USMCA: Get Out of Tariffs Card

Machine Operated Script:

Annik  

Music. Hello and welcome to the simply trade news roundup. We’re here with another episode. It is currently Monday. We’re recording this episode on March the seventh. So some things might be changing. So let me introduce them real quick. We have Jamie Gonzalez. You guys have known him. He’s been on multiple times, not on the news, but he’s been on with Lalo and Andy a couple of times. He’s the president of the ncvfa, which actually there’s a conference coming up, and we will be there. I assume that will be my first time. I’m very excited. And then we also have Brian Barber, nominating committee chair, let me know if that’s correct. That’s what I’ve gathered. Yes. Former

Speaker 1 

nominating committee chair, former current area one representative for NCB, FAA,

Annik  

well, today we’re talking about a couple of things such as usmca, there was just a new announcement that all goods coming under usmca are exempt from the tariffs, which we did not initially see, because on March 4, all tariffs were due on for 25% so everything that was coming across Mexico and Canada 25% so I kind of want to start with the usmca and what happened March 4 for you guys. So

Brian Barber 

I guess I can start there. So I think, you know, we saw, you know, things that kind of ran the gambit on on March 4, right? We had some customers that said, you know, we’re going to take a wait and see approach, right? So I might not ship. I’m going to see how things shake out over the next couple days. Right? We had folks that had orders to fulfill, right? And so, so those goods moved, you know, regardless of tariff, right? And so they had done some forecasting. I think there was a massive push to try to get goods in prior to that, that March, 4 effective date, right? We certainly saw surges and and folks trying to get, you know, basically documentation over and shipments processed however. You know, we don’t control, oftentimes, the conveyance, right? And so, you know, the importers must work very closely with their carrier partners to coordinate, you know, the arrival and the release of goods at the border. So, you know, I think just to kind of sum it up, you know, there’s a big push to get things in prior to the March 4 date, you had some people that you know were taking a wait and see approach, and you had some folks that, you know, it was business as usual. And what I’d say, from some volume perspective, first couple days, you know, things kind of went along as normal. I would say, at least that’s what we experienced. But over the last day, day and a half, we did see a pretty significant decline in volumes coming our way along the northern border, you know, to the tune of, I’d say, probably like 30, 35%

JD Gonzalez 

and to add to that, you know, we have the same kind of situations here on the southern border, you know that Brian was talking about. The only thing about is, we’ve always had some situations with equipment, shortage of equipment, and due to the fact that everybody was trying to cross prior to actually March 3, 1101, central time, you know, based on the time frame we had, I mean, just volume. So more volume than normal crossing. But after that, the last day or so, the really, most of everybody, was kind of anticipating what was happening last night. I want to sit there, go again last night, 11:01pm, Central time, due to the fact that that’s when the tariff shift changes well, and so there are a lot of equipment was being held at the border. So we have over 2000 trucks. That’s our report. And that creates that shortage of equipment, in addition to drivers just sitting waiting cross. I hear, I have a feeling today we’re going to be extremely saturated, just to kind of catch up with the backlogs. But then during that two day time frame. Since these are not retroactive, there will be duties apply. So a lot of individuals that cross during that two frame, two day time frame, the small and mid sized business I’ve been communicating with them, some are responding. Some are not just to the challenge that they were. They they thought that this was not going to happen. So Like Brian said, I have a feeling they’re going to slow down the small and mid size, or they’re going to start importing just until April 2. And I think there’ll be a bigger hit than the bigger companies. The bigger companies are taking a more of a reactive action, I like to say proactive, but then we really don’t know what’s happening, because as of yesterday, when the information came out, we were notified in the morning, around 11 o’clock that, you know, there was an agreement, the executive order didn’t come out to about four o’clock yesterday afternoon. And then we had the CSMs and the FRN and that, you know, the custom server, custom service mission system, or the Federation, didn’t come out to about six seven last night. And then we had until 11 o’clock Central’s time, like I said, Because 12 one in in the eastern time to make decisions and start moving forward. And a lot of people really, we didn’t want to cross this night. We just tell them, don’t risk it, you know, wait, wait till the next day, and then there is going to just start flowing as normal next week. We should, once we start getting the equipment back in order, we should be going back to normal, just for. At least a month. But expect the same thing to happen on on March 31 April 1, just a flood, a flood of merchandise across the border. So, yeah, I mean,

Speaker 1 

I would say that you have to work closely with your broker as a partner, right? I mean, at the end of the day, what we’re doing is we are, you know, running reports, creating work managements based on, you know, time and action and the actions that were in effect at that exact period, right? So that way, I’ll give you a great example, right? We had entries that were processed, you know, prior to March 4, right? And we were unsure when they were running across the border, so they were originally processed without the attached IEEPA tariff numbers, conveyance doesn’t cross until after March 4. So now IEP is applicable, right? Because now it’s within the danger zone of the tariffs, right? So now we have to go back, capture all those ones that were previously processed, round them up, and then make sure that we are adding the IEEPA tariff appropriately, so that way the proper amount is calculated and sent to CBP.

Annik  

What kind of struggles have you heard from your importers?

Speaker 1 

You know, I would say, I mean, a couple of themes I think we’re seeing emerge, right? So I think one like the power of chaos and misinformation. So things are coming so quickly, right? And it’s, it’s extremely challenging to stay up and on top of what is happening at that exact moment. And, you know, we are getting things in piecemeal, you know, JD kind of threw this out a little bit earlier in the respect of, you know, you have the executive or you might actually have a news article break first, right? Rumors or a news article, then you’ll see the EO, which kind of gives you a piece of the puzzle, right? So we’re looking for language within that there. And then, of course, you know, cash flow as well as as well, right? Again, I think I we were talking a little bit offline about this, but in the land border environment, you know, with um usmca Often in play, not high level of duties, right? So a lot of times broker which brokers would tender on behalf of the importer, and now the rules of engagement have changed, right? And so if you take 25% across an entire swath of clients that was previously usmca, those numbers add up very quickly, and a lot of chaos, some misinformation. You know, I think really managing the cash flow component has been a big piece. And I think again, folks are looking for ways to minimize the impact. Just

JD Gonzalez 

to add a little bit to Brian’s comments, you know, one of the, one of the things like you said, the common theme was price, pay or payable. And so, you know, everybody just looked at that for price. Now they’re itemizing. So they’re trying to deduct, you know, free charges or insurances, and some other other individuals trying to be creative and work on additional pricing. Like Brian said, in addition to the valuation, there’s a, there’s a lot of there’s a lot of methods, but you gotta take consideration. There’s a right method, and there’s a method that, you know people are just trying to work with creative language, and even now March 7, the date that came out, it’s only usmca qualifying. Non usmca still has to pay the 25% without

Annik  

a valid usmca certificate of origin, you cannot, you will not be exempt from those tariffs. How quickly can people get that? It really

Speaker 1 

depends on, you know, what kind of commodities you’re dealing with, right? And whether or not you’re looking for a shift in tariff or you’re looking for regional value content, right? Because there’s a couple different, you know, ways usmca can can be qualified, but a lot of you know relates back to the records that the importer might have on file, right? And, and, you know, they’ll get a bill of materials together, you know, which will show all commodities, sort of, all the breakout, the value of all that. And they might have to procure usmca certificates from some other suppliers right, to be able to base their certification on. So, you know, a lot of it really does depend on how good the importers existing records are and how far back, and easily they can, can get information from from their suppliers and put together, really a case to be able to provide to their broker or their consultant or their trade attorneys to walk through the process, right? You know, my advice, I would say, certainly, work with a partner that understands the ins and outs of it, and they can walk you through, you know, specifically your commodity type, you know, what is the requirement for usmca and what information do you need to gather? But, I mean, you know, depending on how good your records are, I think we’ll turn around how quickly you can make a determination of whether or not your goods are actually eligible. You know,

JD Gonzalez 

this is not new. This has only been for two days, so a lot of the importers that were already qualified for usmca is just going to be status quo. But instead of going with a term with the last two days, and I’m talking the southern board, I think the northern board has a different number, we’re going to go from oh one page 20, 25% oh four is duty free for right now until April 2. Then we’ll see how we move forward. I believe Canada has another last two digits. But unlike like Brian Luther, unless you’re a new importer, then that’s where you really have to go through a lot of these steps. But the previous ones, they already know what’s next to qualify. I mean, you essentially qualifying and non qualifying.

Speaker 1 

You can have new parts too, right? New parts can come in, right? And says, folks have new parts and have to work through that qualification process, right? So, you know, I think there’s still our stages in which. Um, you know, usmca verification is going to be it’s going to be needed. As

JD Gonzalez 

brokers, we have to make sure our importers are compliant. But then the next step is, you’re looking at, on the 11th you’re looking at steel and aluminum. So we’re going to be working through another process on Monday as well. So

Annik  

how has that impacted some of the importing, you

Speaker 1 

know, the steel and aluminum isn’t just, you know, it’s not tied just to Canada or Mexico, right? So that’s a, that’s a macro, right, across all countries, right? So one of the questions I immediately have is, you know, if you’re usmca, I think logic would reason that maybe the steel tariff won’t apply. But I haven’t seen any language to clarify that, right? And so one of the questions I have off the hop is, you know, March 12, will Mexican and Canadian steel still be sub to the 25% right? Because everything that we’ve been thinking is stacking in aggregate, right? So I think that’s certainly a point of clarification. Is industry that will want to see, you know, hopefully sooner than later, as far as derivatives, yeah. I mean, we’ve been doing impact assessments. You know, there have been a couple annexes that were published out in the FR ends, which detail the tariff numbers that will be subject to, I guess, the derivative steel and aluminum tariffs. You know, great example. Like we have a, we have an importer that does like metal furniture, right? And typically that, you know, that was not subject to any kind of steel or licensing requirements. But now derivatives would be, it would be a component, potentially for a tariff. And, you know, one of the things that we’re looking at right now is, you know, are importers ready to be able to, you know, supply that information, right? You know, I kind of always use the you know, sort of say, you know, is this something that they have readily available, that can be provided and put on a statement or put on paperwork. Or is this something that only Ernie, the engineer in your company, has tucked away in a file cabinet? Right? It’s gonna be very difficult to supply right, on a shipment by shipment basis. So, you know, that’s part of our communication out right now, right? You know, make sure you’re ready. You know, while stealing aluminum derivatives may be on pause, it’s coming, and can you supply the info and the makeup of what you’ll need to supply to be able to properly pay the tariff? Because otherwise, I think the alternative from what i’ve what I’ve read and what I’ve been seeing is you can pay 100% and obviously people that want to pay 100%

JD Gonzalez 

as broker, they’re kind of thinking, well, maybe might have more information than us. Being on a national level, we’re just like everybody else. Everything comes out whenever we we find the information all at the same time, and our biggest question is definitions of details. You know, like Brian said, derivatives. That’s very, very key. And once we find out the information, we can share that with our clients who are just leaning on every word that we have to say. You know, knowing that we’re the expert at the same time, we just have to rely on the administration provide details. But like, everything came out yesterday, we’re kind of looking at maybe Monday. We might have some kind of information to share with our clients so we can kind of move forward and take the next steps, which is something that it puts a lot of responsibility on us and a lot of challenges on us as brokers, because I know we’re working with our software providers, and a lot of times previous administration, they had a testing period this one, everything is live. It’s just, you know, learn and correct the mistakes as you’re going through so we can make sure that we can process and may, you know, do our our entry, our calculation, provided to our client as soon as possible, as, as Brian alluded to earlier, that they have to fund, and they have to fund us to make sure that we’re funded on that, that aspect, and they just want to get the accurate information almost immediately. And it’s kind of sometimes we have to wait on the software provide us, GDP,

Speaker 1 

you know, I think has been pretty good over these roll outs and getting, you know, the new 99 or IEEPA numbers out right? Just, you know, for us to be able to ingest in the system, right, via abi, but it is certainly a scramble right to JDS point, right? Like we’re getting information, you know, close to, I’ll call it end of business day sometimes, right? And you know, you’re, you’re configuring your systems to work one, one way, and then X amount of hours later, you’re rolling it back right, and then you’re trying to capture work management or software providers are having to, you know, pivot on a dime right, to to provide information to us, and you’re often undoing work right? And that that adds to sort of that chaos and all the different, you know, just scenarios that we’re working through.

Annik  

To wrap this up, what are like some of the top tips that you have to be compliant when you get that

JD Gonzalez 

executive order, when you get that that tweet that’s just informational, you have to wait for the CSMs message, or that frn for to write those, those guidelines that we need as brokers committee to share with our clients. But then we, as brokers, can, we have to work focus down into weeds and wait for the additional guidelines. So we can kind of promote that, share what we have, and see what direction we can guide you in to make sure that we’re in compliance. At the same time, get the best cost for your for your best bang for your buck, to make sure that we do the importing, and we can kind of assist with, you know, maybe the valuation. Process to make sure that you’re still legally within the legal realms of that so, right?

Speaker 1 

Like, I think transparency is really you provide good information to your broker, chances are you’re going to get a good opinion, right? If information is withheld, you know, it’s very possible that you’ll get an incorrect opinion, right? You know, how much time do you really have to prepare for what ultimately could be another round of tariffs? I’ll say right now is a little bit up in the air, right? So we have time right now. If there were things or projects that you were trying to advance, my advice would be, do not take your foot off the gas. So take the time that we have to be ready. Make sure you’ve got your information together for usmca, talk to your brokers, talk to your trade attorneys, and and just be ready. You know, check your cash flow, right? Are you Ach, if you have not filed an application as an importer for ACH directly with CBP right now, that’s something you need to strongly consider.

Annik  

Thank you so much. We’ll probably see you again on the podcast, hopefully, maybe with Lalo and Andy, get a little bit deeper into things. Thank you guys for listening. I hope this helped. If you have any questions concerns, please reach out to us, and any concerns to JD or Brian, you can also send it to us, and I’ll forward it, and that is all See you next week. Monday, bye. Thank you guys so much. You.