Government Shutdown Impact: International Trade

Foley Hoag LLP

Foley Hoag LLP

As the standoff in Congress on the budget threatens to shut down vast swaths of the federal government, we write to remind clients about how a federal government shutdown would affect international trade and investment. The shutdown will have a material impact on agencies including the Department of Commerce's Bureau of Industry and Security (“BIS”), U.S. Customs and Border Protection (“CBP”), the Census Bureau (“Census”), and the Committee on Foreign Investment in the United States (“CFIUS”), the Department of State's Directorate of Defense Trade Controls (“DDTC”), and the Department of the Treasury's Office of Foreign Assets Control (“OFAC”).

This information is current as of September 29, 2023, based on the limited information available or based on experience during past shutdowns, but the situation is fluid and will likely change, especially if the shutdown continues beyond a few days or weeks.

U.S. Department of Commerce – Bureau of Industry and Security (BIS)

In prior shutdowns, the vast majority of the Department of Commerce’s workforce was furloughed. It is likely that BIS will suspend the review and processing of export license applications, advisory opinions, commodity classification requests (CCATS), and other non-enforcement related services except for those with exceptional national security or foreign policy impacts or those related to urgent humanitarian assistance. 

Export controls enforcement, however, will likely to continue with little impact from the shutdown.

U.S. Customs and Border Protection (CBP)

CBP is part of the Department of Homeland Security (“DHS”), which issued a fact sheet on September 28, 2023, detailing the impact of the potential shutdown. According to the fact sheet, 72% of the DHS workforce would continue to report to work. This includes CBP agents and officers working at over 300 ports of entry. Based on prior shutdowns, it is unlikely that CBP’s website will be updated regularly during the shutdown nor will CBP respond to inquiries. 

It is unclear how quickly the adjudication of forced labor-related enforcement actions, including detentions under the UFLPA will proceed. And clearance of shipments subject to CBP review will likely be slower than normal.

Census Bureau

Access to the Automated Commercial Environment (ACE) should continue and exporters should be prepared to continue to submit mandatory Electronic Export Information (EEI) to the Census Bureau. Enforcement activity will also likely continue during the shutdown. However, the release of statistical information will be delayed.

Committee on Foreign Investment in the United States (CFIUS)

We understand that an internal communication has been sent to CFIUS staff, but they have been instructed not to provide any details on the impact of a shutdown on CFIUS’ operations prior to the publication of a notice on CFIUS’ website. The notice should appear shortly after any shutdown begins. 

We believe that CFIUS will delay the formal “acceptance” of any new filings until after the shutdown is over in order to avoid commencement of the statutory review deadlines. For those filings or inquiries that are underway, we anticipate CFIUS will toll or otherwise extend the review period to the extent possible.

U.S. Department of State – Directorate of Defense Trade Controls (DDTC)

As with BIS, during prior shutdowns DDTC’s non-enforcement activities were significantly curtailed. Those seeking export licenses, registration and renewal requests, advisory opinions, or Commodity Jurisdiction determinations should expect significant delays except for urgent requests related to U.S. national security and foreign policy priorities. DDTC has resumed some non-urgent service before the end of earlier government shutdowns. 

Enforcement activities will continue with little impact from any shutdown.

U.S. Department of the Treasury – Office of Foreign Assets Control (OFAC)

OFAC is expected to have some staff continue to report for duty to maintain core operations. However, those seeking specific licenses or regulatory guidance should expect significant delays except for urgent requests related to U.S. national security and foreign policy priorities or humanitarian assistance. OFAC’s communications with financial institutions may also be delayed.

We anticipate that OFAC will continue to update and maintain the Specially Designated Nationals And Blocked Persons List (“SDN List”) though other aspects of its website will likely not be kept up to date.

OFAC will continue sanctions enforcement activities and we anticipate that persons will continue to be designated during any shutdown, especially in connection with the Russian invasion of Ukraine.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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