What the New Executive Order Means in Tariff Wonderland

Machine Operated Script:

Annik  

Hello everyone. We’re back with the simply trait news roundup, and I have a fun episode for you today, because we’ll be talking on some changes that happened last week. So this, we’re recording this April 30, but yesterday, we got some news, which we’ll be talking about, and hopefully this will enlighten you a little bit of the situation we are in right now. But first, let me introduce you to my guest, Lenny Feldman. He is a managing partner at Sandler Travis and Rosenberg and in Miami, correct? That’s right, perfect. We love Miami. Well, I want to thank you for joining. First off, we met the first time at NCP. FAA did a quick little interview there, and I knew I needed you on the podcast, because I know you talk a lot about this, and that’s probably all you do is trade, and you’re super busy. So I thought, why not make you even busier?

Lenny Feldman 

I love it. I love being busy. Who could, who could avoid talking about the tariff Wonderland, as I’m calling it now, right? Ranting a webinar like that, the tariff Wonderland, something BTC, I have something really cool in mind about that,

Annik  

really, do you? I was thinking we’re gonna, we’re gonna name this episode now tariff Wonderland. You did. You did my job. Thank you. Well, I kind of want to mention first that we are one month after liberation, almost, almost. That’s right. One month Ruby,

Lenny Feldman 

huh? Are we feeling liberated people? Are we good, right? That’s a good

Annik  

yeah, we’ll do a poll. Good question. So it’d be may 2. Actually fun thing. May 2 is a really significant day too, because the minimus is going away for China and Hong Kong. So did an episode on that. Please review it, everyone, because that one is with me. Mary Ann Rodin, sorry. You know it’s it’s a really good to listen to it, and I’m sure this one will live up to the same standards. Tell us. Tell us we’re one month after liberation. We’ve just established that, but kind of tell us what the situation is right now. So we’ve gone through a lot of situations, and it’s kind of tough, because I don’t want you to go through all of them, because I think we’ve done it so many times, and I there’s a lot in the past that we don’t really have to deal with anymore, but we’re still dealing with a lot. What are you dealing with currently? So

Lenny Feldman 

Well, first, thanks so much for having me on. It’s great to see you again and be with you. I wish we were in person, but I’m sure that’ll happen soon enough. So trade tariffs, I would like to say we’re having a moment. But we’re having moments because it depends what moment of the day that executive orders are coming out. It depends on what moment of the day, or technically, what day your goods are being entered, right if they’re entered April 9, that was the fateful day when we saw the reciprocals rise from that 11% to 50% additive tariff. And you were stuck that day, unless you were fortunate enough to escape the tariffs that day because of the In Transit rule. And people are still trying to figure out the transit rule. So fast forward, China, the tariffs are just going up and through the roof. Right? 120, 5% plus plus plus plus, right? I describe it as the tariff sandwich that you have these layers to the sandwich. Pick your favorite one. I don’t know, Big Mac Whopper, although I try to stay away from it at this stage of my life. But the sandwich keeps growing layer by layer, and it’s getting really hard to take a bite into it and digest it. So the latest news, as you said, is may 2, which, at the time of this recording, is just around the corner, just really almost hours away. And that is going to mark, at least for now. But I never say never, the end of de minimis for goods originating from China, Hong Kong. So I’ve been receiving lots of calls. I know my colleagues in the trade, in the industry, other counselors, other brokers, have been fielding a lot of calls as to, how do we restructure our supply chain so we still have that end to end compliance and security, yet we are now ready for the informal, formal entry process, or this postal channel that’s been created for less than $800 goods. Long story short, you weren’t paying duties on those de minimis shipments from China Hong Kong, but now you will, but you get to choose your adventure. You could either go into the informal or formal, right? It’s fun. Your formal or informal entry process. We thought that informal was going to be $250 a pop, because the regulation actually has a proviso that says, Nope, can’t go over 200 250 per shipment informal, if you have trade remedy tariffs involved, that’s actually sub chapters three and four to chapter nine. 89 so they went around, they said, nope, nope. We’re going to suspend that. We’re going to allow you to use informal up to $2,500 and you’re still paying the duties. But you could use the informal channel, and it is a little more informal. You don’t necessarily need a bond, but you’d have to pay your duties. So that was interesting. And then the other part of the adventure is postal. That postal as of Friday, if you go international, post China, post us. Post, not just using us. Post, at the end domestically, you’re looking at 120% ad valorem on the value of your shipment. Or you’re able to do $100 per shipment or parcel, but that’s going to be hiked up to $200 on June 1. So this is really going to be interesting. And what I find fascinating as a practitioner about it, it’s the international carrier secured by the International carrier bond, who’s gonna be responsible for making sure all of those duties in that postal channel are provided or submitted, at least on a monthly basis. And they’re gonna have to choose that adventure up front. They’re gonna have to say myself as the International carrier, I’m going for the ad valorem, or I’m going for the flat amount, and you really can’t fluctuate unless you give customs notification of that.

Annik  

So, so would you say that doing business with the bit, doing business with China right now, is not the answer, or is it the answer? Is it a good answer? It depends

Lenny Feldman 

what your options are. I was just talking to a reporter. We had a very interesting discussion in the seafood and fish industry. And I said, I love fish and seafood. We got to figure this out.

Annik  

Me too. Yeah, you have to. You have to do it for it for us, right?

Lenny Feldman 

So I said, Look, are you able to catch the fish? Are you able to process the fish outside of China? Do you have that flexibility? And this is just kind of emblematic of all commodities. To what extent do you have that agility? Can you go to India? I’m I’m getting bigger and bigger in India. I think there’s a lot of potential there. We’re hearing good things about potential deals there, right? I’ve done

Annik  

a whole episode, and we said India should be but there’s, well, we’ll get to that later. But trade deals, that’s the whole that’s the whole thing. Yeah,

Lenny Feldman 

from China, I’m hearing more about it. Southeast Asia is still looking good. Mexico, Canada were still given the gift. They were given the gift of no tariffs for USMC qualifying goods to escape the EPA fentanyl, depending on how you read it, for goods that originate or substantially transform Mexico, Canada out of the reciprocal and Latin America. And my senator here in Florida for years now, Secretary of State, Rubio, has very strong ties in relations, let’s not forget, with Latin America, and that region outside of Cuba Venezuela, is very outspoken about that, and understandably so. So I have a thought that that region is not going to be tariffed, necessarily, in ways that is going to hinder trade there. So I think you have opportunities to, as you said, is China problem. Think you got to look at your alternatives, or if the and if not, then you have to look at some of the legal ways that you are able to maybe put yourself in a classification provision where all of the tariffs wouldn’t apply, perhaps putting yourself on with a lower value. And a lot of folks, again, who are transitioning. This goes back to the de minimis, going to non de minimis, duty able, who’s going to be your import of record, who is going to reflect the value on which you’re collecting those tariffs to at least try to get a break if you’re still in China.

Annik  

Yeah. And that kind of leads me to another topic that we just got hit with yesterday, which is stacking tariffs, right? And there, I think there has been so many questions about stacking tariffs anyways, where people haven’t even figured that out. And now we, we got a new executive order about the stacking tariffs, what? And I’ve talked to many people now, and they’re still decoding because we barely get got it yesterday, I believe the 29th April, 29 What are you making out of this? Do you think this is? Well, it seems to be to an advantage to importers and Americans, right? But what do you what do you make of this?

Lenny Feldman 

So there are a few things going on yesterday, just, I kind of am putting it almost like two buckets, but they interrelated. There was a proclamation on auto giving relief to auto make automakers from the 25% tariffs and offering them credits for portions of tariffs on auto parts that are imported to build vehicles in the US, rebates equaling 15% of the value of the company’s vehicles assembled in the US. So this is an auto assembly, pro assembly provision, or let’s say, proclamation or policy that was issued. What I think got a lot of people confused, and still is, on the other hand, was this executive order that. Came out in stacking, and that was pretty wild, because what it what it did in the stacking is it went through looking at the various tariffs that are, again, think of my tariff sandwich, one on top of the other, whether it was a, as it was listed in section two, the automobile and auto parts tariffs, B, the northern border, iupa, fentanyl tariffs, C, the southern border. I You put fentanyl tariffs, D, the aluminum tariffs, 232, and E, the steel right? So when you look at that, that stacking, so to speak, and how that was working, I’m asking myself last night, if A equals B, and B equals C, and C equals d, this a equal D. I’m trying to, like channel my geometry energy, but I learned that I think a does not equal D.

Is the math not mathing is the not

Lenny Feldman 

because here’s the thing, the way I read it, if d applies, then E applies. So you stack those. But if E applies, D also applies. But if a applies neither B to E applies. But you have to make sure to remember that if B or C applies, D or E do not apply. That’s the mathematics. Are you? Are we ready for geometry now? No,

Annik  

I feel I’m going to go back. I’m looking at this document that I have in front of me

Lenny Feldman 

here. So I kind of had fun with my my Pythagorean tariff theorem last night.

Annik  

No, it looks like equations. It’s giving math. But I’m just okay. So this is my confusion. So So obviously we’re all confused, and we’re all trying to or not me, because I’m not doing it. You guys are doing it. So how you guys are figuring it out? Right? But you can have a different perception than someone else. How are you going to get to this place where all you guys are making the same of this document right? And and and importers are doing the right thing, or paying the right amount of duties, or whatever, like, how is this going to work out? I don’t understand. Do they have to bring out in another executive order to really give you the equations to make this work?

Lenny Feldman 

So there’s a few things to that. So let you know we talk about like, how a bill becomes a law. If you remember Schoolhouse Rock, you know, on that side. But we’re talking the executive branch. We don’t really have that. So what happens is it starts with an executive order from the White House this, a equals b, b equals c, c equals d, does D equal E? Not really, because of the D to E and the A to B and the B to E and all that. So then you go to a Federal Register notice. There’ll be a Federal Register notice, there’ll be a custom service, messaging systems notice, a CSMs notice. Hopefully, there’ll be some frequently asked questions that are issued from customs, and if we just can’t get a straight answer because it’s too complex, nobody’s fault. It’s just hard to interpret. We may have to wait until we get a ruling from customs on some of this, but what’s really important is to follow the bread crumbs. Hansel and Gretel follow the bread crumbs just like the nursery rhyme, right? And what you’re going to do is you’re going to start at the executive board, at that high level, then see how it’s fleshed out, and the Federal Register again, the CSMs, hopefully frequently asked questions. Maybe you’ll have a nice center director at CBP who says, Hey, this is how we’re doing it. But here’s the thing, all of these at the end of the day have to fit in a nice, cozy 10 digit HTS US number. And the language in that 10 digit HTS US number, which is actually statute and law at that point, had has typically some good some good descriptive language that will help you through it. But hey to my friends in the brokerage community, the weekend will be here soon, so you know, maybe you’ll be able to think of other things. It’s going to be tough to really file get the filing right for this, and customs is really going to need to have a lot of patience in order to make sure that you’re stacking the sandwich in the right way, and now understanding that some of the elements or ingredients of that sandwich that we thought had to be stacked do not have to stack. They could actually pull them out of your sandwich. That’s

Annik  

what I see here, too. Yeah, some of it is just it remains the same, and it may stack. Some may stack.

Lenny Feldman 

Right the steel and aluminum are going to stack. And we just asked this question this week, and got informal collaboration confirmation that steel, aluminum product, you pay both, right? But this is basically saying, with the auto parts, you’re going to be fine. Auto Parts again, what we’re seeing here, which is interesting, is kind of the trend or the move, let’s, let’s help the auto parts folks, you know, let’s help the automotive folks, so that, especially if they’re in the usmca region, so that you’re not going to apply the, if there were any, if there were any China, Mexico, fentanyl tariffs, you’re not going to apply the steel and aluminum on top of that. So that’s where you’re kind of taking apart that part of the sandwich where we really weren’t sure if they’re going to have to stack on each other.

Annik  

Yeah. Yeah, and so, so we got this order correct, and now, okay, you guys are trying to figure it out, but then I thinking up about the actual business that needs to price their products correctly to make up for the losses. To make up, you know, because they’re not aware, like, maybe they’re paying way more right now, and they’ll get some relief, but you don’t really know at this point. So what, I mean, what do you tell them, like, how do you move forward? Do you, I mean, you just guess. Is it a guessing game or

Lenny Feldman 

no? I mean, I think you want, you have to be, it’s a bit of that. Okay, I’m going to be honest. But I think you could be strategic. You have to, you have to employ strategic here, you know. So in doing that, first off, you’re going to want to really think this through, take a deep breath, to be frank, and think it through, and get that order down. Look at the information that’s coming out. Then at that point, take stock at what’s coming in, and what’s really fascinating about this. At the end of the day, if you look at the tariffs for the autos or the auto parts, 25% right, which are now not stacking on the steel and aluminum, or steel aluminum 25% coming from China, that’s a better deal, so to speak, trade wise, than bringing toys in from China at 125% plus, plus, plus. It’s an either or. And think of it as that. Think of it maybe like this. Think of it as the of the meat patty of that Whopper Big Mac sandwich that I’m talking about. You actually get to choose whether it’s the wagyu, or you get to choose whether it’s the beyond burger, or you get to choose as to whether it’s just ground beef there your beef layer is going to be different based on whether it’s a steel and aluminum, or based whether it’s an auto or based on whether it’s neither of those. So that’s where a lot of people, I never thought I’d have this in my life, that people are actually asking me, How do I potentially take a toy or window or household good and put some steel and aluminum on it so that I could get it into the 25% as opposed to the 125 plus plus? Wow.

Annik  

That is wow. So we’re getting crazy, okay? But and see, this is what I’m asking. Do you see this as sustainable, this whole stacking thing? Is this sustainable? It will this? It’s crazy to even ask that, because we get something new every week. But do you see it as it’s going to work and people are going to figure it out, and it’s going to be better than what it is now.

Lenny Feldman 

I think there’s going to be some pros and cons to it. I think the fact that we now are hearing that the autos don’t stack in the steel, aluminum, right? And vice versa, I think that’s relief to people bringing in those commodities. I think that that part of it is going to be helpful overall. The idea of the stacking, although it is complex, it actually at a net, net should provide some duty relief. That’s the bottom line that this is that overall, this is, this is lessening the burden of the tariffs. It’s a complex way to do it granted, and it’s going to take some folks to really look at it carefully and figure out their geometric equation, as I as I say, but it overall, it’s a net win. So

Annik  

you really need someone professional to be doing this for you. I mean, I hope at this point, companies already set with someone that does it for them. But at this point, if you don’t have someone who understands this, and you’re bringing things in from China or from wherever. I mean, you really need someone to look at your whole system and supply chain and say, okay, you don’t have to pay these tariffs, or you need to be smarter, or whatever. Correct Absolutely.

Lenny Feldman 

You really have to communicate. You really have to talk to whether it’s a attorney, whether it’s a accountant who’s well versed in, you know, the mathematical, generally accepted accounting principles that go with these valuation type concepts, consultants, your brokers, we’re all in it together. And I think talking it through with somebody who is very focused on these issues, day in and day out, is critical. And I’m not just saying that because I’m one of those people. I would say, if I wasn’t one of those people,

Annik  

yeah, and we just, I mean, in the start of this, we talked on trade deals, and I want to talk about something that has been in the news recently. It’s, there’s not much to talk about, but Commerce Secretary, Howard litnick, we’ve heard lots from him, and he said, there’s a Done, done, done deal with whatever country. Didn’t mention the country

Lenny Feldman 

a mystery country. There’s a mystery

country. Yes, it’s an adventure. Now we’re playing

Lenny Feldman 

clue. Clue is that Colonel Mustard in the parlor with the trade deal.

Annik  

We don’t know, but you know what? If it, imagine it’s India, I think India would be great. I don’t think it’s India would be big. So

Lenny Feldman 

you’re thinking India, um, I’m I was gonna go with maybe Vietnam, because I know Vietnam’s been visiting. It could be Japan. South Korea. I’m leaning Asia, right? I’m thinking Asia. I know Vietnam had said they were going to dismantle their tariffs a few weeks ago. I do know from credible sources that Vietnam delegations have been in Washington, DC. Okay,

Annik  

so you think there’s, this will be kind of a counterbalance, like from China’s influence, kind of gearing towards, yeah,

Lenny Feldman 

I think so. I think that. I think that’s, that’s what we’re looking at. Could it be South Korea? Could it be Japan? I put them as my second choices. But I’m also telling folks, keep your eye on India, because I think things are moving in the right direction there, and I think that has a lot of potential, good potential. And

Annik  

in your opinion, trade deals are going to just make this industry, I don’t know better. I would say, right? I mean, that’s what would this industry needs correct. So

Lenny Feldman 

I think trade deals are a good thing. I think the to the point, and the extent that you’re able to lower tariffs, you’re able to get reciprocal tariffs that look at the end of the day, our tariffs have always been low. I mean, let’s be real about it. Overall, our tariffs have been between two, 2.53% and you look at our trading partners, their tariffs have been higher. So if we are able to achieve that equilibrium, that’s a good thing. But people really need, they really need those options outside of China. And then, of course, there’s the America first trade policy, which is national economic security. And how do you build that by domestic manufacturing. So they’re really, we really need to have those programs and incentives to do that. But in order to be a successful domestic manufacturer, you’re going to need to have the ability to import some of your inputs. You need to import your inputs, right? If you can’t, and that’s going to be really high, that’s going to curtail your domestic manufacturing. So it really is a seesaw to get to that, if you will, homeostasis, to that good equilibrium, where, ostensibly This, again, this is, I think, the administration’s plan. It’s not necessarily the Feldman plan, but I’m just saying calling it out. You know, to build that domestic manufacturing, give it a shot. But to do so, you have to look at the inputs that really are going to be needed, unless they can be made domestically produced in the US. And how long will that take? In some cases, you might be able to do that. In some cases, you probably won’t. So industry by industry, it’s industry by industry. So we’ll

Annik  

see if it’s a good if it’s India or Japan or Vietnam, that’s exciting. Yeah, good. Yeah, it’s right. So exciting. And I

Lenny Feldman 

think China is going to go down. I think what we’re hearing from dissent LUT Nick from the White House, is this isn’t where China ideally, where China and the United States should be. I think it’s going to go down. I think I don’t think it’s going to go down to 10%

Annik  

but I think it’s going to go down. I think every country, I think there will be a trade deal done with most countries, but until then, we’re gonna see tariffs, right? The stacking tariffs. But who knows? I mean, I don’t know. We get an update every week, right? It’s fluid. So that’s really and then what else do we have? Nothing much other than usmca Being up for review in 2026

Lenny Feldman 

that’s interesting. That’s, I mean, it’s kind of sort of an up for review. I would say, the last few months, it’s being reviewed based on all these different policies, right? But let’s see what that looks like, right now. Again, Mexico, Canada looking good. Let’s see what happens now, as a result of the elections new prime minister in Canada, I don’t think they’re going to be bellying up him and Trump, but we’ll see. I think sheinbaum is doing quite a good job from Mexico, from the Mexico side. I also serve as counsel to the North American Customs Brokers Alliance, and we’ve been having some very good, productive discussions from the brokerage leadership in Mexico, US and Canada to really encourage our administrations to move thoughtfully, to move intelligently, let’s say, towards the new usmca, and what that impact would look like. So those discussions are ongoing. It’s gonna be interesting. I’m gonna be in Mexico this summer, and probably Canada right after that. Oh,

Annik  

that sounds great. Yeah, it’ll be interesting. I’m looking forward to those changes. Not that we don’t have enough changes going on, but think change is always good. Anyways. If our listeners have any more questions, please record them to Lenny. Not sure if you’ll answer you, but maybe he will. And other than otherwise, you can also ask those questions to us, and we can forward them to Lenny or whoever could answer your questions. I want to thank you so much for coming on and giving us do. Details on the current changes and updates, and obviously we’ll still be notified for how exactly you’ll be doing that, which will be interesting, and maybe it’ll get rid of your sleepless nights.

Lenny Feldman 

Could do it. And I hope everyone enjoys the stacking enjoy your stackables.

Annik  

Enjoy those equations. Yeah. Well, I hope you have an incredible rest of your day. You too, Lenny, and we’ll see each other soon, hopefully sometime at a conference. I look forward

Lenny Feldman 

to it. I look forward to it. Thanks so much for having me. It’s always a pleasure to be on simply trade and chatting trade with you all. Yeah,

Annik  

this is actually your first time with me. So that’s different, right? Because I’m not, I’m not Lalo and I’m not Andy, not much. I’m not trade professional at all, but I’m learning. And you guys just give me all the meat. We’ve been talking a lot of food. I’m hungry now, there you go. I’m actually, that’s what I’m about to eat, about to do. So thank you so much for listening, guys, and we will be back next week, Monday. Not sure what we’ll talk about yet, because things always change. But for now, hope you enjoyed this episode, and please let us know how you like it, and if you have any questions, have a good day. Bye. Everyone. Bye.

Lalo  

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