‘Slash garment user fee to 2.7 percent’

House majority leader Oscar M. Babauta has introduced a bill that aims to reduce the existing 3.7 percent garment user fee to 2.7 percent to help the local apparel industry compete globally amid the worldwide lifting of trade quotas.

Babauta, in House Bill 14-315, said the reduced user fee is necessary in view of the ongoing downsizing and closures of factories within the garment industry.

He said the 1-percent reduction would serve as an “incentive” so that the Commonwealth garment industry “can remain viable and contribute to the Commonwealth’s efforts for economic revitalization.”

Saipan Garment Manufacturers Association executive director Richard Pierce said he “is very interested” to read the bill. He said it has been the group’s position that there should be no new taxes, no increase in taxes, and no increase in minimum wage.

“Of course, we like the idea that there is a bill to reduce our taxes. What the association has said before as a last resort was that we would even begin to consider the idea that there would be a decrease in taxes or reduction in wages, but that’s a last resort that this association would take to keep it here on island,” Pierce said.

He said the SGMA “considers all things” and “is very sensitive to the CNMI government.”

“To me the whole thing about this bill illustrates the problem of our industry. When we make less money, everybody else gets less money…Now if the government wants to do this [bill] to help us survive longer, then I think it’s the practical thing to do,” said Pierce.

Babauta said that, as a “local remedy,” the reduced rate, would complement the ongoing work at the national level for the amendment of Headnote 3(a) of the U.S. Harmonized Tariff Schedule.

The amendment would allow local garment factories to increase from 50 percent to 70 percent the maximum allowable foreign content material in its products. This congressional amendment is being pushed by the CNMI Legislature, the Executive Branch, and the garment industry.

In the 13th Legislature, a bill that aimed to raise the 3.7 percent user fee by a percentage point of 1.3 for a total of 5 percent, was defeated by a thin margin. Some of the proponents for the increase are members of the current Legislature. They included Reps. Heinz S. Hofschneider, Martin Ada, Joe Guerrero, and Ramon Tebuteb.

Reps. Jesus Attao, Norman Palacios, Benjamin Seman were among those who voted against the fee increase.

Except for Tinian Rep. Palacios, all these lawmakers are part of the current House minority bloc.

Rep. Arnold I. Palacios, who is now the minority leader, had reportedly abstained during the 13th Legislature on the issue by reason of conflict of interest.

Babauta’s bill came even as the House unanimously passed a bill last week requiring garment employers to repatriate any displaced workers in case of downsizing or closure of factories. House Bill 14-142, which offers major amendments to the Nonresident Workers Act, also reaffirms the 15,727-worker cap on the garment industry.

Moves to allow a partial lifting of the moratorium for the industry to give it flexibility in hiring personnel at this time have not been approved.

H.B. 14-142, however, allows “a reallocation of workers should any company closes down.”

This reallocation, according to Babauta, means that the slots remain with the original employer, thus giving the company a chance to hire new personnel when necessary, based on its quota.