EXPEDITORS INTERNATIONAL OF WASHINGTON INC

Previous wording

The United States has undertaken a substantial global tariff rebalancing effort, resulting in higher tariffs on imports, including significantly higher tariffs on goods made in China. These measures led to threatened or actual retaliatory tariffs on goods made in the United States from several countries, including China, the European Union, and Canada. This created an unpredictable trade environment for shippers to determine if and how to adapt their sourcing patterns given these new and fast-changing regulations. If these conditions result in a significant, short-term or longer-term, decrease or redistribution of international trade volumes, it could negatively affect our business volumes and revenues. Expeditors' activity is particularly exposed to trade volume impacts from trade actions and tariff disputes between China and the United States, as we generated 22% of our revenues and 17% of our operating income in 2024, on exports from China and Hong Kong. Uncertainty and changes to trade volumes, could also affect air and ocean freight carriers because they may adjust capacity and transportation schedules, which could result in volatility in available capacity, and average buy and sell rates, all of which could adversely impact our operations and financial results. In the second quarter 2025, our China to U.S. ocean volumes declined sequentially from the first quarter. While some of those volumes are shifting to other lanes, as customers look to mitigate their exposure to China-specific tariffs, it is too early to know what the overall decline in volumes might be. Many of our customers are subject to the increased tariffs and may experience increased costs of conducting business. This could result in a loss of business, bad debt or increased expenses in the future if our customers were to abandon cargo, enter into bankruptcy or insolvency proceedings, or their ability to pay deteriorates. Additionally, the increased complexity of trade regulations and customs declaration processes, challenge our ability to be in compliance with such ever-changing regulations and may require us to dedicate additional resources to our customs brokerage operations.

Current wording

The United States has undertaken a substantial global tariff rebalancing effort, resulting in higher tariffs on imports, including significantly higher tariffs on goods made in China and sectoral tariffs on a range of materials and products. These measures led to threatened or actual retaliatory tariffs on goods made in the United States from several countries, including China and Canada. This created an unpredictable trade environment for shippers to determine if and how to adapt their sourcing patterns given these new and fast-changing regulations. If these conditions result in a significant, short-term or longer-term, decrease or redistribution of international trade volumes, it could negatively affect our business volumes and revenues. Expeditors' activity is particularly exposed to trade volume impacts from trade actions and tariff disputes between China and the United States, as we generated 22% of our revenues and 17% of our operating income in 2024, on exports from China and Hong Kong; these amounts are trending lower in 2025. Uncertainty and changes to trade volumes could also affect air and ocean freight carriers because they may adjust capacity and transportation schedules, which could result in volatility in available capacity, and average sell and sell rates, all of which could adversely impact our operations and financial results. While some of those volumes are shifting to other routes, as customers look to mitigate their exposure to China-specific tariffs, it is too early to know what the overall decline in volumes might be. Many of our customers are subject to the increased tariffs and may experience increased costs of conducting business. This could result in a loss of business, bad debt or increased expenses in the future if our customers were to abandon cargo, enter into bankruptcy or insolvency proceedings, or their ability to pay deteriorates. Additionally, the increased complexity of trade regulations and customs declaration processes challenges our ability to be in compliance with such ever-changing regulations and may require us to dedicate additional resources to our customs brokerage operations.

Previous wording

The timing of the resolution of income and non-income tax examinations can be highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities, may differ significantly from the amounts recorded. It is reasonably possible that within the next twelve months we will undergo further audits and examinations by various tax authorities and possibly may reach resolution related to income tax examinations covering one or more jurisdictions and years. In recent years, the United States and other foreign governments have made significant changes to tax laws, and more changes are anticipated in future periods. Often, those changes are subject to the issuance of new regulations and interpretations, which adds complexity and uncertainty in calculating tax liabilities.

Current wording

The timing of the resolution of income and non-income tax examinations can be highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities, may differ significantly from the amounts recorded. It is reasonably possible that within the next twelve months we will undergo further audits and examinations by various tax authorities and may reach resolution related to income tax examinations covering one or more jurisdictions and years. In recent years, the United States and other foreign governments have made significant changes to tax laws, and more changes are anticipated in future periods. Often, those changes are subject to the issuance of new regulations and interpretations, which adds complexity and uncertainty in calculating tax liabilities.

Previous wording

We are regularly under audit by tax authorities, including transfer pricing inquiries. The Indian tax authority (ITA) has asserted that additional tax applies principally related to transfer pricing and transactions between and amongst the Company and its Indian subsidiary and the applicability to an Indian service tax applicable to ocean and air imports and exports. We believe that ITA’s positions are without merit, and we are defending our position vigorously in Indian courts. If these matters are adversely resolved, we would recognize significant additional tax expense including interest and penalties. Although we believe our tax estimates are reasonable, the final determination of tax audits, including any potential penalties and interest, could be materially different from our tax provisions and accruals and negatively impact our financial results. We cannot currently provide an estimate of the range of possible outcomes.

Current wording

We are regularly under audit by tax authorities, including transfer pricing inquiries. The Indian tax authority (ITA) has asserted that additional tax applies principally related to transfer pricing and transactions between and amongst the Company and its Indian subsidiary and the applicability to an Indian service tax applicable to ocean and air imports and exports. We believe that ITA’s positions are without merit, and we have thus far been successful in defending our position vigorously in Indian courts. However, if these matters are adversely resolved, we would recognize significant additional tax expense including interest and penalties. Although we believe our tax estimates are reasonable, the final determination of tax audits, including any potential penalties and interest, could be materially different from our tax provisions and accruals and negatively impact our financial results. We cannot currently provide an estimate of the range of possible outcomes.