Sequestration Could Cost CBP $1 Billion, Other Agencies 8.2%, Causing 'Nightmare'

CBP would face nearly $1 billion in budget cuts if budget sequestration occurs Jan. 2, as currently scheduled, and Immigration and Customs Enforcement $478 million. Virtually all government agencies involved, even just peripherally, with trade would face budget cuts of about 8.2 percent, if sequestration occurs, according to government figures. Officials of individual government agencies generally have been unwilling to discuss specifics of how they would be affected by the budget cuts.

The news came in the administration's much anticipated sequestration report Sept. 14, which detailed sharp across-the-board cuts to the budgets of most federal agencies. The OMB report spells out what steps Cabinet-level and quasi-independent regulatory agencies of the executive branch would need to take to cut pay and other expenses if Congress doesn't avoid sequestration before 2013.

The sequester, an automatic, ten-year, $1.2 trillion across-the-board budget cut, is required by the Budget Control Act of 2011 (here). The administration report, required by the Sequestration Transparency Act (here), was released by OMB. Senior administration officials hoped Congress would act to avoid the sequester, because if lawmakers fail "it would have a significant impact on the federal workforce," they said during a media call, speaking on condition they not be identified.

A CBP official recently predicted the cuts would create a tough environment for the agency and trade community. Cuts of 7 percent or higher are "going to be a challenge for CBP" and will make it difficult to "maintain efficient throughput of incoming and outgoing cargo," said Al Gina, assistant commissioner for CBP's Office of International Trade, while speaking at a conference Sept. 10. (See ITT's Online Archives 12091134 for summary of Gina's discussion of sequestration.)

If sequestration takes effect, it would be "a nightmare" for international trade, said James Cannon of Cassidy Levy, president of the Customs and International Trade Bar Association. He told us the cuts at CBP and ICE would "have a pretty negative effect on enforcement" of international trade rules, which is "a particular concern for the trade community. ... There is already enough trade fraud."

The actual impact of sequestration on trade will "depend on how they elect to use what they have" after the budget cuts, Cannon said. He speculated that CBP will try to keep "front line" staff in place to keep ports open and trade flowing, but said that would likely mean even less staff available to handle things like trade protests. He told us clients are telling him that they believe there's a 50/50 chance that sequestration will occur, though those who are more familiar with legislative processes put the chances lower than that. The National Customs Brokers and Forwarders Association of America declined to comment on the potential cuts.

International trade lawyer Timothy Brightbill of Wiley Rein said any cuts in the budgets of Commerce or USTR or the courts "would be extremely unfortunate. These entities are already facing increasing workloads ... if anything they need more resources given the growing importance of these trade cases.

It's tough to get a clear picture on exactly how the cuts will affect staff levels at agencies, outside experts said. Center for American Progress's Scott Lilly said: "The first question that has to be answered is whether that cut can be accomplished through furloughs and without" federal layoffs. "If it is necessary to do a reduction in force (RIF) the savings per slot elimination will be small -- definitely less than 30 percent since RIFs require a formal procedure that delays the final payroll date and because those being RIF[ed] are eligible for pay of unused sick leave and vacation time as well as other separation benefits. ... Furloughs would require less severe reductions but I don't think anyone is certain at this point how extensively furloughs can be used."

President Colleen Kelley of the National Treasury Employees Union said if the cuts go unabated, federal agencies would be forced to either furlough or lay off "thousands of workers, threatening the safety and security of the public. ... People could soon go to the government offices and find longer waits and shorter hours." Sequestration would have a "ripple effect" on businesses that could send the U.S. economy "into a tailspin," she said.

The National Small Business Association is "still going through everything to get a more firm understanding of how the various proposed cuts would impact small business," said Molly Brogan of that group. "We don't think Congress should just walk away on the issue. ... We believe there is a better way to do it than sequestration."

Among other government agencies involved in international trade facing cuts and the cut amounts are (note, most of the cuts are 8.2 percent of their full budgets, though the percentage varies in some cases: Court of International Trade,$2 million; the Food Safety & Inspection Service, $86 million; the Bureau of the Census, $21 million; the International Trade Administration, $37 million; the Bureau of Industry & Security, $9 million; the Transportation Security Administration, $508 million; the Coast Guard, $733 million; the Federal Highway Administration, $663 million; the Pipeline & Hazardous Materials Safety Administration, $14 million; the Maritime Administration, $41 million; Alcohol & Tobacco Tax & Trade Bureau, $62m million; the Office of U.S. Trade Representative, $5 million; Trade & Development Agency, $4 million; the Federal Maritime Commission, $2 million; the International Trade Commission, $7 million. The Export Import Bank of U.S. would be little affected (less than $1 million) by sequestration because of its limited net cost to the treasury.

Among the other government agencies at least a portion of whose activities affect international trade and which are facing similar cuts are the Army Corps of Engineers, U.S. Court of Appeals-Federal Circuit, the Environmental Protection Agency, Food and Drug Administration, Departments of Justice and State, Consumer Product Safety Commission and Federal Trade Commission.