Tariff code amendment ‘a difficult fight’

Visiting U.S. Senate Energy Committee staff Allen Stayman believes that the CNMI’s proposed amendment to the Harmonized Tariff Schedule will be “very difficult” at this time, as U.S. lawmakers would not be inclined to do it at the expense of their own people who would lose their jobs as a result of the World Trade Organization’s lifting of quotas in January this year.

“It’s going to be a very difficult political fight because there are American workers losing their jobs. Politically, it would be very difficult for American politicians to create an exemption for the [CNMI’s garment manufacturers] and not for their own people, who are losing their jobs,” Stayman told reporters yesterday.

As such, he concedes that the CNMI garment industry would be hobbled in its efforts to compete globally.

“That’s correct,” he said, while noting that the CNMI had been extended tax privileges in the past several years.

“The CNMI had an advantage in quotas, duties, and ‘Made in the USA’ label. This [lifting of quotas] changes that equation, so they are not as competitive now,” said Stayman.

Saipan Garment Manufacturers Association executive director Richard Pierce said there is nothing new in Stayman’s statement.

“We wouldn’t expect Mr. Stayman to say anything other than that,” said Pierce.

Naturally, he said, dealing with the U.S. Congress is never easy. “Of course, it’s difficult. One, there’s nothing easy in Congress. Two, it’s a trade issue and trade issue is very difficult to move in a federal Congress this year. Three, it’s going to be difficult because America is reacting to the loss of American jobs,” he said.

He said the local industry will continue, however, to lobby for an amendment to HeadNote 3(a) of the Harmonized Tariff Schedule of the United States, to allow CNMI garment manufacturers to reduce the value-added requirement on their products from 50 percent to 30 percent.

In effect, the amendment would allow local garment factories to increase the maximum allowable foreign content materials in their products from 50 percent to 70 percent.

Pierce said Stayman’s statement “doesn’t change a thing” in terms of their efforts to have the law amended.

Currently, the Tariff Code requires that 50 percent of the value of a garment manufactured in the CNMI be added locally by transformation in terms of additional labor, packaging or other overhead costs, so that garment products coming from U.S. exporters like the Commonwealth could enter the U.S. duty-free—as embodied in Headnote 3(a).

Essentially, the amendment would result in less production costs for the local garment industry, putting them in a competitive position with other countries like China, which can manufacture the same products at less cost.

‘Lower cap in garment industry’

Further, Stayman said yesterday that it would be logical to reduce the cap in the garment sector, given the current downsizing and closure of factories.

“I think the cap should be lowered to be consistent with the number of jobs,” he said, while saying that he is aware of some attempts of some local lawmakers to increase the established cap of 15,727 garment workers.

“That makes no sense,” said Stayman, a former Office of Insular Affairs director assigned to handle the CNMI during the Clinton administration.

Guest worker program

Stayman, who is with Democrat Sen. Jeff Bingaman, a ranking member of the Senate Energy Committee, also backed the immediate repatriation of displaced garment workers.

He said the CNMI’s guest worker program intends to keep guest workers only if the local economy needs them.

“It is intended that when the CNMI economy no longer has need of guest workers, that they should return home,” said Stayman.

The local government, he said, could not afford the costs that come with keeping nonresident workers on island.

“Many in the federal government feel there never should have been a guest worker program because the employers would not pay a sufficient amount of money to offset the added cost of the workers,” he said.

It is most evident, he said, in health care where “vast majority of the workers do not have health insurance.” In the end, he said, this liability falls to the local and federal governments to absorb.

Overall, he said, “it’s a question of who will pay the cost of the 35,000 guest workers in the CNMI.”

“That’s not to say that there should not be a guest worker program,” he said, acknowledging that it is important to the local economy. But he said that it should be selective in the sense that only those who can make a net contribution to the economy should be allowed.

By having so many foreign workers, “many of whom are not making a net contribution to the economy,” the CNMI government goes to the United States to make up for the difference.

“And the U.S. is not necessarily sympathetic to making up that difference,” said Stayman, who still thinks that federalization of the local immigration would be better for the CNMI.

Local garment industry representatives are set to meet with Stayman’s colleague, Josh Johnson, this morning to discuss issues facing the sector. Stayman was scheduled to depart the CNMI for Guam early this morning.

Johnson, a staff member of Energy Committee chair and Republican Sen. Pete V. Domenici, is set to leave the island later today. Johnson’s trip to the island is his first.

The two staffers spent two days in the Commonwealth primarily to conduct fact-finding and familiarization work.