oversight

Commonwealth of the Northern Mariana Islands: Additional DHS Actions Needed on Foreign Worker Permit Program

Published by the Government Accountability Office on 2012-09-27.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United States Government Accountability Office

GAO              Report to Congressional Committees




September 2012
                 COMMONWEALTH
                 OF THE NORTHERN
                 MARIANA ISLANDS
                 Additional DHS
                 Actions Needed on
                 Foreign Worker
                 Permit Program




GAO-12-975
                                              September 2012

                                              COMMONWEALTH OF THE NORTHERN
                                              MARIANA ISLANDS
                                              Additional DHS Actions Needed on Foreign Worker
Highlights of GAO-12-975, a report to
                                              Permit Program
congressional committees




Why GAO Did This Study                        What GAO Found
In November 2009, the United States           On September 7, 2011, the Department of Homeland Security (DHS) issued a
applied U.S. immigration law to the           final rule establishing a transitional work permit program in the Commonwealth of
CNMI, as required by CNRA. To                 the Northern Mariana Islands (CNMI) for foreign workers not otherwise
minimize the potential for adverse            admissible under federal law. The final rule addressed key requirements of the
effects on the CNMI economy, CNRA             Consolidated Natural Resources Act of 2008 (CNRA); for example, the rule sets
established a 5-year transition period        the permit allocations for fiscal years 2011 and 2012. As of July 2012, DHS had
scheduled to end in 2014. CNRA                processed about half of the petitions for work permits that employers submitted in
required DHS to establish a transitional      fiscal year 2012. The DHS decision on its permit allocation for fiscal year 2013
work permit program for foreign
                                              and a Department of Labor (DOL) decision on whether and when to extend the
workers in the CNMI and annually
                                              transition period, both required by CNRA, are both pending.
reduce the number of permits issued,
reducing them to zero by the end of the       • DHS plans to announce the permit allocation for fiscal year 2013 by the end of
transition period. CNRA also required           September 2012. DHS has identified one source of CNMI workforce data that it
DOL to determine whether to extend              intends to use for its annual work permit allocations. However, the data source
the transition period past 2014, based          does not provide numbers of U.S. and foreign workers by industry, which could
on an assessment of the CNMI’s labor            help DHS predict future demand for foreign workers. According to a senior
needs. CNRA further required GAO to
                                                DHS official, DHS has not made public the types of information, including its
report on the implementation and
                                                methodology, that it will publish with future permit allocations. Knowledge of
economic impact of federal immigration
                                                DHS’s methodology could help allay any public uncertainty regarding future
law in the CNMI. This report (1)
assesses the status of federal                  access to foreign workers in the CNMI.
implementation of the transitional work       • DOL has not determined whether to extend the transition period, according to
permit program, (2) examines                    DOL officials, and is not required to do so until July 2014. DOL has identified
economic implications for the CNMI of           multiple sources of data on the CNMI labor market, including a source that
pending federal actions, and (3)                provides the number of workers in the CNMI by citizenship and industry. DOL
provides the status of federal efforts to
                                                has also identified the methodology it plans to use in making its determination.
support worker training in the CNMI.
                                                According to DOL officials, DOL plans to estimate changes in CNMI
GAO reviewed CNRA, U.S.
regulations, and information from
                                                employment and gross domestic product that might result from a reduction in
federal agencies and the CNMI                   foreign workers. These data sources and analyses could help DHS assess
government; and interviewed U.S.                workforce needs and determine its annual permit allocation.
government officials and private sector       Uncertainty about the impact of the pending DHS and DOL decisions on access
representatives.                              to foreign workers may be limiting business investment in the CNMI. Foreign
What GAO Recommends                           workers made up more than half of the CNMI workforce in 2012, and CNMI
                                              businesses reported challenges in finding replacements for foreign workers.
GAO recommends that the Secretary             Some CNMI businesses indicated that uncertainty over pending federal actions
of Homeland Security (1) provide, on          has caused them to limit their plans for future investments in the CNMI.
publication of its permit allocations, the
methodology used and (2) use DOL              DOL, the Department of the Interior (DOI), and DHS made available a combined
analyses as a factor in deciding future       total of about $6.5 million to train workers in the CNMI in fiscal years 2010
permit allocations. DHS agreed to             through 2012. DOL provided annual grants that support worker services. DOI
publish its methodology but will wait to      provided a grant in 2011 to support on-the-job training programs, in response to
review DOL analyses until they are            CNRA requirements. As of July 2012, DHS had transferred to the CNMI Treasury
available before deciding to use them.        about $1.8 million it had collected through its permit program for CNMI vocational
                                              educational curricula and program development, as required by CNRA.
                                              Information on the use of DOL and DOI grants is available to Congress on
                                              request, but DHS does not collect information on the use of funds it transfers to
                                              the CNMI Treasury.
View GAO-12-975. For more information,
contact David Gootnick at (202) 512-3149 or
gootnickd@gao.gov.
                                                                                      United States Government Accountability Office
Contents


Letter                                                                                      1
               Background                                                                   3
               CNMI Transitional Work Permit Program Has Been Established,
                 and Federal Decisions Affecting Future Access to Foreign
                 Workers Are Pending                                                      10
               CNMI Economy Remains Dependent on Foreign Workers, and
                 Uncertainty over Pending Federal Decisions May Be Limiting
                 CNMI Investment                                                          22
               Federal Agencies Have Provided Funds for CNMI Worker Training,
                 and Some Information Is Available on DOL and DOI Efforts                 25
               Conclusions                                                                30
               Recommendations for Executive Action                                       31
               Agency Comments and Our Evaluation                                         31

Appendix I     Objectives, Scope, and Methodology                                         34



Appendix II    Statement of Congressional Intent in Establishing Federal
               Immigration Law in the CNMI                                                37



Appendix III   Factors That CNRA States DOL May Consider When Determining
               Whether to Extend Transition Period                                        39



Appendix IV    Consideration of Long-term Status for Foreign Workers                      40



Appendix V     Department of Homeland Security’s Actions to Issue the Final Rule and
               Respond to Public Comments on Its Interim Rule                        41



Appendix VI    Comments from the Department of Homeland Security                          44




               Page i                                   GAO-12-975 Mariana Islands Immigration
Appendix VII    Comments from the Government of the Commonwealth of the Northern
                Mariana Islands                                                  46



Appendix VIII   GAO Contact and Staff Acknowledgments                                      49



Tables
                Table 1: DHS Implementation Decisions Reflected in Final Rule              12
                Table 2: DOL, DOI, and DHS Funds Made Available for CNMI
                         Worker Training, Fiscal Years 2010-2012                           26
                Table 3: Timeline of DHS Actions to Issue the Final Rule on the
                         Transitional Work Permit Program for CNMI                         41


Figures
                Figure 1: Total Numbers of Foreign Workers and U.S. Workers in
                         the CNMI Labor Force, 2002-2010                                     5
                Figure 2: CNMI Real GDP, 2002-2010                                           6
                Figure 3: Status of CW-1 Petitions and Corresponding Worker
                         Permits Received as of July 1, 2012                               15
                Figure 4: Numbers of CW-1 Petitions Received and Processed Each
                         Month, October 2011-June 2012                                     17




                Page ii                                  GAO-12-975 Mariana Islands Immigration
Abbreviations

BEA U.S. Bureau of Economic Analysis
Chamber      Saipan Chamber of Commerce
CNRA Consolidated Natural Resources Act
CNMI Commonwealth of the Northern Mariana Islands
DHS U.S. Department of Homeland Security
DOI U.S. Department of the Interior
DOL U.S. Department of Labor
GDP Gross Domestic Product
State U.S. Department of State
USCIS U.S. Citizenship and Immigration Services
WIA Workforce Investment Act




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Page iii                                           GAO-12-975 Mariana Islands Immigration
United States Government Accountability Office
Washington, DC 20548




                                   September 27, 2012

                                   The Honorable Jeff Bingaman
                                   Chairman
                                   The Honorable Lisa Murkowski
                                   Ranking Member
                                   Committee on Energy and Natural Resources
                                   United States Senate

                                   The Honorable Doc Hastings
                                   Chairman
                                   The Honorable Edward J. Markey
                                   Ranking Member
                                   Committee on Natural Resources
                                   House of Representatives

                                   In 2008, the Consolidated Natural Resources Act (CNRA) established
                                   that U.S. immigration law would be applied in 2009 in the Commonwealth
                                   of the Northern Marianas Islands (CNMI), 1 amending a 1976 covenant
                                   between the United States and the CNMI that had given the CNMI
                                   government the authority to administer its own immigration system. 2 From
                                   1978 to 2009, the CNMI government used its authority under the
                                   covenant to admit to the CNMI substantial numbers of foreign workers. 3
                                   In November 2009, when the United States applied U.S. immigration law
                                   to the CNMI in accordance with CNRA, foreign workers made up more
                                   than half of the CNMI workforce.


                                   1
                                   Pub. L. No. 110-229, Title VII, 122 Stat. 754, 853 (May 8, 2008). 48 U.S.C. § 1806 note.
                                   2
                                    The covenant also provided U.S. citizenship to certain CNMI residents. Covenant to
                                   Establish a Commonwealth of the Northern Mariana Islands in Political Union with the
                                   United States of America (Pub. L. No. 94-241, § 1, 90 Stat. 263 (Mar. 24, 1976), 48 U.S.C.
                                   § 1801 note).
                                   3
                                    In this report, “foreign workers” refers to workers in the CNMI who are not U.S. citizens or
                                   U.S. lawful permanent residents. Other sources sometimes call these workers
                                   “nonresident workers,” “guest workers,” “noncitizen workers,” “alien workers,” or
                                   “nonimmigrant workers.” “Foreign workers” does not refer to workers from the freely
                                   associated states—the Federated States of Micronesia, Republic of the Marshall Islands,
                                   and Republic of Palau—who are permitted to work in the United States, including the
                                   CNMI, under the Compacts of Free Association (48 U.S.C. § 1901 note, 1921 note, and
                                   1931 note). In this report, foreign workers may include aliens who are immediate relatives
                                   of U.S. citizens or U.S. permanent residents.




                                   Page 1                                              GAO-12-975 Mariana Islands Immigration
CNRA’s statement of congressional intent includes phasing out the CNMI
government’s admission of foreign workers and phasing in federal
responsibilities over immigration in the CNMI. The statement also
expresses the intent to minimize the potential adverse economic effects
of phasing out the CNMI’s immigration program and to maximize the
CNMI’s potential for future economic and business growth, including
providing opportunities for individuals authorized to work in the United
States. To achieve these aims, CNRA required the Secretary of
Homeland Security to establish a transitional work permit program in the
CNMI for foreign workers who are not otherwise eligible for admission
under federal immigration law. The number of permits must be reduced
on an annual basis and reach zero during a transition period, initially set
for a 5-year period that ends in December 2014 but subject to a possible
extension. The Secretary of Labor may extend the transition period based
on the labor needs of the CNMI, to ensure an adequate number of
workers are available for legitimate businesses. In addition, CNRA
authorized technical assistance to be provided for worker training in the
CNMI, and required immigration fees to be paid by CNMI employers to
fund CNMI vocational educational curricula and program development.

CNRA additionally required that we report on the implementation of
federal immigration law in the CNMI and its potential impact on the CNMI
economy. 4 In May 2010 and July 2011, we reported on the status of U.S.
efforts to establish federal border control in the CNMI and to implement all
required CNRA programs for workers, visitors, and investors. 5 In this
report, we (1) assess the status of federal implementation of the CNMI
transitional work permit program for foreign workers, (2) examine the
economic implications for the CNMI of pending federal actions related to
this permit program, and (3) provide the status of federal efforts to
support worker training in the CNMI.


4
 We reported in August 2008 on factors that would affect the legislation’s impact in the
CNMI, focusing particularly on the law’s potential impact on the CNMI’s labor market,
including foreign workers; the tourism sector; and foreign investment. GAO,
Commonwealth of the Northern Mariana Islands: Managing Potential Economic Impact of
Applying U.S. Immigration Law Requires Coordinated Federal Decisions and Additional
Data, GAO-08-791 (Washington, D.C.: Aug. 4, 2008).
5
 GAO, Commonwealth of the Northern Mariana Islands: DHS Should Conclude
Negotiations and Finalize Regulations to Implement Federal Immigration Law,
GAO-10-553 (Washington, D.C.: May 7, 2010); and Commonwealth of the Northern
Mariana Islands: Status of Transition to Federal Immigration Law, GAO-11-805T
(Washington, D.C.: July 14, 2011).




Page 2                                            GAO-12-975 Mariana Islands Immigration
                         In preparing this report, we reviewed CNRA; the Department of Homeland
                         Security’s (DHS) interim and final rules containing regulations for a
                         transitional worker classification program in the CNMI; documents from
                         DHS and the Departments of Labor (DOL), State (State), and the Interior
                         (DOI); and economic literature on the effects of uncertainty about future
                         economic conditions on business owners’ investment decisions. We
                         obtained and analyzed data from DHS, the U.S. Bureau of Economic
                         Analysis (BEA), and the CNMI Department of Finance and found all data
                         to be sufficiently reliable for the purposes of this report. In addition, we
                         interviewed officials from DHS, State, DOL, DOI, and the Saipan
                         Chamber of Commerce and obtained information from the CNMI
                         government and members of the Saipan Chamber of Commerce. See
                         appendix I for more details about our scope and methodology.

                         We conducted this performance audit from January 2012 to September
                         2012 in accordance with generally accepted government auditing
                         standards. Those standards require that we plan and perform the audit to
                         obtain sufficient, appropriate evidence to provide a reasonable basis for
                         our findings and conclusions based on our audit objectives. We believe
                         that the evidence we obtained provides a reasonable basis for our
                         findings and conclusions based on our audit objectives.


                         The CNMI consists of 14 islands in the western Pacific Ocean, just north
Background               of Guam and 5,500 miles from the U.S. mainland. Most of the CNMI
                         population—53,883 in 2010, according to the U.S. Census—reside on the
                         island of Saipan, with additional residents on the islands of Tinian (3,136)
                         and Rota (2,527).


CNMI Political History   The 1976 covenant between the CNMI and the United States established
                         the islands’ status as a self-governing commonwealth in political union
                         with the United States. 6 The covenant granted the CNMI the right of self-
                         governance over internal affairs and grants the United States complete
                         responsibility and authority for matters relating to foreign affairs and
                         defense affecting the CNMI. The covenant also provided U.S. citizenship
                         to certain CNMI residents. Further, the covenant exempted the CNMI



                         6
                          While some provisions of the covenant went into effect in 1976 and 1978, the full
                         covenant became effective in November 1986.




                         Page 3                                            GAO-12-975 Mariana Islands Immigration
                             from federal immigration laws and certain federal minimum wage
                             provisions. However, under the terms of the covenant, the U.S.
                             government has the right to apply federal law in these exempted areas
                             without the consent of the CNMI government. Acting under this authority,
                             Congress enacted CNRA in 2008 to apply federal immigration laws to the
                             CNMI; in November 2009, the U.S. government began its application of
                             immigration laws to the CNMI.


Role of Foreign Workers in   Between 1980 and 2009, the CNMI used its authority over its own
the CNMI Economy             immigration policy to bring in foreign workers under temporary renewable
                             work permits and to allow the entry of foreign business owners and their
                             families. Owing primarily to the influx of these workers between 1980 and
                             2000, the CNMI population increased from about 16,800 in 1980 to
                             69,200 in 2000, and the CNMI economy became dependent on foreign
                             labor. Most of these foreign workers were employed in the garment and
                             tourism industries, which together accounted for about 80 percent of all
                             employment in the CNMI in 1995. However, beginning in the late 1990s,
                             the tourism industry experienced a sharp decline, as total visitor arrivals
                             to the CNMI dropped by more than half, from a peak of 736,117 in 1996
                             to 340,957 in 2011. In addition, in 1999, the garment industry was central
                             to the CNMI economy and employed close to a third of all workers;
                             however, by early 2009, the last garment factory had closed.

                             Because of the decline in the tourism industry and the departure of the
                             garment industry, employment in the CNMI has fallen. Between 2002 and
                             2010, the number of foreign workers in the CNMI dropped by more than
                             60 percent, according to CNMI Department of Finance tax data. 7 CNMI
                             tax data also show that in 2010 there were 14,958 foreign workers and
                             11,336 U.S. workers in the CNMI, with foreign workers outnumbering U.S.
                             workers in all industries but government and banking and finance. 8

                             Figure 1 shows the numbers of foreign and U.S. workers in the CNMI
                             labor force from 2002 through 2010.




                             7
                             CNMI tax data for 2011 are not yet available.
                             8
                              For this report, we define “U.S. workers” as citizens of the United States (including
                             certain CNMI residents); citizens of the Federated States of Micronesia, Republic of the
                             Marshall Islands, and Republic of Palau; and U.S. lawful permanent residents.




                             Page 4                                             GAO-12-975 Mariana Islands Immigration
Figure 1: Total Numbers of Foreign Workers and U.S. Workers in the CNMI Labor
Force, 2002-2010




Notes: Employees who submitted multiple W-2s (if employed by multiple employers) were counted
only once. The data do not show whether U.S. lawful permanent residents were counted as foreign or
as U.S. workers.


As the number of foreign workers has declined, the CNMI’s real gross
domestic product (GDP) has also fallen sharply, declining by 49 percent
between 2002 and 2009. Figure 2 shows the CNMI’s real GDP from 2002
through 2010. 9




9
CNMI’s 2011 GDP was not available as of September 19, 2012.




Page 5                                                 GAO-12-975 Mariana Islands Immigration
Figure 2: CNMI Real GDP, 2002-2010




Note: GDP has been adjusted for inflation to 2005 dollars.

The CNMI government’s revenues have also fallen by 45 percent, from
$240 million in fiscal year 2005 to an estimated $132 million for fiscal year
2011. In addition, the cost of labor in the CNMI increased after application
of the federal minimum wage began there in 2007. 10 Labor costs may
increase further because of the potential application of Federal Insurance




10
  In 2007, the United States enacted legislation that incrementally applies the U.S.
minimum wage to the CNMI, increasing the wage by $0.50 per hour each year until the
minimum wage reaches the U.S. minimum wage, which is set to occur in 2016. See U.S.
Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability
Appropriations Act, 2007, Pub. L. No. 110–28, § 8103, 121 Stat. 188 (May 25, 2007), as
amended by Pub. L. No. 111-244, 124 Stat. 2618 (Sep. 30, 2010), codified at 29 U.S.C. §
206 note. Also see GAO, America Samoa and Commonwealth of the Northern Mariana
Islands: Employment Earnings, and Status of Key Industries Since Minimum Wage
Began, GAO-11-427 (Washington, D.C.: June 23, 2011).




Page 6                                            GAO-12-975 Mariana Islands Immigration
                       Contributions Act (FICA) payroll taxes to some previously exempt
                       workers. 11


Key CNRA Provisions    CNRA’s stated intent in establishing federal immigration law in the CNMI
Affecting CNMI Labor   is in part to minimize, to the extent practicable, any potential adverse
Force                  economic and fiscal effects of phasing out the CNMI’s own foreign worker
                       permit program and to maximize the CNMI’s potential for economic and
                       business growth. To that end, CNRA provides, among other things,
                       opportunities for individuals authorized to work in the United States,
                       including citizens of the Freely Associated States, and provides a
                       mechanism for the continued use of foreign workers as needed to
                       supplement the CNMI’s resident workforce. (See app. II for the complete
                       statement of congressional intent.)

                       CNRA required that DHS, DOL, and DOI take the following actions,
                       among others:

                       •    DHS. CNRA required that the Secretary of Homeland Security
                            establish a transitional work permit program for foreign workers in the
                            CNMI during the initial 5-year transition period. In administering this
                            program, the Secretary must determine the number, terms and
                            conditions, 12 and fees for the permits. The Secretary must also
                            provide for an annual reduction in the allocation of permits for foreign
                            workers that results in zero permits by the end of the transition period;


                       11
                         This matter has recently been the subject of litigation. In October 2011, the U.S. Internal
                       Revenue Service wrote a letter to the CNMI government indicating that Filipino workers
                       and their employers may have to pay FICA taxes. The CNMI government filed a lawsuit in
                       federal district court asking the court to find the Internal Revenue Service’s imposition of
                       the FICA tax liability on Filipino workers to be a violation of the 1976 covenant and federal
                       law. The CNMI government also sought a court injunction against imposing the tax. On
                       August 27, 2012, the CNMI government filed a motion to voluntarily dismiss the case. The
                       outcome of the application of FICA taxes to Filipino workers in the CNMI is currently
                       unknown. According to CNMI Department of Finance tax data, Filipinos made up a
                       majority of the foreign workforce in the CNMI in 2010.
                       12
                         Although the Secretary of Homeland Security is responsible for setting the conditions for
                       admission under this program, the Secretary of State is responsible for issuing visas
                       under this program to foreign workers abroad. This applied to foreign workers living
                       abroad who have obtained a transitional work permit from DHS and need to be admitted
                       to the CNMI, as well as to foreign workers living in the CNMI who are granted a
                       transitional permit by DHS, travel abroad, and need re-admittance to the CNMI. However,
                       these visas are valid only for admission to the CNMI and not to the rest of the United
                       States.




                       Page 7                                              GAO-12-975 Mariana Islands Immigration
    however, the length of the transition period can be repeatedly
    extended by the Secretary of Labor (see the following subsection).
    The system for allocating permits may be based on any reasonable
    method and criteria determined by the Secretary of Homeland
    Security. CNRA also requires DHS to collect from CNMI employers
    $150 per worker per year, which the Secretary must transfer to the
    Treasury of the CNMI for the purpose of funding ongoing vocational
    educational curricula and program development in the CNMI by CNMI
    educational entities. In adopting and enforcing the program, DHS
    must consider in good faith any comments and advice submitted by
    the Governor of the CNMI within 30 days of receipt.

•   DOL. CNRA required that the Secretary of Labor, in consultation with
    the Secretaries of Homeland Security, Defense, the Interior, and the
    Governor of the CNMI, ascertain the current and anticipated labor
    needs of the CNMI and determine whether an extension of the
    transition period by up to 5 years at a time is necessary to ensure that
    an adequate number of workers will be available for legitimate
    businesses in the CNMI. DOL must determine the extension no later
    than 180 days before the end of the transition period. DOL is to base
    its decision on the labor needs of legitimate businesses in the CNMI
    and may consider a number of factors, such as CNMI unemployment
    rates and efforts to train U.S. citizens, lawful permanent residents,
    and unemployed foreign workers in the CNMI. (See app. III for a list of
    the factors that CNRA states DOL may consider.)

•   DOI. CNRA required that the Secretary of the Interior, in consultation
    with the Governor of the Commonwealth, the Secretary of Labor, the
    Secretary of Commerce, and CNMI private sector representatives,
    provide technical assistance to the CNMI, including assistance for
    recruiting, training, and hiring of workers to assist employers in the
    CNMI to hire U.S. citizens and nationals and legal permanent
    residents. Technical assistance must also be provided for identifying




Page 8                                    GAO-12-975 Mariana Islands Immigration
                              economic opportunities and for job skills identification and curricula
                              development. 13

                         In addition, CNRA required that the Secretaries of Homeland Security,
                         Labor, the Interior, and State negotiate and implement interagency
                         agreements to assign their respective duties in order to ensure the timely
                         and proper implementation of CNRA requirements.


Prior Work on Economic   In our August 2008 report, we found that the interaction of DHS and DOL
Impact of CNRA           decisions—on how many CNMI transitional work permits to allocate
Provisions               annually and whether to extend the transition period, and therefore the
                         CNMI transitional work permit program, past 2014—would significantly
                         affect employers’ access to foreign workers. 14 We also found that
                         because of the prominence of foreign workers in the CNMI labor market,
                         any substantial and rapid decline in permits for foreign workers would
                         have a negative effect on the size of the CNMI economy. However, a
                         more modest reduction in the annual permit allocations would result in
                         minimal effects on the CNMI economy.

                         To illustrate a range of possible effects on the CNMI economy given
                         varying rates of reduction in the annual allocation of CNMI transitional
                         work permits for foreign workers, for our 2008 report we generated
                         simulations that estimated the impact on the CNMI’s economy by an
                         index representing total GDP. We generated these simulations for several
                         scenarios, using a range of assumptions regarding the effect of a
                         reduction of labor on production and the ability of the CNMI resident
                         workforce to substitute for the foreign workers in production. In the first
                         scenario, we found that a steep reduction in the transitional work permits
                         for foreign workers—from 20,000 in 2007 to 1,000 by 2021—would lower
                         the CNMI’s GDP to a range of about 21 percent to 73 percent of its 2007



                         13
                           CNRA also required the Secretary of the Interior to report to Congress on any
                         recommendations he may deem appropriate related to whether or not the Congress
                         should consider permitting lawfully admitted guest workers lawfully residing in the
                         Commonwealth on CNRA’s enactment date to apply for long-term status under the
                         immigration and nationality laws of the United States. See 48 U.S.C. § 1806(h)(5). In April
                         2010, the Secretary issued such a report. See appendix IV for information on the
                         Secretary’s recommendations.
                         14
                           Our August 2008 report refers to the permits as CNMI-only work permits and refers to
                         the program as the CNMI-only work permit program. See GAO-08-791.




                         Page 9                                             GAO-12-975 Mariana Islands Immigration
                        value by 2021. In the second scenario, we found that a less precipitous
                        decline in the transitional work permits—from about 20,000 in 2007 to
                        about 8,000 by 2021—would lower the CNMI’s GDP to a range of about
                        64 percent to 85 percent of its 2007 value by 2021. In the third scenario,
                        we found that a much smaller decline in the transitional worker permits—
                        from 20,000 in 2007 to 17,000 by 2021—would lower the CNMI’s GDP to
                        a range of no less than about 92 percent to about 98 percent of its current
                        value by 2021. 15



CNMI Transitional
Work Permit Program
Has Been Established,
and Federal Decisions
Affecting Future
Access to Foreign
Workers Are Pending




                        15
                          Our analysis should not be considered predictive of future GDP, because we did not
                        make any assumptions about future demand for CNMI foreign workers. Future demand
                        could be affected by increases in the minimum wage or changes in the tourism industry.
                        While these assumptions may also affect the size of the CNMI economy, they were
                        outside the scope of our earlier analysis. After reviewing a draft of this report
                        (GAO-12-975), DHS noted that this analysis appears to assume that all of the permits are
                        used each year and that it could choose to set a permit allocation that well exceeds
                        demand for the permits. If it set such a permit allocation, DHS noted that it could then
                        reduce its next permit allocation significantly but the number of permits used that year and
                        therefore the number of foreign workers employed could increase. For more information
                        on our 2008 findings and simulations, see GAO-08-791.




                        Page 10                                            GAO-12-975 Mariana Islands Immigration
DHS Issued Final Rule to   On September 7, 2011, DHS issued a final rule to implement a CNMI
Implement Transitional     transitional work permit program, as required by CNRA, for foreign
Work Permit Program That   workers who would not otherwise be admissible under federal law. 16 The
                           final rule creates a classification of CW-1 status for transitional foreign
Addresses Key CNRA         workers and a CW-2 status for dependents of CW-1 workers. 17 DHS
Requirements               delayed issuing a final rule for almost 2 years, following a court injunction
                           on its October 2009 interim rule that prohibited it from issuing a final rule
                           until it followed notice-and-comment rulemaking procedures to consider
                           public comments on its interim rule. DHS received 146 public comments
                           on the interim rule and made some changes in the final rule in response
                           to those comments. (For more information on DHS’s actions to issue the
                           final rule and respond to public comments on its interim rule, see app. V.)

                           As required by CNRA, DHS’s final rule on the CNMI transitional work
                           permit program addresses (1) the number of permits to be issued; (2) the
                           terms and conditions for the permits; and (3) the fees for the permits,
                           including a $150 vocational education fee. United States Citizenship and
                           Immigration Services (USCIS), a component of DHS, is responsible for
                           processing petitions for these permits. 18 Table 1 describes how DHS’s
                           final rule addresses these implementation decisions.




                           16
                            Commonwealth of the Northern Mariana Islands Transitional Worker Classification, 76
                           Fed. Reg. 55502 (Sept. 7, 2011). The final rule was effective October 7, 2011.
                           17
                             DHS deemed CW status to be synonymous with the term “permit” referenced in the
                           legislation. In this report, “permit” refers to CW status. In our 2008, 2010, and 2011
                           reports, “CNMI-only work permit” referred to CW-1 status.
                           18
                             USCIS is responsible for processing applications for immigration benefits in the United
                           States—that is, the ability of aliens to live and in some cases to work in the United States
                           permanently or temporarily or to apply for citizenship. Applications for immigration benefits
                           are classified into several different categories, such as employment-based and family-
                           based, with many subcategories.




                           Page 11                                             GAO-12-975 Mariana Islands Immigration
Table 1: DHS Implementation Decisions Reflected in Final Rule

Implementation decision             Final rule
Number of permits                   DHS will grant up to 22,417 CW-1 work permits for fiscal year 2011 and up to 22,416 CW-1
                                    work permits for fiscal year 2012. Unused permits will not carry over to the next year. Future
                                    permit allocations will be smaller than in the prior year and will be determined on an annual
                                    basis and announced in the Federal Register.
Terms and conditions of permits     Employers must petition for nonimmigrant workers to obtain status. When filing a petition for a
                                    nonimmigrant worker, employers must attest that (1) they are eligible to petition for a CW-1
                                                  a
                                    work permit; (2) they will continue to comply with eligibility requirements while the
                                    nonimmigrant worker is employed; (3) no qualified U.S. worker is available to fill the position;
                                    (4) the position is nontemporary or nonseasonal and is in an occupational category that DHS
                                    has determined requires foreign workers to supplement the resident workforce; and (5) if a
                                    foreign worker is in the CNMI, the foreign worker is there lawfully. The final rule also sets
                                                                                           b
                                    certain limitations on travel abroad for CW-1 workers. The final rule requires CW-1 workers
                                    and CW-2 dependents to submit biometric information as requested by USCIS.
                                                                                                                                                    c
Fees related to permits             Employers petitioning for CW-1 work permits will pay a fee of $325 per petition.
                                    Employers petitioning for CW-1 work permits will also pay $150 per worker per year to fund
                                    CNMI vocational educational curricula and program development and are required to submit a
                                    biometric fee of $85 per worker for workers currently living in the CNMI who are older than 14
                                    years and younger than 79.
                                        Source: Commonwealth of the Northern Mariana Islands Transitional Worker Classification, 76 Fed. Reg. 55502 (Sept. 7, 2011).
                                        a
                                         DHS’s final rule specifies that, to be eligible to petition for a CW-1 work permit, an employer must be
                                        engaged in a legitimate business; consider all available U.S. workers for the position being filled by
                                        the CW-1 work permit holder; offer terms and conditions of employment that are consistent with the
                                        nature of the occupation, activity, and industry in the CNMI; and comply with all federal and CNMI
                                        requirements relating to employment. The final rule states that a business is not legitimate if it
                                        engages directly or indirectly in prostitution, trafficking in minors, or any other activity that is illegal
                                        under federal or CNMI law. DHS will determine whether a business is legitimate. DHS notes that,
                                        although an individual household employing a domestic worker would not qualify as a legitimate
                                        business, it is possible for a domestic worker to qualify for a CW-1 work permit if employed through a
                                        legitimate business that places domestic workers in individual households.
                                         b
                                          If a CW-1 permit holder leaves the CNMI for a foreign destination for any period of time, the permit
                                        holder must obtain a CW-1 nonimmigrant visa, issued by the Department of State, before returning to
                                        the CNMI.
                                        c
                                         An employer may name more than one foreign worker on each petition, provided that the workers
                                        are in the same occupational category, for the same period of time, and in the same location.


                                        DHS’s methodology for the allocation of CW-1 permits for fiscal years
                                        2011 and 2012 included considering, among other factors, requests by
                                        the CNMI governor (as required by CNRA) not to reduce the number of
                                        permits in the program’s first 2 years; CNRA’s mandate that it reduce the
                                        number of permits annually; and the potential demand for the permits,
                                        according to DHS’s final and interim rules for the program. DHS’s final
                                        rule states that DHS set the fiscal year 2011 allocation of 22,417 CW-1
                                        permits based on the CNMI government’s estimate of the number of




                                        Page 12                                                                  GAO-12-975 Mariana Islands Immigration
foreign workers in the CNMI when CNRA was enacted in May 2008. 19
The final rule also states that DHS’s reduction of the number of permits
by one permit for fiscal year 2012 was intended to (1) effectively maintain
a steady level of permits available to CNMI employers for the first 2 years
of the CW-1 permit program and (2) accommodate potential demand for
the permits expected because CNMI government-issued work permits for
foreign workers were set to expire in the first quarter of fiscal year 2012. 20
Further, DHS’s interim rule stated that when making its permit allocation,
DHS considered the Governor’s request not to reduce the number of
permits in the program’s first 2 years as well as CNRA’s requirement that
DHS reduce the number of permits on an annual basis.




19
  After the passage of CNRA in 2008, the Governor of the CNMI requested that DHS set
the first permit allocation at 22,417 permits—the total number of foreign workers in the
CNMI at that time, according to the CNMI government. See letter from CNMI Governor
Benigno R. Fitial to Richard C. Barth, DHS Assistant Secretary for Policy Development,
and Stewart A. Baker, DHS Assistant Secretary for Policy. Re: Public Law 110-229. July
18, 2008.
20
  Under CNRA, foreigners who lack U.S. immigration status but were admitted under the
CNMI’s immigration laws prior to November 2009 could continue to live and work in the
CNMI for 2 years after that date or until their CNMI-government-issued permits expired,
whichever was earlier. The CNMI issued temporary “umbrella” permits authorizing the
holders to remain in the CNMI after November 28, 2009, for a maximum of 2 years,
consistent with the terms of the permit. CNRA’s authorization for individuals with these
permits to remain in the CNMI without U.S. immigration status expired on November 27,
2011.




Page 13                                           GAO-12-975 Mariana Islands Immigration
DHS Has Processed about    DHS’s USCIS had processed 49 percent of the petitions it had received
Half of CW-1 Petitions     for fiscal year 2012 as of July 1, 2012, approving 45 percent and denying
Received for Fiscal Year   or rejecting about 5 percent. 21 USCIS received 5,777 petitions for 11,830
                           CW-1 permits—about half of its annual allocation of 22,416 permits for
2012                       fiscal year 2012. 22 According to USCIS officials, USCIS plans to complete
                           an initial review of all of the CW-1 petitions by September 1, 2012, and to
                           process all of the petitions by December 31, 2012. 23 Employers who have
                           filed petitions that are still pending are permitted to continue to employ
                           workers who were living and working lawfully in the CNMI at the time the
                           petition was filed. 24

                           Figure 3 shows the status of petitions for CW-1 permits that USCIS
                           received between October 1, 2011, and June 30, 2012.




                           21
                             DHS did not receive any petitions in fiscal year 2011, because the final rule did not
                           become effective until fiscal year 2012. In the final rule, DHS predicted that approximately
                           13,216 foreign workers already working in the CNMI would be granted a CW-1 work
                           permit in 2011.
                           22
                             As of July 1, 2012, 430 dependents of CW-1 workers had applied for CW-2 status. DHS
                           had approved 126, denied 2, and rejected 73 applications for CW-2 status; 229
                           dependents had applications that were still pending.
                           23
                            USCIS also plans to complete an initial review of all CW-2 dependents of CW-1 workers
                           by September 1, 2012, and to process all CW-2 applications by December 31, 2012.
                           24
                             Workers who held a valid CNMI-government-issued work authorization at the time their
                           employer filed a petition on their behalf for a DHS-issued CW-1 work permit may continue
                           to work in the CNMI for that employer in their current position without obtaining additional
                           legal status during the adjudication of the petition. However, according to a USCIS official,
                           workers who had been granted parole by DHS—that is, official permission for an
                           otherwise inadmissible alien to be physically present in the United States temporarily—
                           and work authorization in the CNMI when their petition was filed must maintain this status
                           and authorization until the petition is adjudicated.




                           Page 14                                             GAO-12-975 Mariana Islands Immigration
Figure 3: Status of CW-1 Petitions and Corresponding Worker Permits Received as of July 1, 2012




                                        a
                                         According to a USCIS official, a petition is recorded as approved if at least one worker listed on the
                                        petition has been approved. However, an approved petition may list a denied worker. As a result, the
                                        official said that the number of workers listed as approved is the maximum number of workers listed
                                        on the approved petitions.




                                        Page 15                                                   GAO-12-975 Mariana Islands Immigration
b
 Petitions were denied because (1) the petitioner failed to demonstrate eligibility for the CW-1 permit
(22 petitions); (2) the petitioner requested that the petition be withdrawn from consideration (40
petitions); or (3) USCIS requested additional evidence from the petitioner but did not receive a
response within 120 days (7 petitions).
c
 Petitions were rejected because (1) the petitioner submitted the incorrect permit fee or (2) the
petitioner did not sign the petition. Petitions may be resubmitted with the correct permit fee or
signature.


USCIS received almost 93 percent of the CW-1 petitions in November
and December 2011, shortly before and after the expiration of temporary
CNMI-government-issued authorizations for foreign workers on
November 28, 2011. Since November 2011, USCIS has substantially
increased the number of CW-1 petitions it has processed each month,
processing over 850 petitions in May 2012 compared with only 40
petitions in November 2011 (see fig. 4).




Page 16                                                   GAO-12-975 Mariana Islands Immigration
Figure 4: Numbers of CW-1 Petitions Received and Processed Each Month, October
2011-June 2012




According to USCIS officials, USCIS has encountered two main
challenges in completing the processing of CW-1 petitions:

•   Many CW-1 petitions require further evidence from the petitioner. For
    example, some petitions do not contain evidence that the petitioner is
    engaged in a legitimate business and has considered all U.S. workers
    for the position, among other things. As of July 2012, USCIS had
    requested additional evidence for 3,200 petitions, or more than half of
    the CW-1 petitions submitted in fiscal year 2012.

•   The office responsible for obtaining biometric information, such as
    fingerprints, from workers seeking a CW-1 work permit has had
    difficulty meeting added workload demand. USCIS only has one office



Page 17                                    GAO-12-975 Mariana Islands Immigration
                               in Saipan that is able to obtain biometric information from workers
                               seeking CW-1 status, and it is staffed to capacity. To help meet the
                               demands of obtaining biometric information from workers seeking
                               CW-1 status in remote areas, USCIS deployed teams of two staff
                               members to the outlying islands of Rota for 9 business days and
                               Tinian for 16 business days. USCIS has also trained additional
                               officers at the USCIS California Service Center to help process, as
                               needed, petitions and applications related to the CW-1 work permit
                               program.

Agency Decisions on       DHS officials stated that they are working to determine the permit
Fiscal Year 2013 Permit   allocation for fiscal year 2013 and will announce the allocation in the
Allocation and Any        Federal Register by October 1, 2012. CNRA requires that DHS provide
                          for an annual reduction in the number of permits. DHS’s final rule states
Extension of Transition   that DHS will determine the permit allocation on an annual basis and
Period Are Pending        announce it in the Federal Register.

                          DOL officials told us that, as of July 2012, the department had not
                          decided whether or when it will extend the transition period. Officials said
                          the department does not expect to announce a decision before the end of
                          2012 and pointed out that DOL is not required by CNRA to make its
                          determination until July 5, 2014. 25 DOL officials said they plan to comply
                          with CNRA requirements to consult DHS, DOI, the Department of
                          Defense (DOD), and the Governor of the CNMI before making the
                          determination. 26




                          25
                            CNRA requires that DOL make its determination 180 days prior to the end of
                          the currently scheduled transition period, which is December 31, 2014.
                          26
                           In July 2012, the President of the Saipan Chamber of Commerce, a private
                          business organization in the CNMI representing 170 members and the CNMI
                          business community at large, wrote a letter to DOL asking the department to
                          consider extending the transition period. In his letter, the Chamber’s President
                          said that the Chamber did not believe that enough U.S. workers are available
                          and qualified to replace the CW-1 workers if the transition period ends in 2014.




                          Page 18                                       GAO-12-975 Mariana Islands Immigration
DHS Has One Data Source          DHS has identified a single source of CNMI workforce data that it intends
for Pending Decision but         to use for its annual allocation of transitional work permits and has not
Has Not Made Public Its          made public the types of information, such as its methodology, that it will
                                 publish with future permit allocations. In commenting on a draft of this
Methodology, while DOL           report, DHS stated that it will provide its methodology for its fiscal year
Has Identified Multiple          2013 permit allocation upon publishing the allocation. In contrast, DOL
Data Sources and                 has identified multiple sources of data on the CNMI labor market and
Methodology                      plans to conduct a number of analyses of these data in making its
                                 determination of whether and when to extend the transition period.


DHS Data and Methodology for     DHS has identified one data source that it will use for implementing
Determining Permit Allocations   CNRA requirements, including its annual permit allocation decision,
                                 according to a department official. In 2008, we recommended that DHS
                                 develop a strategy for collecting data to help it meet CNRA goals.
                                 According to the DHS official, the department subsequently identified one
                                 data source that it will use to help it implement CNRA requirements: the
                                 U.S. Census Bureau’s County Business Patterns, which provides data on
                                 the number of paid workers, businesses, and payroll by industry in the
                                 CNMI annually. However, the source does not provide numbers of U.S.
                                 and foreign workers by industry, which could help DHS predict future
                                 demand for foreign workers. 27

                                 DHS has also not made public the methodology it will use in allocating
                                 CW-1 permits for fiscal year 2013, and the September 2011 final rule
                                 does not state whether DHS will publish its methodology for future
                                 allocations. 28 According to a senior DHS official, the department has not
                                 made public the types of information—including its methodology for the
                                 allocation—that it will publish with future permit allocations. In
                                 commenting on a draft of this report, DHS stated that it will provide the
                                 methodology for the fiscal year 2013 permit allocation upon publishing the
                                 allocation. The final rule states that DHS will assess the CNMI’s
                                 workforce needs annually when determining the annual permit allocation.


                                 27
                                   An agency should obtain any relevant external information that may affect the
                                 achievement of its missions, goals, and objectives, particularly related to legislative or
                                 regulatory developments and political or economic changes. GAO, Internal Control
                                 Management and Evaluation Tool, GAO-01-1008G (Washington, D.C.: August 2001).
                                 28
                                   The final rule states that DHS believes publishing the allocation annually in the
                                 Federal Register will provide sufficient notice to the public of the permit
                                 allocation.




                                 Page 19                                              GAO-12-975 Mariana Islands Immigration
                               However, DHS also notes that economic analysis is hampered by
                               significant uncertainty regarding future demand for foreign workers and by
                               a general lack of CNMI economic and production data that would allow
                               DHS to estimate the impact of the final rule on the broader CNMI
                               economy. 29

DOL Data and Methodology for   In June 2012, DOL outlined a strategy for obtaining data on the CNMI
Determining Whether to         labor market that it will use to determine whether to extend the transition
Extend Transition Period       period. DOL outlined this strategy in responding to a recommendation in
                               our 2008 report that it develop a strategy for collecting data to help it meet
                               CNRA goals. This strategy includes the data source DHS identified to
                               help it implement CNRA requirements as well as other data sources, one
                               of which identifies the number of workers by citizenship and industry in
                               the CNMI. 30 According to DOL’s strategy, the department will review
                               multiple data sources, including the following:

                               •    U.S. County Business Patterns (U.S. Census Bureau). DOL will
                                    request data for 2008 and 2011.

                               •    U.S. Census (U.S. Census Bureau). DOL will request data for 2010
                                    that includes, among other types of data, social and demographic
                                    data by age, sex, race, household relationship, and household type.

                               •    CNMI tax records (CNMI Department of Finance). DOL will request
                                    data for 2008 through 2011 that includes, among other types of data,
                                    the number of workers in the CNMI by citizenship, industry, and
                                    occupation.

                               Regarding DOL’s methodology, DOL officials indicated that the
                               department plans to analyze the data identified in its strategy, as well as
                               other types of information, to address the factors that CNRA suggested




                               29
                                 The final rule notes that the limit on the number of permits for any fiscal year
                               will be less than the previous fiscal year and the permit allocation will be a
                               number reasonably calculated, at DHS’s discretion, to reduce the number of
                               nonimmigrants with CW-1 work permits to zero by the end of the transition
                               period.
                               30
                                 In May 2008, we recommended that DOL develop a strategy for obtaining
                               critical data on the CNMI labor market to help it make key implementation
                               decisions. For more information on our findings and recommendation, see
                               GAO-08-791.




                               Page 20                                         GAO-12-975 Mariana Islands Immigration
DOL consider when making its determination (see app. III for a listing of
the factors suggested by CNRA). For example:

•   DOL plans to request from the U.S. Census Bureau special cross
    tabulations from the 2010 U.S. Census data by citizenship status,
    employment status, and place of birth to help it estimate the current
    unemployment rate of different populations within the CNMI.

•   DOL plans to use the U.S. Census Bureau’s County Business
    Patterns data, CNMI Department of Finance tax data, U.S. Bureau of
    Economic Analysis estimates of the CNMI’s GDP, and government
    studies to help it determine CNMI businesses’ need for foreign
    workers.

•   DOL plans to conduct structured interviews with representatives and
    officials from the CNMI Office of the Governor, officials from the CNMI
    Department of Labor, officials from and members of the Saipan
    Chamber of Commerce, and CNMI worker advocates. DOL expects
    that these interviews will help it identify efforts by CNMI businesses
    and the CNMI Department of Labor to prepare U.S. residents to
    assume jobs typically held by foreign workers in the CNMI; provide
    evidence that may indicate whether U.S. citizens or lawful permanent
    residents are willing to accept jobs offered; and determine whether
    there is a need for foreign workers to fill specific industry jobs.

•   DOL plans to estimate changes in employment and in the GDP in
    each CNMI industry sector that might result from a reduction in the
    number of foreign workers.

DOL officials noted that the department’s plans to obtain these data and
conduct various analyses are subject to budget and staffing constraints,
and the complete and timely response to its various data requests. DOL
officials also said that they will solicit feedback in the near future from
DHS, DOI, DOD, and the Governor of the CNMI on DOL’s data collection
strategy and the additional analyses DOL plans to conduct using these
data.




Page 21                                   GAO-12-975 Mariana Islands Immigration
CNMI Economy
Remains Dependent
on Foreign Workers,
and Uncertainty over
Pending Federal
Decisions May Be
Limiting CNMI
Investment
Foreign Workers           The CNMI economy remains dependent on foreign workers, given the
Comprised about Half of   high percentage of foreign workers in the CNMI’s workforce. We estimate,
CNMI Workforce in 2012    based on available data for foreign and U.S. workers, that a little more
                          than 13,200 foreign workers remained in the CNMI in 2012, comprising
                          approximately 54 percent of the CNMI workforce. 31 Based on DHS data
                          for 2012, the number of foreign workers includes

                          •    11,750 foreign workers (about 89 percent of all foreign workers) with a
                               valid or pending petition for a CW-1 work permit; 32

                          •    1,369 foreign workers (about 10 percent of all foreign workers) with a
                               valid or pending employment authorization document that allows
                               certain aliens admitted to the United States temporarily and who are




                          31
                            Although data on U.S. workers in the CNMI are not available for 2012, we estimate that
                          foreign workers in 2012 constituted about 54 percent of the CNMI workforce, assuming
                          that the number of U.S. workers in the CNMI has remained constant at the 2010 level of
                          about 11,000 workers according to the most recent tax data available from the CNMI
                          Department of Finance. USCIS data show that since 2010 765 aliens residing in the CNMI
                          had been granted U.S. permanent residency (687) or U.S. citizenship (78), as of April 30,
                          2012 and March 9, 2012, respectively. We were unable to determine whether any of the
                          foreign workers included in our estimate had requested and been granted permanent
                          residency or U.S. citizenship.
                          32
                            The estimated number of foreign workers with a valid or pending CW-1 permit petition
                          include those whose petitions were initially rejected because they lacked a signature or
                          the correct fee; in such cases, petitions can be resubmitted with the correct permit fee
                          and/or signature.




                          Page 22                                            GAO-12-975 Mariana Islands Immigration
                               eligible for employment authorization to work in the CNMI; 33 and

                          •    134 foreign workers (about 1 percent of all foreign workers) with valid
                               nonimmigrant worker or investor status. 34


CNMI Businesses Report    Officials and members of the Saipan Chamber of Commerce (Chamber)
Challenges in Replacing   stated that businesses face difficulties in finding U.S. workers to replace
Foreign Workers           foreign workers. 35 According to Chamber officials, the number of U.S.
                          workers available to replace foreign workers in the CNMI is limited.
                          Officials said that U.S. citizens graduating from high school are more
                          likely to leave the CNMI to obtain a university degree and not return
                          because of the limited availability of jobs, the high cost of living in the
                          CNMI, and the higher earning potential elsewhere. See text box for
                          examples of comments from CNMI businesses.

                          Comments from CNMI Businesses on Challenges of Finding Replacements for
                          Foreign Workers
                          “There [are] simply not enough employable U.S. eligible worker[s] in the CNMI. . . . We
                          have lost two [foreign] workers who have resigned and decided to return to the Philippines
                          [to seek work there]. It [has] been very difficult to replace them.”
                           “If a local person wants a degree in computer science, [the person] would have to travel
                          to the United States and spend at least 4 years in college. After receiving a degree, these
                          local people do not want to return to the CNMI. . . . Their salaries [in the CNMI] would be
                          less than half of [what they would earn on the U.S. mainland]. . . . If we are forced to send
                          all of our highly trained personnel back to the Philippines, then I will be forced to close our
                          doors and go out of business.”
                          “There simply will not be enough able-bodied individuals entering the workforce to replace
                          the departing [foreign] workers.”
                          “We have already tried working with employees who are U.S. citizens. This has not been
                          particularly successful in our profession, because typically the individuals available are of
                          a lower professional standard, or entry level. . . . U.S.-based professionals in our field are
                          not willing to move to the CNMI.”
                          Source: Statements from Saipan Chamber of Commerce members.




                          33
                            Some of the aliens eligible to be approved for a DHS Employment Authorization
                          Document (Form 1-766) include those who have filed an application for permanent
                          residency and otherwise inadmissible aliens who have been “paroled,” that is, given
                          official permission to be physically present in the United States temporarily.
                          34
                           These include H1B, H2B, L1A, R1, E2, and E2C. E2 and E2C investors were included
                          because they are authorized to work in the CNMI.
                          35
                            The Saipan Chamber of Commerce is a nonprofit association of businesses and
                          professional individuals in the CNMI. Its mission is to work to improve business
                          opportunities and to build a better economic and civic community in Saipan.




                          Page 23                                                       GAO-12-975 Mariana Islands Immigration
Uncertainty about Future    CNMI businesses’ uncertainty about future access to foreign workers, due
Access to Foreign Workers   to the limited availability of information regarding future work permit
May Be Limiting Business    allocations and any extension of the transition period, may be creating
                            disincentives for investment. 36 Economics literature on the effects of
Investment
                            uncertainty suggests that government policies and regulations can
                            become a source of uncertainty. 37 When facing uncertainty, businesses
                            tend to delay investments that cannot be easily recovered, such as
                            investments in expanding a hotel or building a new golf course; by
                            delaying investments, businesses keep their options open until more
                            information becomes available. For example, if a hotel in the CNMI were
                            trying to decide whether to expand its operation by adding new rooms, it
                            currently would face significant uncertainty regarding its future cost
                            structure and its access to foreign workers. In 2009, labor costs
                            accounted for approximately one-third of a hotel’s operating cost,
                            according to a survey of CNMI businesses that we conducted. 38 Without
                            access to foreign workers, a hotel might have to increase its wage rate
                            significantly to attract enough U.S. workers with the specific skills, such
                            as the ability to speak a foreign language. Facing such uncertainty
                            regarding future payroll costs, the hotel might decide not to invest until it
                            has more information about its continued access to foreign labor.

                            Consistent with the economics literature, Chamber officials and some
                            Chamber members identified uncertainty regarding pending federal
                            actions that may affect employers’ access to foreign labor as a factor that
                            has limited investment in the CNMI. Specifically, members said that
                            uncertainty has caused them to limit their plans for future investments.
                            The text box below shows examples of comments from CNMI businesses
                            that are members of the Chamber.




                            36
                              After reviewing a draft of this report, DHS noted that disincentives for investment may
                            also be created if DHS and DOL provide greater certainty about CNMI businesses’ access
                            to foreign workers and the information provided negatively affects those businesses.
                            37
                              Avinash K. Dixit and Robert S. Pindyck, Investment under Uncertainty (Princeton:
                            Princeton University Press, 1994).
                            38
                             See GAO-11-427.




                            Page 24                                           GAO-12-975 Mariana Islands Immigration
                         Comments from CNMI Businesses on Impact of Uncertain Access to Foreign Labor
                         on Investment Plans
                         “The uncertainty over the access to foreign skilled labor is preventing investment in the
                         CNMI. . . . While we aim to maintain a presence in the CNMI and continue to look for
                         investment opportunities, it gets harder and harder. In today’s global economy . . . we are
                         looking elsewhere for further and future investment.”
                          “By not indicating that a permanent fix or an extension is in the plan, [federal agencies
                         have] simply made CNMI more unattractive for investors.”
                         “It is probable we will increase [the number of employees we have in the Philippines] as a
                         precaution to the difficulty in obtaining enough qualified people after 2014.”
                          “The uncertainty with labor force puts my company middle and long-term plans on
                         hold. . . . Our company will not purchase any expensive machinery, construct any new
                         facility, open new work positions, which will mean less business for company’s partners
                         and other local businesses.”
                         Source: Statements from Saipan Chamber of Commerce members.



                         Chamber officials also cited limited access to adequate health care in the
                         CNMI, the high cost of living, and the high cost of shipping goods to and
                         from the CNMI as factors that may have affected businesses’ investment
                         decisions in the CNMI.



Federal Agencies
Have Provided Funds
for CNMI Worker
Training, and Some
Information Is
Available on DOL and
DOI Efforts

DOL, DOI, and DHS Have   DOL, DOI, and DHS have made available a combined total of about $6.5
Funded CNMI Worker       million for worker training in the CNMI in fiscal years 2010 through 2012
Training Programs with   (see table 2).
Varying Reporting
Requirements




                         Page 25                                                       GAO-12-975 Mariana Islands Immigration
Table 2: DOL, DOI, and DHS Funds Made Available for CNMI Worker Training, Fiscal Years 2010-2012

                                                Fiscal year
Agency                                2010                                  2011                2012                         Total
DOL                             $1,395,033                          $1,371,935            $1,220,053                   $3,987,021
DOI                                         0                            $700,000                   0                    $700,000
DHS                                         0                                  0          $1,812,600                   $1,812,600
Total                           $1,395,033                          $2,071,935            $3,032,653                   $6,499,621
                                       Source: DOL, DOI, and DHS data.




                                       DOL provided funding through annual grants throughout this period; DOI,
                                       through a one-time grant in fiscal year 2011; and DHS, through a cash
                                       transfer in fiscal year 2012. 39 Each agency’s funding has different
                                       reporting requirements.

                                       •        DOL. Since 1999, DOL has provided grants to the CNMI for worker
                                                programs administered under the Workforce Investment Act of 1998
                                                (WIA). 40 Between fiscal year 2010 and fiscal year 2012, DOL made
                                                available almost $4 million in WIA grants to the CNMI State Workforce
                                                Investment Agency, which is responsible for administering WIA




                                       39
                                          DOI- and DOL-awarded grants are subject to an annual financial audit. Under the Single
                                       Audit Act, certain entities, including the CNMI, expending $500,000 or more in federal
                                       awards, including grants and other assistance under more than one federal program in a
                                       fiscal year, are required to obtain an annual “Single Audit,” which includes an audit of the
                                       entity’s financial statements, a schedule of the expenditure of federal awards, and a
                                       review of related internal controls. The funds transferred to the CNMI from DHS have not
                                       yet been included in an audit. The CNMI Public Auditor said that it believed the funds will
                                       be treated as revenue and not federal awards for the purpose of the audit and one of the
                                       private companies that conduct these audits said that if these funds were selected for
                                       testing, that they would be tested for compliance.
                                       40
                                         WIA created a comprehensive workforce investment system that brought together
                                       multiple federally funded employment and training programs into a single system, called
                                       the one-stop system. One-stop centers serve two customers—job seekers and employers.
                                       Pub. L. No. 105-220, 112 Stat. 936 (codified at 29 U.S.C. § 2801 et seq.) According to
                                       DOL official, funds are made available for WIA Adult, Dislocated Workers, and Youth
                                       programs annually for three years; however, DOL officials said DOL requires 70 percent of
                                       the funds to be obligated within the year that the funds are made available. For more
                                       information on the WIA, see GAO, Workforce Investment Act: Innovative Collaborations
                                       between Workforce Boards and Employers Helped Meet Local Needs, GAO-12-97,
                                       (Washington, D.C.: Jan. 19, 2012).




                                       Page 26                                            GAO-12-975 Mariana Islands Immigration
     programs in the CNMI. 41 WIA programs include programs for adults,
     dislocated workers, and youths that provide a broad range of services
     including job search assistance, assessment, and training for eligible
     individuals. Under the terms and conditions of the WIA grants, DOL
     requires quarterly performance and financial reports from the CNMI
     agency.

•    DOI. In fiscal year 2011, DOI awarded a one-time $1 million technical
     assistance grant to the CNMI Department of Commerce, of which
     $700,000 was designated to support the development or expansion of
     on-the-job training programs for U.S. workers. The training is intended
     to enable participants to meet job requirements and be employable on
     completing the training. 42 DOI provided this grant in response to
     CNRA requirements that it provide technical assistance, such as
     assisting CNMI employers in recruiting, training, and hiring workers
     from among U.S. citizens and national residents of the CNMI and, if
     an adequate number of such workers are not available, from among
     legal permanent residents. Under the grant’s terms and conditions,
     DOI requires the CNMI Department of Commerce to submit
     semiannual narrative and financial reports on the status of the grant
     project until the grant’s expiration in 2013.

•    DHS. In fiscal year 2012, DHS transferred to the CNMI Treasury
     about $1.8 million in funds it had collected for CNMI vocational
     curricula and program development, as required by CNRA. DHS


41
  DOL also made available annual grants totaling approximately $1.1 million for the three-
year period between July 2010 and June 2013 to fund a Senior Community Service
Employment Program (SCSEP) in the CNMI. The SCSEP is a community service and
work based training program that provides subsidized, part-time, community services work
based training to unemployed persons age 55 or older who are low-income and have poor
employment prospects. The goal of the program is to provide community services and part
time paid work based training to participants in order to place them into unsubsidized jobs.
According to DOL, between July 2011 and June 2012, there were 32 participants of the
SCSEP CNMI program. DOL reported that none of those participants left the program
because they were placed into an unsubsidized job.
42
 The DOI awarded the remaining $300,000 to hire an economic advisor in the CNMI. In
2010, we found that the DOI had opportunities to better oversee grants and reduce the
potential for mismanagement and recommended that the DOI evaluate its existing
authorities that could be used to ensure more efficient use of funds by insular areas,
establish its staffing needs for grant project monitoring, and clarify its grant management
policy on the movement of funds between projects. See GAO, U.S. Insular Areas:
Opportunities Exist to Improve Interior’s Grant Oversight and Reduce the Potential for
Mismanagement, GAO-10-347 (Washington, D.C.: Mar. 16, 2010).




Page 27                                             GAO-12-975 Mariana Islands Immigration
                          collects these funds annually from the $150 vocational educational
                          funding fee assessed for each foreign worker on a CW-1 petition. 43
                          According to a senior DHS official, DHS will continue to collect and
                          transfer these funds to the CNMI Treasury until the end of the
                          transition period. The senior official said that because DHS transfers
                          these funds directly to the CNMI Treasury, the funds are not subject to
                          DHS grant terms or conditions, such as performance or financial
                          reporting requirements. The official also noted that CNRA does not
                          direct DHS to impose any such requirements on the funds.

DOL and DOI Grant    DOL and DOI collect information from the CNMI government regarding
Managers Collect     job training activities and results funded by, respectively, the DOL WIA
Information on Job   grants and the DOI technical assistance grant. We also obtained
                     information from CNMI legislative staff regarding the CNMI governor’s
Training Efforts     plans to use the funds collected from the DHS work permit program. In
                     two instances, the same organizations are designated to receive
                     vocational educational funding from two or more of the agencies.

                     •    DOL. The CNMI State Workforce Investment Agency, the recipient of
                          the WIA grants, submits investment performance reports to DOL on a
                          quarterly basis, as required by the grants’ terms and conditions. The
                          agency submitted its most recent performance report, with information
                          on training program participants, characteristics, demographics, and
                          services, in May 2012. According to the DOL grant manager, the
                          services most often provided in the CNMI through WIA’s Adult Worker
                          Program, Dislocated Worker Program, and Youth program are on-the-
                          job training and work experience. Providers of training include the
                          Northern Marianas College, the Northern Marianas Trades Institute,
                          CNMI government agencies, and private businesses. Between June
                          2011 and June 2012, the CNMI State Workforce Investment Agency
                          reported to the DOL grant manager that it had provided training
                          services to 247 individuals in the Adult Program, 17 individuals in the
                          Dislocated Worker Program, and 719 individuals in the Youth
                          Program. According to the DOL grant manager, most of the youths
                          received training services through summer youth programs. The
                          CNMI State Workforce Investment Agency further reported that 50



                     43
                       As of July 1, 2012, DHS had transferred to the CNMI Treasury $1,812,600 of the
                     $1,827,000 DHS had collected from vocational educational funding fees. According to a
                     senior DHS official, DHS has temporarily withheld some of the collected funds until checks
                     for the $150 per worker fee are verified and approved for payment.




                     Page 28                                           GAO-12-975 Mariana Islands Immigration
     participants of the Adult Program, 6 participants of the Dislocated
     Worker Program, and 38 participants of the Youth Program in fiscal
     year 2011 have obtained employment. DOL said that because of
     budget restrictions, the DOL grant manager has not performed an on-
     site monitoring review of the WIA grants to the CNMI since 2006.
     According to DOL officials, information on the performance of this
     grant is available to Congress on request.

•    DOI. The CNMI Department of Commerce, the recipient of the
     $700,000 DOI technical assistance grant for on-the job training
     programs, submits a narrative on the status of the grant project to DOI
     on a semiannual basis, as required by the grant’s terms and
     conditions. The CNMI Department of Commerce submitted its last
     narrative report to the DOI grant manager in July 2012. The CNMI
     Department of Commerce reported to the DOI grant manager that as
     of June 2012 it had trained 227 U.S. workers with grant funds and that
     51 U.S. workers were hired or employed. The June report also
     documents that the CNMI Department of Commerce had awarded
     $586,000 of the $700,000 grant to a variety of CNMI business and
     industry groups and institutions to support their on-the-job training
     programs. 44 According to the CNMI Department of Commerce,
     recipients of funds from the DOI grant include the CNMI Aquaculture
     Producers Association, Marianas Resource Conservation and
     Development Council, Northern Mariana Trades Institute, Society for
     Human Resources Management, Saipan Sabalu Farmers Market
     Incorporated, and The Bridge Project. DOI representatives completed
     at least two site visits to each of the CNMI grant recipients during the
     last 6-month reporting period. According to a DOI official, information
     on the performance of this grant is available to Congress on request.

•    DHS. Because DHS’s transfers to the CNMI government of vocational
     educational funds collected through the CW-1 work permit fee are not
     subject to reporting requirements, the CNMI government has not
     submitted any performance or financial reporting on its use of these
     funds. However, according to CNMI legislative staff, the CNMI
     governor has communicated plans to the CNMI legislature for the use
     of $1.5 million of the $1.8 million in DHS-transferred vocational
     educational funding in fiscal year 2013. According to the plans, the


44
  The June report also documents that the CNMI Department of Commerce has allocated
the remaining $114,000 of the $700,000 grant to a Tourism Hospitality Enhancement
Program ($50,000) and administrative costs ($64,000).




Page 29                                       GAO-12-975 Mariana Islands Immigration
                  funds will be used to defray qualified expenses at the Public School
                  System ($500,000), Northern Marianas College ($500,000), and
                  Northern Marianas Trades Institute ($500,000). 45

              Since the United States applied federal immigration law to the CNMI in
Conclusions   2009, the CNMI economy has remained dependent on foreign workers
              despite their declining numbers. Part of CNRA’s stated intent is to
              minimize, to the greatest extent practicable, harm to the CNMI’s economy
              by providing a mechanism for the continued use of foreign workers as
              needed and providing opportunities to individuals authorized to work in
              the United States. In keeping with CNRA’s stated intent, CNRA gives
              DHS and DOL flexibility to preserve CNMI businesses’ access to foreign
              workers through DHS’s annual permit allocation and DOL’s ability to
              extend the transition period.

              DHS published its methodology for its allocations of transitional worker
              permits for fiscal years 2011 and 2012, stating that the allocations were
              responsive both to CNRA’s mandate and to potential demand for the
              permits. However, to date, DHS has not made public the methodology it
              will be using for the fiscal year 2013 allocation or whether it will provide its
              methodology when publishing future permit allocations beyond fiscal year
              2013. Making this information available could help allay CNMI
              businesses’ uncertainty regarding the unknown impact of DHS’s pending
              decision on their future access to foreign workers and help mitigate the
              effect of such uncertainty on CNMI businesses’ investment plans.

              Despite the limited availability of economic data for the CNMI, DHS has
              identified one data source to help it implement CNRA requirements,
              including its annual allocation of the transitional worker permits.
              Meanwhile, DOL has outlined multiple sources of data that it plans to
              collect and analyses that it plans to complete to ascertain CNMI labor
              needs and determine whether to extend the transition period. Using the
              data DOL collects and the analyses it performs could enable DHS to
              more accurately assess the CNMI workforce needs when determining its
              next permit allocation and the potential economic impact.




              45
                According to CNMI legislative staff, the breakdown of the funding is reported in H.B. 17-
              313, HD10—the fiscal year 2013 appropriations bill that has passed the CNMI House of
              Representatives on July 18, 2012.




              Page 30                                            GAO-12-975 Mariana Islands Immigration
                      Recognizing the need to locate, educate, and train workers to replace
                      departing foreign workers, CNRA requires DOI to provide technical
                      assistance to assist employers in the CNMI in securing employees from
                      among U.S. citizens and national residents. CNRA also requires DHS to
                      collect fees from its permit program for worker training and to transfer
                      those funds to the CNMI Treasury. Currently, information on the use and
                      performance of the DOI grant and DOL grants that fund, among other
                      things, worker training in the CNMI, is available to Congress on request.
                      DHS does not collect information on the use and performance of its cash
                      transfers to the CNMI, because these funds are not subject to reporting
                      requirements.


                      We recommend that the Secretary of Homeland Security take the
Recommendations for   following two actions:
Executive Action
                          1. to help ensure that CNMI’s businesses are better able to plan for
                             future permit allocations, provide, when publishing DHS’s annual
                             permit allocation, the methodology it used and the factors it
                             considered to determine the number of permits allocated; and
                          2. to help ensure that DHS has the information it needs to assess the
                             needs of the CNMI workforce as it decides on future permit
                             allocations, use Department of Labor analyses of economic data
                             on the labor needs of the CNMI as a factor in deciding on future
                             permit allocations.

                      We provided a draft of this report to the Departments of State, Homeland
Agency Comments       Security, the Interior, Labor, and the government of the CNMI for their
and Our Evaluation    review and comment. We received written comments from DHS and the
                      government of the CNMI, which are reprinted in app. VI and VII,
                      respectively. We also received technical comments from the Departments
                      of the Interior and Labor, which we incorporated, as appropriate. The
                      Department of State had no comments.

                      Following are summaries of the written comments from DHS and the
                      CNMI government.
                          •     DHS concurred with our recommendation that it provide, when
                                publishing its annual permit allocation, the methodology it used
                                and the factors it considered to determine the number of permits
                                allocated. DHS agreed that it is appropriate when publishing its
                                annual transitional worker permit allocation to provide at least a
                                brief explanation of how the number was derived. For its fiscal


                      Page 31                                     GAO-12-975 Mariana Islands Immigration
          year 2013 allocation, DHS said that it plans to publish a notice that
          will describe the methodology it used to determine the allocation.
          DHS did not concur with our recommendation that it use DOL
          analyses of economic data on the labor needs of the CNMI as a
          factor in deciding on future permit allocations, DHS agreed in
          general that relevant sources of information should be used and
          that the items described by DOL may be useful in future
          transitional worker permit allocation decisions. However, DHS will
          await further information as to what DOL has to provide. Once the
          DOL analysis is available, DHS will review it to determine its
          appropriateness and whether it should be factored into decision
          making for future permit allocations. We maintain that the data
          and analyses DOL plans to collect and complete will help DHS to
          more accurately assess the workforce needs of the CNMI when
          determining future permit allocations.
    •     The CNMI government agreed with both of our recommendations
          to DHS. The CNMI government also expressed concern with
          uncertainties related to CNMI labor resources and capacity. For
          example, the CNMI government said that the CNMI does not have
          the capacity to effectively track unemployment rates, available and
          vacant positions, as well as skill sets, which the government said
          is necessary to forecast the CNMI’s labor pool. The CNMI
          government also said that it is in full support of the continued use
          of foreign labor in the CNMI economy. The government said that it
          believes in the overall intention of the CNRA to reduce foreign
          workers through the transitional worker permit program and to
          prioritize U.S. qualified workers in order to stabilize the CNMI
          economy. The CNMI government said that it supports any
          reduction of transitional worker permits for fiscal year 2013 to at
          least 50 percent of the original estimate.

We are sending copies of this report to interested congressional
committees. We also will provide copies of this report to the U.S.
Secretaries of Homeland Security, Labor, the Interior, and State and to
the Governor of the CNMI. In addition, the report will be available at no
charge on the GAO website at http://www.gao.gov.




Page 32                                      GAO-12-975 Mariana Islands Immigration
If you or your staff have questions about this report, please contact me at
(202) 512-3149 or gootnickd@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. GAO staff who made key contributions to this report are
listed in appendix VIII.




David Gootnick, Director
International Affairs and Trade




Page 33                                   GAO-12-975 Mariana Islands Immigration
Appendix I: Objectives, Scope, and
              Appendix I: Objectives, Scope, and
              Methodology



Methodology

              The objectives of this review were to (1) assess the status of federal
              implementation of the Commonwealth of the Northern Mariana Islands
              (CNMI) transitional work permit program for foreign workers, (2) examine
              the economic implications for the CNMI of pending federal actions related
              to this permit program, and (3) provide the status of federal efforts to
              support worker training in the CNMI.

              To assess the status of federal implementation of the CW-1 transitional
              work permit program, we reviewed the Department of Homeland
              Security’s (DHS) final and interim rules containing regulations
              implementing the CW-1 work permit program and determined what
              changes to the interim rule were made in the final rule. We also
              independently reviewed the 146 public comments DHS received on its
              interim rule and determined whether DHS captured the comments’ major
              areas of concern in its discussion of the public comments in the final rule.
              In addition, we obtained data from DHS’s U.S. Citizenship and
              Immigration Services (USCIS) on the number of petitions and applications
              submitted for foreign worker beneficiaries of the CW-1 work permit and
              their dependents. We interviewed officials from DHS components,
              including USCIS, U.S. Immigration and Customs Enforcement, U.S.
              Customs and Border Protection, and USCIS Office of Performance and
              Quality. We also interviewed officials from the Departments of Labor,
              State, and the Interior and officials from the Saipan Chamber of
              Commerce. In addition, we obtained information from the CNMI
              government.

              To examine the economic implications of pending federal actions on the
              CNMI economy, we obtained and analyzed tax data from the CNMI
              Department of Commerce that was originally generated by the CNMI
              Department of Finance. These data came from W-2 forms prepared
              annually by employers in the CNMI and submitted to the CNMI
              Department of Finance’s Division of Revenue and Taxation to support
              wages paid and taxes withheld. Because employers completed the W-2
              form, we were unable to determine how foreign workers who had been
              granted permanent residency in the CNMI were categorized in the data
              (i.e., whether as U.S. or non-U.S. workers). Further, to determine the
              number of foreign workers in the CNMI in 2012, we obtained USCIS data
              on the number of foreign workers with an approved and/or pending
              worker status including CW-1, H1B, H2B, L1A, P1B, and R1 and investor
              status (which also authorizes the investor to work) including E2 and E2C
              as of June 2012. We also obtained USCIS data on the number of foreign
              workers with an approved and/or pending Employment Authorization
              Document (EAD) as of April 2012. To determine whether a worker or


              Page 34                                   GAO-12-975 Mariana Islands Immigration
Appendix I: Objectives, Scope, and
Methodology




investor status was still valid, we took the maximum validity period for
each status and examined the number of statuses granted during that
time. For example, if a status was valid for up to 3-years, we calculated
the number of DHS approved statuses within a 3-year interval. Similarly, if
a status was valid for 1-year, we calculated the number of DHS approved
statuses within a 1-year interval. Further, to determine whether an
approved EAD was still valid, we examined the number of EADs
approved in a 1-year interval. According to USCIS, in most cases EADs
are valid for 1 year. We also obtained USCIS data on the number of
aliens residing in the CNMI who had been granted U.S. permanent
residency or U.S. citizenship. In addition, we conducted interviews with
officials from the Saipan Chamber of Commerce (Chamber) and provided
the Chamber with a list of questions on how pending federal actions have
impacted CNMI businesses. Officials responded to the questions and also
distributed them to their members, seven of whom submitted responses.
We also obtained data on the CNMI’s gross domestic product (GDP) from
the U.S. Bureau of Economic Analysis. We reviewed economics literature
on the effects of uncertainty about future economic conditions on
business investments, and data from the 2011-2012 HVS Hotel
Development Cost Survey and a 2010 GAO survey of CNMI businesses. 1

To provide the status of federal efforts to support worker training in the
CNMI, we obtained information on the Department of Labor’s (DOL)
Workforce Investment Act (WIA) grant, such as the grant’s terms and
conditions, performance and financial reports, and notice of obligations;
the Department of Interior (DOI) technical assistance grant that provides
funding for worker training programs, such as grant terms and conditions,
the most recent performance report submitted for the grant, and federal
award amounts; and DHS information on the amount of funds DHS had
collected from its transitional work permit program transferred to the
CNMI Treasury to support CNMI vocational curricula and program
development. Further, we conducted interviews with DOL officials from
the Employment and Training Administration, including the grant manager
responsible for monitoring WIA programs in the CNMI; DOI officials from
the Office of Insular Affairs; and DHS officials from the USCIS Accounting
and Reporting Bureau and USCIS Office of Chief Counsel. In addition, we
obtained information on whether DHS funds would be subject to the


1
 See GAO, America Samoa and Commonwealth of the Northern Mariana Islands:
Employment Earnings, and Status of Key Industries Since Minimum Wage Began,
GAO-11-427 (Washington, D.C.: June 23, 2011).




Page 35                                       GAO-12-975 Mariana Islands Immigration
Appendix I: Objectives, Scope, and
Methodology




Single Audit Act from the CNMI’s Office of the Public Auditor and one of
the private companies generally responsible for completing the CNMI
audits required under the act.

In general, to establish the reliability of USCIS data that it uses to
document immigration benefits in the CNMI, CNMI Department of
Finance data that it uses to document the number of U.S. and foreign
workers in the CNMI, and DHS budget data, we systematically obtained
information about the way in which data were collected and tabulated.
When possible, we checked for consistency across data sources.
Although the CNMI Department of Finance data provided by the CNMI
Department of Commerce had a limitation, we determined that the
available data were adequate and sufficiently reliable for the purposes of
our review.

We conducted this performance audit from January 2012 to September
2012 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit to
obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe
that the evidence we obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.




Page 36                                   GAO-12-975 Mariana Islands Immigration
Appendix II: Statement of Congressional
               Appendix II: Statement of Congressional Intent
               in Establishing Federal Immigration Law in the
               CNMI


Intent in Establishing Federal Immigration
Law in the CNMI
               CNRA includes the following statement of congressional intent in
               establishing federal immigration law in the CNMI, which we present here
               verbatim: 1

                   a. Immigration and Growth.—In recognition of the need to ensure
                      uniform adherence to long-standing fundamental immigration
                      policies of the United States, it is the intention of the Congress in
                      enacting this subtitle—
                         1. to ensure that effective border control procedures are
                            implemented and observed, and that national security and
                            homeland security issues are properly addressed, by
                            extending the immigration laws (as defined in section
                            101(a)(17) of the Immigration and Nationality Act (8 U.S.C.
                            1101 (a)(17)), to apply to the Commonwealth of the Northern
                            Mariana Islands (referred to in this subtitle as the
                            “Commonwealth”), with special provisions to allow for—
                                 A. the orderly phasing-out of the nonresident contract
                                    worker program of the Commonwealth; and
                                 B. the orderly phasing-in of Federal responsibilities over
                                    immigration in the Commonwealth; and
                         2. to minimize, to the greatest extent practicable, potential
                            adverse economic and fiscal effects of phasing-out the
                            Commonwealth's nonresident contract worker program and to
                            maximize the Commonwealth's potential for future economic
                            and business growth by—

                            A. encouraging diversification and growth of the economy of
                               the Commonwealth in accordance with fundamental values
                               underlying Federal immigration policy;
                            B. recognizing local self-government, as provided for in the
                               Covenant To Establish a Commonwealth of the Northern
                               Mariana Islands in Political Union With the United States of
                               America through consultation with the Governor of the
                               Commonwealth;




               1
                Consolidated Natural Resources Act of 2008, Pub. L. No. 110-229, § 701, 122
               Stat. 853-854 (May 8, 2008), codified at 48 U.S.C. § 1806 note.




               Page 37                                          GAO-12-975 Mariana Islands Immigration
Appendix II: Statement of Congressional Intent
in Establishing Federal Immigration Law in the
CNMI




                  C. assisting the Commonwealth in achieving a
                     progressively higher standard of living for citizens of
                     the Commonwealth through the provision of technical
                     and other assistance;
                  D. providing opportunities for individuals authorized to
                     work in the United States, including citizens of the
                     freely associated states; and
                  E. providing a mechanism for the continued use of alien
                     workers, to the extent those workers continue to be
                     necessary to supplement the Commonwealth's resident
                     workforce, and to protect those workers from the
                     potential for abuse and exploitation.
    b.     Avoiding Adverse Effects.—In recognition of the Commonwealth's
          unique economic circumstances, history, and geographical
          location, it is the intent of the Congress that the Commonwealth
          be given as much flexibility as possible in maintaining existing
          businesses and other revenue sources, and developing new
          economic opportunities, consistent with the mandates of this
          subtitle. This subtitle, and the amendments made by this subtitle,
          should be implemented wherever possible to expand tourism and
          economic development in the Commonwealth, including aiding
          prospective tourists in gaining access to the Commonwealth's
          memorials, beaches, parks, dive sites, and other points of interest.




Page 38                                          GAO-12-975 Mariana Islands Immigration
Appendix III: Factors That CNRA States DOL
              Appendix III: Factors That CNRA States DOL
              May Consider When Determining Whether to
              Extend Transition Period


May Consider When Determining Whether to
Extend Transition Period
              CNRA states that DOL is to base its determination of whether to extend
              the transition period on the labor needs of legitimate businesses in the
              CNMI. 1 CNRA states that in determining these needs, DOL may consider,
              among other relevant factors, the following, which we present here
              verbatim:

                  1. government, industry, or independent workforce studies reporting
                     on the need, or lack thereof, for alien workers in the
                     Commonwealth’s businesses;
                  2. the unemployment rate of U.S. citizen workers residing in the
                     Commonwealth;
                  3. the unemployment rate of aliens in the Commonwealth who have
                     been lawfully admitted for permanent residence;
                  4. the number of unemployed alien workers in the Commonwealth;
                  5. any good faith efforts to locate, educate, train, or otherwise
                     prepare U.S. citizen residents, lawful permanent residents, and
                     unemployed alien workers already within the Commonwealth, to
                     assume those jobs;
                  6. any available evidence tending to show that U.S. citizen residents,
                     lawful permanent residents, and unemployed alien workers
                     already in the Commonwealth are not willing to accept jobs of the
                     type offered;
                  7. the extent to which admittance of alien workers will affect the
                     compensation, benefits, and living standards of existing workers
                     within those industries and other industries authorized to employ
                     alien workers; and
                  8. the prior use, if any, of alien workers to fill those industry jobs, and
                     whether the industry requires alien workers to fill those jobs.




              1
              48 U.S.C. § 1806(d)(5)(c).




              Page 39                                      GAO-12-975 Mariana Islands Immigration
Appendix IV: Consideration of Long-term
              Appendix IV: Consideration of Long-term
              Status for Foreign Workers



Status for Foreign Workers

              In April 2010, the DOI recommended that Congress consider permitting
              foreign workers who have lawfully resided in the CNMI for a minimum of 5
              years—which the DOI estimated at 15,816 individuals 1—to apply for long-
              term resident status 2 under the Immigration and Nationality Act. The DOI
              estimated that 15,816 foreign workers would be affected and
              recommended that Congress consider allowing these workers to apply for
              one of the following: (1) U.S. citizenship; (2) permanent resident status
              leading to U.S. citizenship (per the normal provisions of the Immigration
              and Nationality Act relating to naturalization), with the 5-year minimum
              residence spent anywhere in the United States or its territories; or (3)
              permanent resident status leading to U.S. citizenship, with the 5-year
              minimum residence spent in the CNMI. Additionally, the DOI noted that
              under U.S. immigration law, special status is provided to individuals who
              are citizens of the freely associated states (the Federated States of
              Micronesia, the Republic of the Marshall Islands, and the Republic of
              Palau). Following this model, the DOI suggested that foreign workers
              could be granted a nonimmigrant status similar to that negotiated for
              citizens of the Freely Associated States. The foreign workers would be
              allowed to live and work either in the United States and its territories or in
              the CNMI only.

              In April 2011, legislation introduced in Congress proposed CNMI resident
              status for certain long-term residents. 3 To qualify for this status, an
              individual must be (1) born in the CNMI between January 1, 1974, and
              January 9, 1978; (2) classified by the CNMI government as a permanent
              resident; (3) a spouse or child of an individual covered by (1) or (2); or (4)
              an immediate relative of a U.S. citizen on May 8, 2008. The legislation is
              currently pending in the U.S. House of Representatives.


              1
               DOI conducted a voluntary registration of aliens residing in the CNMI in 2009. DOI
              reported that as of January 2010, there were 20,859 aliens in the commonwealth, of
              whom 16,304 were workers and 15,816 had resided lawfully in the CNMI for at least 5
              years. DOI concluded that two groups were underrepresented in the registration: citizens
              from the freely associated states and illegal aliens. See Secretary of the Interior, Report
              on the Alien Worker Population in the Commonwealth of the Northern Mariana Islands
              (Washington, D.C.: Department of the Interior, 2010).
              2
               CNRA required the Secretary of the Interior to report to Congress on any
              recommendations he may deem appropriate related to whether or not the Congress
              should consider permitting lawfully admitted guest workers lawfully residing in the
              Commonwealth on such enactment date to apply for long-term status under the
              immigration and nationality laws of the United States. See 48 U.S.C. § 1806(h)(5).
              3
              H.R. 1466, 112th Cong. (Apr. 8, 2011).




              Page 40                                             GAO-12-975 Mariana Islands Immigration
Appendix V: Department of Homeland       Appendix V: Department of Homeland
                                         Security’s Actions to Issue the Final Rule and
                                         Respond to Public Comments on Its Interim

Security’s Actions to Issue the Final Rule and
                                         Rule



Respond to Public Comments on Its Interim
Rule
                                         The timeline in table 3 summarizes the actions DHS took to implement
                                         the final rule on the transitional work permit program for the CNMI.

Table 3: Timeline of DHS Actions to Issue the Final Rule on the Transitional Work Permit Program for CNMI

Key dates                    Actions taken
Oct. 27, 2009                DHS issues an interim rule to implement the CNMI transitional work permit program and announces it
                             will go into effect in its current form on November 27, 2009. DHS states that it qualifies for an
                             exemption from a requirement that federal agencies publish a notice of proposed rulemaking in the
                             Federal Register to give the public 30 days to comment on the rule; however, DHS states that it will
                                                                                                                                a
                             accept and will consider public comments through November 27, 2009, before issuing its final rule.
Nov. 2, 2009                 CNMI files a motion for a preliminary injunction to prevent the operation of the DHS interim rule,
                             stating that DHS violated procedural requirements requiring notice and the opportunity for public
                             comment before regulations can go into effect.
Nov. 25, 2009                U.S. District Court for the District of Columbia issues an order prohibiting implementation of the
                                                                                                                        b
                             interim rule, stating that DHS must consider public comments before issuing a final rule.
Dec. 9, 2010-Jan. 8, 2010    DHS reopens the public comment period on its interim rule from December 9, 2010 until January 8,
                             2010.
Sep. 7, 2011                 DHS issues final rule, which is effective October 7, 2011.
                                         Source: Federal Register.
                                         a
                                          See Administrative Procedure Act, Pub. L. No. 79-404, as amended, codified at 5 U.S.C. § 553.
                                         Federal courts have determined that notice-and-comment provisions of the act are designed (1) to
                                         ensure that agency regulations are tested via exposure to diverse public comment, (2) to ensure
                                         fairness to affected parties, and (3) to give affected parties an opportunity to develop evidence in the
                                         record to support their objections to the rule and thereby enhance the quality of judicial review. After
                                         giving interested persons an opportunity to comment on the proposed rule, and after considering the
                                         public comments, the agency may then publish the final rule. Under the Administrative Procedure Act,
                                         an agency is authorized to forgo notice and comment when an agency for “good cause” finds that
                                         those procedures are “impracticable, unnecessary, or contrary to the public interest.” In these
                                         situations, the agency may issue an interim rule without providing an opportunity for notice and
                                         comment.
                                         b
                                          CNMI v. United States, 670 F. Supp. 2d 65 (D.D.C. Nov. 25, 2009).


                                         DHS received 146 public comments on its interim rule to establish the
                                         transitional work permit program for foreign workers in the CNMI,
                                         including comments from the CNMI government, the Saipan Chamber of
                                         Commerce, CNMI businesses, and U.S. and foreign workers. The
                                         comments expressed concern on a variety of issues, such as the ability of
                                         permit holders to conduct foreign travel, the fees associated with the
                                         permit, the permit’s validity period, whether foreign workers already living
                                         and working in the CNMI should be given first preference for the permits,
                                         and whether certain occupational categories, such as domestic workers,
                                         should be excluded from the final rule.




                                         Page 41                                                   GAO-12-975 Mariana Islands Immigration
Appendix V: Department of Homeland
Security’s Actions to Issue the Final Rule and
Respond to Public Comments on Its Interim
Rule




In its final rule, DHS said that it considered all of the 146 public comments
it received on its interim rule and made some changes to the final rule
based on those comments. 1 See examples below:

•   Travel. DHS modified the final rule to allow nationals of the
    Philippines, who made up a majority of the foreign workforce in the
    CNMI in 2010 according to CNMI Department of Finance data, to
    travel from the CNMI to the Philippines via a direct Guam transit
    without violating their CW-1 or CW-2 permit status.

•   Fees associated with the CW-1 permit. DHS modified the final rule
    to make the petitioner of the CW-1 worker responsible for submitting
    the $85 biometric fee per worker seeking a work permit in the CNMI
    instead of requiring the worker to submit the biometric fee. However,
    according to DHS, either the worker or the employer may pay the fee.
    DHS also authorized need-based fee waivers for spouses and
    children applying for derivative CW-2 permits.

•   CW-1 permit’s validity period. DHS clarified the CW-1 permit’s
    validity period but did not extend it. DHS also provided that, in the
    case of termination of employment, the worker would have 30 days in
    which to find a new petitioning employer and would not be considered
    to have violated the CW-1 permit if the new employer files a petition
    for the worker within that time. Further, in the case of a change of
    employment, DHS authorized the worker to begin the new
    employment upon filing of the new petition.

•   Permit preferences. DHS made no changes to the final rule to give
    first preference for worker permits to foreign workers already living
    and working in the CNMI. However, DHS did make a significant
    change to its work authorization regulations to authorize the continued
    employment of beneficiaries of CW-1 petitions filed on or before
    November 27, 2011, for lawfully present workers and pending
    adjudication of the petitions. According to DHS, this provision allowed
    large numbers of workers whose work authorization under their former
    CNMI government-authorized “umbrella permits” expired on that date



1
 DHS described the comments in its final rule and explained why it chose to modify or not
to modify the final rule in response to those comments. We conducted our own review of
the public comments and found that DHS’s description of the comments was consistent
with our review.




Page 42                                           GAO-12-975 Mariana Islands Immigration
Appendix V: Department of Homeland
Security’s Actions to Issue the Final Rule and
Respond to Public Comments on Its Interim
Rule




    to continue their employment while USCIS worked through the
    petitions filed for them.

•   Exclusions of occupational categories. DHS did not exclude any
    occupational categories from the final rule, such as dancing, domestic
    workers, or hospitality service workers. DHS said it had considered
    excluding these categories in the interim rule because of human
    trafficking concerns. DHS also strengthened the attestations required
    of petitioning employers regarding compliance with applicable laws,
    and emphasized the limits on the ability of individual households to
    petition for domestic workers stemming from the rule’s requirements
    that established that legitimate businesses file petitions.

DHS made other minor changes to the final rule to clarify certain
references or remove references that were no longer relevant. 2




2
 For more information on the public comments DHS received on its interim rule, and the
DHS action taken in response to those comments, see U.S. Citizenship and Immigration
Services, DHS, Final Rule. Commonwealth of the Northern Mariana Islands Transitional
Worker Classification, 76 Fed. Reg. 55502 (Sep. 7, 2011).




Page 43                                          GAO-12-975 Mariana Islands Immigration
Appendix VI: Comments from the
             Appendix VI: Comments from the Department
             of Homeland Security



Department of Homeland Security




             Page 44                                     GAO-12-975 Mariana Islands Immigration
Appendix VI: Comments from the Department
of Homeland Security




Page 45                                     GAO-12-975 Mariana Islands Immigration
Appendix VII: Comments from the
             Appendix VII: Comments from the Government
             of the Commonwealth of the Northern Mariana
             Islands


Government of the Commonwealth of the
Northern Mariana Islands




             Page 46                                       GAO-12-975 Mariana Islands Immigration
Appendix VII: Comments from the Government
of the Commonwealth of the Northern Mariana
Islands




Page 47                                       GAO-12-975 Mariana Islands Immigration
Appendix VII: Comments from the Government
of the Commonwealth of the Northern Mariana
Islands




Page 48                                       GAO-12-975 Mariana Islands Immigration
Appendix VIII: GAO Contact and Staff
                  Appendix VIII: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  David Gootnick, (202) 512-3149 or gootnickd@gao.gov
GAO Contact
                  In addition to the person named above, Emil Friberg, Assistant Director;
Staff             Kira Self; Ben Bolitzer; Ashley Alley; Ming Chen; and Reid Lowe made
Acknowledgments   key contributions to this report. Additional assistance was provided by
                  David Dayton, Marissa Jones, R. Gifford Howland, and Julia A. Roberts.




(320795)
                  Page 49                                  GAO-12-975 Mariana Islands Immigration
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