Headnote 3(a) amendment poised for intro

A measure amending the Headnote 3(a) of the U.S. Harmonized Tariff Code is expected to be introduced soon in Congress, according to governor’s economic affairs special assistant Richard Pierce.

“Work has been done with Senate and House oversight, trade and finance committees. We expect legislation amending the tariff formula for the CNMI to be introduced…this Congressional session,” said Pierce during the Saipan Chamber of Commerce general meeting Wednesday.

He said yesterday that the measure would either be introduced yesterday or today in Congress.

The amendment would allow the garment manufacturers in the CNMI to increase the value of imported raw materials from 50 percent to 70 percent. This means that the local value-added content of garments made in the CNMI would be reduced to 30 percent.

Pierce said the amendment would allow for an option for manufacturers on Saipan to utilize what is known as OPA or Offshore Processing Arrangement. This means that cut pieces of fabric can be shipped to Saipan to be sewn into clothing and qualify for export to the US.

This process, Pierce said, is already allowed by U.S. Customs for Saipan factories, “but up until now, individual styles are severely limited due to the 50 percent value-added requirement.”

“ If we succeed in amending the local value content to 30 percent, it will provide tremendous new opportunities,” he said.

The amendment would also reduce the amount of fabric waste on Saipan and decrease the number of nonresident workers in the CNMI.

The Babauta administration has hired D.C.-based consultants to lobby for the federal law amendment.

Pierce said Wednesday that Gov. Juan N. Babauta also sent “very solemn letters” to members of the U.S. Congress acquainting them with the pressing economic realities facing the CNMI.

He said the governor discussed in length the Japan Airline’s situation and the World Trade Organization lifting of quota’s impact on the local economy.

Both the garment and tourism industries are endangered, Pierce said.

“The CNMI administration’s response to that truth is to take action to mitigate the current impact, and to plan and execute its reversal,” he said.

Both industries, he said, are making major adjustments to major competitive challenges.

Earlier, the administration said that the recent passage of the Central American Free Trade Agreement by U.S. Congress boosted the CNMI’ chances in lobbying for the amendment to the U.S. Harmonized Tariff Code. CAFTA extends trade privileges to Nicaragua, Guatemala, Honduras, El Salvador, Costa Rica and Dominican Republic. Similar trade agreements had been granted to Middle Eastern countries like Jordan and Egypt.

CAFTA approval would compel U.S. lawmakers to consider the plea of the CNMI, a U.S. territory.