Leibowitz on Trade: The Government Shutdown

The shutdown is “partial,” meaning that only certain government departments and agencies are affected. These in turn are defined by the congressional appropriations bills that have not been enacted (by passage through both houses of Congress and the president’s signature) for the current fiscal year, which began Oct. 1, 2018.

On the trade front, there a number of agencies that have international trade responsibilities. A partial list of those agencies includes: U.S. Trade Representative; Department of Commerce, including the Bureau of Industry and Security; International Trade Administration; Department of Homeland Security, including U.S. Customs and Border Protection; Department of the Treasury; Department of Agriculture; and the Department of Justice.

China

In the coming week, a U.S. delegation is traveling to China for the first session of negotiations to reach a deal on trade-related matters, including intellectual property, technology transfer, tariffs on China’s exports to the U.S., and retaliatory tariffs imposed by China. If those talks make progress, a high-level delegation will travel to the United States next week to continue discussions. The U.S. delegation to Beijing will be led by Jeffrey Gerrish, the Deputy U.S. Trade Representative. (Robert Lighthizer is the U.S. Trade Representative, but will not attend the initial round of talks.) Commerce Under Secretary Gil Kaplan and Agriculture Under Secretary Ted McKinney were also named to the U.S. delegation. However, the shutdown has curtailed operations at Commerce and Agriculture. USTR announced on Dec. 28 that operations of that agency would continue under “current funding.” The USTR appropriation for fiscal year 2019 has not been approved; apparently, there is still some 2018 money available. Expect the negotiations to proceed as scheduled.

Also, on Dec. 28, USTR published the first list of product exclusions under the China Section 301 tariffs. I reported on this list last week. On Jan. 4, a new list was published. The list updated the status of the 10,791 exclusion requests that were filed under List One. According to the updated list, 1,254 requests were denied (again, this was previously reported). USTR approved 983 exclusion requests (this was reflected in the Dec. 28 exclusion notice published in the Federal Register). Nearly 9,000 requests remain to be decided. The shutdown will probably slow down the handling of these requests. Much of the work on them reportedly is being done by outside consultants. While government employees may be “essential,” non-government consultants generally are not.

No exclusions have been finalized on the List Two tariffs, which went into effect on Aug. 23. Over 2,000 exclusion requests were filed by the deadline of Dec. 18. The comment periods for many requests will expire later in January.

The shutdown will begin affecting USTR’s operations next week when paychecks are supposed to be issued, but will not be if the shutdown continues. At that point, the trade negotiation schedule may be affected by the shutdown if it continues.

Steel and Aluminum Tariffs

The Section 232 tariffs on steel and aluminum will be affected significantly by the shutdown. Thousands of exclusion requests under the Section 232 regulations are still pending, with no prospect of decision while the shutdown continues. No new decisions on product exclusions have been posted since Dec. 20. Presumably, the shutdown will prevent additional work on exclusion requests until further notice. A good deal of work on the exclusion requests is done by outside consultants, who are not reporting to work while the shutdown continues.

Antidumping and Countervailing Duty Cases

The International Trade Administration, which handles these cases, is operating in shutdown mode. All work on pending investigations and reviews has ceased until the government shutdown is resolved. Based on prior experience, the case deadlines will be extended until the Commerce Department is up and running again.

U.S. Customs and Border Protection

About 54,000 of the 60,000 employees at U.S. Customs and Border Protection are designated “exempt” from furlough during the shutdown, but they will work without pay for the duration of the shutdown. CBP has not announced whether certain operations of Customs will be curtailed or suspended during the shutdown. If companies have Customs business, it is advisable to remember that Customs personnel are not being paid, even though they are working during the shutdown.

International Trade Commission

The ITC is shut down until the impasse is resolved. All pending matters are in abeyance, including the ITC assessment of the U.S.-Mexico-Canada agreement (USMCA), which is due in March by statute.

What Happens Next?

There have been shutdowns in the past, and each of them had some lasting consequences, although regular order was restored in due course. Dealing with the federal government during this period will require patience and foresight.

Lewis Leibowitz

The Law Office of Lewis E. Leibowitz
1400 16th Street, N.W.
Suite 350
Washington, D.C. 20036

Phone: (202) 776-1142
Fax: (202) 861-2924
Cell: (202) 250-1551