What does the US shutdown mean for the logistics industry?

As the US government shut its doors on October 1, many within the transportation and logistics sector are wondering what its effects will be on the industry.

According to the Journal of Commerce, most federal transportation agencies are feeling some kind of negative impact. For example, only three of the 140 employees at the Surface Transportation Board, the railroad regulatory agency, are exempt from furlough, while 467 of the 886 Federal Railroad Administration workers have been furloughed. Of the 830 workers at the Maritime Administration, 451 are furloughed.

Truck movements are expected to continue on as normal thanks to separate funding of the Federal Motor Carrier Safety Administration.

The shutdown also comes at a time when retailers are importing goods for the holiday season. According to the National Retail Federation, the group has not heard of any delays at the US ports. Still, it is cause for concern and many freight forwarders and logistics providers are warning customers to expect delays, particularly for goods that need to be inspected by any of the following government agencies: US Consumer Product and Safety Commission, Food and Drug Administration, Environmental Protection Agency and the US Department of Agriculture. These agencies have had to furlough much of its staff.

In fact, 45% of FDA employees have been furloughed. According to its website, activities that have been halted include “routine establishment inspections across the agency portfolio, some compliance and enforcement activities, monitoring of imports, notification programs and the majority of the laboratory research necessary to inform public health decision-making.”

Although Customs and Border Protection agents will continue to clear cargo, The American Association of Port Authorities estimates that only 88% of US Customs and Border Protection employees would remain on the job. The potential of this could mean longer clearance times at borders, ports and airports.

For how long can the shutdown last is unknown however, as the debt ceiling deadline looms, it is hopeful that an agreement on both issues will be reached prior to the deadline.

According to economists at Moody’s Analytics, if the government shutdown lasts 3-4 weeks, it could reduce GDP by 1.4% for the quarter. Other economists estimate that the shutdown will cost the economy $1bn a week – something the fragile US economy cannot afford.

Meanwhile, no one is quite sure what will happen if the debt ceiling is not raised. Many economists predict interest rates will spike and perhaps throw the US and quite likely the rest of the world into a recession. Others, including some in Congress, do not believe anything will happen. Regardless, Wall Street, the US people and the rest of the world are not willing to take a chance on a negative outcome and as such are ready for the US Congress to resolve its differences and come to an agreement on the issues at hand.