I guess the other was a proclamation. The other executive order that got issued yesterday addressed something that's called HTS stacking. So Jared, if you don't mind throwing this link in the chat, it is important to read this. You can start about halfway down, if you would like, start at the (1). That's where it gets it's good and helps explain this. Fair warning, you're going to need to get out of pen and paper to track it, but you can do it. I have confidence in you. So they issued this executive order. And it's the intent is to prevent the cumulative effect of overlapping trade remedies, okay? These are often called stacking, okay. So the chart below outlines the scenario is eligible for this treatment. So first and foremost, when you read the executive order, which I absolutely hope you do, you will see that not all trade remedies are on the table, okay? The original Section 301s are not on the table; reciprocal tariffs not on the table; antidumping, not on the table. There's a very small subset of trade remedies that are on the table, I guess, to keep using my terrible analogy for this executive order, okay? And I put them in this chart with some of my colleagues so that you can clearly hopefully see what opportunities you might have for a refund and how we're going to need to do entries going forward. So if you have paid IEEPA fentanyl and immigration duties, that's Canada and Mexico only, not China, IEEPA. And you paid Section 232 steel or aluminum, then you could get refunded your Section 232 steel or aluminum. So in that scenario, fentanyl and immigration is going to win, even though they're of the same duty rate, that's the one that is going to win. The other one will not be applicable, okay? The only time that those overlapped was starting March 12 onward, okay? The next scenario is IEEPA fentanyl and immigration duties for Canada and Mexico only and autos okay? If you paid those from April 3, right, because that's when auto started, onward, you will be refunded the IEEPA fentanyl and immigration duties, which is 25%. Same percentage is autos, right? It's just 25%, 25%. So those are what is on the table to be refunded. I did put the other scenarios in here that technically could occur based on the parameters of the executive quarter. But from a practical perspective, they don't actually occur because there's no HTS overlap. So I put them here because I went through the process, similar to many of you guys and you're like, "Hey, she didn't cover this scenario." I actually did, and I want to make sure everybody knew that we thought about those scenarios they're just not practical in application, okay? So with that said, this chart does not include auto parts because auto parts do not start until Saturday. I do not know what will happen between now and Saturday. CBP might provide us a way to make sure that these are not stacked. We might stack them. I don't know. So right now, this really just shows what's on the table. Also, CBP has until I think it's May 16, if I remember right, to come up with a process. So right now, we're going to need to, as a broker, keep filing the way that we were filing until we get instructions from customs on how to do this because if we start trying to leave out some of these HTS numbers, we could potentially get some rejects depending on how it sorts out. So we need to figure out what that looks like and then also how we're going to get our customers the refunds. So more to come. This is a very dynamic situation right now, but we look forward to making sure that you guys get your money back and then also get this implemented. So the biggest thing to take away from this is that there are certain trade remedies that will be eligible for this anti-stacking but there's many others that won't. So I will touch on those in a little bit. Brenda, with that said, what is on the horizon?

Stephanie, I don't know how I can top yours, and I'm not sure that anybody as brain space left to think about what might happen over the next few months. But what I want to try to do this morning is to give you all a bit of cheat sheet just so you've got this in the background. So as Ted mentioned and he walked through was what had already happened? Well, I want to give you the cheat sheet on what may happen. There is a tremendous amount of 232 activity underway. We'll talk a little bit more about the maritime action on cargo ships and ship-to-shore cranes. I'm not going to touch too much on potential tariffs associated with sales of Venezuelan oil and gas. We know that's out there. We haven't seen the Secretary of State, though, flag any countries for additional duties because of their interaction with Venezuela. But we do want you to keep in mind that there are, let's see, seven 232 investigations underway, which could result in duties. Some of these you've heard about before, semiconductors, copper, wood, but there's 2 new ones in the 232 world. One on heavy trucks and parts that was announced on April 22. And one on critical minerals also announced on April 22. Those 232 investigations are looking for feedback from the public. Those comment periods close May 16. So if that's your industry and you have something to say, be sure you get your comments into the Bureau of Industry and Security. All right. Let's move on and talk a little bit about where reciprocal tariffs are. So just, as Ted noted, April 2, Liberation Day announcement of not only a 10% duty rate but bespoke or custom tariffs on over 60 countries. Those were paused shortly thereafter. But what we have learned over the last week or so is that there are a number of countries over 60 -- actually, I think over 75 was the last number that I've heard that indicated to the U.S. government that they wanted to engage in trade negotiations. There were approximately 18 that actually came in with a documented offer. And those are the 18 that the United States Trade Representative wants to engage with on a formal basis. There was a great article over the weekend from the Wall Street Journal, which basically indicated that USTR has set up a process they have a template for their trade agreement that they'd like to see as the foundation for these negotiations in that base trade agreement, they want to cover things like tariffs and quotas, non-tariff barriers as well as other discriminatory practices like the digital services tax, some practices associated with rules of origin and then the general category of economic security. It looks like they will be meeting with 18 of those countries in the next 6 weeks to try to reach agreement. If I was a betting person, I would say that the negotiations with countries like India, the U.K., Japan and Korea are the furthest forward. We've seen that in the press that there have been ongoing discussions. But to be honest, the big elephant in the room are the talks with China, with the Canadians and with the Mexicans. So China, a Phase II deal with China is on a separate track and we believe that the negotiations with Mexico and Canada may be happening in the background, but the bulk of those negotiations will be part of the review of the USMCA and any subsequent renegotiation. All right. Let's move on and talk about the recent Federal Register notice issued by the United States Trade Representative, which was a result of the Section 301 investigation on China's maritime in logistics industry. The focus of this Federal Register notice was to implement new fees on the activity of Chinese owned and operated ships and Chinese built ships. It may have caught your attention a couple of months ago when we saw proposed fees of $1 million to $1.5 million per port visit, that structure has changed slightly. And the details are on the slide. I won't walk through all the details, but the bottom line is these are fees that will be charged on ocean carriers and collected by customs and border protection. We don't know yet because we haven't gotten guidance from those carriers, whether there will be a pass-through of those fees to importers. They will not start the collection of these fees that CBP won't start the collection until the middle of October. We will likely see additional operational guidance on how those fees will be collected. So stay tuned on those. The other part of that Federal Register notice was a proposal to increase the tariffs on Chinese produced ship-to-shore crane and other cargo handling equipment. The thing I want to call out here, and they are looking for comments on these new tariffs. The thing I want to call out here is that it is not only on goods manufactured in China, ship-to-shore cargo handling equipment manufactured in China, but by Chinese-owned or Chinese-controlled individuals. That is something that I have been expecting to see from the Trump administration. So for example, if you have a factory in Vietnam that is owned by a Chinese individual that maybe previously was in China, but has moved into Vietnam to avoid some of the China tariffs. The Trump administration believes that those should be subject to a China tariff rate. So watch for that. Let's see how that plays out, but it is something that should be on your radar screen. And then lastly, we're going to speak about the America First Trade Policy reports. Ted noted that on inauguration day, the President asked for analysis and recommendations from a number of federal agencies. We have not seen those final reports from the agencies that were due on April 1. But in the report from the White House summarizing those reports, there were 6 areas that struck me as [ ripe for ] additional activity whether it is additional duty rates, a change in process, increased enforcement. And those are -- should be no surprise to you things like the USMCA review and renegotiation, a broad swath of new trade agreements. Some changes in the antidumping and countervailing duty process as including the self-initiation of antidumping cases. There is a call for ending the de minimis exemption and we've already seen those changes that will take place later on this week. I would anticipate that anything that is not coming from China that still has a de minimis exemption is likely to be closed in the next couple of months. There is a focus on a Phase II agreement with China and then finally, additional Section 301 investigations on China. So all of these things should be on your radar screen in that brain space left to you to think about the future. And with that, I'm going to pass it back to Stephanie for more good information.

Thank you, Brenda. Okay. So you guys, I tried to do the impossible, which was to provide a visual on tariff stacking. Now I would like to give you all of the disclaimers on this. Every good visual falls apart at some point right now due to the complexity of how these tariffs are applied. But hopefully, this will give us a little bit of a grounding spot. So the first 5 levels, which is an amazing thing to even say are fairly straightforward. So the top level, we have a base tariff rate. That's the HTS number that we've always used that has an associated duty rate with it anywhere from, of course, free to -- Well, I don't know what the top end is 40%, 50% for just a normal HTS number. And then, of course, if you have a free trade agreement, that's where you would apply that and it would impact your base duty rate. Then we have the layer of antidumping and countervailing duties. Of course, those have not gone away. Those used to be big numbers that shocked us, and boy, they don't anymore. Then we have this green bar that I'm showing as 201 active cases. Those aren't super prevalent or super popular, not popular, like a legal trade basis is a popular thing. But we're not seeing as many of those right now. These were actually the very first trade remedies that Trump rolled out. Under Trump 1.0, it was washing machines and solar cells for anyone here who remembers all of that. The Layer 4 is the Section 301 Forced Technology Transfer. So I had to start using the full name, and I started asking people in the chat about this. It's like you can't just say 201 or 232 or 301 anymore because there are so many of these cases. So I'm really trying to make sure that we're using the full name. So Section 301, the Forced Technology Transfer. Once again, this is a trade remedy from the original Trump administration and Biden actually built on it. So this was where he put on like syringes and face masks and semiconductors and batteries and electric vehicles. So all of those, of course, are still flowing and stacked. And now we have this layer that is 5 -- well, what I call 5, and I broke it into 2 because it's a little bit -- this is where things start to get a little bit hairy. So we have the IEEPA fentanyl duties for China and Hong Kong, right, which currently are at 20%. And then we have the IEEPA fentanyl and immigration duties for Canada and Mexico, which are also at 25%. We are also at 25%, 20% for China and Hong Kong, 25% for Canada and Mexico. So this is where, like I said, things get hairy, and any good visualization falls apart. So let's go to the left side. The left side is the reciprocal tariffs, okay? IEEPA fentanyl for China and Hong Kong can stack on top of the reciprocal tariffs and we are seeing that today, okay? So that's where China and Hong Kong right now, are 125% -- 20% for Fentanyl and then 125% for reciprocal. So it's technically, and you'll see this in the news. Most people say, at a minimum, it's 145% duty rate for China. Those do stack. For reciprocals, of course, remember, reciprocals aren't -- didn't go away. Their country-specific ones are on pause. Everybody is paying the universal 10% unless you're at China and Hong Kong, where you're paying the 125%, okay. Now let's go over to the left or the right side. This is the Section 232. So when the Trump administration put out the reciprocal tariffs, they had this intent to say, hey, we don't want to actually double dip between the reciprocal tariffs and the Section 232 tariffs. And what made it a little confusing was it wasn't just the active 232 cases. It's also all of the pending 232 cases, okay? So steel and aluminum and auto and technically auto parts are not active yet, but autos are -- and then there's a whole lot of pending cases like Brenda showed, right? So we got the copper, the timber, pharmaceuticals. You guys can all read they're right there, okay? So you really are trying to be in one of these buckets, okay? So that's what this tries to show is depending on where you are, you're going to be paying either reciprocal or 232s. And if you're Canada and Mexico, IEEPA, then you don't pay any -- or you don't pay those thing -- I'm confusing myself. You don't pay any reciprocal you're just over on the side there, paying your IEEPA. And now sometimes your 232s, but that's all up in the air now based on the executive order from yesterday. So I have managed to confuse myself so we'll just keep going here. I did take a couple of minutes just for fun, because this is my idea of fun, is to go find a shipment where we have seen this. This is an actual real life shipment, I promise, and have seen this progression. So this importer brings in, it's like 100 textile belts. At the end of every month, we clear this entry. And I think many of you guys have the same experience. And it's interesting to see, as each month goes, you start off with, of course, just the old 301s in the base tariff. And then the next month in February -- end of February, we had the same thing, but then we had this fentanyl transit exemption. So we increased the complexity but didn't increase the duty payment yet. That duty payment increase came in March, right? So now we are paying the 20% on fentanyl. Then in April, once again, turned the dial up on the complexity. So now we have a transit exemption for reciprocal but still paying the same duty amount. So I think this is an interesting visualization because it shows a bit of the slow role that all of us are going through, while we're managing the complexity of the additional tariffs, and then somewhat of lag of the duties. So I don't know, if you guys are all interested in this as well. But thinking about in the future, if this company chooses to and just like it's being reported in the news, we are seeing so many people holding freight especially out of China right now waiting to see what the Trump administration will do. In theory, if they bring in the same shipment of belts, the belt is going to be almost twice as expensive as -- in duties as with the actual value of the belt is that they are buying. So just an interesting way to think about it and look at it, I think a lot of times as brokers we go to like the worst case, and we show you this insane 19-part HTS stack. This, I think, is what most people's reality is. One other thing to go back to my example that always falls apart, if those additional tariffs come on, like Brenda was chatting about, we're now going to have multiple 301s, right? So we have the 301 Venezuela oil gas duties. We have this 301 Chinese-made port equipment duties. And then, of course, all of the 232s can move to an active case status. And really who knows what other industries might be brought in under Section 232 pending. One person asked how long a 232 case takes. Technically, on paper it takes 270 days yet. I think we would all be naive to think that any of that would take that long under the Trump administration. We have seen everything kind of upended and all those norms tossed out of the window. So I think many of these, you should expect a lot shorter time line on them coming into force. With that good news spread, Madeleine, let me turn it over to you.

I don't know if I have any better news to top that Stephanie. But thank you. So everyone, in this crazy environment, -- and because we have so many complex, as you heard from all my colleagues and as you're hearing and seeing every day, so many complex regulations and changes, and tariffs being thrown at us. There's unfortunately still a lot of gray areas where we don't have really clear guidance from customs and from the government. And so we just wanted to take a few minutes to talk about an example and how some key principles that we are using and that we recommend maybe all of us used to help us succeed in this environment where there are a lot -- where there are still a lot of areas that aren't clear and are not -- where we don't have black and white guidance from the government. So one of the first things is of course to stay and of course we are all trying -- staying as informed as possible. And one thing to note here when you get a copy of the presentation, you will have links to what you see here under number one. And that is that customs is posting frequently asked questions and answers in regards to IEEPA Section 301, Section 232, both for steel and aluminum and for autos. But they do not send out a CSMS message saying, "Hey, by the way, we just posted some new questions and answers on automobiles under Section 232. They don't do that. So you have to go to these -- to their website and look at these sections and see if there have been any additions. I recommend having someone on your teams are doing that maybe on a weekly basis because they are adding information and adding guidelines and clarity, but it's not maybe happening as fast as we would all like to see however they are coming forward with this information, but you have to check. The second, of course, I'm sure you are asking lots of experts on and getting their opinions on some of these great areas. And because there's no clear guidelines, you're probably getting lot of different opinions because there are no clear guidelines. Everyone is looking at some of these areas in a different -- slightly different way. So one thing, too, that I would encourage is if you are getting a lot of different opinions and it's an important question to you send that into CBP. We have a link here to their e-mail address. They will get back to you. It may not be the next day or for a few days but they will get back to you or they will just post the question and answer on their website. But I do encourage that because it's good for CBP to see if the same people are asking the same question. I think they will at least see that, hey, this is an important area where we need to apply better guidance. And then I think one of the most important things to remember and really to ascertain for all your -- for yourself and for your companies is what is your company's risk tolerance. Because with some of these gray areas, you really have to determine, are we going to take more the conservative approach or path? Or are we going to take a little bit less conservative path. And it all depends on your risk tolerance. What are you -- what kind of risk do you want to take? Because at the end of the day, if you take a less conservative path, customs may or may not agree, and you'll end up having to do post entry. So the key is whichever path you take in these gray areas as we are awaiting further guidance make sure you're keeping very good records, records to support the choices or the path that you are taking, make sure that it follows the principles of reasonable care and we added a link here to the Informed Compliance guide on reasonable care and be ready to pivot. Once those black and white guidelines, if they do come out, you'll need to be able to pivot and be ready to either file post entry or whatever it may be to make those changes or not. But I wanted to walk through an example, one that we have talked about a lot internally, and we've talked with many of our customers, and we're still awaiting clear guidelines. And that one example are the transit exemptions. So there was a transit exemption in the beginning of February, and there was one here recently in April to circulating or just right around having to do with the reciprocal tariffs. So in the executive order, it states loaded on to a vessel at the port-of-loading and in-transit on the final mode of transit before 12:01 am Eastern standard time on loaded on or before April 5, and entered for consumption or withdrawn for consumption after April 5. So that is if you have cargo that departed prior to April 5, you may very well be able to take that transit exemption and when you take that transit exemption, it means the duties you will not have to pay those additional duties, not all the duties, but the duty specific to that time period. So there's a lot of the questions and answers about this transit exemption. For one being what's the definition of vessel and customs has given a very specific definition of vessel. It's -- you can find it in 19 USC 1401. It basically states as water craft or other contrivance used or capable of being used as a means of transportation in water, not including aircraft. So we have taken more of a literal interpretation and taken that definition to mean, hey, this transit exemption should be just for freight coming in via ocean. But there are other companies that don't agree with that, that look at this differently and say, "Hey, this could actually be applied to air or other modes. So here's where there's a real gray area. There's no clear guidelines. However, there is a definition for vessels. So you either take a conservative approach and stick with the literal interpretation or maybe you take a less conservative approach, and not stick to the literal interpretation, but you'll want to have the proper backup and show reasonable care. There's also the end that's been included in this transit exemption. So there's lots of discussion about and in-transit. Is it sufficient for the goods just to be loaded on board the vessel or does the vessel actually have to be moving. Literally -- I literally look at this. It should be moving but there are other companies that look at that differently and in addition to that, there's a lot of discussion about, is it the mother vessel? Or is it the feeder vessel. And then if you take a very strict conservative approach, you may say, hey, it should just be the mother vessel, the last vessel coming into the United States. But you could also look at this as including the feeder vessel. So again, do you take a more conservative approach or less conservative approach, whichever approach you take as there isn't a clear guideline, you want to make sure you have the proper documents and backup that you can -- that you have in place in case customs ask you about this or once more information. And the one thing that we can say about all of this is we are seeing quite a bit of enforcement. So if we go to the next slide, we do see -- and we have seen a lot of CF 28s and 29s regarding the transit exemption, the specific one at beginning of February. So that's where we've seen quite a bit of activity where custom says, "Hey, this vessel or this actually departed after February 1, the transit exemption was applied and it should not have been applied. So we do see them looking at this. They're looking at it very closely. Again, most of the activity that we've seen has just been with the February transit exemption. But again, this is why it's important to have backup and records that you can show if you don't agree and that you're ready to provide customs and of course, your customs broker. There are varying. And I know this is frustrating for many of our customers that there are so many different opinions in these gray areas, right? We, as your customs broker may give you one opinion, your attorney may give you another opinion, a trade association may give you a third opinion, there's varying opinions out there. And that's, of course, because there's no clear guidelines. So everyone is looking at it a little bit differently. But again, the most important thing is make sure that you're looking and exercising reasonable care and you've got the proper backup to support whichever path you choose to take as we are awaiting clear guidelines. And we are bringing these questions up with customs. We have sent them into customs. We've actually had a conversation with customs headquarters. They are working on a lot of these questions. So hopefully, we'll come -- they will come out with clear guidelines on some of these gray areas. And then lastly, as we go to the next slide, you see here close to time. Key takeaways. These are things that we have talked about in previous webinars to the right. You will also get links to all of the Section 232 investigations that Brenda talked about earlier and the Section 301 investigation. Those are all -- the ones listed to the right are all open where you can provide comment, so we've provided the links. So if you are in those industries, I want to provide comments you certainly can. I'll also allow you, obviously, to the left, the potential impacts. Many of these areas you have seen already in previous webinars and can review this when you look at our slide deck and just reach out to us if you have any questions. And lastly, for all of you that are customs brokers or CCS certified through the NCBFAA, this webinar is certified, and we do have the certification number at the very end of this slide deck, and that you will receive as well. So you'll able to count this webinar for your continuing education of your licensed customs broker. So I think I'm coming up right to the end here, 2 more minutes, Samantha, to rush through a little bit at the end but hopefully -- anyway.

And Madeleine, I wanted to chime in real quick. Kelsay, included a link in full irony. CBP just posted some clarification on their transit exemptions. Look at that, it's almost like we call it forth. So please everybody check that out. I haven't read it yet. So I don't know exactly what the clarification was but -- never dwell around here.

Breaking news, everyone as we do these webinar.

Exactly. So if you need a question answer, just let us know and we will put in the webinar and then hopefully during the webinar, it will get answered for everybody -- so yes, minute to minute.

Thank you, all. You definitely, as always covered a lot of information. We appreciate customers all of your questions. We fully recognize we still have some out there and we will work to get those answered for you. Thank you, Kelsay, for dropping that link. I've also a couple of links because we had several questions about the ocean market as well as duty drawback. So we have 2 webinars coming up in the month of May, one on the ocean market on May 9 and another on duty drawback, specifically focused on that May 20. So we hope you all will join us for those events as well. And as I mentioned, please fill out your feedback survey that we will send you within about 2 hours, and you will get the materials from today's event. Speakers, thank you so much for all your hard work on all this content.

Thanks, everybody.