Labor Department agrees with user fee reduction

The Department of Labor has so far been the only government agency that expressed no opposition to the proposed reduction of garment user fee from 3.7 percent to 2.7 percent.

DOL Secretary Joaquin A. Tenorio, in a two-paragraph letter to Nace Soalablai, acting special assistant, Programs & Legislative Review at the Office of the Governor, said without elaborating that his office has no objection to House Bill 14-315, which aims to reduce by 1 percent the existing user fee on the gross value of garment export products.

“Please advise chairman Palacios that the Department of Labor does not oppose this bill and that we thank him for bringing this bill to our attention,” said Tenorio.

Rep. Norman S. Palacios chairs the House Ways and Means Committee, which held a public hearing on the bill last week.

During the hearing, the Babauta administration opposed the measure, saying that it poses adverse impact on the government revenue collection.

Finance Secretary Fermin M. Atalig said the passage of the bill would mean loss of some $6.5 million in revenues in fiscal year 2006.

This is on top of the projected 20-percent reduction in garment user fee this year due to the worldwide lifting of trade quotas.

Taken together, the impact would mean a reduced collection of about $18 million from $30 million average annual revenue from user fee.

Atalig said it would also reduce the FY06 projection revenue collection to $199.8 million from $206 million as reflected in the Babauta administration’s budget submission for the next fiscal year.

The administration submitted a total of $226 million proposed budget for FY06, which includes a $20-million revenue generating enhancement package.

Atalig said that the bill does not limit the reduction in fee to the garment industry but to any future goods manufactured for export.

Further, he said that while it reduces the government collections, its implementation would not stop the decline within the garment industry.

He said a more prudent action is the amendment of the Headnote 3(a) of the U.S. Harmonized Tariff Schedule which would make the local manufacturers competitive.

The CNMI is lobbying U.S. Congress to amend the law to increase the allowable foreign content material requirement to 70 percent from the current 50 percent.