Tags: Shutdown | Trade | Financing | Ports

Shutdown Hinders Trade as Processing, Financing, Ports Slow

Friday, 11 October 2013 03:29 PM

Business at Thrush Aircraft Inc. should be booming this time of year as the Georgia company ships its crop dusters to customers in Brazil preparing to fertilize crops.

A partial U.S. government shutdown, however, has brought about $13 million worth of orders to a halt because the shuttered U.S. Export-Import Bank isn’t providing financing for the buyers in South America, where it’s now spring.

“It’s just brutal,” said Eric Rojek, the vice president for sales of the closely held company, based in Albany. “It’s a very difficult position that these guys have put us in,” he said, referring to U.S. lawmakers who couldn’t agree on a plan to keep the bank and other federal agencies open before the Oct. 1 start of the fiscal year.

American exporters and some companies trying to ship products into the U.S. say they are finding new roadblocks as the impact of the shutdown in Washington spreads overseas. In addition to delayed sales, the furlough of hundreds of thousands of federal workers has slowed the processing of goods like pesticides inspected by the Environmental Protection Agency, which laid off more than 90 percent of its staff.

“It’s really been bogged down,” said Aaron Ellis, a spokesman for the American Association of Port Authorities. “Especially with goods like frozen beef, it really costs a lot of money to maintain because they have to be plugged in to stay frozen on the dock,” he said in a phone interview.

Tea Party

The normal operation of the Export-Import Bank — whose existence was the subject of a months-long battle last year between Tea Party Republicans and airlines on one side and the U.S. business lobby on the other — has come to a halt.

“The fact is, we can’t do new deals” or process those that have already been submitted for approval, David Sena, the bank’s chief financial officer, said by phone. The bank provides financing, including loan guarantees, to foreign buyers of U.S. goods. Those deals benefit companies including Chicago-based Boeing Co. and General Electric Co., based in Fairfield, Connecticut.

“There are no immediate financing impacts to Boeing airplane deliveries,” Doug Alder, a company spokesman, said in an e-mail. “However, as the shutdown continues, there is the potential of some customer impacts to near-term deliveries where Ex-Im financing has been planned.”

Supplier Disruptions

Export-Import Bank financing can act as an “export magnet” because sales of complex systems like aircraft or satellites also benefit suppliers, Remy Nathan, vice president for international affairs at the Aerospace Industries Association, said in a phone interview. The Arlington, Virginia-based industry group’s members include Lockheed Martin Corp. and United Technologies Corp.

“Anything that interferes with the bank’s operations has implications for the suppliers,” Nathan said.

Some agencies that perform inspections, like the EPA, have pared their staffs during the shutdown. The U.S. Food and Drug Administration has furloughed 18 percent of its 420 investigators who work on imports, agency spokesman Steven Immergut said in an e-mail.

The U.S. International Trade Commission, which investigates trade disputes to determine whether imports have unfairly harmed U.S. businesses, has stopped that work. The Commerce Department division that promotes exports is virtually shuttered. The U.S. Trade Representative’s office, in the process of negotiating major agreements with the 28-nation European Union and 11 Pacific-region nations, is operating with 26 percent of its 232- person staff.

Technology Exports

The Commerce Department’s Bureau of Industry and Security has furloughed about 60 percent of its workers. The bureau reviews the export of goods that are restricted because they contain advanced technology.

The lapse in the bureau’s routine functions “could affect our ability to ship products to certain markets,” said Kevin Winston, managing director of corporate communications at Applied Materials Inc., a Santa Clara, California-based computer chipmaker. “Pending applications and future submissions are on hold,” he said in a statement.

Delays in shipments of millions of dollars worth of pesticides are already having an effect, Ray McAllister, the senior director of regulatory policy for CropLife America, a Washington-based trade group representing agricultural chemical manufacturers, said in an e-mailed statement.

Chemical Pesticides

With inventories of chemical ingredients running low for products in production, “it may not take long for the bottlenecks to have an effect on supplies of crop protection products for agriculture,” which would disrupt planting seasons, McAllister said.

There could be delays in document reviews and exams for some imports due to reduced staffing at the FDA, which inspects drug and some food imports, according to an update Samuel Shapiro & Co., a Baltimore-based customs broker and freight forwarder, posted on its website. The U.S. Fish & Wildlife Service declarations now need to be filled out manually, and the licensing system for steel has stopped.

Jane Taeger, Shapiro’s director of compliance, said the company hasn’t noticed significant changes in customs processing, though shipments such as pesticides have been held up by the lack of inspectors.

“Unfortunately, a lot of the shipments were already on the water, and now they’re just sitting” at the pier gathering storage charges, she said.

U.S. Customs and Border Protection has kept its inspectors working throughout the shutdown.

“It’s mass confusion,” at U.S. ports, said Lisa Goldenberg, president of Delaware Steel Company of Pennsylvania, a wholesale distributor based in Fort Washington, Pennsylvania. Steel is being held up at ports in some places and at warehouses in others, she said in a phone interview.

‘Pretty Quiet’

“What I’m hearing is that they’re running, but light,” Goldenberg, who is also president of the Association of Steel Distributors, said of the nation’s ports. “They’re open for business, but sort-of not really.”

Spokesmen for ports in California, Louisiana, Houston and Georgia said their facilities haven’t seen a significant impact.

“It’s been pretty quiet,” Art Wong, a spokesman for the Port of Long Beach, said in an interview. While there hasn’t been a backup of cargo, “in some cases they don’t get to open the containers until they get inspections. They could be sitting in warehouses waiting for paperwork to clear.”

If the shutdown persists, ports will increasingly see their operations affected, said Page Siplon, executive director at the Georgia Center of Innovation for Logistics.

“The backlog will build up to the point where it could really impact the flow of ports more generally,” Siplon said in a phone interview.

Fortunately, most merchandise needed for holiday season sales entered the U.S. in August and September, according to Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation.

“Our bigger concern with holiday sales is the impact of the shutdown on consumer confidence,” he said in an interview.

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Business at Thrush Aircraft Inc. should be booming this time of year as the Georgia company ships its crop dusters to customers in Brazil preparing to fertilize crops.
Friday, 11 October 2013 03:29 PM
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