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‘Amendment would lower NMI prices’
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Posted on Mar 09 2006
An amendment to Headnote 3(a) would restore the local garment industry’s competitive advantage by reducing the selling price of Saipan-manufactured clothing by 16 percent.
The Saipan Garment Manufacturers Association and Richard Pierce, the governor’s special assistant for trade relations and economic affairs, told the Senate Wednesday that the proposed U.S. Tariff Code amendment would greatly cut Saipan’s costs and place the local industry in a level playing field with China.
The Headnote 3(a) amendment being pushed by SGMA would allow duty-free entry into the United States of Saipan-made garment products that have up to 70 percent foreign content.
Currently, the U.S. Tariff Code sets a maximum allowable foreign content of 50 percent. Due to this requirement, apparel manufacturers buy foreign fabric that is then cut, sewn and packaged as final goods in the CNMI.
A 70-30 content ratio would allow Saipan factories flexibility to cut pieces overseas at a lower cost and assemble on Saipan.
To illustrate the cost reduction, the garment officials explained how the amendment would apply to the selling price of 100-percent cotton men’s trousers.
At the current 50-percent allowable foreign content, these trousers cost $189.01 per dozen. This includes $75.15 for raw material and freight in costs; 71.87 for manufacturing; $16.02 mark up; $6.77 for Saipan user fee; and $19.20 other costs.
With a 70-percent maximum allowable foreign content, garment manufacturers would be able to use components cut and sewn abroad—China, for instance—at lower cost.
The hourly minimum wage in China is at least 250 percent lower than in the CNMI.
By doing so, Saipan factories could save $29.19 in manufacturing costs and $1.11 in user fee, and reduce the markup by $2.62.
The total selling price would then amount to $159.10, which is only 1.5 percent higher than mainland China’s price of $161.46. This selling price is also 4.5 percent lower than that of Macau, which amounts to $166.61.
A bill amending Headnote 3(a) is pending in the U.S. Congress.
