Action sought to save what remains of garment industry

The seven remaining garment factories in the CNMI recently sent an urgent message to the Commonwealth’s elected leaders requesting the Fitial administration and Legislature to undertake actions that would assist the industry to continue operating in the CNMI.

In a March 27, 2008, letter to Gov. Benigno R. Fitial, House Speaker Arnold Palacios, and Senate President Pete P. Reyes, the seven Saipan factories stated, “the death of this industry is greatly over exaggerated. Doing nothing to change or not applying resources for change will fulfill the prophecy of the industry’s demise.”

The firms that signed the letter were United International Corporation, US CNMI Development, Marianas Garment Manufacturers, Inc., Onwel Manufacturing, RIFU Apparel, Neo Fashion, Inc., Uno Moda Corporation, and Kueng Seung Saipan, Inc.

As a group, the companies asked the Fitial administration and Legislature to consider three separate initiatives to assist the remaining factories.

“Our industry has waited for several years for changes to Headnote 3(a). Companies that would have taken advantage of Headnote 3(a) are now closed. Higher labor costs anticipated years ago have not been mitigated with the opportunities afforded through amendments to Headnote 3(a),” read the letter.

The factories also requested the administration to continue its effort to seek amendment of the special tariff privilege that created the industry 25 years ago, one that now is almost meaningless with newer free trade agreements existing in foreign countries.

The companies asked that the governor to keep talking with the U.S. Congress to delay the next scheduled increase in CNMI minimum wage rates as a way to continue their operations. Many smaller companies in the economy provide service and products to support garment manufacturing. Closure of the industry will have ramification throughout the economy.

The current minimum wage of $3.55 is scheduled to increase by $0.50 cents to $4.05 come May 26, 2008.

Lastly, the apparel firms asked the governor and the Legislature to consider implementing reductions in user fees, beautification taxes, excise taxes, and labor processing fees that foreign competition does not pay making their products less expensive.

“Our industry will continue to remain in the CNMI as long as it makes economic sense to do so. The mutually beneficial partnership entered into 25 years ago is in serious jeopardy due to the erosion of those opportunities that attracted investment here. We hope that with your administration’s careful consideration and effort we know we can continue to exist in the CNMI longer than many would have us otherwise,” their letter further read.

Garment company executives estimate they still contribute $15 million in user fees, excise, payroll, beautification, and other taxes annually.

This does not include payments made to CNMI Labor and Immigration, Commonwealth Utilities Corp., Commonwealth Ports Authority, and Commonwealth Health Center, and on-island vendors for local purchases of gasoline, telecommunications, insurance, food, and supplies, restaurants, hotels, legal representation and others.

According to Richard A. Pierce, Gov. Fitial’s special assistant for trade relations, the CNMI collected $532,000 in user fees in March, up 10 percent from February.

“In recent work with the U.S. Government Accountability Office (GAO), the CNMI submitted it would receive 8 percent of its general account collections from the garment industry in 2008. This does not include government fees collected by independent agencies for power, health services, ports fees, etc.,” he said in telephone interview with the Saipan Tribune.