Categorized | Politics, Trade

Federal Government Shutdown Starts to Crimp Trade

Reposted from The Wall Street Journal


Federal Government Shutdown Starts to Crimp Tradeexports

Importers, Exporters Can’t Get Approval to Ship Computer Gear, Lumber, Steel

The U.S. government’s partial shutdown is beginning to gum up trade.

All pesticide imports to the U.S. have been halted, according to the Environmental Protection Agency, which must approve them but has had more than 90% of its staff furloughed. Some U.S. technology companies can’t fill overseas orders because they cannot obtain U.S. Department of Commerce authorization to export. Steel imports are stranded at customs-clearance warehouses awaiting paperwork.

“It’s a mess,” said Marianne Rowden, president of the American Association of Exporters and Importers.

More than 40 government agencies, including the EPA, the Department of Agriculture and the Department of Commerce, are involved in trade shipments, said Ms. Rowden. Fourteen agencies have “release and hold” authority that trumps clearance from U.S. Customs and Border Patrol, she said.

Yet while Customs is largely staffed during the shutdown, many of the other agencies have pared staffs and closed websites.

It is unclear how widespread the problems are or how many industries are affected. But trade is an increasingly important engine of the $15 trillion-plus U.S. economy. U.S. exports last year rose 4.4% to $2.196 trillion and imports grew 2.7% to $2.736 trillion. The Commerce Department says nearly 10 million American jobs are supported by exports.

Applied Materials Inc., AMAT +1.17% one of the largest makers of computer-chip manufacturing equipment, believes the lapse in routine export approval “could affect our ability to ship products to certain markets,” said spokesman Kevin Winston. “Pending applications and future submissions are on hold.”

Last Thursday, a website run by a Commerce Department bureau suddenly shut down on Beth Peterson, president of BPE Global, which advises importers and exporters on compliance with regulations. She was trying to apply for export authorization for a client. “We knew right away” the exporter faced a problem, said Ms. Peterson.

The Bureau of Industry and Security site is used by sellers of high-tech goods that are subject to export controls, particularly those with encryption capabilities that could interfere with the government’s intelligence-gathering. Licenses often are required to export equipment used to make semiconductors, particularly advanced chips that can have military applications.

Cisco Systems Inc. CSCO -0.56% and Juniper Networks Inc. JNPR -1.39% require export authorization for some of their networking gear, for example. A spokesman for Juniper said it hadn’t yet been affected but could be if the shutdown persists. Cisco declined to comment.

The export approvals sought Thursday by Ms. Peterson of BPE Global would have assigned a tracking number required for an invoice. For affected companies, the setback “is significant,” Ms. Peterson said. “This is the final quarter of the year. They can’t get authorization for their new products. They can’t complete transactions. They’re worried about revenue recognition. It impacts their stock, their profitability,” she said.

She estimated that a week-long shutdown would affect about 60% of her clients.

In 2012, the Bureau of Industry and Security processed 23,229 export license applications for transactions valued at about $204.1 billion, according to a study by American Shipper magazine.

Meanwhile, the EPA has stopped clearing pesticides for importation. “Without EPA’s review and approval of forms demonstrating that the pesticides have been properly registered, the products will not be cleared for entry into the United States,” Alisha Johnson, a spokeswoman for the agency, said in an email.

U.S. annual expenditures on pesticides total about $12 billion, with imports accounting for around 15% of that, according to the EPA.

“We have a substantial amount of pesticides coming in the next weeks and we don’t have a solution,” said Vincent Iacopella, chief operating officer of Janel World Trade Ltd., JLWT +17.78% a logistics company and customs broker. Pesticides will sit at ocean terminals, at rail ramps or be held in warehouses if the bottleneck isn’t cleared, he said.

The problems have begun to affect steel imports as well.

Lisa Goldenberg, president of Delaware Steel Co. of Pennsylvania, a distributor and steel trader in Fort Washington, Pa., said steel is being waylaid in customs-clearance warehouses in Baltimore and Newark, N.J., pending issues such as permits to allow it to enter the country.

“It’s sitting there waiting for paperwork,” Ms. Goldenberg said. “It’s in limbo.”

In Mobile, Ala., trucking executive Tommy Hodges can’t move a load of furniture-quality lumber out of his warehouse for export until it is cleared by the USDA’s Animal and Plant Health Inspection Service, to ensure the wood isn’t bug-infested. But “there are no inspectors working,” he said, at least none he could find.

That has caused Mr. Hodges, chairman of Titan Transfer Inc., to conclude that his wood inspection is “nonessential.” But multiply his load by many others and “it’s probably deemed more essential than a lot of people think,” he said. “None of ‘em in Washington have much of a clue about what happens in the Main Streets across the U.S. They live in La-La Land.”




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