Your $175B Tariff Refund Checklist With Ryan Petersen, Flexport CEO

I feel like a hurricane reporter. Everybody calls me up when everything's going wrong in the world of logistics. If I'm on the show, something's probably messed up.

If you're not in the industry and you just read headlines, what you just heard is that tariffs are now illegal. What you're saying and explaining to everybody is that one very small slice of the tariff pie got overturned. You'll be refunded for—

the markets react like it might be the law of the land.

We have pretty high level of conviction, certainty that you'll get the refund, and it's $175 billion. Oh, and by the way, you also are going to get 6% interest on your money. At least the government held on to you and is paying you 6% return.

How are you seeing AI, and I think you used the phrase in a text with me, like kind of the age of wonder. How are you seeing AI impact the way that you run your company and do business?

I have people now asking Victor to go do work for them, and you could just watch it happen in real time. AI is making everybody a programmer, but without the security and optimization of the years of training.

The AI is not just free and cheap labor, it's way better than the experts are. I haven't been this excited about tech since I was a teenager.

There's a chart of all the airplanes flying, and they call it World War III. Nobody's flying over Iran, flying over Ukraine and that nobody's flying over where the Houthis are in the Red Sea.

If you are someone who's paid tariffs in the past year, that you are eligible for refunds, what should you be doing right now?

Well, the first thing you want to do is—

Welcome to the Operators Podcast. I'm Mike Beckham. I'm here with Shawn Frank, and we have our good friend Ryan Petersen from Flexport with us today. We're going to talk about tariffs. We're going to talk about Iran. We're going to talk About AI. But before we get to any of that, we're going to start out. Ryan, welcome to the show. Start out by telling us if you are someone who's paid tariffs in the past year that you are eligible for refunds, what should you be doing right now?

Yeah, great. Thanks for having me on, guys. So, I mean, I think you want to have a, the checklist is pretty simple. The first thing you want to do is figure out how much refund are you owed. I do think you're going to get paid. I do. It's a question of timing more than anything. And then secondary, a question of process, but Regardless, you want to know, and your CFO definitely wants to know, how much money are you going to get back? Flexport has built a great tool for this. It's free. So I feel okay plugging it. Go to tariffs.flexport.com. Click at the top there, the button that says refunds. Very simple to go download your report. Now, first you have to download your report from ACE. So ACE is your US government system. So I guess maybe that's the first thing you should do is get your, get your account in place. Most of you already have this. If you have it, Just upload the report. It's called the ES-003. It's your entry summary report. It's all your entries that you've done with customs. So download that report, upload it. We'll show you in one instant how much you're owed. We've done about $3.5 billion of calculations in the last 2 weeks, uh, for companies. So that's number one. Um, actually 2 is that ACE, while you have your ACE account, make sure you've got access. Go put your ACH number in there, your bank account info, where you want these funds to flow. Make sure you've got pretty tight controls over who can Put that number in there. You don't want somebody putting— there's probably going to be some fraud here. Make sure you've got control over where that bank, which bank account this money's going to flow to. It will come electronically. They're not going to send you a check. So that'd be second. Third is you can use our report. If you scroll down the page, once you calculate your refund, you'll see where we show you for each of your entries, when is it going to expire or how much, what's the current status of that entry? Our take is you want to Go file either a post-summary correction or a protest before the entry hits liquidation. It's a little bit technical, but once it hits liquidation, you have to file a lawsuit to, to get your refund. Whereas if you just go ahead and file a protest or a post-summary correction, and Flexport can do this for you, as can many other vendors, go file these protests, then you should, under normal circumstances, get your refund. Without needing any lawsuits. If you have entries that have already gone to liquidation, you're concerned about going to liquidation before you're able to go place these post-summary corrections or protests, then you may want to join a lawsuit. There are a handful of these class action suits out there that you can join. We'll probably talk about that at some point here, what you guys are doing on this take. But the last thing I would do, fun fact that very few people have noticed, there's a hero, there's an American hero we should all celebrate. The guy, and I should pull up his name, but the guy who owns, it's called Voss Selections. This is the guy that won the lawsuit that's getting these refunds for everybody. This guy owns a liquor store in Manhattan and you should go there. It's at 38th and 8th Avenue and buy some champagne and celebrate with him and his, you know, this guy, vossselections.com. Go on his website, buy some champagne, crack it open with your friends. Maybe wait till the check arrives, but we got to celebrate this American legend. Dealing with big box retailers means EDI connections, and that's often a trigger for needing an ERP system. We've been using EDI connections to Costco forever, and the only way that we've really solved that problem to make it seamless is through Fulfill. EDI adds complexity to everything you do, and Fulfill solves that complexity with their connections to their systems. You need Fulfill to move from being just a D2C brand to being a, a true multichannel brand because big box retailers are gonna require you to connect to their systems using EDI. Let me tell you, it's way easier if you do it with Fulfill.

Ryan, my understanding is tariffs are over. The Supreme Court has ended tariffs. We're never gonna hear about tariffs again. Is that right?

Tariff jubilee. We are not there. There's a whole lot of different tariffs that are out there that are— tariffs have been around since basically that's how governments funded themselves for the first like 3,000 years of civilization. So I don't think we should assume that they're going Anywhere, but, uh, one particular class of terrorists, which is called IEPA, the International Economic Emergency Powers Act, was overturned by the Supreme Court. So that was the reciprocal tariffs. That was a big bucket of tariffs and gave Trump, in his view, now the Supreme Court said he didn't have those powers, but his view was they had kind of blanket powers to throw tariffs out at anybody at any time for any reason. You look at him the wrong way one morning, he'll drop a tariff on you. Uh, The, that is now over, but there are many other forms of tariffs that the, tariffs that the administration still has access to and they're still existing and expect new ones to come out. So that's the high level. Yeah.

And Ryan, you know, speaking of REACH, we obviously had a 10 or 20% IEPA put on us, but the biggest tariff affecting us is like a 50% global steel and aluminum tariff. And that is still. in place. No one's challenged that. Like, maybe explain to the audience that the Supreme Court tackled one small sliver of tariffs and we're going to get refunds on that or potentially get refunds on all that. But like, how many other slivers are there in the tariff world?

First off, like, I guess the highest level understanding here is that under the US Constitution, it's the Congress that controls the tariff and not the president. And there are a large number of tariffs that are put in place by Congress that have existed for a long period of time. And those are— no one's questioning that. There are at least 5 acts of Congress where they have given the president authority over tariffs under certain circumstances. And so AIPA was one of those. AIPA has never been used for tariffs before. It has been used for— the president was given powers to do things like sanctions and cutting off countries that we're at war with. There's Iran sanctions are done under AIPA, Russia. Many others where there's like, hey, you can't trade here. Trump's interpretation of AIPA was, hey, we can use this to put tariffs on people. If I can use it to stop trade, then I can certainly use it to put a tariff in. And the Supreme Court said no. You mentioned steel and aluminum. So that's done under what's called Section 232. That was the trade act. That was a different trade act where Congress gave power under national security and they used it for steel and aluminum. I think it's a reasonable case. If it has been challenged, they won the challenge. No one thinks that's going away. Steel and aluminum tariffs, reasonable to say, hey, we need to have a steel and aluminum industry for times of war. You got to be able to make tanks and everything else. Interestingly, it was the steel, it was the same Section 232 tariffs for national security that Trump used at the end of last year to put tariffs on furniture. So he has declared a national security emergency on furniture. That is being challenged. I think that's going to be a tough case to make that we have national security concerns around our furniture industry. So that's 232. Those are, that's one form. 232 requires an investigation by, I think it's US Trade Representative's office that has to, it's some formality and it has to be by one sector in one country that you need to go and say, hey, this sector, this country, Is exposing the U.S. to national security issues. You also have Section 301, which is a similar thing, but that Section 301 is the tariffs that were done on China back in original Trump administration, and Biden kept those in place. Those have, if they've been challenged, they've, they've held up and they're not going anywhere. Then you have Section 122. That's the tariff that he put in that morning of the Supreme Court ruling. They put in Section 122 tariffs. Those are temporary and a maximum of 15%. Temporary, they end on July, what is it, 24th, I think. They have 150 days maximum term and they're only a maximum of 15%. Interestingly, he announced 10%. That was put into law, put into the regulation. He then the next morning said it would be 15%. We still 2 weeks later, the 15% never came out. We're all paying 10%. We probably shouldn't talk about this. Don't remind him.

He's distracted, Ryan. He's distracted. Don't say anything.

Totally right. I mean, I think literally that's what's happened. You know, he did post it to Truth Social that it was going to 15%, but Truth Social is not the law of the land and posts to Truth Social are not legally binding for the moment. Um, so we are still waiting.

Are you sure about that? I thought if you posted on Truth Social, it is, it is.

The markets react like it might be the law of the land. All right, so let me summarize what we've said up until this point. There's a lot of numbers, there's a lot of legalese here, but as Ryan said, tariffs have been around basically forever. Hamilton used these at the outset, tariffs and duties, to help fund the government originally. There wasn't like a federal income tax, which is how we derive a bunch of our income today. So it's not a new idea. The thing that has been new under this administration of Trump is using these never-before-used statutes and approaches to try and create basically unilateral authority and power for the president to tariff anyone at any time for any reason. And more or less, the Supreme Court looked at that and was like, okay, obviously just on its face, this doesn't make sense. One of the more kind of damning moments of the Supreme Court case was Barrett asked the lawyer for the government, she said, so you're telling me we have a national emergency with Switzerland, who is an ally of ours and we run a trade surplus with? And they were like, yeah, I guess so. So it just didn't hold up in court. It obviously didn't withhold scrutiny, which I think is a win for just our country that like, hey, we have systems and you have to follow them. And now the president is pursuing these other avenues. And as Ryan said, they're getting challenged legally. So we're not done hearing about the courts and legal challenges to these tariffs. It sounds like just about anything he does from this point forward is going to be challenged. And we'll see how that plays out. But the idea of tariffs are pretty significant because at one point it got as big as like 150% or some kind of crazy number. So as a result, there's $150 billion of money that's at stake. And let's talk about that. That's a pretty big number, Ryan. How are companies going about getting that money, and do you think they will get that money?

Yeah, so we have a pretty high level of conviction, certainty that you'll get the money, that you'll get the refund. And it's $175 billion is the stat that I read. So it's a massive amount of money. And what is uncertain for, very uncertain as of today is process for how to get the, when you will get it and the timing. Oh, and by the way, $175 billion. I got to double-check where this stat came from, but you also are going to get 6% interest on your money. So you're, it's not the worst investment of all time that you put your, you know, maybe some of you guys would've wasted your money on stupid things like excess inventory or ad spend that didn't work. And that, you know, at least the government held onto you and is paying you 6% return. So you get, you will get an interest on it. How you're going to get it and when is very much under, out for debate, or we're going to find out more soon. So the reason I have high certainty, I have 2 reasons. One is I read the court case docs myself and have my team of lawyers reading it too. And what is very clear in the court, the way that this all played out is that the Court of International Trade took the case. And that's where the administration first lost, lost the case in the Court of International Trade. Then it went to the appellate court, which is the level below the Supreme Court. They lost again. And then it went to the Supreme Court where they lost a third time. In the second case, in the appellate court, the government filed a motion that said, if we lose this case, we will issue refunds. Like it's black and white. There's a paragraph in there that I'm sure the guys who wrote it, probably getting fired by Trump. Like it is a direct, like, uh, say, and it's going back to the same court. Um, and they're going to read the judge, same judge is going to read it and go, well, you told me that you were going to do refunds. So it seemed like a slam dunk to me. That's my interpretation. I'm not a lawyer. Uh, however, I've talked to 3 trade attorneys in the last, really the first week after this went down. Um, and 2 of them told me 100% certainty that the government was going to lose the case and have to do So I'll interject here.

One of the best parts in one of the court proceedings on this, there's this back and forth with the representative of the government, their lawyer, and the judge going back and forth. And the judge said, your position is clear. The Supreme Court told you what your position is. You have to issue refunds. And the government Lawyers said, "Well, it's going to take a manual review. It's going to take millions of man hours. We don't know how you know some kind of insane estimate." And the judge said, "We live in the age of computers. It must be possible for the Customs Service to program its computers so it doesn't need a manual review." So it definitely feels like the the legal branch has kind of had it with this administration. And one interesting opinion I have is Trump. Better be careful how he handles these refunds because if he screws around too much and drags his feet too much, what happens if the 122s get struck down in the lower court? They're not going to put— they're going to put an injunction on those tariffs, I would think. Don't you think, Ryan? Like if I'm the court and the last time I ruled against you, you said, hey, you know what? We're going to pay it back plus interest. You can keep it in place until it goes all the way to the top of the chain. If I see you as a bad actor who's not fulfilling on your promise to do that, then the next time I rule against you, I'm just going to be like, no, we're not collecting these anymore.

Yeah, I wouldn't want to speculate whether 122s hold up. I'm not, probably not qualified on that. I think a lot of these have held up in the past. It was Ayupa that was the extraordinary one where it's never been done before. But it will get challenged, 122. And I haven't talked to enough lawyers that have a, I think they won't give you that level of certainty that it's going to get struck down, but it's temporary is the thing. And I think the furniture one is very likely to get struck down. Others, Will, that, that first thing you said though, that customs has to do a manual review. I mean, come on. We like, literally, if you go to tariffs.flexport.com, go to the top and click the refund button, there's a refund calculator there. We've calculated $3.5 billion and it's instant. You just download your data from the government system, upload it, and you'll see your refund amount instantly. We've calculated $3.5 billion of refunds for people and it's zero human labor. Like you just do it.

Ryan, they're using abacuses. This is not, it's not as simple as you're making it out to be. It has to be done manually.

Yeah, so we'll see, we'll see. They, they'll drag their feet probably.

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I would love to get money back from the government, but the whole time I've been so nervous that it's never going to happen just because like my relationship with the government is money goes one way. So I'm glad we're all very confident we're going to get it back. Have we thought about ways we could get screwed over though? Have we thought about ways that they could not pay the money back? Like what, what are the risks as you sit here today?

First off, Flexport has gotten over $900 million of refunds from government, from CBP on behalf of our customers over the last 5 years. So it's like, there's a long precedent here of getting refunds. If you overpay duties, you're owed money back. There's a simple process. It's not simple, but there is a process for this that we've largely automated that we can go file those and get it back. It's unclear as of today if, well, I guess to answer your question, what are the risks? One risk is they don't file the standard process of how this has worked over the last decade and beyond of, you know, you file what's called either a post-summary correction or a protest. And that's pretty straightforward. We know how to do it. We do it every day on behalf of people who have overpaid their duties in some other way. Now, one risk is what Mike was alluding to is the government says, ah, we can't do this. We don't know how to do this. And it all depends on this one guy named John who has to review every piece of paper. And John doesn't have, you know, John only works 9 to 5 and he's a government employee. So we're not, it's going to take us 100 years to file your thing. So that's a real risk. And then it goes back to lawsuit and judge has to order it and then they just don't comply. I mean, There's ultimate, there's some risk here of like, you talking about our democracy, like, will they comply with order from the Supreme Court? Uh, that's always a risk, I suppose. I mean, I think it's probably overhyped, that risk, but, um, they took away one big risk. So over the last 5 years, there's $900 million that we got for customers. Um, until February 6th, like one month ago, those were all sent via paper checks in the mail. And we were having so many incidents of the check never showing up and then getting cashed by a scammer. Uh, for our customers that thank goodness they finally set it up. So if you, if you want to get your refunds, you must go to the ACE portal. ACE is Customs, uh, Technology System. It's called the Automated Commercial Environment. You should have an account as an importer. You get one. If you don't have one, go sign up. Um, you got to go put your ACH details for your bank account in there because that's how the wires are actually going to come through is go into ACE and set it up. And I thought it was very interesting that in late January is when they announced, hey, we're switching away from paper checks. to automated ACH refunds.

Totally a coincidence, Ryan. Totally a coincidence.

Yeah.

Could not have been because they felt they were going to lose.

I think Customs is gearing up knowing that they're going to have to pay this. And Customs is run by like responsible civil servants. So, you know, it's not, they're not really political appointees in there. These are people who are like, Supreme Court orders them to do something. I think they're probably going to do it. So that's kind of my take on it.

So the number one thing you're saying is to, if you have paid these, these tariffs, you should file protests on, especially on anything that could be getting close to liquidation.

That would be our number one thing. That's our approach. Yeah.

That's our approach.

It's not, it's not very costly. It's like, go ahead and get ahead of this, like avoid. But if you're already in a lawsuit, maybe it covers the bases already. But like the traditional approach to getting refunds is very straightforward, very standard. You file either a post-summary correction or a protest. By the way, the difference in those, not to get too technical, but You're basically, the post-summary correction comes first and you can only do that for the first 188 days or something after the entry. And then you have another window of 180 days for the protest, and then it starts to go to liquidation. That's all. The dates are always a little hard for me to remember, but something around those lines.

We ended up joining a class action in December of last year, just before there was the ruling, just to like prevent or save our stuff from going into liquidation. And There's so many of them happening right now that we were able to join one. It was like $14,000 from a big law firm. And that guarantees like all the way through.

Right.

And we did the math and it's like, we were doing a lot of daily bringovers and like, it was going to be like $200 a pop to file the protests or something. If we did it like piece by piece.

No, but you can file all the entries for that price. You don't, you don't need to file like every single entry individually for $200, but yeah, it would be like, maybe you do it once a quarter or once a month or something like that as the, as the new ones keep coming off.

So one of the things that's making it more affordable legally is that you've got big dogs like Costco that have billions at stake that are really leading the process and pushing this through the courts. Like Simple Modern and Ridge aren't at the front bearing the cost. And so I think it sounds like we're pretty similarly situated, Sean, where we're a part of one of these larger lawsuits, but we're not having to incur the cost other than—

And as of, by the way, as of, I looked at this like the week after the Supreme Court ruling, there were 2,100 lawsuits challenging the— basically demanding a refund. So that's also part of why we're like, you probably don't need to file yet another lawsuit. Like the court has said, like if one company gets a refund, everybody's getting a refund. So our views have been like, yeah, God bless you Costco and you guys for bearing the cost, but I don't think every single company in the world needs to file a lawsuit. But if you're in your state, you said 8 figures, like, all right, you know, if it's $14,000, great. Like throw in on that all day.

How much of the strategy of delay, delay, delay do you think is just letting stuff go to liquidation? And my second question is how much, what, how likely is it that Congress gets their shit together and actually, you know, passes a law this year that they must do a refund or, you know, must do a refund or actually gives us more framework around like, how about clear guidelines of what the president can do when it comes to tariffs, right? Like, you know, Congress hasn't functioned in probably 15 years. So do you think that's ever going to happen?

No, I don't think you're going to get anything from Congress because the midterm elections are coming up and both sides, like the Republican side doesn't want to be seen opposing Trump because that makes them unelectable and the Democrats don't want to be seen siding with him. So it's very hard for those 2 sides to align, especially on trade right now. Like there's other trade acts that are just going nowhere in the current day. I don't know your other question about like dragging feet. I don't think they are. I assume that the people at the top don't understand this liquidations process. The people in the administration, I mean, it's pretty technical and I think they're just like moreover dragging their feet to hope that somehow they win the appeal or something happens. And they may not be dragging their feet. Like at this point, we'll find out pretty soon. Customs said last week that they would issue guidance in 45 days. Some puts us kind of, I want to say middle of April is when Customs said they would issue guidelines on how refunds— what's going to happen with refunds.

Yeah, I think it's just timelines at this point. It's going to happen. It's just kind of when does it happen?

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Sign up now and you can lock in 50% off unlimited tests We should mention the secondary market that's brewing, and I'd love to get your guys' take on it.

Oh yeah.

How are you reading it?

We've had offers. Sean, have you guys had offers recently at higher percentages?

Well, Cantor Fitzgerald, day one of the tariff, was offering us 33 cents on the dollar, right? Or 50 cents on the dollar. So there is a lot of money markets to be made doing this, but We haven't taken any deal. I actually don't know of any brand who's taken any deal. So Ryan, I would love to hear your perspective.

We see quite a few. Um, the, the, there are a few brokers out there, kind of banks that are doing this. Um, and they're, they're, the price was around 20 to 25 cents on the dollar until the Supreme Court, the morning of the Supreme Court. It may be, you know, some outliers like 33 or something, but it was around 20 to 25 is what we were hearing. Um, and then by the night of the Supreme Court, by that Friday, it had hit 50. So like capitalism is just a beautiful thing. I'm now, I heard about 2 transactions that took place. In the kind of 58 to 62% range of about $100 million of like big claims. So there is transacting now. And I've talked to a lot of CEOs. I'd love to take, hear your guys' pulse on this, but I talked to a lot of people who were like, get me 70%, I'm in. And there's kind of the market hasn't cleared at that level. So I think there's a lot of pent-up demand a little bit higher just because of the uncertainty of timing. And a lot of people are skeptics like Sean's saying, I don't know, there's probably a million ways I cannot get paid. The government never pays me anything. And there's some people just need the cash. Or have good, you know, you got a good opportunity to invest it. You think you can earn a higher return inside your business than, than whatever interest rate you're getting here. So I think at 70%, there's a lot of demand. The other thing is those buyers have only been restricted to claims above $10 million. So the smaller guys with $1 million or $2 million haven't been able to participate. Watch this space. I think Flexport, as we've processed $3.5 billion of calculations, we want to come to those people and go, hey, you want to sell? Here's the deal.

So try to find—

It's like everything's a prediction market. It's like, uh, you know, in some ways It's just like, this is another version of a prediction market.

Totally.

And that's interestingly, like when you think about the ways that Polymarket has like kind of intersected my life, the place where I track my go-to on like what is likely to happen was looking at the Polymarket on the US losing its Supreme Court case on tariffs. And I would just, I'd watch it daily and if it ticked up, I'd get nervous. And if it went down, I'd feel pretty good. Because I've just kind of come to assume that like whoever, that there is some alpha and there's some people that really know things that I don't know that are betting on those.

The fascinating thing too is like the Monday after the Supreme Court case, ARK, you do, Simple Margin does a fair amount of retail sales. So I don't know if you've had this experience or want to talk about it, but the Monday after, a bunch of our customers who sell through retailers, big box said, hey, we got calls that Monday saying, hey, let's talk about refunds and what's going to happen here. You have no legal obligation to give money back to whatever retailer, but they have no legal obligation to carry your product.

It's one of the reasons why when you, when you sell to retailers, you, you know that they're doing channel checks, looking at your cost structure, and that they've got their own internal estimates of your cost structure. But you're always going to be, uh, you know, as protective of that information as you can. And tariffs are kind of this very public way for people to understand and get insight into your cost structure. And with us, interestingly, we were already— we'd already decided Hey, regardless of what happens here, we're going to make some moves on pricing and cut pricing in some areas. So fortunately, like we were kind of, we didn't get those calls because we were already like moving that direction. But like you said, Ryan, like for sure, if I'm a DMM at Walmart, I'm like, hey, it's time to dial for dollars. The Supreme Court just struck these down. And we know everybody's cost structure just went down, you know, whatever, 10, 15%. Let's go get it. And, uh, that's the game.

Yeah.

And it's, um, it'll be interesting to see how much of that is just lower my price going forward versus like, hey, I want a piece. I want a piece of the action. And it's a great moment for DTC founders because you just get all the money. And I don't, I mean, Costco said they were going to give refunds to their members, which is kind of epic marketing. We'll see what that looks like, but your average DTC company is not going to go do that. You're just in a pretty good place where all of a sudden you got a cash windfall. Don't go waste it.

Yeah. As long as you survived, right? You, you just said the, the, the small guys can't you know, can't sell their refund potential to a bank or whatever. They would, those are the people who would need it. Like if you have a $500,000 claim or a million-dollar claim, like we know a lot of people who got super screwed, nearly went outta business or some that did go outta business because they couldn't handle the rapid change so fast. If you were doing Section 321 outta Mexico and then you had a 0% tariff, then it goes to 147%, like you just, you couldn't deal with that and you had no US presence. And we know people who got caught Call them up.

They're on the beach somewhere. They might have a lot of— they might have a nice asset coming their way that they forgot about. I think there's going to be— that's the next interesting play here. It's probably going to be this whole secondary market of buying up kind of bankrupt, failed companies just to go get their refund claims.

Let's pivot to the rest of tariffs. Like, this obviously isn't over, Ryan. It's just going to be kind of a feature of this presidency for as long as it lasts. And I think that As you mentioned, we've got, uh, Congress is, is going through midterms. It doesn't look great for the Republican Party. Uh, it usually doesn't, uh, when you have the, uh, kind of incumbent president. It seems like we're going to continue to have tariffs and we're going to continue to have legal challenges and kind of congressional indifference or potentially even antipathy towards. So what happens in July? So July is a big day because that's when the 122s have to roll off. This is not in debate. So what will happen then in your view?

I think what you should expect is between now and July that they replace these temporary Section 122 tariffs, the 10% that's going to be 15% as soon as they remember to do it. That is when that will roll off in second half of July. By then, they're going to want to have rolled out new tariffs under either Section 301 or Section 232. And Those require this congressional, uh, this investigation either by USTR or Commerce Department. I forget which one is which. One of those requires Commerce and one USTR. Those require a little bit more formality, let's call it like a 2-month, it's a 2 to 3-month process. There's 12 of those investigations ongoing right now at the Commerce Department for different sectors. Uh, they did one for furniture. They're going to do one. They've got one going for semiconductors. You can look these up and see what are the 12 different sectors and see, is my, you know, my product falling in that area? So I would expect a bunch of those to ramp up and get deployed. They kind of have this deadline, like, yo, you need, we need new tariffs by July. So we're not out of the woods here and it's going to get even more complicated as they, they stack in different ways. And you've got some tariffs stack, some are replacements, some, you know, so it's, it's not a simple math.

Yeah, Ryan. So let's, let's really unpack that for the audience. Because if you're not in the industry and you just read headlines, what you just heard is that tariffs are now illegal. And what you're saying and explaining to everybody is that one very small slice of the tariff pie got overturned. You'll be refunded for, for some people it's a lot of money, right? If you're, if you, for some people, the only tariff they paid was IEPA, right? I like, I don't, you know, the famous one was syringes got to 187% or whatever. I don't know if syringes have other tariffs and duties on top of them, but like that was a big deal, the IEPA tariffs on that. But For me, steel and aluminum has remained unchallenged. Like, no one is trying to give me a refund for that. That is going to continue because it went through Section 202 or 301 or whatever.

232. 232.

Yeah, there you go. And like, I'm going to have to pay that forever because that's just the new regime. And what you're saying is, hey, IEPA is going to be done. You're going to get a refund for that, but you're not out of the woods. There's going to be more tariffs coming and you have to watch really closely if your industry is going to be caught up in one of these 12 investigations. Is that what you're saying?

Exactly. And 12 investigations, that stat's a month old. I should have prepared a little bit more here. There are probably some other ones that I haven't paid attention that I should be all over. But Commerce Department has got these little investigations, big investigations going. And I don't know, like, by the way, in the age of AI, how hard is it to make an investigation? You're like, hey, you know, Claude, write me a 6, you know, take, here's the investigation we did on steel and aluminum. Make one of these for semiconductors and like it spits it out and you're like, okay, present that to Congress. So, So this idea that that's some kind of blocker for the administration may not be true anymore. It's just create these investigations and spin them up on the fly. So there's going to be, yeah, it's going to get more complex and not really go away. He has quite a few levers to keep imposing tariffs, but they're all like a little bit more constrained in terms of like, it's either one sector at a time or one country at a time. They're not just this bland, it takes more formality, not this blanket, like, oh, I didn't like the way the Prime Minister of Canada looked at me like, fuck you, Canada type of vibe that we've had.

But if you're, if you're a betting man, Ryan, if you're going on Polymarket, you know, would you say in a year the average consumer brand is spending more money on tariffs than today or less money on tariffs than today?

Well, let's not say today, but then 3 months ago, or like a month ago, I would say less. Like this has helped the Supreme Court. It is going to come down. Relative today, it might go up a little bit because it's only at 10% for a lot of markets. It's not— they'll have some levers to go higher than that for certain industries that they want to target.

So my take on this is that actually this is going to kind of work out well for brands. What's going on with Iran, which is where I want to pivot next after this, is you're getting a lot of disruption. You're getting oil prices going up. That's absolutely not what you want when you're the party that's in control going into midterm elections. And I think that you're going to see some real efforts by the administration to keep inflation in check as much as they can. And so I think that you'll have some— it's interesting, before the Supreme Court ruled against the government in our particular industry, there was some chatter that they might relax, reduce the tariffs on things like water bottles just because it's a consumer product that's basically all made in other countries. And it's just, they know that it's driving inflation. There's not really a domestic industry to kind of prop up. So we'll see. I think the other thing that's interesting here is The unilateral nature of AIPA was probably the most frustrating thing about it because there was no alpha in having a great supply chain. It's like, oh great, you built redundancy where you can produce in Malaysia and Thailand and China. Doesn't matter. They're all at the same tariff rate. And my guess is that there's going to be some room for that in what's to come, that as the administration goes and does these investigations, that it's not going to hold up to be like, you know what, everybody making furniture everywhere but the United States. Is bad and violating it. Like, that just doesn't hold up in court anymore. It's going to have to be, okay, this country and this industry is not behaving ethically. And to be clear, we should have things that punish that and keep that in check. My, my big position on this thing the whole time has been we have separation of powers and we have processes for a reason. And that's what makes our country great. And I think that regardless of where you are on how you view international trade, China, some of these things, I think we can all agree it's good when the process works. So it'll be interesting to see how that plays out. But like, Ryan, tell me, tell us a little bit about what you're seeing with the Iran situation. Obviously, we've had a very important trade route that's just totally been closed off. And oil for a short period of time went up to like $110 a barrel. Things are pretty wild right now. How is this impacting things on the ground?

Actually, one of the big impacts, it's the Persian Gulf is not that important from an ocean freight perspective. from a containerized ocean freight is hugely impactful for oil, you know, famously. And that's, that's the real impact here is like what happens to the economy with the price of oil and not just price of oil, but oil shortages in many parts of the world because, you know, price goes to infinity if there's no oil. And so that, that can be very ugly. It is not that important for containerized freight because if you just look at the map, it's a cul-de-sac, right? Like it's not the Red Sea where it's just this main thoroughfare that every container has to go through. 35% of the world's containers go through the Red Sea. Before the Houthis problem, but actually these are very closely linked conflicts. And one of the bad, really bad impacts of this is that Maersk, the second or third largest container operator in the world, container line, had just in February begun resuming service through the Red Sea, through the Suez. As that took hold and their competitors followed suit, that was going to unlock about 15% of ocean freight container capacity in the world. And it would have dropped the price of container shipping like dramatically. They immediately pulled out because of course the Houthis are considered this proxy for Iran. And if Iran's shooting missiles in the Persian Gulf, like for sure, you can't trust your ships sailing through the Red Sea. And so they pulled back after just one month, kind of worst case scenario from their perspective is to start it and then pull back. So that's, that's like probably the biggest impact on container shipping is actually we were about to see green shoots. of capacity coming back. It unlocks a huge amount of capacity just because it takes the ships so long to go around Africa.

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Air freight is the other big impact, and bigger impact because the Middle Eastern airlines own. I think I read 18% of the world's cargo airplanes, cargo capacity rather, is owned by Emirates, Etihad, and Qatar Air. There's 3, and maybe that counts Saudi Arabia too. So those are basically grounded. They're starting to fly back again, surprisingly to my view. Like we read this morning from our air freight team that Emirates has restarted service out of Dubai Airport to Asia, from Asia to Dubai. So you're seeing some amount of capacity come online. It temporarily, I hope temporarily this week, the price of air freight spiked by about 50% from Vietnam to the US, like a trade lane that you, I don't know why that's connected on the surface, but these are all connected because it's a global market of supply and demand. And there's always a, there's always a case in logistics of like you price what you can get away with and people find any, you know, there's some excuse to raise prices. They'll try it and see if the market will bear it. I don't think that's going to hold at that Level of 50% probably. But, uh, yeah, price is going to be a little elevated for those who do air freight. Hopefully neither of you, hopefully you guys are all ocean freight, but, um, some air freight. But the real impact of all of this is the price of oil and what happens to the availability of oil. And if the Strait of Hormuz stays closed, like container shipping is not your problem. Your problem is like oil and can't run manufacturing and cars and buses all over the world.

We're getting quotes, you know, coming into Chinese New Year, we have a hit product. I'm trying to get it into every market as fast as possible. And, you know, if we want to get this hit product from China to the UK, it's, we're getting quoted 60 days basically for ocean, right? And we're like, okay, we'll air it, right? And it's like, oh, it's $5 a unit to air. It's like, okay, well, I'm gonna look into a train and, you know, there's only like one train that can take it over. And I guess I'm just gonna wait the 60 days.

Train, we'll talk offline. Maybe we get you on a sea-air option. You could do ocean part of the way and The rest of the way.

There's some crazy— Pony Express, Sean. We'll have people on horseback. And that's not a big item that you're doing.

Even a wallet? What product you got? $5 a set?

No, it's like, it's, it's not a big item. You're not talking about a piece of luggage either, right, Sean?

This has a battery in it, so that's why it's really hard to get it on an airplane.

Well, I think you'll start to see that come down. I think the capacity's starting to come online. As I said, Dubai's already, Emirates has already restarted shipping flights to Southeast Asia. What's happened is they've been routing. There's basically 3 routes that the airlines have done to skip Dubai Airport until it reopens. And that was, they were flying a lot to India and then refueling and going onward. They were going over Iran. Remember, you can't fly over Ukraine either. So you're like trying to weave your way through here and landing in Istanbul and refueling. And then some others are going to Egypt and refueling. Those are the 3. routes that I've seen.

There's a chart of all the airplanes flying and they call it World War III. And like nobody's flying over Iran, no one's flying over Ukraine, and then nobody's flying over where the Houthis are in the Red Sea. And then nobody's flying over South Sudan where there's another conflict happening. So there's just like, there's just like 2 or 3 little highways where all of the planes on Earth are going through right now. And it looks, it just looks crazy.

You said this, Ryan, but one thing I think That's good for people listening to understand. There were 2 or 3 times that you mentioned like, hey, that could be a 15% reduction or a 20% increase in capacity. But one of the, I would say, counterintuitive things is if you lose 15% capacity, you don't get like a 15% move in prices. Or if you gain 15% in capacity, that doesn't just mean that things get 15% cheaper. It tends to be a lot more dramatic than that. Is that accurate?

Yeah, it's incredibly volatile. And for the simple reason that you don't, the amount of units you ship is rarely a function of the price of freight. It's always a function of your demand and your overall margin structure. And can you make money? I mean, Sean will pay $5 for that product. If he can make money, he'll do it. You know, it's like, it doesn't really matter. It'll matter if you can't make money, but otherwise you're better off shipping it than not shipping it. Maybe another way to frame that is, In a world where there's excess capacity, then the price of freight drops to the, in pure economic theory, to the marginal cost of that supplier, of that carrier. And in, let's take the ocean freight example. Let's say there's excess capacity in the network, in your ship. I've got a ship sailing today. It's not full. The cost of throwing one more container on the top, loading it in China is like $100. Unloading, it's like $300.

Cool.

As long as someone's willing to pay me $500, I'll make a profit. I should take that container.

Yeah, it's kind of like the airline example where when they have an empty seat on a plane that's about to take off, you know, they'll sell it for $50 maybe. But when you've got a full flight and they're asking, will anybody give up their seat? Sometimes they have to pay you $2,000 to give up your seat. Same exact principle.

It's very similar. And then on the inverse side, when there's not enough capacity, when there's excess demand, people pay any price. And I was just reading recently, there was a Washington Post article yesterday about Apple having a container load of iPhones or some product, maybe computers stolen, and it had $7 million worth of electronics in it. So, you know, if you're shipping $7 million worth of freight, do you really care if the price of freight is $2,000 or $3,000? Like, no, you need to make sure it gets there and doesn't get stolen. And you saw that in COVID, the price can go to $20,000 because Apple and other people just make, they've been making plenty of money. They're willing to spend it, uh, if the price goes crazy. So it's a very volatile market. It makes it difficult, by the way, to operate. It's why most of the ocean carriers are either privately held in like family businesses or owned by a government because like Wall Street can't handle this kind of like volatility. They want nice quarterly predictable earnings. You're like, oh, one year you make $100 billion and then you lose money for 10 years. Like that is not a Wall Street—

I saw some crazy stat like in '21, There were a couple of these that made more than they'd made in the previous 20 years or something. Yeah. Like just insane concentrations.

They're 10 companies and they combined made $150 billion in one year and they're owned by these families. Like they got some nice art collections and like one year you make $20 billion. You're like, and after a decade, some of them were borderline bankrupt, like their debt was trading at huge discounts and then Hanjin did go bankrupt, the Korean one. 2 of them went bankrupt like 2 to 3 years before the COVID thing when they wouldn't— Oh dude, that's brutal.

Oh, it's just like, that's a bad beat right there.

I was gonna say, it's also why the, like the oil tankers, you know, won't risk going through the Strait of Hormuz. It's because like the oil tankers, dude, they cost like $4 billion for one of those ships. So like you just, you lose everything if it goes down.

Yeah, it's super asymmetric risk. You know, like you can not sail for a while.

There was one like Greek god of oil who's just running the strait though.

Greek god of oil. That's what, that's what I aspire to, guys. Later in my career, I just want to have some weird esoteric part of the logistics chain that I just own. I'm the, I'm the Australian railroad tycoon. You can't go through Australia on, on these tracks without my approval.

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All right, Sean, Ryan, I know both of you guys are very AI-forward with your organizations. And it's been insane. I feel like it's taken up every spare moment I've had over the last couple months. Ryan, I'll start with you. How are you seeing AI? And I think you used the phrase in a text with me of like kind of the age of wonder. How are you seeing AI impact the way that you run your company and your business?

I've had a couple moments here where I just woke up and said, okay, every single thing has changed. And it keeps happening to me. The most recent one being Claude Opus 4.6. Like the last month of my life has just been, I haven't been this excited about tech since I was a teenager. Just unbelievable. Just building stuff and building apps and lighting people on fire, frankly, at my company being like, look what I did in 1 minute. What are you doing? Like, what's going on? Why are you taking so long? Like, look what I can, look what you can do. And we're a licensed customs broker. As a licensed customs You know, that's why we're talking about tariffs a lot here, but we have a compliance process as one does. So we review about 5% of entries a second time with a more seasoned, experienced customs compliance team. And we just re-review the customs entry to see if we made mistakes. Our error rate on those was 1.8%, which is best in class. It's in industry. It's very good. By the way, it doesn't mean we made mistakes that were like illegal, but maybe you didn't include some free trade agreement. That you were eligible for. And then we had to go back and file a correction, a protest. Well, in October of last year, we introduced this AI agent and now we audit 100% of entries before we hit submit. We still do the same exact compliance after the fact, but now we do 100% audit. We took our error rate from 1.8% to 0.2%. And that was the moment for me. We had that, we started to get that data in around November when you go, oh wait, The AI is not just free and cheap labor. It's like, it's way better than the experts are. It can do this. And then you start looking at, wait a minute, it can do this across every part of our business. Um, and so that was the big wake-up call. We started building agents for everything. We've got agents for bill audit, agent for consolidating freight, for looking at opportunities, for checking, did we invoice the customer the right amount based on what we quoted or what the services that were rendered are on this thing? So that was That, and then if you guys, I mean, I assume you're using it, but Claude Code everyone talks about, I think Claude Cowork for a non-engineer, non-technical person, it was the first thing that people see that will just totally blow their mind because it lets you watch the agent work on your behalf and just go out to use other apps and just get work done. It's unbelievable, mind-blowing as a technologist to see this take place.

Yeah. Sean, what about you? What's, how's this showing up with Ridge?

We are really entering the agent age, right? So, you know, AI and, you know, prompting Claude to do work for you or sending data is awesome. But yeah, Claude co-work, I use a lot of Manus to do a lot of like, you know, deep research stuff for me and actually like build presentations. And then we just rolled out Victor. So Victor's in, I think it's a fork of OpenClaw that lives in Slack. So the reason why this is good is setting up OpenCall is a pain in the ass. So Victor's like SOC 2 compliant and like, you know, data and security ready for an organization. And then because it's in Slack, everyone can use it. And that was the big game changer in our organization is like, you know, I'm very confident, you know, if I had Ryan on my team, he'd go out there and he'd figure stuff out and build awesome stuff. If I had Mike on my team, it's the same thing. How do you get someone who is, you know, a junior level account manager to actually use the best-in-class tool? How do you, how do you put it in front of them and make sure they're engaging with it? Victor's been awesome because they can roll it out across Slack and he's in every single channel and he's doing summaries. And I have people now asking Victor to go do work for them and you could just watch it happen in real time, right? You connect Victor to everything.

This is very similar to what we've experienced. Um, I, I've talked to a lot of different people, a lot of different chat groups are going crazy right now. And what it seems to be the key is there's, there's all these different tools. Like I haven't used Manus at all. A lot of people are using Claude Code, but you've got things like Victor and you've got, you know, Perplexity has their kind of all-in-one kind of solution. There's all kinds of stuff and there's more stuff coming to market just literally hourly. And what I think I've learned is it's not even about what tool are you using. It's, are you helping people in your organization to have that initial aha moment where they realize what is possible is so much greater than what they thought. And I think you nailed it, Ryan. I had a similar situation. I've run our Amazon ads accounts for a lot of the last 10 years. And then in one of our newer businesses, I'm running it. And I just, I just was like, I'm going to build a system to do this in an automated way. And the thing that is kind of radicalizing about it wasn't just that I built a system and I'm like, I've probably spent 1,500 hours working with Amazon ad system, and now I can spend like 5 hours a year. It was that I built a system that does it better than me. Like it just, it has more inputs, it has better judgment because it can look at more things at once. And so like, this isn't just like outsourcing, it's more like upgrading what's even possible for your organization to do. And I think that that's That's kind of the way that I've thought about it going forward as a CEO is my number one job. And some of that's like me building things and showing it to people to give them inspiration. Some of that's bringing in tools, whether it's Victor or anything else to help people have that initial light bulb moment. It's funny, I had a back and forth with our creative director for Simple Modern last week, and I think to him, AI had been more of a discouragement than an encouragement. You know, because it's just like you see it cannibalizing all these skills that you've built. Well, anyway, we had a good conversation, but Friday at 9:30 PM, he sends me a Slack and he's just like, okay, this is amazing. This is my radicalizing moment because this would've taken me 4 hours and I just did it in 30 seconds. He attached like a Loom where he just showed it in like 30 seconds. He did this amazing thing that would've taken him a long time under any kind of previous set of tools. So that's my big takeaway is that It, like you said, Ryan, it's a fundamental reshaping of what business is gonna look like, what's possible. This thing absolutely destroys busywork, which is awesome. Nobody wants to be doing reconciliations. Yeah.

You know, one of the biggest wins we had over here is we have a licensing business, Mike, your licensing business. You typically, if you wanna run a licensing business in your organization, you need 2 to 3 full-time hires. Okay? Because the amount of paperwork that goes into a licensing business is insane. Right? Like every month you're sending a different report to the NFL or the MLB or whoever else, right? Claude just does it now. It really was a 20-hour per month structure of reports and paperwork and emails and whatever, and it's down to 5 minutes. It's like, here's all our sales, run it for us. And like, there's gonna be so many big unlocks like that.

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One of my favorite examples here, I was, this was just a creative endeavor and to learn what the AI is capable of, and I was using Claude Cowork. And the Claude, actually I had to do a little bit of research on this, but only as of right now, Midjourney is the image generation AI that can actually upscale to the level required to print something at a DPI that's necessary. And I, so I wrote a children's book. I wrote a children's book actually a few years ago about the ship that got stuck in the Suez Canal. Plug it right here. It's on Amazon. You can buy it. But I just wrote another one about tariff refunds. And it took this one. This is hand, this is an artisanal hand-drawn, real humans were involved in writing and drawing this one. I did it with Claude Code controlling Midjourney in the browser. It generated the prompt, it generated the script, it logged in. I used bookbaby.com to print this thing. I gave it access to my bookbaby.com account. It logged in, it figured out all of the design specs, like how big does it need to be, the bleeds, the sizing, everything. It then logged into Midjourney, created the prompts. I gave it a high-level hero's journey of a story of, you know, this mouse importing cheese from France. And then like the business got fucked up by tariffs and then, you know, there's a refund and everybody gets free cheese. Uh, it was kind of my high-level story and it figured the whole thing out and nailed it. It's like the most beautiful art. It's 10 times better book than this one. It actually took me 4 or 5 hours. Um, but that's because I made some mistakes along the way and it was a fun process. I was iterating. But I created it as a skill that I saved in a doc that now I can do. I think I'll have my next children's book in like an hour of work.

That's the thing that's crazy is like, there is some tuition, there is some learning, but then once you've done it, you're like, okay, now I can move 10x faster because I don't need to think through all the setup. And it was similar with me when I was getting OpenClaw set up. Like I did a lot of things wrong, but now I could go, it probably took me 100 hours to get to where I am, but I could probably reset it up in 5 because I, I kind of understand the concepts. And I'm not even convinced— I think where we're going, I think these models are going to be so good that even a lot of the things we're having to do where we're kind of getting in the way, I think even those things are going to get abstracted, that you're just going to be able to qualitatively say, hey, do this. I don't care about all the details and the logins and the crons that you need to do to pull this off. Just tell me what you're going to do and go do it, and it'll be like, okay, great.

There's also downsides on some of these things. Like, my brother's building— my brother's a great computer programmer, and he's more obsessed with this than anybody. He actually has Claude Code hooked to Voice Mode, so he just walks around wherever he's going, just coding on his phone just by talking to it. But he showed me this hilarious screenshot where Claude completely deleted everything in his database Oh yeah, I shouldn't have done that. Sorry. Like, wait, what? Like, and Amazon this morning just announced that they're like heavily restricting what junior developers can push with code because very often if you're actually running a SaaS application, when you tell it to make a change, what it actually does is delete the entire application, then make a new one.

Well, Amazon pushed bad code last week. They took the entire front end down for 3 hours. And we were talking about that. that were like, how many billions of dollars in sales is that? I, I don't even know, but it's like, it's some kind of an insane number of sales they lost because they pushed some bad code. And, and this is going to be another interesting thing. It's like, depending on where you are as a company— are you a public company, are you private, how big are you— your ability to lean in, uh, this is actually, I think, like really bullish for small businesses. Amazon is going to have to be more brittle. They're going to have to be more regulated, whereas You know, people like Simple Modern, like we can move it basically as fast as we want to move because there's not any kind of customer-facing code that would be that bad if we broke it.

Yeah. And being founder-led, like you can give everybody forgiveness, like, and set the pace, like, yo, we're going to take some risk here. We're going to move fast. We're going to break things. We're going to get it done. Whereas if you're some middle manager in a giant company, you're like, it's not worth the risk, man. You get fired. And the upside is like, oh, conversion rate optimization. Like, it's not worth it.

You said in one of the group chats, you said like, AI is making everybody a pro— like a programmer, but without the security and optimization of like the years of training. We have a friend who spent like $4,000 on tokens just like, 'cause he built something wrong and he just let it run overnight. It's like, oh, it cost me $4,000. And it's like, we're all programmers, but we actually have no idea how to make something secure or efficient.

What we don't know is we don't know what comes next. Because we know the technology is going to get way better, and we know that there's going to be some real security issues that pop up. That people are going to start cutting off access to their data. They're going to try and start creating more walled gardens, and you're going to have some pretty major breaches, I'm guessing, in some pretty public places. And so we'll see. I don't know. But I think what we've been emphasizing with our team is like two things that I don't think abstracted. Data's going to be really, really, really valuable in a world where everybody has access to these models. It's your ability to create interesting things is what your access to data. And then there's still a judgment layer. And what I've been challenging people around me with is even if you have, it's kind of like the magic lamp with the genie, right? It's kind of an age-old story because let's say you did find a magic lamp that where you rubbed it and there was a genie and he gave you 3 wishes, what would you use the 3 wishes on? It's kind of a hard question. And in, in a way, that's kind of what clogged code is. It's like, oh, I can do literally anything with you. And then it's a little bit overwhelming. It's like, well, I don't even know what I would build. And so it actually takes kind of rewiring your brain to even think through, like, how would I use all this power? And that's what I've been really trying to challenge myself and the people around me to do recently. All right, thanks for being with us. We want to thank our special guest, Ryan Petersen, He did a great job of summarizing what's going on, the craziness with logistics. I'm sure we will have him on again very soon. Want to thank everybody for joining us, and a special thanks to all of our sponsors that make the pod possible. We appreciate all of you. All right, till next time. See ya.