Proposed garment tariff change gains support

Local government officials and business groups rallied behind the local garment industry’s clamor for help in seeking congressional amendment to the U.S. Tariff Code for a reduction of value-added requirement on garment exports from the Commonwealth.

Saipan Garment Manufacturers Association executive director Richard Pierce commended the Commonwealth’s Senate for its adoption of Resolution No. 14-32, which pushed for the reduction of value-added requirement from 50 percent to 30 percent—or the increase in maximum allowable foreign content material in garment exports to the United States to 70 percent.

“The CNMI House of Representatives, in a similarly adopted House Resolution, the Governor’s Strategic Economic Development Council and the Saipan Chamber of Commerce all have entered support to amend what is now an essentially restrictive value-added requirement for entry into the U.S. domestic market for apparel assembled in the CNMI from cut pieces, as U.S. federal trade offices have already stated they will allow cut-piece assembly in the insular area of the Commonwealth,” Pierce said.

“All we need to do now is to allow our island manufacturers to utilize what the federal government has already allowed in this type of manufacturing, by putting in place the necessary economic formula facilitating the CNMI’s ability to provide its own local industry the ability to perform,” he added.

The Senate resolution urged Interior Deputy Assistant Secretary David Cohen, Washington Rep. Pete A. Tenorio, and Gov. Juan N. Babauta to lobby the U.S. Congress to make the necessary Tariff Code amendment. Besides, it said that the CNMI is not and will not be included within the customs territory of the United States, citing provisions from the Covenant.

In a letter to Senate President Joaquin Adriano and Senate members yesterday, Pierce said the adoption of the resolution showed that the Upper House is addressing the need to maintain the local garment industry’s viability, when quota restrictions on garment imports are lifted in the United States pursuant to World Trade Organization agreement.

The Senate resolution pointed out that the current 50 percent value-added requirement would put local garment manufacturers at a competitive disadvantage by WTO member countries.

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 Senate recognized that an amendment to the value-added requirement would allow local manufacturers the flexibility to import cut pieces and panels for assembly to eliminate cutting operations and concentrate on sewing and assembly operations. The Senate said this flexibility would result in significant reduction of garment wastes.

Pierce said the Senate correctly pointed out that reduction in value-added requirement would also translate to corresponding increases in direct and indirect government revenue.

“With the factories’ cutting rooms turning into sewing and packaging rooms, when, as a result of amending the value-added requirement we are better able to meet buyer demands in cost-competitiveness, there will be an increase in CNMI user fee payments and spending in the CNMI,” he said.

Garment industry players worldwide expressed fear that the lifting of quota restrictions beginning Jan. 1, 2005 would result in big players such as China dominating the U.S. market, the world’s largest apparel market.