CSCMP's Supply Chain Quarterly
June 26, 2019
Forward Thinking

Federal shutdown stalls few logistics operations

Critical transportation agencies remain open, UPS sees "business as usual."

Transportation and logistics providers took a wait-and-see approach to handling the potential impacts of the partial government shutdown that began at midnight Dec. 21 and requires "non-essential" employees of many federal agencies to stay at home while they are barred from working.

With President Trump and Congress mired in a stalemate over the terms of approving a budget to keep the government operating, the shutdown had no obvious end in sight as the nation headed into the New Year's Eve holiday break with thousands of workers idled.

One government body that was closed today was the Federal Maritime Commission, which in a statement on Wednesday said that all its employees had been placed on furlough and were prohibited by law from performing any duties during the shutdown. The exception to that requirement was the commission's acting chairman, Michael A. Khouri, and its commissioner, Rebecca Dye, who are exempted because they are Presidentially-appointed, Senate-confirmed officials.

According to its website, the commission is an independent regulatory and enforcement agency responsible for ensuring a reliable international ocean transportation supply system that supports the U.S. economy and protects the public from unfair and deceptive practices. Those duties are now on hold: "No transactions or filings will be accepted until appropriations legislation is enacted and the federal government reopens," the commission said in a release. "The Commission will resume normal operations upon enactment of appropriations legislation."

Among other impacts, the closure means that the commission:

  • will not respond to email or phone inquiries, or update its website
  • will not accept online filings for applications such as: Ocean Transportation Intermediary (OTI) applications or license updates; Foreign Unlicensed Non-Vessel Operating Common Carrier (NVOCC) registrations or renewals; Tariff Registration Forms; or eAgreements Filing System (Ocean carrier or marine terminal operator agreements or amendments).
  • will not support access to its online databases, including: SERVCON, the VOCC and NVOCC Tariff List, List of FMC Licensed and Bonded OTIs, and the Agreement Notices & Library.

Likewise, the U.S. Department of Commerce is now closed, according to its website. "Due to the lapse in Congressional Appropriations for Fiscal Year 2019, the U.S. Department of Commerce is closed. Commerce Department websites will not be updated until further notice," the site says. "The Department is prepared for a lapse in funding that would necessitate a significant reduction in operations and is currently implementing its plan."

However, that closure comes with some exceptions for operations that are considered essential safety or emergency programs, said Aaron Ellis, a spokesman for the American Association of Port Authorities (AAPA). One example is the Commerce Department's National Oceanic and Atmospheric Administration (NOAA) unit that manages the Physical Oceanographic Real-Time System (PORTS), Ellis said.

Also unaffected would be ongoing U.S. Army Corps of Engineers projects at cargo ports, although various other agencies could see changes, depending on the exact source of their funding within the federal budget, Ellis said.

In contrast, the shutdown has not affected a cadre of agencies within the U.S. Department of Transportation (DOT) that are funded by the Highway Trust Fund and federal gasoline taxes instead of through Congressional appropriation bills, a spokesman for the Federal Motor Carrier Safety Administration (FMCSA) said in an email today.

In addition to the FMCSA, those agencies continuing to operate normally during the shutdown include the Federal Highway Administration (FHWA) and the National Highway Traffic Safety Administration (NHTSA), said Lloyd Brown, a spokesman for the American Association of State Highway and Transportation Officials (AASHTO), an industry group for state DOTs.

Thanks to that funding structure, most of the federal agencies that work with state DOTs will continue to operate through the shutdown, he said. For example, that means state DOTs working on federally approved projects should not see any changes to their FHWA reimbursement funding, he said. "For now, we do not see much direct impact from the partial shutdown," Brown said in an email. "That does not mean we are not watching the situation closely and if things change, we'll definitely advocate on behalf of our state DOT members."

UPS, NRF see little disruption for consumers

As logistics and transportation providers navigate the uncertainty and disruption caused by these various impacts of the shutdown, many are taking a wait-and-see approach.

"We're operating business as usual," UPS Inc. spokesman Matt O'Connor said in an email today. The hurdle comes just days after Atlanta-based UPS stretched its network to accommodate the business shipping days of the entire year, including the peak surge the transportation and logistics company calls "National Returns Day."

While that approach may support normal operations for some providers, the National Retail Federation (NRF) industry group voiced concern about the potential impact of the shutdown on consumer confidence and buying patterns.

"It's disappointing that a year marked by a consumer-driven economic recovery is ending in gridlock. Congress and the administration should move quickly to resolve this stalemate so that every American family can enjoy the holidays without worrying about dysfunction in Washington," NRF Senior Vice President for Government Relations David French said in an emailed statement.

The government's stalemate comes amid economic and policy uncertainty heading into 2019. On one front, the NRF and other groups are weighing the potential impact of looming tariffs on Chinese imports and the possible replacement of the North American Free Trade Agreement (NAFTA) with the proposed United States-Mexico-Canada Agreement (USMCA) trade deal. And on another front, several economic trend watchers are warning of signs of a slowdown in trade and growth statistics in 2019 and 2020.

NRF figures show that the economy is holding strong against these threats so far, shown as November retail sales increased 5 percent over 2017, and the country is on track to meet the group's holiday forecast predicting that holiday sales will increase between 4.3 and 4.8 percent this year.

"We do not believe this partial government shutdown will dampen consumer confidence heading into the New Year, but it certainly doesn't help either," French said.

Ben Ames is Editor at Large and a Senior Editor at Supply Chain Quarterly’s sister publication, DC Velocity.

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