Tariff Trends 2026: Expert Insights on the Evolving U.S. Tariff Landscape

The below transcript has been generated by an AI system and may contain inaccuracies, errors, or omissions. While efforts have been made to ensure the accuracy of the content, the AI-generated transcript should not be considered fully reliable or definitive record.

Marcus Eeman

Hello. Good morning, and welcome to our ongoing series tariff trends one twenty six, talking about some of our latest news and tariff insights, from the last month or so. And before we begin, just a brief, legal note here. Please note that, everything we're talking about today, here in our session is based on the current, situation today and may not be customized to your specific business requirements, and things change fast. We always recommend reaching out to a Flexport expert to discuss your particular situation.

There's a few housekeeping items to go over as well. On your screen, you'll see a sidebar on the right of the main stage where you can submit your questions. At the end of the presentation, we love hosting a q and a, try to get through as many questions as we can. So get your questions in early to make sure we get to yours.

In that same sidebar, you also see a tab labeled docs. This is where you can download a copy of today's slides and find other helpful resources like our tariff simulator, tariff refund calculator. Above your screen, you'll also see a button called audit your customs broker. This is our AI powered tool that helps run a compliance audit on historical customs entries over with 200, different audit checks that we run. It can help identify entries with tariff stacking issues or estimate duties that you might have over or underpaid. Please click on the button above your screen to get started.

Okay. Joining me in the presentation a little bit later, is my associate, Jen Park. She's our director of trade advisory. I'm a director of custom systems and process here at Flexport. Okay. Our agenda is we're gonna go over the latest news as we always do here. We're gonna, then dive a little bit deeper into some of the court case updates. Right? There's been quite a few things. We all watched the IEBLOCE, you know, case last, last February kinda get announced here, but there's been more movement on 01/22, on on 03/2001. IEPA continues and even three thirty eight as of yesterday. So we're gonna go into all of those things.

We also wanna show you, a new tool that we've been developing called our importer audit, and Jen's gonna walk you through a demo of that and how this can really help you catch mistakes in real time and make sure they get fixed before they become PSCs. And then finally, we'll have our q and a.

Alright. We'll go to our latest news here today. And so for the news, it's been, I would say, relatively of a quiet month. A lot of things that have had momentum in previous months have continued happening, but I wouldn't say there's any major, bigger, splashy announcements. That said, there's still plenty of of small topics that I wanna make sure you're aware of.

First of all, Xi Jinping came to United States, and the US China board of trade, has an agreement here, to reduce tariffs on a few products. Now there's no implementation for it, but this covers, certain agricultural things, toys, small appliances, holiday decor. China agreed to buy more US farm products, as part of this thing here. And this extends a truce that was supposed to expire November 10.

If you remember last year, China had a whole swing of duty rates. It was 20%. It was 30%. It was a 125%. It was 84%. There was supposed to be an increase on November tenth of last year. During that time, they they came to an agreement. China committed to buying more agricultural products. The US agreed to keep allowing China to buy cutting edge AI chips. And so that led to a truce. Nobody raised duty rates anymore. Nobody put in more import restrictions on on rare earths or anything like that. And so that truce was temporary. It came up to a one year mark here. But now it's being extended from November 10 in... To January 10, an additional two months.

This is probably good for both sides in some ways. They both wanna be able to reassess, the political landscape in The United States after, the midterm elections. I don't think Trump really wanted to have a headline saying Chinese tariffs increasing right before the election. And likewise, perhaps the Chinese think they have a better negotiating hand where the Democrats to win control of Congress, starting after the midterm elections here.

One other thing I wanted to point out is that we're still waiting to get any kind of updates here on section three zero one overcapacity. We saw the section three zero one labor, program come to effect fairly quickly after only, you know, within a couple 100 days. But the three zero one on overcapacity, which was just taking place only a week later, still no updates really here yet. This was affecting a much smaller group, but recall this investigation was just saying that there's a kind of a perennial state of dumping, from several countries in several areas. There's supposed to be, some sort of result from this here. We'll have to see. Most of these investigations have taken about a year. This one seems to at least being paused. Unclear for for what? Do they also now wanna announce anything prior to the election and create any kind of spark here? Are they still sorting it out? And maybe they're figuring out how this plays with existing agreements, for example, with the EU or Japan or South Korea.

Finally, or I guess for the next one here, we also saw some federal, registered notices on a couple of other clarifications here. So one was for US content. This was having to do with USMCA. There was an exemption for two thirty two duties for USMCA qualified products, but only on the value of US produced content in those USMCA products. There was an open question. How do I know what the value is? They did clarify this in some rulemaking here. They said, okay. This is based on substantial transformation or the metal content, steel, aluminum, copper that is melted and poured, smelt and cast in The United States. So they also did this. They also said how to, calculate some of those some of those offsets. So if you import, some of those two thirty two products under USMCA, and some of that product is US, US content, there is maybe a way to split out your lines again, and get a reduction.

Another notice here is, CBP put out a a notice of rulemaking for the type 13 entry. This would be a mail entry and kind of the last gasp of de minimis here. After all the movements last year on de minimis, mail entry seemed to be somewhat of the only route left for small parcels to have a streamlined, simpler, easier entry clearance. That has continued to get tighter with country of origin reporting requirements, full classification reporting requirements, and duty rates collected at the HTS value rather than flat parcel rates.

This is coming, you know, going to be solidified from the rulemaking. But I think one other piece of this that, is worth noting is that they're clarifying what I thought was pretty ambiguous over the last year or so, actually, maybe longer when it came to de minimis is who is the importer of record? In theory, there was no importer of record. Customs tried to enforce it saying, well, the broker is the importer of record. Brokers said I have no financial interest in this transaction. I would never be importer of record. I couldn't be. This is hoping to clarify this, and I think that's an important change to note is that any of these kind of low value parcel shipments, whether it's by mail or something else, if it's not actually going to be a company or the actual recipient is the imported record, the broker would be the imported record. Also note there's some bonding requirements that go along with this. This hasn't normally been required on informal entries before, but this is something that customs is hoping to do. I think comments on this go through December 7. So if this affects your your products, be sure to check out the federal register notices, to find out where you can, make additional comments for your particular case.

The third case, third, pillar here we have is our comment period for the disclosure rulemaking, is ending in... On 12/01. And this may... You may recall this was from a couple of months ago. This had a pretty expansive, list of requirements to say, okay. We want our importers to now report, entities beneficial ownership. We want them to report how products are made, tiering of transactions. We want brokers to show how they're validating importers of record. We want to deactivate importers of record that haven't, shipped before. We want to inactivate, certain imported records or avoid, suspect importers of record. All of these things are things that customers wanted to do, and they wanted input on how to do it in their proposed notice of rulemaking or their advanced notice of proposed rulemaking, which is kind of a introductory fact finding, type here. And this common periods end on twelve one.

A lot of these things are targeted toward foreign importers of record, but many more things are also just targeted toward all importers of record. This is something that if... You should maybe take a take a close look at if you haven't yet decide if you do or do not wanna make comments, as a company if you are for an importer of record. This could make life much more difficult for you, trying to be able to prove what are sufficient US assets, being able to prove company structure, and asking how to do this here. We've already seen some of these inactivations occur, but I also wanna just kinda clarify. Being inactivated usually means you just haven't shipped enough. Customs said they deact... Or inactivated, excuse me, inactivated over 5,000,000 records. And many of these are just companies that maybe just went out of business. They had three imports one time three years ago, and they haven't done anything since. Whatever that case is, many of those have been active, and that's somewhat of low hanging fruit.

But being avoided import of record was actually... Means that somebody at customs made a determination based on import history, for that, and that's a much harder, process to get reactivated. So if you're... You haven't shipped in a while or you haven't used a certain certain corporate entity as an importer for a while and it comes back as inactive, it is relatively easy for your broker to reactivate that. If it's been voided, that may mean that customs has more questions before they'll let you reactivate that importer of record number. These data validations are getting a little bit more intense as well, I think, and that's something where I really wanna focus on. And you'll see this in the next couple of slides here. That's kinda my theme here where they talk about how do they validate origin and how do they validate, different, different categories of of importers, as well as their brokers. So that's something we're gonna dig into in a little bit.

But the CTPAT certification, if this isn't something that your company has right now or CTP, CTPAT validation verification where CDP comes on-site, I would recommend you start doing this now. If you're starting to get into annual planning this year, I would like you to include in your annual plan that you're gonna need some budget for consulting services to set up CTPAT. A lot of the indications from this rulemaking are saying CTPAT is going to be much more important going forward, both whether this means, as table stakes just where, like, you have to have it in order to import, or it's gonna be more Fastlane access if they make that difference between being CTPAT certified and not much more painful in terms of exam rates, or other kind of facilitatory, treatment. So CTPAT, that is something that, you should look at very closely if you haven't signed up for this yet, if you haven't started to export it yet. It's not something you can really do over a weekend, but if you do need help to do so, this is a service that we do offer at Flexport, within our trade advisory department, and Jen can talk more about that if you have questions.

Finally, Canada and Mexico, both sides are kinda paused on negotiations when it comes on 232. Again, probably some of the midterm elections are coming into play here. If the Democrats come in and wanna unwind or limit or cut back section two thirty two, Mexico and Canada maybe maybe wait a little bit. But more importantly, they just wanna know that they can, you know, have certain assurances about how goods will be treated under USMCA from The United States. And the other piece of this is that The US, seems to be saying that within USMCA, they wanna change that preferential treatment rule as part of whatever their negotiation is. And so going, you know, going back on 232 for The US may come at a negotiated cost by tightening up rules of origin for both Canada and Mexico. We probably won't know more until after the election, but it is something to to kinda watch, and that's where where things stand at the moment.

Okay. I wanna go into one of the things where we talked about this federal register notice of rulemaking. And one of these things we talked about was entity verification and validation. I wanted to share with you a document that you as an importer probably wouldn't see, but your broker might. This is a sample, or a piece of a letter that comes to customs brokers asking about power of attorney verification, and these are some of the more questions that we are now starting to get. The fifty one zero six form is the process by which a new importer of record gets added to CBP's electronic system. And so once you complete that, this is what customs uses. But they're looking to validate more of this. They wanna know, did we, the broker, do our due diligence in setting you up? How do we find out? They wanna know more about, are these addresses real, or are they just service a process addresses in Delaware or Wyoming? Did we actually review your photo ID?

So if you are switching brokers, if you've had questions from your brokers, or if your brokers are now sending you revised versions of POAs and asking you to sign and asking for a lot more invasive information, I wanna say it... It's probably not them. They're probably getting this from CBP. CBP is the one asking for a lot more of this information. This is something that they are, much more, inclined to look closer at, than they really ever have before. So, this is something that you should be aware of. Know that if you're not the signer, if you're not somebody that can bind your company on a POA, brief your CEO, brief your president, brief your chief legal officer that, there may be some more questions for them. Validating their identity is probably just the tip of the iceberg. Brokers are probably gonna start asking much deeper questions about that in anticipation of, the rulemaking standards that come out and in reaction to these kind of forms that we've been getting from CBP asking about our setup.

Okay. The last thing I'm gonna talk about before I turn it over to Jen is talk a little bit more about rules of origin in focus. And I think this is going a little bit under the radar, but I've heard a rumor that there's at least some idea of wanting to change the rule of origin standard, not only for Canada and Mexico, but for everybody. The current standard today that you maybe have heard about is substantial transformation where a good last underwent production in a substantial way, where it lost its name, identity, and use and gained a new identity character or use. This is kind of a standard that's been defined before when it comes to marketing rules backed up by case law as well and is a standard for just about every country.

However, it seems that customs and, specifically, the White House is not so set on this as they once were, that maybe they're looking to see how can this maybe be tweaked or adjusted a little bit. If nothing else, one of the things that comes out through the federal rulemaking pretty clearly is they want a lot more proof of substantial transformation. They want a lot more proof about production records. They wanna see about tracing. Where did all the inputs come from? Where were things made? How are they changed when they were there? How did they come to United States?

But the problem with this is feasibility. This has kind of already been running a couple different ways. One is with UFFLIPA, the Uyghur Forced Labor Act from a few years back, and also sex... Section two thirty two last year where if you were asking your supplier, hey. I know I import pens or, you know, piston pumps for cosmetics. I need you to tell me the origin of the metal in this little spring. They may not have been able to do so, and that was definitely a challenge, I think, for the trade. But it does tell the customers a little bit more about where things were made, where these inputs come from. And so what maybe looks to be happening is that there may be an attempt to try to change the standard, that there may be an attempt to try to modify it away from substantial transformation as it as it exists today to maybe something more value based. And I would want you to kind of know a little bit more about this. And if nothing else, I do think you should start asking your suppliers today more questions about where their products come from, where their inputs come from, how they're transformed while they're while we're there. But something seems to be coming up, and we're gonna get to the great transshipment scam document, the report that the White House released over the summer, that maybe hints at the direction that they're going to in light of this rumor I've heard about, potentially, a a quick bill to try to refine, this law, to try to refine this rule.

And the reason for it, I think it's pretty simple. And it really comes down to this idea of transshipment. And here's a chart that kinda shows both alloy and non alloy steel rod, imports over the last few years. And what you see from this is that, there was very little steel rod being exported from, you know, Malaysia, Vietnam, Indonesia, and India to The United States in 2023, very little in 2024. And then all of a sudden, we start to see some large increases in 2025 and 2026. Some of this may be the result of legitimate changes. A big part of the tariffs were to try to get people to decouple from China. Maybe this was successful in legitimate ways. But customs also looks at this very same chart and starts to wonder, well, wait a minute. Indonesia had zero steel production of steel and alloy rod over the last three years, and then all of a sudden now they have almost 18,000 metric tons year to date. Did they start up a new steel mill, or are they engaging in something perhaps a little bit, below board? Are they doing something maybe they shouldn't be?

Vietnam barely even produced 500 metric tons in 2023 and 2024 and yet somehow have increased their production to 250,000 tons through August of this year. Did they start up a new steel mill, or is there a leaky border with China? Probably both. There's probably a bit of legitimate production going on in Vietnam, but there's also probably a bit of illegal trans shipping going on. This is the data that customs sees, and this is why they're asking about questions of country of origin and substantial transformation and value add. This is why they wanna know what's actually happening in Vietnam. What is actually being done to produce this steel bar, this steel rod? What's actually happening here? This is something that they're looking at much more closely. And with the goal of trying to decouple from China, this is something that has been working to an extent.

The chart on the left shows all US imports. In the blue line at the top, it shows the green line of China's share of those imports, and then it shows a gray line that's descending of China's share of all US imports. And between 2022 and 2025, the value of China's imports almost fell in half. Meanwhile, our value of imports increased. I think a big, notable trade statistic from from last year is that, actually, we spent more in terms of value on imports than we did in 2024. As crazy as last year was, we somehow, imported more in terms of value. But China's share of imports is falling. And the suspicion is, from the White House, is that we're not actually seeing reshoring happening here and that China's value in terms of their exports may actually be also unchanged.

And here's an example of eighty five seventeen. And if you've been bored by what I'm talking about and you've been looking at your phone, you're already ahead because you're looking at the eighty five seventeen product we carry with us all the time. Smartphones, Bluetooth headphones, other, you know, well, formerly produced headphones, other Bluetooth devices. All those sorts of communication and telecoms devices here, have mostly been imported flat in flat volumes. You look at twenty twenty two, '23, '24, '25, all the kind of roughly in the same $1.22 to $150,000,000,000 a year range. China's share has fallen by more than 80% from 63 to about 11,000,000,000, year to date. Meanwhile, the rest of other countries, India, you know, Indonesia, Malaysia, Vietnam, Taiwan, South Korea, they've made up that difference. We're still importing the same amount of 85 seventeens roughly as we have been for the last five years. But what has changed is the origin of it. So perhaps this is another big target for the administration to say, wait a minute. Are they actually producing phones in India, or are they just doing some flash production? And that's maybe why this idea of substantial transformation is something that customs isn't totally married to. And what they look at now is probably something more towards value.

From this report, the great transshipment scam that was published by the White House over the summer, they talk about this idea of true economic origin. They talk about this thing about the Chinese economic origin of the inputs that go into it and that they need congressional action to make some sort of modifications. I think this is where the administration wants to head, and I think this is maybe where they want to look at some version of including value added, in components that are later imported in finished products. You know, may recall that in my previous webinar two months ago, that iPhone four from all those years ago, was 6% Chinese origin by value add. Right? But it was still country of origin China because it was substantially transformed and produced in China. But this leads to some wacky areas, and I think it's something I'm gonna watch a lot more closely, certainly from the political standpoint, going forward into the winter. And I'd encourage you to watch a little bit more closely too. It's good questions and good practice now to ask about where are your inputs coming from beyond tier one and start to kinda get a sense of where you may have certain exposure. Are you seeing true production occurring in some of these countries that you're reporting as the origin, or are these just more, smaller operations that maybe you need to do rethinking, and to seal the sort of maybe compliance, blind spot in your process? Anyway, I'll leave you with that here, but let's get into, the court cases, with my colleague, Jen, to take over, our head of trade advisory.

Jenn Park

Thanks, Marcus. Alright. Before we go into AIPA and Kate, we're gonna start with some updates and background on 01/22 and 03/2001. I know we, there's no new developments in every area, but we just wanted to kinda make sure that these are still on your radar. So we'll start with the section one twenty two tariffs. As you know, section one twenty two allows up to 15% surcharge for temporary time frame for any, US payment, US balance of payments issues. Back in May, we know that there was a CIT ruling that was issued to three specific importers where they had found that the section one twenty two was invoked improperly so that these tariffs were essentially unlawful. Shortly thereafter, the government had appealed. And we know that today, these tariffs are no longer, being, tariffs. So, like, as July 24, that was the d day in terms of these one twenty two tariffs going away.

However, this is still under appeal at the Federal Circuit. Something to call out and we wanted to put on your radar is that this relief is very narrow. It's for these three specific importers unlike the IUPAA tariffs where it was universal injunction. So this court case is really tailored to those two, private, companies and also the state. And so what we wanna make sure that we call out here is that even though tariffs are no longer being collected going forward, I think the issue that everyone has on these 122 tariffs are are there gonna be refunds available for us in the future, similar to IIPA. And as I mentioned, since this is a very specific relief for these three importers, what we would say is it is to be determined in terms of how the federal circuit will, decide on this. It may go through all the way to the Supreme Court. There is skepticism in terms of whether the super... Supreme Court will actually hear this case considering the tariffs are not as high as IEPAA, but also the duration that it's only for a limited period, whereas with IEPAA was for basically unlimited until there was something that would stop it. So, I think with those factors, there... It's very acceptable whether the Supreme Court would hear it. But I think in general, we know that it's not gonna be a quick and easy decision. It... I... It took a long time. So this may take a while, but something that we wanna follow is at the timeline, but also that this is really tailored to these three importers. So we hear that it is possible, depending how this plays out, that importers may need to file their own, court orders in order to get the relief that they want.

Next, we wanna focus on section three zero one. So we know three zero one is nothing new and three zero one was, something that came out as a result of IUPTA tariffs going away. We knew that 122 tariffs were going to be a temporary stunt and we knew that tariffs were going to be, they were going to be replaced by something which was three zero one tariffs. And The US does have the ability to implement tariffs in order to, address any unfair foreign practices that do, impact our US commerce. And so in... Back in May... Or, yeah, back earlier this year, we had two different investigations that were started by the USTR. One is forced labor and then we have the overcapacity. The overcapacity, Marcus, as mentioned earlier, is that there's still no decision yet. We're still pending on that. But as for the forced labor, we do have some developments in terms of, we know that as of July 24, that these were implemented for 60 countries. This investigation actually started with 75 countries and it was found that within 75, 60 countries were gonna be implemented with 10 to 12.5 tariffs, as of July 24, depending on the country, which would essentially replace the 122 tariffs.

Shortly thereafter, there was a court case that was obviously filed by multiple plaintiffs. These were all consolidated to CIT and Learning Resources became the sample and lead case on this issue. The latest development there is that there were oral arguments that were actually held on the September 30. The complaint itself from the plaintiffs, if you have time, you should read it. The attorney is pretty witty in that. They start off by saying third time is not the charm. So third time being that the first was IEP, but second is 122, and the third time that they're trying to implement these tariffs is under three zero one. And so they're saying that this does not... Is not applicable. But what their basis of their argument is that for three zero one, there is a statutory prerequisite that must be met, that the USTR must show that based on a country by country review, that they found that these unreasonable practices did lead to, impacting The US commerce in an unfavorable way. And so what the report that you see from the USTR that concluded the investigation, one is that it was conducted and completed within two and a half months, which is very quick compared to what we see on other three zero one investigations that generally take more than six months. And the report itself was very generic and vague. So it didn't really do a country by country specific analysis and findings. It was kind of a general finding itself. And what they had... What the plaintiffs were arguing is that the USTR had cherry picked certain examples to kind of make an assumption that there was unreasonableness there. So I think what they're saying is it was done hastily, but also that the requirements of actually finding country specific findings was not there.

And during the oral arguments, there were three things that the three panel judge had really focused on. And they were saying that, first, that the report itself, the findings itself, did not really investigate, the economies in terms of their economic development. So, obviously, all 60 countries are in different development... Economic development, and they did not take that into consideration. And what the government is saying is that what we did was invoke three zero one b. They go into the statutory differentiation in terms of what statute that they had used to implement or determine their findings. The government is saying they used three zero one b, which is more of a general, statute, and they're saying they relied on that. So there... It was not required that they do find a country by country specific and, go into the details of the economic development of each country. However, the court is saying that you should have used three zero one b, but at the same time, they also called out the the USTR saying, hey, in your report, you actually invoked three zero one d itself. So you should have used the stricter language. But they also go into the difference between a fundamental ban... A functional ban and an express ban. So what the judge has also said is that maybe you should have used a functional ban. So give an example of Taiwan and saying, like, you know, during their, agreements they did, you could have said, that that they were willing to take into consideration that they would, take into forced labor bans into their agreement for the reciprocal tariffs. And that could have been a possibility as opposed to doing an express ban, but the government disagrees that that they prefer an express ban itself. But I think in general, the crux is that the USTR did not really produce any country specific findings. It was very vague. And I think that's kind of like what we were hearing from the judge. So, I do see that the judge from what we're hearing the oral arguments that there is some skepticism from the judges in how the USTR had conducted their investigation, how fast it was, and if they did not really take into consideration all the finding country specific findings. No decision has been made yet on, this issue. We know that in terms of next steps that briefs are due, but we have yet to, we'll keep you posted on this. But, yeah, the first step is just the arguments for now.

The next one for overcapacity, something I just wanted to call out is that even though we're still pending a decision on this investigation, we know that the latest here is that for there was a G20 trade ministerial meeting held back in September 30 to beginning of October, where, there was a proposal by the US Life, James and Grier, on this in terms of discussing, the overcapacity issue, which was not met really well with the other countries. They didn't seem to agree with their proposals. So, it's something that came up, but it's something that's going to be probably discussed further during the G20 Summit in December. Something that's not on my slide, but it is a recent development, is as of yesterday, there is a court case that has been filed for the section three thirty eight tariff. So not surprised, but, we'll keep you guys posted. In the next webinar, we'll provide you more details on that case.

Alright. So for IAPA and CAEP, we did get an update from Brandon Lord beginning of this month in terms of how CAEP is, progressing. We know that to date there is about 136,000,000,000 that... Refunds that have been accepted and processed. Out of that 126,000,000,000 has been dispersed. That is about 21,000,000 entries, I believe, and about 75% of the overall 166,000,000,000 that were paid unlawfully by importers to date. And so there is a lot of progress being made. I even hear for phase two refunds are being issued for, you know, entries that were flagged for recon. So it does seem that, it is going well.

We'll go to the next slide to really discuss CAEP three. CAEP three, we know that was delayed, from September, but October 6 was the launch date for CAEP three. As you know, these cover fully liquidated, finally liquidated entries filed by plaintiffs who have an actual civil suit filed with the Court of International Trade. So, it's just limited to those importers that had filed a suit and it covers finally, liquidated entry. So any entries past that ninety day liquidation date. I guess from Kate purposes it's really an eighty day liquidation date. And what we hear also is that it does cover, entries with open protests, open or suspended protests. However, from, like, our team, the feedback that we got is we did try to upload entries with, open protests and it did not go through. And we're also hearing conflicting stories that it... Even in the FAQ for IBA page, it's saying that it's not eligible. So, something to note is that as you're working through and you're trying to upload for phase three, it is possible that if you do have open or suspended protests, those may not go through. You may have to work with whoever filed those protests to get those withdrawn prior to filing CAEP. But it looks like CAEP phase three is working. And as you know, it was only limited to those that had submitted their IRR by July 30 as of yesterday, and we know that this group has expanded, so that any importers who had submitted their importer of record numbers to CBP between the dates of July 31 and August 13 have also received, an update in terms of when their turn is to upload for CAEP phase three.

Alright. And for those that did not file service suit and is not eligible for CAEP phase three, the latest development there is that, a win for you guys is that, Judge Eaton did grant a class certification. So, for... This applies to all importers that had filed, IPAA duties between the dates here 02/01/2025 to 02/19/2026 and excludes all parties that had filed a separate suit. What this suit is for is it certifies a class and there are certain requirements that must be met in order to certify a class. And there were some debate between the government and the plaintiffs as to the timeliness of filing a suit, whether the commonality. And so what the government had initially been pushing for is that this was not a time... Was not timely filed, and that also the commonality. So every party here has different amounts of refunds, so it'd be impossible to kind of use that as a common, issue. However, what the court said here is that they agreed that this this is a certified class. The good thing here is that you don't have to opt in. It's it's a mandatory thing. So, like, any importer that had... That meets the requirements that they paid within this time frame and did not file suit is already, like, automatically opted in, and it covers you. And what there's... What they said here is that it's... It was timely because the suit was filed actually prior to the Supreme Court decision, and so it was it was not a surprise. But also the commonality is that what this injunction or what this class certification will do is that once a decision is made, the monetary aspect of it is basically incidental to the decision. So, you know, it's not a judge. It's not judicial order that must be given to each specific importer, but it's basically just letting CAEP run the process of issuing refunds. So it's it's, that kinda takes care of that.

So next steps here is that we do hear that there's gonna be an appeal by the government, and I'm sure there's gonna be no surprise there. They have forty five days to appeal. And so even though we do have a win in terms of a class certification here, it's still long ways before we have a final decision on any, refunds being issued to importers that have not filed a civil suit. We do think it's gonna take months. And something to keep in mind is that in order to bring a civil suit, there is a statute of limitations of two years. And that start date is when the date is that, the date of when the action is brought. For here, it's that date of entry. So for those importers that have entries that were cleared starting February 2025, it's... February 2027 is just around the corner. So something that you should be doing is consulting with an attorney whether it makes sense to file a civil suit, as you follow this case, because it is possible that as an... It is possible that if this decision comes out after or even before that there's... And it's unfavorable that you may miss the opportunity to get your refunds on these entries because you missed the ability to bring a civil suit. So I would say right now with importers that have not filed suit, if you're not planning to, just probably best practice is to consult with an attorney what your best options are and in terms of timelines, what you should keep in mind so that you don't miss out on future refunds.

Alright. For the next, we will show you a demo of our importer audit. And so, our trade advisor team has been really busy this year, obviously with IBA. But, you know, one thing that has come up a lot with a lot of clients, working with us today is, importer audits. This all started with the tariff stacking, tariff trade remedy, but really in 2025, there was a lot of chaos in terms of all the tariffs that were applied to your entries and whether it was being done correctly because CBP was issuing updates left and right and, you know, the ABI systems that the, brokers use was not updating as quickly. So, there were concerns in terms of whether the proper tariffs were applied but also the tariff stacking was applied properly. And so, we had a few clients coming up to us in terms of, auditing this. However, we built a new platform where we audit your entries and we made it, we've updated the process where it's no longer manual, it's no longer Excel. It's a proprietary tool that our team, within Flexport has built. It was led by a a team member who has ten years of regulatory experience with CBP, and he's brought his knowledge and his know how into our team and built out a new tool where it implements the use of AI tech and of course, the human in the loop in order to audit your entries. The scope is different depending on what you're looking for, but it goes all the way from applying the tariff revenue rules to even your business rules.

And what we'll do is start with scoping out what it is that you want us to audit. We'll gather the information. This generally means gathering your ACE data, your entry data, so your entry packets, your commercial invoices, your product database. And that's generally for those that are literally... That are asking us to ask... Check for whether our broker applied our SOPs correctly, whether we had applied our product database SKU classifications correctly. We'll look at that SKU data as well. What we do is digitize all that information so we can map. Mapping means we're mapping your ACE data against your SKU level data. As you know, ACE only provides HTS level information. But in order to make sure that we're able to confirm whether the proper classifications, country of origins were declared on that particular SKU, We need to drill down to that SKU level data and that's what we pull from your commercial invoices and tie that to the product database that you provide. The analysis is conducted in our tech platform and then what you get at the end is our audit dashboard.

We did not want to provide a report. Generally, it was like a 30, Excel with 30 columns, especially now with all the various tariffs that come into play. We didn't want you to scroll through all the way to the right to figure out what is the underpayment overpayment of a particular entry in our findings. And what we did was we updated our process so that we have an interactive dashboard. The interactive dashboard is an HTML file. If you've done one of our ACE analysis, it's a similar look and feel where you can look at, the report, and you can essentially play around with it depending on the user. So there's different views that you can look at, which is an executive summary view that you see here in the top left picture. And it shows you how many entries were audited, what was the total duty tariffs that were actually declared on your ACE versus what we think should have been declared based on our findings and an overview of your underpayment, overpayment of duties. This this page gives you an overview and a summary by category, so the tariff categories. But you can go drill down into various levels of review depending on what kind of information you're looking for. The next tab is like an entry summary review. The next one drills down all the way to the entry line level.

Essentially, what we're trying to do here is to reconstruct your 7,501 as if Flexport was declaring your entry. For those that are familiar with the tariff simulator, our back end audit program is a tariff simulator, so it does apply the tariff rules based on that. But we also take into consideration any other business rules that you want us to look at. And so if you see the snapshot here on the bottom right, you'll see on the left, we looked... I gave an example of an entry line. It shows you what was declared by your broker originally. And then based on the rule sets that you've given us and our terraforming rules, we provided you a snapshot of what Flexport would have declared if we were your broker. And so it gives you a comparison and then shows you what the overpayment, underpayment would be. It's very interactive in terms of you can, categorize by, country of origin, maybe particular SKU numbers that you're looking at. So it's it's it's nice if you want to kind of just drill down into the SKU level information and where their overpayment underpayment is.

And so what also we provide is next steps overview. I know after the audits a lot of feedback is what do we do with all these findings? Do we do corrections? Is it PSCs? Is it protests? So there is an entry summary view that shows you all the different methods... All the corrections that are required. But at the last column there on your right, what you'll see is, the method of revision. So based on your liquidation date, your protest deadline date, whether it's an overpayment, underpayment finding, we will advise you in terms of what the correct mechanism would be to correct that data with CBP, so a protest, PSC. But also, we do realize that not every, you want this data so that you can send probably to your broker or a vendor that you work with to make these filings. We have the ability to also download these instructions directly from the HTML file. You can download it, send it to your broker, or if you want Flexport, we obviously can correct it for you. Then this whole report itself, if you don't like an HTML file, you have the ability to download everything into an Excel or a CSV file, whichever you need. I know some prefer both the file and the actual Excel Excel so that they can manipulate the data on, internally. So we have that capability as well.

And essentially, what we're trying to do is identify any areas of improvement in your import profile. So once you give us a product database, your section two thirty two, do you have information? During this process, we will be identifying, hey, it looks like the SKU has inconsistent use of classifications on these entries. Which classifications should you be using? So you can update your internal database. So we do identify areas of concern. If you have any callouts, we definitely take a drill, drill down into those specific areas. But, ideally, this is, our updated process in order to not only make the audit efficient, but being able to kind of audit your data by pulling your ACE and your skill level data and giving you a holistic view and really reconstruction reconstructing that data so that it's in a view that you can easily digest and understand what kind of changes we're recommending based on those rules.

Next, we'll go into resources. Before we jump into Q and A, what we'll do is provide a few ways that Flexport can help. We have, the free AI tool that runs a compliance audit on your historical customs entries that services mistakes, misclassifications, missed duty savings. If you are interested, you can click on your audit your customs... Customs broker button at the top right. The audit your customs broker is a little bit different than the one that I just discussed. The audit your customs broker is more of a, a whole, high level. It looks like your ACE data and just targets whether your tariffs are applied properly, that's stacking. What our tool does is really drill down to that SKU level data and your business rules, and gives you the entry line level details, that we find in terms of the financial impact. And then we also encourage you to use our tariff refund calculator, our tariff simulator. But also we have a new AI classification tool that has been launched, so we encourage you to use that as well. And should you have any questions, please contact our experts. We, you can get in contact with our Flexport team, classificationflexport dot com for any classification, duty rate questions. And then you can contact our customs BD at Flexport for any questions that you may have around trade advisory, drawback, and our brokerage inquiries. Alright? And with that, I would invite Marcus back on stage for some q and a.

Marcus Eeman

Hey. Thank you, Jen. Alright. I'll take a couple of the first questions here, a little bit. So first one, we are seeing some rumblings of increased tariffs on India due to purchase of Russian oil and that India and The US are close to a trade deal. Can you provide an update on India and US tariffs and the trade deal? Yeah. Sort of. I don't think it'd be very satisfying, but I can update you with what I know. What I know is that, you may recall, like, a couple weeks ago, the the house and senate passed the Lindsey Graham Act, which would automatically put 100% tariffs on the top five importing countries of Russian oil. And right behind China, India is number two. So that would have automatically put a 100% tariffs on India. India and US have been trying to work on a trade deal for the better part of a year now, trying to agree to purchases, you know, opening up dairy access from, American dairy farmers to, to India. And, you know, there's been some rumblings on it the last few weeks ago. You know, Greer said, oh, we're kind of far off. Rubio said we're 99% of the way there. And I think, just today, Trump said we're, you know, we're really close. It's almost... So just just close to the finish line here.

But this does put a little bit of a wedge in it because, as soon as those tariffs were put into place, the president exercised the power of a waiver that was also in this bill saying, I'm not gonna implement a 100% tariffs on these countries, and I'm not gonna implement 500% tariffs on Russian origin products, which the bill said, I'm gonna hold off just a little bit longer. And in fact, I'm actually gonna buy Russian diesel. Well, that was definitely rankled some feathers, not only among Democrats, but also very much within his own party. There's been some push from, sitting Republicans to want to to say, like, actually, no. You need to put these tariffs in place, which it's really hard to do a trade deal under those sort of circumstances. This entire point of the trade deal was to try to get lower tariff treatment, and India has specifically said they wanna be in that that same 15% bucket as the EU, as South Korea, as Japan. They wanna get that 15% preferential kind of all in rate that all these other countries have. Well, a 100% tariff for purchases of Russian oil, which India has had to increase because of the war in Iran, is a tough sell. So against that backdrop, it's tricky to kind of know how close that deal is coming to pass. Are the Republicans gonna get a vote to do so? Maybe not. And I don't think there's a scheduled time for house representatives to be in congress for a few weeks now. So... And and certainly probably not until after the election. So this may not, get done soon. And even if it does, a forced vote from the house that probably maybe has the votes to to override any kind of presidential veto. At this point, the president would be compelled to enforce a 100% tariff on India, on all Indian products, which would probably blow up this trade deal. So no... That's what I have, in terms of how you kinda balance these, like, this kind of ongoing deal with this giant 800 pound gorilla in the room, is is a tricky a tricky thing.

Yeah. To make sure I understand correctly, are we still expecting to see further reductions on toys, small appliances, and holiday decor now? This did not place... Take place last year, and then I see a a second question below it. We import toys from China which have 0% duty, but we pay the 12.5 percent under the three zero one tariff. Will this 12 and a half percent go away per the China US agreement? Yeah. That's the idea for some of these... For certain products of the toys here is that there will be some reduction on, some of these. They have, like, this 30 for 30 list, which is like bed sheets and, sporting goods, holiday decor, couple other small appliances, fireworks also on that list. Those would all go down, and get the reduction correct. But we are not sure exactly... This hasn't been implemented yet. And as has happened in the past, this could be retroactive. They announced this in September, this, like, kind of reduction here, but it hasn't been implemented. So the question is, well, when does it actually go into effect? It's not in effect today, but doesn't mean that at a future date, they don't backdate it to the date of the announcement. Maybe it does go back in time. There's another another PSC process for you to follow-up with, to to get these these duties back, but we don't have any more information there. Let's see. Let's see. How about for you, Jen? We got a couple here. Are there any updates for a possible phase four of CAPE for finally liquidated entries? I think that's a that's a key question. Wait. Do you have anything there?

Jenn Park

Yeah. No updates on phase four. We're still on phase three and trying to roll out that for all those importers that fell a civil suit. So I know there are still entries that are either flagged for drop... Drawback and a few other categories that are not eligible just yet, but still no word from Brandon Lord or CBP on phase four. And also, there's another question that's similar that says we were trying to obtain the IEPA 10% duty refund however the CAEP due date has passed because entry was liquidated in July. We then submitted a protest, but we have informed that it's been suspended. Is there any other process available for IEPAA duties on entries that have already liquidated and are past the cape due date? So, unfortunately, there is no mechanism for receiving refunds through CAPE on filing liquidated entries that are past the CAPE due date, assuming you are not, one of those importers that filed a sue suit. So right now, the only way to get refunds on filing liquidated entries is to file a civil suit. We're just waiting on whether that is necessary or whether the courts will allow importers who did not get their refunds. And if so, that's kind of like a... We're wait... A wait and see game right now. So we... There's no mechanism just yet, but just know that if you do file a protest with an IBA refund preservation, it will get suspended. That's just the course that it takes and it will sit there until the court cases are decided.

Alright. And then will we receive refunds of the section one twenty two tariffs? That is, that's a good question. I I think the way that the court case is going, we don't know. We still have to figure out whether the Federal Circuit will agree with the CIT. But like I mentioned, the relief that the CIT gave was very import specific. It's not universal like IEPAs. So it is possible that you may need to file your own court case. However, we don't know how the federal circuit rule... Will rule. And if they do agree with CIT, the government can also appeal. So it's gonna be a lengthy process. However, I don't think... I think the issue here is very different from IEPAA. IEPAA was whether tariffs could actually be applied based on regulating imports, whereas with section one twenty two, you can. It's just the issue was whether, the government met the definition of what is considered a treated deficit. So I think the issue is a little bit different, and I think the the tariff amount, the timeliness, the duration of it is a lot less than what we saw in IEPAA. So, it... There are skepticism whether the Supreme Court will actually hear this. So, right now, there are no refunds for 122. There's going to be a long path to get there and right now it's uncertain.

Then I have a few questions on the audit tool. What is the source data for the audit tool? Are you using the 7,501 to audit off of? The source data for the audit tool will always be your ACE data. We'll need access to your ACE to pull your ACE report and then we will need your entry packets. We want to know what was declared on your entry, but what we're getting from your entry packets is your commercial invoices and packing list. The starting file will have your HTS, but then we're going to drill down to within that HTS what SKUs were cleared. In order to map the data of the HTS level and your SKU level data, We start with the entry packets and then we'll also ask for your product database. If you have a source of truth in terms of for this SKU, this is the correct classification, country of origin, section two thirty two that should have been applied by our broker. We're also taking a look at that and making sure that your broker did apply those rules correctly in addition to the tariff stacking and those tariff rules in their systems. How do we get access to the audit tool? If it's audit your broker, you can speak with an account manager, SDR to get access to that or get looped in. But if you're looking at our importer audit tool, then you would have to reach out to our customs BD team or our trade advisory team. It's not a tool that you can just log on, unfortunately, to like a website that we have for like our tariff simulator or AI classification tool. It's a managed service. You do work with our trade advisory team so that we can gather the information, scope it out, digitize, map, and then we will present you with what you saw at the interactive dashboard. If you are interested in seeing the actual demo of the dashboard, feel free to reach out to our custom speedy team to see if you can get something scheduled. We're more than happy to show you a demo of that. Alright.

Marcus Eeman

Alright. I got two more here. Somebody asked about CT... Actually, a few people asked about CT patent. CT patent is the customs, trade partnership against terrorism. It was passed in 2001. And, basically, kinda how it has worked before in the past has been kinda like TSA precheck. You provide more information. It's a little bit kind of... There's some setup cost. There's some maintenance cost to it. Right? But, it provides a little bit faster treatment of entries. What it does, like customs talks about, is that it lowers your risk profile, and that your incidence of, like, random exams and all that goes down a little bit. And, basically, what you have to provide is you have to provide entity data. Who are your company officers? What's their name, address, background? Where are some of your physical locations? What are the physical security measures you have in place at your various locations. So the setup is... I wouldn't say it's like a trivial amount of work. You do have to, like, kind of provide a lot of information within the CTPAT portal. But the idea is that it's gonna provide a little bit of benefit. The reason why I'm recommending it now, though, is that custom seems to be saying, hey. A lot of this information we get from CTPAT, supplier verifications, entity verifications, company officers, corporate structures, this is really valuable information for us. And so what I think is starting to happen is, like, that carrot at the end of, like, this, you know, CTPAT process that customs is offering is getting bigger. Right? They're offering. more benefit. It seems like what they wanna do going forward is that this is not just, like, kind of a nice thing. You save five minutes at TSA. It's more like, actually, you're gonna save a lot. And there's already been, like, some kind of surveys done in the past where maybe some importers say, well, probably overall saves us 10% on cost, you know, due to faster exams or or fewer of them. But this is something to to take a look at. So, you can start with the CT pat manual and, like, the the handbook there. But if you want to kinda just get a hands off, this is something our TA team can do, has done. So if this is something you you need, feel free to to reach out to us.

And I gotta answer this one here for the the customs nerd, which is great. Do you know what rules of origin are applied in determining whether a product is Canadian and subject to section three thirty eight tariffs, no CBP guidance on this, and no response when we contacted them to ask. The reason this is being... This is a this is a customs nerd question, which I appreciate, is because there's essentially two sets of rules of origin. For most countries, as you may have noticed from my slide, substantial transformation is a test. For. Canada, Mexico, they have the NAFTA marking rules of 19 CFR one zero two, and Israel also has some additional carve outs within one zero two. And these are not quite substantial transformation. They have a different test. They have... Basically, you look at... Like, they're kind of like tariff shifts but light where you see what kind of production is occurring, what's actually going... You know, what's taking place here. And then you kind of look to see what was it, you know, what was the HS code of how it was... How it entered the, you know, Canada, Mexico, and then how did it leave. And that kinda tells you, did it actually make this this satisfying change here. And, yeah, I... There is no guidance yet. Correct. I don't have anything for you. What I'm afraid of is some weird double dipping that's potentially possible, where for substantial transformation purposes, suppose something is Chinese origin and therefore subject to section three zero one duties, therefore subject to, the new section three zero one duties, and also section to... Or subject to section three thirty eight because for marking purposes, it also satisfies the one zero two NAFTA rules. Could you have three thirty eight and China three zero one assessed on a single product? Hypothetically, I'm terrified to say yes. I think you might. And I'm wanting to see if customs will clarify this a little bit. But, yes, it is it is possible. That does make me that does make me nervous. I see one last question here, maybe a good one to end on, Jen. Kind of one we can maybe chew the fat on a little bit. If control of congress changes, what do you expect regarding a tariff landscape? Jen, what's your take?

Jenn Park

That's an interesting question. I think we kind of like... When we look historically when Biden took over office after Trump, we all expected that the tariffs would go away, especially the three zero ones and things would get better. However, we did not see any tariffs change within the Biden administration. They actually found that three zero ones were were okay, and so they they resumed. Right? And so I don't think... I would be skeptical to say that once... If if congress does change that these tariffs were gonna go away, that we're gonna be okay in the three thirty eights, all of that. I do think there is gonna be a, some reel back on some of these tariffs, but I don't think you will see a sweeping, tariffs going away even if Congress changes. And so that's my take on it. I don't know, Marcus, if you if you disagree or make. it, but...

Marcus Eeman

I think you're right. I think I kinda described, like, the three zero one tariffs as, like, getting a ball over a hill. Like, it was... Took a lot of energy from Trump one to, like, kind of get this tariff ball rolling. And now that it's on this side of the hill, it's a lot hard... It's still difficult to get it back, and that's why we didn't really see much of a change from Biden. I do think the Democrats will... They have to try to do something. If they're going to win, right, if they've probably won on some questions of affordability, right, that's probably some mix in their winning formula. They said tariffs are making inflation too high. They're making things more expensive. We need to lower tariffs. So I do expect Democrats to have some votes, but the president can still veto it. Do I think they have a veto proof majority? I don't think so. The only wild card is I wonder a little bit maybe about two thirty two on Mexico and Canada. There is a little... Maybe a little bit more support for that. I think especially as you kind of seen some softening stances about Republicans in Ohio, Republicans in Michigan, some of these Rust Belt automotive states, where they can't really say, actually, we wanna try to stop trade with Canada. We wanna try to do this here. That's a tougher sell for them. So I can imagine a case where Democrats have a great night. They just blow... You know, they win 15, 20 seats in the house, eight, nine seats in the senate would be a crazy positive night for them. And then Republicans say, yeah. This tariff thing on Mexico and Canada, this is too much. And the president's lost his power. He's lost his credibility. He got me... You know, he had me lose my seat or almost lose my seat. I can't back him on this anymore. I have to now break rank and maybe look to override this veto with the Democrats. I think I could see that if there's a if there's a big loss, where that really kinda says to... Sent a message, but I... Overall, I don't think many of these go away. I think Democrats are gonna have a tough time going back to some of these, like, steel plants and saying, actually, we're gonna we're gonna move back all these tariffs on China and Turkey and India and all your competitors. We're gonna pull these back. I I think that's a tough sell. So I don't see too much changing except for maybe with Canada and Mexico.

Jenn Park

Yep.

Marcus Eeman

Yeah. Alright. Well, thanks for, attending, everybody. There will be, an email with follow ups here from today's, from today's webinar. Have a great rest of your day. We'll see you next time.

Jenn Park

Thank.

Marcus Eeman

Bye.