User fee collection plummets

The government collected less than $2 million in user fees in April and May this year—the lowest since 1995, according to governor’s trade and economic affairs assistant Richard A. Pierce.

He said the government only collected some $1.83 million in April and some $1.80 million in May.

“Those two months are the first two months since 1995 that we had user fee collections [that amounted to] less than $2 million,” he said.

The CNMI government used to receive an average of $30 million a year from garment user fee—an average of $2.5 million a month.

In February this year, the Saipan Garment Manufacturers Association reported a dramatic decline in sales by about 28 percent, resulting in a substantial decrease by about $520,000 in government revenue from garment user fee.

User fee collections last month totaled $2.08 million, which significantly dropped from February 2004’s user fee total of $2.5 million.

The decline was due to the closure and ongoing downsizing in the industry as a result of the worldwide lifting of quotas, which took effect in January this year.

The SGMA predicted that sales would drop by as much as 50 percent this year, which could mean a substantial decrease in user fees by up to $10 million.

Earlier, the association projected that lost government revenue from the collapsing garment industry would amount to about $35 million in 2006.

The Customs Division collected some $2.3 million in user fee last January, or $100,000 less than the $2.4 million collected in January 2004.

User fee collections in the preceding months registered equal or greater amounts compared to their counterparts in the previous year. User fees totaled $2.8 million in December 2004 and 2003, and $2.2 million in October of both years. In November 2004, user fee increased to $2.5 million compared with the $2.3 million collected in November 2003.

Meantime, SGMA had reported that garment sales in February registered at $54.6 million, nearly $24 million less than December 2004’s sales of $78.3 million.

The figure was about 20 percent lower compared with figures registered in February 2004.

As the CNMI’s largest industry, the garment sector claims to support about a third of the Commonwealth government’s revenue, while directly employing some 15,000 workers.

Recent statistics show that the garment industry generated some 30 percent of the government’s revenue, or some $69.9 million.

Pierce, a former executive director of SGMA said, said that the industry decline, coupled with the looming pullout of Japan Airlines, are “pretty serious.”

As government’s trade and economic affairs assistant, he said that, “I’m going to bring to this office my experience, my understanding about how things work.”

Pierce said he would actively participate in lobbying for the amendment of the U.S. Tariff Code to reduce the value-added requirement on garment exports from 50 percent to 30 percent for local manufacturers to avail of duty-free treatment.

The Tariff Code currently 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 U.S. exporters like the Commonwealth could enter the United States duty-free.