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US Government Shutdown Update

As the government shutdown continues into its second month, the impact on the US supply chain is beginning to be felt more acutely. U.S. federal agencies and industries involved with the movement of goods are feeling a greater strain with each passing day, which in turn is trickling down to businesses across the country.

Aviation

In a joint statement, the heads of the unions (who represent the nation’s air traffic controllers, pilots and flight attendants) advised that major airports are already seeing security checkpoints close, with more closings to possibly follow; safety inspectors are not back on the job at pre-shutdown levels; and analysts’ ability to process safety reporting data and take critical corrective action has been weakened. The union presidents stated that the “air safety environment” is “deteriorating by the day,” and that “to avoid disruption to our aviation system, we urge Congress and the White House to take all necessary steps to end this shutdown immediately.” While it remains to be seen what the impact will be on air freight, it is clear that as the government shutdown continues, the risk increases.

Maritime

43,000 uniformed members of the U.S. Coast Guard, that oversee both operations and the underlying transactions, are being forced to work without pay. Another 8,000 civilians who work alongside them and provide regulatory support have been furloughed and are prohibited from working. The lapse in appropriations that is causing the shutdown has severely limited the Coast Guard’s National Vessel Documentation Center, which is now unable to process commercial vessel documentation and financing critical to maritime commerce. Therefore, ship owners and operators are unable to purchase and document U.S.-flag commercial vessels, or obtain mortgage loans on documented vessels, according to the law firm, Winston & Strawn.

The Federal Maritime Commission (FMC) has ceased all operations. None of the online FMC databases, including the listing of effective shipping service contracts, the common carrier tariff list, or the list of licensed and bonded ocean transportation intermediaries, will be available during the suspension of services. With the FMC closed indefinitely, the industry may be forced to choose between foregoing business opportunities or violating the law. For example, carriers cannot comply with requirements that agreements between common carriers, such as space charters, to be on file and in effect with the FMC before the common carriers may act under such agreements, and shippers cannot update or enter into new service contracts on file with the FMC, if it refuses to accept filings of any kind. Similarly, with the FMC no longer accepting complaints, there will be no forum for shippers, passengers or other consumers to pursue relief under the Shipping Act. This effectively suspends enforcement of the Shipping Act until further notice.

Section 301 Tariffs

As a reminder, dates to the Automated Commercial Environment (ACE) to reflect exclusions from Section 301 tariffs won’t be implemented until 10 business days after the shutdown has ended. However, it should be noted that the Office of the U.S. Trade Representative recently granted almost 1,000 product exclusion requests with regards to the initial tranche of tariffs across $34 billion worth of goods from China in 2017 import value. “This means that until the government reopens, importers that qualify for the exclusions will have to continue paying the additional tariffs on affected goods,” said the analysis.

US Customs and Border Protection (CBP)

U.S. Customs and Border Protection is continuing several of its responsibilities during the shutdown, including issuing Customs broker licenses, permits, filer codes and reviewing and responding to the Enforce and Protect Act trade evasion allegations and electronic allegations of trade fraud. As previously mentioned, while CBP’s liquidation process is functioning, the agency isn’t processing refunds on any type of normal entry or drawback transaction and interest may apply to the delayed refunds. Customs also isn’t currently issuing any new rulings to importers on its Customs Rulings Online Search System (CROSS) database. In addition, a notice on the CBP website advises users that due to a lapse in federal funding, the site is no longer being actively managed.

Trade-related Agencies

Other trade-related agencies are also being affected by the shutdown. Almost 90 percent of Commerce Department staff has been furloughed, as the International Trade Administration (ITA) and Bureau of Industry and Security (BIS) are operating with “extremely minimal” staff, according to the analysis. “The ITA has effectively ceased all anti-dumping and countervailing duty investigations, as well as other administrative proceedings, including annual administrative reviews due to the lack of funding,” the analysis says. “The delay in ongoing proceedings will have cascading effects on impending deadlines for months to come as all cases are either delayed or postponed for several weeks after the agency reopens.” The shutdown has also halted BIS’ exclusion process for Section 232 tariffs on steel and aluminum, with no new exclusions granted since Dec. 21, and a significant, continuing backlog and further delays are expected as the Commerce Department now has more than 100,000 requests to review.

RIM logistics, ltd. will continue to closely follow the government shutdown and will provide updated details as more information is released in its continuance.

 

Sources:

·       Gallagher, John. (2019, January 24). Unpaid Coast Guard Workforce Slows Maritime Business. Retrieved from https://www.freightwaves.com/news/maritime/lack-of-coast-guard-pay-affecting-vessel-financing.

·       Stevens, Matt. (2019, January 23). Aviation Professionals Warn of Dire Risk Amid Shutdown. Retrieved from https://www.nytimes.com/2019/01/23/us/shutdown-airports-security.html?action=click&module=Top%20Stories&pgtype=Homepage.

·       Bradley, Brian. (2019, January 21). Months of ‘Cascading Effects’ From Closure Expected. Retrieved from https://www.americanshipper.com/news/months-of-cascading-effects-from-closure-expected?autonumber=73214.

·       Papavizas, Charlie, Black, H. Allen, and Gardner, Bryant E. (2019, January 21). Commentary: Shutdown Hurts Maritime Industry. Retrieved from https://www.americanshipper.com/magazine/daily/year=2019&month=1&day=21&page_number=3.