Expeditors International of Washington, Inc. Status update

Thanks, Sarah. Looking forward to going through these questions today with everybody that we received. But prior to digging into that level up, we're going to do a little bit of knowledge just on Expeditors at a glance. We'll talk about ECIB, Expeditors Cargo Insurance Brokers, briefly. Expeditors, for those of you not familiar, we were founded in 1979, and we are headquartered in Bellevue, Washington. Our global headquarters is Bellevue. We have regional headquarters, London, Dubai, Singapore and Shanghai. We have more than 335 locations in 100 countries, supported by more than 20,000 employees worldwide. We have a global presence, local market expertise, and the ability to connect services across regions. We're also traded on the New York Stock Exchange under EXPD.

For Expeditors Cargo Insurance Brokers, under Expeditors, we have a wholly-owned subsidiary called ECIB, Expeditors Cargo Insurance Brokers, a specialty insurance broker. We are a niche broker only operating in that marine cargo space. We do not work with any other lines of insurance, such as workers' comp, property and casualty. We are only operating in that marine cargo space. What we leverage there is our relationships with the carriers. With our parent company being Expeditors, we leverage that relationship with our suppliers when working with that marine cargo insurance. We have our first poll question. If an Incoterm puts risk on your organization and you need to understand the insurance coverage in place, who do you turn to? I will give you a couple of minutes to provide your answers. Risk management, accounting/finance, purchasing, logistics, or I would have to figure out who to ask. Okay. Where did everybody come in?

Okay. Okay, pretty good spread. Risk management, logistics look like to be the top contenders, which totally falls in line. Accounting/finance coming in third there. Okay. Very good. It is definitely something to understand who to go to if something happens, right? You want to understand how that insurance coverage works or is it in place or who to go to. Definitely good. Okay. We will get started. We are leveling up this time. We always have done the Incoterms 101, kind of introducing Incoterms, breaking them down.

Now we wanted to reach out to the field, to our clients and say, "Okay, what questions are keeping you up at night?" Or, "How can we make sure that our supply chain is in the right here?" One of the questions that we received, with the Enforce and Protect Act, will there be a change to any Incoterms, especially foreign IORs, in parentheses DDP? We have dug in and using our resources, working to help answer that question, right? With the Enforce and Protect Act, there will not be a change, right? EAPA governs CBP investigations into AD/CVD evasion, not related to those Incoterms. So DDP would remain a valid contractual choice. What could change is the risk exposure, right? A foreign importer of record carries the duty, the AD/CVD and penalty liability, and has limited recourse against the non-resident.

Practical step, we kind of laid it out here. You would want to review those DDP terms using a foreign IOR, confirm that they have the bond sufficiency, and consider DAP with a U.S. IOR. It is definitely important to review those DDP terms when using a foreign IOR, to make sure that you understand the exposure that is out there. Okay. But we do not foresee any changes at this time to Incoterms as a result of the Enforce and Protect Act. Okay. Next question, and this is one that we get all the time. It is definitely very, very common. So when and why should we use Ex Works, EXW, and FCA, Free Carrier, and what is the better term to use? Okay. My opinion, I would prefer to use FCA over Ex Works, and we will get into that explanation.

Again, for Ex Works, it is the seller's minimum obligation. They just have to have the goods ready to be loaded into a container. The actual loading of the goods, export clearance, and all transport risk is going to be on the buyer. It is up to them to have all the export documentation ready and load the goods at the seller's facility. FCA is going to deliver those goods export cleared, so the seller will have already taken care of that. They will have taken care of the loading and the export clearance and the transport risk when using FCA. That will already be handled on the seller side. FCA is going to deliver those goods export cleared to the carrier at the seller's premises or another named place, depending on how you have that named place listed with the Incoterm.

It could be FCA seller's premises, or it could be FCA to the port. That is going to be handled, that previous to that named place, is going to be handled by the seller. FCA is the better term for international moves. The seller can file the EEI, the loading responsibility is clear, and that proof of delivery supports letters of credit. Again, just a couple items there to share why we prefer FCA is better versus Ex Works. Okay. All right. The next question we have, who is responsible under FCA term of any storage costs arising from random inspections, taking care at the port if vessel cutoff is missed? Is it the vendor or the consignee? Okay, so under FCA, risk and cost transfer the moment goods are handed to the buyer's nominated carrier. Okay? If an inspection occurs that pushes you past that cutoff, and the demurrage and storage that could follow sit with the consignee, not the vendor.

That is going to fall to the buyer, not the seller. Okay. The seller still pays any export country inspection, but if it is after that named place, the turnover spot, yes, the storage inspection costs that have to happen after that would be on the consignee, so the buyer. Okay. Again, to point number three, a way to control it in the PO, you can define that named place, the cutoff expectation and who absorbs the storage caused by vendor documentation? The Incoterms will definitely help guide that, but it will boil down to what is stated in the contract, in the PO, the SO.