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

Hello, everyone. And welcome to our U.S. Customs market update webinar. Thank you for joining us today. We are going to go through a U.S. customs market update with our team. And before we start, we're going to go through a few ground rules and just how the webinar will run and cover some questions that we often get and then we'll hand it over to our experts to go through the content. And then finally, and if we have some time with some question and answer, normally, we go right to the end. So if we don't cover your question today, we will certainly follow up after the webinar. My name is Nicole Gallanis. I'm new -- I'm covering for Samantha, who you normally see on these webinars today. So she is out on vacation. So if you do have any questions or don't receive the survey after the webinar, that's usually how we will distribute the content to you. So if you don't receive that, you can certainly reach out to me and I will make sure that you get a copy of the materials that we shared. If you are hearing an echo, you might have been -- you might be joined on multiple devices. So please make sure that you are only joined from your one device. We often get that feedback as well. And if you do have any questions, please put those into the Q&A window at the bottom of your screen. We will try -- our team will try our best to get through all the questions. We often get many on these sessions. And if we don't get to it, again, we will follow up. And last but not least, if you would like to receive notifications and invites for our future webinars and events, you can go ahead and scan this QR code, and it will bring you to our subscription page, where you will automatically receive those updates. So without further ado, I will introduce our presenters today. We have -- we are fortunate enough to have our experts here with us from Expeditors. We have Brenda Smith, Global Director for government outreach. Stephanie Holloway, Director of Customs Operations for the Americas. Ted Henderson, Senior Adviser for Customs and Jared Crowell, systems development analysts for customs. So without further ado, I will pass it over to Stephanie to get us started.

Thank you, Nicole. And I think for some of you, you're not going to be able to see my video. My apologies for that. You're just going to have to channel your 2010 version of yourself when you would sit around listening to a video or not a video phone, no video phones, just the audio phone in the middle of the conference room. So with that, though, we have a lot going on over the last 2 weeks when items were coming out, my head, of course, always goes to what is -- how are we going to present this? How are we going to talk about this on the webinar. And the material just kept coming and I kept thinking, "Oh, gosh, we have so much to cover." And when I was sorting through everything that we needed to look at, I just kind of kept being drawn to understanding that we needed to step back and look at, make sure we're looking at all this holistically, not just going down a rabbit hole and just talking about 1 Section 301 case or just talking about a 232 change. So we're going to try to do that throughout this webinar. Just make sure we put our heads up, make sure that we see the whole picture and not just be distracted by one little bit that's coming out. I'm going to cover the tariff and trade developments, and I have Jared coming on to talk a little bit about the metals that I'm very excited about. Ted is going to talk a little bit about the tariffs in the legal system. So the judicial system is really supporting that check and balance right now on tariffs. So it's very important to follow closely as to what's happening over there. Brenda, as always, our favorite is going to do what's on the horizon. So looking at what we're seeing for Section 301, there was so much activity for 301. We are getting very close to July 1 for USMCA. What does that actually mean? So we have a really nice just condensed slide and then getting a little bit beef here on this executive order. So we, as the whole trade community were issued quite a loaded executive order, I'll say, on June 3 called strengthening Customs Enforcement. And if you haven't looked at that or thought about that, Brenda is going to do some high-level themes of what we're seeing and thinking about at this exact moment. I'm going to wrap up with Ted talking a little bit about a force labor document that came out. That doesn't seem like, hey, how is this important, but it's really tying into the overall theme of where customs is going with supply chain traceability. So with that said, let's get rolling. This is a crazy time line. And it was crazy when I put it together, but I think sometimes it almost validates all the feelings that we have with how much stuff is coming at us as trade professionals. It's been a lot. So we, I think, did this last webinar mid-May. Just where we've been in 4 weeks and what's come out is intense, especially in the month of July. So a couple of things I want to highlight. Many of these dates will be rehighlighted back or during our webinar. So don't worry, and of course, you always get this material. But a couple of things on here that we might not touch on in this webinar or not might. We won't. I made the content. I know it's not in there. is the Section 232 pharma. So all of you in the pharma world, you're well aware, we've spoken about this the last 2 months, but we have our first date coming up July 31. And then another one, September 29. So those are extremely important dates to call out. So with that said, the rest will unpack as we go. So what has been happening or what is about to happen in the trade world operationally. So CPSC. So CPSC is, of course, Consumer Product Safety Commission, well often call the PGAs. PGAs means partner government agency, participating government agency, but essentially, it's a government agency that has jurisdiction over imports, which, of course, all of us know CPSC has -- so they are moving from their form just being required at time of import, but they didn't have to be filed anywhere. It just had to be presented upon request. That is now going to be part of the import process. So the CPSC has been doing pilots for a long time. It was actually announced a year ago that this was going to become mandatory in July. And we all blinked and here we are almost to July 8, 2026, and that is when CPSC is going to become mandatory. So as part of our filing process, as your customs broker or you have a different broker, we are going to have to provide CPSC data that aligns with your imports, or that import that's happening. The tricky part with all of this, as we mentioned before, is that none of this data is new. This is all stuff that your company has been collecting. What is new is that we have to get it into our import process. So a big thing that we've been seeing as we're talking to importers is the need for UA to make sure, and hopefully, you know now, who manages this. Where is your product safety folks? What are they testing? Because the other kind of tricky part to this is that this data for this PGA it's not kind of set it and forget it. like we see for other PGAs. It's constantly changing. You're constantly retesting products. Even if it's the same product, there's different requirements for how often you need to test it. The other twist if there isn't enough twist is that CPSC has provided an online registry. You don't have to use it, but you can. And what that essentially is, is like a product library where you can store it. And then as part of your entry, you're just doing a smaller data set to reference what they already have in their library. So figuring out, a, what products there are, how does it correlate to your imports, how does it get pulled in? And then where are you going to store that data. That's a lot of kind of pivot points to solve. So hopefully, you are in the thick of that right now because we are very close to going live on that. And CPSC, as you likely know, that you just cover such a huge range, yes, that's the right word in this. A huge range of products, and they did attempt to flag some of you guys know us, they'll put flags on the HTS numbers, but it's just not a reliable way. This agency just covers so many things and it's very, very difficult to flag for them. So those are evolving. We can give CPSC feedback to flag them, but it is just kind of a little bit of a finger in the air for you to pay attention to. So more to come, please, if we're a broker, make sure that we're talking to you, we're all learning because this, as I said, is really a new process and a new way to do PGAs. So we'll be successful, but we all need to make sure that we're having those conversations right now. The next thing that has come out since we did our last webinar is that medium and heavy-duty truck the offset program has opened for application. So this is bearing what we had already seen for the auto industry. And that is your ability, if you produce trucks in the United States, you can apply to commerce application that says, this is how much I produce. I can show you that I produce these in the U.S. and you essentially get assigned a credit and then that credit can be used to import auto parts or truck parts, okay? So that's really important. The whole -- I mean, seeing between the lines here stepping back, right? The U.S. government wants more production to happen in the U.S. They understand not all auto parts or truck parts can come here. So they give you a credit to use on these parts, okay? So this just opened. What we also see are a lot of conversations is not just the major truck or auto manufacturers asking about this. your downstream suppliers also get asked because are asking questions because the automakers or the truck U.S. manufacturers can give portions of their credit to their downstream suppliers or upstream, whatever way you're streaming. And then that reduces their costs. And of course, then the manufacturer says now, please give me a reduction in price. So there's a lot that goes into this. But I just want to highlight right now that it's open. I don't think any truck manufacturers have been issued credits yet. This literally just opened not even exactly 1 month ago. The auto one last year opened about this time in 2025, and we didn't get it until December. I don't know what the time line for the trucks will be. Maybe somebody on this call has some insider knowledge and wants to share, but we will see this. So we're just going to be mirroring and we figure operationally, it will be very similar to autos. But it's really on the manufacturers right now to submit to commerce to get this credit. And for those of you who are in that boat, I'm sure you're well aware, but I just want to bring more awareness to the folks who might be in those down or upstream supplier relationships and are trying to figure out how this is going to work. Once again, though, at the very bottom, I have a little thing here, this really points to a broader shift, right, which is where the administration is using tariff programs to try to drive behavior and that behavior that they want to drive is U.S. manufacturing. So the last topic I'm going to talk about in this section is metals. So we -- I think we all remember when did metals change into metals. Beginning of April, yes, deals like a lifetime ago yet, it was only new weeks ago. We had the 232 steel aluminum and copper, right? So those all got rehoused under 1 metals program back in April, and we all had to kind of readjust our brains. At the beginning of June, June 1, maybe don't quote me on that. We have another twist. So the metals Saga just keeps evolving. So I'm going to hit on some of the high points of this and then -- then I'm going to have Jared come on and just talk about what are we learning? What are we thinking about as we continue to see this metals Section 232 evolve? And how do we look at this a little more holistically. So first of all, there was 5 major things that happened with this, and they are very nuanced okay? So first of all, we have just overall list changes. Some HTS numbers were added, some were removed yada yada. And I think this speaks to the fact that these lists are going to continue to shift and move, okay? Another big thing that happened was that USMCA got a content split, but they put a cap in. So previously, Section 232 for metals there was no way to accommodate if your product qualified for USMCA. You now can do this but there's a twist with. It's not the metal breakout. It's on the total product value. So once again, getting a little bit crazy in how you look at this. They also changed the U.S. processing threshold from 95 to 85. But of course, to take advantage of this, you still have to understand all your different components that are going into the imported product. We got another interesting one to try to understand and put into practice, but it's looking at end use rate reductions. So for this line, you have to be on one specific list for the part that's imported, and then you have to be on another list as the end-use product. And if you are on both of those lists then you're able to bring your duty rate down maybe 10% or 15%, okay? Same thing with these trade agreements, these are not formal trade agreements. It's those kind of like handshake deals, trade deals that the Trump administration has been working on. They have a list of those countries and have certain rates renegotiated if you're on certain list at lower rates. The twist being -- well, there's a couple of twist on this one, but one of the main ones being that there's still countries being listed there that we actually don't have ways to implement those trade deals yet. So it is just kind of a mashing of a lot of things here. So with that said, Jared, do you want to come on? So Jared, I'll introduce them real quick. Jared is fortunate, fortunate to have him on our team. He's one of kind of our master minds when we get this trade remedies in both for interpreting, but then figuring out what we're going to do with them systematically. With that said, Jared, I'll hand it over to you to give us all of your metals wisdom.

All right. Thanks, Stephanie. So yes, great to meet everybody. Obviously, I'm not quite a frequent flyer on these things like Stephanie is -- so big thing that -- one of the big things that I do on our side, some of you may not know, but Expeditors, we actually build our own entry system. And so all the time that we're doing our entries, that's something that we're building and we're iterating on and I'm one of the folks that's helping to try and keep that short up through all of the very many twists and turns over the last 2 years. I think like a lot of you guys, I have had to learn, new and exciting skills, such as reading the future and trying to guess which direction things are going. So that we can try to keep up with it, right? If we're constantly waiting for the changes to come, we're going to be late for everything. And so we're really trying to look through each of the trade remedies and figure out what are the common threads, where is this actually going so we can try and stay ahead of it as best we can. So there's a couple of main things that I wanted to highlight here with 232 metals, but trade remedies in general, right, everything starts with tariff lists, the most fundamental thing. I think as importers, you guys are all very used to the idea of having to understand the classification of your product, having to understand the origin of your product, right, and using those things to determine trade remedy eligibility. That's been the pattern that we've known for years and years. And I think everyone has gotten really good at understanding that being able to keep up with tariff shifts and all of these things and understand some of the more basic things, let's say, that go into trade remedy eligibility, like USMCA applicability, other duty reduction programs, et cetera. The thing that we're seeing with this with trade revenues in general, though, over the last 2 years, right, is that you really need to learn your product in depth and you need to be able to prove all these things that you learn about your product, right? So -- you start with the HCS in the country of origin. That's great. Maybe you expand to some of these free trade agreements or duty reduction programs. That's great, too. But increasingly, you have to know more, right? So you have to start to understand what's the content in your product? Where -- what's the origin split of the content in your product okay, cool your product contains steel. Now you have to know where is that steel actually coming from? Where was it smelted, where was it cast? All of these things, I think, if you had asked us collectively as a community 3 years ago, we couldn't have even imagined trying to get to the bottom of, right? So I think it's just highlighting that more and more and more customs expect you all to be true, true experts in everything that you guys are importing. And for right now, and for some of the trade remedies that we've gotten so far, it's really down to, can you get a little bit of duty savings, right? That's what we're seeing. We're seeing, if you know your product super well, maybe you fall into this U.S. processed exemption or rate reduction, you get to save a little bit of duty. That's great. I think all of us collectively know a lot more about our products today than we did 2 years ago. But again, trying to exercise that skill that we've all developed over the last 2 years and figure out how do we look into the future? What does this look like long term? I think we all need to kind of keep our eye on the price, right? Right now, that knowledge is giving you rate reductions. But I think we can all see that this is a really important focus area from customs. We've seen a lot of the messaging coming out of customs. We've seen a lot of the piloting coming out of customs with some of the programs they've been working on with their partners. And all of it is increasingly coming back to supply chain traceability. You need to know your product in out left, right, up, down every direction. You need to know everything about it. And more to the point you need to be able to back that stuff up, you need to be able to prove those things, right? Because if comes asking questions, they're going to want the documentation. They're going to want spec sheets, they're going to want mill certificates and all of this backup that you guys have to put together to understand your product. They're going to want those things to make sure that you've done the due diligence, you know where your product is actually coming from and you know everything that's going into it. So obviously, I think all of this is a little bit or guessing in the future, right? But increasingly, that seems like a really important direction for all of us to go to have any shot of trying to keep up with what's coming and what we -- what gets implemented tomorrow, retroactive 3 weeks. So anyway, just a couple of things there, but I think that's where we will leave it for now.

Thank you so much, Jared. Yes. I think he's spot on. We had a fun convert fun -- not fun. But really, you can get so bogged down in all of these crazy details of this, but really the bigger picture is that right now, you get a nice benefit if you truly understand it all. And you can back it up with some rate reduction, but as we'll continue to point through to throughout this presentation, customs expectation is very, very clear. And it will be -- it's pretty interesting to see how that's evolving. Maybe not on this call, but a later call. I also want Jared to chat with us a little bit more about how do you -- how are we fundamentally going to get that information from you all to make those determinations in the future so that we can actually apply this stuff more automated to our entry process. So we'll chat about that later, but that's a big problem and thing that we're thinking about because it's not just an easy if-then statement, like if it's country origin and this then apply this. we're like 18 steps deep to try to get to the right trade remedy now. So we will chat about that more at a future date. So with that said, let's talk about the legal system. Ted, I will hand it over.

All right. Thank you, Stephanie and Jared. So let's spend some time reviewing some tariff actions and the U.S. judicial system as a whole. I think for cases related to international trade and compliance really are nothing new. The Court of International Trade that we know today actually traces its roots back to 1890 when Congress created a Board of general appraisers that was supposed to settle questions related to tariffs applied to imported goods. And over the years, that Board morphed into a more formal judicial mechanism. And ultimately, it was reorganized by Congress in 1980 as the U.S. Court of International Trade. And I'll just say as a side note, I know that many of us on this call are big fans of Congress's action in 1980 to create the CIT because we're getting EPA refunds, and that's cool. But I do want to point out that 1980 was also the same year that Rupert Holmes hit #1 on the charts with the Pina Colada song. So not everything in tenuity was good. What we want to talk about today for a few moments is the Court of International Trade, the large judicial system and the role it seems to be playing around tariffs. It just seems like legal challenges are becoming the new norm with respect to tariff actions. First, it is absolutely clear that U.S. importers have become emboldened, if you will, to take on the administration, particularly given the recent decision on Supreme Court and the APA tariffs. So we're seeing more action in that respect. But second, it does not appear that Congress has emboldened sufficiently to take back their constitutional authority over tariffs and attempt to manage the actions of the administration of the President. So importers really are having to go to the third branch of the U.S. government, the judicial branch in an attempt to get interpretations, evaluations of the executive actions related to tariffs. I think, honestly, given the current environment, we're going to continue to see these legal challenges, and we're going to talk about them on our customs market days in the future. quick look at a couple of 3 recent court actions just to kind of illustrate this. First, IEEPA. We're certainly going to talk a little bit more about the IEEPA case and tariff refunds in a minute. But the bottom line here is we have a Supreme Court ruling in place that found that IEEPA didn't confer authority to the President to impose tariffs following that Supreme Court ruling, the Court of International Trade where Eaton ruled that as a result of the Supreme Court action, guess what, IEEPA tariffs get to be refunded by CBP. With the IEEPA litigation, we saw a successful litigation there around the core issue of whether a specific law granted authority to the President to levy tariffs in total. And ultimately, the full U.S. court system has come back and determined the law did not grant that authority and ultimately rolled somewhere around $166 billion in duty should be refunded. Second, let's look at Section 122 legal actions. These tariffs, as we know, they were implemented kind of an emergency temporary measure by the administration, got to backfill the IEEPA tariffs that went away. And once again, the administration's tariff actions have been challenged in the judicial system in the Court of International Trade and mining up through Court of Appeals. In this case, the issue is whether certain conditions as required in the law exist for the President to impose tariffs. So first, we talked about IEEPA that does allow for tariffs. In this case, the law allows for tariffs, but are the conditions being met by the administration in order for that to happen. We're going to dig into 122 also a little bit deeper in a moment. But again, the core question is, does the statutory language in this case, have certain conditions that the President has to meet in order to move forward with tariffs. And then finally, we have an example here in Section 232 legal action. In this case, it's Express fasteners, the U.S. And we're seeing a variation where importers are using the judicial branch to evaluate tariff actions by the government. But the issue is not whether the authority exists to impose tariffs in the law or whether the conditions have been met in the law. Here, we're seeing an example of the judicial system being asked to determine whether tariffs are being calculated appropriately, both in the context of Section 232 and the valuation statutes. So this certainly will have an impact on potential duty refunds but how we manage our compliance programs as well. So there's a lot -- there are other litigation examples we can certainly speak to. But our point here is really just to call out how the judicial branch is being brought into an area that really might otherwise fall under the legislative branch under their constitutional authority. So with that, let's dig in the IEEPA and talk about that for a little bit. We're all need deep in the refund process. I think most of us are familiar with CBPs, consolidation, administration and processing of entries program, the Cape process. And we are thinking in terms of the CBPs lingo, a Phase 1, Cape Phase I, Phase II. Today, we thought we'd look at entries in the refunds. And in terms of the actual liquidation process and group them a little bit in that context as opposed to CBP's Phase I, II, III. Remember, liquidation refers to the finalization of the life cycle of a customs entry. And there are several phases certainly of the life cycle, but also of the actual liquidation process. So first, let's talk about unliquidated entries. These are entries that have not been finalized and are available for action by either the trade or CBP. CBP is currently processing many of these unliquidated entries that have been submitted by importers through Cape and refunds are being issued. This is CBP's Phase 1 cap processing. Good news is CVP recently stated that they're going to add an additional group of entries into this phase and -- or into processing under cape and that will be under Phase 2, and that's going to include reconciliation entries and certain antidumping countervailing duty entries. And the target date is actually supposed to be in 2 weeks or so on the 29th of June. So generally speaking, things seem to be going okay for the processing and refunds of unliquidated entries. I know there have been questions -- it seems like there have been some positives, refunds are going a little slower lately. But again, CBP for what it's worth, seems to be the processing these unliquidated entries. The next group, we need to look at are entries that were recently liquidated in the last 80 days or so. Technically, the statute runs to 90 days, but for processing purposes, CBP is looking at 80. So those entries, based on law can potentially be actioned by CBP or an importer as long as they're in that window of 80 to 90 days prior to liquidation. They're eligible for refund processing in cake now. ironically are not under Phase I. This is a different group of entries, but they're still under Phase I. And as long as that liquidation date, 80 days or less. So -- and the Phase II component of adding antidumping countervailing duties, recon entries, that's going to jump in also with this group of entries. The third group of entries that we have are those that have finally liquidated. And in the context of the law, that's basically 90 days past liquidation date. And that's a point where really the own CVP doesn't have an authority to automatically go in and re liquidate entries or act on them unless there's criminal actions that they deal with. So as of right now, CBP has stated they do not believe they have the statutory authority to action those entries as they don't -- they can't just automatically offer refunds on them. The administration also has a similar interpretation on this, and that's based on both statute and some Supreme Court decisions. So both the administration and basically believe that an importer must file a lawsuit in [indiscernible] international trade in order to be eligible for a refund process on entries that are past that 90-day plus liquidation date. However, the Crib International trade has explicitly ruled that all importers should have their duties refunded regardless of having to file a lawsuit regardless of liquidation status, et cetera. So right now, we have this group of entries, liquidated entries that are in limbo. Very likely, we're going to see this group of entries have to be managed through lawsuits and perhaps our ultimate review by the Supreme Court on whether or not the government is required to refund duties without a lawsuit by the actual importer. So keep your eye on this section if you have entries that follow in this bucket, good news is CBP has stated they are building the Cape system to process those entries. If and when the time comes for them to deal with them, they're calling this Phase II. They estimate this cover somewhere around 27 million entries that are out there. People ask us all the time, what's our recommendation on how we should be managing our entry, certainly monitor, pay attention to your liquidation dates. On top of that, for this group of entries that are in that finally liquidated bucket post 90 days, if you will, after liquidation. We do recommend that you're filing protests on them. You may also certainly want to speak to compete customs Legal Counsel and see if you should be proactively filing lawsuits to get ahead of things. That's up to you and your legal counsel bare-minimum definitely file protests as it goes. So this one, we thought we had a pretty clear understanding based on the ruling of Judge Eaton that customs would ultimately be refunding duties, but based on actions by the administration and statements by customs, it appears this finally liquidated group of entries may end up back in the court system. So let's pay attention for that as we keep moving forward. And let's go to Section 122. Really, my update on 122 is pretty much what we talked about as last month, it's business as usual. We're continuing to pay Section 122 tariffs as we talked about a Court of International Trade agreed with 2 orders and some states that filed lawsuits and that suited the government and they -- the CIT, the Court of International Trade rule that the President did not meet the conditions of Section 122 with regards to the balance of payment imbalance, if you will, that therefore, the tariffs were not appropriate. However, that the CIT limited their decision specifically to the [indiscernible] in that case, the government is in the process of appealing that decision up to the Federal Circuit. The tariffs basically remain in place for now. So we certainly expect that we're going to see business as usual for the tariffs up through the anticipated expiration date. So remember, these are scheduled to terminate the last data collect the tariffs would be the 23rd of July. They should be terminated by 24 July because the requirement under second 122 says these are temporary tariffs. They can only be in place for 150 days without congressional action. It doesn't appear that Congress is going to act on this. So again, tariffs likely remain in place. The court actions will continue, but we just don't see them being concluded prior to the 23rd of July, that's just weeks away, if you will, relatively speaking, so their top gap. We know that the government are taking other actions in Section 301 that Brett is going to talk about here in a second. The only caveat that we really want to throw out here is a recent comment by the U.S. trade representative [ Jameson Greer ]. Last month, Ambassador Greer was speaking publicly and we acknowledge that Section 122 tariffs are indeed temporary, they're time bound. But he also suggested that doesn't mean that we can't interpret Section 122 to mean that it's a one-and-done deal that perhaps they could be reused by the administration. So we have to think about this. Does this mean the administration that's considering a new round of Section 122 tariffs as soon as the current round expires, it's possible. We know, again, we have 301 tariffs on the horizon. We've got other stuff, but it is possible that the administration is thinking that they can, if you will, reuse Section 122 tariffs and implement them once again. So we may be talking about future legal actions on that. All right. With that, enough of me previewing Section 301 tariffs, and let's have Brenda actually give us the main feature and talk about it. So Brenda, off to you, please.

Great. Thanks so much, Ted. As we talked about last month, the month of July is going to be a very busy one. So depending on how engaged you are, you either may want to take your summer vacation or not. What we wanted to focus on in terms of what's on the horizon were a couple of issues, starting with the Section 301 activity at the United States Trade Representative. So looking back to Trump 1.0, we saw that there was really a new and very broad use of the Section 301 tariff authority. That is still playing out in the courts, though the Supreme Court has just declined to take a look at the final list for the initial China tariffs. However, what we saw from that is that, that is a tool that the truck administration is likely to use to address a broad range of issues that it sees. There is an ongoing comment request from the United States Trade Representative, which basically focuses initially on whether if you are a domestic industry, whether you have been impacted by these tariffs, whether they've helped you or not. And that will be an evaluation that USTR conduct over the next few months in another -- in order to make a final determination or a determination in this phase of those initial China 301 tariffs. We've also seen in Trump 2.0 a pretty significant expansion of the use of 301. And some of this has been to address specific trade issues, and I'm referring to things like the logistics and shipbuilding, China 301 tariffs. But we've also seen more recently as a replacement or a complement to the IEEPA court decision, new remedies that are being explored by United States trade representative. The first, we actually have seen an announced remedy of between 10% and 12.5%. And on those countries that do not have a forced labor prohibition in place or they are not enforcing a forced labor prohibition. We've also seen though we haven't gotten the initial round of rates on excess capacity, but 16 very large economies that we trade with has been announced, and we are waiting for that, the remedies coming out of that investigation to be announced, though we expect that it will be before the July 24 expiration of the Section 122 dates. We've also seen a very large case investigating Brazil for a variety of different practices. And most recently, a case on Vietnam, for their intellectual property protection and market access issues. The bottom line is that the negotiations coming out of or being impacted by the Section 301 or really the Trump administration's attempt to rebalanced [indiscernible] the most significant, of course, is the one between the U.S. and China. President Trump's recent visit to Beijing resulted in the announcement of several possibilities around tariff relief. That will be discussed either separately in advance of further visits, which are scheduled to happen this year between the 2 leaders or as part of the agenda of the proposed Board of Trade. So stay tuned on those, but the just don't forget that the Section 301 cases are really a pretty significant underpinning not only to the ongoing negotiations, but also to the Trump trade -- America First trade strategy at large. So let's dive a little bit deeper into those 301 cases. We wanted to be sure that you all were tracking what was going on with the specific cases underway. So the first one we just mentioned was the one on forced labor. 60 economies, a very broad swath of our global trading partners. There are some key deadlines if you want to make comments or if you are looking for where this goes next. So June 22, if you'd like to appear at a hearing, which the trade rep will be holding in July, written comments on the proposed remedies of between 10% and 12.5% are accepted until July 6. And then the actual hearing discussing this will happen on July 7. If you are a watcher of 301 cases, you know that these time lines are very fast for a 301 investigation. Our assumption is that this means that the USTR is trying to act or the President is trying to make a decision on what these remedies will be before July 24 and so that they could be implemented as Section 122 remedies or Section 122 duties are headed out the door. The Brazil investigation is also underway, and there are comments that can be made if you do a lot of trade with Brazil and you have insights or advocacy that you want to do on behalf of your organization. Those comments are due by June 22 -- I'm sorry, the request for the hearing are due by July -- June 22, written comments on the Brazil investigation due by July 1 and the public hearing starting July 6. That's going to be a very busy week for USTR in the trade community. And finally, as we talked about in last month's webinar, there is a -- the second review of the Trump 1.0 China 301 tariffs underway. The initial phase is just to take input on weather. There has been an impact on domestic industry of by those 301 tariffs. There will be a more extensive phase if -- the answer is yes, that there has been an impact, where there will be a much deeper dive on specific products and specific impacts. So that's something that's going to roll out over the next 6 to 9 months. So 301, a key thing that should be on your radar for this summer. The next thing that should be on your radar is the USMCA negotiations. And unfortunately, we don't have a significant amount of new information to share with you. Stephanie, can we move on to the USMCA slide? But we thought it would helpful if we could walk through the potential options for what is likely to happen on or around July 1. We either could get full agreement in the next 2 weeks, very optimistic that, yes, the 3 countries want to move forward with USMCA as written, no changes and the duty rates will essentially stay in place. That is highly unlikely. The next thing that is potentially likely is that the agreement will continue but there will be renegotiation over specific provisions. There is a lot of discussion around rules of origin, around labor issues, around managing China inputs into goods made in the U.S., Canada and Mexico as well as energy issues, and I would add to this list a number of agricultural issues. If the countries agree that there will be continued negotiation around these issues and they are on a good path. It is likely that there won't be significant changes otherwise other than these targeted areas, and we are likely to see those changes roll through probably a regulatory process in the next 6 to 24 months. The other -- the next option that is a lot less predictable is the no extension option, which is when at least one of the countries, in my book, it's probably the United States, determines that they do not want an extension of the current agreement -- no agreement is reached on July 1. And in fact, we enter into an annual review and renegotiation cycle. It is possible at some point that the 3 countries will come to an agreement and there will be a full bar extension of USMCA. But I think it's most likely that we are going to have this continuing conversation. The downside of that is that the predictability for the trade community and for businesses interested in investing in any of the 3 countries is going to be a lot less predictable. So stay tuned. We should hear more in the next 2 weeks on exactly what option the Trump administration is going to go with. Because of the vast amount of business support for the agreement and the supply chains that are in place, it is highly unlikely in our thinking there will be a full withdrawal from the agreement. But even if that happens, that needs a pretty significant process in place and will happen over a couple of years if it happens at all. All right. And finally, the last thing we want to be sure is on your radar screen is the President's executive order on Customs Enforcement that was issued about 2 weeks ago. It has a lot of meat on the bones. And it is very consistent with what we have seen coming out of this administration around an America-first trade policy. What this executive order is attempting to do is to really ensure that not only the laws that are already in place are enforced to the full extent of U.S. government authority but also that where tweaks can be made either through legislation or more likely a regulatory change that, that will be done to do a better job of carrying out the intent of current U.S. trade law or future U.S. trade law. The basics of this are pretty clear, and we'll talk about those details in just a minute. But what we wanted to highlight for you is that this really sets out a framework for how the U.S. will treat the importation process and those businesses that participate as U.S. importers whether they are located here in the United States or whether they are what is known as a foreign importer of record. CBT is on a very short time line. They have been given approximately 180 days to -- as far as we can tell, complete a regulatory process, which is a very, very fast regulatory time line. It is unclear at this point whether these regulations will be issued with the opportunity for notice and comment from interested parties or whether they will be issued as an interim final rule, which is the Trump administration has been using more regularly with notice and comment after the IFR has been issued. So let's look at a few of the details that we have pulled out from the executive order. For me, one of the most significant is that importing becomes permission based. In other words, in CBP's words, importation becomes a importation is not a right. It is a privilege. And so what CBP will be doing in order to convey that privilege is a significant amount of betting into future importers, financial strength, their transparency around their supply chains and business arrangements and their overall compliance approach. For me, that gives CBP a huge tool to do their betting upfront. And while there are current provisions on the books to allow CBP to disallow importers from bringing goods into the United States because of bad behavior or because of instability or lack of transparency, this really, as I mentioned earlier, puts meat on the bones. It is not clear yet what that will mean in our world, but the regulation should provide a lot of additional detail. There is also a significant amount of pushback on foreign importer of records and kind of those low friction in other words, informal entry models. The details of those are not specified, but there's enough indication to know that if you are a foreign importer of record and you use either the formal or informal entry process that there will be a significant amount of change coming at you. We've talked about traceability already a couple of times. And in a minute, we'll do some more on the forever front. Traceability is a watchword for CBP and it is moving upstream. If you don't have -- provide that level of transparency or you're not able to ability to take really strong enforcement action is going to be increased. There's guidance here, which says that CBP's usual mitigation approach of -- for a first violation taking it down to essentially a parking ticket and not moving forward on that enforcement spectrum until later on in the game is going to be cut out. So mitigation is only allowed at the 50% level. So there's a lot in here. There's also a lot of speculation from law firms in the United States that are focused on these issues. It is something you should have on your radar screen and be ready to comment when the opportunity presents. So with that, let me turn it over to Stephanie, and she will give us a little bit of input on one more thing that's hit our radar lately.

Thank you, Brenda. So a lot of themes about traceability. Customs has been not so subtle and really expecting you know the depth of your product. And I know many of you are taking action. A lot of that came honestly from the metals and trying to figure out your content percentages or if you're importing a sector that has been more targeted with forced labor. [indiscernible] put out an update, I think, just last week on this manual they have. And I have a link here and of course, you will all get it. But it's called CBP forced labor enforcement operational guide for importers, really makes you want to get in here and dig around. But one of the things I put on the screen is the appendix because the appendix, of course, feel free to read all 100 pages, but the appendix is really interesting because it really gets into the heart of what CBP is truly expecting and giving good examples of how to practically fulfill this traceability concept. So you can see in here when you're submitting documentation, what are the best practices for doing that? How do you reduce risk lots of different things, very specific examples on certain commodities as well as giving detention notices. So this is really where CBP is going and really an area for all of us to truly understand. So right over on the right there, before it was really supplier certifications, high-level due diligence. And now it's really getting into full supply chain mapping many tiers, many layers where all those components coming from. Where were those components made, that's where all of this is headed. So I just wanted to put in here a tangible thing. First of all, please look at this guide. But secondly, where do you start with all of this? And many of you are already on this journey, but at a minimum, please read this and start looking for your gaps. But then the next thing we're seeing because a lot of this traceability stuff is also coming through the request that seeing in current CF 28, 29. So that's when customs send you a formal request. So really looking at that and saying, hey, if I conducted a mock audit, could I get these documents? And these documents are referenced in this guide. Could I go out to my top supplier for my top product and do that. You don't like overwhelm yourself, just start with one item and try to trace it from raw material all the way to such good. Where do things break? Who do you need to be talking to? And as you're doing this activity, can you be building yourself a playbook? Because this is what it's all going towards. And then best, what customs are clearly getting to is how do you do this on a regular basis? How is it repeatable? How could you pull together one of these, which is honestly what importers are being asked to do with their CF 28 and 29 now, can you do that within 30 days? Can you put together a good response? And a good response is appendix C, they're telling you, you have to tell the story, just sending over bankers' boxes worth of documents is not the way to solve this problem. It's really, can you tell customs a cohesive story about your product, where it was sourced from, how did it move? And how do you eventually get here? Okay. So please look at that in all of your spare time. So we tried to put together and kind of re cleaned up all of this in terms of what are your actual takeaways from this whole preso. First of all, many of you, I'm sure, are very excited for APA Phase II. So as Ted said, that's coming very soon at the end of June. So do you have those queued up? Do you know which entries those are? And are you ready to go on those? Section 122, we don't know how that's going to sort out, but keeping your eye on that and watching it move through the legal system, I think, is very important. Please read what Brenda talked about, the executive order for strengthening customs enforcement I do this as well. Please use AI to analyze that document and help give you tangible examples. But nothing takes the place of just reading and really trying to see customs is doing and what they're moving towards, not customers, what the administration is doing and what they're asking customs with. So much of this still comes back to compliance fundamentals, right? If you don't have the right HTS, the right origin, the right valuation, you're really building, of course, this whole trade remedy trade change on a very shaky foundation. So is there a way that you can continue to strengthen those and feel really good about those for your company? Making sure that you have some basic auditing or hopefully very cool audits in place to make sure what your broker is declaring is correct. And then as this guide I just mentioned, please look through the appendix, see the example, see the documents that customers are expecting you to collect, okay? Bonds, there were some questions in the question-and-answer and bonds are just going to become a bigger and bigger conversation. Many of you are being faced with really trying to dig deep to get collateral and even fulfill your bonds. That's a major risk or I think that many of your companies have not maybe had to talk about so explicitly with the strength in customs enforcement, bonds are even more front and center. So really thinking that through understanding, a, do you know how saturated your bond is but then what does that look like from a contingency plan to do the right people at your company know that that's even a risk factor? And when is your bond coming up? And will the your bond provider potentially require more collateral than you've ever had to provide before. Over on the right is all of those USTR comment periods. Brenda highlighted, there's so many. And I encourage you, even if you're like I'm a company that doesn't comment, that's fine. Go be a company that reads and pays attention to the comments because there's a lot out there. And is an opportunity. It's not just to make comments, you can also comment on comments. So it's almost like its own social media out there and you can see what people are thinking about and what's being presented. We, as a trade community, don't have an opportunity to have a very loved voice. It feels like sometimes this is one of the ways that you can exercise that. To whatever extent works out is a different story, but this is where that engagement is honestly happening right now on a large sense. Of course, there's government affairs and lots of other things behind the scenes, but this is probably the most public forum that we're seeing. So with that said, of course, this is accredited, we reached to the end, all of you now reserve on hold credit for LCB credits. So Nicole, any final words from you.

No. I just want to thank everyone for joining us. I know we're right at the hour here, so we'll be respectful of time. And if you have any questions or have any trouble getting the material, expect that to come out in about 2 hours from now, reach out to any of us and we will follow up with the questions that came in that we were not able to answer. Thanks again, and take care. See you next time.

Thank you, everybody.

Bye-bye.