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, everybody. Welcome, to today's webinar, and a special welcome to anybody that is taking the customs broker exam and then watching the recording, of this webinar. If you are taking a test today, please don't watch this live. But thank you very much for coming today. We always have some good content. Today's real focus is about the CAPE process. What do we see in a couple days in here? And so before we begin, if you're not familiar with our webinar, format, I'd like to go over a few housekeeping items. First of all, on your screen, there's a sidebar on the right of the main stage where you can submit questions. At the end of the presentation, we host a q and a. We always try to make a good amount of time for for question and answer, after our webinars. So, please get your questions in early. In that same sidebar, we 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 and tariff refund calculator. Above your screen, you'll see a button called, audit your customs broker. This is one of our newest AI tools that runs a quick compliance audit on your historical customs entries. It can help identify entries with tariff stacking issues and estimate duties you might have under or overpaid. Click the button at the top of the screen to get started. Now for a brief legal note, please keep in mind that all the information provided in this session is based on a situation at this current time and may not be customized to your specific business requirements. We always recommend reaching out to a Flexport expert to discuss your particular situation. Today, I am joined, by our director of trade advisory, Jen Park, and I am also director of customs, systems and process here at Flexport. Our agenda today is we're gonna do a little, update on some of the latest news and some of the latest highlights, from around the tariffs from the last month or so. But really we're gonna focus on Cape deep dive. Right? Cape portal launched. This is the way we get refunds back for AIPA. It launched, on the twentieth, just two days ago. And, we will be looking into what do we know so far, what's been happening, how well is it working. After that, we'll go into some resources that you can use to get more insights about your supply chain, and and then we'll leave the time at the end for our q and a. So, getting into latest news, you know, I'm gonna leave most of this here for for my colleague, Jen, to talk about, but Kate went live on 04:20. And, you know, there have been some challenges. There are rejections. There are issues. It doesn't process all entries. But on the whole, I think we'd characterize this as generally successful. Customs took, you know, within sixty days, went from the Supreme Court ruling to actually rolling out a refund process that is actually reviewing and processing entries. We still have to wait for money to actually show up in people's accounts to really call it a a true success, but so far so good. They stuck to their timeline. They seem to have, ready and ready to go, and, entries are at least being accepted into the portal. The USMCA summer negotiations are also starting to take shape a little bit. Over the past few weeks, there's been some congressional hearings. There's been some, you know, press releases. There's been some trade teams established, and they're starting to kinda see exactly what are each party's maybe looking for. Mexico is seeming to be a little bit more collaborative and a little bit more receptive to what The US is trying to do. And The US really is looking to tighten rules about rules of origin. So if you have something that's qualifying for USMCA, you must be, you know, originating for purposes of your trade agreement. Those rules get tinkered with a little bit, and they're wanting to strengthen that. That's what seems to be the position of The US trade representative, Greer, as he talks about these negotiations. And then what a deputy US, trade representative, Schweitzer had mentioned is that, they're looking for more, external tariff alignment between the USMCA parties. So they basically want, Canada and Mexican origin goods. They still get the duty free treatment of USMCA, but they wanna have similar trade barriers outside. So these tariff rates and these tariff restrictions and different kinds of, you know, measures to try to limit the influence of, really, China, but also other potentially Southeast Asian countries as well, they really want Mexico and and Canada to play along with The United States and really kinda form this kind of broader customs union where everybody's kinda unifying their tariffs and tariff practices against non USMCA countries. That's an interesting one. It kind of infringes upon national sovereignty and this idea of if if Canada and Mexico wanted to act like a dealmaker perhaps on their own. Right? It would limit their ability to do so. But that seems to be what The US is going for because right now, they worry that a lot of, goods are shipping to Canada, Mexico. They're being transformed a little bit. They are qualifying for USMCA, but the net result is still undercutting, American labor, American factory output. So, that seems to be what The US is wanting. Mexico seems to be on board with this at least a little bit or at least they seem to be negotiating. In fact, right now, USTR Greer, I believe, is traveling to Mexico this week, to negotiate face to face and and start to work with some of the Mexican counterparties on what to do for these kind of automotive tariffs. I saw a statistic, maybe illustrates this point that for the first time since Mexico, came be became part of NAFTA starting in 1994, the Mexican automotive industry, shrank last year, for the first time in its history. And that's a pretty remarkable fact and maybe kinda says this is something that the Mexican government wants to continue to prioritize. They want to be able to have this capacity build out. A lot of automakers have designed their supply chains around existing USMCA rules. They probably wanna keep most of those intact. So Mexico seems to be a little bit more on board. Canada, a little bit less so. Canada seems to be a little bit cooler, but their main priority has to do with the two thirty two exemptions. They're a major aluminum producer globally. And so noting that most of those two thirty two duties or virtually all of the two thirty two duties now are still affecting Canada the same as any other country even if they qualify for USMCA is not exactly something Canada is thrilled about. So they're gonna be looking for more of the kind of two thirty two exemptions. They seem to be a little bit more, you know, a little bit less, receptive to some of these US overtures in in this US led trade policy. They made deals for, some Chinese automakers to import limited number of Chinese made cars into Canada. They've been making, you know, had preliminary discussions with the European Union about potentially joining the European Union. Now these are still pretty pretty early stage, and it's unclear if this is just kind of negotiation posturing for USMCA to kinda have a credible threat to try to make The US give some concessions or if Canada's actually sincere about trying to join the EU. Remains to be seen, but I think Canada overall, though, doesn't quite seem to be in the same the same seat that Mexico is, and they're they're a little bit more skeptical of The US. Maybe maybe this is stemming from, you know, prime minister Carney and Trump not having a a very close relationship or Trump's, desire to make Canada the 50 the 50 state. Maybe that's, put things on the back foot. But overall, we're starting to see where this will end up as they meet for negotiations later in July. We have an update on February and 01/22. You know, if you saw a couple weeks ago, we gave kind of the details of what's happening. A lot of it's kinda we're past the hump a lot, past the chaos, past a lot of the major changes. New new rules have been implemented, which in general, makes it simpler even if it maybe cost people more. It basically removes the content exemption where people could say, well, only part of my product is steel or aluminum, so I don't have to pay $2.32 duties on the whole value. Well, now you do. That was the main headline effect from from those changes on April 6. But, also, it is just a little bit easier to comply with. There isn't so much work to do there. The only thing that still is outstanding has to do with the Russian aluminum stacking on top of one twenty two duties, but for the most part, that is still, that is mostly, resolved, and and the Russian, duplicating is also seems to be resolved. On section one twenty two, there are still the challenges. They're making their way to the courts. I wouldn't expect any relief on this before, it expires, in in July, July 24 for section one twenty two at 10% rate. The states are challenging this thing. There is no balance of payment dispute. There's been some pretty strong court briefs that kinda say that effect, but, doubtless, there will be more challenges to these one twenty two duties. So perhaps this k process, will get reused in perhaps in the coming months and years, to refund section one twenty two duties, but, still early stages yet, overall. What I would point out is, hey. What happened to the 15% of the 15% threat for section one twenty two? Well, that still hasn't happened yet, and we are about 40% of the way. We're about just about a little over sixty days, I think, since the, rollout of section one twenty two. That's about ninety, ninety three, ninety four days until, the expiration of these one twenty two duties, in July. So this you know, it's getting a little bit late in the day to try to increase section one twenty two to 15. That may have just been an empty threat at this point. Hard to hard to know for sure, but there's no indications that there's been a movement toward increasing this rate toward fifteen percent. And finally, little update on section three zero one. The comment window for both of the three zero one investigations that were open has now closed. The first, round of public hearings for the forced labor three zero one, case is gonna start on April 28. The second round for the, excess overcapacity, will start on May 5. Trump is generally skeptical of these exclusions. That was per, the ITT reporting from, I think it was Jackson Lanzer, quoting the deputy, USTR Switzer saying that Trump is not really interested in doing three zero one exclusions this time around given that the reindustrialization he hoped from three zero one exclusions the first time around didn't happen. So if you're looking at three zero one and saying, I've seen this I've seen this movie before. I will just wait and, you know, send my lobbyist to go secure me an exclusion. The so far, the indication is this may not necessarily be, be the case. That would probably take several months. Until it does happen, we still need to actually have three zero one duties levied. And until that happens, we're not actually quite sure we're gonna see any of that. And as a quick reminder here, these are the countries that are affected by these three zero one investigations in blue. These are just the forced labor investigations. This is about 87 individual countries. The ones in green, this is, people that have a forced labor investigation for three zero one as well as, this question of excess overcapacity. That's about 47, 47 independent countries. Ultimately, this affects about 98% of all US, import volumes would be subject to some three zero one investigation right now based on the country of origin. So given that, we are looking at a pretty expansive way to recreate the IEPAA tariffs in terms of the breadth, as well as perhaps even the rates themselves. And as I said in the last webinar, kinda covering this topic, remember, the three zero one investigations are initiated and conducted and decided all by the USTR. So I think it's very likely that we should expect the USTR to find what they hope to find in terms of three zero one investigations here. I think they will find quite a lot of inadequate forced labor enforcement. I think they'll find the excess overcapacity they expect to find that maybe they you know, some countries tried to defend themselves in the comments. They said, oh, no. Like, our value went down or this is Switzerland tried to say this is just our random fluctuation of gold prices spiking, but it doesn't really have to any, like, structural overcapacity. I think, ultimately, those rationales are not gonna be very convincing to the USTR, and I do think we should expect, three zero one duties right around that July timeline. So, something to keep watching. Feel free to look, to watch the recordings and watch the live cast of those hearings, starting in a couple weeks. Actually, next week for the forced labor one. But overall, still looking like three zero one duties are likely. Nothing really to to change that. Alright. And with that, I will turn over to our, main main course here today for this webinar. I will do a deep dive into CAPE. So welcome to the stage, Jen. Please, take it away. Give us an update.
Jenn Park
Great. Thanks, Marcus. Alright. This was a big week that everyone was waiting for. I know 04:20 was the day that everyone had their eyes on, and I'm sure everyone was wide awake really early trying to get their CAEP filings completed. I know my team, we all logged in at, I think, 07:50, which is 04:50 West Coast time, to file our first CAEP claim together. So it's been pretty exciting, but, the work is not done. But at least CAPE is live, and we are, filing. But I just wanted to start this with some stats. At the beginning of, the CAPE process, you know, customs had come out some statistics saying that there are about 330,000 importers that filed, any entries with, 100 I believe it was about 166,000,000,000, AIVA tariffs. And it was worth about five fifty three million entries. So, again, that was the starting point. We know that cape phase one does not cover all entries. There are, some entries that were excluded. We're just focusing on kind of, like, the easier ones, which is the unliquidated entries, entries within that eighty, day timeline from liquidation date. And so this would only cover about 63% of eligible entries. Other statistics that we wanted to share is that, on Monday, Susan Thomas from CBP did come out and provide some numbers in terms of, you know, what they've what they've seen from a CAPE perspective. They did say that there were over 50,000, trade members, which could be, you know, importers, filers, logging in to file CAPE. And she said there were about 4,000,000 entries that were filed at that time, but we know from yesterday's update from CBP, that number has increased to 5,000,000. So a a lot has been filed. I know there are still more filings being done by importers filers, today, but just wanted to provide some numbers out there. And I'm sure a lot of you on this call are probably within the five, million entries that were filed today or yesterday or the day before. Alright. So CAEP overview. I'm sure this is something that you've heard throughout the past two months in terms of how CAEP will play out, but we wanted to kind of go over the step by step of the four steps of CAEP and just provide some insights of what we've seen as we've filed, especially for the submission phase. Submission phase. But to begin, we just wanted to make point out that it's been very clear in order to file your, refunds in CAPE, ACH portal account and the ACH refund has been the main indicator whether you're gonna get your refunds. So hopefully, you were able to get that set up so that your logins were successful. I think there was a 98% successful rate, that was shared by customs. But if you haven't done so, I know there are importers that are still struggling to sign into ACE, and the ACE help desk has been not as helpful because I'm sure they're, pretty busy with all the requests coming in with all the importers trying to, get all their issues resolved. But, hopefully, you can get those resolved soon. But with those two steps being taken care of, you know, I think the CAPE upload process has been very simple, surprisingly. I think we're all hesitant whether ACE will crash, whether CAPE will be able to substant all the importers filing all their entries. But I think in the morning of, we did see some high volume traffic. So there was about there was a little bit of a glitch in in terms of CAPE, but I think that was resolved fairly quickly. After that, we haven't really seen much of an issue in terms of getting entries filed or logging into CAPE itself. Like CBP had mentioned over and over again, they intend the upload process to be very simple. It's just going to be entry numbers. I know there were questions of whether is it dashes, how's the number formatting, it's it's just the entry numbers without any dashes. And so you just upload the, entry numbers into the csv template that you can download from the CAPE portal. It's fairly quick. Even the acceptance rejection status that you receive once you file is pretty it's it's quick as well. It takes a few seconds. You'll get a notification basically within thirty seconds of whether your file has been rejected or accepted. Hopefully, a lot of you have been accepted with no rejections, but we do see that there is a common theme in some of the rejections that we've seen. For us in terms of what we've seen on our filings is I think the number one is that the statement has not been paid. That was surprising because we didn't expect that one to be one of the issues but the April's payment statement date is I think April 21 so Tuesday. So some of the entries were not accepted because the statement was not paid. So once you pay that on the twenty first, you should be able to refile that claim right after. Another one is if you were flagged for a drawback, that would be excluded. And the third bucket I'm sure you've all seen, not hopefully not all of you but some of you are still questioning is unable to calculate duty. That is something that we've seen and it's still something that is unclear as to what kind of entries really fall within that bucket. From CBP's webinar yesterday they do understand that this statement is very vague. It does seem to be a catch all for any entries that doesn't fall within a specific rejection And so customs has said that they're gonna be, issuing some additional guidance on this specific rejection to kind of clarify what are the different reasons of why it would fall within this bucket. So more to come on that, but just wanted to share that in terms of what we've seen. Those are the three main rejections that we've kind of seen from our side. And then once you get that accepted rejected status within those seconds, you'll get that claim number issued. So I think general, we've seen a very positive, response in terms of how CAPE has been implemented and how it's launched. We haven't really seen much issues. We don't see that it's crashed. Like, a lot of us were really skeptical how it was gonna, play out, but I think overall it's been very positive. However, we do want to preface that this is just the first step of CAEP. I think the first step was intended to be easy and simple just so that customs can get the data. I think the next steps will take a while and one of the questions that does come up a lot is how soon can we get our refunds once we file our claim? Customs has made it clear in our FAQ that this is a sixty to ninety days that you can expect your refunds once your claim is accepted. So, once you get that claim number and it says accepted, that waiting game starts and so you have sixty to ninety days. What's very important is that the second step is going to be very simple. It's going to be on customs where they're just going to look at your entries, take off all those IFA duties associated with those entries, and recalculate the refunds that are owed. The third step is what importers should be really watching out for. This is the step where customs has made it clear over and over again starting from March when they had to respond to, Judge Eaton in terms of what kind of process that they plan to put out for the IFA refunds is that customs does have the right to review these entries before issuing refunds. So for importers that think that their claim got accepted, great. That means that they're gonna expect 100% of the refunds. Probably not, that's being optimistic. I'll just say that. But I think what you'll wanna be is also, prepare for that. Customs may review your entries, and you may need to work with them to resolve some of the issues that may come up. This forty five day timeline has specifically been called out by customs to say that they are gonna be reviewing your entries. Unfortunately, they did not clarify what type of audit or review they will be doing. So it could be very expansive or it can be very simple, but we do expect that if you do have errors and you aren't you know these errors, I'm sure customs will be able to catch those as well. They are gonna be looking through some of these high risk, high, touch points where, you know, if there's any section two thirty twos tied. If there's any entries where maybe there was a cap in terms of IEPAs, so there was a 15% for some of the countries where we had a trade deal, if you go back to, you know, implementing your general duty rates, is that gonna be higher? If so, then, you know, you can expect offset there. So I think there's a lot of areas where they will be looking in terms of what they'll be auditing from an entry perspective, but just know that it's not going to be as simple as uploading your data in from this first step of submission. They are going to be reviewing. They will let you know and they did say that it's generally a sixty to ninety day timeline to get your refunds. However, if they do identify a compliance concern that this timeline may be extended. So, just expect that from that point. But once the review is completed, they will reliquidate or liquidate your entries, and then you can expect your refunds during the fourth step. And something to note for the refund is that only the IOR or the notified party and the original entry will be able to receive those refunds. Alright? And just wanted to give you some, care tips, cape tips so that you can keep these in mind at for those that may have already filed or may not have yet filed, just to keep in mind. Some of the entry rejections that I have gone through in my previous stage, I've also kind of put a snapshot to share with you in terms of what are all the rejections that could potentially come up for your CAEP filing. This has been posted by customs, so you can see this on their, CBP CAEP refund page. But a lot of these are kind of known. I think CBP has made it clear that phase one does not include every single entry. We already knew that CAPE one will exclude entries that are flagged for drawback, for recon, with an open protest, anti dumping, a few others. So if you have those in your file and you submit those, you know, I think it was gonna be expected that those would come back with a rejection. There's also ones where it's under review. Customs may reject it for that reason. Like I mentioned, the statement processing is not complete. There's a protest on the issue. Or and one thing that also comes up is that, no AIPA on the entry. So or if there's no valid entry number that they can find. Hopefully, those didn't show up because if you're pulling an ACE report, those are all valid entry numbers. But, you know, in the instance where maybe you had an error or a typo on your entry number, Those might be the issues why those are rejected. And then there was one that came up with, I think it was a good value I'm just gonna read this. Good value amount not allowed on IHTS lines. So that came up as a question in the industry and I think what that means is that your broker may have made a mistake in terms of when you when they've declared the entry, there should be no goods value on the IHPS line. It should be all associated on your underlying classification. So, if there was any value associated with the IEPHA HTS, that's when that would flag and your entry would get rejected. And so, some of these rejections, what you could do is file your refile your claim again with the entries that were rejected. So, what you'll see is that once you file a claim, all the ones that are, don't have any rejections, those will be processed and go through with that claim number. Any entries that are rejected, the importer or the broker is required to review those and either there's two different steps that can be taken. One is depending on the issue, so for example, if it's an entry that is just excluded because it's not eligible for phase one, those will just need to be resubmitted on a separate claim later on when it becomes available. Statement payment date, that one is you can do it right away once that statement is paid so you'll have to refile it on a separate claim. Other issues, you may need to file a PSC to correct the error before filing CAPE. Customs has made has come out and made it clear that PSCs can be filed before you file a CAPE claim. However, if your entry is on a CAPE claim, you cannot go later you cannot file a PSC later on. So if you have any corrections, that's why it's very important to do that audit first, is to file a PSC to correct any errors so that when you file the CAPE claim, you it's you don't run into any rejections, but also, you know, you don't have the issue of, okay, I filed a CAPE claim, I can't file PSE anymore so I'm gonna have to wait for the entry to liquidate on CAPE and then file a protest later on. So that just takes that just takes a lot longer and you just don't wanna deal with that. So we would say audit your entries, file PSE if needed, but in terms of if you already filed a CAPE claim, you get a rejection, some of these errors may result in that you file a PSE to correct those data points. For example, that, the one I just mentioned where you may have a value associated with your IHTS, you may have to just go back correct that entry first and then file refile your CAPE claim. And so another thing we wanted to keep in mind besides the rejections is that there are still protests that need to be filed. Right? What is ineligible for CAPE one are entries that are liquidated past that eightieth day. We know that protest is available for one hundred and eighty days past the protest deadline so it's we still have to hear from CBP in terms of what's what the correct method will be to file refunds on entries that are liquidated past the eightieth day but within the one hundred and eight day protest deadline. We do anticipate it's going to be part of phase two. We still don't know when phase two will be implemented. We're still waiting for CBPA to provide more guidance there. But until then, entries are still liquidating. It's still their entry is still near that protest deadline. So, until we hear official guidance, I think what we're recommending is that if it's near that protest deadline, you may want to file a protest just to preserve your rights to those refunds because we don't know if phase two will be implemented in a week, in two weeks, in a month. So, and another thing to consider is that the CIT case is still ongoing. I know everyone was focused on atmos filtration, but I'm not sure if everyone is aware, but atmos filtration actually dismissed their case, back in April 6. Judge Eaton did approve that, and what happened is that Judge Eaton lifted a stay on another case, which is Euronotions Florida. And I believe that is the case that is going to be the lead IEA bug test case. So, like, that is the one that you should be keeping your eye on, not atmos filtration. And so, that one was, Judge Eaton issued an order on April 7, which is basically saying the same thing what he's, said in atmos filtration in March where he wants every unliquidated entry to be liquidated without any IFA tariffs, liquidated entries to be reliquidated. So, the same order was basically issued under Euro Notions. What that what, makes it a little bit challenging for importers here is that the sixty day timeline for government to appeal the decision has now been extended. It starts from now April 7. So they have up until May I think May or June 7, if I'm doing the calculation correctly, June 7 to, file appeal. We don't know if the government's gonna appeal, but that's just still something that's out there. So because of that, we're that's why our recommendation of filing those protests if they're near the protest deadline is still relevant today that, similar to what it was, you know, a month ago even under administration. So just keep that in mind. So if you have any protests that need to be filed, please do so. I know with Kate where it's it's hard to kind of keep track of all the deadlines, liquidation dates, protest deadlines, but something to keep in mind. Third point, audit your entries. Like I stressed before, we don't know what customs will review during their review and liquidation phase, but we know that they have specifically called out that they're going to be reviewing these entries. And from a Flexport standpoint, we do have audit your broker tool where we are able to catch some of these errors. So if you know of these errors, you know, our guidance is always to correct these errors, file POCs before filing your CAPE claim. It's just a matter of trying to figure out, are you gonna be able to, delay the are you are you okay with delaying the process of getting a refund? So, you know, if your if your CAPE claim was rejected, you have to make those corrections. You have to go back and file POCs. You know, it is it is something that's time consuming, if and so we just want to have a clean process of being able to correct and then file so that you're able to get that sixty to ninety day timeline, kind of, in your pocket. But also, another reason why you want to audit your entries is not because of, your because of errors, but also there are instances where we need to conduct audits for our clients on third party entries is that you can maximize your duties. Right? 2025 has been a very challenging year for brokers. The systems did not keep up with all the changes that were happening and, you know, you would hope that if you were to apply a particular tariff like section two thirty two, the IEPAs would not automatically apply or, you know, the tariff stacking rules that came into place. Unfortunately, a lot of the broker systems did not consider that. So if a broker applied three different types of tariffs when they shouldn't have, it is possible that it was on an entry. We've done audit entries where, you know, the auto tariff to apply the section two thirty two applied IFA was applied on the original entry and there are clients going back and trying to correct that so they can get refunds back on the 232s and applying the IFA and then getting the IFA refunds. So it's not, the audit is not just from a compliance perspective catching the errors but also from imports perspective. Can you maximize your refunds? Right? And so you wanna have both angles but it's always best if you're able to maximize your refunds, correct the data, and see what other dues and tariffs, that may be out there for you to recover. And for the progress update that we expect from CBP, April 28 is the next date to be on the lookout for. We don't know when phase two will be implemented. I know that is a huge question mark for everybody, and we've been pushing customs on that, and we're hoping that all liquidated entries will fall within that frame. But, we won't know until the twenty eighth.
