• Federal Government Shutdown Increases Risks to Smooth Supply Chain Flows

    16 January 2019

    The 2018-2019 United States federal government shutdown entered its third week on January 7, and is starting to elapse to the point where further continuation will have noticeable impact on supply chains. Starting on December 22 after a lapse in appropriations stemming from disagreement between President Trump and Democratic Congressional leadership on funding for a proposed border wall, the shutdown’s effects were anticipated to be minimal due to the number of employees deemed essential. Several elements of the Department of Homeland Security (DHS), including CBP and C-TPAT, and the Department of Agriculture (USDA), fall under this purview.

    Federal employees have restrictions on their ability to strike as defined by 5 U.S.C. § 7311 and the Federal Service Labor-Management Relations Statute of Title VII of the Civil Service Reform Act of 1978. A gray area, however, exists with contractors, who while not performing the majority of public-facing roles of DHS and USDA associated with international commerce, do so for notable support roles, such as updating databases and information sources such as the Harmonized Tariff Schedule of the United States (HTSUS). While contractors are subject to similar continuity of operations regulations as sworn federal employees, their status as private sector employees affords them the possibility of strike protections under the National Labor Relations Act. Compounding the possibility is the fact that contractors will not receive back-pay as a guarantee as do federal employees.

    While essential employee provisions and automated flagging serve as an important contingency measure, further slowdowns by TSA employees, whose responsibilities include outbound shipment inspection, could be a sign of similar operational slowdowns to come. Such slowdowns could also affect shipments exempt from Section 301 tariffs, as staff involved in those inspections are furloughed, which merits attention for those importing goods impacted by U.S.-China trade war tariffs on consumer and industrial goods including those for the aerospace, IT, and manufacturing sectors.

    While critical security aspects of international commerce such as C-TPAT are anticipated to remain intact, proceedings for import relief under Sections 201, 332, 337 and Title VII of the Tariff Act of 1930, as well as maintenance of the HTSUS, are at risk. Furthermore, furloughs of Federal Aviation Administration (FAA) employees not covered under essential provisions adds a physical dimension to a predominantly bureaucratic issue, where doubts about airworthiness of aircrafts requiring inspection can potentially impede scheduled departures. With sources of customs and international shipping data wanting due to lack of appropriations, performing such tasks with outdated information can cause delays and issues with reinspection in the future.

    The current government shutdown is already the longest in US history. With impacts on DHS, USDA, and FAA, the shutdown’s developments, as well as their impacts on the federal and contractor workforce, those shipping to and from the US should anticipate continued challenges to customs clearance facilities and are advised to plan accordingly.

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