Sequestered at the Border

The following is from the 12 March 2013 edition of Journal of Commerce.

The need for a new Customs commissioner will become agonizingly clear when the fallout from federal sequestration delays clearance of U.S. imports as early as this month.

Without a politically appointed chief, the agency has been unable to argue against the bumbled implementation of $85 billion worth of total federal budget cuts, according to international trade attorney Susan Kohn Ross. As a result, Customs and Border Protection has $512 million less, or roughly 5 percent of its fiscal 2013 budget, for core operations, forcing the agency to reduce overtime pay and hold off on adding new agents.

The reduced manpower could add five or more days to container examinations at seaports, and border crossings will experience “significant daily backups for truck shipments,” Deputy Customs Commissioner David Aguilar said.

Aguilar stepped into the lead Customs role when Commissioner Alan Bersin, a recess appointee by President Obama, resigned in December 2011. Aguilar plans to leave Customs at the end of this month, and Homeland Security Commissioner Janet Napolitano hasn’t named his successor. A new Customs commissioner would have to be nominated by President Obama.

For members of Customs’ trusted trade programs such as the Customs-Trade Partnership Against Terrorism and the Free and Secure Trade initiative, the sliver of good news is they can expect their shipments to clear faster. “At this point, the fairest thing I can say is, we have no way to predict how long it’s (the sequestration) going to take or how badly it’s going to impact the supply chain,” Ross said.

What is clear is that the delays will mount when roughly 60,000 agents are furloughed up to 14 days between April 21 and the end of September. The reduced Customs manpower reportedly increased the wait times for travelers at major airports in mid-March, but the impact had yet to shift to the cargo side.

“We expect to start seeing delays in a week or two on the ocean and air side,” Brandon Fried, executive director of the Air Freight Forwarders Association, said on March 7.

Despite the lack of a politically appointed commissioner, Customs has been doing an “excellent job,” said Ross, who expects the agency to do its best processing cargo quickly without sacrificing safety. But the way the sequestration cuts “are being implemented and forced down the throat of Customs is a direct result, I think, of there not being a (permanent) commissioner,” Ross said at the JOC’s 13th annual TPM Conference in Long Beach, Calif., this month.

The impact of the federal budget cuts goes beyond just hindering Customs’ ability to speed the processing of imports. The sequestration — created by Congress and the Obama administration as way to force themselves to negotiate budget cuts and reduce the overblown federal deficit — also could hamper Customs’ implementation of the Automated Commercial Environment through future budget cuts. The agency needs more money in the fiscal 2014 budget to complete the long-delayed cargo process system.

Future budget cuts also could slow progress on the Beyond the Border Initiative, a U.S.-Canadian initiative to speed the movement of goods and people across the border.

The nation’s ailing highway and road network also will suffer, as the sequestration cuts some $380 million worth of surface transportation infrastructure spending. The Department of Transportation’s total fiscal 2013 budget is shaved by nearly $2 million, according to a White House report. Through those cuts, the Surface Transportation Board, the railroad regulatory agency, and the Federal Motor Carrier Safety Administration each will receive $1 million less. The Saint Lawrence Seaway Development Corp. also will get $2 million less for the operation and maintenance of the waterway that facilitates trade between the Great Lakes to the Atlantic Ocean.

Through the sequestration, the U.S. Army Corps of Engineers’ operation and maintenance budget for the rest of the fiscal year will be cut 5 percent, or $250 million, likely resulting in less dredging for the nation’s ports and inland waterways. The federal cuts will decrease the amount of foreign food aid U.S.-flag vessels can ship because Food for Peace grants will be trimmed by $74 million, or by 5 percent.

James Caponiti, executive director of the American Maritime Congress, fears the cuts will be even greater, because there is a growing call to give recipient countries monetary aid directly instead of through grain shipments. Such a move, he argues, would hurt U.S. farmers and seafarers, and giving a lump sum of cash to needy countries increases the chances of fraud.

U.S.-flag carriers already absorbed a blow late last year, when the federal surface transportation bill, known as MAP-21, reduced their guaranteed share of aid cargoes from 75 to 50 percent.

Carriers enrolled in the Sealift Readiness Program, an arrangement in which the Defense Department maintains a ready fleet of U.S.-flag carriers for times of war and emergency, also will take a hit from sequestration. The 7.8 percent, or $14 million, cut to the Maritime Administration’s Maritime Security Program likely will evenly reduce each of the $3.1 million in annual payments made to the carriers that operate the 60 vessels in the program, Caponiti said.

The federal payments only offset about half the increased costs of operating a U.S.-flag vessel rather than a foreign-flag ship. He said he doesn’t expect the sequestration cuts to spur carriers, including Maersk Line Ltd. and APL, to exit the program, but they “will make it harder for these guys to compete.”

The larger concern regarding the sequestration is that the cuts are just beginning, as $1.2 trillion is scheduled to be chopped from federal budgets over the next 10 years unless Congress and the Obama administration solve the federal deficit issue, said Leslie Blakey, executive director of the Coalition of America’s Gateways and Trade Corridors, a Washington-based advocacy group.

In addition to lowering economic growth — which would reduce the amount of freight moving through U.S. supply chains — the sequestration slows the trade processes that boost U.S. production, she said.

“I do think, frankly, that there’s going to be a quick solution when you see the CEOs of the major corporations getting on the phone with the White House and getting on the phone with the congressional leadership and saying, ‘Fix things now before we have to start laying off people,’ ” Ross said.

Contact Mark Szakonyi at [email protected] and follow him at twitter.com/Szakonyi_JOC.