‘Garment sector’s decline triggers high shipping costs’

The fallout from the local garment manufacturing sector’s slow decline appears to have reached the CNMI’s ports as diminished cargo shipments drive up tariffs, Richard Pierce, chief trade advisor to Gov. Benigno Fitial, said this week.

“This increase in shipping costs is not just the price increase in fuel for the container ships,” Pierce said. “It’s more about the loss of cargo revenue in those now empty containers. This has already shown itself in increased commodity pricing on Saipan.”

Labor officials last month disclosed that two garment factories, owned by United International Corp. and Onwel Garment Manufacturing, will shut their doors Sept. 21 and Aug. 21 respectively, marking the latest closures in the demise of the clothing production industry, once the lifeblood of a controversial economic boom in the Commonwealth.

Onwel and the UIC’s two factories represent approximately 25 percent of the remaining workforce in the apparel industry, which once employed more than 17,000 people and now has an estimated 1,500, Pierce said

Yet even before this announcement, local ports and the government were feeling the symptoms of the garment sector’s collapse with a severe drop in export taxes—the so-called “user fees”—charged on shipments and a decline in the number of shipping containers leaving Saipan. Shipping statistics reveal the average weekly number of 20-foot shipping containers departing the CNMI has dropped from the 140 each week seen in 1999 and 2000 to a mere five per week.

Consequently, Pierce noted, tariff rates for all shipping into and out of Saipan have risen by 115 percent.

“Businesses ranging from restaurants to grocery stores to communications to insurance and automobile dealers have felt the withdrawal of those factories and their employees from the CNMI,” Pierce said.

In addition to diminished cargo container shipments, user fee collections for July showed a significant drop compared to the previous month. July’s fee collections totaled $175,137 compared to the $373,100 seen one month prior, according to government data. User fee collections for the first 10 months of fiscal year 2008 totaled $4.79 million. The first 10 months of fiscal year 2007 netted $11.75 million.

The loss of the garment industry also carries a host of other “collateral damage,” Pierce said. For example, the Commonwealth Health Center, the Commonwealth Utilities Corp., the Commonwealth Ports Authority, Labor and Immigration and other government agencies depended on fees associated with it.