Expeditors International of Washington, Inc. ($EXPD)

Good morning, everyone. For those of you that were on a little bit early, this is your second time seeing me for those that have joined us here at the top of the hour. My name is Brendan Carruthers. I will be your host for today's webinar. Thank you for joining us. As we are getting started with the housekeeping items I'm going to cover here before we jump into the content, my colleague sharing hosting duties today, Julia Perry of our North Central region, is going to throw a poll up. I'm sure appreciate it if you could give us your thoughts. So first of all, I understand that today's webinar will indeed be recorded and available to you after the completion of the post-webinar survey, which we're going to send to you, we guarantee within 24 hours, but probably within about 60 to 90 minutes of the conclusion of this event. We should appreciate your thoughts on that. We do take your responses to heart, and it is what drives future content. So once you complete that survey, you will be directed to a landing page, which will have this entire presentation and some other information about the subjects we're covering today that we hope will be useful to you. And so of course, our team will be sharing things today, putting images up there and of course, talking, understand that your video is off and your microphones are muted and will remain so through the duration of the event. However, as the team is sharing information with you, if you have any questions, please feel free to drop them in the Q&A box, and we can -- we'll be addressing them throughout the event. But if we don't get to them in the event, we'll take care of them at the end during the Q&A portion. And for those of you unfamiliar with Zoom, there is a section called More when you have the Zoom display. click that, it's got 3 dots on it, and that's where you'll find the Q&A drop down. As I said earlier, my colleague, Julia Perry, is joining me in hosting duties today, and she's of our North Central region. We do need to acknowledge this disclaimer for this event. For anyone that has joined any of our other events, this is extremely familiar to you. For anyone unfamiliar with this disclaimer, I'll just linger here for about 10 seconds so you can get a good peek it. And of course, this will be included in the materials that you'll see on that landing page at the end. So we're going to start today with a strategic review of supply chain conditions, followed by customs and compliance, including IEEPA tariffs and refunds, and then we will conclude with how everything is going to be affecting the automotive industry. Before I tell you who you're going to be hearing from today, Julia, go ahead and share those results. Let's see here. Pretty evenly spaced, but not applicable is the top answer. Interesting, interesting. So this is going to be helpful and you all -- for whoever is in attendance here to maybe get some direction on that or confirm the fact that it's not applicable to you. So who are we going to be hearing from today? Madeleine Veigel is Vice President of Customs for the Americas; Adam Karson, Chief Economist for Onex Strategic Insights; and Han Rose is Regional Manager for the Americas. for Automotive and Mobility. And Adam is going to be getting us started today. Adam, over to you.

All right. Thanks, Brendan. Good morning, good afternoon. Thanks to everyone for joining today. I hope you get a lot out of this webinar, and please feel free to put some questions in the Q&A box, and we'll get to those as well. But I wanted to kick things off by providing some kind of global geopolitical and macroeconomic context and then hand it over to Madeleine and Han to talk kind of more details about customs and then the industry. So let's kick things off on the next slide, just kind of first kind of laying the broad context for how we see the global macro economy and how geopolitics are affecting that outlook. Now in forecasting timing is everything, and if we were having this conversation a month ago, we'd be talking about how 2026 started off on a pretty decent footing with U.S. growth trending in the low 2s, which is right around its potential, supported by some fiscal stimulus and obviously, a lot of the AI CapEx, which is driving growth. We'd also be talking about how the tariff risks from last year were pretty well contained and that inflation had peaked and consumers were kind of holding on. But I think what that top line misses sometimes is that once you start peeling back the layers, particularly of the U.S. economy, there's quite a bit of turbulence underneath and a lot of uneven growth that creates some risks. In particular, growth is very highly concentrated among, say, the top 7 or top 10 companies in the sort of AI ecosystem and then also driven by top quartile earners. So this is the so-called K-shaped economy that a lot of economists are talking about. And this kind of dovetails with the affordability crisis that many households are feeling, not just with sort of day-to-day expenses, but with houses and automobiles. The average automobile in the U.S. is selling for about $50,000 right now, which is not exactly affordable for most households. We also had a pretty stagnant labor market over the past 12 months and higher interest rates are freezing out the housing market and causing a lot of problems. So on the surface, okay, but kind of underneath the surface, some trouble brewing. And of course, now we have to layer on top of that some pretty significant geopolitical risks. But -- and what I'm going to argue in a couple of slides is that we should be looking at the current geopolitical situation really through the lens of the U.S. trying to create leverage against China. Even with regards to the war in Iran, that's kind of the primary lens to be thinking about the geopolitical risks going forward. But we also need to kind of consider that the war in the Middle East right now is best case, having a mildly negative impact on the economy and in some ways, trending towards a more sustained stagflation shock and potentially creating more geopolitical uncertainty and risks down the road, certainly for the Middle East, but also kind of some backlash for the U.S. market. And then as we look forward and kind of how we transition to Madeleine and thinking about the kind of customs compliance area, we need to think about how policy uncertainty certainly was very high last year went after liberation date and kind of cooled off, but that policy uncertainty is returning again. And it is a little more diverse, right? So we have to have uncertainty around monetary policy. I think it's on hold for right now. But we have potential for global divergence of policymaking around the world, which can lead to changes in capital flows and currency valuation issues. And then we had the Supreme Court ruling on IEEPA tariffs and how the Trump administration is going to go about reconstructing sort of their tariff policy. And then the big kind of wild card right now on the policy side is what's going to happen with the USMCA renewal, and we'll get into that into some details in a couple of slides. That hopefully gives you a little bit of context of like the macro economy doing okay, some trouble under the surface, but then we have to layer on top of that geopolitical and policy uncertainty that could really throw a wrench in how we see the next year or 2 playing out. Let's go into a little more detail. On the next slide, just kind of reiterating this point about the macro economy was calm at the surface. So as of February, we were looking at the global economy as doing pretty well. And as I said, off to a pretty decent start with the U.S. economy actually accelerating a little bit with the support of fiscal stimulus from the one big beautiful bill. We're all going to get these amazing tax refunds, and that was going to be a really nice boost in Q2, Q3. Europe kind of moving sideways at 1.5%, pretty much in line with its potential, doing okay. China decelerating a little bit, but managing through its property crisis and battling off some deflationary risks. So not great, but also kind of avoiding a deeper crisis there. And on the inflation side, we saw inflation ticking down in the second half of this year in the U.S., which was going to give the Federal Reserve some leeway to cut rates, maybe 1 or 2 rate cuts in the second half of the year. And I thought that would be very supportive of kind of thawing out the housing market. For a brief period of time, we saw the average 30-year mortgage rate drop below 6%, which is a really important threshold, which could help kind of unlock some economic activity and give even a little bit more of a boost to growth going into next year. But now I think we're probably on a pause for the foreseeable future. So that was the column at the surface kind of view. Now on the next slide, though, we need to be really cognizant of the turbulent undercurrents. And I don't want to overstate these, but at the same time, these are the things that are kind of holding the U.S. economy back from even more from stronger growth and certainly more balanced growth and more resilient growth against risk. So as the labor market basically has been flat for 14, 16 months on average, generating about 10,000 jobs per month, which is extremely sluggish. The housing market frozen, the outlook for auto sales was, I think, pretty moderate, a little bit of a downgrade from 2025 to 2026. So when it comes to jobs and kind of big purchases, houses, cars, big appliances for the home, that side of the economy was not doing great. And a lot of this can be attributed to the lack of affordability for big purchases. So you can see in the bottom left there, 35.4 weeks of median household income to purchase a new vehicle or the median house is 38% of median income. These are metrics that are above where we want them to be. Now they are trending kind of in a good direction of where affordability is slowly improving. But the affordability of sort of the median vehicle and the median home is still out of reach, and it was going to take another year or 2 for that to normalize. This underlying symptom here, really, I would argue, is the so-called K-shaped economy where you have, as I already mentioned, financial markets dominated by 10 companies. Wealth and the wealth effects driving a bigger and bigger wedge between the upper quartile and the rest of households and income earners. In particular, you have the top 20% of earners driving 50% to 60% of consumer spending. That is extremely high. And I think there are similar statistics for the auto sector where you have households that are earning over $150,000 accounting for more than 40% of car purchases. And that's up 10 percentage points from 5, 6 years ago. So we're at levels here, which makes economists like myself feel a little bit uncomfortable that growth is so concentrated in particular sectors and in particular segments of the income earners that any reversal on the stock market and those wealth effects can kind of unwind the growth that we're seeing. So that's something to really pay attention to. And then kind of then when you think about layering on top of that, that really the geopolitical environment is also creating, I think, a permanent sense of uncertainty and risk. So in the past, geopolitical risk is something that has kind of had peaks and valleys and we've had periods of relative calm. But these kind of -- the peaks are becoming more and more frequent. And here are some examples of kind of how geopolitical risk is manifesting itself. But in the interest of time, instead of going through each one of these, what I really want to kind of urge you to think about is that the things listed on this page are the ways in which a bigger geopolitical sort of battle, if you will, is playing out. These are the tools through which the U.S. and EU, in particular, are competing with China. So whether it's tariffs, export controls or frankly, military action in Venezuela, Iran, it's -- I would urge you to think of this through the lens of how the U.S. and Europe are competing with the Chinese economy. And let's focus on a couple of things. For example, USMCA, which is going through a de facto kind of renewal right now. And then the EU, which is kind of going between tariffs and a minimum import prices on Chinese EVs. These are key policy levers to protect domestic manufacturing from Chinese imports, which lends itself to not only economic security, but national security interest. So in the case of the U.S., I think the goal here is pretty clear, wall off the market from Chinese capital and technology. And then -- and we see that through tariffs. We see that through export controls, the USMCA renegotiation. The U.S. is going to put a lot of pressure on Canada and Mexico around Chinese investment. The U.S. is doing that with other trading partners in the Western Hemisphere. So the whole sort of so-called de doctor of kind of creating a Western Hemisphere ecosystem. That's what that's all about is protecting U.S. interest against Chinese capital and technology. I think Europe is approaching it from a different perspective, where in a sense, maybe thinking that direct competition or trying to hold off Chinese capital might be somewhat of a futile engagement. And so it's more of a managed competition model, where Europe is trying to prevent China from undercutting its domestic market with cheaper imports, but simultaneously partnering with Chinese companies to adopt new platforms, speaking specifically of the auto sector. So this is much -- this is kind of a dual track plan. Now both of these plans have risks. The U.S. risks overprotecting its domestic industry, which there is a -- there are dozens of examples of countries trying to do that. And in the end, what you end up doing is raising inflation and making your domestic market less competitive globally. And then the EU risks loss of industrial sovereignty. So can Europe really kind of manage that tension between letting Chinese companies in, but kind of holding them off from kind of dominating the domestic market. So all these things, again, are sort of the texture of these 2 battles between the U.S. and China and the EU and China. Moving on to the next slide then. What I want to focus then and go a little bit deeper on what we're seeing in Iran. So I would argue there are multiple reasons why the U.S. went into Iran. I think a big one that we cannot underestimate is that the U.S. viewed its engagement in Venezuela and now Iran as creating some leverage for negotiations with China. The problem here is that the war in Iran has the -- has a lot of risk of backfiring. And we are kind of in an in-between stage right now between a limited -- a short and limited conflict and a prolonged and more severe conflict. And the impacts of this war really are transmitted through 4 channels: energy markets, financial markets, freight rates and then direct regional impact to the Gulf. And as you kind of like scan through these 2 columns on the right, you can see there are elements of both, right? There are -- for the time being, the impacts are somewhat manageable for the U.S. and European economies, but oil prices over $100 a barrel, European gas prices are trending up. So we're risking the difference here between a temporary bump in inflation and a temporary impact to GDP and a much more persistent and sustained inflationary or stagflationary impact to the global economy. The things I would kind of also focus here on are the impacts to freight markets. We've been doing some modeling on how these kind of events impact freight rates and things like fuel surcharges. And typically, what we've seen is that when you have such a large geopolitical shock, you get a 100% to 200% spike in freight rates, and we saw that in the air freight market in particular. And then once the conflict is over, it takes about 2 to 3 months for rates to fully revert to kind of where they were before the conflict. But the longer this goes on, the higher rates go and the longer it takes for them to revert to normal. And actually, they may never revert to normal. We saw coming out of COVID and coming out of Russia-Ukraine war that rates basically come back kind of permanently higher than they were pre-conflict. On the next slide, just kind of going a little bit deeper here. With regards to the war in Iran, Europe and Asia are going to feel the brunt of this conflict because of their dual exposure to oil and gas. The U.S. is a little bit less affected. And over the long term, actually, the effect of the U.S. economy is pretty neutral. And this is assuming kind of a 1-month conflict and then a reversion back to normal. The reason the U.S. economy is kind of neutral over the long term is that you basically have a shift of income and wealth from households to the oil and gas sector. We're producing so much oil and gas right now that over time, that income just gets kind of switched from one sector to the other, and it all kind of washes out. So there's distributional effects for sure. It's bad for households, bad for consumer spending, pushes up interest rates, makes cars more expensive. So although it's kind of neutral on the surface, again, it's that calm at the surface turbulent underneath kind of narrative. What this means for the auto sector. On the next slide, some pretty straightforward impacts, I think. First, input cost pressure. So we're going to -- we're seeing aluminum prices go up, energy prices go up, steel, other cost of other components is going to be driven up. There's some mild demand destruction, and this is all kind of commensurate with how long this conflict lasts, right? The higher cost equal less demand, higher interest rates and higher energy is going to add to that affordability crisis that I talked about earlier. And then, of course, there are some supply chain disruptions that kind of trickle through the system. Certainly, anything moving by air right now is getting hit with higher rates and big fuel surcharges. And then what I want to wrap up with here is talking about some of the policy drivers and how policy is driving kind of future sourcing patterns. In particular, again, I want to highlight that the USMCA renegotiation the push for higher regional value and U.S. kind of trying to block off Chinese investments and perhaps other countries investment in Mexico, in particular, Canada as well. And then restructuring of tariffs, I think Madeleine is going to talk a lot about tariffs. But the way we've kind of viewed the Trump administration's approach on tariffs is that even with IEEPA being struck down, there are other tools in the toolbox to reconstruct sort of this tariff framework. And so whether it's 232s or 301s, there are going to be a number of avenues that the Trump administration can pursue to kind of reestablish the tariffs that they think are necessary to support domestic manufacturing. And then just kind of reiterating the sixth point there on the EU, China minimum import price. This is something to really pay attention to and how German OEM -- or sorry, European OEMs try to manage this kind of partnership, this very delicate partnership with Chinese companies in adopting new technologies and new platforms to try to reinvigorate European competitiveness. So like, for example, the German manufacturing sector has been in a recession for 3, 4, 5 years. It's really in a tough spot. And it really is kind of a shot in the arm. This could be one opportunity for that to happen. But again, it's a delicate balance in how the European sector kind of manages this transition. So I went to do that kind of fast, but I want to make sure we have enough time for the rest of this great content. And with that policy discussion, hopefully, that segues well to Madeleine kind of digging into some more details on tariffs.

Adam, thank you, and hello, everybody. Thank you so much for joining this webinar. I am going to get into the tariffs. I'm going to start with what's on everyone's mind, and that is the duty refunds from IEEPA and then I'll get into some of the other trade remedy tariffs and a few things specific to the automotive industry. So just as a quick recap in terms of how we got here. As we all know, the Supreme Court ruled that the tariffs that were implemented under the International Emergency Economic Powers Act were unlawful. Basically, they said, hey, the President does not have authority to implement an actual tariff under that statute. The statute does have language that says regulate importation, but the Supreme Court said, hey, regulating importation is not the same as implementing an actual tariff or tax. They said implementing tariffs and taxes that resides with Congress. So as we all know, the IEEPA tariffs are no longer in play. All the tariffs -- IEEPA tariffs that were implemented because of fentanyl. So for China, Hong Kong, Mexico and Canada were removed. All the reciprocal tariffs, we had reciprocal tariffs in place with nearly all countries around the world due to a trade deficit that we have trade deficits with many countries around the world where we are buying much more from them than they are buying from us. And then there were some IEEPA tariffs due to Russian oil. And again, that was actually due -- those tariffs were imposed on India because the President felt that India was purchasing too much oil from Russia, and this was jeopardizing his negotiations between Russia and Ukraine. And then also, of course, Brazil. The President was very -- President Trump was very unhappy with how ex-President Bolsonaro was being treated in Brazil. But anyway, all of those tariffs were under the umbrella of IEEPA and have been removed. Of course, the decision from the Supreme Court did not affect Section 301 or Section 232. Those continue on. And these tariffs were removed as of February 24. That's when the message came out from customs, the cargo system messaging service or the CSMS, those are always the messages that we wait for because those have the final implementation instructions from customs. You can sign up for those messages on CBP's website. So anyway, those -- as of that date, we no longer are paying IEEPA tariffs. The one thing the decision did not take -- did not talk about was refunds, so -- or how importers were going to get their money back. That was kicked to the Court of International Trade. So we can go to the next slide, please. yes. So what began happening at the beginning of March was a couple of orders that came out both March 4 and March 5 from the Court of International Trade. So there was a company called Atmos Filtration that filed a lawsuit immediately after the Supreme Court came out with their decision that the tariffs under IEEPA are considered to be unlawful. Atmos filed a lawsuit immediately saying, hey, we want our money back, of course. And the Court of International Trade said, yes, you should get your money back now that the Supreme Court has made this decision. So the Court of International Trade ordered CBP, Customs and Border Protection to liquidate and reliquidate all entries with IEEPA duties. And initially, this decision for -- it seemed to be kind of focused just on Atmos. But on the 5th of March, it became more apparent that really this decision was meant for all importers. So anyone that had filed duties or had paid duties under IEEPA. There was also -- we found out through those 2 rulings that Judge Eaton is the judge who is going to be overseeing all IEEPA refund matters. So that was something else that we learned. So after March -- we can go to the next slide, please. After the March 4 and 5 rulings, there was a document published by Customs and Border Protection on March 6. So CBP had a closed door meeting with the Court of International Trade with Judge Eaton, and they presented a 13-page document. This document is actually pretty easy reading. It sounds like a lot, but it really -- it's quick reading, and it's interesting because it really lays out the entire import process from customs and it includes a lot of very interesting statistics. But this document basically lays out the fact that CBP today, with the systems that they have today and with the number of people that they have are not able to process a whole bunch of post-summary corrections in order to refund all importers their IEEPA duties. So at the very end of that document, they said we have to come up with a new system that we are in the process of building, and it will be ready in 45 days. And this is what we're going to utilize to refund importers their IEEPA duties. So we didn't get a lot of detail about that system in that specific 13-page document. But on March 12, so the judge basically on March 6, he said, hey, I understand you're not in a position to refund the money immediately. However, it is very critical that you refund the money as soon as possible. So CBP, please give us an update on the following week, which was March 12. So if we go to the next slide, CBP gave much more information in their report that they filed with the judge on March 12. And basically, they laid out a new system, which they call or they announced a new system that they're going to utilize in order to refund importers, their IEEPA duties, and it's called CAPE. And it stands for the consolidated Administration and processing of entries, but also known as CAPE, C-A-P-E. And we will talk about that here in a little bit in more detail because there's a lot of validations that are involved with CAPE as well. So they laid that out in the March 12 report. And then March 19, they had -- we can go to the next slide, please. The laid out -- they gave -- provided another update on CAPE. And again, we'll talk about that here in a moment. They broke down the percentages in terms of how much they had accomplished in terms of developing CAPE and how much more they have left to do. But initially, again, when CBP announced this new CAPE or when they announced to the Court of International Trade on March 6, this new process, they said we can be ready in about 45 days. Well, 45 days from the date of March 6 is April 19. So we think that is the earliest that CBP will be ready to actually begin refunding importers their duties. But there's a lot that can happen between then. So that would be the earliest date that we believe the refund process may start. But again, there's a lot of -- there are a lot of caveats there. So we can go to the next slide, please. One of the big things that's pending, and I can throw a wrench into all of this is -- and we're surprised that this hasn't happened yet, but the DOJ Trump administration has not yet appealed this refund order. And we were expecting that they would file an appeal. They have not done so. If they filed an appeal, then this whole process may slow down, and it may take months still before anyone sees any refunds. But they have up until May 3 is the last that I read that they could -- up till that date to file an appeal. So we're kind of surprised this hasn't happened yet. But on the other hand, they may just -- they may not file an appeal. But this is a big question. We don't know if we're still going to see this. But if we do, then more than likely the process will slow down and the April 19 date will not hold. So anyway, let's talk about the process in a little bit more detail. First, I just want to remind everybody of some of the numbers because these numbers are so big. And customs put this in that document, that 13-page document that I referenced that they sent out on March 6. Anyway, there's $166 billion of IEEPA duties that have been paid by all of the importers across the United States. So that's a lot. It's over 333,000 importers. The one thing to note is that -- and that was very interesting within that document, customs provided a statistic that only 2,897 of those importers are enrolled in ACH refund. And you have to be enrolled in ACH refund in order to get your money back. So there's a huge -- there's a lot of opportunity there for importers to still -- I mean, obviously, they need to sign up. Importers need to sign up in order to get their money back. And this is super important, and I'll talk about this a little bit more here in a moment. And then a total of 53 million entries total that were filed with CBP that include IEEPA duty. So it's a huge, huge number. So what did customs -- what have they laid out? And we can go to the next slide and maybe click 2 more times. Yes, perfect. Okay. So what customs laid out was this new CAPE module, which is going to be part of the ACE portal. And the initial part of this process seems to be fairly straightforward, meaning the importer or the broker would upload a spreadsheet of all the entries for which there are IEEPA duties paid, okay? So it's uploading a spreadsheet to this new CAPE module, which is part of the ACE portal. So that's fairly straightforward. But once the spreadsheet is uploaded, customs will perform 3 levels of validation. The first level, fairly straightforward. They look to see, hey, is the importer, a valid importer of record? And are all the entry numbers listed valid entry numbers. But the second validation is when they go through to check whether everything is in order with all the Chapter 99 numbers. And this is where we have a bunch of questions because we don't know what will happen if an entry does not pass a Chapter 99 validation. I mean, we know we will be notified. There will be some type of reject message, but how do we fix the issue? Do we -- will customs reopen the entry and allow the broker to go in and fix or fix the problem? Or will customs say, no, you have to file a post-summary correction in order to fix the problem. Or no, you have to file a protest in order to fix the problem. Because we assume, and this is a big assumption, that if an entry doesn't pass the validation, you're not going to get a refund until that issue is fixed. But we have no idea how these fixes are going to take place. We have sent these questions into customs headquarters. We have not heard anything back yet. We're hoping that more detail and visibility will be provided to the trade on how that will be handled. And then the third validation, let's say you get through the first 2, the third is that customs will then remove all the IEEPA HTS numbers and recalculate the entries without the IEEPA HTS numbers without the IEEPA duties. Then the entry will either liquidate or it will be set up for reliquidation. But customs still will give a number of days before the liquidation or reliquidation occurs for customs to go back in and look and manually do a review. So we don't know what kind of review that will entail, but there is an opportunity there for customs to go back in and review the entry. Once the entry liquidates or reliquidates and that occurs Monday through Thursday, then the entries go into what's called ACE collections and CAPE will issue a refund to the importer. But again, the refund can only go to an ACH refund account. So that is the overall process at a high level. Below in the gray bar, you will see based on customs last status report, how much they have done for those specific modules of CAPE. So you see the first 2 modules, there's 73% completed. For the removing the IEEPA duties and reprocessing the entries, they're 45% complete. The liquidation, reliquidation, 80% complete and then issuing actual refunds is 63% complete. So next Tuesday, the 31st, customs will issue another report, and we'll see what those percentages show. I'm assuming a lot of testing has to be done, and I really hope that we get some more information on how corrections need to be dealt with. That will be super important. But this is what we know so far. So just as a summary, and we can go to the next slide, please, it is really -- one other thing before I get into what you need to do. When they roll out CAPE, it will not include antidumping countervailing duties. So if you have AD/CVD entries for which you also had to pay IEEPA, that will -- you won't be able to get a refund on those yet. You also will not -- they're not -- you're not going to be able to deal with warehouse withdrawals, drawback or recon entries. All of those we don't have instruction for yet. And supposedly, that will be rolled out via CAPE in a future iteration, but it will not be included in the first iteration. So those sorts of entries you won't be able to get a refund for your IEEPA duties on yet. So what can you do now? If we go to the next slide, please? Make sure that you are monitoring your liquidation dates, and we've talked about this on many webinars. Also, if -- once your entry liquidates, which means it finalizes, and that's normally 314 days after the date of entry, then you need to make sure you're filing protests. Filing protests to reserve your right to a refund. Okay. The other thing that many attorneys have talked about is filing a lawsuit in the Court of International Trade. That is something we can't really provide guidance on, but you need to talk to an attorney, your internal counsel or a trade attorney to find out if that's the right thing for you to do as a company. Then please, everybody, make sure you've got an ACE portal account and that you're signed up for ACH refund. If you're signed up for ACH, that does not mean you're signed up for ACH refund. Those are 2 separate programs, and you need an ACE portal account to make it very easy to sign up for ACH refund. So please make sure you do that because that's the only way you'll be able to get a refund. And lastly, the good thing to do would be make sure you're auditing your IEEPA entries, making sure everything is correct, your -- is are dotted, Ts are crossed because the more correct they are, the less of a chance that they will hit one of the validations within the CAPE process and hit a validation that customs will want a correction and then put a stop to the refund process. So make sure you're auditing your IEEPA entries as well. So -- and we will have more information on all of this in a webinar we're hosting next Wednesday. So look out for that. We'll go into more details. So just quickly on other trade remedy actions, and there was a question already in the chat or in the Q&A earlier. What other mechanisms does the administration have to implement duties? And one of the ways is these new -- is under Section 301. Remember, Section 301 is administered by the U.S. Trade Representatives Office. They just announced 2 new investigations, one on excess capacity and one on forced labor. For excess capacity, what they're saying is there are 15 countries, and you see them listed there, plus the EU, where they believe the U.S. administration believes these countries have, in certain sectors have overproduced different product with -- in those sectors. And as a result, they've exported those products to the United States. So they've overproduced product, and they've exported those products. And so this is what the administration's investigation is on. You see there's many sectors involved that's listed here on this slide. Automobiles, I've highlighted. You can make comments on this comment period is open until the 15th of April, and then USTR will hold a hearing on the 5th of May. They've also announced this forced labor investigation. So this is looking at 60 different countries that are currently still importing product that has been manufactured by forced labor. They haven't done enough to curb that. And so the administration -- U.S. administration is worried that those products are being sold that were manufactured by forced labor in those countries for a very low price. And therefore, American product cannot compete sufficiently against that. So it puts us at a disadvantage. Comments, again, are open, and you can make comments up until April 15, and then USTR will hold a hearing on the 28th of April. We believe that they want to wrap up these investigations by early July so that they can implement tariffs to replace the tariffs that are currently implemented under Section 122. So again, Section 301 is one mechanism for implementing tariffs. And we believe these 2 investigations because they're so broad, the administration is wanting to use those to replace the Section 122. So we can go to the next slide. And Section 122, remember, those tariffs are currently in place. They're still at 10%. We all hear that it's supposed to go up to 15%. That hasn't happened yet, but there's been a lawsuit filed by 24 states stating that the reason for Section 122, which should be a balance of payment issue is not the same as a trade deficit. So the administration has implemented Section 122 under the Trade Act of 1974 because they're saying there's a balance of payment issue. And the administration and many states and many folks have said, hey, a balance of payment issue, that's not what we currently have. We have a trade deficit with many countries, and that's not the same thing. So we'll see what happens in this lawsuit. It's also before the Court of International Trade. And also besides that, these duties do expire by the end of July. So that's why we think the administration is trying to queue up the Section 301 duties to replace these when these end at the end of July. Okay. So we can go to the next slide. And just very quickly, I just wanted to touch on these automotive programs. There's an import offset adjustment program. It's a program run by the Department of Commerce. It's currently used for passenger vehicles and light trucks, and it helps to reduce your Section 232 duties. You do have to make an application to the Department of Commerce. They will issue you a license number, and that license number is then used on the declaration when we file it with CBP. When we file with the license number, the Section 232 duties for passenger vehicle and light trucks are assessed at 0%. So we have many automotive companies that are -- or auto manufacturers that are taking advantage of this program. The other program is called an opt-in or self-declaration of auto parts program that started on November 1 of last year. Importers can choose to do this if you have a part that's not on a Section 232 tariff list for passenger vehicles and light trucks for the medium and heavy-duty vehicle parts. Also, the part cannot be classified under Chapter 72, 73 or 76, and it's got to be used for production or repair activity here in the U.S. And we notate this or it's notated on the declaration with a special Section 232 header. So the question might be, why would I want to opt in or self-declare a part as an auto part. So in the next slide, the reason you may want to do that is to help lower your duties overall. Even though you'll pay duties on the -- as an auto part, that will then allow you to exclude paying any duties on steel and aluminum. And there's a lot of burden with that as well, understanding how much a part is -- actually is made up of steel, how much part is made up of aluminum. So you don't have to worry about steel and aluminum duties. So it reduces the number of Chapter 99 numbers. It will reduce the number of line items, could make for simpler audits, and it also allows you to apply for the offset program that I mentioned through the Department of Commerce. So you have to do the math on this, but there are some good reasons for opting in to lower your overall duty rate. So in a nutshell, I would say these are just the main areas that we recommend to succeed as an importer here this year. I think one of the most important is making sure that you are really looking at your compliance program because there's a lot of enforcement out there. So just make sure that you're properly using classification, valuation that you have all the necessary backup if you're claiming a free trade agreement. You've got to stay really informed. There are so many changes that are coming out fast and furious. And you've got to be, of course, agile and be ready to file post entry. So anyway, I went through that fairly quickly, but I want to make sure that my colleague, Han, has enough time to run through his important material for you. So Han, I will hand it off to you.

Thank you so much, Madeleine. I appreciate that. So we have about 10 minutes left. I have about 10 slides. So one slide a minute, we can make this happen. Go ahead with the first slide. So when we first started to schedule this webinar a few months ago, my thoughts about the content has changed probably about a dozen times since then, right? Because a lot of things are happening. Last year, we had a very similar webinar with the same lineup of speakers actually. And it was on March 27 last year. And it was pure coincidental that it's exactly a year later. That day was the day after the initial announcement came out about a 25% tariff impact for autos and auto parts. So a lot has happened in 1 year. We were also young and innocent back then. So we've gone through quite a few challenges since then. And it's kind of reflected in this first slide. When there was a question raised to North American suppliers about their sentiment, what do they view the automotive industry to be for the next 6 months, positive or negative. And as you can see, about 51% responded in a somewhat or very pessimistic response. So some of the things that I'll be talking about is really in succession to what Adam and Madeleine already reviewed in their segments. And it's a little bit about the different markets, how they're reacting, how they're performing throughout the Americas. So the 4 primary markets in the Americas and also Europe, and it also follows closely to what Adam was talking about earlier. So since last year, next slide, please, quite a few things have happened from a merger acquisition and spin-off perspective. So going top to bottom, Aptiv was one of those examples where a new company has now formed called Versigent, right? Eaton recently announced that they are spinning off their automotive division, which will go forward as an independent entity. Continental, very similarly spun off their automotive division called Aumovio. And then bottom left, you see American Axle recently acquired an organization that included GKN, and they rebranded their name to the last name of their initial founder, which is DAC. So that's how they will go forward in the market. And then finally, on the bottom right, you'll see Allison Transmission that last summer, announced the acquisition of the off-highway business part of Dana and which is now in effect here in 2026. So what I'll be talking about first is the market at a global level. And I wanted to review the 2025 full year sales numbers. Again, this is global. This is not just for the Americas region. If you focus your attention on the left side first, I had a similar slide last year at the same time, right, with the previous webinar. It shows the top 25 OEMs globally. And the Chinese OEMs, I've highlighted with a red arrow next to their name. So last year, in the top 25, there were 8 Chinese OEMs with 2 in the top 10, the first one at the #7 spot. So only a year later, now there's 9 Chinese OEMs in the top 25. The first one comes in at the #5 position, and there's 2 more in the top 10 and then the fourth one in the 11th spot. When you go to the right side, that is what is causing these shifts, which are quite rapid. These are the sales numbers changes year-over-year. So there, you'll see, again, highlighted with the red arrow, the market share growth or the sales number growth year-over-year that the Chinese OEMs were able to accomplish. So as you see, the traditional OEMs were all in the single-digit changes, either positive or negative. When you look at the Chinese OEMs and their gain in sales numbers year-over-year, it is significant, right? It's typically in the double-digit area. And with Geely, a large component of that is about -- with about a 25% growth in sales year-over-year. Okay. So in that context, let's go forward. I wanted to go through, like I said, the main markets here in the Americas. First off, the U.S. So in February, the latest numbers here, when you look on the left side, the blue bars are for 2026 numbers, and it's in comparison to the dark gray, which is 2025 and then the light gray, which was 2024. So as you can tell, in February, a slight decline, almost 2%. And since October of last year, it's now the fifth consecutive month that we've seen a decline in year-over-year numbers in the U.S. market. So biggest contributing factors is the overall affordability situation, average vehicle prices have gone up, and there's been now a lack of EV subsidies. So when those went away in September of last year, we saw an immediate decline in overall vehicle sales. So recently, the top 3 U.S. automakers, excluding Tesla, so GM, Ford, Stellantis announced a total loss -- so a combined loss for those 3 OEMs of about $50 billion in reversing the EV investment, right, either in electric vehicle manufacturing, battery manufacturing, joint ventures, et cetera. And the next bullet there that you can see the SK battery plant recently announced a layoff of about 1,000 people, which represents about 37% of their workforce. So it's all signs of how the EV market has contracted significantly and how big of an impact the administration has in each of the countries we're talking about on the development of the automotive market there. So the one positive, of course, is for the aftermarket, right? With people holding on to their vehicles longer, it's certainly a positive impact for the aftermarket suppliers. When I saw and looked at the average age of a vehicle on the road in the U.S., I was quite surprised. I was thinking about probably 6, 7 years or so average age of passenger vehicles. It's actually over 12 years. So with that, again, it's a positive sign for aftermarket. Lots of people decide to repair their vehicles as opposed to buying a new one. And then one quick second back. The bottom bullet there for the U.S. is an important one where GM is now requiring their suppliers to stop sourcing parts from China, forcing them into a resourcing environment. And so it's going to be interesting to see what the impact of that will be. Go to the next slide, Mexico. So Mexico is actually in a better situation, right? Modest gains first couple of months of this year. You see an overview there of the top 5 brands, which are still called the traditional OEMs, but closely followed by the top Chinese OEMs now in Mexico that you see listed there. What I find interesting is, again, the impact of tariff decisions and then impacting the decision -- the investment decisions for OEMs. What I show there is Tesla, -- they were considering going to Monterrey. There was already a lot of suppliers that started to move there as well in anticipation of that plant build, but they decided against it because of the tariff situation. BYD was going to go into Monterrey. They also decided against it last year. But now in the city of AguasCalientes, there was a plant that was a result of a joint venture between Mercedes and Nissan called Compass. They have left that facility. So it's idle, and 3 OEMs have shown an interest. BYD is back in the market, potentially setting up a manufacturing presence in Mexico. And the other 2 are Geely and VinFast from Vietnam. And the reason I wanted to highlight that is I have no doubt that with the USMCA negotiations already having started, that this is a bargaining tool for Mexico, but for the U.S. to step in and try to limit the investment from Chinese OEMs in our neighboring market. Right now, the tariff on Chinese imported vehicles into Mexico is still at 50%. Next slide, please. Next market is Canada. So in Canada, I draw a little bit of a comparison to Europe, perhaps because we've seen some manufacturing activity shift from Canada down into the U.S., again, tariff-driven, primarily through the Stellantis manufacturing that transition down into the U.S. So as a result, we see the Canadian government shift their attention a bit towards China and are more -- or warming up to more direct investment from a Chinese perspective, right? So now Canada has announced it will allow up to 49,000 EVs annually to be imported from China, represent about 3% of their total market. So it's still a small number, but it's a start. And it will be imported at a 6%, 6.1% tariff rate. BYD, Geely and Cherry are the 3 OEMs that have shown interest and that will likely take advantage of that ruling. So -- and that will increase to about 70,000 by the end of the decade. The Canadian government and like I said earlier, the $7,500 EV incentive in the U.S. was lifted that ended last September. In Canada, it has now been introduced, smaller amount, CAD 5,000. But again, it is a show that different administrations are reacting differently to market conditions and creating a different environment within each of their markets. Go ahead, next slide, please. So wrapping up the discussion around North America, USMCA negotiations, right? It's going to happen this year, massive impact for the next several years. Go ahead, next slide. I'll go through the last ones very quickly. Brazil introduced this legislation and go ahead to the next slide, which is actually showing that it's paying off. They're focusing on domestic production. Brazil is really establishing themselves as the hub, the export hub for all of Latin America. So this is quite a positive story down in Brazil. And -- but the Chinese are also coming in there. And from an EV perspective, they represent about 80% of new EV vehicles sold in the Brazilian market. And final slide is about Europe. And go ahead next click through the first one, please. Because of these changes that Adam already referred to with the EV market is really -- the adoption has slowed down significantly. So Europe from a competitive standpoint was behind other regions, other global regions, and they have announced this Industrial Accelerator Act. It was announced earlier this month on March 4. It's now in the legislative process. And the main component there is also focus on the regional production with a minimum value content of up to 70%. So with that, I'll wrap up the webinar. I hope you found it interesting. We will send you a copy of the material once you complete a survey that we'll be sending to all of you, and I'll turn it over to Brendan.

Thank you, Han. As Han was just saying, everyone, we are going to be sending out the survey here shortly. If you would please complete it, we do read what you say. We do actually pay attention to the survey. It's not checking the box. Your feedback drives the content of these webinars. It drives the material that we put out there to support you in your global supply chain. For those that are looking for continuing education credits, this webinar qualifies. Here is your code. And of course, this will be included in the presentation deck that you'll receive once you complete that survey. This will also be -- there's ways for us to stay in touch with you. allow us to do so or for you to pull down information however you like, whenever you like. Thank you so much for joining us. We appreciate the fact that you spent this time with us for choosing us. Have a great day.

Thanks everybody.