Shoe investors waiting for Headnote change

Foreign investors wanting to set up shoe factories on Saipan remain interested but they are waiting for the U.S. Congress to amend Headnote3(a) of the Harmonized Tariff Code, according to Gov. Benigno R. Fitial.

“They are waiting for the 70-30 amendment since this will add to the competitiveness of products made on Saipan,” said Fitial.

The Headnote 3(a) amendment will allow manufacturing firms in the Northern Mariana Islands to sell products to the U.S. that have 70 percent foreign value-added content and 30 percent local value-added content.

Right now, the law requires a 50-50 ratio of value-added materials.

Fitial said Friday that he met with the shoe factory proponents and other investors during his recent trips to Hong Kong, Guangzhou, Macau, and Korea.

He said he flew to these places “on my own account” after the April 21 State of the Commonwealth Address.

“I just got back. I went to meet with these people [investors] who expressed strong interests to invest here. …They want to meet with me again,” he said during Friday’s news briefing.

He said there are two groups who want to put up shoe factories on the island, including the Hong Kong-based Yue Yuen, also known as YY, a leading supplier of branded wholesale athletic and casual shoes worldwide, with more than 300 factories in China, Vietnam and Indonesia. It makes shoes for Adidas, Nike, and Reebok, among others.

The second shoe factory interested in Saipan is based in China.

“There’s another one coming in,” said Fitial, without identifying the company.

He both investors have visited the island, and at least one of them has identified a site to put up the factory.

Positive on Headnote 3(a)

Fitial said the latest feedback from his “friends” and consultants in Washington D.C. is that the “chances of 70-30 passing are good because it has bipartisan support.”

The Fitial administration has retained the services of the Sandler, Travis, and Rossenberg consulting firm to lobby Congress for the tariff amendment. The firm was initially tapped by the previous administration for the same purpose.

Earlier, Washington Rep. Pete A. Tenorio expressed confidence that the bill would pass Congress within the year.

He said that no less than Sen. Pete V. Domenici, chairman of the Senate Committee on Energy and Natural Resources, indicated to him recently that he would push for the approval of the amendment.

Since the amendment would reduce the local value-added requirement on manufactured products from 50 percent to 30 percent, it would make Saipan’s manufacturers more competitive.

The amendment would allow factories the flexibility to cut pieces overseas at a lower cost, assemble them on Saipan, and export the end-product to the U.S. duty-free.

At present, garment manufacturers buy foreign fabric, ship them to Saipan, then cut, sew and package them as final goods for the United States market.

Local authorities originally pushed for the bill’s passage to benefit garment factories that have been adversely affected by the 2005 worldwide lifting of trade quotas.