Customs vs. C-Suite: The Disconnect That’s Hurting Trade Compliance Strategy

[Transcript]

[00:00:00] Jan Griffiths: Welcome to the Automotive Leaders Podcast, where we help you prepare for the future by sharing stories, insights, and skills from leading voices in the automotive world with a mission to transform this industry together. I'm your host, Jan Griffiths that passionate, rebellious farmer's daughter from Wales with over 35 years of experience in our beloved auto industry and a commitment to empowering fellow leaders to be their best authentic selves.

Stay true to yourself, be you, and lead with Gravitas, the hallmark of authentic leadership. Let's dive in.

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Just when you're about to roll your eyes and say, "Oh no, not another podcast on tariffs." Wait a minute, because today I'm gonna bring you a different perspective. We are going to look at the tariff disruption through the eyes of leadership and how do you handle the conversations internally with your own team? Are you speaking the same language? And the simple answer coming back is probably not. But to go deep into this subject, I am thrilled to bring on the show to today, Jenae Ciecko. She is the President and CEO of Copper Hill, a company that is dedicated to working with you on trade compliance.  Jenae, welcome to the show.

[00:02:20] Jenae Ciecko: Oh man. Wow, that sounded awesome. Thank you for having me. Finally, people are excited to talk about trade. So, yeah, this is good.

[00:02:26] Jan Griffiths: You are so right. And I have to tell you a little bit about my history,  Jenae, because I know that you have worked in the Tier One space and you now are running your own business. But I will tell you, in the world of supply chain, the many years that I spent in supply chain, there have been times when customs and compliance worked for me under the umbrella of supply chain and times when it didn't. And when I was responsible for customs and compliance, I didn't want any part of it because I didn't understand it. I didn't want to understand it. It is so specialized and so detailed, the only thing I wanted to know is are you keeping us legal? Are you making sure that we're not spending more money than we need to? That's all I wanted to know. If somebody in finance came up and said that they wanted control of customs and finance, you would not hear

[00:03:27] Jenae Ciecko: Yeah. You're like, "Here, take it."

[00:03:29] Jan Griffiths: Take it. If that's a better fit, go right ahead. So, tell me,  Jenae, what is happening out there right now in the world of customs and compliance? Is it mostly in the finance area or do you see it in both supply chain and finance?

[00:03:45] Jenae Ciecko: Oh, I definitely see it in both. We see it in both. In organizations— and you made a great point—when we're talking to the field and to our customers, this function reports up to different areas within organizations. So sometimes it is finance. Sometimes it is legal. Sometimes it's supply chain. And those have different goals, those different organizations, right? And really, I don't think that customs and trade has been talked about more ever and it's been a wild ride. Our customers are certainly, you know, they're panicked. And it changes every day. And it's exhausting for them, honestly. And it's funny you said that you wanted nothing, 'cause it is, it's really detailed. There's a lot of people, you just wanna know what's happening and if it's happening correctly. And now, it's just getting a lot more focus. And I mean 25% on anything, margins are tight in automotive, you know that as well as anyone. And so, there's certainly just a kind of a hysteria, a little bit right now, and we're just working like listening to what the customers are saying, what the trade is saying, try not to overreact to it because we have to manage it for them.

And we have to figure out how to administer it. How is it going to be administered? Some of these things have never happened before, right? So, not only just the impact and the size of the tariffs, but how they're like just literally from a systemic perspective gonna be administered for our clients. It's challenging for sure.

[00:05:11] Jan Griffiths: Yeah. And let's go there for a moment because that's a big question that's on my mind too. And if it's on my mind, I'm sure other people are thinking about it too. And that is, we hear the, you know, "effective midnight," "effective on this date," "this percentage effective on that date." But we all know in automotive, you cannot make something effective as of a certain day with no notice. Walk us through some of the mechanics of what it takes for a tariff to take hold,  Jenae.

[00:05:39] Jenae Ciecko: It's fascinating in terms of when you see these orders come out and then what kind of comes downstream, right? So, the administration of 'em and these taxes, they have to be, you know, assessed by the customs broker. So when these things are coming into the country, when things are being imported, the customs broker is the one that is submitting to the government what should be paid. And when a tariff is— other than what's been traditionally done—it's separate line items that they maybe never had before in their system. And so, we have to kinda look at that and navigate that with the customers. But yeah, it really honestly blows my mind how fast it happens in terms of it comes out, and it's literally in the system for as long as the broker has the ability within their system to submit—it's there, it's ready to go. But I can't say enough how crazy fast it happens.

[00:06:37] Jan Griffiths: So, where does the broker get the signal from? I mean, how does that work?

[00:06:43] Jenae Ciecko: Yeah. So these customers—when, you know, in automotive companies are shipping every day—and they know what they're gonna be shipping ahead of time, which I'll get into, I think there's some really great things to be gleaned from that. But the customs broker gets the transactions, whether it's electronically or literally—paper that is being submitted to 'em, scans of documents—they're taking that, and they're entering it, and transmitting it to Customs. Customs system is getting updated for those tariffs live. So if I'm bringing in something today and the tax or the duty is 10% today and it's 20% tomorrow, when I enter it tomorrow, the system will be updated. So it's that fast. But we have to monitor—what date is it based on? And all of those things. And trying to keep up with it. It's really challenging for us to help our customers and their customers to navigate really.

[00:07:37] Jan Griffiths: Yeah. I'm thinking about, let's say for example, you got a truckload of wire harnesses coming out of Torreón.

[00:07:44] Jenae Ciecko: Torreón.

[00:07:44] Jan Griffiths: Yep, Torreón. just talking about Torreón. So you have a truckload of wire harnesses coming out of Torreón, and then you get the news that they're effective midnight. Well, maybe, maybe they're in the truck, so the paperwork would've been done at that point. Is that right?

[00:08:03] Jenae Ciecko: Yep. It would've been released.

[00:08:04] Jan Griffiths: Okay. So if it was prior to the 25% tariff, you were operating under USMCA. But now these parts they come to the border, and by the time they hit the border or they're ready to cross the border, you've got this 25% tariff. So now what happens? Do they stop it? What do they do?

[00:08:22] Jenae Ciecko: No, it keeps going. And then, really the importer is responsible for the tax. And when they're in process, the companies are trying to pull ahead, ship ahead, maybe hold back shipments based on kind of speculating what's gonna happen. And that's all part of trying to mitigate the impact, right? But once it's across the border and the transaction is done, the transaction's there, and then it's really up to the customs broker to determine through the filing what tax was appropriate based on when the goods crossed and when it was filed, essentially. Yeah. And there's nothing that can be done really. Yeah. Once it's there, it's there. Yeah.

[00:09:02] Jan Griffiths: Let's get out of the weeds a bit from the tactical and let's switch to the C-suite. So the C-suite, if you are a senior-level supply chain leader or CEO or CFO, or a VP of Ops, you are gonna go to your supply chain person—or whoever run wherever customs compliance may sit in your organization—and you're gonna say, "Okay, I need a what-if scenario."

I need to know what if it comes through a 25%. What if it's half of that? What if Europe is 10%? What if this, what if that? You are gonna wanna run a bunch of what-ifs scenarios to understand the impact to your business. Now, problem number one: You need to understand where every single one of your products comes from, all the way down the supply chain. And that transparency is not always there—but that's an episode for another day. So, assuming that you have full transparency of the supply chain, you know where the product is coming from, where it's the country of origin, you know exactly where it is. So, you're gonna look at your customs person, and you're gonna say, "Okay, so figure this out." I think the communication breaks down there. What happens? You tell me.

[00:10:10] Jenae Ciecko: Yeah. So kind of going back to what we were talking about when we first spoke, trade is not the most glamorous and exciting thing. Folks that are in the C-Suite are used to just getting the answer. They're like, "Tell me if it's compliant. Tell me what my taxes are." And they wanna move on from that. Now, we have them with a lot of interest, and they're asking questions from an impact perspective from folks that are very, for good reason, in the weeds, in the details because that's their world. Compliance managers, customs compliance managers are very tactical and detailed. And they're looking at this trying to solve the problems for the questions that are being asked. But I do see that there is definitely a gap in like how they're communicating. And also just trying to solve before understanding the problem. We're kind of wired as trade people to try to mitigate tax. Just like accountants are mitigating IRS taxes. We're wired to mitigate custom taxes.

The C-suite right now needs to know worst-case scenario, maybe scenario, best-case scenario. And I think that we really have to get our arms around those questions, how they're being asked, and the danger honestly of misinformation if the communication is not correct. I always joke, but I feel like the answer is only as good as the way that it's asked, right? So the teams that are getting these questions are just trying to do the best they can to report the information to their leadership. But, definitely, I see a big gap there, for sure.

[00:11:41] Jan Griffiths: How do we bridge that gap today? What are some of the things, or how should the C-suite be phrasing the questions? Or how do you prevent that frustration and misinformation?

[00:11:52] Jenae Ciecko: Yeah. I think it's challenging because I think that they're very wired to minimize the impacts, the C-Suite, in terms of cash, in terms of future liabilities. So, I think they need to understand that, first of all, they need to really look at the full scope. And you mentioned, we know that data all the way down the supply chain, but really making sure that they're getting all of their tax IDs. They're looking at the full scope of what they import from a value perspective, what they're currently able to utilize free trade agreements for, and what they're not—because it wasn't a priority in the past. We're seeing that a lot where companies have traditionally, if they're what we call the Most Favored Nation, but their MFN tax was 0%. They may never have even looked at these things, right? But maybe they do qualify for a free trade agreement. So they really have to look at the big picture and say, "Look, I need to understand—if nothing changed. And when I say nothing changed, I mean nothing changed in terms of whether or not our goods are eligible for free trade agreements. If we are literally shipping the same goods across the border that we've been doing and that we plan to do for the foreseeable future, and these taxes come in place, what does that do to me?" And start there. Then, work with your compliance teams on how to mitigate down those taxes 'cause there are creative ways. And tariff engineering is something that people always bring up. Obviously, we work with our clients to make sure that you're compliant and doing the right thing, but using every opportunity. There's definitely things within the USMCA rules that clients maybe haven't needed to look at—to kind of scrape further into whether or not they can get things to qualify—that they're gonna need to now. So, it's really getting the C-suite to ask the questions that get the compliance team to look at it full circle. Then, how do we mitigate it down? Right? So, it's a gap for sure. And the cash flow impact right now is just incredible. I was talking to a customer yesterday, and their head of tax, and they wanna know. I mean, they need to know for their investors right? To know what this impact is going to be. And it was interesting to watch the communication between the different stakeholders, right? There's those that are managing the facilities and the business. There's the person that's responsible for tax and reporting out. There's the person that's responsible for compliance—trying to make sure they understand the question and, "Am I getting you the right information?" We're just, you know, really trying to be there to support, to be empathetic. And it's a tough time, and it's not going away. We're here for a bit.

[00:14:36] Jan Griffiths: Yeah. Well, but on the upside, it is forcing a spotlight on understanding your supply chain in more detail than ever before. And it is making us all aware of this field, this very specialized field of trade and compliance.

[00:14:54] Jenae Ciecko: Yeah, it is. And to me, it's always funny that if you go into business and you started a business, people know when they go into business that you need an accountant. You know, if you're gonna start a business, you know you need an accountant. It is really always kind of interesting, and I'm never surprised anymore, that companies send things across international borders and don't necessarily look into how they do that to pay the right amount of tax—until sometimes after the fact, right? And this has just put a big spotlight on it because the stakes are higher, and the percentages are higher, and the risk of being wrong is a lot higher.

[00:15:30] Jan Griffiths: Talking about that risk —if I were running a Tier One right now, so my options are, of course... let's assume that I'm compliant with USMCA. That's a given, sort of. So, I'm compliant with USMCA. The new tariffs come in. What if I just say, "You know what? I'm not gonna pay it. I'm just not gonna pay them." What Is that even an option?

[00:15:51] Jenae Ciecko: No, I think that there's definitely where we have Tier Ones that are trying to push back on their customers to be responsible for it. There's long-term contracts negotiated here, but a 25% tariff on some of these companies could bury them. And it's who's gonna bear the burden of that? And the answer is no, you can't. If it crosses that border Customs is going to get their money. That is just going to happen. It's, do companies hold back shipments? Do they say, "I'm not gonna ship it to you until you say that you're gonna take responsibility for this." And then, the tracking of that—our customers, if those situations are coming up, they're asking us, "How do we track that and build them? How do we pass that on logistically?" And all of these things are just unprecedented. If you're buying from a Tier One and you got a bill for the tax, what would the burden of proof that you would ask for to make sure that you're reimbursing them for the right amount of tax? And that's all of the stuff that just has to be navigated and figured out. That just was not really on the table before.

[00:16:51] Jan Griffiths: Yeah. It's a lot. Jenae, in your experience in the last few months, tell me, from looking through the leadership lens into leadership at Tier Ones, give me the mindset and the behaviors of a leader that's handling this well.

[00:17:14] Jenae Ciecko: Ooh that's really good. That's a really good question. I think that if I'm thinking about the Tier Ones, we have to stay calm. I think that this is a scary time, and there has always been in the automotive industry, a great sense of urgency. It's fast-paced, and everybody wants an answer right now. I think that the more we can stay calm and know that we just need to weather the storm and communicate what we know—so, really communicating the scope of things and what is happening and getting ahead of it to the degree that you can so you're not so reactionary— is really everything. And I've been telling my team, it's certainly stressful. And we're trying to like make sure everybody keeps their head up, avoid burnout. A lot of stress. We're all in this together. Be compassionate. Understand that everybody has a boss, everybody is asking for something, and we're all just trying to do the best we can. And I would say the other thing is that sometimes directional information is better than no information. And I think that trade people are quite wired to be detail oriented because of the nature of the rules, but I think that I would definitely advise like, you know, Tier Ones trade people to work on how they can get directional better than none. Because I think their leadership would, as long as it's caveated with "this is directional," it takes a little bit of that give-and-take pressure off of "I need this right now." You know? Can I give you something directional now and exact down the pike?

And it's kind of what we were talking about—the bridge of communication, like how the question's asked.

[00:18:57] Jan Griffiths: From what I hear you saying is that, really, the language of the C-suite and the language of customs and compliance— you've got to find a way to bridge that gap in your culture and your organization with your people. And don't just throw out some high level task or request out there. Don't do that. Knowing that your instinct is to do that. It's my instinct—I wanna know how much and when, right? Okay. But really, have some conversation, dial it in a bit. And we all know the number one rule of accountability and communication is clarity. So get perfect clarity and buy-in of the task before you send your compliance group into a tizzy and they don't know which day it is. Just bridge that gap of communication, stay calm—like you say—and we will get through this.

[00:19:51] Jenae Ciecko: We absolutely will. It's panicky. I get it. You know what I mean? I know we both do, but if this is our new world —and I don't have a crystal ball, I don't think any of us do—we're looking at right now that these tariffs and the ability to avoid them through USMCA is available to the trade through the end of this month. Will that go on into future months? We hope so. I mean, it's certainly, the good side of this—you said earlier—the positive side is, yeah, this does put a focus on our business and trade. It's not great for these companies, and the impact is catastrophic, right? So if we can hope that USMCA will still be available for companies, and it's just more work and effort to look to qualify for those agreements that weren't even on the table before. Okay, we can do that and we'll help our customers do that. Or the Tier Ones and the OEMs—they can do that. It's a way to keep moving and not be as impacted by this tax.

[00:20:51] Jan Griffiths: Yeah. And I would say to the leaders listening out there—this is a time to ask yourself, are you a command-and-control leader? Are you barking out orders and demanding answers? Or are you taking a more authentic leadership approach, staying calm amongst the chaos? Because that's what great leaders do. And are you really thinking about the fact that you have to bridge the communication gap? You talk two different languages—between customs compliance and the C-suite. So, what are you doing to bridge that communication gap? It's up to you guys out there. You answer the question— how you wanna lead through this? I know you're in the thick of it, but maybe take a moment to just sit back and think about your leadership style. Because we know this is just the beginning, right,  Jenae?

[00:21:40] Jenae Ciecko: We do. And I think it's, you know, it is stressful and I think everybody, as leaders, I think we all have our moments, right? But it's about taking a beat— no great things come out of chaos.

And I really do understand, I have so much empathy for some of these companies and this tax burden—it's unbelievable, right? So it's that "says easy, does hard" thing—like to not go, "Oh my God, how am I going to manage this?" from a cash, from an investor, from all of those things.

But it's how do we get to the data—to tell people what's going on and share that on a regular basis.

[00:22:17] Jan Griffiths: Yeah. And then one other thing that you mentioned that I really think is important—you talked about if you decide to push it up to your customer, to the OEM, or a Tier Two, to a Tier One, make sure that you've got all that detail. You are gonna need the customs people to make absolutely sure that they've got all the supporting documentation to make that claim and support that increase. Otherwise, we know the OEMs will not accept it. That's a really good point.

[00:22:47] Jenae Ciecko: A hundred percent. And the burden with the OEMs and as well with Customs and Border Protection—if there's more tax being avoided, there's going to be more scrutiny on the avoidance, right? So, the enforcement is certainly going to be there to make sure that companies are doing this correctly. Customs has always done random audits, and there's certainly checks and balances from that agency, but there's more at stake now.

[00:23:12] Jan Griffiths: Yeah, okay. No, I get it. I get it. Well, it's been great talking to you,  Jenae. Thank you so much for joining us today.

[00:23:20] Jenae Ciecko: Oh, of course. No, it's been my pleasure. Thank you.

[00:23:22] Jan Griffiths: Thank you for listening to the Automotive Leaders Podcast. Click the listen link in the show notes to subscribe for free on your platform of choice, and don't forget to download the 21 Traits of Authentic Leadership PDF by clicking on the link below. And remember, stay true to yourself, be you, and lead with Gravitas, the hallmark of authentic leadership.