NMI attempt to alter HeadNote is still a go

The imminent shutdown of Concorde Garment Manufacturing makes it more compelling for the CNMI government to pursue a lower local add-on requirement for garment products made in the Commonwealth, the Fitial administration maintained yesterday.

Press secretary Charles P. Reyes Jr. said that the administration would continue to push for an amendment to Headnote 3(a) to restore the local garment industry’s competitive advantage in the global arena.

“There may still be some factories that may be saved,” he said.

Acting Gov. Timothy Villagomes said in a separate statement that the planned closure of Concorde further illustrates the urgent need for a Headnote 3(a) content amendment in the U.S. Congress. “This is necessary to save the industry for local employment, tax revenues, and continued business activity in the islands,” said Villagomez.

“All things considered, we are in for greater economic challenges ahead,” said Villagomez.

The government and the Saipan Garment Manufacturing Association are asking the U.S. Congress to amend Headnote 3(a) and allow CNMI-made garment products that have up to 70 percent foreign content to enter the United States duty-free.

Currently, the U.S. Tariff Code only allows up to 50-percent foreign content. Due to this requirement, much of the manufacturing process, including cutting, sewing and packaging, has to be done on island.

A 70-30 content ratio would allow Saipan factories flexibility to cut garment pieces overseas, where costs are lower, and do the assembly on island.

Reyes said that the factory’s closure would have a huge impact on the economy.

“It is a devastating blow to the CNMI economy. We anticipate significant loss in fees and taxes. There’s going to be multiplier effect,” he said.

Concorde pays $250 in labor processing fee and $25 in immigration fee for each of its approximately 1,400 employees every year. As consumers, these workers also contribute to the economy.

Reyes also lamented the timing of Concorde’s closure, which comes in the heels of a recent decision by affiliate L&T Amusement to withdraw from the poker gaming industry.

Vice Speaker Justo S. Quitugua said that Concorde’s announcement was unfortunate and it should alert the government to the importance of finding other means to generate revenues.

“It was expected that the garment industry would not be here forever, that they would eventually move where costs are lower. Our leaders should have thought of economic diversification years back,” Quitugua said.

Nonetheless, he expressed hope that the new U.S. Congress, which takes over next month, would grant the CNMI’s request for an amendment to Headnote 3(a).

He also raised concern about the workers that would be displaced. “I hope that [the Department of] Labor is prepared to deal with all the employees that will be left without jobs,” Quitugua said.