Tariffs, Executive Orders, and Supply Chain Challenges: Solutions for US-Canada Trade

Machine Operated Script:

Warrington Ellacott  

Hey, welcome everybody. It’s Warrington Ellicott, back with you from the Canadian Association of importers and exports with our friends at the simply trade podcast, brought to you by the global Training Center, they invited us back, which is great. And I got two of my friends with me today who are going to give us a discussion on the latest updates on US Canada trade. So I’ll start with Jill. Jill first is a Senior Director of Global Trade and consulting at Livingston International, and she’s located in Buffalo, and she’s a morning Buffalo Bills fan. At the moment, she’s distraught, but we’re here to cheer her up. And we got will Paller, a good friend of ours, partner at McMillan up in Ottawa, and all of us are just covered in snow right now, and it’s just we’ve had enough. It’s time to get it’s time to go down and visit our friends in in Texas. We’ll go see lay on Texas and be a little warmer. So the last time we spoke was, let me just see january 24 and we figured we get everybody together here today to talk about what’s transpired over the last 25 days, which is really nothing, right? Really nothing. But anyway, I am going to date stamp this. We’re recording this on Friday, the 21st of February, at about 11 o’clock in the morning, so things could change by the time you hear this sometime next week. Anyway, I just wanted to start briefly with a little Canadian political update. I know we have a lot of us listeners here today who don’t follow Canadian politics. And last time and Prime Minister Trudeau is still the Prime Minister of Canada. He’s not the governor of Canada. He’s a Prime Minister of Canada, but there is a race to replace him. And last time we discussed you, we have Mark Carney, the previous Bank of Canada and UK Bank of Canada head, Karina Gould, Who’s the youngest in the group, Chrystia Freeland, who was the previous Deputy Prime Minister, Ruby dala, who is an MP from Brampton and a previous MP from the Montreal office. Don’t mind my dogs, previous Montreal MP, Frank Baylis is in the running, but Carney is clearly in the leading position in the race, and he was just last night, endorsed by Dominic LeBlanc, who is the lead on the Canadian Trade file. And strangely enough, since the inauguration of the President, the conservative lead in Canada has virtually come to an end. They’re almost identical now in the polls. So this is getting very exciting, and it looks like we’re going to have an election here after March 9, when the Liberals decide who’s going to be their next leader. It would appear that whoever the leader is doesn’t want to face Parliament on the 24th of March, and looks like we’re going to go to an election. So we got now. Canadian election is only up to six weeks in length, so this is going to be over pretty quickly, and then we’ll see what we get after that. Enough for the politics, let’s start our trade discussion, and I just want to briefly give the listeners a little bit of a playbook here. I’m going to go through the executive orders here, and then I’m going to get Jill, and then Will’s perspective will give us a Canadian perspective legal context, and Jill can give us kind of the brokerage and legal context in the United States. And hopefully they’ll help the listeners try to figure out what’s going on on both sides of the borders and how we might all navigate our ways around this. Okay, so that’s how we’re going to approach things today. So last time we had we had talked about the America first trade policy executive order, and that was issued on January 20, and that the President asked many departments of the US government to come back to him with reports on trade, right? And I think we talked about the real emphasis of this was sort of reset the balance of trade. But we haven’t really seen the results of that just yet, so I don’t know. Why don’t I start with you, Joe, what did you feel was one of the most important things on the US side that came out of that.

Jill Hurley 

Yeah, I mean, it really set the stage for what their priorities and focuses were going to be on. And you’re seeing now the administration is sort of going through with those in order. So, you know, you’re. Looking at balance of trade. You’re looking at things like de minimis, getting rid of de minimis, and even going through now, and looking at, you know, taxes overseas, how that that might negatively affect the US and and the purchases in the trade in the US. So really was a pretty accurate roadmap of what they were going to focus on as they moved through trade. And we’re seeing that that go through the focus on China right the it was the only set of tariffs that came out through executive order that have pushed through and are currently active right now and didn’t get kicked down the road. I think that we’ll, we’ll start seeing things on the export side as well. But you know, the originally, when it came out, we’re going to focus on three things. They they were pretty accurate and clear on exactly what they were going to do, and they are moving through that list fairly quickly.

Warrington Ellacott  

And then will from the Canadian side. I think it’s fair to say when that policy was released, there wasn’t sort of an immediate concern on Canada’s side that seemed to manifest itself through the other executive orders that came later on. But interested in your thoughts on the initial I

Will Pellerin 

think everyone’s in full firefighter mode right now in Canada, and everyone’s worried about tariffs going in place tomorrow morning. And this one here gave us kind of that April 1 breathing room. There’s going to be a report. And so April 1 feels like years from now, at this point, right, even though that’s just around the corner and still very, very scary. I think there’s more immediate concerns that steel and aluminum tariffs go in place really quickly. Automotive tariffs can go in place really quickly. The March 5 deadline is still right around the corner for the general 25 or March 4, 25% tariffs that would go into place. So ultimately, I think the that the idea that there will be a report in place, that they’re going to look at balance of trade, that they’ll dig into the details, buys us a little bit of breathing room and and I think we’re thankful for that at this point, even though that’s still very, very scary,

Warrington Ellacott  

yeah, and on the same day, the the other executive order was the, effectively, the United States walking away from the OECD global tax agreement, which we then saw on future executive orders that came through in the month. But I, but I wanted to get to that weekend, the February 1 weekend when all it all broke loose. That was the move by the President in the executive order for 25% tariffs on Canada, all goods coming in from Canada and Mexico, including de minimis, and 10% on China. Tariffs. And I know Jill, I’m curious what went down within your organization, because I know I was pretty busy. Yeah,

Jill Hurley 

yeah, when those, when those executive orders were released, I said, Really, got to do this on a weekend. But one thing that did stand out to me was that there was a date in the future, even though it was only a few days, right? So anytime you see an executive order come out that says we’re going to do this thing, and then there’s a date in the future, we anticipated that there would be some room for negotiation. And so as you look at the order it was, you know, there was an additional 10% on on China. And we’re already used to sort of managing the China tariffs from the 301, perspective. But we were interested to see, all right, how are we going to implement these? And we needed the CSMs messages from CP to say, Okay, it’s a new, entirely different chapter 99 line, and here’s how you manage it. Okay, we’ve got the roadmap for that, as far as China and or as far as Canada and Mexico go, 25% is obviously extraordinary to hit on our closest trading partners, 10% for those petroleum products. So a little little extra for them there instead of the 25% and it was interesting to come in to the office on Monday morning and see that shine. Baum was already talking to Trump from the Mexico perspective and negotiating that, that delay right away, you know, earlier in the day. And then we’re all waiting for Canada. Okay. What about Canada? We’re sitting all day long. Okay, he’s going to talk to Trudeau at three o’clock, and then the call happens, and ironically, he ends the call to go congratulate the Florida Panthers on their Stanley Cup win. And then they didn’t actually tell us on February 3 if it was going to be delayed until after 5pm so that was a lot of tension and consternation. There. A little bit of release at 505, when they finally announced, yes, we’re gonna kick it down the road, same as Mexico. And it’s a little unsettling now that as we creep up on March 4, are we going to have that same stressful day before negotiations again? So

Warrington Ellacott  

yeah, and I think, you know, Will, the interesting thing that I found about that was the the on the Canadian side at least, was the impact on de minimis also hit Canadians business, and Canadian business had not been subject to that prior, and that caused a lot of consternation, at least that day, right? Right? De

Jill Hurley 

minimis is a big thing, and also really important note, and I know that usmca A lot of times, you couldn’t claim it if it was usmca goods going back and forth, but the inability to draw back the duties related to these orders, so that was huge, right to say de minimis is going to be impacted, and that’s a huge impact For folks in Canada who have set up warehouse operations specifically to deliver in accordance with de minimis into the US, and then also this is going to go in effect, and you will not be able to draw back these additional 25% that that is a huge hit now

Warrington Ellacott  

will, I would imagine that your firm had to put sort of countermeasures and actions into play for your clients. And I know you’ve been doing some some investigative work there, what kind of activities were you guys enacting during that weekend?

Will Pellerin 

Yeah, it really was an all hands on deck type situation. It was probably like 100 different clients coming out of the woodwork, some existing clients of the firm, but also just folks that had never really retained trade lawyers, because they had always been shipping duty free, and never really thinking about this as a as a true possibility. We had a client come in and say, We, you know, we have about $100 million a month of exposure, and if a duty hits, and that’s kind of catastrophic. They won’t be able to renegotiate in time they’ve already signed for the next month, for example. So trying to work through what that actually means and what we can do, but fundamentally, I think it was a massive shock to the system. In the course of a weekend, we had major multinational company like fortune, 50 type companies that legitimately had no idea who would even pay a tariff as between the two, as between their supplier or their customer and themselves, right? And and they’d been trading back and forth, sometimes in their POS, you know, referencing terms and conditions that hadn’t been looked at in 25 years, right? No one had ever bothered to look at these things they reference. They were referenced them. You know, dude, it all works out. Everything’s fine. I’ve never had to really litigate on this stuff. It’s, you know, the big deals are happening by email. At this point, everyone knows each other. All of a sudden it’s like, oh my goodness, we have to actually dig into these contracts and Terms and Conditions reference down the way, even pulling them up. Like, where are these things? So all of a sudden you pull these up, and you’re doing a very basic scan of who it actually has liability. What are your inco terms under this, you know, terms and conditions from 25 years ago, and trying to understand what other provisions in those contracts actually might modify those, those in co chairs, and are you selling FOB? Are you selling DDP, right, delivered duty paid? And if you’re selling delivered duty paid, how does that work, and what are the rights that exist under that contract. So some of that very basic stuff, I would say, but totally legitimate for these companies to never have thought about it, because this is Canada and the United States, right? So you can’t fault them, but so we were doing a lot of catch up with some folks there. That’s the kind of step one that we were doing, which is just who would even have liability for it. The next step is, once you do that, what are the other clauses would you or the other side try to bust out of this contract? Will you try to break it or renegotiate it? Does the force majeure clause that you have in your contract allow you in the context of a duty to cancel or terminate the contract. So we’re reading these force majeure clauses. A lot of contracts that we reviewed had change of laws provisions that might or might not apply in the context of a tariff. If there’s a tariff, are we allowed to renegotiate? Sometimes you have these renegotiation clauses that say, Okay, you’re allowed to renegotiate within five days, and if you can’t reach an agreement, then you can terminate, right? So, so doing a lot of that kind of review and and then beyond that, I would say that was the vast majority of the of the flow, right? It’s a 30 minute call, a little bit of a contract review. The associates on my team reviewing a number of these types of things. Things. And then with a subset of the companies with the greatest exposure, then we get into kind of the more advanced strategies on duty, mitigation value for duty, transfer pricing and the like. We can dive into that later. Yeah, and

Warrington Ellacott  

it’s interesting. So where we are right now in our timeline, we’re still on that weekend, right? Right? And then, so then we come to that. We come to the Monday when the markets opened and the markets basically tanked. You could see the concern amongst industry in North America for not just in the United States, but in North America broadly. And then the administration kind of walked at this thing back a little bit and said that, you know, this is not a trade war. This is a provisions on Canada and Mexico taking provisions to strengthen its border provisions. And this was more more so about the fentanyl matter than it was about a trade file. And then we saw that those executive orders, like Joe was saying, extended to March 4. And it was interesting a trade attorney for the Government of Canada yesterday reminded me that those orders are, in fact, in effect, unless the president either defers or cancels or changes those orders. So I don’t think the listeners should park March 4 away in a drawer and think nothing’s going to happen, because something still could happen on March 4 and then Jill. I think one of the lasting things that came out of that was the impact of the 10% on the goods of origin for China in the United States, and I think a lot of Canadian firms and even Mexican firms for that matter, had their supply chains based in the United States, and they were bringing goods over from China and then dispersing them into Canada and Mexico or other markets, and in this case, they had no ability to draw that back. So now there’s a scramble to try and figure out whether they can get those goods from offshore to the countries which need them the most directly. Right? Do I have that?

Jill Hurley 

Yeah, I actually so a lot of companies during the first Trump administration, what they had done with the 25% 301 is they had done a lot of near shoring and so they were assembling finished goods, particularly in Mexico. But we also saw some articles moved to Canada, as well finished assembly and substantial transformation in those countries, and then ship it to the US, so that you would not only have the 25% 301, but you would also get us MCA. And so from there, you know, that was sort of the supply chain change we really saw quite, quite extensively during the first Trump administration. And then, you know, now, with a threat of tariffs on on Mexico and Canada, that blows that up, I think as far as additional 10% on Chinese goods that a lot of participants in the trade had already gotten used to the three Oh ones if they couldn’t avoid them. And so it’s the additional 10% not that it’s nothing, but it’s not the same extensive impact that putting 25% on usmca countries or Kuzma countries has in the same it really a lot of the mitigating investments that companies had made to avoid the 301 the first time around, extraordinary efforts to Build and move plants into IMAX facilities in Mexico is completely down the drain if we move forward with the 25% tariff on on the Mexico goods or Canadian goods, whereas you didn’t hear as much as much outcry over the additional 10% On the Chinese origin merchandise, as you said, the 25% on us and or on Canada and Mexico,

Warrington Ellacott  

I see, okay, well, I guess that’s a positive, I guess. But then we, then we came to February 10, and this was the, the other culture shock was the the the executive orders related to steel and aluminum, and, of course, 25% on steel and aluminum flowing into the United States from all countries is a big deal, but I but I don’t think a lot of people caught the the executive order did not include the HTS code detail for the derivatives. And I guess will I mean, you might want to have to help the listeners out here to try and determine, like, what is a derivative and how is a derivative determined? And what are the kinds of things that that those the derivatives face in terms of importation in the United States?

Will Pellerin 

Yeah, Jill, I think you looked like you wanted to jump on. This, did you have a good sense? Or have you been doing some analysis, more on than than we have, perhaps, on that

Jill Hurley 

one, well, on the derivatives. We do have some lists of merchandise I was just going through here to see which, which ones in particular. But there are hundreds of chair classifications that,

Warrington Ellacott  

yeah, kitchen, you know, kitchenware, hinges, casters, motor vehicle parts, some furniture, things, of that shit. And the important point on that one is that it’s the content of the steel or aluminum inside the derivative. That is, that is the point of discussion here. And so companies that have not done due diligence in terms of melt and poor, you know, data, or bill of material data, specific, specific bill of material data for those importations of those goods is now in a big, big data mess, right? Yeah,

Jill Hurley 

you know what’s interesting is we had an anti dumping order that was coming through last year, that we thought would come through last year, that actually would have required folks in this industry to do something similar. We had to come up with a whole tool to figure out how to calculate this and whatever else, and then that that order did not end up going through. So that was really interesting. It was a crash course and how to do this. And so now, as we look at, you know, the steel and aluminum derivatives this time around, related to Trump’s tariffs, it’s a very similar exercise, but it’s not easy, because you’re looking at the value of the steel based on country of origin. You’ve got some articles that are in chapters 72 and 76 that will be easy, because it’ll be pretty much the whole thing, if they come from us, origin, product. But beyond that, it really is a complicated exercise. But what’s really interesting about the executive order related to derivatives, and I’ve been working on this with another attorney colleague of mine at Livingston, there is a provision that stood out in that executive order that says, if customs, I’m paraphrasing here, but if customs decides that you have misclassified a derivative in order to avoid the tariffs that they will penalize you and you cannot mitigate that, which I found really interesting. First of all, how would they determine that? And secondly, the penalty and mitigation provisions are statutory in nature, so to basically say in an executive order that you no longer have an administrative remedy is quite shocking. So beyond all of the complications with calculating what it is you’re going to pay duty on with these derivatives, you also have this hanging over your head that, well, oh, my classification is not in the list. But if customs decides I got it wrong, and I did it on purpose, you know, basically assigning culpability that I have penalties that can’t be mitigated, or at least the administration is saying that. So that was a very interesting provision to sneak into that executive order.

Warrington Ellacott  

Well, right after that, we had Canada publish its China surtax remission order. And will I, you know, like this was related to the China orders, previous China orders, but I think it’s an interesting point for listeners, that Canada did have a remission process and and maybe you can help explain that, but also the value of businesses going through that exercise, especially with what we’re facing here on opportunities to submit remissions to the Government of Canada if captured, yeah,

Will Pellerin 

that’s absolutely right. So you get the retaliation list and again, going to the China sur taxes under Section 53 of our customs tariffs and what we’re doing and planning, with respect to the United States remission, is a key part of the mitigation strategy and planning for companies, so that, as we just saw with the China remission, there is a lot of products there that in theory, based on exceptional circumstances, would not be subject to the China terrorist and the Government of Canada then, effectively, both forward looking and retroactively allow for remission of duties. And I mean, the remission process makes sense fundamentally, right, if we don’t, if you can’t get the product anywhere else, and all it’s going to do is hurt Canadian manufacturers, because the good is an input into something else that we make here, then fundamentally, the government has an incentive to to allow for a remission or non payment. Of duties on a go forward basis, and in some cases retroactive. I think that the list, with respect to the China tariff remission order that was that came out, there’s a lot of consternation as to what actually made its way onto that list. I think there’s a lot of players in the Canadian steel producers world that are very angry at that list. We represent some steel producers and clients that that have massive issue with that list, because it’s products that they themselves make in Canada. So it doesn’t look like the Government of Canada got it quite right, and they seem to have aired on the side of providing more remission rather than less, which for many importers and exporters, that’s a great thing, but it certainly is, is very controversial. But remission orders generally are part of the strategies that that we work with clients on, and in fact, are preparing a number of applications as we speak, in the event that Canada does impose retaliation tariffs on various goods. So

Warrington Ellacott  

should remind the listeners that Canada, responding to the original IEEPA actions, had a total retaliatory list of approximately $155 billion in total, 30 billion of that was reflected immediately and concurrent to the now March 4 process, but it was rescinded, so we’ll have to see where that goes. And then they were holding another 125 in their back pocket. And then, of course, with you, the announcement of US steel and aluminum Canada has not, at this time, inter discussed any retaliatory actions against that, those two executive orders, but the level of that trade is approximately 24 point 4 billion US dollars, if my recollection is correct. So there’s so I guess the recommendation to listeners is, if you know remission activities should be going on right now in your companies, right it should be taking a look at this. Yep.

Will Pellerin 

And I think you have to be ready on day one if there’s a retaliation tariff imposed by Canada, whether it’s on the first list or second list or a new list altogether. And this is a product that you need from the United States, especially if it’s something that you can’t obtain domestically here in Canada, then there’s a very strong case to be made that you should apply for a mission order and try to get one for that. That product that’s not an easy thing to put together. Like these are real packages that require a significant amount of information and data and and meetings with government officials in order to push this through. We’ve done that successfully with clients, but it is. It’s a heavy lift. There’s no question. Yeah,

Warrington Ellacott  

it’s it doesn’t get it doesn’t get easier from here, because there’s money on the table that they want, and obviously you’re trying to protect that money. And so that dance happens. And so then we move towards February 13, where the executive order was basically issued on a reciprocal trade policy. Now this is a fundamental change in US trade policy, and I think we probably should, you know, help the listeners to try to understand what is the what is what does that mean? I mean, Jill, let’s start with you. What’s your, what’s your take on this?

Jill Hurley 

Yeah, so it’s interesting what they’re doing here. But basically they’re, they’re looking at both trade and non trade, not barriers, per se, but challenges that US exporters have when shipping to these overseas market, markets, and whether or not, comparatively, we have the same kind of issue for foreign exporters importing into the US, Nobody’s really sure how they’re going to do this or what is going to be included, so and whether or not that counts, right? So if we think about that, for example, in the EU, we don’t have that in the US, but we do have sales tax. Are they the same? Is it really a hindrance if we have that in the EU versus sales tax in the US, and does that count the the other, the other sort of issue we’re pondering is, let’s say duty rates are are higher overseas. I’ll just pick a random country, Germany. Let’s say that that duties are higher for US exporters to, you know, get their goods. It’s higher in Germany than it is in the reverse for German goods to come to the US. Are we going to look at every single line of the tariff and then are we going to just make it even? Are we going to increase our duties to match there? Brokers, are we going to have millions of tariff lines of data that brokers have to manage. So if you’re importing a car from Germany, it’s this, but if it’s from Canada, it’s this for the entire tariff. So a lot of the trade community is still wondering how this is going to play out, how this could even possibly be reviewed in any meaning, you know, short term, meaningful amount of time considering the complexity of of tariffs, of non trade related issues that may be challenges for US exporters. It’s an extraordinary amount of information to sift through, and if a report comes through quickly, is it really comprehensive, or are we making sweeping generalizations about challenges for US exporters. So a lot of the trade community is is sort of not even clear on what’s going to be included. How we would what reciprocity looks like like. I said, Do we just bring our duty right up to match theirs? Do we do that for every single tariff line for every single country? How? How would that even be possible? So it’s, it’s quite interesting to see how this is going to play out. Well,

Warrington Ellacott  

from the Canadian side, how did, how did you take it? Yeah,

Will Pellerin 

that’s exactly, I mean, Jill is absolutely right here. This is a fundamental departure from the international framework on international on trade, like writ large, right? So you’re starting from the premise under the WTO agreement that whatever you offer to one country you have to offer to all countries, right? That’s the fundamental, most favored nation principle, the MFN principle. And so as long as you are below your kind of WTO trade agreement rates, you can reduce your rates further, so long as you offer that to everybody, unless you have a specific trade agreement that allows you to go even lower. So there’s an exception on the WTO agreements for free trade agreements that allows you to reduce your rates for that subset of countries, right? But that’s that’s the general rule, what you offer to one, you offer to all, and as long as you’re below those, you’re not above those, those rates that are set under the WTO agreements, you’re fine. Problem here, therefore, is if the US is saying, well now anyone that trades with us has to match what we offer, then every country now has to either reduce its rates to get to where the US what what the US has offered them, and it just becomes a massive rework internationally, and not just in respect to the United States, because otherwise you’d be completely offside your international obligations with Your other trading partners. So and from the US perspective, as Jill is mentioning, this is unmanageable, like you would have to basically be looking at 1000s of tariff codes for 100 plus, you know, 150 plus country that you actually trade with, and try to assess, am I higher? Am I lower? And that’s just on what they actually have as a listed tariff code, not even thinking yet about everything else that the US is suddenly interested in, such as value added taxes or non trade barriers or digital service taxes that Canada might have that would Then somehow lead to the US, saying, Okay, well, Canada offers 10% to us on this one. We offer 8% to Canada on that one, but Canada also has this digital service tax, so we’re going to tag on a punishing rate there, and they do this, and so we’ll add a punishing rate there over literally 10s of 1000s of line items. So the mathematical exercise is incomprehensibly large, and frankly, I don’t see how it can be done in a really mathematical way in any realistic time period. So what will probably happen is there will be really quick and dirty shortcuts taken by the United States that will create massive problems and some even more obvious unfairness, right? They’re going to have to say, Okay, well, we have this rate for the EU on cars, and therefore the EU needs to bring its tariff down, or we’re hitting them with an additional piece ourselves. So, so the fundamental premise just sounds like it’s a sound bite, right? It’s like reciprocal trade. Whatever you offer us we offer you, is an oversimplification that blows up everything,

Warrington Ellacott  

especially in the if you’re a usmca trader, right? Because we were trading most of our goods tariff free, very few of them were MFN or non preferential rates. And so now how? And of course, then this vat question, or the GST question, we came in, and how’s that on? Get pieced together. I don’t, I don’t think any of us really know. So if we don’t know, it’s it gets complicated real fast. But then following that, we’ve had a various discussions from the president that talk about 25% additional tariffs on automotive products, pharmaceutical products, semiconductor products, and last evening on Lumber Products. And the issue here is that there was really no definitions around this. The timing also is said to be on or about April 2, which is the period of the second executive order, which goes towards August 11. But again, no details, nothing of that nature. So I think the heads up on that one, if you are in any of those sectors, you need to start having some conversations right about what exactly are we doing? Where are we getting our goods? Where are our goods going, and things of that nature. So I think what I wanted to try to get at at the end of this is to get to your perspective on Jill seeing all this coming your way. What might you might be your three top recommendations for your your the folks on the US side of our listener base today, and what they might take away,

Jill Hurley 

yeah, and I can even to a certain extent, say our Canadian friends as well. Because of us MCA, we have a lot of Canadian non resident importers into the US, just as there are many US non resident importers into Canada. And so what you I’d say my top, biggest recommendation is you need to get visibility on your supply chain, particularly if you’ve done the best money or trade within North America, across borders, you need to argue the import of record into that country. Do you know what you’re bringing across? Do you understand the implications of fluctuating duty rates, because for so long, since at least 1992 with NAFTA, we haven’t given it much thought. In North America, our goods have been flowing pretty freely with minimal duty and tax implications for doing that. So you need to get a handle as an as someone who participates in the trade community, what your supply chain looks like. And then from there, you’re going to want to be able to have something in place where you can model these, these scenarios as they’re sort of thrown out there. Because Trump does act very fast. He tweets things, and you can’t just blow them off and say they’re they’re just tweets. These are becoming reality. So if he says, you know, I’m mad at Columbia, I’m going to tariff them if they don’t do what I want, he will actually go ahead and do that. So when you start hearing, especially if it gets repeated in the industry a lot, or it keeps coming up as a topic, make sure that you have your trade data in place so that you can model how that’s going to impact you. Should it become an actual reality, and so that would really be the next step. And then finally, what I will say, just as a citizen, is that you should be participating from a political spectrum perspective, as far as contacting your representatives, right? So one thing that keeps coming up is Senator Grassley and potash trying to get potash out of the out of the Canadian tariffs, because his constituents are so highly dependent on it. Somebody saying something to him, for him to go and lobby and do that, that you need to be active if you feel that these are headed your way and and speaking out to your representatives so that you can at least try to participate and push in the best outcome.

Warrington Ellacott  

Yeah, no. Good, good, good points. Well, your perspective from the Canadian side, that’s

Will Pellerin 

Jill really hit the nail on the head. It’s really three things, right? So the first is, understand and quantify your exposure, which I think Jill described really well. So it’s dig up those contracts. Understand how much you’re shipping. Where’s your liability? Who’s the actual importer that has liability? Here are there refund mechanisms between the parties, or reimbursement mechanisms between the parties. What do those contracts say and the like. And then, you know, measure that that exposure, the the second bit is scenario, plan, right? Get, get ready for different levels of tariffs on different products and different goods. What does that do to your business and to your market and to other players in that market? And then the third is, mitigate as much as possible. And in some cases, that’s not going to be easy, and in other cases it’s a little bit easier. Frankly, there are, you know, low hanging fruit out there. That, that you can do so value for duty strategies, right? Fundamental, we’re seeing some really nutty things, and I’m sure Jill is also right. A lot of people, when they’re crossing goods across at the border, are just using their invoice price as your value for duty. And that invoice price, that transaction value might be completely off, because you’ve always had a 0% duty on it, and you’ve never taken five minutes to actually look at what you’re declaring as the value for good, for duty on which the tariff would apply. You’re shipping something for 1000 bucks across the border. 25% might hurt. If you can get that number down to $500 you know, that becomes from someone a little bit more manageable, right? We’re seeing things like so the obvious one is freight. Get your freight out of your value for duty. It shouldn’t be there in the first place, but a lot of people haven’t been careful. And it’s, it is in there, right in your in your transaction price, get it out. We’re seeing services lumped in. Sometimes you do a lot of aftermarket service and training and assembly in the foreign market. You send a guy down to, you know, help assemble the thing. Well, all of that shouldn’t be in your value for duty, right back out those services. Get to your Ex Works factory gate. Price for that, for that good, wherever possible. So those are some really easy stuff. But again, it goes to the mitigation and there’s the much more complicated stuff around transfer pricing and affiliate company pricing, where you might be able to to actually have a first sale that is far lower valued on which the the duty would apply. In terms of other mitigation strategies, right? Look to other markets for some companies, that’s possible, right? If you’re in a commodity world, and you’re producing some form of mineral, then maybe, you know, you’re shipping to the EU, and the EU starts shipping to the US, and sure, everyone pays a little bit more, but it’s a global commodity. It trades as a commodity. You’ll be able to sell it if you’re a furniture manufacturer in Winnipeg selling luxury furniture to the US, you might be screwed, right? Like you’re not going to be selling that stuff to China tomorrow morning. We’re not selling furniture to the Philippines, right? So ultimately, it depends very much on the sector. But there are alternative markets out there, and trying to understand where they are, including internal trade, which is, of course, the big topic du jour here in Canada. Jill hit it on the head, lobby influence, right? Understand also the retaliation list. So from the Canadian perspective, one thing that we’re doing is either some companies want more added to the retaliation list. That’s very important, right? So let’s say you, you’re a manufacturer of something in Canada. All of a sudden, if the US is going to impose a tariff on us of 25% and you can’t ship to the United States, you might want to make darn sure that the US product isn’t coming into Canada either, right, so that you at least have a market in which you can sell. So we are working with clients to get more things on the retaliation list in certain circumstances and in others, getting it off the list to make sure that you know, you don’t hurt your own Canadian producers or something of the sort. So again, lobby influence, yeah,

Warrington Ellacott  

Kim and I talked about that different in the previous episode that, you know, because US, Canada, Mexico, has been such an integrated market for so many years, there’s been a comfort of comfort of trade, I guess I’ll describe it as, and that that connectivity to other markets has somewhat become disconnected. I’m not saying they’ve been fully disconnected, but they’ve been, you know, put on a shelf or something like that. So I think if you’re whether you’re a business in Mexico, Canada or the United States, the activity that should be taking place now is, Where can I sell my wares? What do I have to do anything to my wares to to access that market. Are there specific technical requirements or labeling requirements, or things of that nature to get into those markets? And then who do I need to have a conversation with to facilitate that trade? Now in Canada, I’m more familiar with the Trade Commissioners services, which are fantastic. They’re in every major market. I’m sure. Jill, there’s us, government foreign trade officials in each of the major markets at both the state level and the local level. And then, of course, we talked about, you know, local Chambers of Commerce can assist, you know, listeners to get connected. If you’re not connected, because I know a lot of, a lot of listeners here run small business enterprises or medium sized business enterprises in both US and Canada. And the chambers of commerce are fantastic organizations to help you. And then, of course, people like us at the Canadian Association of importers, our colleagues in the US as well, can facilitate more dialog at a higher level. So I think that the parting shot, I guess I’ll make as the host, is, get engaged, right, expand your thing. Working right here, because if you’re gonna if Canada is not going to be your number one market, you’re going to have to figure out who the next guy in the chain is going to be number one, who’s going to be number two, and so on and so forth. The other thing I would suggest to listeners today is call your customs and legal professionals, such as Jill and will here with me today, as you can see that they’re a wealth of information and fact based information. You want to avoid going out to social media and finding those so called experts that would not be my recommendation. And of course, our good friends at the Global Training Center who helped us with this podcast again, another great organization to help you on your way. And Jill and will, I really want to thank you for joining me today, as always, a great, great education for myself. And with that, I will wish everyone a good day and hope to see you at our next episode. Cheers. You.