CNMI master concession agreements bill now law

A bill to spur competitive concessionaire bids at the Tinian and Rota airports is now law, after acting governor Ralph DLG Torres signed the new mandate last Friday, a few days before the current CNMI-wide master concession agreement expired. Public Law 19-21 authorizes the Commonwealth Ports Authority to grant master concession agreements “for each point of entry” on Saipan, Tinian, and Rota.

In 1985, Public Law 4-60 defined master concession agreements as the exclusive right to operate facilities at each and every port of entry for the sale of duty-free and other items of merchandise. That same year, CPA and DFS Saipan, Ltd. entered into a master concession agreement, or MCA. Current successive agreements were set to expire Nov. 15, 2015.

The law notes that since 1985 DFS has only operated stores at the Saipan International Airport. DFS Saipan has not exercised its exclusive privileges at the Tinian and Rota airports due to low retail demand, low passenger traffic, and unstable air service at each airport.

The new law states it is important for “national or international concessionaires” to open concessions on Tinian and Rota.

“Exclusive island concession opportunities will generate additional revenue for CPA, stimulate the economies of Tinian and Rota, and provide additional retail options for visiting passengers.”

The law amends the definition of a “master concession” in the CNMI to grant “separate” master concession agreements for Saipan, Tinian, and Rota, respectively.

It also mandates CPA to proceed with master concession agreements for the CNMI islands if determined to be in the best interests of the CNMI.

“[Rota and Tinian] deserve to take part and benefit from the two concession agreements,” the House Committee on Commerce and Tourism said in September. “Amending the current statue to clarify that Tinian and Rota are part of the CNMI will clear any ambiguities that currently exist and indicate that their port of entries are eligible for business.”

For their part, CPA has also written in support of the new mandate.

In a letter to the Senate in July, CPA cites a report from consultants Ricondo and Associates on the viability of separate agreements. CPA said duty free shops on Rota and Tinian might be impractical due to lack of direct flights, and said business ventures may not be profitable. However—since that consultant report was issued last year September 2014—CPA said they have received interest for a retail concession on the two smaller islands.

“For these reasons, CPA believes that the current master concession discussions for Saipan contemplate that Tinian and Rota would need to either be segregated or a master concessionaire on Saipan would have to subsidize duty free sales on Tinian and Rota,” said Maryann Lizama, CPA executive director, in July.

“We encourage the passage of the bill,” Saipan mayor David Apatang also wrote in September. He said this is “step among many that must be performed” to materialize policies to allow for profits at the Rota and Tinian ports.

In a statement in October, DFS Saipan president Marian Aldan-Pierce said that what DFS wants is to have a master concession for Saipan only, writing in support of the legislation that would divide the CNMI master concession and create a Saipan-only master concession,” she said.

Aldan-Pierce was commenting on a recent CPA board resolution to not negotiate another master concession with DFS. On Sept. 28, the CPA board voted to not enter into another Commonwealth-wide duty-free master concession with DFS Saipan, although such negotiations received overwhelming support at a public hearing last year. “It appears that the CPA directors, anticipating the bill’s passage, denied the request to negotiate a CNMI-wide master concession with us and we are fine with that,” Aldan-Pierce said.

Senate President Victor Hocog (Ind-Rota) introduced this bill. The Senate committee on Resources and Economic Development in July lamented the lack of duty-free business on Tinian and Rota airports since their inception, in the report, which recommended the passage of the bill.