Senate calls for garment tariff schedule amendment

The Senate is pushing for the amendment of the U.S. Tariff Code to allow local garment factories to increase the maximum allowable foreign content material from 50 percent to 70 percent to ensure the industry’s global competitiveness.

The Senate passed Friday Resolution No. 14-32, urging Gov. Juan N. Babauta, Washington Rep. Pete A. Tenorio, and Deputy Assistant Secretary for Insular Affairs David Cohen to lobby the U.S. Congress to allow the amendment.

The Senate said that increasing the foreign content value of locally made garments to 70 percent is necessary as the local industry is expected to undergo a major upheaval in 2005 when worldwide quotas on textile and apparel products are eliminated on Dec. 31, 2004.

“The 50 percent foreign material value limitation will put the CNMI apparel industry at a competitive disadvantage by World Trade member countries, which could have a devastating effect on the entire Commonwealth economy,” reads part of the resolution.

The resolution specifically seeks to amend the General Note 3(a)(iv)(A) of the Harmonized Tariff Schedule of the United States, which exempts from duty all goods imported from U.S. territories, which are outside the customs territory of the United States.

It further provides that imports from the CNMI be subject to the same treatment as imports from Guam into the customs territory of the United States.

The CNMI-U.S. Covenant, the Senate resolution said, provides that the CNMI will not be and is not included within the customs territory of the United States

Currently, the U.S. Tariff Code requires that 50 percent of the value of the garment has to be added locally by transformation, in terms of additional labor, packaging or other overhead costs, so that garment products coming from the Commonwealth could enter the United States duty-free.

The proposed reduction of the local requirement to 30 percent—or conversely the proposed increase in the maximum foreign content value to 70 percent—covers all goods including those described in section 213(b) of the Caribbean Basin Economic Recovery Act.

The Senate said that raising the foreign content level to 70 percent would allow the local apparel companies flexibility to import cut pieces and panels for assembly, “thereby eliminating cutting operations and efficiently dedicating resources to sewing and assembly operations, which translate into corresponding increase in direct and indirect government revenues.”

Further, the Senate said that such flexibility to import cut panels and pieces will result in significant reduction in unused fabric excess that end up in the sanitary landfill, contributing to pollution.

Earlier, Tenorio called on the Babauta administration and the CNMI Legislature to support him in lobbying for the same amendment to Headnote 3(a) provisions.