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Marcus Eeman
Hi. Good morning. Welcome, everybody. Thank you for attending today's, tariff update, tariff trends webinar. My name is Marcus Eeman. I'm a director of customs here at Flexport. And so we have a lot of content to cover here. So I just wanna go over a few kinda housekeeping notes before we begin. On your screen, you'll see a sidebar to the right of the main stage where you can submit questions. At the end of the presentation, we host a q and a and answer audience questions. So be sure to get your questions in early. We do try to prioritize by when the question gets in. In that same sidebar, you'll see a tab labeled docs. This is where you can download a copy of today's slides and find some other helpful resources. Above your screen, you also have a button to request a duty drawback analysis from Flexport. Duty drawback, how you get money back from the government. This is something if you're not not part of it or you have to kick the wheels on it, please take a look at it. We we feel very proud of our program, and we'll review this a little bit further on the presentation. But click that button if you wanted Flexport to reach out to discuss a drawback analysis for your business. Okay. And now before we begin, just a quick legal note here. Please keep in mind that all this information provided, in the session is based on a situation at this current time and may not be customized to your specific business requirements. We will always recommend reaching out to a Flexport expert to discuss your particular situation. Today's a little bit different for tariff trends. I don't have another customs person, with me here, but I actually have Kyle Beaulieu joining me. He's our head of Ocean for the Americas for Flexport. And we're gonna talk a little bit more about section three zero one and all the shipbuilding tariffs here, as a different as a different, portion, a different perspective maybe on some of these tariffs that we've that we've gone over many times in these last few months. The agenda for today is that we're gonna go through some of the latest news. We're gonna look at the section two thirty two medium and heavy vehicle duty, announcement that's going into effect on November 1 because there's a few things to unpack there. You may think, oh, this isn't maybe meant for me. Well, it might be. We're gonna get into that. We're also gonna look at the Section 301 shipbuilding that I mentioned. Kyle's gonna dive into that, and then we're just gonna have a q and a, to wrap up. So with that, latest news, is kind of, I think, maybe five buckets. I think really starting recently here, we see Colombia being threatened, with additional tariffs. There are some truth social posts here. The president has been, you know, confirmed that he's considering that tariffs are the consideration based on uncooperative attitudes, with, with the Trump administration. Currently, they have an IEPO reciprocal rate, of 10%. They don't have a specific rate yet. So this this may potentially change. That's something that we're watching watching very closely, especially as a coffee drinker knowing that there's already pretty heavy tariffs on 50% tariffs on Brazilian coffee. Please don't hit Colombia too hard. I I'm addicted. As for Nicaragua, there's a section three zero one investigation that maybe some people didn't realize. It actually started I think it was just about a month or so before Biden left. This was this initiated under the Biden White House, but it's been continuing. They prepared a 48 page report here, under section three zero one, and they found violations, from Nicaragua having to do with human rights, having to do with unfair business practices, having to do with cheating. Remember, section three zero one is looking for, you know, unfair business conditions in terms of trade, you know, or or other kinds of advantages, you know, disadvantages given to American companies, or other unfair advantages given to Nicaraguan companies. And so they found quite a few of these of these, violations here, both adding also human rights, child labor abuses, and, undue pressure, on religious institutions as well. As part of that report, the US trade representative recommended suspending the CAFTA status for Nicaragua. Remember, Nicaragua is part of a free trade agreement called, Doctor CAFTA. They get duty free treatment. There's a lot of apparel manufacturing that happens there, textile manufacturing. They want a suspension of their, of their, entry in that program for twelve months. They also recommended a 100% tariff, under section three zero one. This is different than all the IEPO tariffs here. This is a section three zero one investigation. So that's something else to watch closely. Couple weeks ago, actually, just last week, there was a, section two thirty two duties levied on timber, and lumber, but also including timber and lumber derivatives, that is furniture. And so starting on October 14, there's a ten percent two section two thirty two duties on timber and lumber, 25% on select wooden furniture, mostly focused on, vanities, kitchen vanities as well as, upholstered furniture. And so right now, those are at 25%. But the announcement also said that as of January 1, upholstered furniture, is gonna go up to, 30%, and the vanities are gonna rise to 50%. So we're gonna see more section two thirty two duties, there as well. This is also different than maybe some of the other material based ones in that there's no, like, kind of lumber breakout. Like, you don't just, you know, avoid, you know, pay only 10% or 25% on the value of the timber. You pay 25% on the whole value of the product. Fourth, two weeks from now is the oral arguments for the VOS selections v Trump, Supreme Court case. This is the case that challenges five of the IEPRA provisions. So that is the, Canadian, Mexican, and Chinese fentanyl tariffs as well as two rounds of reciprocal, IEPRA tariffs. This is challenging that saying, IEPAA, the act itself, doesn't actually allow the president to levy tariffs. So says, the challengers. Government says, yes. It does. And from what we're hearing and from what we can see so far, the decision seems a little bit murky. It doesn't seem, you know, like it's gonna clearly go either way. Obviously, the, president lost, on the first two courts at the CIT and then at the circuit appeals court. But we're recommending kinda to our clients, you know, look at your options here, but it seems like protests may be the best hedge. A protest kinda keeps your entry open and active, while this case proceeds. We're not exactly sure what's gonna happen. Are we gonna have a decision a few weeks afterward, or are they gonna wait until, like, kind of the June decision dump, you know, 2026? We're not sure. But, you know, if you haven't yet considered filing protests, it's like a way to kinda keep it open. It really depends on how the supreme court writes their opinion. They could write it very broadly, very, you know, simply, like, you must turn all the money back or it says importers may challenge to get their money back under this statute. We're not quite sure what exactly the supreme court will decide, but a protest hedges your bets. Excuse me. But I think another portion that I think is, good to know about this is that even if, you'd you know, the case is is won. Right? You you know, the AIPA is declared illegal, refunds are authorized, the Supreme Court says in some form or fashion, hey, government, give money back. There's a lot of time that can happen, a lot of hijinks that can happen between the time when the Supreme Court says, hey. These tariffs are illegal to actually having money come back into your bank account. So, I think just to kind of set expectations here, I would've think that we were maybe a longer refund process. This may not be something that goes quickly. This may be something that drags on. Maybe it's a protest. Maybe they require court challenges. Maybe they require large amounts of evidence. Maybe it comes along with audits. I don't know. But I'm not expecting it to be a very simple process even though it could be. I think that we should, all expect a longer process when it comes to actually getting money back even if the court, finds in favor, of lost elections. Finally, this is a you know, I try to keep it more toward, like, what's the actual news, but I feel like this rumor is too too important to leave off this slide. You may remember a couple weeks ago, Trump threatened to say there's gonna be a 100% tariff on China on a Friday night because it's always on a Friday night, and he threatened a 100% starting, November 1. Then a few days later on Sunday night, he's like, oh, maybe we have a you know, we've got a better relationship with Xi. They're gonna back off their export controls here. Now we don't need to do this. And it seemed like it was not, you know, just just blessed or a threat or maybe even a misunderstanding. But now, as of yesterday, he said in the press conference I'm sorry. On Monday, he said in the press conference, 100% is still on the table for November 1 if we can't get a deal done in Korea. So that's fascinating to watch. That is definitely something that maybe it could still be there. How does that 100% come? Is that gonna be part of the reciprocal? Is that gonna be something else? Is that section three zero one? We're not quite sure. But we will we'll have to see. I don't seems like it's just a threat, but who knows at this point? And, additionally, we're also coming close to the end of the second ninety day pause. Remember, back on Liberation Day, China had the 34% tariff. They, you know, retaliated. It's 84%. It's a 125%. And then in May, Trump said, okay. We're gonna pause a little bit. We're gonna do a ninety day pause to give us a window to negotiate. And so we're just gonna give them the all country 10% rate on China while we negotiate for ninety days. The ninety days came and went. They reauthorized another ninety day pause in August. And so, we're now coming to the end of that second ninety day pause in August. Meaning, on November 10, the rates could go back up to the 34% on reciprocal. So, otherwise, a total of 54% on all Chinese imports. So, yeah, 34% reciprocal plus 20%, I e plus fentanyl, that gets us to 54%. So we're gonna watch to see what happens there. It's a little couple weeks out, but if you have air shipments and you, you know, you know, you have shipments that you wanna move by air, maybe hedge your bets, this is maybe the the last call to to potentially book that if you think, the discussions are gonna are are not gonna be productive. Okay. So that's the headlines around here, but we're gonna focus mainly on the section two thirty two order for medium and heavy duty vehicles, MHDV, because that's a mouthful to say, the MHDV order here, because there's a few pieces that go into it. And I'm gonna pause on this, on this for just a minute, one to have a sip of coffee, but also to have you just take a look at all the active section two thirty two investigations going on. We are working our way through the list. They keep adding new ones to the bottom. If they add any more, I can't do this all on one slide. But, hopefully, this is this is the end of it here. We are currently right in the middle on the medium heavy duty trucks and parts. It was a hundred and ninety three days from when they announced this to when tariffs were implemented. Now remember, for February, the the law says that if they're gonna do this investigation, they have to conclude that investigation in two hundred and seventy days with recommendations. So, we're seeing both on the ones that were kind of initiated this year, like copper and timber and the, medium heavy, MHDVs, we are seeing well under the two hundred and seventy days. There are two others that are still under the two hundred and seventy days, but are maybe larger impact, pharmaceuticals and semiconductors. But we're gonna look at the MH, DTE, here and see what see what we got. So medium heavy duty vehicles. Starts November 1, the buses, 10%, medium and heavy duty trucks, 25%, and then parts of any of those, 25%. The stair stair stacking is equivalent to auto parts on Section 232. So if you're in the automotive industry or you do parts or, you know, OEMs or anything like that aftermarket, you'll know that you'll that the 25%, it kinda gets applied first. The first question in this flowchart is, well, okay. Does the 25% on auto parts apply? If yes, that's what you pay. If not, look at some of the other flag tariffs, whether it's IEPA or section two thirty two on steel or aluminum. The tariff preference is equivalent here. So, these ones, are gonna be kind of the same level. So if you have an auto part that's flagged, auto parts have an exclusion or rather an option to disclaim it if it's not part of a passenger vehicle or light truck. Many times, especially now, we've seen some of our importers, saying no. It doesn't apply because this is an auto part for a heavy truck. This is, you know, for a for a semi trailer for a semi tractor. This is gonna kind of put it on equivalent footing, so you still will review this one before going on to other section two thirty two or other IEP applicability. But the short reason is that if this is an auto part, of medium heavy duty vehicles, then section two thirty two steel, copper, aluminum would not apply. And this also doesn't double stack. So if you have something that's applicable as, maybe it is for both passenger vehicle and light truck, and it's also for heavy duty and light truck, and come back to that in a second. In that case, they don't stack on top of each other. You don't do 25%, plus 25%. It's gonna be, either one. Third is that there's no breakout on parts, but there is a breakout for US content on completed vehicles. The secretary of commerce, is a has been authorized to give case by case relief, for completed vehicles under USMCA. And automakers have to request this status. So I don't think maybe there's maybe there's a handful of, large automakers on this call, but I think for most importers, this isn't gonna be, you know, rarely applicable. You're not importing, completed cars. However, there is something that I do think has a sneaky applicability, and this is when we look at our silver lining. Some there's a little bit of some good news here, in this otherwise dark storm cloud. First, they provided this provision, the 99037409 provision, which is for, products that are not classified in chapter 72, 73, 76, not on an auto parts two thirty two list, but are going to be used in the production of a medium or heavy duty vehicle. In this case, importers can opt in to paying 25% section two thirty two. Now why would somebody wanna pay section two thirty two on one of these parts? Well, maybe 25% is less than 50% on the steel or aluminum flight tariff. Maybe 25% is less than your IEPRA rate. We think about Brazil, India, Switzerland, Burma, Myanmar. These are some countries that have high IEPRA reciprocal rates. Right? Brazil and India are both at 50%. Maybe it's more advantageous to say this is for a vehicle part, or for vehicle production rather than, paying the IEPRA rate. The hypothetical scenario, we kinda have two here. Imagine, you know, bringing in automotive paint. Well, this is for the production of a, you know, heavy duty vehicle. If it's Brazilian origin, you'd pay 50%. But if it's gonna be used in production of a vehicle, you can claim this, you know, two thirty two. You can opt in to paying two thirty two duties instead and only pay 25%. Say another example, India exports a lot of leather hides. Right? If you're an importer of leather hides from India, right now you pay 50% IUPAC reciprocal. That's the 25% India plus the 25% Russian oil. It makes 50%. But if you are going to certify that that leather is gonna be used in production, of a vehicle, or, you know, medium or heavy duty vehicle, you can claim this exemption instead. Well, I wouldn't maybe I don't call it an exemption. You can use this alternative instead of $74.00 9 to only pay 25% on that import of leather hides. So the other one that they don't they kinda, like, kinda gets lost in the shuffle here, that this also is gonna apply to the passenger vehicles and light trucks starting on November 1. They have a different code. So there's the 99037409 for medium heavy duty vehicles. But they added an additional code, 99039407 since just reordering the numbers, 9407. That is for passenger vehicles and light trucks. So importing leather items of that, is going to, be part of it. Now major caveat, these parts, you know, these kind of inputs, so things like plastics, things like rubber that aren't otherwise covered, maybe instruments of chapter 90, 82, 83, zinc articles, nickel articles, other earth minerals, using this. Maybe ceramics are used in this year. There's quite a bit of possibility. I already mentioned paints and leather. Right? These are some possibilities. There are some chapters that aren't part of these, provisions that could still be used in it. If you want to, you can opt in to one of these, section two thirty twos. However, the main conditions that has to be used in the production of one of these kinds of vehicles. So I would highly, highly recommend that you have affidavits completed, that you have production records about how this is going to be used, after the fact. So if you're gonna say that, yes, I'm gonna pay the 25%, it has to be used in vehicle production. If it's not used in vehicle production, you can't opt into this. Remember, the incentive of these section two thirty two is to encourage more manufacturing in The US for autos and auto parts. So if you're not doing that, you don't get to use this possible savings opportunity. Okay. The second good news here is that Great Britain EU Japan deals are looking better with age. Great Britain has a 10% cap on the cost of their auto parts. EU and Japan have a 15%. So instead of a 25% on auto parts, they are capped out at 15%. That's 15% combined between the standard most favored nation rate, the normal duty rate, and section two thirty two combining to lead to a 15% cap or 10% in the case, of Great Britain. So, that is a a a notable savings opportunity there. A lot of our Japanese and and EU, automakers, will notice and and realize some some savings here or at least less pain, through this, through this provision. And finally, USMCA is still looking good for parts for these medium and heavy duty vehicles. Remember, USMCA auto parts have an exclusion for passenger vehicles and light trucks. Heavy trucks also have an exclusion too. If the parts are USMCA qualifying, parts are exempt from the section two thirty two duties on medium heavy duty vehicles just like they are in passenger vehicles, in addition to base duty. So once again, USMCA is still somewhat of, like, the best free trade agreement left out there and that it still does provide true savings opportunities, for for our customers. Okay. With that, I'm gonna pause here and turn it over to Kyle to talk about, section three zero one, but not section three zero one with China or section three zero one with Nicaragua, section three zero one with shipbuilding, specifically within China. So, Kyle, why don't you tell us a little bit about it?
Kyle Beaulieu
Thanks, Marcus. Yes. So today, we're gonna talk about three zero one for for shipbuilding.
Marcus Eeman
I
Kyle Beaulieu
think first, just a quick quick review here of, what section three zero one is and how this applies, to shipbuilding. So this is a tool that in The US law that gives The US trade representative the for authority to investigate or take action against the foreign countries on fair trade practices. So, actually, under the Biden administration, in April 2024, a petition was filed by, some major US labor unions, that started an investigation into China's maritime logistics and shipbuilding sectors, to assess whether or not they did have unfair, trade practices. And as a result of that investigation, in January 2025, an official report was released that found that China's trade practices were unfair and have had a negative impact in US commerce, due to the state led practices and rapid growth in the shipbuilding sector. So so to put this into to perspective, of the market share they've taken over the last twenty five years. So in 1999, China's shipbuilding market, represented less than 5% of global tonnage, and that is now over 50% in 2023. And and over that time as well, China's ownership of the commercial world fleet has risen to over 19% as of January 2024, and they control production over 70% of shipped to short cranes, 80%, 6% of intermodal chassis, and 95% of shipping containers. So it's been a a massive change in the landscape, for building each of these necessary needed products, for for shipbuilding and ship operations over the last twenty five years. And to give you a perspective now, the current order book, for new vessels has around 75% of those vessels being built in China. And so a lot of those orders were placed, before this this, latest investigation and the resulting, tariffs. So, after the proposal and review session in April, US port fees and tariffs were announced that went into effect in October. Those went into effect, last week on October 14, and the fees and tariffs are directed across the sector, at Chinese bill owned or flagged vessels, plus Chinese made port equipment. So in the next slide here, we're gonna look at what are those fees. How do they play out? So this is a, summary of those, different charges. So you can see here across, there's some variance. Annex one is on Chinese owner operated vessels, while annex two is on Chinese built vessels. Between these two, it's the higher of the two, cost depending on on the carrier and how it applies. The the most substantial, one of these and the first one that you can see, is on Chinese owned or operated vessels. So that comes in at $50 per net ton. And what that translates to for you, for all you in the shipping containers is to about $300 per TEU or $600 per 40 kaiqiu. So quite substantial overall, and, that fee increases annually up to a $140 per net ton, by 2028. And so the impact of this is very clearly on Costco and double o c l, who are Chinese owned or, from Hong Kong. And so they cannot necessarily manage around these charges like other carriers can. So Reuters has cited that it's expected that the China owned, Costco, is the most affected and will account for nearly half of the over $2,000,000,000 cost, from these fees in 2026. So other carriers, really mainly fall under this annex two. And so, they're subject to about 35% of that fee, which translates to about a $100 per TEU, when they operate Chinese built vessels. The difference for them, which we'll talk a little bit here in a couple slides about, is that they do have the ability often to swap out those vessels, to other trades. And because they had notice of time, they've already actually done quite a bit of that. For each of these vessel fees, carriers must self report and pay before arrival, and or they face rejection or holding at a US port, which is, definitely potentially a operational concern if they weren't to to do that. There's import there's a few important things to note, that aren't necessarily accounted for here on this slide, but, they are not called or they are not charged, I should say, for every, port call at rotation. So, they apply on the first port of call on a string. So, for example, on The US East Coast, it's not uncommon, for carriers to call ports up and down The US East Coast. So they can go from New York to Norfolk, Savannah, and Charleston. They don't they they won't be charged, four times in this instance. They'll be charged once at the first port of call. And this is important detail, because it's potentially could incentivize carriers to increase the number of port calls in The US. Especially right now, it's not uncommon, for vessels to either the PSW to only call LA or Long Beach or the PNW tool only call Seattle or Tacoma. So, there's potential that carriers as they go into next year and they re reconsider their, routings could take this into consideration, for the number of calls they they make in The US on those strings. Balancing this out though, and which is potentially beneficial for US West Coast routing, there's also a cap on the number of times that an individual vessel can be charged in a year. So this is capped at five. After that, that vessel will no longer be charged. So each of these nuances, really gives carriers additional things to consider, when trying to plan for supply and demand. So, it's not uncommon, right, for a carrier to transition a new vessel, on a string when a vessel has to undergo repairs or, when a vessel is delayed at another port and it's got off schedule and they need to, implement another one. These moves are generally just weighed against short term cost benefit for the carrier and what kind of vessels do they have in their fleet. But now, this additional cost could be taken into consideration because if you put in a vessel for only one call, that's an expensive additional, hit to your bottom line. And as for the cranes and chassis, the basis for these charges are are really in a multi administration effort, towards improving security at key infrastructure in The US, like US ports, to not have them as reliant on US production or technology. The largest impact here, will be on the shift to short grains. So they they represent over 70% of the market, and these overall tariffs could increase the cost of port mine port modernization, and expansion, within The US. K. So that's, the summary of The US. Next, we're gonna look at China's response to this. And so, China kinda sat on this, for a little while. And just this month after this term from, Golden Week, have have made the response. When in doubt, what you have to think for the China's responses, what did The US do? So it's essentially a a mirror, of what, section three zero one shipbuilding charges are. So it targets, the opposite. So it targets US owned, US operator, US built, or US flagged, vessels. It also launched on October 14. So carriers did not have time to necessarily, respond to it, and it escalates on the exact same dates through 2028 as the other US fees. And the fees are similar. So they're they're start around 400 RMB, which translates to about $56 per net ton, versus the $50 per net ton, that came from the section three zero one c. So, this is very, very similar, to to The US and it's basically, a mirroring of the response. Now the impact here is much smaller, but it is clear. So it's a much smaller percentage of of global cargo fee or fleet. And on the TPEB, this can impact Matson, the CMA APL US flag services, and the Gemini cooperation. They all have to manage around these fees. But overall, it's a much smaller portion. So for example, The US built vessels are less than a percent of current global order book, versus over 75% from China. Now what does all this mean for importers? So this is definitely increasing the cost of carriers. So, we talked about the the highest cost there being about $300 per TEU. What non Chinese flag carriers have done, so since the announcement of this, they started redeploying vessels across the trades. And they have made the determination that they will not charge an additional fee on any US bound cargo. So that's a good news for for importers there. And really, they've they've managed to, heavily mitigate, the impact of this charge, by sending those vessels to other trades and and putting new ones in their place. Now the Chinese flag carriers, Costco and double o c l, they've also determined that they will not charge a fee, but they have not been able to fully redeploy. So, they take a pretty significant hit there. I mentioned earlier the the total expected cost to Costco. And so right now and now this is just current deployment on the TPEV. There's currently six carriers with Chinese or Hong Kong class vessels, flagged vessels still on the TPEB. And 10% of those vessels, that represents 10% of total vessels and about 12% of total t TEU on TPEB. Now of those 61 vessels, Costco and double o c l account for 50 of them. So, clearly, the impact to them is much larger. That represents, those vessels represent over 70%, over 90% of their fleets respectively. Outside of them, Maersk actually has the highest number of vessels, but it's a small percentage of of their overall fleet and something that they'll likely be able to further mitigate the cost of. Now, initially, when this is announced, there was expected that there'd be a new new surcharge, implemented with it. But because those nine Chinese flag carriers have been able to redeploy, they've made a determination that they will not charge right now. But it's important to note that, you should expect, over the course of the next few years, potentially a new surcharge related to these. So, even if they're not calling The US, there are, there's an inherent cost to carriers, by not being able to actively use their fleet across the global network. And all carriers and all MBOs have retained the right, to to charge a fee if they determine it's necessary to do so. If they do that, it will need need to be announced thirty days prior to implementation. Now as for the carrier responses, special port fee, as I noted, this just really came out in October. So impacted carriers are currently, determining all their redeployment options. And, they may have to work around any commitments that they might have to US government for US flag services. The most immediate impact is, or seen impact or change was Hapag and Maersk and the w c five, actually have rerouted multiple vessels already. So they they stopped, their port of call in China, for that service and and rebounded by other shuttle services. Matson, also announced, that despite the impact to them on the cost structure, that they will not charge a fee at this time and overall that they're committed to the trade. So in summary, a lot of lot of different charges out there, that carriers have to navigate around. But so far today, they've been able to to navigate them, and it's not coming necessarily as an increased cost to importers as a surcharge, but it's something that we should, consider and expect in the future. So, with that, I'll bring Marcus back on, and, we'll go to go to q and a.
Marcus Eeman
Yeah. Great. Thanks, Kyle. I think we actually have just a couple, of other one other slide here just to kinda plug, some things here about how else we can kinda help support. You know, I mentioned at the beginning here the drawback analysis, and please feel free to, you know, add you know, request this if this is something you need using the the button at the top of the screen. If you have annual drawback already, you know, we feel very confident in a lot of the tooling that we've been rolling out in our drawback program this year. We're finding a lot more money for, people that are already using this. So if you're already having this and your drawback claims exceed a million dollars of refunds, we wanna go head to head and see what we can do, see if we can find you more money. We think we can. On average, we're finding some of our customers more than two times what other drawback providers are are finding for them. Not because, like, we're, you know, or, you know, we're we're doing anything, you know, you know, mostly because we're we're trying to find, better places to find that data and link together those imports and those exports. There's no new kind of data obligation here. There's no no obligation to kinda report any things, but we feel very confident in this. So if you have it, feel free to see if we can get you more. We also still offer our Flexport customs analysis using your very own ACE data. You can look for this. Just go ahead and click yes in the poll, and you can see it. And, you know, of course, many of you already know about our tariff simulator. We've done this a few times. I even see some of the questions came in asking about tariff simulator. We'll go into that. If you haven't looked at it yet, please check it out, tariffs@flexport.com. We're hoping to make this very easy, for our importers to understand, and we only update based off of official guidance here. So, with that, we will go into our our q and a. And we have quite a few, so I'm just gonna we'll go kinda quickly into a few of these, to start. Let's see here. So the first one, please clarify further on the violations found by USTR with Nicaragua. Is this only against Nicaragua? Yes. It is only against Nicaragua. These are, three zero one investigations that are very specific, to to comp you know, the countries. They found this based on kind of a mixture of human rights violations. There's some child labor. There's one report saying that there's, 10, you know, 10 to 14 year old kids who are working in gold mining operations, in Nicaragua, questions about, you know, seizing company assets, without provocation, weird user fees, and and other kind of administrative penalties, in addition to, you know, kinda messing with, Jesuit services, Catholic services, as well. So that's really was kind of the crux of it. It was mostly focused on, human rights violations as well as unfair trade practices. But, yes, it is only focused on Nicaragua. Somebody asked about the protest. You only need to protest if the claim is gonna be liquidated, which happens almost a year after entry. So very few companies will have entries that are approaching liquidation since the tariffs didn't start until April. Correct? Well, the IEPRA reciprocal tariff didn't start until April. But for many, this may have started back in February when Canada, Mexico, and China, which by the way are at the subject of the Supreme Court case, started to, see tariffs starting in February later than again in March. They started to get impacted by these tariffs. And you're correct. It does take about three hundred and fourteen days from the date, of customs release until an entry liquidates. However, that means we're starting to come to this point here in in about a month. So the reason I'm bringing it up, is to have a plan for yourself and make sure you you realize this that, like, hey. These are coming up. You need to find out, you know, what's your plan. Are you gonna kinda take a chance here? Do you wanna file a protest to keep them open? What's kind of your approach? What's kind of your view? And remember, liquidation happens, whenever CBP were like, usually just reviews an entry. So whether it's a CF 28, if you ever file the PSC, most of those will go to accelerated liquidation, moving up your liquidation date. But also liquidation is kind of a file close. It's sort of like when CVP reviews it, everything looks right, and they close the folder and put it in the stack, saying, like, we reviewed it. They're done. So if they're doing entry reviews, even if they're not issuing CF 20 eights, some of your entries may just be liquidating early because CBP has been beefing up their reviews and their audit team. So you may be seeing more of this. So maybe the bulk of your entries haven't liquidated yet. Maybe that's coming in a month or two months. But what you may be seeing though is here and there, CBP is reviewing very closely some of these. They are doing a file close. They're liquidating it. You don't actually even know about it, because it's all happening behind the scenes. This is where there's a real value to this kind of Flexport custom base analysis, where you can see this happening in real time. Let's see. Should we pause oh, here's kind of a one for both of us, Kyle. Should we pause our freight due to the pending hundred percent eleven one China tariffs or try to ship as much as prior to the ninety day pause that ends on 11/10. I guess, Kyle, first question, what, like, you know, eleven one's kinda close for ocean freight, from China. Do they do they have a leg to stand on here? Can they is there a is there a very fast boat service that can get it from from China to to The US West Coast, in before November 1?
Kyle Beaulieu
There's not. There's not. And, even if you wanna go in for a departure, before the or the each of these dates, you really wanna make a booking now. So there's a a very small chance you could get in on a departure before eleven one hours and, but, a better chance before that, pause the ninety day tariff change. Do you wanna remind our listeners too on how that plays out between arrivals and departures?
Marcus Eeman
Yeah. So the if there's, like, what they call, like, an in transit provision, like there was with the AIPA reciprocal tariffs, it had to be departed before a certain date and then, you know, entered into The US at a certain date. And, generally, there's kind of some complexity which I'm going to just, you know, gleefully hop over here. Generally, it should be based on arrival. So get it to The US before those deadline dates will put you in a good spot. I'm not gonna guarantee anything because a lot of things things can happen, you know, vessel changes, ITs, ports of arrival, holds, exams. All of these things can come into play of where you know, what actually is your date of entry, but for for tariff calculation purposes. However, if you get it, arrive to The US before the effective date, you're putting yourself in the best position to realize any possible savings that that may occur. Yeah.
Kyle Beaulieu
And with that on arrivals, if really that's what you're targeting, there's there's very few options, that are left before either of these dates. And the options you do have are really from from Mainland China and a couple of the fast boat services. So, if you've moved to other regions, then then that won't really apply, but these are are China based. So those options are from from China based ports. One thing I'll add here too, what we've seen in talking to a lot of different importers, is lot of importers have have taken to, managing their supply chain just within their their needs, because it has become very difficult to plan and coordinate around these different dates. So, though they have, tried maybe with a little bit of their cargo to, give themselves some insurance on these different tariffs because the landscape has changed, so frequently. Quite a few of them have focused more on, what is their, their total need for for cargo at this time and how do they, balance out their own inventory needs. Next question I'll take, have, any surcharges been announced, that have been passed on the importers related to the three zero one on Chinese built vessels. No, surcharges at this time from from any carriers. So if you see a surcharge out there from an MBO, it is not coming, from from carriers. And then, also, an additional question on the vessels, is if Chinese carrier ships will not initially charge a fee to importers in response to section three zero one, are they just absorbing all the cost for now? That is correct. So they are, absorbing those costs for now, and it's a pretty substantial hit to their bottom line, especially for, Costco and double c l. But this is a area where, you have to take overall market considerations, into into effect. So because other carriers, are not charging that fee, it'd be pretty difficult for, Costco or double o c l, to charge their own fee separately. Could they do it? Yes. But it would put them at a at a disadvantage versus overall market. And lastly, there was a question too on the number of times a vessel can be charged. So that is capped at five times per year, not total. So five times per year, at the beginning of every year, it refreshes. Marcus, go back to you for Yeah.
Marcus Eeman
I got another another batch here. Question regarding January '26 updates on timber furniture February. Will those only be applicable products that include wood? For example, if you have a metal chair that doesn't contain wood under an HTS in the order, would the product be exempt? So first of all, two things here. Number one is that the HTSs in the order are very focused on wooden frames. So just kind of a note a note there here. But let's say they were to expand it, for instance. I would caution you about this because there's, there are still tariffs on steel and aluminum. And some of those, section two thirty two on steel and aluminum are mentioning furniture, HTS as well. So you may not you may be out of the frying pan into the fire. You may be avoiding a 25% or 30% with tariff, but you happen to fall into the 50% tariff on furniture, based on the steel or metal or or aluminum content. So, something to kinda keep in mind there is that you you you may be exempt here, but, you may not be out of, out of the woods, pun intended. If the trade truce is not extended, would the tariffs increase to a 150% that was the final level before the truce was announced plus the new 100% that was threatened recently? I'm gonna set aside the 100% threat that came on truth social that seemed to be backtracked that was then set again on Monday. I'm gonna ignore that first part and say, okay. Well, Marcus, what happens on on November 10? Why did you say 54%? It was a 145% when the truth went into when the truth went into effect. I'm basing this off of a very literal reading of the HTS. And so China has a, has their own specific code of an IUPRA reciprocal rate. I think it's, nine nine zero three zero one sixty three or 68, and that says specifically 34%. It also says in the notes, this tariff, this, you know, this specific code is suspended until November 10. The implementation is suspended. So my reading of that is, like, once this date passes, what goes into effect is what's written in the HTS. And what's written in the HTS says 34%. So that's why I'm thinking it's gonna go back to 34%. Now I will, be prepared to be humbled by a president with a different mind than me. But me reading a tariff very plainly, very clearly, I read this as saying, if this were to the suspension were to end and this goes into effect, what will go into effect is what is written in the HTS. And what is written says 34%, not 125%. Okay. Let's see. Do you feel that the potential 34% reciprocal for China will be based on arrival to The US sailing gate from China or sailing from the last foreign port? My guess is arrival, but it's a very thin guess. The reason why is I think there's been so much kind of, like, you know, this is known. This has been happening for a while. This has been, kind of a a long running thing. This is a suspension of something that should already be implemented. So I would say of those three options, I'm leaning slightly toward, a very quick implementation, meaning it'll just be in effect on November 10. No delays. No questions. But, that is just, an opinion. I am basing that off of nothing except my own intuition. Let's see here. Kyle, do you anticipate, increased TPEB transit times with carriers avoiding sending US flagships to China and avoiding sending Chinese ships to The US? Will they change vessels more at intermediate ports?
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