Quest News™

October 02, 2013

Impact of Government Shutdown


Of the 2 million U.S. federal government employees, an estimated 800,000 will be furloughed immediately due to the government shutdown. While crucial government services and benefits will continue without interruption, the trade and transportation industry can expect delays – some more drastic than others. While the current and potential impacts of the shutdown on both the government as a whole and the trade and transportation industry have been widely reported, we wanted to provide an update regarding industry related surety bonds.

Delayed bond filings with CBP

Among the Department of Homeland Security operations, CBP will retain roughly 88% of its employees said to provide “exempt functions.” The agency recently released details of Revenue Division functions intended to reaffirm the continuance of only those things required for exempt activities. They are:

  1. Retain only the minimum required personnel to accommodate continuous bond processing necessary to support Trade operations;
  2. Retain only the minimum required personnel to accommodate revenue collection activities;
  3. Retain only the minimum required personnel to support CBP Port of Entry collection operations;
  4. Ensure that only the minimum amount of recordkeeping is conducted to document the expenditure of funds;
  5. Acquire only the minimum amount of supplies necessary for continued critical operations;
  6. Secure all property and data not used for critical activities in a mannerthat protects the assets and ensures sensitive Trade data is protected;

Although Revenue Division bond filing operations continue, notifications sent in response to bond filings state they will be operating with a limited staff and the trade should expect processing delays. The Division’s main focus will be on processing and as a result, they will not be able to return phone calls and/or answer status questions in a timely manner.

Avalon’s Centralized Bond Unit (CBU) assists customers by managing their bond filing. The CBU will continue to process bonds as normal and assist with any general bond inquiries. Status of submissions will be difficult to confirm as the Revenue Division has stated they are not able to respond at this time. Current processing times may likely exceed 5 business days. The point of contact for revenue functions under a hiatus is Mr. Bruce Ingalls at (317)298-1107 or bruce.ingalls@cbp.dhs.gov.

No bond filings with the FMC at this time

The Federal Maritime Commission (FMC) will be severely impacted with all 120 employees furloughed. Bond filings with the FMC will be dated the day of receipt and handled accordingly when the agency reopens. The FMC website remains available, but will not be updated with new information.

FMCSA bond requirement is now effective

While the Department of Transportation reports roughly one in three workers will be furloughed, the Federal Motor Carrier Safety Administration (FMCSA) has indicated that they are fully funded through the Highway Trust Fund and not subject to the shutdown. The final rule regarding amendments to implement certain provisions of the MAP-21 Act was posted today in the Federal Register. Click here to read.

Effective today, both MAP-21 and the FMCSA’s rule provisions require transportation brokers and domestic surface freight forwarders to provide evidence of minimum financial security in the amount of $75,000. The agency has announced a delayed enforcement period of 60 days, but this is not to be interpreted to mean there is a phase-in period for the bonding requirement. Even though the agency will not immediately revoke a broker’s authority, the law required that all transportation brokers and surface freight forwarders obtain a $75,000 bond or trust by October 1st.  While those not in compliance will not have their authority revoked until December 1st, they are subject to private party civil actions effective immediately. At Avalon, we are here to assist. We offer a comprehensive range of insurance and surety products to meet the needs of transportation brokers and domestic surface freight forwarders.

Other impacts on Trade

Ports and industry associations report seeing the shutdown’s impact in various ways. For instance, the FDA in Chicago has furloughed 45% of their personnel, but the FDA in New York has advised they have staff in place at the moment to handle releases. Certain government websites including the USTR’s Tariff Schedule have been taken offline, while others are available but are not being updated. Others have been unaffected. Federal courts are to remain open until further notice as are the Office of Export Enforcement at Commerce’s BIS and The Office of the U.S. Trade Representative.

Avalon will provide more information on the government shutdown and the impact on the trade and transportation industry as it becomes available. We are committed to providing the highest level of service and will strive to keep you apprised of government updates impacting your business. Should you have any questions, please contact an Avalon representative in one of our regional offices.

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