Expeditors International of Washington, Inc. Status update

Thank you, Brenda. I am, and thank you, Samantha, and hello, everyone.

Thanks so much for joining us today. It has been a busy August. We appreciate your taking time out to talk about this executive order that dropped in early summer. Before we get started, we wanted to issue our usual disclaimer, translated means we are not attorneys. We do the best we can to translate the policy and the legal documents that are issued by the U.S. government, and give you our best interpretation, but we are not attorneys, nor do we play them on television. With that, let's get started. As we dive into the environment that we are operating in from an enforcement perspective, there's a couple of key policy documents.

The reason that we wanted to spend a little time on this is because what we have observed about the Trump administration is it is rare for them to take action without telegraphing it in advance. Sometimes the telegraphing comes very close to when an action actually happens. But typically, if you look at the documents, you look at the guidance, you will understand where the administration is going, at least in the general direction. So on Inauguration Day, one of the very first documents that President Trump issued was the America First Trade Policy. It was very broad, it was very sweeping, and had a lot of new ideas in it and new actions. That pretty much set us up for the 18 months since then.

In early June, however, after a lot of the tariff activity and the agreements on reciprocal trade activity had kind of hit a consistent rhythm, we saw a new document, the Executive Order on Strengthening Customs Enforcement, which directs very specific action, most of which is to be taken by U.S. Customs and Border Protection. It essentially gives us a framework for how the government is thinking about enforcing current laws, making changes to either law or regulation, and doing an operational approach to enforcement.

That was fairly quickly followed by the Department of Justice and the Department of Homeland Security issuing a pretty extensive guide, the Trade Fraud Resource Guide, which really outlined the enforcement priorities from both DOJ and DHS, and really sent up a red flag for those participating in U.S.-bound supply chains to really pay attention and make sure that all your I's are dotted and your T's are crossed because there is a renewed focus by the U.S. government to identify and address trade fraud. Then finally, and one might have thought that this would come out earlier, but it came out in August, just a week or two ago, something directly from the White House. Our assumption is that Peter Navarro, one of the president's key trade advisors, his team drafted a report called The Great Transshipment Scam.

We are used to working with a very specific description of, or definition of transshipment. Mr. Navarro has actually kind of expanded the approach. He raises a number of points about goods moving between countries. How origin is not or could be verified, and the expectations around supply chain visibility. A lot of these ideas we have seen before, but this really puts the meat on the bones for the justification of why the Trump administration is taking the actions around enforcement that it is. So this is sort of the policy background for how CBP will be moving forward. With that, I'm going to turn it over to Stephanie, that will give us a little bit more insight into how that policy translates into the day-to-day.

Thank you, Brenda. Okay, let's see here. My computer seems to have a mind of its own. As Brenda said, she just covered the high level policies. How are we actually seeing this play out day to day? This is where I love, not for enforcement purposes, but what I always like to look at, and what I like to bring to the table during these webinars, is the practical sense as a broker, how are we seeing this role? This slide shows, and we've talked about this before, on the left-hand side, this is activity or data that Expeditors has collected. As a broker, you often get copies of the CF-28s and CF-29s. That's a request for information, that's a CF-28, a very formal document that's sent.

Or a CF-29, which is a notice of action or a notice of proposed action from customs, also a very formal letter. You can see here how it has jumped around and really made a significant jump in 2025. The other thing that you can see is that our general document request, these used to just kind of be emails informally sent from customs. That's almost completely disappeared. You can see the amount of CF-29s to CF-28s has significantly increased. Most of the time before the pattern was you would get a CF-28, you would respond, customs would come back or not with a CF-29. Now we're often just seeing a CF-29 issued and not a CF-28. On the right-hand side, there's some interesting data points. These are all published by customs. Customs actually has a number of dashboards.

This particular data set is coming from a dashboard that's called CBP Trade Statistics. You can Google it or you can just use this link here. This is not secret information. You have access to it just like I do. But some of the signals per se that we're seeing on the ground is importer audits. Customs is actually doing less of them, but yielding much higher results per audit. Traditionally, you can see, I think their data goes to 2021. They used to yield about $200,000, $250,000 per audit. Last year, that took a jump to about half a million, $500,000, and they are trending almost $800,000 per audit now, doing less audits. You can really see when they go to do an audit, I think they already have the smoke, right? They know it. It's not a random thing. They really have intel. The other thing that we're seeing a lot more that their data is saying is liquidated damages.

They're issuing much more of these. Liquidated damages are often issued if you have a late payment, not following a notice to redeliver, things like that. They are issuing many more of these, and then the way they group the amount they've collected is with penalties, so it's a little bit harder, but they have now exceeded, not by double, but close. Last year, they collected $46 million in penalties and liquidated damages, and this year, even though they're not through their whole fiscal year, they're already at $70 million. These are just some kind of random, not random, intentional stats that we pulled to help paint some of the picture of what's happening on the ground.

The other thing, and we've mentioned this in passing before, is really understanding what is being issued. We know they're issuing more CF-28s and 29s, but what's in them and how are they asking for data? If you have not gotten a CF-28 or 29 from Customs in the past year, this is going to be very surprising to you. They are very different than what we used to see. These examples that I have here, I have anonymized, but these are ones that we got in the last couple of weeks. I didn't go dumpster diving for really hard, weird ones. This is just how they look now. If you get one, it's going to look like this. I used to see ones years ago that were like, "Send me your certificate of origin." That's it. Those days are gone. This CF-28, a request for information, they're already testing a specific claim.