Expeditors International of Washington, Inc. Status update

I am. Thank you, Samantha, so much. Samantha is going to die that I am going to say this, but I feel like we are all in this webinar family together, and I got to meet Samantha for the first time, and she said, "You are going to see how short I am." I was like, "You cannot honestly be that short," because she gives off, you guys can chime in on this, she gives off such tall people vibes, and she is five feet tall, everybody. The whole time, my brain just could not reconcile it. Samantha, now everybody. Thanks, Stephanie.

All 1,200 of us now know how tall you are.

If anyone else was wondering, there you go. Now some insider baseball to Expeditors. Hey, look at that. Samantha, there is another 5-foot-tall person in the crowd, so I love this. Now everybody is going to be guessing at how tall Madeline and I are. Madeline is taller than me, just so everybody knows. Let's jump in here. We are alternating back and forth, so I am going to be doing tariff and trade section. I will hand it off to Madeline, who is taller than me, to talk about what is happening in the court system. I am going to talk about what is on the horizon, and then Madeline will wrap up with enforcement. We have a nice full agenda, as we always have. Customs and the Trump administration always provide, so we never have to worry that we will have enough.

With that said, I think our last webinar was September 22nd, if I am remembering correctly. At that point, the Section 338 import ban had not yet started.

As we all know, Section 338 was one of, I would say, the first time the Trump administration had used this legal basis to put tariffs on, and it was for Canada. You use Section 338 when there is discrimination against U.S. commerce, and the Trump administration said Canada was discriminating against three industries, dairy, autos, and alcohol. Their tariffs were proposed. It was a 50% tariff that took effect back in August. When we met, that tariff was already on. The scope got changed, not that much longer, a few weeks longer. A few weeks went by, and the scope got changed around mid-September. Essentially what it did was it said there is going to be an import ban.

They adjusted some of the HTS numbers because a big part of Section 338 that you have to understand is the HTS that the U.S. is targeting from Canada do not correlate directly to the discrimination in the products that is happening. Some of them do. But it is not just like, "Hey, I do not import dairy. I do not import autos. I do not import alcohol, therefore, this won't impact me." That is actually not how this works. So they made some adjustment to the HTS list, and then we were all wondering, "Hey, is this import ban going to happen?" Because the other thing about this kind of, I will say, ping pong match, for lack of a better word, between the U.S. and Canada, is that each is giving each other kind of a long leeway, right?

The U.S. will announce something but it is not just, "Hey, this is happening tomorrow." There is usually a few weeks. I personally, this is Stephanie Holloway's opinion, I think it is because they want each other to come to the table. They really want to have an agreement here. But at this point, we do not have one, and import bans did start on September 29. Just because I am a little bit of a trade nerd and I like data, I wanted to look at our own data set, so this is just Expeditors entries, to see, hey, what played out, right? I think most of us know there is obviously going to be certain industries that are going to be more prevalent to be imported from Canada down to the U.S.

Over here on the far left column, and I have used this before, this is how USCBP groups you as an importer. It is called the CEE, Center of Excellence and Expertise, or your industry. What I did was I said, "Hey, as we have gone through each of these iterations, working our way towards the import ban, what happened?" This is where it is obviously fun if you play with data, but it is real fun with AI, because I was trying to kind of level set it and say, "Hey, we definitely do more auto than agriculture and prepared products, AKA alcohol, but let's equalize those so that we can look at it as a cross-section." Everything has been equalized to this pre-338 level to 100. Then what you can see there is at the 50%, what happened.

At the expanded scope mark, what happened, and then with the import ban, what has happened. What you can see really is the automotive consumer products machinery, a little bit up, a little bit down, not too many swings. Of course, at least for what Expeditors imports, it is buried within the agriculture and prepared products. That is where the alcohol is that we import. That has been hit very hard. You can see there that there definitely was a significant tick up before the import ban. You can see that these importers truly believed or were at least hedging their bets that this import ban may happen, and therefore they got a lot more products in, almost double. Now it has decreased of course. There are still food products in there that can be imported, which is why that is not at zero or even a lower number.

That was fun, right? Just a little bit of nerd talk for you. Another thing that I want to touch on is we have Section 338s happening right now. There is a lot of, I would say, almost trade noise happening, but it is almost hyper-specific. Okay? It is like if you do not import from Canada, Section 338 is not really that impactful to you. But if you do, and especially if you do alcohol or something that is on the import bans, it is really impactful. That is how I feel like almost everything I am going to talk about in this category is right now, is it is just kind of noise. Unless it hits you, then it really hits. I am going to talk about them a little bit in a broader sense as well, because through all of this, looking for the themes is the really important part. Okay? This is a good theme one to look at.

When did this come out? A couple of weeks ago? I am going to go, yes, sometime in the last couple of weeks. There was a release per se, done that helped define U.S. content for a very specific situation. For under Section 232 metals, if you are taking this Annex I-C mobile industrial equipment and machinery, if you are taking that exemption, there was a reference to U.S. content, but it was never defined. This came out back in June 8th, I think, is when you could start using it. At least that is what this slide seems to convey. If you had used it, you were kind of in this gray area. You kind of had to make up your own definition for U.S. content. This is not super unique.