In negotiating the Covenant relationship between the United States and the Northern Mariana Islands the United States agreed to permit duty free entry into the United States of certain “qualified” products manufactured In the Commonwealth.
A summary of the legal mechanism permitting such exports has been summarized as follows: Headnote 3 (a). General Headnote 3(a) of the Revised Tariff Schedules of the United States permits articles grown, manufactured, or produced in the Northern Mariana Islands to be imported into the customs territory of the United States free of duty if 70 percent or less of the value of the product is derived from foreign materials. If more than 70 percent of the value of the product is derived from foreign materials, the product is subject to the usual duties.
For certain articles – notably textiles and wearing apparel – only 50 percent or less of the value may be derived from foreign material in order to qualify for duty free treatment.
The Qualifying Certificate (QC) Program was intended to reduce business start-up and operating costs. The program grants tax relief by way of rebates and/or abatements to qualified investors.
The QC program targets specific industries, including franchise restaurants, water parks, aquariums, cultural centers, theme parks, resort hotels and condominiums, golf courses, convention centers, dinner theaters, special events such as conventions and sporting events, CNMI based airlines and other aviation related activities, manufacturing or processing of high technology products, and internet related businesses and/or businesses engaged in internet commerce.
Qualified investors may receive up to 100% in rebates and/or abatements on CNMI taxes, including business gross revenue taxes, income taxes, capital gains taxes, excise taxes, developer infrastructure taxes, and alcoholic beverage taxes for periods of up to 25 years.
Manufacturers & Wholesalers:
- $0 if annual gross revenue is $0- $5,000 - 1.5% of annual gross revenue if annual gross Manufacturers & Wholesalers revenue is $5,001 -$50,000 - 2% of annual gross revenue if annual gross revenue is >$50,000
Saipan serves as an ideal transshipment location because of its geographic location as a gateway between Asia and North America, being the closest U.S. port to Asia, and its exemption from the federal Jones Act11 (Cabotage).
The port of Saipan’s exemption from Jones Act allows foreign carriers to move cargo from Saipan to any U.S. port. Foreign carriers offer lower operating cost to U.S. vendors due to non-U.S. rates.
Most U.S. ports, i.e. Guam, Hawaii, U.S. mainland, are subject to the Act.
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