Global Trade This Week – Episode 231
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Keenan Brugh 0:00
You're watching global trade this week with Pete mento and Doug Draper,
Pete Mento 0:09
Hello everyone, and welcome to Global Trade this week. I'm Pete mento, and with me is the CO hostess with the mostess. Doug Draper, this is our clean shaven version of the show. Yes, I do have a face. For those of you that forgot,
Pete Mento 0:23
I do have a face. Like I look like an angry gerbil, but I do have a face. It's good to see you, Doc,
Doug Draper 0:30
to see how clean that literally, April, April, whatever. Sixth, fifth, seventh,
Doug Draper 0:38
second, last time I saw you somewhat cleaned up. I thought your alter ego, Paul, instead of Pete, was jumping into the show today. So I'm glad that you clarified. I don't think I've ever been so happy to read a PDF in my entire life than reading that decision and knowing that I could just, you know, run out and get my face just back to normal. I'm going to grow it a little longer this I was telling you before, but before, but I'm just letting my face breathe for a little while. You forgot what it's like to just be in the shower and feel the water on your it was wonderful. It was wonderful the simple things. Doug, I know, I know, good, and you've given up the sauce for a period of time during Lent so clean as always. No booze, man, yeah, like a man out of rehab, sober, clean shaven and irritated and irritated, very irritated. Yeah, yeah. So why don't you kick us off, buddy? You got the first one this week? Well, we will certainly talk about tariffs, right? I know you've been very robust on LinkedIn lately, and so we'll talk about that, but I'm going to shift gears a little bit and talk about this maritime action plan that the White House has been kicking around just this month.
Doug Draper 1:49
And the gist of it is Pete and we, we talked about this before, and it was implemented where they would put a tax on ocean containers, the individual unit for foreign built ships that would call on US ports. Now they're pitching an idea where it would be weight based, essentially a weight based tax right, that would impact global trade. So again, it would hit cargo on foreign built ships that we call on the US. It's basically a workaround, for lack of a better term, with some of the IEPA, you know, just the ruling. But basically, here's the gist of it, Peters, they're saying it could be one penny to 25 cents per kilo, right? Of a fee. The fees not been or Well, that is the fee, right? So if your product weighs a certain amount, you just do the math, and that's what you're paying. Has nothing to do with value, has nothing to do with country of origin. It's simply based on how much is your freight weigh. And here's the applicable fee. It's specifically designed to go to help us ship building, but there's enough vagueness in in the action plan that basically says that the White House can do whatever they want with the money. You know, they'll work around that concern is it's going to hit kind of lower valued goods, the hardest, right thinking furniture, like exercise equipment, you know, kind of bigger things like that. You know, with T shirts or a high end garment, may not be as impacted, but it could, you know, raise landed costs pretty darn fast, and it just adds to our famous comment Pete of supply chain uncertainty. And how do you really identify what your landed cost is and what the fees are going to be associated as you import. So even though the Supreme Court ruling has been, you know, top of mind for everybody, I think we're going to see more things like this that says, What's the work around, where's the lever we could pull or bend, so to speak, to try to find these tariffs. So I don't think this is going to be the first topic of this that we'll talk about, but it caught my attention because it just kicked in this month. As far as being discussed, right? It's a policy concept with some political momentum, if you want to, for lack of a better term, but it's not law yet.
Pete Mento 4:20
Doug, I rarely curse on the show. This is bullshit. All right, this is bullshit. This is like when you have an angry teenager who says, Oh, those are your rules. Well, here are my new ones, right? It's bullshit. And the idea that you're going to base this on, from what I understand, right? I had never even heard of this until you brought it up, all right. So from what I understand, the idea is that that that rate will be based on the HTS code, so rather than applying it to the value, you apply to the weight, right? So pillow full of feathers might be 25% but. Tractor trailer will be 1% right one way or the other. Everybody ends up paying the same amount. It leads right back to what we're going to talk about in a minute. The President doesn't have the authority to do this you want. He's going to call it What's he was going to call it a stamp or permitting fee or something. Nope. This is going to go down. And in the meantime, until it's put into court, it's going to be miserable for everyone to live with, and then people like me are just going to charge to get the money back at some point. This is, this is a childish reaction to being told no by your parents, and it's ridiculous, you know. And I'm going to go on a rant here, dude, but I had to block people on LinkedIn. These are, these were not bots, people I know, because I just got sick and tired of the you know, this is the best thing for our country. And, you know, that's your opinion, dude. But when every single thing I post creates a comment about how it's political, I've warned you a million times. Just don't. Don't do that. The one of the strange things about that case on Friday was the ire that we got out of people in our industry who make a living off of importing. It was incredible. It was incredible. But I think this is just a ridiculous reaction, an emotional reaction. We had a plan in place to deal with rebuilding the US Merchant Marine. I felt it was pretty solid, but now we got to find revenue. So here we go.
Doug Draper 6:27
Yeah, yeah. I suspect that there's other rocks to be turned over to find ways to change rules.
Pete Mento 6:35
Yeah, over and we'll all go to court and throw them at you. Go right ahead. Let's party.
Doug Draper 6:42
All right, I love it, so be a good show. All right, what's your first topic?
Pete Mento 6:47
Sheriff's so God, I hate to say this, but told you so everybody out there who said it would never get overturned. Kick rocks, nerds. I'm right. Go outside, get some sunshine. It worked out. Now, why it worked out is not at all what I thought it worked out because the justices, it was split right across ideological lines, which was interesting, but the the main story just came out that only Congress has the authority to create taxes. I didn't think that would be what they would use to do it, but it was. And I put some things on LinkedIn about the decisions again, guys, I've never read Supreme Court decisions before. The way these guys can write these just beautiful view on both the dissenting, you know, and the just beautiful, beautiful writing, even the ones that disagreed with the decision was inspiring. The way that they wrote their decisions. It was beautiful. But the outcome has caused my phone to practically melt, which I guess is good. You know, I worked probably until six o'clock in the morning on Saturday morning. I slept for a few hours, and then I was right back on the phone. I was up until God knows what time, three, four in the morning, talking to people in Asia on Sunday, it hasn't stopped, and that's great, but we don't know exactly what's going to happen next. So the Supreme Court kicked this down to the lower courts, which means the Court of International Trade, and we've got a pretty good indication of how they're going to deal with this, you know, protest plus entry adjustments. What we don't know is if they're going to expand the protest period from 180 days. 180 days to longer, because when these tariffs first started was when they were the highest, and those are going to fall out of the opportunity. We don't want that. So hopefully the court does something about that. If not, we're going to litigate it. You're not getting your money back anytime soon. So for those of you that are under the impression that it's going to be like your tax refund, that it's going to show up in your bank account in six to eight weeks, it's not eight weeks. It's not what's going to happen. This is going to take a long time. The review of your protests is going to be scrutinized and degree you've never felt before. It's like dealing with your insurance company. They don't want to pay the claim, so have your information together, make sure it's right. Don't call your broker. I'm auditing entries every day. Guess what? It hasn't been a good year. Those brokerage areas are going to come up with the analysis. You'd have someone who can do the legal side of it, do the regulatory through customs brokerage, and need a tax person, because if you get back 2345, $10 million that's going to have a material impact on state, local tax, excise taxes, inventory taxes, federal income tax, all those things. So there's more money out there than just what your customers. Broker is going to do. Get it all done at once, guys. But yeah, we won. They lost. Bite me.
Doug Draper 9:36
You know, I we've spoken about this before, like even if this did come to fruition, which it did last Friday. To your point, it's not like, Hey, let me push a button. Fill a couple forms out and push it and all the things you just said, Pete, especially for these large importers, every single person you mentioned in that category costs money, right? So then you get into the point of, how much are we going to have to spend? How much are we going to get back? Like, do we just kick Do we just move forward? And I think in my career, you know, with the organizations you work with over your tenure, you're dealing with multinationals, and I dealt with a lot of smaller companies in my in my area, you know, small to medium sized companies. And I know for a fact some of these are going to be like, I don't have the resource to do it. I'm holding on by a thread because I had to pay these in the first place, and this really sucks, but I'm just going to move on, and I'm not even going to go down this road. Maybe I'll try a little bit, but I don't I'm speaking as if I was a small to medium sized importer. I don't have the resources right now. I'm strapped. I'm trying to make payroll. I'm trying to just keep this vessel afloat, and I don't have the ability to fork out 10s of 1000s or more of dollars to try to recoup this. So I think there's going to be a lot of companies in that size level that are just going to be like, well, I guess it's better moving forward than then. And, you know, chalk it up to one hell of a 2025, and I bet the United States government feels
Pete Mento 11:04
that'll be the case for them. Yeah, yeah, you know. So here's what makes me nuts. Okay, Customs has the ability to just go into their system and give everyone their money back. They can do it, but they won't. They won't because they're going to be directed by the DHS, who's a cabinet member level, directed by the White House, to not do that, right? And a lot of this money is going to end up stuck at the Treasury because no one's going to bother to go and get it. And that's, that's a crime shame, dude. It's crime shame. And now we have new tariffs. We have the one two, twos, which are supposed to be used under very specific economic conditions, conditions which do not currently exist. So you're going to see the same process over again. Someone's going to sue the government. Case is going to get through, it's going to win, then it's going to go to appeals, it's going to win, then it's going to go to the Supreme Court, and it's going to win again. And we're going to be in the same position trying to get back these probably a year from now. Of all these tariffs that people started paying at midnight last night. It's It's infuriating. It's infuriating.
Doug Draper 12:06
Yeah, yeah. I'm disappointed. Last thing I'll say on this one is that there wasn't any the court made their ruling, but they didn't provide any direction or mechanism to what's the next step. It's like we made our ruling. Let's kick it down to the next guy and move on to the next, next agenda item, right? Which you know results in all this ambiguity.
Pete Mento 12:26
I'm gonna tell you why Doug investment resources, yeah, why? Who ultimately pays the tariffs? You and me, we do right? So now the imports, importers are gonna get their money back, and the courts are like, now you guys go figure it out. You figure out if you're gonna give your money back to your your customers. You figure out if you give your money back to your suppliers, or if you're gonna use that money to just buy your stock back, which is what a lot of these big companies are going to do to jack up the value of them, shareholder value, right? And then you work it out between the rest of you and the courts. But we're going to finish where we have statutory authority, that's with the import of record. Take it easy, guys. So everything that we've bought over the course of the past 10 months that cost more money, and a lot of it did, what are we gonna do? A class action suit to the Treasury on behalf of the US consumer? Sign me up. I want my cash, right? But I don't think that's realistic. I think it's going to end up being for individual consumers, and it's going to be nasty. Yeah, agreed this happier. I'm way too fired up, Doug, let's make this happier.
Doug Draper 13:29
I was about to say a funny, happy part of the show is halftime, and we are there right now, brought to us by CAP logistics, Keenan and his crew over there. We wouldn't be here every single week talking to our audience about global trade without cap logistics. So check them out@caplogistics.com we appreciate them week in and week out. Pete, what do you got for your first go around?
Pete Mento 13:51
Here I am in Texas, everyone I'm in Houston. I'm giving two speeches this week Talk about bad timing, like the worst possible time to not be in the office. But I made three stops today, Doug at the crown jewel of roadside. Yeah, I am. I'm Texan born, so whether I like it or not, I am a Texan. And there are things about the state, like the town I'm in, that I generally don't care for. But one thing I love. I love buckies. I love the idea that I can pull off into a place that has 100 gas pumps, no waiting. The cleanest bathrooms that you'll ever find on the roadside, ever there's a gentleman or a lady inside of the bathroom who's just waiting for someone to use it, just waiting, like a like a pit bull, waiting for you to throw them a piece of pepperoni, just waiting. And then as soon as you're done, they rush over and spick and span, nice and clean. Everyone's friendly, everyone's nice, all kinds of stuff. Is there more than you would ever possibly want? You could probably decorate an entire trailer home with the things that are in bucky's and. I don't care how much wackiness you want, jerky, ostrich jerky, Shark jerky, turkey jerky, it's there the best snacks, excellent, excellent availability, fresh, smoked brisket, sausages, burritos, anything that you could want. Buckies has it. It is the most American thing there is, period, big in your face, inexpensive and built for consumption. So my halftime this week, Doug, God bless buckies.
Doug Draper 15:30
Yes, I like buckies. There's one here. They just put one up in Colorado. It's on the front range up by by Loveland, Colorado, which is close to Fort Collins. If people know where that is, I went in there once I literally stopped, got out of my car, had this killer angle, and took a picture of all the gas or all the gas pumps, and sent it to my kids. But you make a good point, and I'll be done with it. But the place is clean, it's big, it doesn't feel crowded, and I'm a clean freak as it is. So they have, you know, a guy, I think they have a name for somebody that hangs out in the bathroom and gives you a mint on the way out. Yes, and the bathroom attendant, yeah, yeah. So anyway, big and clean, and it's not crowded, and got everything you want. A lot of barbecue sauces, a lot of salsas, lot of beef jerky.
Pete Mento 16:22
God bless buckies. God bless buckies.
Doug Draper 16:25
What's your halftime pal? All right? Well, this is, as you know, especially during the Olympics, I was watching a lot of a network TV, big Olympic Fan Guy, but I was noticing the amount of commercials that sell drugs now, right? And my wife and I were sitting there like every single one of these songs, right? Is a song that you and I knew from, like, the 80s, right? And I started thinking, what they're doing is they're trying. So first of all, we're the target market, right? We're middle aged men who were probably a little overweight, and are like, you know, oh, my, my heart's or whatever right, whatever ailment you have, right? There's a pill for it. And I think they're trying to say, you know, remember when you were young and when you could conquer the world. And if you take this drug, it will take you back to that time in your life. And oh, by the way, here's a song that you probably listened to whenever you were of that age, and they just changed the words around. So I'm going to give you a couple of them here, and I'm going to not sing them directly, but the ozempic is probably the one that most people have heard, and the song is magic, and it was by a band called pilot. I'd look that up, but you know the ozepic, right? It's Oh, it's magic, right? They have the Jackson Five doing ABC, 123, for trilogy. Take on me. You remember that song by a band called Aha, Take on me and Brugh, maybe, I think is the name of it, flow rider song. Good feeling. There's a drug that's associated with that song. So I was just thinking, I got to bring this up at halftime. It's all of these drugs that are, that are on being sold. They're all linked to songs of the age, of the people they're marketing to. And I think it's absolutely brilliant, right from a marketing standpoint. I guarantee there's somebody in some marketing agency, like a J Walter Thompson, if they're still around, or Ogilvy Mather, was another big one. These guys are crushing it. What a great idea to link songs to the memories you had when you were little to take a pill to fix your ailment so you can pretend that you're young and Spry once again.
Pete Mento 18:50
I think there's some missed opportunities here. The fact that, like Lexapro or some other anxiety drug, hasn't used crazy trade by Ozzy Osborne, or that ozempic didn't pick fat bottom girls by Queen. I think that we've missed opportunities here, and we should be a little smarter about how we pick them, right? Smoking in the boys room for the one that gets you to quit smoking. You know, there's, there's some great opportunities that were really missed by these companies. They had to call us next time. We'll give them better songs. Yeah, yeah.
Doug Draper 19:20
Love it. Good deal. Well, that was halftime brought to us by CAP logistics. That takes us into the second half of our show. And Pete, I'll let you take it with your second topic.
Pete Mento 19:31
So Topic number two, for me, is interesting. I've seen a couple of reports on this. For the past couple of years, it's been pretty common that a number of the airplane companies have been converting passenger aircraft to cargo aircraft, and a lot of that was in response to the fast fashion e commerce world and the need for all of that space that has slowed down, slowed down to a trickle. And as a matter of fact, over the last couple of days, a massive one of those projects was canceled. Is this a harbinger for bad air? Airfreight news on the horizon, or is it just an attempt to try to constrain capacity and keep rates where they are? I don't know, but I see something like that done, and it seems like a bellwether for things not exactly working out for air freight for the next couple of years. I don't know. What are your thoughts?
Doug Draper 20:14
Yeah, it's a good one, right? I think that the cause, well, first of all, it, it. It's it. It seems like a stretch to say it's a post covid realignment, right? Things move slow. And, you know, covid was five years ago plus, but the ramifications still linger on. So I think that has part to do with it. I think that the minimus had something to do with it, because those planes were full of crap that we didn't need, but, but thought we had had to buy, right? And just the way that that supply chain worked out is a lot of that stuff wasn't shipped until it was purchased and it was over in China. And then I think this is the one piece that that I thought about Pete, is that personal travel, or business travel, is at an all time high, especially a personal travel, right? So there's more aircraft in the network to service you and me that want to go down and take a trip to Houston, Texas or whatever, right? And so there's more capacity in these bellies, because they're moving more people, and there's more there's more equipment in the air. So it's like, All right, well, are we going to spend X millions of dollars to retro a passenger plane to a cargo or are we just going to stick a few more bags of mail in the belly of the plane and and call it good? So I think there's a lot of I think it's a right sizing more than oh my gosh, it's an omen that something bad is going to happen, and I think a lot of it has to do with de minimis. Fast fashion is slowing down, so I think that's a big part of it. But, yeah, it's definitely something to take
Pete Mento 21:54
note. All right, man, take us home. Last topic.
Doug Draper 21:57
All right. Well, I was thinking about this one this morning, and then, just between now and then, I've seen five posts on LinkedIn about it, right? And it's FedEx is suing the government to get their IEEPA tariff refunds back. And when I first saw that, I'm like, wait, FedEx isn't technically the importer of record. Like, why are they going after this, right? But in doing a little research on it, right? So they file the entry on behalf, they advanced the duty payments, and then they bill their customers, right? So there's a lot of exposure there. I don't know if any of this happened, but I can pretty much guarantee with the amount of entries that they've supported, customers didn't get, didn't reimburse them. Shipments were abandoned. You know, duties essentially became bad debt, right? And facts could be taken a real hit. But the key thing here, and you made a point of it before, is there are strict deadlines around what you can do, and where you will line up, or where you will be in line, for lack of better term, to get your money. And so a lot of this, in my opinion, was FedEx is like, we need to get our hat in the ring. We need to make sure we're in line, and we'll see how this, how this plays out. So they're not really suing because they were importers. They're suing because they were the ones that Cut The Check right. And if they don't get in line first, somebody else will, which means they could lose out on some money, and I guarantee that they've had bad debt that's just popped up left and right in the course of these changes. So it was interesting. It caught me at a surprise, like, why is FedEx suing for this specific reason? And then you peel the onion back a little bit, and it kind of makes sense. I don't know. I think you did a post on it today, didn't you? I did,
Pete Mento 23:47
yeah, the I was gonna say, you know, not to quote the great trade sage and oracle of all things trade, pied mento, but I did discuss this today, right where, what's going to happen if I, if I used FedEx and they, they built the cost of the tariffs into their model, then don't they owe me some money if they got their money back, or does it? Buyer Beware, I don't know their terms condition. Do you think I read that thing before I sign it? No, right. So this could be another situation where they go back and get their money and the rest of us are like, what about me? Too bad, champ, you're not getting your cash back, right. So it's another instance where I think the court is going to end up saying, you guys, go figure it out. But it's just a sign of the times, and it's going to happen all over again with the one two twos. So strap in, kids. This ain't over yet.
Doug Draper 24:33
Yeah, yeah, for sure. Famous last words on our episode. I think that brings us to a close, my friend, we can call this week done. We actually missed last week. We were both busy, couldn't, couldn't find the right spot. So it's good to see you in person again and and talk about global trade, because that's what the show is all about. You. Me, global trade topics, our take on it. We always try to be forward leaning and forward perspective, versus like, um. Monday morning quarterback. And so hopefully our listeners appreciate that. And of course, we appreciate cap for making it all happen. And as you say, my brother, it's happening in global trade. We're going to be talking about a week in and week out. Enjoy Houston. I will see you next week.
Speaker 1 25:15
All right, but see you next week. All right. Take care. You. You.
Transcribed by https://otter.ai