What a Government Shutdown Would Mean for the Supply Chain

government shutdown

While Congress managed to avoid a government shutdown this week, the agreement is temporary. In 45 days, members will have to revisit the sticking points and work again to keep the government open. Should they not reach an agreement—which is a very real prospect—the government shutdown would impact the supply chain in many ways.
The first and potentially biggest way a shutdown could become disruptive is in the international flow of goods. Many areas of imports should remain relatively intact, but they could slow. For instance, the Customs and Border Protection Agency falls under essential government and would remain in place, so trade processing at ports should continue relatively unscathed. Along the U.S.-Mexico border, however, trucks and trains are already experiencing delays as some operations have slowed or halted for several days due to a surge of immigration. Both BNSF and Union Pacific, for instance, held freight for several days until crossings reopened. Adding this to a looming shutdown could lead to a perfect storm.

Services related to imports, such as processing tariff-exclusion requests, might halt, slowing the supply chain. Trade enforcement would also likely continue but at a slower pace. Also worth watching is hazardous materials shipping. Past government shutdowns have included EPA disruptions as the agency suspends some of its operations.
The export side of the supply chain may face even bigger disruption. Offices like Census and OFAC usually take a hit from shutdowns, slowing the speed of exports. For shippers already facing slow trade volumes, this could prove painful and costly.

Things to keep in mind and ways to prepare should the shutdown go forward in November: If you’re a company that moves cold-chain products, such as food and some drugs, ensure your cold storage is in good shape. This will help offset delays in overall shipping times should that come to pass.
Also, keep an eye on highway and road projects. Those that are underway when government shutdowns start will continue to progress, but bidding for future projects, as well as their ability to begin, will go on hold. When it comes to the FMCSA and the Federal Highway Administration, there is currently enough cash on hand to keep staffing full, so truck inspections would at least continue at a normal pace.

Another step to take ahead of a potential government shutdown is fortifying your inventory levels. Like during the pandemic, if you don’t have adequate inventory on hand when a shutdown occurs, you might be faced with unhappy customers. Ensure your visibility software is up to date, too, so that you can be aware of incoming disruptions and alert your customers to them in advance.
There are no guarantees that a shutdown will occur, but as with many of the supply chain disruptions that have hit U.S. companies in the past few years, preparation is key. Tighten up your procedures and systems and have a plan in place should negotiations grind to a halt come November.