Welcome to Weise Wednesday! Twice a month we will share a brief Q&A with the former U.S. Commissioner of Customs, Mr. George Weise. If you have questions, we encourage you to send them to This email address is being protected from spambots. You need JavaScript enabled to view it..

 

Q. What is the impact of a government shutdown on the trade community? How likely is another shutdown?

A. The good news is that the recent shutdown of the government had virtually no impact on trade because it lasted only three days and occurred over a weekend. The bad news is that the Continuing Resolution (CR) that ended the shutdown expires soon, and if a bipartisan agreement is not reached on a number of difficult issues, we could be looking at another government shutdown on February 8.

 

Why government shutdowns occur

A government shutdown is not a new phenomenon. There have been 19 government shutdowns since 1974.  Before last week’s shutdown, the most recent was in September 2013. The longest running shutdown occurred in 1995 when I was Commissioner and lasted for 21 days.

A government shutdown occurs when the Congress and the President fail to pass legislation in a timely manner to fund government operations and services. If appropriations for the government are not enacted, the Anti-deficiency Act requires the government to shutdown affected activities, furlough “non-essential” personnel, and curtail agency actions and services.

 

How CBP operates during shutdowns

Fortunately, past shutdowns had limited adverse impact on trade because CBP designated nearly 90% of its employees as “essential.” During last week’s shutdown, CBP made a similar commitment on the designation of “essential” employees. It kept its personnel in place at land, air, and sea borders and between our ports of entry to carry out its important responsibility of securing our borders and keeping legitimate goods and people moving. 

In a  call with the trade community on January 22, CBP announced its intention to conduct daily calls with them to respond to their questions and address issues impacting shipments. CBP said it would work closely with their partner government agencies (PGAs) to reduce the risk that issues related to those agencies would adversely impact the clearance of import and export shipments. The expectation is that CBP would take similar steps if a new shutdown occurs.

Administrative and headquarters personnel are usually deemed “non-essential” and are furloughed. Under a future shutdown, it would not be surprising to see delays in areas such as responses to requests for rulings and resolution of protests. 

While CBP’s commitment is reassuring to the trade community, it is doubtful that other PGAs involved in trade compliance will designate such a high percentage of their employees as essential. Consequently, some shipments that are dependent on these PGAs for release could experience some delays.

 

A word on the budget process

It is difficult to predict whether the political issues that resulted in the most recent shutdown will be resolved before the next deadline of February 8. If another CR is not passed then, a second shutdown will occur.

It is clear that our flawed budget process has been a significant contributing factor in past government shutdowns. One of the most important responsibilities of the Congress is to fund the government. Each year, the budget process begins when the President submits a proposed budget to Congress. The Congress then is supposed to prepare a budget resolution outlining its priorities. The final step is for Congress to pass a number of appropriations bills funding the various agencies of Government.

Unfortunately, in the partisan political environment of the past 20 years, appropriations bills are rarely enacted, and the Congress has come to rely on CRs to fund the government on a temporary basis. The pending expiration of CRs creates a temptation for amendments not directly related to the budget to be tied to legislation to extend the CRs. Over the years, both parties have been guilty of this practice. Until the budget process is fixed, this practice is likely to continue.

 

Takeaway

My advice to all of you is to watch carefully as this process continues to unfold and stay informed on steps that CBP and other PGAs are taking in the event another shutdown occurs.