By coinnews 
00:00 Speaker A
Well, as a courier company, FedEx plays a crucial role in international shipping, including the handling of tariffs where goods are subject to duties. I was at the shipping giant’s Memphis Hub yesterday, talking to CEO Raj Subramaniam about navigating the current economic climate.
00:26 Speaker A
Goods are being tariffed if they are coming into the United States. How what are you seeing? Are you seeing flows change from international and how is that affecting FedEx?
00:39 Raj Subramaniam
Well, I think, uh, FedEx is in the business of moving high value goods across the global supply chain. In fact, we move over $2 trillion worth of commerce through our system every year. We connect about 3 million shippers to about 225 million consumers around the world, and we are in the center of this high value supply chain ecosystem. The fact that we are here, there, and everywhere makes it, you know, that our, that we’re, the scale advantage of FedEx has got that we are already there to these markets, meaning that any particular market is already connected to the world and the world is connected to that market using FedEx. So, yes, we will monitor the overall demand and they’re going to go through ups and downs as we as as the situation changes. But as the supply chain patterns themselves change because of our unique network that we have, we have an advantage because we’re already connected to all parts. That’s one. The second thing is the operational side of it, because we are in the business of moving packages end-to-end, including customs clearance. This is what we do for a living. So, we are, you know, been preparing and are prepared to manage through these changes in the tariff environment, and I’m really proud of my team that they’ve done an outstanding job of getting ready and being flexible to manage through some of that’s happening. The third is also very important. Every country to every other country for every commodity, we have the classification information in our systems because that’s what we do for a living over the years. But what’s important is that over the last five years, we have engineered the data, and I use the word very carefully because that’s what’s going to be very important. And that structure is already in place. I didn’t know that this was coming, but this we are you know, we are built a digital twin of FedEx essentially over the last five years. So now, as the complexity of tariffs and these flows becomes more, becomes more frictionful, then the need for a platform like ours on clearance becomes even more meaningful. So, prior to this, when it was much smoother, smaller companies or pure tech companies, the need of the need of the hour was basic algebra. Now, the need of the hour is advanced calculus.
06:08 Speaker A
So in other words, if someone is importing something, you can help them by saying here’s what your tariff rate is on this particular item?
06:17 Raj Subramaniam
Exactly. Let me give you an example. So, there was this customer, you know, shipping neon signs. They were under $800, and there are these are all the small customers who buy these neon signs, and there are varieties of combinations of them. Steel, glass, wood, this, that, the other thing. There are 200 different combinations. Prior to last week or prior to this week, actually,
06:57 Speaker A
When the de minimis exemption has now been removed.
07:02 Raj Subramaniam
Yeah, so these were like $200, $300, $400, okay? The shipper, he just googled up a classification code, and he just slapped them on all shipments and it cleared. Starting now, he needs 200 different classification codes. So now, we have integrated their product catalog into our system, and we are auto-generating those classification codes because we have the information and gen AI that’s able to run across and being able to provide that provide that information. So, that’s why I meant, you know, the need of the hour is advanced calculus, and we have we can do advanced calculus.
08:22 Speaker A
Right.
08:22 Speaker A
Can you charge more for that service, or is that included already in the in the fees that you charge?
08:29 Raj Subramaniam
So, you know, I think our digital capabilities are now starting to expand quite rapidly, and I think we will be in a position to be able to provide even more advanced services to be in their workflows on the supply chain, and then we will obviously will have we’ll have an opportunity to create value for all our stakeholders.
09:01 Speaker A
Are you seeing customers who have just said, I’m not going to import those items anymore because I can’t afford to now pay a full tariff without that exemption? I know you said on your most recent conference call that it wasn’t, it was a minority of your package, I believe, was the the word that one of your executives used. But can you quantify that for us?
09:24 Raj Subramaniam
Well, I think it’s too early to do that. This is literally the first day or two here, and so we’ll have to watch and see how it performs. But what I think someone, I think who made that comment was saying is that our China to US lane, our largest straight lane, was represented a small percentage of our total volume that goes through the FedEx system every single day. But however, we’ll have, this is something we have to watch very carefully. It’s too early to call it right now, and there are some immediate reactions, you know, you can see some of the some of the companies have basically said they can’t afford to ship these, their commodities to the United States with these tariff rates. But they could change tomorrow, so it’s very too early to call that question.
10:25 Speaker A
Right.
10:26 Speaker A
Do you think the US will enter a recession?
10:31 Raj Subramaniam
Oh, I don’t know. It’s just it’s impossible for it’s too early and that very dynamic to to say what’s going to happen to the US economy at this point. We are focused on the things that we can control. That’s that’s the lesson I’ve learned over the last few years. You know, it’s so many things being very dynamic. Let’s focus on the things that we can control. You know, like put forward the best value proposition we can give to our customers. Make sure that we are as efficiently as as efficient as possible and build infrastructure for the future.
11:15 Speaker A
Something we are seeing some of your competitors do or or even manufacturers, companies that ship things into the US. They’re making it very clear how much the tariff is costing for customers. Is that something, do you all have a tool like that?
11:38 Raj Subramaniam
Well, that’s a retailer’s decision to see what they want to display to their customers. We can provide them all the information that they want. That’s what we are part of their workflow. And now, this clearance platform that we talked I talked about, is we’re able to provide all this information, then it’s up to the retailer to decide what they want to charge and how they want to show those. That is, you know, that’s those are all policies that they’ll have to decide on. We we just provide the information required to do what they need to do. We’re focusing on the things that we can control. We are making sure that we have as efficient as we possibly can, creating new value proposition both physical and digital for our customers. And our vision of making supply chains smarter for everyone is the right one for the right moment. And I think we’ll be very successful. We are people first organization from the get-go. The philosophy of FedEx is people service profit. This was from the very founding of FedEx. It’s not changed and it’s not going to change. You take care of your people, deliver outstanding experience for your customers, which generates profits for our company, when we’ll reinvest back in our people. This unending circle is guided our principle from the very get go. So whether it’s our communications, whether whether it is the the way we treat people, whether we know, and the way expectations are clear as to what needs to be delivered. And so, you know, this is something that we have honed over now 50 plus years, and we continue to get better, but something we are extremely proud of.