Sequestration: How will it affect Imports and Exports?

As a part of the budget sequestration process that began on March 1, 2013, Customs and Border Protection will be required to make significant cuts to its budget. CBP plans on implementing the budget cuts through the following:

  • immediate reduction in overtime
  • furloughs (which will take at least 30 days to implement. We don’t expect to see furloughs until early or mid- April)
  • hiring freeze

The process will have an impact on the importing and exporting community in different ways.

IMPORTS

Air Shipments

Importers who have a continuous bond and have a positive history of paperless releases should see little impact on their inbound air entries. The electronic paperless release process does not involve CBP active personnel reviewing the entries. Therefore cuts in overtime, furloughs, and hiring freezes should not impact the paperless release process.

Where a delay may be felt is if Customs selects the shipment for review. If Customs selects a shipment for document review, they normally are able to release a shipment within roughly 24-48 hours. However with the budget cuts, this process may take longer. The same may be said in cases where Customs selects a shipment for exam. Fortunately, the frequency of exams on air shipments is significantly lower than the frequency for ocean shipments.

Importers who do not have a continuous bond always have their shipments selected for document review. Therefore such importers who have urgent air shipments should be cognizant of the potential for delayed Customs release and should plan accordingly.

Ocean Shipments

For full containers, importers who have a continuous bond and normally receive paperless releases should not see any impact from the budget cuts. Where importers could see delays would be as follows:

    • Containers subject to an x-ray exam. Most ports usually manage to complete x-ray exams in roughly three working days. Customs has already mentioned that officers do from time to time need to work overtime in order to complete these examinations. With the inability to work overtime, Customs has indicated that these exams could take five days or longer to complete. This delay may cost importers not only in time, but also money. Most ocean terminals don’t provide more than five days demurrage (storage) time. If Customs takes longer to examine a container, it is the importer who remains responsible for the demurrage fees. 
    • Intensive exam – As with x-ray exams, intensive exams are reliant on Customs man power to complete. The inability to provide overtime work combined with furloughs could significantly delay the exam process time resulting in higher fees as well as delays in cargo release.
    • LCL cargo is commonly subject to x-ray and/or intensive exams. This is regardless of the importer’s status. Importers who ship LCL cargo must now understand that the likelihood for delays in shipping will rise with the budget cuts.

The Customs Office of International Trade also mentioned that there could also be eventual delays in rulings, audits, and various strategic initiatives.

We haven’t heard about how sequestration may affect other government agencies that regulate imports (FDA, USDA, CPSC, etc.).

EXPORTS

Most standard exports are released through the Customs AES system electronically. These shipments should not be impacted by the budget cuts. However shipments that are subject to possible Customs review at the time of export should expect to see longer response times. Automobile exporters should anticipate that Customs may take longer than the customary 72 hours to release a shipment. Carnet exports as well I.E.’s may also take longer to process.

We will be closely monitoring news for additional information about the impact of sequestration on imports and exports.

Feel free to contact me with questions.

-Jimmy Ting

jimmyting@great-world.com

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