CPA eyes ways to reduce costs of goods shipped to CNMI

Increased activity at the Saipan International Harbor and the ability to reduce or maintain a status quo on port charges could help lower the cost of goods shipped to the Northern Marianas, which is currently higher than those transported to Guam.

Ports Authority Executive Director Carlos H. Salas said that by making Saipan as point of transshipment in the Micronesian region would eliminate or at least reduce the 23 percent Guam-transshipped cargo bound for the CNMI.

Mr. Salas was responding to concerns raised by Rep. Rosiky F. Camacho on the comparatively higher prices of commodities in the Northern Marianas than those available in the neighboring island-territory of Guam.

According to the CPA official, costs of consumer goods shipped to the CNMI can be significantly reduce if the government succeeds in encouraging non-U.S. carriers to make Saipan as a second port of call on voyages from any American port.

“The CNMI may have an advantage over other U.S. jurisdictions under the Jones Act for non-U.S. carriers to bring or pick up cargo on vessel voyages originating from any U.S. port,” Mr. Salas told Mr. Camacho.

He also made a pitch on the need by the ports authority to receive full funding of about $2.5 million from the CNMI government for a project that aims to pave the container yard at the Saipan International Harbor.

The condition of the container yard at the seaport facility compromises the ability to safe keep the cargoes, as well as contributes to extensive and frequent repairs of heavy equipment, said Mr. Salas.

He added that CPA should also intensify its capability to hold any future increases on port charges but pointed out that this is attainable only if the agency is able to increase its non-harbor activities in order to be less reliant on wharfage, dockage and anchorage fees.

“If CPA enhances its non-harbor revenue, it may not be necessary to increase port fees in the future, which have direct effect on the price of goods moved into Saipan,” the ports authority official stressed.

He pointed out, however, that CPA does not have enough land area at the Saipan seaport to develop as a good source of additional non-harbor revenue and that it can be addressed by granting the agency additional land adjacent to the sea transport facility.

The ports authority is also asking the CNMI government’s assistance in its efforts to intensify promotional campaigns that would help perk up activities at the harbor, including the arrival of more Naval and passenger liner vessels.

“These activity serves as added revenue and may be applied against future port fee increases,” Mr. Salas said, adding that efforts should also be intensified to find an alternate source of outbound cargo to replace the possible loss of outgoing shipments from the garment sector.

Garment Pullout

The eventual pull out of the garment industry from Saipan is expected to drag consumer prices up, since the apparel manufacturing sector virtually supports the Commonwealth’s cargo segments.

In a study, financial consultant Booz Allen & Hamilton, said not only will a significant loss in garment exports have a material impact on the Commonwealth Ports Authority’s remaining cargo segments, it will also essentially eliminate container backhaul.

As a result, this will likely drive up the transportation costs for Saipan imports.

With the exception of garment exports, the seaport primarily, or at least 83 percent, handles imported commodities like petroleum products, container cargo and construction materials.

Saipan’s container traffic is heavily imbalance with nearly three times as many loads bound for the island than originating in the island during the last fiscal year. The net result of these inefficiencies and lack of scale is a higher cost to carriers.

This, even as the CNMI’s garment industry comprise close to 20 percent of the outbound traffic. Analysts are wary that prices of imports will shoot up when ships start leaving the Commonwealth practically empty due to the garment sector’s pending pull out.

Observers anticipate no more than five- to seven-year life for garment production on the island, citing the absence of specific advantages offered by the CNMI government to garment manufacturers other than the existing tariff and quota exemptions.

And when garment the garment industry, which employs up to a quarter of Saipan’s population and wages paid to garment employees amount to nearly 20 percent of all CNMI wages, uproots from the island indirect cargo volumes will accordingly decrease since there will be fewer consumers.

The sector has been expected to pull out of the CNMI in seven years when the agreement which created the World Trade Organization takes into effect. A kin to this, the United States will have to phase out its garment quota system by 2005.

This and the resulting reductions in tariffs will virtually eliminate the competitive advantage of garment manufacturing industry on Saipan.