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IndustryNet Blog

How the government shutdown is affecting manufacturing

Posted by IndustryNet on Friday, January 25, 2019

100000332emptyconveyorsWith the U.S. government in shutdown mode since December 22nd, all eyes have been on Washington with hopes that the budget stalemate will soon resolve, and government operations can get back to normal.

The shutdown is already the longest in American history (breaking the record set in 1995, when the Clinton administration shut down the government for 21 days) and a number of reports suggesting the shutdown may stick around for a while.

We’ve all heard the reports of how the shutdown is affecting federal workers and essential services like the TSA, but what about the business community?

Turns out, the government shutdown is having a serious impact on U.S. companies, especially those in the manufacturing sector, with some crucial details such as import inspections, labeling, federal contracts and small business loans either delayed or shelved altogether.

Here are just a few examples of how the shutdown is impacting the manufacturing world.

No SBA loans. If your company is looking to obtain Small Business Administration funding, most likely you’ll need to wait until the government is up and running. The SBA has ceased making most types of loans as a result of the shutdown.

The good news is the SBA is still offering loan programs for businesses affected by natural disasters.

No tax help The IRS will continue to tax your company as usual, but you won’t have anyone to complain to (at least, no one from the IRS). Also, if you are of the patient sort and have been calling the IRS with questions about your business’ tax situation, your inquiries will need to go unanswered for now.

However, a good tax advisor or CPA should be able to answer most of your tax questions. If you are expecting a refund, don’t hold your breath. But you don’t have to worry about audits, at least for the time being. The IRS will not be processing those, either.

No Employment Eligibility Verification When you sign on new employees, your HR Department probably heads over the E-Verify, the online system that allows employers to confirm the eligibility of their employees to work in the U.S..

But with the shutdown, this handy website is now adorned with a bright red message that states: “Due to the lapse in federal funding, this website will not be actively managed.”

This isn’t to say you can’t hire anyone during the shutdown. Those of you who have completed your employee I9 forms the old school way know that you can simply request the employee present documents that confirm their identity and eligibility for employment. They can also fill out an I9 form, found here.

No Economic Data: Many businesses look to economic data released by the federal government to get an idea of current business climate and labor market conditions. With the shutdown, data on some key economic indicators such as GDP, consumer spending, and manufacturers’ shipments, will not be collected.

Government shutdown: Specific industries affected

In terms of manufacturing, the shutdown is continuing to have an impact on industrial businesses, with some industries feeling the pain more than others. Here are some specific sectors that are most affected by the government shutdown:

Aviation Industry: A wide range of U.S. manufacturers, such as aerospace suppliers and shipbuilders, rely on defense contracts, and now many are reporting they are feeling the burn from the government shutdown. Boeing announced this week that it expects the shutdown to have an impact on its operations and the aviation industry as a whole. This, of course, could have a ripple effect across a wide range of suppliers to major defense contractors.

Supplement Industry Starting December 22nd, The Food and Drug Administration halted inspection of supplement facilities, which means the nutritional supplement industry must now worry about public perception and confidence in its products now that inspections have lapsed. This could have a drastic impact on sales, should the shutdown wear on.

Some supplement makers may also delay the release of new products, as many rely on adverse effect reports of common drugs released by the FDA when developing new supplements.

Alcohol Industry You wouldn’t think your average brewery or vineyard would need the federal government to get its products to market, but it turns out, the alcohol industry relies on the Alcohol and Tobacco Tax and Trade Bureau (TTC) to approve new ingredients and product labeling.Craft-Beer-Brewery-Brewing-Ale-Beer-Alcohol-Craft-2449887

This is having a growing impact on the nation’s craft breweries, which tend to issue numerous varieties per year. In fact, D.C. -based Atlas Brew Works has been waiting for an approved label since the start of the shutdown, and may possibly cease operations altogether if they do not receive approval soon.

Food Industry With the FDA in sleep mode, food inspections are minimal, having stopped altogether Dec. 22nd and just last week have resumed, but very minimally.

This has the American public worried about the safety of the food supply, and meanwhile, the Center for Science in the Public Interest is warning consumers to avoid pre-packaged foods like salad mixes. This public perception could have a major impact on pre-packaged food processors.

Adding to this, the Department of Agriculture is helping fewer growers and farmers at the moment, many of which supply the nation’s major food processors.

Imports/Exports. According to IndustrySelect’s database of 400,000 U.S. manufacturers, 43,636 industrial companies in the U.S. rely on imported raw materials for the production of their products. 

With 6,000 U.S. Customs and Border Protection employees furloughed, the shutdown has an impact on both U.S. imports and exports, creating delays in shipments and approvals for imported items.

warehouseIn addition, many imports coming into the U.S. are subject to inspection by the U.S. Consumer Products and Safety Commission, the FDA, the EPA and the U.S. Dept. of Agriculture, the employees of which have largely been furloughed as well.

The Wall Street Journal reported specific incidents of the EPA not being available to approve pesticides coming into the country and the USDA not having anyone to approve exports of wood.

This, of course, influences a broad spectrum of industries that rely on international trade.

Finding domestic suppliers

As the shutdown continues to have an impact on the nation’s manufacturing companies, especially those that rely on imports, many are turning to IndustryNet to source local suppliers.

IndustryNet maintains up-to-date information on over 400,000 U.S. manufacturers and suppliers of more than 10,000 products and services.

IndustryNet lists suppliers across a range of industries, producing everything from steel and aluminum to solar cellsball bearings and printed circuit boards. Visitors can set up a free user account, build custom lists of potential suppliers, send quote requests, download catalogs, view company photo and video libraries, and more.

IndustryNet is also a direct path for U.S manufacturers to increase their visibility among domestic industrial procurers. Learn more about our marketing solutions for industrial companies.

 

 

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