Episode Transcript
[00:00:03] Speaker A: Cindy, last month we had the very somber 25th anniversary of 9 11.
In many ways, that pushed US trade policy towards national security.
But you've said the priority now is economic security, as it's being told expressed to you from the likes of CBP and the administration.
So before we get deeper, what does that actually mean for how forwarders and shippers do business?
[00:00:28] Speaker B: I think to build on what Steve said, it's the data understanding where the data came from, but also where the goods themselves came from, not just that last supplier point that we've all been used to. We're used to knowing what comes across the border and where it came from. But what we need to know now is much more in depth. How was that product built? Who built it? What borders did that good move over in the past?
So it's understanding your product level all the way back to the origin of the components, which is a major change.
And if you look at, you know, 9 11, as somber as it was, it really drew the country together and helped us all focus on physical security. And everyone was willing to play their part and give more information about those parties in the supply chain that were actually touching the physical goods.
They're trying to affect a similar change on an economic environment, on a commercial environment, without really having a triggering event like 9 11. So this has not been as accepted as some of the security initiatives in the past, but it all centers around the ability to have that data.
[00:01:46] Speaker A: Sydney, I was listening to one of your own very excellent trade podcasts, and you were explaining that at a recent CBP conference, you were being told that an importer now means understanding geopolitics and the Trump administration's intent, rather than just tariff classification. And you were getting this message that trade is a team sport.
And I was like, what does that mean? If the US Is one team? And that was my understanding of it, who's the. You have to have an opposition, right? Is it Canada? Is it the eu? Is it China? Is it everyone?
[00:02:21] Speaker B: Well, I think it depends on the day and it depends on the mood of our president. Unfortunately.
We've definitely watched where the US has pulled into almost a protectionist measure. Like you said, we are talking about massively building up our own industries within the US and protecting the domestic producers that are here spurring investment.
But what does that really mean? That means that we in the US Are the team and everyone else is the opposition.
And we have to determine how we're going to deal with that opposition, what tools we have, what plays do we have in our book. Whatever sport you want to analogize with that. But you know what. What plays do we have? What can we do to ensure that that opposition team moves in the way that we want it to move in? And the overall impact is that the administration wants to. To spur investment in the United States. And certainly the tariffs and some of the other trade actions, we've seen that.
Some are a little bit nonsensical, in my opinion, and we'll get into that later. But some of them, when I look at all of the different authorities that the Congress has given the President.
232. Section 232 authorities which are to help national security, some of them make sense to me. We saw in Covid some. Some of the pharmaceuticals that we could not import. We could not get them into the United States. And I think, similarly, other countries saw that as well. That's kind of a big deal. We need to make sure that we have enough medicine, enough goods to take care of the people in a time of economic and major disruption like that.
So Those targeted Section 232 tariffs kind of make sense to me. The other tariffs, you know, kind of don't. But what does that mean for an importer of record?
An importer of record in the United States takes authority for everything in imports. That means they certify to the government that what they are actually claiming is accurate and true to the best of their ability and belief. And that to the best of their ability and belief has always been kind of the basis of that understanding.
And CBP is really seeking to change that. They want to ensure that the importers of record who are bringing goods into the United States not just know what those goods are, but how they were made, who made them, how many borders they crossed, what the value is, what the country of origin of those components are. And that's where it gets really complicated for an importer, because that's way beyond the information that they've been required to have. It's beyond the information of importers even have access to. A lot of those downstream suppliers don't want to give that information because they're afraid they'll lose business. There's real business concerns, real confidentiality issues.
So we're looking at a requirement or desire to have a requirement from the government that these importers of record take a larger role in the entire supply chain. And as shippers and as.
As, you know, freight companies, you have to make sure that your importers have that information. So if you're a shipper, you want to make sure that you've gathered as much information as you can and given that to your importer client. If you're a freight forwarder, you want to make sure that all of that information is there. Because the worst thing that can happen is those goods get to the United States, they're held, it costs your shipper, it costs your importer a lot of money. It's tying up equipment in the United States States, it's tying up space at the carrier's facility.
So understanding that data overall is going to be really key. And that's really where I see the massive change that's coming. And how we can meet economic security is understanding where all of those goods come from. How are they produced? Are there enough goods coming into the United States to meet our demands? And what does that mean for us as a country? Do we need to then supplement that with domestic manufacturing?
[00:06:42] Speaker A: I'm sure we'll get Stephen to come in later on on how you look at upstream risk and supplier risk. But just if we can zoom in on, let's call them tariff plays, to use your team language. In July, we had some big changes in tariff policy. Just for someone who maybe gets a little bit confused or hasn't followed the maelstrom, the minutiae of U.S. trade policy and tariff policy, what are the key things they need to know about what happened in the summer and what's in the pipeline.
[00:07:10] Speaker B: So the President has four different authorities that allows him to assess tariffs. IEPA is not one of those four, however, that was used. That's why it was overturned by the Supreme Court. So IEEPA is not a true authority that was given to the President to actually assess tariffs. Section 122 is a different type of authority that was given to the President. It has a cap 15% for six months. So when IIPO is found to be unlawful, the President immediately assessed Section 122 tariffs. When that ran out, those Section 122, he reached into another authority that he has, which is section 301. And in using 301, there has to be a basis for that assessment under 301. And what they used is forced labor. Section 301 for forced labor. He assessed it on over 60 countries at a rate of 10 to 12.5%, with some caveats for certain products and some caps for certain countries.
So what does that mean? That means if you're importing into the United States and you're from one of those countries, you have section 301 on top of other assessments. The other two assessments are section 232, which I talked about, that's targeted for national security for specific industries. And then a new section that had never been used before, which is section 338.
That is the fourth authority that was given to the president, and he assessed that against Canada, of all things. So, you know, you might think that, you know, Canada, we thought they were in our league. You know, Canada, Mexico, US We're a little league. We might have had some, you know, rivalries, but together we all come together. And this was really a shock to a lot of folks in the United States and in Canada. But it was an escalation of some of the provincial tariffs, some of the limitations on liquor by some of the.
The liquor control boards on the provinces in Canada and what most of us have seen as an overreaction to what's going on in Canada.
I get a lot of questions. Why? Why Canada? What did they do to us? They're very polite people. Why them? And really, you have to look at what this administration wants out of Canada.
It wants Canada actually to limit the amount of component goods from other countries.
So at the beginning of this administration, they talked about higher walls around the North American manufacturing.
So they wanted to limit the inputs from other countries into the North American manufacturing base so that they could revise USMCA, U.S. canada, Mexico trade Agreement to limit some of the inputs to encourage, again, domestic manufacturing within North America. And it seems like Canada hasn't really gone along with that. They've looked at their own economy and said, this is not really something we want to. This is not an action we want to take.
So what's happened is you have this sort of retaliatory action. And right now, you know, we've seen trade dip between Canada and the U.S.
not to the degree that everyone thought, because Some of these 50% tariffs that were put on under Section 338 aren't something that we import a lot of into the United States. But it certainly has had the effect of chilling trade. So we have, for the first time in the history of the United States, we have tariff actions on those four sections. 122, which is gone now. 232 on specific products. We have section 301 on forced labor, and we still have the section 301 on Chinese goods as well. Then you have 338 on Canada. So a lot swirling around tariffs. Yeah.
