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Garment firms ask for a breather
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Posted on Mar 08 2006
The local apparel industry asked the Legislature yesterday to revisit a proposal that would reduce garment taxes and fees.
The tax breaks, according to the Saipan Garment Manufacturing Association, would keep factories afloat while they were waiting for the Headnote 3(a) amendment.
The Headnote 3(a) bill would grant U.S. insular areas equivalent treatment to free trade partners by extending to all products, including textile and apparel, the requirements that eligible products contain at least 30 percent U.S. and local content.
The bill is pending in the U.S. Congress and is not expected to be acted upon until after the midterm elections in November 2006.
In the meantime, the CNMI government could provide factories with a tax relief. A bill seeking a tax break for the garment had been introduced in the previous term, but it did not get enacted.
The lawmakers responded by asking SGMA and the Governor’s Office, represented by special assistant for trade relations and economic affairs Richard Pierce, to come up with fact-based scenarios illustrating how a tax break could cut the industry’s costs.
Currently, the government collects 3.7 percent user fee on all locally manufactured and finished apparel products.
In an interview, Rep. Absalon Waki Jr. said that the Legislature also wanted to see how such a tax reduction could affect government income.
“It’s going to hurt the Commonwealth either way. We hope we can come up with a win-win solution to this,” Waki said.
The Department of Commerce has reported that garment sales had declined by 21 percent in 2005, compared with 2004. Garment sales in 2005 amounted to $650.8 million, down from $826 million in 2004.
User fees, which are based on export invoices and make up nearly half of total apparel government payments, fell 13.94 percent from fiscal year 2004 to FY2005.
There are now only 18 garment factories on Saipan, down from 34 in 1999 and 25 in 2004. Seven more factories are expected to shut down this year.
