Episode 92: Navigating Tariffs and Challenges for Canadian Businesses with Deborah Stern

0:00 Hi everyone, It's Evelyn Akka from the Ask Canada Immigration Lawyer podcast.

0:05 I am so excited today to have my colleague and hopefully a new friend, Deborah Stern, joining me.

0:11 Welcome, Deborah Stern Pratt.

0:14 Thanks so much for having me, Evelyn.

0:16 It's really great to be here.

0:18 I'm going to give you a quick bio about Deborah's experience and background and then we're going to dig right into talking about all things immigration tariff related.

0:28 OK.

0:29 So Deborah is a partner with the law firm of Sandler, Travis and Rosenberg and she is on the advisory committee as well.

0:37 And she's resident in the Miami office of of the firm.

0:41 She advises domestic and multinational clients on both US and foreign customs compliance and other trade matters.

0:49 She concentrates her practice in traditional customs areas such as tariffs, which is my new favorite word, seizures and penalties, and country of origin marketing, valuation, trademark infringement, broker compliance, government procurement and trade preference programs.

1:08 With all of her years of experience Deborah brings to us today, I'm so excited to have her.

1:15 Thank you so much again for doing this.

1:17 We know each other through Provisors.

1:20 Yes, we do.

1:21 That's been such an invaluable resource for in both directions.

1:24 Yes, for me too.

1:25 So because I'm an immigration lawyer and you're a trades lawyer, I wanted to have you on to talk about the fact that you've worked on both sides of the issue.

1:35 You know, I understand you worked inside US Customs and now you're a private partner lawyer attorney doing this for corporate clients.

1:43 So tell me about your career and how you got into this area.

1:48 Let's start there, please.

1:50 So I started my career officially after law school.

1:56 My first job out of law school was at US Customs, the US Customs Service at the time, painting myself a bit, and I got there through an unusual channel.

2:09 I knew I wanted to be in the international arena, but in law school, you don't really know what that means until you're there.

2:15 But I took as many international related classes, including immigration as I could.

2:20 And then I begged and pleaded my way into a State Department internship.

2:26 So I was working at their legal advisor's office and through a lot of the contacts that I made, because I had learned early on it's who you know that gets you there and what you know that keeps you there.

2:38 So I knew that I wanted to make sure I was networking and meeting as many people as I could.

2:43 And one of those people happened to work at US Customs in the office that I ultimately ended up at.

2:49 So I'm giving you the short version of the story.

2:53 I went back home, I went to to Florida State University in Tallahassee for, for undergrad and for law school.

3:00 I had to go home from that internship to graduate and turned around and moved right back to DC and started at US Customs.

3:07 And this was pre 9/11 and pre the development of Homeland Security and the department, you know, Customs and Border Protection.

3:15 So I was there throughout that transition and a few years after that as well.

3:21 And in that time I developed a a core expertise in specifically tariff classification.

3:27 But I had exposure also to a number of other issues.

3:30 Some of our free trade agreements, the then NAFTA, obviously now USMCA, some of the other trade agreements that were being negotiated at the time I was involved with because there is a classification element there and generally got a lot of exposure to all of the other pieces of customs compliance.

3:52 And I was also probably the, the thing that was most exciting about the time there, other than just being in DC as a young attorney, which is great, is I was a the US delegate, one of the US delegates to the World Customs Organization in their Harmonized System committee, which is the body that manages the international tariff on which all of our tariff schedules are based or 200 countries and resolved disputes between nations.

4:22 And actually got got very friendly with the Canadian delegate who I'm still in touch with today.

4:28 Wow, that's amazing.

4:30 So you did that and then what happened then you moved to private practice.

4:35 I moved to private practice.

4:37 It was it was only after five years, but that five years when you're working for the government is a very intense five years.

4:43 And when I moved, I had some personal reasons to relocate me back to to Florida, South Florida where I came down.

4:51 And so Sandler Travis and Rosenberg is a in our space is a very well known firm.

4:58 We're actually the largest boutique trade firm they in the country and probably global 70 professionals between attorneys, non attorney, trade advisors, customs, auditors, government affairs.

5:12 So anyway, we run the gamut on all things that touch trade, export controls and sanctions.

5:16 But I always like to tell people we don't do immigration.

5:19 We do do some some immigration adjacent things, but immigration is the movement of people.

5:25 We deal with the movement of goods.

5:27 And I had known about the firm and I had worked with some of the attorneys from the firm kind of on the other side, if you will, when I was at customs issuing administrative rulings.

5:37 And and so I had again, through contacts and things, I had gotten myself into this space.

5:46 I had actually started somewhere else for for a short while.

5:50 But ultimately, this is where I always wanted to be once I was in the customs world.

5:55 And so here I am 18 years later at this firm, a dream job.

6:00 It it, it was.

6:01 Yeah.

6:02 Yeah.

6:03 And then and then this happened.

6:04 We we thought we thought Trump one point O was challenging.

6:09 It is nothing compared to what we are dealing with today, what customs brokers are dealing with today and of course, what businesses are dealing with today.

6:19 So much uncertainty.

6:21 So let's oh, thank you so much for that.

6:22 Let's talk about really understanding what is a tariff.

6:26 I want to really dumb this down for me because I didn't take any international trade in law school and I want to make sure that, you know, we have a good foundational understanding.

6:36 What do you consider to be a tariff in simple terms?

6:39 How do they work and why do governments use them?

6:43 So a, a tariff is essentially a tax on imported products and the, the tariffs are set at the, I'll call it the product level, but it's really based on this tariff classification system.

7:00 Historically we had something called the tariff schedules of the United States.

7:03 Now it's the Harmonized Tariff Schedule of the United States.

7:07 Canada has, of course, it's harmonized tariff schedule.

7:10 And the reason it's called that today is because of this body at the World Customs Organization that I had had worked in that had established the harmonized system.

7:22 Convention countries all signed on and said, yes, we're going to try to harmonize our tariff schedule and we'll get into how much harmony there actually is or isn't at some time.

7:34 But ultimately it is a classification system.

7:37 Just like when you're in, you know, 6th grade science and you learn Kingdom phylum class order genus species for, for classifying animals and products have a similar system.

7:47 And it's a hierarchy just like Kingdom phylum class order genus species, but it's tariff headings and tariff subheadings.

7:56 And once you get to a certain level of, of specificity, you, your product fits there.

8:04 You know, an imported product has to fit somewhere in the tariff schedule.

8:07 And there's not only terms, right, describing different types of goods, but there's also legal notes that tell us what goes here, what doesn't go here.

8:16 And so there, there are rules of interpretation, there are definitions, there's other, you know, means to kind of figure out how does my product fit within this tariff schedule?

8:27 And once you find where you fit, where your product fits, there is a duty rate assigned to it and that is normally called is the MFN rate or the the column column one rate in in our tariff schedule.

8:38 It's the normal base duty rate and it can vary anywhere from zero to all the way up to 40 something percent in the US depending upon the product area.

8:49 But the US historically has had relatively low tariffs on most products until recently.

8:57 Until recently.

8:59 Wow, thank you for that.

9:01 I mean, that's what I thought.

9:02 I just want to make sure.

9:03 And so right now, obviously, so many changes.

9:07 How are you and your colleagues dealing with this for your clients?

9:12 Like because at least as a Canadian, I hear every day on the news about lumber tariffs and aluminum tariffs and I don't know, beef and just, it just goes on and on and on with the cross-border.

9:24 So tell me how the tariffs connect with NAFTA or the former NAFTA USMCA because we thought we had a deal.

9:33 And so how is this now, you know, changing things Like how is that even possible when we haven't renegotiated that treaty, right?

9:42 So there's a lot to unpackage with that question, but I think I'll, I'll kind of start from, from the end of the question.

9:49 You know, how, what does this happen that we have this arrangement between the NAFTA parties, between Canada, Mexico and the United States?

9:59 And incidentally, that agreement was renegotiated during the first Trump administration, right?

10:06 Greatest agreement in the history of free trade agreements.

10:11 And what what we did find is that, you know, during this administration when the rules started to change because there are certain industries and in in particular the automotive industry, the supply chains are so inter intertwined and interdependent on one another within, you know, they all bring in parts from other places as well.

10:36 That was actually that immediate backlash of you can assess these tariffs and it's not because hey, we have a deal.

10:43 It's hey, if your tariffs are supposed to be protecting the US industry, US industry includes our partners in Canada and Mexico, at least for certain industries.

10:54 So how it happens is a question of, you know, what authority the president has and under which it's posed.

11:00 And of course, I'm sure many of of our listeners here know that in the US, the authority to issue these tariffs has is, is in the courts right now.

11:11 And first level courts have actually two different courts have ruled them unlawful.

11:18 And that's now before the appellate courts.

11:21 And we should expect an appellate court very a decision very soon.

11:25 But we do expect this to go to the Supreme Court there.

11:28 We know we'd love to say that every judge is unbiased, but historically the Supreme Court has historically tended to lean one way or another.

11:40 And you know, beauty is in the eyes of the beholder, right?

11:43 It's, it's, it's not a straightforward question, but you know, how can it happen?

11:49 This is how it happens.

11:50 We have an agreement, but also that agreement that we have has an out a lot of people talk 6 year review and the renegotiation of NAFTA.

12:00 That six year review is actually really intended to determine whether we will extend the original 16 year term on USMCA for another 16 years.

12:13 So it's no, nobody's supposed to be renegotiating next year when the parties sit down.

12:18 It's supposed to be July 1st.

12:21 And the intention is not to renegotiate the tariff, right?

12:24 The agreement, the intention is to determine is it working?

12:28 What isn't working?

12:29 Do we want to continue this relationship for a longer period of time?

12:33 And again, those periods of time are all about having some certainty to rely on.

12:41 So we will, you know, but but the parties may not agree and then they'll have to meet every year thereafter.

12:47 Will they come to an agreement?

12:49 But there is also a unilateral withdrawal provision.

12:53 So, you know, again, the future is not certain in terms of our our trade agreements with with anybody but but in particular USMCA.

13:03 But there are some really strong domestic voices that that, you know, the administration is not ignoring, right, Because they did make this USMCA exemption from the emergency tariffs.

13:19 Yeah, I'm hearing a lot of people, at least on certain, certain states, whether it's bourbon related, you know, because that's been huge.

13:27 Ontario LCBO, their liquor board apparently is the largest that that that imports bourbon in the world from the US.

13:37 And so there's certain states I hear that are really trying to negotiate and trying to help, you know, argue that we should not be subject to the kind of tariffs that President Trump is putting on Canada on a daily basis.

13:53 But how do you advise clients, let's say, who tend to be your clients, Deborah?

13:58 Are they American companies, Canadian companies, international companies, Japanese companies?

14:03 Like who do you normally talk to and how do you advise them in this constantly changing environment?

14:11 Yeah.

14:11 And then thanks for for refreshing that that original question as well.

14:16 So we work with every type of company in the supply chain, but predominantly importers, manufacturers, exporters who in the US can also serve as non resident importers.

14:34 That's the bread and butter.

14:36 And we also work with trade associations.

14:38 We advise countries on their negotiations with the US.

14:41 So we really touch all aspects we represent, you know, trade trade associations, we represent the national customs brokers and forwarders in the US.

14:50 So we are, we kind of have our hands in all the pots, but and, and each of their needs is a little bit different, just like every sector is different.

15:01 So we have clients everywhere from mom and pop shops to major multinationals based here based in Canada.

15:10 We do a lot of cross-border work, specifically on the northern border and the southern border, but we're also working with folks in in Europe and in Asia and in Latin America.

15:23 And so how we advise them really varies depending upon their industry and their specific issues.

15:30 And so a regular day for me right now, I might be jumping from a conversation about baked goods to a conversation about semiconductors to a conversation about how do I determine, you know, the steel content in my, you know, water bottle?

15:52 And, and if it comes from the US, how do I deduct it from these reciprocal tariffs?

15:58 You know, we are really running the gamut on industries as well as company sizes.

16:05 And, you know, some of the answers are one-size-fits-all, but most of them aren't because everybody's industry is different.

16:14 Everybody's supply chain is different.

16:17 I had a conversation this morning where, you know, a tech company, they know their, they know their products very, very well.

16:23 But now they've got to break out the steel and break out the aluminum and it's not enough.

16:30 It's not just an enclosure, right?

16:32 There's there's all different bits that they may or may not realize are there now over the last several years, there has been a big push for supply chain transparency, supply chain visibility and some of the measures to determine and get your verification.

16:49 Not just about what your steel content is because of your duty rate, but also because there is melt and pour reporting requirements.

16:58 What country was it melted in?

16:59 What country was it poured in or for aluminum, you know, smelt and cast and we've got companies going how I never needed to know that.

17:08 How do I do that?

17:09 And so we walked through, you know, how many layers back in the supply chain do you have to go?

17:15 And it's not as simple as, hey, I, you know, first tier supplier, I need this information.

17:21 You need to get it for me.

17:23 Yeah, it's not that simple.

17:25 Or, hey, our contract says you have to help me comply with U.S. law.

17:29 It's like, yes, but maybe that first tier's contract with their second tier supplier doesn't have the carrot and stick, you know, and, or all the way down to not even just who acquired the steel, but who melted it, who poured it.

17:44 Now US Customs, when that particular requirement came into being on June 4th, that now the melt, the Melt and Pour has been around for a while, but that you had a 50% steel content, a 50% tariff on the steel content of designated articles that may or may not traditionally be steel products.

18:08 You know, we, we had to look at right, not just how do you determine the steel content.

18:14 There's a, that's a whole discussion in and of itself on valuation and on.

18:19 But then that next step of how do I know Melt and Pour and what US Customs did after our administration promulgated this new revision to the steel tariffs, as we call them.

18:34 Customs said if you don't know your country of Melt and Pour, then you need to.

18:40 You can put unknown.

18:41 Here's a code to insert unknown into your import data.

18:46 But if you do that, you will be subject to a 200% tariff.

18:50 Oh my gosh.

18:51 Now that number seems pretty strong, right?

18:54 Talk about a big stick.

18:56 Wow.

18:58 But there is actually some background basis to that 200% happens to be the punitive tariff on sanctioned products from Russia.

19:08 Then they're creating this presumption, A rebuttable presumption that if you don't know the Melt and Pour or the cast and smelt, we're going to treat it like it's Russian because you haven't proven to us that it's not.

19:22 So clearly it's it's in the business owners interest to figure that this out, right to dig deep into the background.

19:29 Unbelievable.

19:31 Exactly.

19:32 And what you know and what does that look like And what is that due diligence?

19:35 How do they at least satisfy that they've done everything they could to get the right answer.

19:40 That's what is not a one-size-fits-all.

19:42 But we do have an objective standard of what it, what may be sufficient evidence generally, But as applied to these circumstances, sometimes it'll depend upon what does that supply chain look like?

19:56 How reasonable is it for you to rely on your vendor saying, I got that from Germany.

20:01 And it's this is the same conversation we have for aluminum, for copper, for our, our Uyghur forced labor compliance, for our other, Oh my God, for you know, and, and some of the other issues just even validating the origin.

20:18 Right, because under the USMCA we have certain rules to determine whether products qualify for that USMCA treatment, which was just regular duty free.

20:29 And now of course is also means a product is exempt from the Canadian or Mexican emergency tariffs.

20:36 But we have other rules of origin that also apply and implicate other tariffs, like China tariffs.

20:44 You can apply one rule and say I'm Canadian, and you can apply another rule and say I'm Chinese and there's different implications and you may have to declare both.

20:53 Both.

20:53 My God.

20:56 Yeah.

20:56 And then there's dumping and countervailing duties on top of that, if they if they're applicable, which is again, another calculus, another set of determination you have to make.

21:08 So again, on any given day, we might be talking about all those things at once or, you know, how do we mitigate?

21:16 How do we reduce our duty liability?

21:21 And so, so it's not obviously not just about compliance, but cost, right?

21:25 How do we make this better and less painful?

21:28 And so there are a number of tools in the toolbox, but again, they're not one-size-fits-all.

21:35 And I, I learn more and more everyday about non traditional tools.

21:39 You know, if I talk to a, a tax advisor and, and there may be a, a, a benefit elsewhere that a company can take that doesn't exist in the custom space if some of our mitigation tools don't work, OK, good.

21:53 There's a everyday is is learning the new rules as they were figuring out the challenges for the rules.

22:01 We don't think makes sense, you know, due try to advocate with the agency directly and formally formally.

22:08 Do we plan to file an administrative challenge?

22:11 Do we go to court and some of it is all of these things at once.

22:17 So wow, that's a lot.

22:19 I'm just kind of like, so most people think, most people think that, you know, tariffs and customs are fill in a form and go on your merry way.

22:28 Like obviously this is not the case.

22:30 You know, it's not me shopping in the US and declaring the shoes or the purse that I bought.

22:36 This is serious.

22:38 And the money involved.

22:40 How have your clients been dealing with the extra costs?

22:43 Like, I just, I can't imagine this is not costing them.

22:46 And so even if you're mitigating, you're thinking about risk and compliance, at the end of the day, you know, their businesses are being affected.

22:54 Are you seeing that happening that people are shutting down, slowing down, cutting people?

23:00 Like, I mean, what are you seeing on the on the ground in terms of clients who just can't afford this, this level of pressure?

23:08 Right.

23:08 Well, and, and there are so many different examples.

23:13 I, I can, I can offer, but one thing I think to, to level set I, I, I like to think by now everybody does know this, but I'll say it anyway.

23:24 It is not the countries or the sellers that are paying for the tariffs for the most part.

23:32 Now come some companies are renegotiating their pricing with their vendors.

23:37 Hey guys, you know, we, we can't sustain this ourselves.

23:41 You got to work with us, and that's working.

23:44 But also companies have to be very careful when they're when they're renegotiating their transactions because there are customs valuation rules.

23:54 They are complicated, particularly for related parties.

23:57 But even in unrelated party transactions, if you're buying arm's length, you know, it's not enough to say, you know, OK, then vendors willing to drop their price rate, right.

24:11 But wait a minute, we'd like to make up the difference on a service fee.

24:15 So we're going to we're going to bill you a separate service fee.

24:18 Nope.

24:19 Because that's probably dutiable unless you have a legitimate service that is unrelated to the production and sale of that merchandise to the US.

24:30 So we have some that, you know, and, and sometimes the first conversation is we can't afford to do this.

24:35 We can't sustain, we can't survive.

24:38 And by the second or third conversation the companies kind of figured out, OK, if we do this and we do that and we do that, then we can get through.

24:47 And so for example, I was working with a Canadian company that had done e-commerce into the United States for years.

24:55 And when, when the and their their goods are coming from China.

25:00 So when the writing was on the wall and ultimately came to pass that there would be no longer our de minimis exemption, which is used for e-commerce.

25:10 So it's duty free and it's an entry free process to bring to the country.

25:16 They had to shift very quickly.

25:18 So they established a US entity and they started selling to the US entity, but they were consolidated shipments, you know, sold fruit, sold to end customers, sold to retail customers and customs stopped their shipments at the border because they were just, you know, there's random end targeting injection.

25:40 And the the officer at the border said, hey, your goods aren't marked correctly, but by the way, your value looks a little low for this product area.

25:52 Now, why would a customs officer at the border know what is a right price?

25:56 Well, a lot of data.

25:59 They've been collecting data for decades and decades.

26:04 So they do have a sense of what doesn't look right, but especially in this case when the shipment is coming in with, you know, three dozen and customers individual invoices.

26:18 So we had to go through this exercise to find that and when we're still not done with this process.

26:26 But you know that first conversation was there is no way I can pay duties on the retail price.

26:32 I'll be barely up in a month.

26:35 And so but we had to do some some work with them and some education and some backfilling of how they set up that US operation in the 1st place.

26:46 They needed to dot some I's and cross some T's that they just in the rush to get it done, didn't do, didn't think was that important, right.

26:56 So a lot of it's education and and it's not enough to say, well, we, we know that that a government's supposed to respect the corporate form.

27:07 Well, Customs doesn't really have to unless you have a lot of layers in there to demonstrate that there is a bona fide sale between those parties for export to the United States and that it's at an arm's length price.

27:25 So this again, this related party, this additional requirement for a related party and how they prove it's an arm's length price, right.

27:34 Having a distribution agreement designating when transfer of title and risk of loss take place.

27:40 You know, what INCO terms are you using?

27:42 How are you paying for the goods?

27:44 It's got to be paid on a transactional level and so on and so forth.

27:49 So there's a lot, again, a lot of it is the devils are in the details.

27:52 And so we, we work, we're working with a number of companies right now who are in this space of maybe they've had a US entity for years or maybe they're just setting one up, but it's, it's often the same conversation.

28:06 I've definitely had some clients that I mean, we do the cross-border immigration that are like, we're just going to set up a US entity.

28:11 That's like, I don't think it's that easy.

28:13 It's not that simple.

28:15 Just say get an LLC and think you can just go on your merry way.

28:18 You still, it sounds like what you're saying is there's still so many details.

28:23 So you can't bypass the tariff just by setting up a business.

28:28 Oh, exactly.

28:29 No, no.

28:30 And you hit the nail on the head, Evelyn, of why I was so excited to come on your podcast is because you're in business immigration, right?

28:39 So there's a lot of cross-border there.

28:42 Obviously, we're not dealing with the people side of it very much, but the businesses that those people are in may not realize that there are these additional steps to take and that there are opportunities to mitigate within how they set that up.

29:00 OK.

29:00 So, you know, it may be that we have to come in and have a, you know, a painful or even tearful conversation.

29:05 But by the end of it, you know, there, there will be a path forward.

29:12 So that you're giving some hope.

29:15 There really is.

29:16 There is hope by the fact that we are getting new, new rules and requirements every every week for sure.

29:23 And sometimes every day.

29:25 It's funny because right now in immigration in Canada, I've been doing this for 26 years.

29:29 I in the last year and a half, I would say the most changes, the most, the most, most, most that I've lived through like every day, every week, every, you know, and it feels like that's your life too.

29:41 And ours is because of, we're reacting to what's happening in the US.

29:45 And so our immigration system is like, well, you're going to do this, we're going to do this and it's changing everyday and trying to keep up on it is incredibly challenging, no matter how smart and detail oriented.

29:57 How are you keeping up?

29:59 How are your colleagues keeping up with all these announcements?

30:03 What kind of systems do you have that just say alert?

30:06 Here it is another thing, another thing right now.

30:10 Great question.

30:10 And I just, I just want to, before we get into that, you know, my, my heart truly goes out to every client that you're working with right now.

30:21 It is a very scary time to be crossing these borders.

30:26 And it shouldn't be, especially for Canadians.

30:28 It should exactly, but you know, it, it is.

30:32 And, and at the same time to then be, be, you know, having to worry that, you know, I might not be allowed back across the border.

30:40 And by the way, my, my business is, is at risk now because of all of these uncertainty, all the uncertainty and all these new costs.

30:47 So, you know, we're, we're in a very similar boat.

30:51 And how we might have advised a client 12 months ago is very different from how we're advising them now.

30:57 You know, it's, oh, you know, a year ago.

30:59 Oh, don't worry, of course, you'll be allowed back in.

31:02 You know, now it's like, it's now it's like, be prepared for everything and anything.

31:08 That's all right, right.

31:09 And of course, so being prepared is about information and of course, the right information.

31:15 And so our process, we have a daily trade newsletter that we send out and that comes from somewhere.

31:26 We have a wonderful team of folks who are calling the Federal Register notice, messaging all of the different data sources that are relevant, monitoring the courts to and, and we have, we're a very collaborative firm.

31:43 We are probably the most collegial environment you'll ever see in a law firm.

31:48 So we are constantly sharing that information with each other, not only to consolidate into a report that we send out every day to our database, but which, you know, clients and non clients alike, but that we are also sharing that with each other.

32:06 And we have a, we have a, a meeting every, it's every other week still.

32:10 But in between we're communicating these, these announcements.

32:14 And what does this mean?

32:15 And we're talking about it, We're digesting it together because, you know, putting 2 heads together is, is exponentially better than one.

32:24 And you know, and part of it, of course, is as attorneys, right?

32:27 It's our job to stay on top of it.

32:28 Yes, it is.

32:30 But you know, but we do have our certain target sources.

32:33 And then we're also looking at, you know, we're learning from our clients about the boots on the ground challenges that they're having.

32:40 And so we're learning and taking that information and maybe using it elsewhere as well.

32:45 Not obviously not the confidential information, but hey, that worked for one client, maybe it'll work for another.

32:52 You know, and we're, we're and are rating, you know, templates where we can for validating and vetting, you know, the origin process.

33:02 And we're talking to customs.

33:05 They happen to be, we found customs is kind of the last to know with all of these orders.

33:10 And then they are responsible for quickly turning out those orders into instructions into updates into our automated commercial environment where entries are filed, which now have so many more codes on them.

33:23 If you, you know, I would, but we tell everyone, if you haven't hugged your customs broker lately, they need it.

33:31 You know, they're, they're, they're really the the front lines here and, and it's very challenging, but we, you know, we're, we're getting questions from, from them, from, from the importers.

33:44 And so again, there is a lot of uncertainty.

33:47 We're very clear about that when we, you know, sometimes we just don't have an answer, but we try to be very solution and operationally oriented.

33:56 And so it gets to a point where, you know, I'm doing your presentation on the tariffs and, and it just it nothing is wrote, but you have to stay on top of it so that each thing can build on the next.

34:10 And so nothing gets lost and we've got to connect the dots.

34:13 So again, we have a of wonderful professionals where we are not just seeing what's been put out, but talking about and again, talking to the agencies about it.

34:24 Oh my goodness, are they collaborative?

34:27 You find generally like, you know, it's, it's up and down, right?

34:30 It depends on the person, right?

34:32 Yeah, no, it, it, it does, but it's, but at least the conversations are happening.

34:38 There may not be great answers.

34:40 And there is a process to get an official determination from customs, A rulings process, you know, so we do a lot of do we want to get the ruling?

34:48 Do we not want to get the ruling, You know, but, and we're monitoring the issuance.

34:53 In fact, there was just a ruling issued 3 weeks ago, the first one on the US content exemption from the reciprocal tariffs.

35:03 So if you say if you have US materials that you send abroad to be made into something else and you bring it back, you're allowed your US materials and only pay tariff on the rest if you meet certain conditions.

35:19 And we've been advising clients since this happened in April how we think we should be applying this and then looking at their specific transaction structures and, and trying to say, OK, that this makes sense.

35:32 That doesn't make sense.

35:33 Let's try to get this, try to get that.

35:35 Well, now we have at least our first ruling, probably the first rule that it's pretty short.

35:42 It's not super detailed because of confidential information, but it does give us, again, now we have some official guidance, right?

35:50 We have a, this worked.

35:53 Now let's build from it.

35:54 So we just have to be on top of it.

35:57 Wow.

35:57 I love this part of law, you know, just I love law generally.

36:01 As you know, that's why we're lawyers because it's never boring, never boring and it challenges us too.

36:07 One thing you mentioned I just want to go back to is that this whole Uyghur workplace, like what is that about is like even who's doing the work, who's even assembling, who's doing the the labor.

36:19 Tell me about that.

36:20 I've never heard that before.

36:21 So the So in the US in 2022, we, our Congress, adopted the Uyghur Forced Labour Prevention Act.

36:32 Now, this was not the only forced labour control or protection that the United States has had, but this one is specific relating to the Uyghur people in the Xinjiang region of China.

36:46 Labour from there, just like under U.S. law, labour from North Korea is presumed to be forced labour.

36:54 OK, So, but just as a starting point, you know, we have, we have certain mechanisms that say, OK, this is presumed to be forced labour because of certain geopolitical conditions.

37:06 And what the weaker Forced Labour Prevention Act did is it prohibited any products coming in the United States made with Wegar labor, which includes also that your source materials didn't come from there because right, you're not gonna have a tomatoes are are an example of one of the targeted sectors.

37:30 You're not gonna have a tomato grown in that region that isn't also picked by that person, that person protected class.

37:40 So they go hand in hand.

37:42 And what the law basically requires is that importers, particularly for the targeted industries, and they just added five more targeted industries to the list.

37:54 The weaker list, you need to be able to trace your raw materials from crop to shop.

38:04 And in doing so, you also need to prove that your supply chain is free of forced labor.

38:09 Now forced labor isn't just Uyghur labor or North Korean labor.

38:13 It's child labor, it's prison labor and you know, indentured servitude.

38:20 So there's a bunch of different things that are pulled into this, but it is, it is a, it is an element in the law.

38:27 That's not new, but it was just new specifically to the weaker region.

38:32 And it did also, it did also bring in line some statutory changes that were implemented a few years earlier, which closed a loophole that used to exist under our forced labour banner, which was, well, if there's no domestic availability of the product, then it's OK.

38:55 Well, that loophole got, got shut down a few years before the Uyghur forced labour.

39:01 And of course, we've seen an influx of actions customs.

39:06 Now this is different from the tariffs customs can merchandise and then the importer has to rebut the presumption that the product is made with forced labor.

39:19 And how you go about that is a very intensive supply chain tracing exercise, not so different from the one that an importer has to go through to get its steel content or it's copper content and it's melts and smelt.

39:33 And so, you know, country reporting.

39:35 So we start seeing how a lot of these rules are starting to align because where your, where your product is made affects your country of origin, affects your, your duty rate.

39:46 Now where it might not have before.

39:50 And Customs may question, you know, you say it's Vietnamese, but that it doesn't qualify.

39:57 And it's not enough now to make the argument, well, this is what happens in Vietnam versus the raw materials that came into Vietnam.

40:05 And so yes, we qualify under the rule of origin that it's Vietnamese.

40:11 Well, then Customs says, yes, OK, but prove it.

40:14 Prove to me that that production actually happened.

40:18 And that's a very similar exercise, proving that you don't have forced labor.

40:24 On a transactional basis that the raw materials and the and the components that went into the product were manufactured where the documents say they were and how the documents say they were.

40:38 And so it is a very intensive and very collaborative process with your overseas vendors.

40:46 And I have to say this was kind of funny, not funny, haha, but funny In our, our space.

40:51 You got a question the other day about products made from in a US prison going to Canada.

41:01 And my, my colleague in Canada, we have a, we have an amazing trade consultant who we've worked with for 30 years in Canada, based in Ottawa.

41:12 But he's in particular he, he goes, well, let me see here.

41:16 We have a provision that says all prison labor is prohibited.

41:22 I mean, very straightforward right as well.

41:27 But the reason it was funny to me is because our rules are only outward looking in this space.

41:34 We have and in fact there there are municipal contracts and state contracts for products made in prisons.

41:42 Obviously it's not the concept is it's not forced labor because they're fair price.

41:47 There are good.

41:49 Yeah.

41:49 Anyone who's watched Orange is the New Black you know he knows.

41:54 So yeah, the girls don't apply to us apparently except but just everybody else.

41:59 Everybody else.

42:00 OK this has been incredibly eye opening.

42:05 I just I can't even believe the kind of work you and your colleagues doing.

42:09 It's it's hard, incredible challenging detailed work.

42:13 How do you, just so we can kind of get close to wrapping up, Deborah, what, what one or two pieces of advice would you give a corporation a leader who's starting this process as their tariffs go up?

42:27 And we've got some clients in the lumber industry and in mining industry.

42:31 And I know they've got people already, you know, maybe on the customs broker side.

42:35 But what would you give them as some advice to kind of help them to start this process of either reaching out to you or working with their customs people to reach out to you?

42:47 Like, I don't even know how to advise, keep them sane.

42:51 What would you advise?

42:53 Well, you know, it's, it's a great question because it is, it is not, it's obviously easy and sounds very self interested to say call us, right.

43:04 But but that, that's actually what has to happen.

43:08 You know, the, the company's customs brokers are definitely the first line and at some point the brokers will say we can get you this far and then you've got to go talk to the attorneys and the consultants.

43:22 And so yes, having that conversation, but also, you know, making sure that the companies themselves are educating themselves as best they can on what the processes are, what the what the rules are.

43:37 Because I have so many conversations with with companies who, you know, their leadership is not well, they don't need to be well versed in the mechanics, but they do need to understand the rules and the impact, right.

43:51 And so that's a lot of that conversation is what are the rules, what's the impact?

43:55 And then how do we mitigate this?

43:58 So yeah, that really all does come out in a conversation.

44:01 And then ensuring that the trade team that that the companies do have if they have one, because a, if you don't have someone who knows customs, hire them.

44:13 Please get somebody.

44:14 Yeah, this is not a dabbling opportunity, right?

44:18 Right.

44:19 But but even, you know, but even then, right, you still, you still need to have more than what that one person can can do in, in and of themselves.

44:26 And also, you know, you want to have that outside expertise to provide the company with reasonable care.

44:34 That is our the importer's legal statutory obligation to exercise reasonable care, which is a form of due diligence.

44:44 And you know, the, you know, our laws specifically say you are exercising reasonable care if you have the advice of outside counsel.

44:55 OK, excellent, excellent.

44:58 So that's already like low hanging pieces.

45:01 Hire a professional, please.

45:05 Oh my gosh, yeah.

45:07 And I know that they're not, they're not alone.

45:09 And, you know, and of course, looking at a resource like ours as well as their, their customs brokers allows a lot of benchmarking, right?

45:20 What are other companies doing?

45:22 How are they figuring this out?

45:25 So that's really helpful as well.

45:27 And, and, and I would say my other big piece of advice to every company who has cross-border transactions is and, and the freight forwarders are wonderful, but they are not the customs brokers.

45:40 They are not the one who can because customs brokers can also provide you with that reasonable care advice, communicate directly with them, and also have your own import data.

45:54 Particularly for the cross-border companies you're working with that have a US entity.

45:58 They're the importer.

46:00 They have access.

46:02 They just have to go get it.

46:04 They have access to the import data that Customs sees access to that data, analyzing that data, monitoring it allows so many opportunities to determine whether whether there's anything wrong, right on the first thing, right?

46:21 Did something go wrong?

46:22 Even a clerical error.

46:23 Sometimes that clerical error has a lot of zeros to it, whether you're whether it's catching clerical errors or whether it's analyzing the data for opportunities.

46:34 And that's again, a lot of what we of what we do.

46:38 Having that ACE data, talking directly with your customs broker, not through your freight forwarder and calling outside counsel.

46:45 Excellent.

46:46 Oh my goodness, Deborah, thank you so much for this information.

46:51 This is going to be one of the very popular podcasts.

46:54 I can tell you because I was so excited when I met you and I was like, Oh my God, because I don't understand all of this.

47:00 And you've just given me so much more information to at least share with our clients to then direct them because that's not what we do.

47:07 And I just like I tell them, don't do your own immigration, don't do your own surgery, don't do your own, don't do your own tariff work and international customs trade.

47:18 So I'd love to thank you so much for joining me on my podcast, Deborah, that you were just exceptional, so articulate, so knowledgeable.

47:26 And if anybody wants to find you, they can find you at Sandler, Travis and Rosenberg.

47:31 We will provide all the details in our show notes.

47:34 Please do reach out to Deborah and her team directly if you have any questions arising from this podcast.

47:40 And I know that I feel like I have a lot more to learn about tariffs, so we might have to have you back one of these days if things ever settle down.

47:49 Absolutely.

47:50 I would love to come back anytime.

47:51 And always wonderful talking with you, Evelyn, and thank you so much.

47:55 And I would just suggest, you know, for anybody that needs to reach out, you know, whether it's me or somebody else, reach out to somebody.

48:02 But yes, my contact information will be available.

48:05 I am very responsive despite the craziness.

48:09 We want to help as many companies as we can.

48:12 This is a really difficult time.

48:14 It is.

48:14 Thank you so much for being with us.

48:16 I appreciate you so much.