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0 WELCOMING AMERICA -NEWEST COMMONWEALTH The Second Interim Report of the Northern Mariana Islands Commission on Federal Laws to the Congress of the United States KH 400 N54 1985 August 1985 MEMBERS, OF THE NORTHERN MARIANA ISLANDS COMMISSION ON FEDERAL LAWS Benigno R. Fitial, Chairman* Member, House of Representatives, Northern Mariana Islands Commonwealth Legislature Saipan, Northern Mariana Islands Pedro A. Tenorio, Vice Chairman Lieutenant Governor, Commonwealth of the Northern Mariana Islands Saipan, Northern Mariana Islands Joel J. Bergsma** Chief Counsel, House of Representatives, Northern Mariana Islands Commonwealth Legislature Saipan, Northern Mariana Islands Jesus C. Borja Attorney at Law, Borja, Mitchell, and Salas Saipan, Northern Mariana Islands Dewey L. Falcone*** Attorney at Law, Falcone and Falcone Los Angeles, California Robert J. Lagomarsinot Member, United States House of Representatives Ventura, California Edward DLG. Pangeiinan Attorney at Law; Legislative Assistant to Congressman Ben Blaz, United States House of Representatives Saipan, Northern Mariana lslands@and Olney, Maryland Replaced James A. Joseph on February 19, 19F5. Replaced Agnes M. McPhetres on February 19, 1985. Replaced Myron B. Thompson on February 19, 1985. t Replaced the late Congressman Philip Burton on March 9, 1984. WELCOMING AMERICA7S NEWEST COMMONWEALTH The Second Interim Report of the Northern Mariana Islands Commission on Federal Laws to the Congress of the United States 0 - S . DEPARTMENT OF COMMERCE NOAA COASTAL SERVICES CENTER 2234 SOUTH HOBSON AVENUE CHARLESTON, SC 29405-2413 Property of CSC Library August 1985 Northern Mariana Islands Commission on Federal Laws Washington, D.C. 20240 (202) 343-5617 Senigno R. Filial The Honorable George Bush Chair and President of the Senate Commissioner Roan S-212 Pedro A. Tenorio The Capitol Vice-Chair and Washington, D.C. 20510 Commissioner Joel J. Bergsma Dear Mr. President: Commissioner Jesus C. Borja I have the honor of submitting to you the second interim Commissioner report of the Northern Mariana Islands Commission on Federal Laws. The Commission, appointed by the President pursuant to Dewey L. Falcons section 504 of the Covenant to Establish a Cumi, alth of Commissioner the Northern Mariana Islands in Political Union with the Hon. Robed J. Lagomarsino United States of America (approved by Public Law 94-241, 90 Commissioner Stat. 263, March 24, 1976), is instructed "to survey the laws of the United States and to make recamnendat ions to the Edward DLG. Pangelinan United States Congress as to which laws of the United States Commissioner not applicable to the Northern Mariana Islands should be made applicable and to what extent and in what manner, and which Daniel H. MacMeekin applicable laws should be made inapplicable and to what Executive Director extent and in what manner." The Commission is required to make its f inal report and recommendations to Congress within one year after termination of the Trusteeship Agreement pursuant to which the United States now administers the Northern Mariana Islands. Before that time, the Commission is authorized to "make such interim reports and recommendations to the Congress as it considers appropriate to facilitate the transition of the Northern Mariana Islands to its new political status." The enclosed second interim report of the Commission is comprehensive and for all practical purposes may be the final report of the Commission. The date the Trusteeship Agreement will be terminated is not now known, however, and developments between now and that date may make desirable submission of further recommendations to Congress by the Commission. Accordingly, even though the Commission's staff will be disbanded after submission of this report, the report is labelled as interim rather than final. Legislation to implement the Commission's recommendations is incorporated within the report. The Catatission urges the Congress to enact this legislation at its earliest opportunity. Sincerely, B@enig R. Fitial J@ Northern Mariana Islands Commission on Federal Laws Washington, D.C. 20240 (202) 343-5617 Senigno R. Fitlai The Honorable Thomas P. o'Neill, jr. Chair and Speaker of the House of Representatives Commissioner Room H-204 Pedro A. Tenorio The Capitol Vice-Chair and Washington, D.C. 20515 Commissioner Joel J. Bergsma Dear Mr. Speaker: Commissioner Jesus C. Sofia I have the honor of submitting to you the second interim Commissioner report of the Northern Mariana Islands Commission on Federal Laws. The Commission, appointed by the President pursuant to Dewey L. Falcone section 504 of the Covenant to Establish a Commonwealth of Commissioner the Northern Mariana Islands in Political Union with the Mon. Robert J. Lagomarsino United States of America (approved by Public Law 94-241, 90 Commissioner Stat. 263, March 24, 1976), is instructed "to survey the laws of the United States and to make recommendations to the Edward DLG. Pangelinan United States Congress as to which laws of the United States Commissioner not applicable to the Northern Mariana Islands should be made applicable and to what extent and in what manner, and which Daniel H. MaclYleskin applicable laws should be made inapplicable and to what Executive Director extent and in what manner." The Commission is required to make its final report and recamendations to Congress within one year after termination of the Trusteeship Agreement pursuant to which the United States now administers the Northern Mariana Islands. Before that time, the Commission is authorized to "make such interim reports and recommendations, to the Congress as it considers appropriate to facilitate the transition of the Northern Mariana Islands to its new political status." The enclosed second interim report of the Commission is comprehensive and for all practical purposes may be the final report of the Commission. The date the Trusteeship Agreement will be terminated is not now known, however, and developments between now and that date may make desirable submission of further recoymndations to Congress by the Commission. Accordingly, even though the Catutission's staff will be disbanded after submission of this report, the report is labelled as interim rather than final. Legislation to implement the Cammi ss ion I s reccmmenda t ions is incorporated within the report. The Commission urges the Congress to enact this legislation at its earliest opportunity. Sincerely, BenigIn R. F--i-tial WELCOMING AMERICA7S NEWEST COMMONWEALTH The Second Interim Report of the Northern Mariana Islands Commission on Federal Laws to the Congress of the United States I Preface The Northern Mariana Islands is the first significant acquisition of territory by the United States since the Virgin Islands were purchased just before the United States entered Wbrld War I, more than sixty-eight years ago. More important, the Northern Mariana Islands is the first territory to became a part of the American political family, not by purchase or conquest, but by negotiation betveen its own representatives and representatives of the United States followed by the subsequent popular vote of its inhabitants. The results of those negotiations are enbodied in the Covenant to Establish a Ccmmonwealth of the Northern Mariana Islands in Political Union with the United States of America. The Covenant was approved by 78.8 percent of the people of the Northern Mariana Islands voting in a 1975 plebiscite and, in 1976, was approved by the Congress of the United States in Public Law 94-241. The Spanish, Germans, and Japanese successively ruled the Northern Mariana Islands until the United States, in bloody World War II battles at Saipan and Tinian, wrested the islands fran the Japanese. Since 1947 the Northern Mariana Islands has been administered by the United States as part of the Trust Territory of the Pacific Islands, a United Nations trusteeship. During the trusteeship period, the United States has had the power to apply federal laws in the Northern Mariana Islands, but has done so only to a limited extent. The negotiators of the Covenant, however, intended that the Northern Mariana Islands be brought into a closer relationship with the United States than existed under the trusteeship and, accordingly, that more federal laws apply in the Northern Mariana Islands. The negotiators were unable to examine each federal law to determine the wisdan of applying it to the Northern Mariana Islands. Instead, they addressed in the Covenant only the applicability of the federal laws most central to definition of the new political relationship. Even with those laws, only general principles were established; the detailed provisions were left for later examination. For other federal laws, a rule of thumb was established: laws applicable to nearby Guam should also apply in the Northern Mariana Islands, at least for the time being. Th examine in greater detail the wisdan of applying or not applying specific provisions of federal law to the Northern Mariana Islands, the negotiators provided in the Covenant for the establishment of this Commission. Earlier camissions had reported to Congress on appropriate legal regimes for the newly@aoquired Territory of Hawaii (1898) and for American Samoa (1931). Other camissions reported to Congress in the 1950s on the applicability of federal law to Gum and the Virgin Islands. This report thus - ii - continues a tradition of examining closely the application of federal laws to those parts of the American political family that for reasons of size, distance, or cultural tradition are not full participants in our political processes. In identifying specific problems of applying federal law to the Northern Mariana Islands and in formulating alternative solutions to those problems, the Catutission received advice and assistance frcm a large number of individuals and organizations, both govermnental and private. The Catutission would like to note in particular sane of the most helpful. Several congressional camittee staff members followed the work of the Ccmmission throughout its life and made many contributions to i ts work. Deserving of particular rwntion are James P. Beirne, of the staff of the Senate Catmittee on Energy and Natural Resources, and Patricia A. Krause, Jeffrey Farrow, and Thamas S. Dunmire, of the staff of the House Camittee on Interior and Insular Affairs. officials in many different federal agencies also willingly provided expert advice to the Camnission's staff. Especially useful were the comments and suggestions of Ruth Van Cleve, former Director of the Office of Territories in the Department of the Interior and now with the Office of the Solicitor in that agency, and of Herman Marcuse, of the office of Legal Counsel in the Department of Justice. Substantial assistance to the Camission in its work was also provided by members of the executive branch of the government of the Northern Mariana Islands under the successive administrations of Governor Carlos Camacho and Governor Pedro P. TLenorio; by the leaders, members, and staff of the Legislature of the Northern Mariana Islands; and by members of the bar and the business camunity in the Northern Mariana Islands. The staff of the office of the Representative to the United States for the Commonwealth of the Northern Mariana Islands, under the direction of, first, Ccrmnission member Edward DLG. Pangelinan and,, then, Froilan C. Tenorio, was of great help in bringing to the Ccmmission's attention particular problems in applying federal laws to the Northern Mariana Islands and in discussing alternative solutions to those problems. The Camnission also wishes to acknowledge the administrative support provided by the office of Territorial and International Affairs in the United States Department of Interior, under the successive leadership of Wallace Green, Pedro Sanjuan, and Richard Montoya. In particular, the Ccmmission would like to acknowledge the administrative assistance provided by Odessa Mitchell, Angela Clements, and Del Sines of that office. Over the years, the interests of the territories from time to time have been advanced and protected in Congress by various Senators and Representativest none of whom stood to gain with his or her own constituency from efforts expended on behalf of the territories. None was wore able and effective in this task than the late Congressman Phillip Burton, of San Francisco, California. Congressman Burton, as chairman of the House Subcommittee on Territorial and Insular Affairs, was a prominent behind-the-scenes negotiator of the Covenant that brought the Northern Mariana Islands into the American political family and was instrumental in securing congressional approval of the Covenant. Fran the beginnings of this Camission's work until his untimely passing, Congressman Burton was a member of the Commission and an active and highly esteemed participant in its work. The Commission dedicates this report to his nxNwry. Benigno R. Fitial Chairman SUMMARY TABLE OF CONTENTS TMe Preface. i Detailed table of contents. v List of tables. xii Executive summary. Executive Sunmary 1 Introduct ion. 1 Recam, ndations. 38 Title-by-title Survey of the United States Code. 214 Proposed Northern Mariana Islands Federal Relations Act. 532 Appendix. 559 Documentary supplement. Printed as separate volume DETAILED TABLE OF CONTENTS Page Preface. i Summary table of contents. iv List of tables. xii Executive summary. Executive Summry 1 Introduction. 1 The Northern Mariana Islands. 2 The islands. 2 The people. 6 History. 8 The econany. 19 The CaLU1 ission. 21 The Camission's methodology. 21 Determining the applicability of federal statutes to the Northern Mariana Islands. 22 Recanmendations. 38 General recammendations. 38 The continuing trust relationship. 38 Sanctity of the Covenant. 42 Specifying geographic applicability. 49 Recammnded changes in federal law. 53 A nonvotinq delegate to the United States Congress 53 Land grant colleges. 61 Residency requirement for naturalization of citizens of the Northern Mariana Islands who become nationals of the United States on termination of the trusteeship. 71 - vi Page Nominations to the United States Military Academv, the United States Naval Academy, and the United States Air Force Academy. 73 Conversion of national banks into banks orqanized under laws of the Northern Mariana Islands; merger of banks organized under laws of the Northern Mariana Islands into national banks. 81 Maximum amounts for federally-insured mortgages in the Northern Mariana Islands. 83 Insurance of "public unit" accounts in federally" insured savings and loan associations. 85 Farm Credit System. 88 Escheat of abandoned money orders and traveler's checks. 90 Northern Mariana Islands banks' participation in domestic markets. 91 Surveillance of ocean areas. 93 Investrent companies. 97 Automobile Dealers Day in Court Act. 99 Fishery trade officers; Department of Commerce. 101 Restrictions on garnishnent. 104 Fair Credit Reporting Act. 107 Electronic Fund Transfer Act. 109 Petroleum Marketing Practices Act. 112 The Magnuson Fishery Conservation and Managenent Act. 114 Tuna fisheries. 119 Importation of fruit bats. 125 Customs crimes. 126 vii - Page Exportation of arms, liquors, and narcotics to Pacific islands. 130 IDttery prohibitions. 131 Tlechnical amendments to title 18 of the United States Code, Crimes and Criminal Procedure. 135 The Higher Education Act. 138 Northern Mariana Islands financial institutions as federal depositaries. 148 Issuance of substitute federal checks. 150 Federal enployee allotnents to Northern Mariana Islands credit unions. 151 Public participation in block grant proposals. 152 The Rivers and Harbors Act. 154 Judicial venue under the Clean Water Act, the Ocean Dumping Act, and the Ocean Thermal Energy Conversion Act. 157 Medicaid. 160 Subrrerged lands. 172 Government depository libraries. 188 Enforcement of federal laws in the Northern Mariana Islands. 192 cam%--nded temporary changes in federal law pending termination of the trusteeship. 200 Permanent resident status in the United States for aliens who are immediate relatives of citizens of the Northern Mariana Islands. 201 National Consumer Cooperative Bank. 204 Depository Management Interlocks Act. 206 Right to financial privacy. 207 Creation of a special United States passport for citizens of the Northern Mariana Islands. 209 - viii - @2e Title-by@title Survey of the United States Code. 214 Title 1. General Provisions. 215 Title 2. The Conqress. 215 Title 3. The President. 216 Title 4. Flag and Seal, Seat of Goverment, and the States. 218 Title 5. Goverment Organization and Employees. 219 [Title 6. Repealed.] Title 7. Agriculture. 226 Title 8. Aliens and Nationality. 238 Title 9. Arbitration. 252 Title 10. Armed Forces. 253 Title 11. Bankruptcy. 260 Title 12. Banks and Banking. 262 Title 13. Census. 306 Title 14. Coast Guard. 312 Title 15. Commerce and Trade. 312 Title 16. Conservation. 386 Title 17. Copyrights. 392 Title 18. Crimes and Criminal Procedure. 393 Title 19. Customs Duties. 410 Title 20. Education. 410 Title 21. Food and Drugs. 410 Title 22. Foreign Relations and Intercourse. 410 Title 23. Highways. 411 Title 24. Hospitals and Asylums. 411 Title 25. Indians. 411 Title 26. Internal Revenue Code. 412 Title 27. Intoxicating Liquors. 478 Title 28. Judiciary and Judicial Procedure. 478 Title 29. Labor. 478 Title 30. Mineral Lands and Mining. 483 Title 31. Money and Finance. 483 Title 32. National Guard. 497 Title 33. Navigation and Navigable Waters. 497 [Title 34. Repealed.] Title 35. Patents. 505 Title 36. Patriotic Societies and observances. 507 Title 37. Pay and Allowances of the Uniformed Services. 507 Title 38. Veterans' Benefits. 507 Title 39. Postal Service. 507 Title 40. Public Buildings, Prcperty, and Works. 509 Title 41. Public Contracts. 509 Title 42. The Public Health and Welfare. 517 Title 43. Public Lands. 522 - ix - Page Title 44. Public Printing and Documents. 522 Title 45. Pailroads. 522 Title 46. Sbippinq. 523 Title 47. Teleqraphs, Telephones, and Radioteleqraphs. 524 Title 48. Territories and Insular Possessions. 525 Title 49. Transportation. 526 Title 50. War and National Defense. 530 Proposed @brthern Mariana Islands Federal 'Relations Act. 532 Appendix. 559 The Covenant to Establish a CaTmnwealth of the Northern Mariana Islands in Political Union with the United States of Arerica. 561 List of draft staf f recanmndations circulated for ccrnment. 57P Biblioqrar)hy. 581 Commission staff. 596 - x - DOCTIENTARY SUPPLFMIT (Printed as a separate volume.) Page Table of contents. i Bylaws of the Ccmission. I Minutes of Ccmmission meetings. 11 May 7, 1980. 13 SepteTber 12, 1980. 14 January 12, 1981. 19 November 30-December 1, 1981. 29 July 7, 1982. 45 December 16-17, 1982. 57 March 29-30, 1983. 75 November 29-30, 1983. 92 July 12-13, 1984. 109 May 8, 1985. 128 Carmission correspondence to MerTbers of Congress. 143 February 5, 1981, to Senator McClure, regarding Saipan hospital funding (identical letters sent to Senator Robert Byrd and Representatives Yates and McDade). 149 July 29, 1982, to Senator Thurmond, regarding the bankruptcy laws (identical letter sent to Representative Rodino). 148 Page April 8, 1983, to Senator McClure, regarding the immigration and naturalization laws (identical letters sent to Senators Johnston, Matsunaga, and Weicker, Representative Eagomarsino, and Delegate Won Pat). 161 In re Northern Mariana Islands Ccnunission on Federal Laws, Decision B-202206 of the Ccimptroller General of the United States, June 16, 1982. 163 Commission staff papers. 169 Background Information on the Legal Status of the Camission. 171 A Survey of Rights and Duties of United States Citizenship, As Provided in the United States Code, with Notes on Extending those Rights and Duties to Citizens of the Northern Mariana Islands prior to Temination of the Trusteeship. 178 Borders: The Applicability of Federal Law to Imports to and Exports from the Northern Mariana Islands--A Survey. 264 Solicitation of Views on the Applicatiori of the Medicaid Program in the Northern Mariana Islands. 346 Draft staff reccmmendations not acted on by the Commission. 355 Title 19 of the United States Code, Custom Duties. 356 Import quotas. 395 Vessel documentation and vessel crewing laws. 404 - xii - LIST OF TABLES Table Page 1. Islands of the Northern Marianas. 4 2. Land Areas: The Northern Mariana Islands and Selected Other Jurisdictions. 5 3. The United States and the Northern Mariana Islands: Demographic Comparisons. 7 4. A Northern Mariana Islands Chronology. 13 5. Citations of Federal Law in the Covenant. 24 6. TL-rritories and Possessions of the United. States. 27 `WELCOMING AMERICA'S NEWEST COMMONWEALTH: THE SECOND INTERIM REPORT OF THE NORTHERN MARIANA ISLANDS CCMMISSION ON FEDERAL LAWS TO niE CONGRESS OF THE UNITED STATES EXECUTIVE SUMMARY The Northern Mariana Islands. The Northern Mariana islands is a chain of fourteen islands located in the western Pacific Ocean near Guam. Since 1947 the islands, as part of the Trust Territory of the Pacific Islands, have been administered by the United States under a trusteeship agreement with the United Nations. In the early 1970s representatives of the United States and of the Northern Mariana Islands negotiated a new political status for the Northern Mariana Islands. The new arrangement was described in the Covenant to Establish a Ccmmonwealth of the Northern Mariana Islands in Political Union with the United States of America. The Covenant was approved by 78.8 percent of the people of the Northern Mariana Islands voting in a 1975 plebiscite. In 1976 the Covenant was approved by the United States in Public Law 94-241, 90 Stat. 263. The Camission. Section 504 of the Covenant authorizes the President of the United States to appoint a commission "to survey the laws of the United States and to make recamTendations to the United States Congress as to which laws of the United States not applicable to the Northern Mariana Islands should be made applicable and to what extent and in what manner, and which applicable laws should be made inapplicable and to what extent and in what manner." Cammission members were appointed in early 1980. The original members were James A. Joseph, former Under Secretary of the United States Department of the Interior, now President and Chief Executive Officer of the Council on Foundations, V7ashington, D.C., who first chaired the Ccmmission; Pedro A. Tenorio, Lieutenant Governor of the Northern Mariana Islands, Saipan, Northern Mariana Islands, who is Vice Chair of the Camission; Jesus C. Borja, Esq., private attorney, Saipan, Northern Mariana Islands; Agnes Manglona McPhetres, President of the Northern Marianas College, Saipan, Northern Mariana Islands; Executive Summary 2 Edward DLG. Pangelinan, Esq., former Representative to the United States for the Cammnwealth of the Northern Mariana Islands, now legislative assistant to the Delegate from Guam to the united States House of Representatives, Saipan, Northern Mariana Islands, and Olney, Maryland; and Myron B. Thompson, Trustee, Kamehameha Schools, Honolulu, Hawaii. Until his death on April 10, 1983, the Honorable Phillip Burton, Member of the United States House of Representatives frcm San Francisco, California, was a member of the Ccmmission. In March 1984 the Honorable Robert J. Lagamarsino, Member of the United States House of Representatives from Ventu 'ra, California, was appointed to the Cammission to fill the vacancy created by Congressman Burton's death. In February 1985, Benigno, R. Fitial, Member and former Speaker of the House of Representatives of the Northern Mariana Islands Legislature, was appointed to the Cammission to replace James A. Joseph and was designated Chairman of the Ccmmission. At the same time, Joel J. Bergsma, Chief Legal Counsel to the House of Representatives of the Northern Mariana Islands Legislature was appointed to the Cammission to replace Agnes M. McPhetres, and Dewey L. Falcone, private attorney, Los Angeles, California, was appointed to the Cammission to replace Myron B. Thampson. The Development of Ccmission Reccmmendations. In preparing this interim report, the Ccimmission has been mindful of its duty to "take into consideration the potential effect of each law on local conditions within the Northern Mariana Islands, the policies embodied in the law and the provisions and purposes of [the] Covenant." Th fulfill that duty, drafts of each of the reccmmenda t ions contained in this report have been widely circulated among officials of the Government of the Northern Mariana Islands, other public officials and concerned private individuals, firms, and organizations in the Northern Mariana Islands, agencies of the Federal Government concerned with the subject-matter of the recammendation, and other interested persons. Numerous camments, criticisms, and suggestions fran these sources have been of great value in preparing this report. The Ccinmission's Recommendations. General reccnrendations. The mandate of this Ccmmission is to recamiend to Congress which laws of the United States not applicable to the Northern Mariana Islands should be made applicable to the Northern Mariana Islands and to what extent and in what manner and which applicable laws should be inapplicable and to what extent and in what manner. In conform i ty with this mandate, most of the reccmmendations in this report are concerned with specific federal laws. During the course of its deliberations, however, the Ccmmission has decided to make three general reccmmendations to guide Congress in applying particular federal legislation to the Northern Mariana Islands. Executive Summary 3 Two of the Camnission's general recammndations go to the very heart of the relationship between the Northern Mariana Islands and, the United States. First, the Ccmmission recammends that Congress continue to regard the Northern Mariana Islands as the beneficiary of a trust relationship with the United States, even after termination of the trusteeship. Second, the Commission recommends that Congress not enact any legislation to amend or repeal provisions of the Covenant, except in accordance with the mutual consent and consultation provisions of sections 105 and 902 of the Covenant. The Commission's third general recamrendation is procedural. The Ccninission reccnwends that Congress, in enacting any statute, routinely consider inclusion of a provision enurwrating the jurisdictions to which the statute applies. A nonvoting delegate to the United States Congress. Legislation should be enacted to provide the Northern Mariana Islands representation in the United States Congress by conferring the status of nonvoting Delegate to the United States House of Representatives on the Resident Representative to the United States for the Northern Mariana Islands. land grant colleges. Legislation should be enacted to permit land-grant funding of a post-secondary educational institution in the I\brthern Mariana Islands. Irmi2ration and nationality, In the drafting of the Covenant, great care was exercised in determining which federal immigration and naturalization laws should apply in the Northern Mariana islands. Those laws, with specified exceptions, are inapplicable to the Northern Mariana Islands. No change should be made in the general framework established by the Covenant. Legislation should be enacted, however, to address two relatively minor problems. First, legislation should be enacted to allow citizens of the Northern Mariana Islands to petition for permanent resident status in the United States for their immediate relatives. Second, citizens of the Northern Mariana Islands who elect to beccoe nationals rather than citizens of the United States on termination of the trusteeship cannot subsequently be naturalized as citizens of the United States without establishing a residence in another part of the United States. Legislation should be enacted to allow residence in the Northern Mariana Islands to satisfy residency requirements for naturalization of these nationals. Executive Summary 4 Nominations to the United States Military Ac2g M , the United States Naval Acad2a, and the United States Air Force Academy Legislation should be enacted to allow the Resident Representative to the United States for the Northern Mariana Islands to nominate one individual each from the Northern Mariana Islands to attend the United States Military Academy, the United States Naval Academy, and the United States Air Force Academy at any one time. Banking and related housing laws. In general, most federal banking laws and related federal housing laws are now applicable in the Northern Mariana Islands. The applicable laws should continue to be applicable, with three minor modifications. In addition, five federal banking laws not now applicable in the Northern Mariana Islands should be made applicable there. The agency administering a sixth law should be given discretion to make that law applicable to the Northern Mariana islands. The Catatission recommends nine specific legislative changes: 1. Legislation should be enacted to allow a national bank in the Northern Mariana Islands to convert. into or consolidate or merge with a bank organized under the laws of the Northern Mariana Islands and to allow a bank organized under the laws of the Northern Mariana Islands to merge into a national bank. 2. The Secretary of Housing and Urban Development may increase the maximum amunts for federally-insured mortgages in Alaska, Guam, and Hawaii to allow for high construction costs in those areas. Legislation should be enacted to allow the Secretary similar discretionary authority to increase maximum amounts for federal ly-insured mor tgages in the Northern Mariana Islands, where construction costs also can be substantially higher than prevailing costs in the forty-eight contiguous States. 3. When public funds are invested in insured savings and loan associations, federal law permits establishmnt of separate, "public unit" accounts so that the maximum insurable amount is not exceeded. Legislation should be enacted to allow the goverment of the Northern Mariana Islands to take advantage of this provision. 4. Legislation should be enacted to allow the Northern Mariana Islands, like the States of the United States, to become the owner of abandoned or unclauned money orders, traveler's checks, and similar instruments purchased in the Northern Mariana Islands. I Executive Summary 5 5. Legislation should be enacted to allow the National Consumer Cooperative Bank to make its loans and services available to eligible cooperatives in the Northern Mariana islands. 6. Legislation should be enacted to make clear that banks organized under the laws of the Northern Mariana Islands are eligible to establish Federal branches or agencies. 7. Legislation should be enacted to extend the protections of the Depository Management Interlocks Act to the Northern Mariana Islands. 8. Legislation should be enacted to make the Right to Financial Privacy Act of 1978 applicable to the Northern Mariana Islands. 9. Legislation should be enacted to allow the Federal Farm Credit Board to extend the services of the Farm Credit System to the Northern Mariana Islands if the Board determines extension to be feasible. Surveillance of ocean areas. Congress should emphasize to the executive branch of the United States Government the importance of patrolling ocean areas within two hundred miles of the coastlines of the Northern Mariana Islands and monitoring foreign economic activity within that area. Congress should also ensure that sufficient funds are apprqpriated to the executive branch so that the United States Coast Guard can patrol these waters frequently. Legislation should be enacted authorizing the Coast Guard to utilize, on a reimbursable basis or otherwise, the personnel and resources of other federal agencies and of the government of the Northern Mariana Islands in patrolling these waters. Investment companies The Investment Company Act of 1940, which requires registration of mutual funds and other investment companies and otherwise regulates their activities, is now applicable to the Northern Mariana Islands. Legislation should be enacted to exempt investrent companies organized and doing business only in the Northern Mariana Islands from the provisions of this Act. A similar exemption already exists for investment companies organized and doing business only on Guam or only in any other single territory of the United States. Executive Summary 6 Autcmobile Dealers Pay in Court Act. Federal law protects autcrobile dealers in the United States against certain unfair practices by autcmobile manufacturers in the performance or termination of franchise agreements. Legislation should be enacted to extend the sane protections to autcmobile dealers in the Northern Mariana Islands. Fishery trade officers; Department of Ccomerce. The United States Department of Canmerce, among other functions, is given the duty "to foster, promote, and develcp the foreign and damestic canmerce [and] the mining, manufacturing, and fishery industries of the United States." In addition, the Secretary of Ccmmerce appoints fishery trade officers to serve abroad to "promote United States fishing interests." Legislation should be enacted to confirm and ensure that the Northern Mariana Islands is considered part of the United States for purposes of these provisions. Restrictions on garnishment; Fair Credit 222ating Act; Electronic Mr=r@ansfer Act. Legislation should be enacted to clarify and confirm the applicability to the Northern Mariana Islands of three titles of the Consumer Credit Protection Act. Those titles contain certain restrictions on the garnishment of wages; the Fair Credit Reporting Act, wtiich regulates the conduct of credit reporting agencies; and the Electronic Fund Transfer Act, which establishes the rights and duties of persons and institutions using electronic fund transfer systems, such as autcmated bank teller machines and cash dispensing machines. (The other three titles of the Consumer Credit Protection Act are now applicable to the Northern Mariana Islands.) Petroleum Marketing Practices Act. Legislation should be enacted to make applicable to the Northern Mariana Islands a federal statute protecting gasoline and diesel fuel distributors and service stations fran arbitrary or discriminatory termination or nonrenewal of their franchises by their suppliers. The legislation should also make applicable to the Northern Mariana Islands provisions in the same statute requiring sellers of gasoline to disclose the octane rating of that gasoline. The Fishery Conservation and Manaaement Act. Legislation should be enacted (1) to define "State," for purposes of the Fishery Conservation and Management Act, to exclude the Northern Mariana Islands, thereby making that Act clearly inapplicable to the Northern Mariana Islands; and (2) to exclude the Northern Mariana Islands as a constituent State of the Western Executive Summary 7 Pacific Regional Fishery Management Council, but to allow the Governor of the Northern Mariana Islands to designate a nonvoting observer to the Council. Tuna fisheries. Legislation should be enacted (1) to require the Secretary of State, upon the request of and in cooperation with the governor of the Northern Mariana Islands, to negotiate and conclude international fisheries agreements for the conservation and managemnt of tuna in waters adjacent to the Northern Mariana Islands; and (2) to require that the benefits accruing fran any such agreenents be paid to the goverment of the Northern Mariana Islands. Federal crimes. Most federal laws making specified conduct criminal should continue to apply to the Northern Mariana Islands. No legislation is necessary to achieve that result. Legislation should be enacted, however, to make inapplicable to the Northern Mariana Islands (1) certain offenses against the custams laws of the United States, since the Northern Mariana Islands is not part of the custams territory of the United States; and (2) the prohibition of importation of "flying foxes" or fruit bats of the genus Pteropus Legislation should also be enacted to rmdi fy the applicability of federal lottery prohibitions in the Northern Mariana Islands, where lotteries are caamionly used to raise funds for charitable purposes. An obsolete federal law prohibiting the export of arms, liquor, and narcotics to certain "uncivilized" Pacif ic islands should be repealed. Finally, a number of technical aimendments to the federal criminal laws are recamended to confirm that the goverment and residents of the Northern Mariana Islands have the same rights and duties as do other jurisdictions and persons subject to those laws. The Hiaher Education Act. Legislation should be enacted to establish a block grant for higher education programs in the Northern Mariana Islands. This block grant will replace the Northern Mariana Islands' share of funds appropriated each year by Congress under various financial assistance programs funded under the Higher Education Act. Creation of special United States passport for citizens of the Northern Mariana Islands. Legislation should be enacted to grant the Secretary of State authority to issue special United States passports to citizens of the Northern Mariana Islands confirming their privilege to enter and to reside and be employed in the United States without restriction. Executive Summary 8 Money and finance. The Secretary of the Treasury currently has authority to designate financial institutions in territories and possessions of the United States as depositaries; to receive deposits of federal funds. Legislation should be enacted to give the Secretary similar authority to designate financial institutions in the Northern Mariana Islands as federal depositaries. Legislation should also be enacted to allow the issuance of substitute checks to replace checks drawn on federal funds on deposit in the Northern Mariana Islands when the. original check is lost, stolen, or destroyed. Existing law allows issuance of substitute checks to replace checks drawn on federal funds on deposit in Guam or in other territories and possessions. The proposed treatment would establish identical procedures for the Northern Mariana Islands, Guam, and the other territories and possessions. Federal employees may allot portions of their pay to accounts in banks and savings and loans in the United States, the territories or possessions, or the Northern Mariana Islands. They may also make allotments to accounts in credit unions chartered under federal or State law. They may not, however, make an allotment to an account in a credit union chartered under the laws of the Northern Mariana Islands. Legislation should be enacted to correct this discrepancy and allow credit unions chartered under the laws of the Northern Mariana Islands to be treated as are credit unions chartered under the laws of other American jurisdictions. The Northern Mariana Islands is eligible to receive various block grants pursuant to the Omnibus Budget Reconciliation Act of 1981. Current law applicable to each jurisdiction eligible for these grants other than the Northern Mariana Islands requires the jurisdiction to take certain steps to encourage local public participation in formulation of proposals for use of the grants and to ensure that the funds are spent as intended. Legislation should be enacted to make these requirerwnts applicable to the Northern Mariana Islands as well. The Rivers and Harbors Act. Legislation should be enacted to confirm the applicability of the Rivers and Harbors Act of 1899 to the Northern Mariana Islands. Judicial venue under the Clean Water Act, the Ocean Dumping Act,, and the Ocean Thermal Energy Conversion Act. Legislation should be enacted to make the District Court for the Northern Mariana Islands the prcper forum for lawsuits arising in the Northern Mariana Islands (or in which the defendants are in the Northern Mariana islands) under the Clean Water Act, the Ocean Dumping Act, and the Ocean Thermal Energy Conversion Act. Executive Summary 9 Postal prohibitions on lottery materials. Provisions in the federal postal laws making certain lottery materials unmailable should be modified to exempt mail to an address within the Northern Mariana Islands for a lottery conducted in the Northern Mariana Islands by a norprofit organization for religious, charitable, educational, or benevolent purposes. Medicaid. Legislation should be enacted to authorize the Secretary of Health and Human Services to waive or modify particular requirements of the Medicaid program otherwise applicable to the Northern Mariana Islands. Submerged lands. Legislation should be enacted to convey to the Northern Mariana Islands any property rights of the United States in lands permanently or periodically covered by tidal waters within. three geographical miles of the coastlines of the Northern Mariana Islands. The proposed legislation is similar to laws already enacted to convey federal interests in submerged lands to the States of the Union, Guam, the Virgin Islands, and American Samoa. The legislation would be without prejudice to any claims the Northern Mariana Islands may have to submerged lands seaward of those conveyed by the legislation. The legislation should become effective on termination of the trusteeship, when sovereignty over the Northern Mariana Islands becomes vested in the United States. Government depository libraries. Legislation should be enacted to allow the governor of the Northern Mariana Islands to designate a library in the Northern Mariana Islands as a depository for publications of the United States Goverrinent. Enforcement of federal laws in the Northern Mariana Islands. Legislation should be enacted to confirm the authority of the government of the Northern Mariana Islands to enforce federal laws in the Northern Mariana Islands. The legislation should also authorize federal financial and technical assistance to the government of the Northern Mariana Islands in enforcing federal laws in the Northern Mariana Islands. WELCOMING AMERICA'S NEWEST COMMONWEALTH: THE SECOND INTERIM REPORT OF THE NORrHERN MARIANA ISLANDS COMMISSION ON FEDERAL LAWS TO THE CONGRESS OF THE UNITED STATES INMDUCTION on March 24, 1976, Public Law 94-241 (90 Stat. 263) became effective, approving the Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States of Amrica (the Covenant). Section 504 of the Covenant provided for establishment of this Commission, the Northern Mariana Islands Commission on Federal Laws: The President will appoint a Camission on Federal Laws to survey the laws of the United States and to make reccinmendations to the United States Congress as to which laws of the United States not applicable to the Northern Mariana Islands should be made applicable and to what extent and in what manner, and which applicable laws should be made inapplicable and to wtiat extent and in what manner. The Canmission will consist of seven persons (at least four of whan will be citizens of the Trust Territory of the Pacific Islands who are and have been for at least five years dcmiciled continuously in the Northern Mariana Islands at the time of their appointments) who will be representative of the federal, local, private and public interests in the applicability of laws of the United States to the Northern Mariana Islands. The Ccmmission will make its final report and recormendations to the Congress within one year after the termination of the Trusteeship Agreement, and before that time will make such interim reports and recanmendations to the Congress as it considers appropriate to facilitate the transition of the Northern Mariana Islands to its new political status. In formulating its recommendations the Ccrmnission will take into consideration the potential effect of each law on local conditions within the Northern Mariana Islands, the policies embodied in the law and the provisions and purposes of this Covenant. The United States will bear the cost of the work of the Camission. Canmission members were appointed in early 1980. The original members were Janes A. Joseph, former Under Secretary of the United 2 States Department of the Interior, now President and Chief Executive Officer of the Council on Foundations, Washington, D.C., who first chaired the Cannission; Pedro A. Tenorio, Lieutenant Governor of the Northern Mariana Islands, Saipan, Northern Mariana Islands, who is Vice Chair of the Canmission; Jesus C. Borja, Esq., private attorney, Saipan, Northern Mariana Islands; Agnes Manglona McPhetres, President of the Northern Marianas College, Saipan, Northern Mariana Islands; Edward DLG. Pangelinan, Esq., former Representative to the United States for the Canmonwealth of the Northern Mariana Islands, now legislative assistant to the Delegate fran Guan to the United States House of Representatives, Saipan, Northern Mariana Islands, and Olney, Maryland; and Myron B. Thanpson, Trustee, Kamehameha Schools, Honolulu, Hawaii. Until his death on April 10, 1983, the Honorable Phillip Burton, Member of the United States House of Representatives fran San Francisco, California, was a member of the Canmission. In March 1984 the Honorable Robert J. Lagcoarsino, Member of the United States House of Representatives fran Ventura, California, was appointed to fill the vacancy created by Congressman Burton's death. In February 1985, Benigno R. Fitial, member and former Speaker of the House of Representatives of the Northern Mariana Islands Legislature, was appointed to the Catutission to replace James A. Joseph, and was designated Chairman of the Commission. At the same thne, Joel J. Bergsma, Chief Legal Counsel to the House of Representatives of the Northern Mariana Islands Legislature was appointed to the Camission to replace Agnes M. McPhetres, and Dewey L. Falcone, private attorney, Los Angeles, California, was appointed to the Canmission to replace Myron B. Thompson. The Camission held its first meeting on May 7, 1980. it subsequently hired a small staff and proceeded with its survey of the laws of the United States. THE NORTHERN MARIANA ISLANDS The islands The fourteen islands of the Northern Marianas lie along the Andesite Line. Tb the east of that line is the western Pacific Ocean; to the west, the Philippine Sea. Immediately to the east of the islands is the Marianas Trench, within which is the world's greatest ocean depth, 36,198 feet below sea level. The Northern Mariana Islands are situated between 14* and 21* north latitude and between 140* and 150* east longitude. That places the chain at about the same distance west of the United States mainland as Tokyo or Melbourne and about the sane distance north of the equator as Mexico City or Manila. (A fifteenth island, Guam, is the southerrmost of the archipelago, but it has-been a separate political entity since caning under the American flag during the Spanish American War in 1898.) - 3 - 11Sa ipan . . .and Tinian in the Marianas are 1800 miles fran Shanghai, 1260 miles frcm Tokyo, and 1480 miles from Manila, but are 3300 miles fran Honolulu and 5400 miles fran San Francisco." Senate Report 94-433, The Covenant to Establish a Commonwealth of the Northern Mariana Islands 24 (1975). The Mariana Islands are nine time zones west of Kbshington, D.C.; six zones west of San Francisco; and four zones west of Honolulu. The International Dateline is between Honolulu and the Marianas. As a consequence of this geography, at no time do normal business hours on the east coast of the United States coincide with those in the Northern Mariana Islands. The total land area of the Northern Mariana Islands is 184 square miles. Saipan, the largest island with 46.6 square miles, is roughly 12 miles long by 5 miles wide. Table I gives the population and area of each of the islands of the Northern Mariana Islands, while table 2 offers a canparison between land areas in the Northern Mariana Islands and saree other, better-known jurisdictions. 4 TABLE I ISLANDS OF THE NORTHERN MARIANAS (listed fran north to south) Population Area in square miles Uracas (Farallon de Pajaros) .79 Maug .81 Asuncion - 2.82 Agrihan 32 18.29 Pagan 54** 18.65 Alamagan 18 4.35 Guguan - 1.61 Sarigan 1.93 Anatahan 12.48 Farallon de Medinilla .35 Saipan 14,549 47.46 Tinian 866 39.29 Agiguan -- 2.77 Rota 1,261 32.90 Total 16,780 184.51 Source: Population figures are from U.S. Bureau of the Census, 1980 Census of Population (PC80-1-A57A, 1982). Areas are frcm E. Bryan, Guide to Place Names in the Trust Territory of the Pacific Islands (1971). *Section 2 of Article XIV of the Constitution of the Northern Mariana Islands requires that "Whe islands of Sariguan [Sarigan] and Maug and other islands specified by law shall be maintained as uninhabited places and used only for the preservation of bird, fish, wildlife and plant species except that the legislature may substitute in place of Sariguan another island as well suited for that purpose." **In May 1981 Mt. Pagan erupted, forcing evacuation of the 54 persons then residing on the island of Pagan. Pagan. People . Reach Safety, Pacific Daily News (Guam), May 1.8, 1981, at 1. Continued volcanic activity has prevented their return. ***Farallon de medinilla, leased to the United States Goverment pursuant to sections 802 and 803 of the Covenant, is used by the Armed Forces as a banbing practice range. 5 TABLE 2 LAND AREAS: THE NORTHEIN MARIANA ISLANDS AND SELECTED OTHER JURISDICTIONS Area in square miles Northern Mariana Islands 184 Saipan, Northern Mariana Islands 47 Rhode Island (smallest State of the United States) 1,214 Oahu, Hawaii 593 Hong Kong (including Kowloon and New Territories) 398 Singapore 226 Malta 122 Staten Island, New York 58 Manhattan Island, New York 23 Bermuda 20 Sources: 1981 World Almanac & Book of Facts 443, 449, 558, 575, 591 (17980); E. Bryan, Guide to Place Names in the Trust Territory of the Pacific Islands (1971). Fran Uracas in the north to Rota in the south is approxiinately 338 miles, or roughly the distance from Albany, New York, to Baltimore. Guam is 32 miles south of Rota. Many of the islands of the Pacific are low-lying coral atolls, rising only a few feet above sea level. The islands of the Northern Marianas, however, are high islands, of volcanic origin. Volcanoes in the northernmost islands of the chain are young and fairly active. In May 1981 a major eruption of Mt. Pagan forced the evacuation of Pagan Island's entire population of 54 persons. The Northern Mariana Islands are tropical, but not uncomfortably SO. ne islands lie in a northeasterly trade wind belt and experience winds from the northeast almost constantly. Due to the great distances the trade winds travel over the ocean uninterrupted by major land masses, they are remarkably steady, averaging at least 10 knots day in and day out through most of the year. See generally G. Rumney, Climatology and the World's Climates 637 (1968); U.S. Weather Bureau, Atlas of Climatic Charts of the oceans, charts 27-30 (1938). According to the Guinness Book of World Records Saipan--the most populated of the Northern Mariana Islands--has the most "equable" climate of any place in the world: 6 During the nine years 1927-35, inclusive, the lowest temperature recorded [on Saipan] was 67.3*F Jan. 30, 1934, and the highest was 88.5*F Sept. 9, .1931, giving an extrEme of 21.20F. N. McWhirter (ed.), Guinness 1983 Book of World Records 124 (1982). Average rainfall in the Northern Mariana Islands is 82.2 inches per year. 4 Worldmark EncVclopedia of the Nations 394 (5th ed. 1976). While wet and dry seasons are not clearly differentiated, the heaviest rainfall usually occurs fran July through October. E. Gallahue, The Economy of the Mariana Islands 2 (ms. 1946). The 77@ islands lie 1 typhoon alley," the northwesterly track of tropical storms originating in the area north of Ponape and east of the Marshall Islands. Typhoon alerts are frequent from July through November each year and, several times each decade, one or more islands in the chain are devastated by savage typhoons. '1he people The islands of the Pacific are often classified, according to the ethnic derivation of their inhabitants, as Polynesian, Melanesian, or Micronesian. See generally D. Oliver, 'The Pacific Islands 21 (rev. ed. 1961). The Northern Mariana Islands are a part of Micronesia, the grouping that also includes the Caroline and Marshall Islands. * The principal ethnic groups in the Northern Mariana Islands are the Chamorros and the Carolinians. (Both groups are considered Micronesian.) The Chc-mrro population is the larger of the two, although definitive statistics on the relative sizes of the groups do not appear to be available. The 1980 census recorded 16,780 persons living in the Northern Mariana Islands. As shown in table 1, the large majority of the population, 14,549 persons, lives on Saipan. The next most populated islands are Rota, with 1,261 persons, and Tinian, with 866. The other islands are sparsely inhabited or uninhabited. The population of the Northern Mariana Islands, like that in many less-develcped areas, is noticeably younger than that of the "Micronesia" is often used synonymously with the Trust Territory of the Pacific Islands, and the two labels are largely overlapping. Micronesia, however, is generally considered to include Guan, Nauru, and the islands of Kiribati (formerly, the Gilberts), none of which are part of the Trust Territory. The Trust Territory, on the other hand, includes the Polynesian atolls of Nukuoro and Kapingamarangi. 7 United States, while the average household in the Northern Mariana Islands has almost twice as many members as the typical home in the United States. Table 3 offers some demographic comparisons between the Northern Mariana Islands and the United States. TABLE 3 THE UNITED STATES AND THE NORTHEIN MARIANA ISLANES: DEMOGRAPH IC COMPARISONS United States Northern Mariana Islands Population 231,106,727 16,780 Area in square miles 3,539,289 184 Population per square mile 64.0 91.2 Population per household 2.76 5.36 median age of population 30.0 19.7 Percent of population under 18 years of age 27.5 58.9 Source: U.S. Bureau of the Census, Statistical Abstract of-the United States: 1982ZL3, at 6, 43, 200, 846-47 (103d ed. 1982). 8 History Nobody knows for sure where the f irst Chamorros came from. It is safe to assume that the original Chamorros belonged to the large group of Pacif ic neoples known generally as Malayo-Polynesian, but there is no certain evidence to tell us where the first inhabitants of the Mariana Islands cam from. . . . After the near extermination of the pre-Spanish Chamorros through epidemic diseases and mass murders, outhreedinq was most camon, especially with Spanish and Filipino groups. These admixtures were then further modified by later contacts with other Europeans, Americans, and Japanese. D. Toppinq, Chamorro, Reference Grammar 2 (1973).* The first Carolinians came to the Northern Mariana Islands early in the 19th century fram atolls in the Caroline Islands to the south, at a time when the Spanish administration had removed almost all of the Chamorro inhabitants frcm the Northern Mariana Islands to Guam. [TIhe Marianas are exceptional in Oceania in that they were colonized and their inhabitants thorouqhly acculturated at a much earlier date than the other islands of Micronesia, Polynesia, and Melanesia. A. Spoehr, 22mmst culture and Colonial Culture in the Marianas during the Spanish Period in N. Gunson (ed.), The Changing Pacific 274, 252 (1978). The lengthy Spanish administration among other things imprinted the islands with the still-daminant Roman Catholic faith. Early efforts at agricultural exploitation of the islands, begun during the relatively short German rule of the Northern Mariana Islands, gave way to massive importation of labor and capital during the Japanese League of Nations mandate. "When Japan assumed control in 1914, there were reported to be about 100 resident Japanese in the German Marianas F. Keesinq, The South Seas in the Modern World 354 (rev. ed. 1945). By 193@, the 4,180 Chawrro and Carolinian inhabitants of the Northern Mariana Islands were outnumbered in their own islands by 42,688 Japanese. T. Yanaihara, Pacific Islands under Japanese mandate 30 (1940). Vbrld War II left no families in the Northern Mariana Islands untouched. American landings on the beaches of Saipan marked the *See also Underwood, The Native origins of the Neo-Chamrros of the Mariana Islands, 12 Micronesica (journal of the University of Guam) 203 (1976). - 9 - beginning of one of the bloodiest island battles of the Pacific campaign. Three thousand four hundred twenty-six Americans and 27,586 Japanese were killed on the Saipan; another 314 Americans and 6,939 Japanese perished in the fight for neighboring Tinian. 18 Encyclopedia Americana, Mariana Islands 284 (1972). More than 300 Chamorros and Carolinians, roughly nine percent of their total population, were killed during the hostilities. A. Spoehr, Saipan: . The Ethnoloav _, of . a , War-Devastated.. Island 92 (1954). One contemporary observer described the immediate postwar situation in these words: Natives in each of the islands, who had been sucked into the maelstrom of battle or caught in preparations for the major offensive on Japan, had the normal tenor of family life disrupted and disarranged. Natives at times during canbat were fighting for their individual lives, as well as those of their kin. Loss of natives' lives in each island and repatriation of Orientals fran Saipan and Rota had left more than the normal number of widows and orphans. Native laborers from Saipan and Rota had been taken to other islands, either voluntarily or forcibly, many had not been returned. In such instances families were broken, many wives and children were without direct means of support, and family plans for the rehabilitation and development of their resources were largely at a standstill due to lack of normal guidance. Native homes, also practically all their personal property, had been lost. many natives had their land taken over for military or other uses. Pre-war sources of income had either vanished or changed radically on Saipan and Rota. E. Gallahue, The EconcmV of the Mariana Islands 25 (ms. 1946).' Saipan, Tinian, and nearby Guam played an important role in ending World War II in the Pacific. Frcm November 1944, B-29s based on the three islands bambed Japan unremittingly until the atamic banbs, carried by B-29s fram Tinian, forced Japan's surrender in August 1945. During this period Saipan was second only to Hawaii as a support base for American forces in the western Pacific, while the airfield camplex on Tinian was the largest in the world. The first government in the Northern Mariana Islands as the islands were wrested form the Japanese forces was of necessity military government. The United States Navy was given the responsibility for governing the Northern Mariana Islands. on Saipan and Tinian, where most houses had been destroyed, the Chamorro and Carolinian inhabitants were housed and provided their basic needs in centralized camps. Not until July 4, 1946, a day still celebrated as @"Liberation Day" in the Northern Mariana Islands, were the - 10 - inhabitants permitted to reside outside the camps. In the meantime, virtually all the Japanese survivors of the w-a-;- in the Northern Mariana Islands, as well as the colonists fran Korea and other nations brought to the islands by Japan, had been repatriated to their hcmelands. The American military presence likewise was drastically reduced, as part of the worldwide postwar demobilization. In the period immediately following the war, the Northern Mariana Islands and the other islands of the Japanese mandate ccmmanded far more attention at the international level than at the local level. At Yalta in 1945, President 'Roosevelt, Prime Minister Churchill, and Marshall Stalin agreed that the former League of Nations mandates should become international trusteeships under the auspices of the United Nations. The United States was instrumental in ensuring that provision for such a trusteeship system was included when the United Nations Charter was drafted later in 1945. Even though the United States had been prcminent in establishing the trusteeship system, within the United States the Navy and War Departments, with support fran many other quarters, opposed placing under international supervision the islands so recently taken at such a high cost from the Japanese. These interests preferred outright annexation of the islands. In 1946 President Truman decided that the Northern Mariana Islands and the other islands of the former Japanese mandate would beccue a "strategic" trusteeship under Article 83 of the United Nations Charter. Article 83, which had been drafted with these particular islands in mind, allows the Security Council of the United Nations (where the United States has veto power) rather than the Trusteeship Council (where no nation has veto power) to exercise all functions of the United Nations with respect to strategic trusteeships. In 1947 the Security Council and the United States Congress, in a joint resolution signed by President Truman, approved the Trusteeship Agreement for the Former Japanese Mandated Islands. The Trust Territory of the Pacific Islands cane into being on July 18, 1947. The administrative headquarters of the Trust Territory was established at Pearl Harbor in Hawaii (well outside the geographic limits of the Trust Territory). In the Northern Mariana Islands and the rest of the Trust Territory, government remained a responsibility of the United States Navy until 1951, when President Truman transferred administrative responsibility to the Department of the Interior. In late 1952, however, Saipan and Tinian were returned to Navy jurisdiction and, shortly thereafter, the sparsely pcpulated islands north of Saipan were also returned to Navy control. (Thus, only Rota continued to be governed by the Department of the Interior). In 1962 President Kennedy transferred administrative responsibility for all of the Northern Mariana Islands back to the Department of the Interior. In the intervening years under Navy administration, Saipan was the site of a secret Central Intelligence Agency training facility. Access by outsiders to the Navy-controlled Northern Mariana Islands during this period was limited. In 1962, also, the administrative headquarters for the Trust Territory was brought to the Trust Territory for the first time, and established on Saipan in the quarters recently vacated by the Central Intelligence Agency. In the same year President Kennedy initiated "a policy of bringing the Trust Territory into a permanent relationship with the United States." Senate Report 94-433, at 37 (1975). In furtherance of that policy, a survey mission was sent to the Trust Territory to report and make recam-endations "on the political, economic, and social problems of Micronesia." Id. The mission's report, among -many other specific recamxendat ions, "proposed significant increases in the Trust Territory budget and Emphasized the need for a territory-wide legislature." Id. Congressional appropriations for the Trust Territory subsequently %ere significantly increased and, in 1965, by order of the Secretary of the Interior, the Congress of Micronesia was established as a legislative body for the entire Trust Territory. Among the first itEms of business on the agenda of the Congress of Micronesia was resolution of the future political status of the Trust Territory. (By the time the Congress was created, eight of the eleven United Nations trust territories created after the Second World War had become independent. The ninth and tenth, Nauru and New Guinea, were well on their way to that status. Nauru became independent in 1968 and New Guinea, in union with Papua, became independent in 1975.) Despite a history of local legislative resolutions, petitions, and plebiscites expressing a desire for separation fran the rest of Micronesia and for close association with the United States, the Northern Mariana Islands joined with the other areas of Micronesia in negotiations with the United States to end the trusteeship and establish the future political status of the Trust Territory. By 1972, however, it was clear that the objectives of the Northern Mariana Islands and those of the rest of the Trust Territory in negotiating a future political status did not coincide. In Apr il 1972 the United States acceded to a request by the Northern Mariana Islands for status negotiations separate from those for the rest of Micronesia. Negotiations between the Northern Mariana Islands and the United States proceeded forthwith and, in February 1975, the Marianas Political Status Commission and the Personal Representative of the President of the United States signed the Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States of America. Five days later, the Covenant was unanimously approved by the Mariana Islands District Legislature (the local legislative body for all of the Northern Mariana Islands). on - 12 - June 17, 1975, after several months of campaigning, the Covenant was approved in a plebiscite observed by representatives of the United Nations. Ninety-five percent of the eligible voters in the Northern Mariana Islands registered to vote. Ninety-five percent of those registered in fact voted in the plebiscite. Of those voting, 78.8 percent voted in favor of the Covenant. On March 24, 1976, the Covenant was approved by a joint resolution of the Congress of the United States, signed by President Ford. Public Law 94-241, 90 Stat. 263. (The text of the Covenant is reproduced in the Appendix to this report.) In 1977, pursuant to authority granted in the Covenant, the people of the Northern Mariana Islands drafted and approved their own constitution. That constitution, by proclamation of President Carter, became effective on January 9, 1978, the same day the first popularly elected governor of the Northern Mariana Islands assumed office. Most provisions in the Covenant became effective on its approval by the United States Congress or on establishment of the constitutional goverment in the Northern Mariana Islands on January 9, 1978. The remaining provisions will become effective on termination of the trusteeship. Principal among these rEmaining provisions are the vesting of sovereignty over the Northern Mariana Islands in the United States and the conferral of United States citizenship upon citizens of the Northern Mariana Islands. When the trusteeship will end had not been determined at the time this report went to press. The United States has taken the position that the trusteeship will end for all parts of the Trust Territory at the same time. I Public _Papers of the Presidents: Gerald R. Ford 1975 at 898, 899 (1977). Termination thus depends upon the satisfactoiy conclusion of negotiations between the United States and the three other political entities in the Trust Territory: the Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau. A "Compact of Free Association" has been agreed upon by negotiators for the United States and negotiators for the Republic of the Marshall Islands and the Federated States of Micronesia, and has been submitted to the United States Congress for its approval. 21 Weekly Compilation of Presidential Documents 203 (1985); 20 id. 454 (1984). Final agreement has not yet been reached between r@@otiators for the United States and their counterparts for the Republic of Palau. - 13 Table 4, A Northern Mariana Islands Chronology, presents scime of the more important dates in the history of the Northern Mariana Islands. TABLE 4 A NORTHEFV MARIANA ISLANDS CHRONOLCGY 2496 B.C. 200 years Archeological evidence shows the Northern Mariana Islands were inhabited at least as early as this. 1521 A.D. Magellan's landing on Guam marks first European contact with Mariana Islands. 1564 Spain claims sovereignty over Mariana Islands. 1668-1821 Mariana Islands are ruled by Spanish governors reporting to Mexico. 1821-1898 Mariana Islands are ruled by Spanish governors reporting to the Philippines. 1898 Guam is captured by the United States in Spanish-American War. 1899 Spain sells the Northern Mariana Islands to Germany. 1899-1914 Germany administers the Northern Mariana Islands as part of its New Guinea protectorate. 1914 Japan, at war with Germany, occupies the Northern Mariana Islands. 1919 Japan receives League of Nations mandate to govern the Northern Mariana islands (and the Marshall and Caroline Islands). 1934 Japan withdraws fram the League of Nations. 1941, December 8-10 Japanese armed forces, based on Saipan and Rota, attack and occupy Guam. - 14 - 1944, June-July United States armed forces attack and occupy Saipan and Tinian, and recapture Guam. 1947, July 18 The United States Congress by joint 'resolution approves the Trusteeship Agreement for the Formr Japanese Mandated Islands, T.I.A.S. No. 1605, 61 Stat. 3301, making the United States responsible to the United Nations for administration of the Northern Mariana Islands (and the Marshall and Caroline Islands). 61 Stat. 397. The new Trust Territory of the Pacific Islands is placed under administration of the United States Navy. Executive Order 9875, 3 C.F.R., Ccimp. 1943-48, at 658. 1951, June 29 President Truman transfers administration of the Trust Territory fran the Navy to the Department of the Interior. Executive order 10265, 3 C.F.R., Ccmp. 1949-53, at 766. 1952, November 10 President Truman returns Saipan and Tinian to Navy administration. Executive order 10408, 3 C.F.R., Ccmp. 1949-53, at 906. 1953, July 17 President Eisenhower returns islands north of Saipan to Navy administration, leaving Rota the only island in the Northern Marianas under Depart:ment of the Interior administration. Executive order 10470, 3 C.F.R., Camp. 1949-53, at 951. 1953, August 8 First specific congressional authorization of appropriations for the Trust Territory of the Pacific Islands is approved.* 67 Stat. 494. *Earlier appropriations were made without specific authorization. See, for example, Act of July 9, 1952, c.597, 66 Stat. 445, 457-58. - 15 1962, May 7 Administration of the Northern Mariana Islands (except Rota) is transferred from Navy to Department of the Interior (already administering Rota). Executive Order 11021, 3 C.F.R., Camp. 1959-63, at 600. 1965, February 16 Legislative authority for the Trust Territory is transferred from United States-appointed High Commissioner to newly-established Congress of Micronesia, subject to Department of the Interior veto. U.S. Department of the Interior Order 2882 (Sept. 28, 1964). 1967, August 5 Congress of Micronesia creates its first commission to explore future political status options. Trust Territory of the Pacific Islands, Senate Joint Resolution 25. 1969, August 29 Congress of Micronesia creates Micronesia Political Status Delegation to negotiate future political status with representatives of the United States. Trust Territory of the Pacific Islands, Public Law 3C-15. 1969, September 30 First meting is held between Micronesian political status delegation and United States officials. 1972, April 12 United States agrees to Northern Mariana Islands' request for political status negotiations conducted separately from those for the rest of Micronesia. 1975, February 15 The Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States of America (the Covenant) is signed by the Marianas Political Status Camission for the people of the Northern Mariana Islands and by the President's Personal Representative for the United States. 1975, February 20 The Covenant is approved by a unanimous vote of the Mariana Islands District Legislature. - 16 - 1975, June 17 The Covenant is approved by 78.8% of the people of the Northern Mariana Islands voting in a plebiscite. 1976, March 24 The Covenant is approved by joint resolution of the Congress of the United States. Public Law 94-241, 90 Stat. 263. The following provisions of the Covenant cane into full force and effect: Section 105 (United States legislative power); Section 201-203 (Northern Mariana Islands Constitution); Section 503 (inapplicable federal laws); Section 504 (Ccmmission on Federal Laws); Section 606 (social security); Section 801 (property of the Trust Territory in the Northern Mariana Islands); Section 903 (enforceability of Covenant in courts of United States); and Sections 1001-1005 (approval, effective dates, and definitions). 1976, April 1 United States administration of the Northern Mariana Islands is separated from that of the remainder of the Trust Territory. U.S. Department of the Interior Order 2989 (March 24, 1976). 1977, March 6 The Constitution of the Northern Mariana Islands is ratified by 92% of the people of the Northern Mariana Islands voting. 1977, October 24 Presidential Proclamation 4534 announces approval of the Constitution of the Northern Mariana Islands by the United States and sets January 9, 1978, as date for establishment of constitutional goverment in the Northern Mariana Islands. - 17 - 1978, January 9 The Constitution of the Northern Mariana Islands ccms into full force and effect. Constitutional government is established; the first elected governor and the first Camronwealth legislature take off ice. The following provisions of the Covenant ccme into full force and effect: Section 102 (supremacy of Covenant and applicable federal law); Section 103 (local self-government); Section 204 (oath of office); Section 304 (privileges and immunities); Sections 401-403 (judicial authority); Section 501 (applicability of provisions of the United States Constitution); Section 502 (applicable federal laws); Section 505 (continuity of prior laws); Section 601-605 (revenue and taxation); Section 607 (bonds and other obligations of the Northern Mariana Islands); Sections 701-704 (United States financial assistance); Sections 802-805 (lease of land to United States; restraints on alienation); Section 901 (Resident Representative to the United States); and ", Section 902 (mutual consultation). end of trusteeship The following provi 'sions of the Covenant cane into full force and effect: Section 101 (establishment of Commonwealth; Section 104 (United States foreign affairs and defense responsibility); - 18 - Section 301-303 (citizenship and nationality); Section 506 (immigration and nationality); Section 806 (acquisition of Northern Mariana Islands land by United States); and Section 904 (international matters). - 19 - The economy The Gross Island Product for the Northern Mariana Islands for 1982 was estimated at $165,000,000. Commonwealth of the Northern Mariana Islands, Overall Economic Development StrateqV 5 (1983) (hereafter, Overall Economic Development Strategy). Tourism is the principal industry, with more than 80 percent of all visitors originating in Japan. Id. at 23-24. That industry has experienced rapid expansion in recent years, with 767 hotel roams now available in the Northern Mariana Islands. id. The development of commercial fisheries in the waters surrounding the Northern Mariana Islands is widely considered as one of the most promising approaches to the economic advancement of the Northern Mariana Islands. See id. at 231, 53-54; Robert R. Nathan Associates, Inc., Assessment of Curr(Tn-t and Prospective Socio-economic Conditions in the Comonwealth of the Northern Mariana islands 15, 18, 89 (1980) (hereafter, Nathan Report). At present, commercial fishery operations based in the Northern Mariana Islands are quite limited and the value of seafood imports to the Northern Mariana Islands exceeds the value of the local catch. Commonwealth of the Northern Mariana Islands, Fisheries Development Plan 4-5, 7 (1981). Nonetheless, the potential for future development is demonstrated by the high level of current activity by Japanese, Korean, and Taiwanese fishing vessels in the waters adjacent to the Northern Mariana Islands and by the substantial Japanese fishery based in the Northern Mariana Islands before the Second World War. Id. at 4, 7. A third important sector of the economy is agriculture. The largest agricultural operation is the 7,000-acre Bar-K Ranch on Tinian, which raises dairy and beef cattle and swine. Nathan Report 12. Small farms "featuring an acre of tree crops (fruits a7d coconuts), vegetable gardens and a few small livestock (chickens, goats, pigs)" supplement family income for many families in the Northern Mariana Islands. Id. In general, agriculture is now "an economic activity of only secondary importance. " Id. By contrast, during the Japanese administration of the Northern Marigin-a Islands, sugar cane and other crops were intensively cultivated. While now only 600 acres in the Northern Mariana Islands are under cultivation, in 1937 36,900 acres were reportedly under cultivation. Id. (It should be noted, however, that agriculture during the Japanese period was largely in the hands of Japanese, Okinawan, and Korean immigrants, with little of its profits inuring to the Chamorro and Carolinian inhabitants of the islands.) Employers in the Northern Mariana Islands (other than the Federal Government and its contractors) are not subject to federal minimum wage laws. A locally-imposed minimum wage of $2.15 per hour is in effect. 4 Code of the Northern Mariana Islands � 9221 (1984). (The federal minimum wager by contrast, is $3.35 per hour.) 20 A frequently-cited weakness of the economy of the Northern Mariana Islands is the large percentage of the labor force employed in the public sector. In 1982, 21 percent of wage and salary earners were employed by the GovermTent of the Northern Mariana Islands, while another six percent were Employed by the Government of the Trust Territory of the Pacific Islands (which, although no longer concerned with the Northern Mariana Islands, continues to be based there). Overall Economic Development S,trategy 18. By contrast, in the United States in 1981, federal, State, and local government employees account for less than 16 percent of the employed labor force. U.S. Bureau of the Census, Statistical Abstract, of the United, States 1982-83, at 303, 375 (103d ed. 1982). The large proportion of the labor force in the public sector of the Northern Mariana Islands is primarily due to the small population and the insularity of the islands. Sane minimal number of persons are necessary to provide basic goverrmental services, regardless of the number of persons served. The Northern Mariana Islands, with its small population, enjoys few economies of scale and, consequently, must Employ a larger proportion of its labor force to provide those services. The need for additional employees in the public sector is also attributable to some extent to the insular character of the area. Each island must have its own power supply and water system. Transportation and communication difficulties favor decentralization of scrw other basic government functions, such as public safety, and road construction and maintenance, again with the loss of economies of scale. Additionally, health care and power generation, which in other communities -may be private sector activities, throughout the American administration of the Northern Mariana Islands have been part of the public sector. Even though the public sector employs a disproportionate percentage of the labor force, public sector employment declined by 30 percent between 1977 and 1982, while private sector employment increased by 74 percent. Overall Economic Devel2EMnt Strategy 18. Unemployment in 1984 was estimated at just under twelve percent of the total labor force. P. Leddy, The Unemployment Situation on CNMI: July 1984 (ms. 1984). Almost 39 percent of the labor force in the Northern Mariana Islands are aliens. NMI Jobless Rate, 2:2ps, Pacific Daily News (Gum), February 4, 1983, Focus supplement, at 9A. Most of these aliens are employed in construction trades, while others work as entertainers and maids. Id. Eighty-one percent of the alien workers in the Northern Mariana Islands are from the Philippines. Mos t of the rest are from Japan, Korea, and China. INO Reports 4,907 Aliens, Marianas variety, March 22, 1985, at 6. - 21 - THE COMMISSION The Carmission's methodology Examination of the entire body of federal law to determine which laws should and which laws should not apply to the Northern Mariana Islands is a formidable task. Federal law includes the Constitution of the United States, treaties between the United States and foreign countries, nearly two hundred years of statutes codified into the forty-eight active titles of the United States Code, the volumes of administrative regulations collected in the Code of Federal Regulations, and judicial and administrative interpretations of all the foregoing. Mindful of its mandate to report to Congress, the Commission has concentrated its attention on federal statutory law, that part of the body of federal law that can be changed only by Congress. The Ccmission recognized that study of any given federal statute could consume a substantial portion of the total resources available to the Commission. For example, expert consultants could be retained to perform independent investigations to determine the effects of a statute on the Northern Mariana Islands. To make optimal use of its resources, the Camission decided to rely on published sources, on work done by others, and on the efforts of its own staff in preparing this report. Any distortions caused by this reliance, it is hoped, were corrected by the extensive circulation of its work for critical camxent, as described below. The Camission decided early in its existence to focus on existing problems in the application of particular federal laws to the Northern Mariana Islands rather than to start with title 1 of the United States Code and proceed sequentially through each title. Accordingly, the Commission sent letters to the principal agencies of the Federal Government and to public officials and private persons in the Northern Mariana Islands, notifying them of the Commission's establishment and its task, and seeking from them descriptions of problems encountered in the application of particular federal laws to the Northern Mariana Islands. From responses to these letters and from suggestions of Commission members and staff, the Commission developed a list of general subjects and particular federal statutes to be given high priority. This list of priorities was revised and updated at each meeting of the Commission to take into account problems of which the Ccimmission had previously been unaware and other developments since the previous formulation of the list. Once a general subject matter or a particular statute was selected for study, the Ccmmission's staff prepared a draft recommendation on the selected topic. The format generally followed in these recaumendations included a summary description of the purpose and operation of the statute (or statutes) at issue, findings 22 - on whether the statute is now applicable to the Northern Mariana Islands, a discussion of the pros and cons of applying the statute there, and a specific recommendation that the statute(s) apply, apply only in a certain way, or not apply to the Northern Mariana Islands in the future. If the draft recommended a change in a statute's applicability, legislative language was proposed to accomplish that change. once a draft staff recommendation had been prepared, it was circulated for comment to the members of the Commission; to federal agencies concerned with its subject matter; to the Department of Interior's Office of Territorial and International Affairs; to public officials, private institutions, and individuals in the Northern Mariana Islands; and to other persons knowledgeable or expressing an interest in the subject matter of the draft. The draf t was then revised as necessary in light of comments received and presented to the Commission for consideration. All of the Commission's recamneandat ions for changes in federal laws in this report were developed through the process just described. All of the Ccmission's recamnendations were adopted without dissent. Determining the applicability of federal statutes to the Northern Mariana Islands The applicability of a particular federal statute to* the Northern Mariana Islands may be determined by the terms of the statute, by provisions in the Covenant that specifically treat the applicability of certain statutes, or by general formulae in the Covenant for determining the applicability of federal law to the Northern Mariana Islands. Careful attention must be given to the date the statute was enacted (or the date of enactment of any earlier statute mended by the statute in question), the date the Covenant was approved by the Congress of the United States (March 24, 1976), and the effective date of provisions in the Covenant affecting the statute's applicability (January 9, 1978, or March 24, 1976). *The phrases "applicable to the Northern Mariana Islands" and "applicable in the Northern Mariana Islands". are used synonymously in this report. - 23 - The effective date for most provisions in the Covenant making particular federal statutes applicable to the Northern Mariana Islands is January 9, 1978. See Covenant S 1003(b) and Presidential ProclaTmtion 4534, 42 Fed. Reg. 56593 (1977), which govern Covenant SS 403(b), 502, 601,* 603-605, 703. Provisions in the Covenant making particular federal statutes inapplicable to the Northern Mariana Islands generally became effective when Congress approved the Covenant on March 24, 1976. See Covenant � 1003(a), governing id. �� 503, 606. Statutes mentioned specifically in the Covenant. The applicability of certain federal laws to the Northern Mariana Islands is specifically dictated by provisions in the Covenant. Those laws and the correlative Covenant provisions are listed in table 5. Statutes enacted on or before January 9,, 1978. Section 502 of the Covenant establishes several formulae for determining the applicability to the Northern Mariana Islands of federal laws enacted on or before January 9, 1978, the effective date of section 502. Section 502 provides: (a) The following laws of the United States in existence on the effective date of this Section and subsequent amndments to such laws will apply to the Northern Mariana Islands, except as otherwise provided in this Covenant: (1) - those laws which provide federal services and financial assistance programs and the federal banking laws as they apply to Guam; Section 228 of Title II and Title XVI of the Social Security Act as it applies to the several States; the Public Health Service Act as it applies to the Virgin Islands; and the Micronesian Claims Act as it applies to the Trust Territory of the Pacific Islands; (2) those laws not described in paragraph (1) which are applicable to Guam and which are *But see section 205 of Public Law 96-205, 94 Stat. 84 (1980); section 303(a) of Public Law 96-597, 94 Stat. 3477 (1980); and section 3(a) of Public Law, 98-213, 97 Stat. 1459-(1983). 24 TABLE 5 CITATIONS OF FEDERAL 1AW IN THE COVENANT Federal law Mentioned in Covenant section United States Constitution 501 Title 28, U.S.C. (judiciary and Judicial Procedure) 403(b) Laws providing federal services and financial assistance programs 502(a)(1); 703(a) Federal banking laws 502(a)(1) Section 228 of title II of the Social Security Act (certain old-age benefits) [42 U.S.C. S 4281 502(a)(1) Title XVI of the Social Security Act (supplemental security income for the aged, blind, and disabled) [42 U.S.C. �� 1381 et seq.] 502(a)(1) Public Health Service Act [42 U.S.C. �� 201 et seq.] 502(a)(1) Micronesian Claims Act (85 Stat. 92; 87 Stat. 4601 502(a)(1) Laws regarding coastal shipments; coastwise laws 502(b); 503(b) Laws regarding conditions of employment, including wages and hours of employees 502(b) Immigration and naturalization laws 503(a); 506 Prohibitions against foreign vessels landing fish or unfinished fish products in the United States 503(b) Minimum wage provisions of Section 6, Act of June 26, 1938, 52 Stat. 1062, as amended [29 U.S.C. S 2061 503(c) Income tax laws 601, 703(b) 25 - TABLE 5 (CONTINUED) Federal law Mentioned in Covenant section Customs laws 603, 605, 703(b) Excise taxes 604, 606(b) Soldiers and Sailors Relief Act of 1940, as amended [50 U.S.C. App. 5� 501 et 605 Self-employment taxes 606(b) Social security retirEment benefits 606 Title 26, chapters 2 (tax on self-employment income) and 21 (Federal insurance contributions act) 703(b) of general application to the several States as they are applicable to the several States; and (3) those laws not described in paragraphs (1) or (2) which are applicable to the Trust Territory of the Pacific Islands, but not their subsequent amndments unless specifically made applicable to the Northern Mariana Islands, as they apply to the Trust Territory of the Pacific Islands until termination of the Trusteeship Agreement, and will thereafter be inapplicable. (b) The laws of the United States regarding coastal shipments and the conditions of employment, including the wages and hours of employees, will apply to the activities of the United States Goverment and its contractors in the Northern Mariana Islands. With regard to section 502, the negotiators of the Covenant stated: The interim formula stated in this Section is not intended to be the exclusive rmthod by which laws of the United States are or can be made applicable to the Northern Mariana Islands. The Congress of the United States will have power subject to Section 105 to alter the manner and extent to which laws covered by the formula apply to the Northern Mariana Islands, to make laws not covered by the formula applicable or to make laws covered by the formula inapplicable. The formula does not make the Northern - 26 - Mariana Islands into a territory or possession of the United States prior to termination. In many instances, however, the Northern Mariana Islands will be treated as if it were a territory or possession of the United States prior to termination, for many laws applicable to Gum because it is a territory or possession will beccme applicable to the Northern Mariana Islands. The phrase "applicable to Guam" or "applicable to the Trust Territory of the Pacific Islands" in this Section is to mean "applicable within" as well as "with respect to" the geographic areas mentioned or the people who reside in or who are citizens of those geographic areas. Report of the Joint Drafting Ccmittee on the Negotiating History of the Covenant C-3 (1975), reprinted at Hearings before the SUbccmittee on Territorial and Insular Affairs of the House Camittee on Interior and Insular Affairs on H.J. Res. 549 et al. to Approve _ the "Covenant to Establish a Commonwealth of the Northern Mariana Islands," 94th Cong., Ist Sess. 374, 376 (1975). The touchstone for determining the applicability to the Northern Mariana Islands of a federal statute enacted on or before January 9, 1978, (and subsequent amendments to the statute*) is thus most often the applicability of the statute to Guam. Whether a particular statute is applicable to Guam is determined, first, by examination of the language of the statute and, second, if the language provides no unambiguous answer, by ascertaining the intent of Congress. (Congressional intent in this context is discussed below.) Guam is a "territory or possession" of the United States. A statute may be applicable to Gum by specific mention of Gum or by reference to the "territories and possessions of the United States." *Determining whether a statute enacted after January 9, 1978, amends a statute enacted before that date is not always easy. See, for example, the discussion of the present applicability of subchapters III and VI of chapter 41 of title 15 of the United States Code, in the Title-by@title Survey section of this report. 27 TABLE 6 TERRITORIES AND POSSESSIONS OF THE UNITED STATES Territoryor Date of Area in 1980 possession acquisition Square miles population District of Columbia - 69 638,000 Puerto Rico 1898 3,515 3,196,520 Guam 1898 209 105,979 American Samoa 1899 77 32,297 Virgin Islands of the United States 1917 132 96,569 Northern Mariana Islands end of trusteeship 184 16,780 Source: U.S. Bureau of the Census, Statistical Abstract of-the,united States:.1984, at 8, 12, 202, 203 (104th ed. 1983). Data for United States possessions without permanent populations, such as Wake Island and Johnston Atoll, are anitted. 28 - But federal statutes may apply, not to "territories and possessions," but rather to "Territories" or to "territories." Congress has enacted an organic ;ct establishing a civfl government for Guam. 48 U.S.C. �� 1421 et seq. Guam is thus an "organized" territory of the United States See United States,v. Standard Oil Co., 404 U.S. 558, 559 n.@ (1972). Guam is not, however, incorporated. 48 U.S.C. 9 1421a. Incorporated territories are those predestined for Statehood. A distinction is sometimes made between "Territory" and "territory," with the capitalized form deemed to apply only to incorporated territories and the lower-case form deemed to mean only unincorporated territories or used as a generic term, to include both incorporated and unincorporated territories. See, for example, House Report 93-507 (1973), reprinted at 1973 U.S. Code Conq.,, & Ad. News 2730, 2732; H. Seidman, our. Territorial - Dilemma, reprinted in 106 Cong. Rec. 2010 (1960); House Report 1521, 90th Cong., 2d Sess., Appendix (1968); House Ccmmittee on Interior and Insular Affairs, Resource Materials Used, in the. Pre2Eation - of, the Report of the. Camytission on Mlication of,, Federal Laws., to., Guam 182 (CaTunittee print 1952); U.S. Department of SFate, Burea-u of Intelligence & Research, United States, and., Outlvinq - Areas 9 (Geographic Bulletin No. 5, April 1965). The capitalized form, however, has been used so often to Embrace unincorporated areas that whether or not the word is capitalized is not a reliable indication of congressional intent. See, for example, Public Law 90-201, � 2, 81 Stat. 584 (1967), 21 U.S.C. � 601(g); United, States. v. Villarin Gerena, 553 F.2d 723, 724-26 (1st Cir. 1977); Kanazawa Ltd. v. Sound Unlimited 440 F.2d 1239 (9th Cir. 1971); and Moreno, Rios v. United States, @56 F.2d 68, 71-72 Ust Cir. 1958). See also Garcia, v. Friesecke 597 F.2d 284 (1st Cir. 1979), certiorari denied, 444 U.Se 940 (1979). Indeed, the capitalized form has been used on at least one occasion to include the Trust Territory of the Pacific Islands. See 12 U.S.C. � 1772. From 1950 until 1968, the Organic Act of Gum, a federal law, provided that "no law of the United States hereafter enacted shall have any force or effect within Guam unless specifically made applicable by an Act of Congress either by reference to Gum by name or by reference to 'possessions.'" Act of August 1, 1950, c.512, S 25(b), 64 Stat. 390, 48 U.S.C.A. � 1421c(b) (1952), repealed by Public Law 90-497, � 7, 82 Stat. 842 (September 11, 1968). *"The word "possession" is not a word of art, descriptive of a recognized geographical or governmental entity." Vermilya-Brown Co. v. . Comell, 335 U.S. 377, 386 (1948) (holding a military base in Be ida leased from Great Britain a possession of the United States for purposes of Fair Labor Standards Act). But see the concurring opinions of Justices Frankfurter and Jackson in United States,. v. Spelar, 338 U.S. 217, 222, 224 (1949). - 29 - Accordingly, federal legislation enacted during this period and made applicable to the "Territories" or "territories" of the United States should be presumed inapplicable to Guam, unless a clear intent to override the provisions of the Organic Act in the later legislation can be shown. The legislative history of the statute repealing the requirement that federal legislation applicable to Guam specifically name Guam or refer to "possessions" does not explain why the requirement was eliminated. The term "possession" may have been thought pejorative, demeaning -to the people of Guam and carrying a connotation of imperialism.* See letter fran Judge Albert B. Maris to Senator Hugh Butler (April 19, 1954), reprinted in Senate Report 1271, 83d Cong., 2d Sess., in turn reprinted in 1954 U.S. Code Cong. & Ad. News 2609-10 (suggesting that "possession" not be used to describe the Virgin Islands). many federal laws will be found applicable to Guam because Guam is specifically named, or because they apply to all "territories and possessions of the United States" or to all areas "under the jurisdiction of the United States," phrases that clearly include Gum. Except for the presumption that legislation enacted between 1950 and 1968 is not applicable to Guam unless Guam or the "possessions" of the United States are specifically named, no general rules govern the applicability of other statutes to Guam. Whether Guam canes within a given congressional act "depends upon the character and aim of each act." Garcia v. Friesecke, 597 F.2d 284, 293 (Ist Cir. 1979), certiorari denied, 444 U.S. 940 (1979), quoting Puerto Rico v. Shell Co., 302 U.S. 253, 258 (1937). Guam and the Virgin Islands are unincorporated but organized territories of the United States. A statute's applicability to Guam may be inferred from the statute's applicability to the Virgin Islands. If a statute applies to the Virgin Islands by nane,** but does not mention Guam, it should be presumed inapplicable to Guam under the general rule of statutory construction that mention of one or more items (for example, the Virgin Islands) in a category (the unincorporated but organized territories of the United States) implies the exclusion of all items in that category not specifically mentioned (Guam). See 2A Sutherland, Statutes and Statutory *The requirement was included in the same section of the Organic Act that created the Commission on Application of Federal Laws to Guam. By 1968 that Ccwmission had long since completed its work, so the section may have been repealed as surplusage without attention to its other provision. **See also 48 U.S.C. �,q 1405c(b)-(d), 1574(c), specifying the applicability of certain federal laws to the Virgin Islands. - 30 Construction S 47.23 (4th ed. Sands 1.973). If the statute's geographic applicability is not defined in the statute but an exception from some or all of the statute's requirements is made for the Virgin Islands, the statute may be presumed applicable to, at least, unincorporated but organized territories. otherwise, no exception would be necessary. See, for example, 21 U.S.C. � 104. A court's holding that a statute is applicable to the Virgin Islands, in the absence of contrary statutory language, is authority for application of the statute to Guam. Whenever conclusions are to be drawn regarding a statute's applicability to Guam based on its applicability to the Virgin Islands, care must be taken to establish that Guam and the Virgin Islands shared the sane status at the time the statute was enacted.* Statutory language and judicial decisions addressing the applicability of a statute to Puerto Rico, American Samoa, or other areas within the jurisdiction of the United States but not part of any State may be of some assistance in determining a statute's applicability to Guam. Because these other areas share only some juridical characteristics with Gum, these authorities are generally less persuasive than those addressing the applicability of a statute to the Virgin Islands. Useful references in determining the applicability of particular federal laws to Guam are the Report of the Commission on the Application of Federal Laws to Guam, House Document 212, 82d Cong., lst Sess. (1951); House Committee on Interior and Insular Affairs, Resource Materials Used in the Preparation of the Report of the Commission on Application of Federal Laws to Guam (Committee print 1952); and Leibowitz, The Applicability of Federal Law to 2uam, 16 Virginia Journal of International Law 21 (1975). See also Green, Mlicability of American Laws to Overseas Areas Controlled by the United States 68 Harvard Law Review 781 (1955). Statutes enacted after January 9, 1978. De term i n i ng the applicability to the Northern Mariana Islands of statutes enacted *Guam was acquired by the United States in 1898, the Virgin Islands in 1917. The Organic Act of Guam was enacted in 1950. 64 Stat. 384. The original Organic Act of the Virgin Islands, since revised, was enacted in 1936. 49 Stat. 1807. See also Richardson v. Electoral Boards 1 V.I. 301, 332-33 (D.V.I. 1936), cited with approval in Hayes v. Virgin Islands, 392 F. Supp. 48, 49 (D.V.I. 1975), holding that the Virgin Islands has been an organized but unincorporated territory since its acquisition in 1917. This holding is inconsistent, however, with the dictum of the Supreme Court that a territory becomes "organized" when Congress enacts an organic act for that territory. United States y. Standard Oil Co. 404 U.S. 558, 559 n.2 (1972). - 31 - af ter January 9, 1978, that are not amendments of statutes enacted prior to that date is relatively simple. Section 105 of the Covenant establishes a rule of statutory construction: if . . . legislation cannot also be made applicable to the several States the Northern Mariana Islands must be specifically naned therein for it to become effective in the Northern Mariana Islands." Thus, such a statute will not apply to the Northern Mariana Islands if the Northern Mariana Islands is not specifically naned in the statute and the statute is not applicable to the several States. The Marianas Political Status Commission (MPSC) explained the purpose of section 105's rule of construction in these terms: [Slince the power of the Congress with respect to a commonwealth, such as the Commonwealth of the Northern Marianas, is, at least in theory, broader than Congress' power with respect to a state, special precautions have been taken in Section 105. Article IV, Section 3, Clause 2 will continue to be the mechanism through which the Congress will legislate with respect to the Northern Marianas. But Section 105 provides that laws which Congress could not also make applicable to a state cannot be made applicable to the Northern Marianas, unless the Northern Marianas is specifically named in the legislation. This assures that Congress will exercise its special authority under Article IV, Section 3, Clause 2 purposefully, after taking into account the particular circumstances existing in the Northern Marianas . . . . It is the view of the MPSC that as a practical matter this wording of Section 105, combined with the recognition of the right of local self-goverrment in Section 103 and the other provisions of Article I, provide adequate assurances that federal legislation will not be made applicable unless it is appropriate. Much federal legislation, of course, is highly desirable and should be made applicable to the Northern Marianas. In particular, those laws which provide federal prograns and financial aid will be of great assistance to the people of the Northern Marianas. The United States has made clear on many occasions its intent to exercise its powers with respect to the Northern Marianas with strict regard for the right of local self-govermmnt, as it mist in view of Section 103. In recent decades at least, the United States has in fact followed this policy with respect to the territories and the CamTonwealth of Puerto Rico. Neither the Commonwealth of Puerto Rico nor any territory has the express protection contained in Section 105; they can be affected by federal legislation which could not be made applicable to a state even if they are - 32 - not named in that legislation. Indeed, American Sanoa and the Trust Territory of the Pacific Islands are now wholly run by the Executive Branch of the federal government and they can be affected not only by a wide variety of federal legislation but also by executive orders over which they have no control. This will not be true with respect to the Caumonwealth of the Northern Marianas. It will not even be true prior to the establishment of the Camnonwealth, for Section 105 canes into effect before termination of the Trusteeship. Marianas Political Status Canmission, Section bV Section Analysis of the.Covenant 14-16 (1975). If a statute enacted after January 9, 1978, by its own terms applies to the Northern Mariana Isl6nds, no problems of statutory construction arise. By the statute's own terms and consistently with section 105 of the Covenant, the statute is applicable to the Northern Mariana Islands. After termination of the trusteeship, the Northern Mariana Islands will be a territory or possession of the United States. Nonetheless, section 105 requires that legislation enacted after January 9, 1978, that is not applicable to the several States, name the Northern Mariana Islands specifically in order to be applicable there. Accordingly, a post-January 9, 1978, statute applicable to the territories and possessions of the United States but not to the several States is not applicable to the Northern Mariana Islands. Even though the later statute would apply to the Northern Mariana Islands but for section 105, the mre specific provisions of section 105 control. See Busic v. United States, 446 U.S. 398, 406 (1980); West India Oil Co,. v. Damenech, 311 U.S. 20, 29 (1940); Lavergne v. United States Casualty Co., 259 F.Supp. 425 (D. P. R. 1966); 2A Sutherland, Statutes. and Statutory.. Construction � 51.05 (4th ed. Sands 1973).* *This conclusion applies with even greater force in the case of such statutes enacted after January 9, 1978, but prior to termination of the trusteeship. Prior to termination, the statute is inapplicable because the Northern Mariana Islands is not then a territory or possession. World Camiunicat ions Corp. v. Micronesian Telecomnunications. Corp., 456 F. Supp. 1122, 1125 (D. Hawaii 1978). After termination, the question beccmes: Did Congress intend the phrase, "territories and possessions," to apply to areas, such as the Northern Mariana Islands, that subsequently beccme territories or possessions of the United States? See Puerto Rico v. Shell Oil. Co._, 302 U.S. 253, 257 (1937); United States v. Villarin Gerena ' 553 F.2d 723, 724-26 (Ist Cir. 1977). Flor the Northern Mariana Islands, section 105 of the Covenant provides a clear negative response to that quest ion. 33 - Section 105 of the Covenant does not supply a rule of decision for statutes enacted after January 9, 1978, that by their terms are applicable to the several States but not specifically to the Northern Mariana Islands. Determining whether such a statute applies to the Northern Mariana Islands involves, first, examination of the language of the statute. The language, for example, may show that the statute is applicable to the "territories and possessions of the United States," a phrase that after termination of the trusteeship will include the Northern Mariana Islands. Or the language may show that the statute encompasses all areas "subject to the jurisdiction of the United States." See, for example, 15 U.S.C. � 1127. Even prior to termination of the trusteeship, the Northern Mariana Islands is subject to the jurisdiction of the United States. See Trusteeship Agreement, Art. 3; Covenant �� 101, 1003(c). In the absence of specific language in the statute under examination, resort must be had to the usual methods for determining the intent of Congress in enacting legislation to determine whether the statute is applicable to the Northern Mariana Islands. Determining congressional intent. A statute's legislative hist6ir-y is the principal source for expressions of legislative intent. Pr ior judicial cons truct ion of the statute and administrative agency practice may also be helpful in determining whether the statue is applicable to the Northern Mariana Islands. The normal rules of statutory construction apply. See generally 2A Sutherland, Statutes and Statutory Construction �� 45.01 et seq. (4th ed. Sands 1973). In addition, courts have fashioned a few more specific guides. For example, when the extent of a statute's applicability is not clear from the language of the statute, the statute and its legislative history should be examined to determine whether, in enacting the statute, Congress intended to exert all the power it possessed with respect to the subject matter of the statute. In United States v. Standard Oil Co., 404 U.S. 558 (1972), the SuprEMe Court found that Congress intended the Sherman Antitrust Act to apply in American Samoa, even though the United States had not yet acquired American Samoa at the time the Sherman Act became law, because Congress intended to exert all its powers with respect to trade and commerce in enacting the Sherman Act. Those powers subsequently extended to American Samoa, so the Court found the Act applicable there. See also Puerto Rico v. Shell Co., 302 U.S. 253 (1937), relied upon in the Standard Oil case, concluding on the sane rationale that the Sherman Act applies in Puerto Rico; Kanazawa Ltd. v. Sound, Unlimitedf 440 F.2d 1239 (9th Cir. 1971), citing the comprehensive language of the Arbitration Act in concluding that statute to be applicable in Gum; and Van Camp Sea Food Co., 212 N.L.R.B. 537 (1974), concluding that Congress intended to exercise fully its powers over commerce in enacting the National Labor 34 Relations Act and that the Act was consequently applicable in American Sama. Scme statutes define "United States" or "State" to include Guam and/or the Northern Mariana Islands, but in their operative terms refer to neither the United States nor the States. See, for example, 12 U.S.C. �� 1749 et .2M. and, especially, � 1749c(e). The Camnission has concluded that inclusion of Guam or the Northern Mariana Islands in the definition of "United States" or of "State" generally indicates a congressional intention that the statute apply in those areas. When a general law expressly mentions . . . [a particular jurisdiction], it can hardly be contended that Congress did not have [that jurisdiction] in mind when it passed the law. Rubenstein v. United Statest 153 F.2d 127, 129 (D.C. Cir. 1946). See also People of Enewetak v. Laird, 353 F.Supp. 811, 815 (D. Hawaii 1973). If no congressional intent either to apply or not to apply a particular statute to the Northern Mariana Islands can be discerned, the statute is presumed inapplicable to the Northern Mariana Islands. See Allen v. United States 47 F.2d 735, 736 (3d Cir. 1931); United States v. Gancy 54 F.Supp. 755, 757 (D. Minn. 1944), affirmed, 149 F.2d 788 (8th Cir. 1945), certiorari denied, 326 U.S. 767 (1945); 22 Op. Attly Gen. 268, 269 (1898). See also Rasmussen v. United States, 197 U.S. 516, 523 (1905); Munoz v. Porto Rico Railway Light & Power Co., 83 F.2d 262, 266 (IsE-Cir. 1936), certiorari denied, 298 U.S. 689 (1936); Nagle v. United States, 191 Fed. 141, 143, 146 (9th Cir. 1911); People of Enewetak v. Eaird, 353 F. Supp. 811, 815 (D. Hawaii 1973). But see Hayes v. VirQin Islands, 392 F. Supp. 48, 49 (D.V.I. 1975). Determining congressional intent--a note on nomenclature. The Covenant establishes the Northern Mariana Islands as a "commonwealth. The term "ccmmonwealth" is not a word describing any single kind of political relationship or status. A number of the States of the Union, including Virginia, Massachusetts and Kentucky, have the official name of Camnonwealth. The same title is or was held by political entities as dissimilar as England under the Crcmwells, Australia, Puerto Rico, and the Philippines during the ten-year period preceding their independence. The choice of the term "ccmmonwealth" for the Northern Mariana Islands therefore does not denote any specific status . . . . Senate Report 94-433, The Covenant to Establish a Commonwealth of the Northern Mariana Islands 65 (1977)-. - 35 - The Northern Mariana Islands technically will not becane a "ccmmonwealth" until termination of the trusteeship. Covenant �� 101, 1003(c). Nonetheless, the Northern Mariana Islands is already frequently referred to as "the Canmonwealth of the Northern Mariana Islands," particularly by public officials and other persons in the Northern Mariana Islands. See Constitution of the Northern Mariana Islands, Schedule on Transitional Matters � 9; Northern Mariana Islands Constitutional Convention, Analvsis . of . the Constitution of the Ccimmonwealth.,of the Northern Mariana. Islands 209 (1976). In making federal statutes applicable to the Northern Mariana Islands, Congress has employed both "the Northern Mariana islands" and "the Ccmn-onwealth of the Northern Mariana Islands." Canpare, for example, 15 U.S.C. � 4002(a)(5), (6); 16 U.S.C. 1453(4); 26 U.S.C. � 4612(a)(4)(A); 33 U.S.C. � 151(c),- 42 U.S.C. 6903(31), 9102(15); and 46 U.S.C. @ 1452(10), all referring to "the Ccmmonwealth of the Northern Mariana Islands," with, for example, 16 U.S.C. S 1632(13); 20 U.S.C. S 3610(8); and 42 U.S.C. �� 3022(6), 7835(b), which do not use the term "Camlonwealth." No intent to postpone applicability to the Northern Mariana Islands of statutes employing the term "Ccmmonwealth" until termination of the trusteeship is discernible.* Sane legislation enumerates the areas to which it is applicable in this fashion: The te3in "State" means each of the several States, the District of Columbia, the Canmonwealth of Puerto Rico, American Samoa, the Virgin Islands, Guam, and any other Cammonwealth, territory, or possession of the United States. *But see Public Law 96-351, 94 Stat. 1161 (1980), authorizing citizens of the Northern Mariana Islands to enlist in the Armed Forces of the United States. Ibis statute expires "upon the establishment of the Camronwealth of the Northern Mariana Islands," because it will not be necessary after termination of the trusteeship, when citizens of the Northern Mariana Islands will becane citizens of the United States and will no longer need the special authority of this statute to enlist in the Armed Forces. Here, "upon the establishment of the Cammonwealth" clearly means on and not before termination of the trusteeship. See Senate Report 96-851, at 2 (1980). See also section 4601-8(b) (5) of title 16, U.S.C., providing that "the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Cam-onwealth of the Northern Mariana Islands (when such islands achieve CamTonwealth status) shall be treated collectively as one State" for purposes of receiving certain land and water conservation funds. 36 The term "United States", when used in a geographical context, means all the States thereof. 16 U.S.C. � 1802(21), (24) (Fishery Conservation and Management Act). See also 19 U.S.C. � 2571(15), (17) (Trade Agreements Act); 30 U.S.C. 9 1403(13) (Deep Seabed Hard Mineral Resources Act). The reference to "any other Commonwealth" could be deemed a reference to the Northern Mariana Islands, since it is the only foreseeable "canmonwealth" other than Puerto Rico, already specifically mentioned in the definition.* If the intent is to include the Northern Mariana Islands, a second question arises: Is the Northern Mariana Islands included immediately or only on termination of the trusteeship, when it becomes a commonwealth under the terms of the Covenant. This question has not yet been auttnritatively answered." Future legislation. Any statutory formula for determining the applicability of federal statutes to the Northern Mariana Islands is subject to modification by later statute.*** Deter-mining whether a *But see section 3371(h) of title 16, U.S.C.: "The term 'State' mans any of the several States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, Northern Mariana Islands, American Samoa, and any other territory, commonwealth, or possession of the United States." "Congressman Robert L. Leggett, then chairman of the Subcommittee on Fisheries and Wildlife Conservation and the Enviromk-nt of the House CaTimittee on Merchant Marine and Fisheries, in a November 4, 1977, letter to Corgressman Phillip Burt-on, then chairman of the Subcommittee on Territorial and Insular Affairs of the House Committee on Interior and Insular Affairs, stated that the Fishery Conservation and Management Act was intended to became applicable to the Northern Mariana Islands when it "officially [became] a Commonwealth," that is, on termination of the trusteeship. (A copy of this letter is in the court file in Marianas Fisheries, Inc. v. Kreps? District Court for the Northern Mariana Islands, Civil No. 79-031.) But see House Report 97-549, at 17 (1982), stating that the Fishery Conservation and Management Act became applicable to the Northern Mariana Islands on January 9, 1978, by operation of section 502(a)(2) of the Covenant, since it was applicable to Guam and the several States on that date. ***The power of the United States Congress to enact legislation affecting the territories is granted by Article IV, Section 3, Clause 2 of the United States Constitution and is plenary, restricted only by other provisions in the Constitution itself. Although the Northern Mariana Islands is denominated a Commonwealth, it is subject to the powers of Congress under Article IV, Section 3, Clause 2. 37 later statute is intended to modify, for the purposes of that statute alone, the applicability provisions of the Covenant could conceivably be difficult, although few such problems have been encountered. Section 105 and Article V of the Covenant provide generally satisfactory formulae for determining the applicability of federal laws to the Northern Mariana Islands. For most federal statutes, applicability can be determined quickly and with little difficulty. In any case, no legislative remedy can anticipate such problems, since that remedy would itself be susceptible to problems created by yet later legislation. In its general r ecommenda t ions, the Commission urges that the Covenant, although having the status of a federal statute, be afforded an especial deference in keeping with its constitutional importance to the people of the Northern Mariana Islands. Only when there is clear and convincing evidence of congressional intent to override Covenant provisions on the applicability of federal laws should a federal law be found applicable to the Northern Mariana Islands when the Covenant says it should not be, or should a federal law be found inapplicable to the Northern Mariana Islands when the Covenant says it should apply there. The Commission also suggests, in its general recommendations, that checklists used by Congress in legislative drafting incorporate a reminder to consider inclusion of geographic applicability provisions in the same routine manner as severability and effective date provisions are considered. Specific listing of the jurisdictions to which a federal statute is to apply is the surest means of avoiding later controversy and confusion over the statute's geograph ic reach. Language extending a statute "to all areas under the jurisdiction of the United States" ensures the broadest geographic reach, when that is the intention of Congress. - 38 - RECOMMENDATIONS GENERAL RECOMMENDATIONS 1'he mandate of this Ccmission is to recam-end to Congress which laws of the United States not applicable to the Northern Mariana Islands should be made applicable to the Northern Mariana Islands and to what extent and in what manner and which applicable laws should be inapplicable and to what extent and in what manner. In conformity with this mandate, most of the recomwndations in this report are concerned with specific federal laws. TAxing the course of its deliberations, however, the Ccmmission has decided to make three general recamie-ndations to guide Congress in applying particular federal legislation to the Northern Mariana Islands. Two of the Ccmmission's general reccmmendations go to the very heart of the relationship between the Northern Mariana Islands and the United States. First, the Ccmmission recanmends that Congress continue to regard the Northern Mariana Islands as the beneficiary of a trust relationship with the United States, even after termination of the trusteeship. Second, the Ccmmission recaTimends that Congress not enact any legislation to amend or repeal provisions of the Covenant, except in accordance with the mutual consent and consultation provisions of sections 105 and 902 of the Covenant. The CaLUtission's third general recamnendation is procedural. The Ccmmission reccmmends that Congress, in enacting any statute, routinely consider inclusion of a provision enumerating the jurisdictions to which the statute applies. Each of the three general recamv--ndations is discussed below. The continuing trust relationship The Comission recamneands that Congress continue to regard the Northern Mariana Islands as beneficiary of a trust relationship with the United States, even after termination of the trusteeship agreement. The Northern Mariana Islands is now administered by the United States as part of 'the, international trusteeship system established under Article 75 of the United Nations Charter. Trusteeship Agreement, Arts. 1, 2. The Northern Mariana Islands will beccm a full-fledged ccmmonwealth of the United States only on termination of that trusteeship. Covenant �� 101, 1003(c). when the trusteeship is terminated, the existing trust relationship should be replaced by a new trust relationship that involves only the United States and the Northern Mariana Islands. The United Nations will no longer be a participant. The new trust - 39 relationship is not based upon any particular document,* but on the notion that whenever a "discrete and insular minority"" does not have full access to the political processes that establish government policy, the government owes an especial standard of care to that minority.*** *Article 73 of the United Nations Charter, however, does provide that: "Members of the United Nations which have or assume responsibilities for the administration of territories whose peoples have not yet attained a full measure of self-government recognize the principle that the interests of the inhabitants of these territories are paramount, and accept as a sacred trust the obligation to promote to the utmost, within the system of international peace and security established by the present Charter, the well-being of the inhabitants of these territories **See United States v. Carolene Products Co., 304 U.S. 144, 153 n.4 (1938). ***"Speaking in the [British] House of Commons on December 1, 1783, during the consideration of Fox's India Bill, [Edmund] Burke expressed the 'trusteeship' principle of colonialism in the following manner: 'All political power which is set over men, and all privilege claimed or exercised in exclusion of them, being wholly artificial, and for so much a derogation from the natural equality of mankind at large, ought to be in some way or other exercised ultimately for their benefit. 'If this is true with regard to every species of political dominion, and every description of ccmme-rcial privilege, none of which can be original self-derived rights, or grants for the benefit of the holders, then such rights or privileges, or whatever else you choose to call them, are all, in the strictest sense, a trust; and it is of the very essence of every trust to be rendered accountable; and even totally to cease, when it substantially varies from the purposes for which alone it could have a lawful existence.' Thus did Burke insist that the possession of political power implied a duty towards the subjected people, a duty to exercise this political power for their benefit." C. Thussaint, The Ttusteeship System of the United Nations 6 (1956) (citation omitted). 40 The Northern Mariana Islands does not now have, nor will it have on termination of the trusteeship, full access to the political processes that establish national goverrment policy. United States citizens residing in the Northern Mariana Islands are not entitled to vote for President or Vice President of the United States. The .Northern Mariana Islands are not represented by voting members in the United States Senate or House of Representatives. The inhabitants. of the Northern Mariana Islands are among the most vulnerable of all groups to the operation of the majoritarian process at the national level. They comprise less than one hundredth of one percent of the national population. They live more than three thousand miles -from the nearest State of the United States, Hawaii. Their traditional culture is distinct. Their per capita income is much below average per capita income in the poorest of the fifty States. Unless and until the inhabitants of the Northern Mariana Islands are entitled to full participation in the national political process, the trust relationship is appropriate. The fiduciary nature of the relationship between the United States Government and the American Indians has long been established, although no treaties or documents specifically state that the relationship is fiduciary in nature. See, for example, United States v.. Mitchell, -- U.S.--, 77 L.Ed. 2d 580, 596 (1983); Seminole Nation v. United Siates, 316 U.S. 286, 296-97 (1942). In Carino v.- Insular Government of - the, Philippine Islands, 212 U.S. 449 . (1909), Mr. Justice Holmes applied similar stanaards, although without articulation of the fiduciary concept, in discussing the relationship between the United States-administered government of the Philippines and the. inhabitants of those islands. See also Cincinnati. . Soap, Co, v.., United- States' 301 U.S. 308, 314 (1937) (quoting Elihu Root on the Amer ican administration of the Philippines: "it is our unquestioned duty to make the interests of the people over whom we assert sovereignty the first and controlling consideration in all legislation and administration which concerns them"); Reavis v. Fianza, 215 U.S. 16 (1909) ("especially must (the United States] be sup@@ to have had in view the natives of the islands, and to have intended to do liberal justice to them"); Neely v.. Henkel, 180 U.S. 109, 120 (1901) (characterizing Cuba under United States rule following the Spanish American War as a territory held in trust for its inhabitants). The trust relationship between the United States and the Northern Mariana islands should not come into existence as a corollary of the broad constitutional powers the United States possesses with respect to territories. and possessions of the United 41 States.* Indeed, in approving the Covenant with the Northern Mariana Islands, the United States has voluntarily relinquished powers routinely exercised with respect to other, earlier-aoquired territories and possessions. Compare Mormon Church v.. United States,, 136 U.S. 1, 43 (1890), with Covenant �9 102, 103, 105, 201, 202, 501. Neither should the trust relationship between the United States and the Northern Mariana Islands be based on any outdated notion that the inhabitants of the Northern -Mariana Islands are somehow "backward," incapable of finding their way in the modern world without the tutelage of an advanced nation." Rather, the trust relationship between the United States and the Northern Mariana Islands should be founded on one concept and one concept alone: so long as the citizens of the United States residing in the Northern Mariana Islands are not able to participate fully in the representative democracy that is the United States, by enjoying with other citizens of the united States the right to vote for President and Vice President of the United States and for Sena tors and Representatives in the United States Congress and by otherwise sharing the same rights enjoyed by the citizens of the several States, the United States must treat those inhabitants of the Northern Mariana Islands as a trustee does the beneficiaries of a trust.*** In practical terms, the trust relationship means that Congress, in determining whether or not to apply particular federal legislation *See Choctaw Nation, v. United. States, 119 U.S. 1, 27-28 (1886); United.States v. KaAama, 118U.S. 375, 383-84 (1886). **See United States.v.. Chavez., 290 U.S. 354, 361 (1933); Parte -Crow. Dog, 109 U.S. 556, 568-69, 571 (1883). See also C. Tbuissaint, The Trusteeship SyEtem. of the United Nations 5 (1956); 0. Wright, Mandates Under the League of Nations 8-23 (1930). ***The Ccmmission does not suggest that it is wrong that citizens of the United States residing in the Northern Mariana Islands be treated differently than citizens of the United States residing in one of the several States. The role of the States in our federal system, coupled with the small population of the Northern Mariana Islands, makes impractical at this time full and effective participation in national political processes by citizens of the United States residing in the Northern Mariana Islands. See generally the Ccmmission's recamne-ndation, A nonvoting, delegate. to the United States Congress. Neither does the Ccmmission intend to suggest that the United States has acted in the past toward the Northern Mariana Islands other than as a trustee might act toward the beneficiary of a trust. - 42 - to the Northern Mariana Islands, should consider the interests of the inhabitants of the Northern Mariana Islands as paramount. Congress should be particularly sensitive, when enacting legislation affecting the Northern Mariana Islands, to the promises made by the United States in sections 701 and 703 of the Covenant. In section 701 the United States promises to "assist the Government of the Northern Mariana Islands in its efforts to achieve a progressively higher standard of living for its people as part of the American economic community and to develop the economic resources needed to met the financial responsibilities of local self-government." In section 703 the United States promises to "make available to the Northern Mariana Islands the full range of federal programs and services available to the territories of the United States." More generally, the trust relationship requires that Congress be sensitive to the impact of new legislation on any part of the Covenant. And, in interpreting the Covenant, "all poss ible ambiguities should be resolved in favor of and to the benef it of the people and government of the Northern Mariana Islands. " 12 2 Cong. Rec. 7272 (1976) (statEment of Representative Burton, floor manager and a principal sponsor of legislation approving the Covenant). Sancti,tV.of the Covenant. The Commission urges Congress not to enact any legislation to amend or repeal provisions of the Covenant, except in accordance with the mutual consent and consultation provisions of sections 105 and 902 of the Covenant. The Covenant establishes an entirely new relationship between that part of the United States organized into States of the Union and an area outside of those States.* In one respect the Covenant resembles a treaty, in that it was negotiated between the United States and a people not under the sovereignty of the United States." Formally, however, the Covenant was approved for the United States *"[Tlhe political, legal, and social precedents to be established with approval of the Marianas Covenant are salient. Foremost, a new systEm of local government, unique in the annals of U.S. history, will be enacted." 121 Cong. Rec. 23662, 23669-70 (1975) (statement of Representative Clausen, cosponsor of legislation approving Covenant and ranking minority member of subcommittee reporting that legislation). **So long as it is part of the Trust Territory of the Pacific Islands, the Northern Mariana islands is not under the sovereignty of the United States. Brunell.v., United, States? 77 F. Supp. 68, 70 (S.D.N.Y. 1948). - 43 not as a treaty with the advice and consent of two-thirds of the United States Senate, but by a joint resolution of the United States Congress, which, when signed by the President, became a public law of the United States. Further, when all parts of the Covenant beccme effective, on termination of the trusteeship, the Northern Mariana Islands will ccme under the sovereignty of the United States. Covenant �� 101, 1003(c). Frcrn that time forward, the Covenant will no longer be an agreement between the United States and a people not under the sovereignty of the United States. If promises in a treaty are not kept, the offended nation may repudiate the treaty and go its separate way. See, for example, G. Schwarzenberger & E. Brown, A Manual of International Law 137 (6th ed. 1976). If the United States after termination of the trusteeship should fail to keep a pranise made in the Covenant, the people of the Northern Mariana Islands have no such alternative. They have thrown in their lot with the United States for good or for ill and can rely only on the political institutions of the United States for justice. Traditionally, territories and possessions of the United States have been governed pursuant to Article 117, Section 3, Clause 2, of the United States Constitution: The Congress shall have Power to dispose of and make all needful Rules and Regulations respecting the Territory or other Prcperty belonging to the United States . . . . 44 The powers of Congress under this clause are plenary and far-reaching.* On termination of the trusteeship, the Northern Mariana Islands will be subject to those powers." "Congress may not only abrogate laws of the territorial legislatures, but it may itself legislate directly for the local government. It way make a void act of the territorial legislature valid, and a valid act void. In other words, it has full and ccmplete legislative authority aver the pecple of the Territories and all the departments of the territorial governments." Mormon Church v. United States, 136 U.S. 1, 43 (1890), quoted in Inter-Island Steam Navigation Co. v. Territory of Hawaii, 305 U.S. 306, 314 (1938). See also Examining Board of Engineers, Architects, and Surveyors v. Flores de Otero, 426 U.S. 572, 586 n. 16 (1976). The territorial clause in the Constitution of the United States was drafted by Gouverneur Morris. in a letter some years later respondi ng to an inquiry as to the meaning of the clause, Morris stated that, as to territories acquired after adoption of the Constitution, "it would be proper to govern them as provinces, and allow them no voice. in our councils." The letter is quoted in the opinion of Justice Campbell in the Dred Scott case, Scott v. Sandford, 60 U.S. 393, 493, 507 (1856). Congressional power over the territories has also been found to arise as a conseauence of sovereignty. DeLima v. Bidwell, 182 U.S. 1, 196-97 (1901); United States v. Kaoama, 118 U.S. 375, 380 (1886). Whether congress ioiTa-lauthori ty is based on. Article IV, Section 3, Clause 2, of the Constitution or on the inherent rights of the sovereign is irrelevant in determining the scope of that power. National Bank v. Yankton, 101 U.S. 129, 132-33 (1880); American Insurance Co. v. Canter, 26 U.S. (1 Pet.) 511, 542 (1828). "Report of the Joint Drafting Ccmittee on, the 2!9otiating History of the Covenant, at C-2 (1975) (regarding section 105), reprinted at Hearings. before the Subcomittee on Territorial and Insular Affaiis--of the House Committee on Interior and Insular Affairs on H.J. Pes. 549 et al. to Approve the "Covenant to Establish a Commonwealth of Me Northern Mariana Islands," 94th Cong., lst Sess. 374, 375 (1975); Senate Report 94-596, at 2, 15 (1976); Senate Report 94-433, at 67 (1975); 122 Conq. Reac. 3775 (statement of Senator Burdick), 4016 (stateTwnt of Senator McGee), 4203 (statement of Senator Fannin) (1976); I--ibowitz, United States Federalism: The States and the Territories, 28 American University Law Review 449, 468 (1979)-@ 45 Further, fran the standpoint of the United States, the Covenant is simply a law of the United States. Amrican jurisprudence r.ecognizes no category of laws inferior to the Federal Constitution but superior to laws and treaties of the United States. A law of the United States is. generally subject to amendment or repeal by a later law of the United States. 1A Sutherland, Statutes and Statutory Construction SS 23.03, 23-09 (C. Sands ed. 1972):r- Despite the plenary powers of Conqress under the Constitution and despite the general power of Congress to amend earlier legislation in later leqislation, the Covenant is intended to bind both the United States and. the Northern Mariana Islands. The preamble of the Covenant states: This Covenant will be mutually bindi-nq when it is approved by the United States, by the Mariana Islands District Leoislature and by the people of the Northern Mariana Islands in a plebiscite, constituting on their part a sovereign act of self-determination. The mutually binding character of the Covenant is enphasized in its section 903, wtiich provides that "the undertakings by the Government of the United States and by the Government of the Northern Mariana Islands provided for in this Covenant will be enforceable in [courts established by the Constitution or laws of the United States.]" Some provisions of the Covenant are intended to be more binding than others. Section 105 of the Covenant identifies certain provisions of the Covenant as fundamental and provides with respect to those provisions that: "In order to respect the , right of self-government guaranteed by this Covenant the United States agrees to limit the exercise of [its authority to enact legislation in accordance with its constitutional processes which will be applicable to the Northern Mariana Islands] so that the fund'armntal provisions of this Covenant . . . may be modif ied only with the consent of the Government of the United States and the Government of the Northern Mariana Islands." The -fundamental provisions are identified, *in section 105, as Article I (political relationship), Article II (constitution of the Northern Mariana Islands), Article III (citizenship and nationality), section 501 (applicability of United States Constitut.ion), and section 805 (restriction on alienation of land). Section 105 of -the Covenant is intended to limit permanently the otherwise plenary power of Congress under Article IV, Section 3, *Even if the Covenant is characterized as a treaty, the same result holds. A treaty is subject to aTmndrent or repeal by a later act of Congress. 2 Sutherland, Statutes and Statutory Construction S 36.07 (C. Sands ed. 1973). 46 Clause 2, of the Constitution to enact legislation rodifyinq the fundamental provisions of the Covenant.* *Senate Report 94-596, at 19, 23 (1976) (minority views of Senators Stennis, Cannon, H. Byrd, G. Hart, and Scott); Senate Report 94-433, at 66 (1975); U.S. Dep't of Justice, Explanation of the Covenant (1975), reprinted at Hearings before the Subcommittee on Territorial and Insular Affairs of the House Ccratittee on Interior and Insular Affairs on H.J. Res. 549 et al. to Approve the "Covenant to Establish a Commonwealth of Ehe Northern Mariana Islands," 94th Cong., lst Sess. 384 (1975); Marianas Political Statu@7 -Ccrmnission, Section by Section Analysis of the Covenant, reprinted in the forecited Hearings, at 626, 630-32. See also the forecited Hearinqs, at 413 (sF-a-t nt of Representative Burton), 623, 625 (statement of Edward DLG. Pancjelinan, chairman of the Marianas Political Status Ccrnmiss ion) 121 Cong. Rec. 39592, 42116 (1975) (staterrents of Senator G. Hart). One praninent authority on the application of federal law to the territories of the United States has described section 105 as "a unique, specific limitation on Congress' territorial clause authority." Leibowitz, The Marianas Covenant Negotiations, 4 Fordham International Law Journal 19, 29 (1980). See also id. at 79: "The Covenant clearly articulates the need for Northern tg-rianas approval prior to federal action. This was the first time in the history of United States territorial affairs that the federal government agreed to an unambiguous limitation on its power." Section 14 of the ordinance of 1787, 1 Stat. 51 note, establishing a framework for the governance of the Nort1west Territories, provided that certain of the articles in the ordinance were to "be considered as articles of ccmpact, between the original States and the people and States in the said territory, and forever remain unalterable, unless by canmn consent." Early cases held that, even after the adoption of the Constitution two years later and the subsecuent achievemnt of statehood by those territories, those articles remained binding on both the United States and those States, unless modified by mutual consent. See, for example, @P.24er v McConnell, 22 F. Cas. 939 (C.C.D. Ohio 1838) (No. 13,245) (opinion Fy- Justice McLean of the U.S. Supreme Court, sitting as Circuit Justice); Scott v. Detroit Young Men's Society's Lessee, 1 Douglass 119 (Mich. 1843); Hogg v. Zanesville Canal & Manufacturing Co., 5 Ohio 410 (1832). Later cases, however, held the admi@;ion ,of th e States into the Union constituted mutual consent to abrogation of the binding provisions of the Ordinance of 1787. See Sands v. Manistee River Irrprovement Co., 123 U.S. 288, 295-96 (1887); Huse v. Glover, 119 U.S. 543, 546 (1886); Van Brocklin v. Tennessee, 117 U.S. 151, 159 (1886); Escanaba Co. v:-U71c-ago, 107 U.S. 678, 688 (1882). See a lso Economy ght & Power Co. v. United States, 256 U.S. 113, 120 (1921 - 47 - The ability of the Ninety-fourth Congress, in approving the Covenant, to limit the powe-rs of future Congresses under Article IV, Section 3, Clause 2, of the Constitution is not altogether free frCM doubt. See Note, Inventive Statesmanship vs. the Territorial Clause: The Constitutionality of Agreements Limiting Territorial Powers, 60 Virginia Law Review 1041 (1974).* The report on the Covenant by the Senate Committee on Interior and Insular Affairs and the explanation of the Covenant prepared by the United States Department of Justice each cite one of the Gold Clause cases, Perry v. United States, 294 U.S. 330 (1935), to support the power of the Ninety-fourth Congress, in approving the Covenant, to bind future Congresses." In the pertinent passage in the Perry case, the Supreme Court of the United States stated: [T1he right to make binding obligations is a canpetence attaching to sovere ignty. In the United States, sovereignty resides in the people, who act through the organs established by the Constitution. The Congress as the instrumentality of sovereignty is endowed with certain powers to be exerted on behalf of the people in the manner and with the effect the Constitution ordains. The Congress cannot invoke the sovereign power of the people to override their will as thus declared. ne powers conferred upon the Congress are harmonious. The Constitution gives to the Congress the power to borrow money on the credit of the United States, an unqualified power, a power vital to the Government, --upon which in an extremity its very life may depend. The binding quality of the prcmise of the United States is of the essence of the credit which is so pledged. Having this power to authorize the issue of definite obligations for the payment of money borrowed, the Congress has not been vested with authority to alter or destroy those obligations. *hmong other arguments pro and con, this Note caimnts: "If Congress could totally dispose of its power over the Philippines by granting them independence, it seems logical that it could also partially dispose of its powers by granting them something less than canplete independence." Id. at 1060. "Senate Report 94-433, at 67 (1975); U.S. Dep't of Justice, ExplaRation of the Covenant (1975), reprinted at Hearings before the Subcommittee on Territorial and Insular Affairs of the House Committee on Interior and Insular Affairs on H.J. Res. 549 et al. to Approve the 'Tovenant to Establish a Commonwealth of the Northern Mariana Islands," 94th Cong., lst Sess. 384, 385 (1975). 48 294 U.S. at 353-54. In other areas, the right of one Congress to bind future Congresses is also recognized. When title to public lands is granted by the Federal Goverment to an individual pursuant to an Act of Congress, a subsequent Congress may not constitutionally enact legislation divesting that individual of title. 'United States v. Rowell, 243 U.S. 464, 469 (1917). Once an individual beccmes a citizen of the United States, Congress may not enact legislation depriving that individual of his or her citizenship. AfroVim v. Rusk, 387 U.S. 253 (1967). And, in a holding directly relevant the rth rn Mariana Islands, the Supreme Court has stated: (WIhere the Constitution has been once for mally extended by Congress to territories, neither Congress nor the territorial legislature can enact laws inconsistent therewith." Downes v. Bidwell, 182 U.S. 244, 273 (1901). There consequently is respectable authority that Congress, in exercising its plenary control over territories of the United States, may grant irrevocably to a territory sow of its constitutional powers.* Regardless of whether Congress has the power to alter the fundamental relationship established between the United States and the Northern Mariana Islands by the Covenant without the consent of the Northern Mariana Islands, it should not attempt to do so. The entire Covenant, and especially the fundamental provisions enumerated *The arguments in favor of and against this proposition are set forth in great detail in legal memoranda reproduced in Hearing on the Puerto Rico Federal Relations Act before the Senate Committee on Interior and Insular Affairs 86th Cong., lst Sess. 90-123 (1959). See also id. at 19-21, 24, 29-36, 45-53, 62-65, 88-89; Hodgson v. Union de EhVleados, 371 F. Supp. 56, 59 n.7 & accompanying text (D.P.R. 1974); Public Papers of -the Presidents: John F. Kennedy 1963, at 416 (1964); Magruder, The Commonwealth Status of Puerto Rico, 15 University of Pittsburgh Law Review 1, 1.4-16 (1953), and the cases there cited; Nader, 'Ihe Commonwealth Status of Puerto Rico, Harvard Law Record, December f3-, 1956, at 2. 49 in section 105, should be regarded as inviolable. Men the Covenant was put to the people of the Northern Mariana Islands, it was on that basis that they voted to beccme part of the United States.* One [basic value that underlies our society] is the "m ral i ty of pranise-keeping." Mr. Justice Black expressed this value most eloquently: "Great nations, like great men, should keep their word." The Constitution protects this value in the contract clause . . . . More fundamentally, the morality of pramise-keeping is "implicit in the concept of ordered liberty." . . . Beyond cavil, one value "basic in our system of jurisprudence" is that a deal is a deal. . . . For the government to do otherwise (than honor its prcmises] violates an important tenet, deeply rooted in our legal traditions, that is designed to bond society by encouraqing principled relations. Newton, Federal Power over Indians: Its Sources, Scope, and Limitations, 132 University Of Pennsylvania Law Review 195, 262-63 (19847(citations cmitted). Specifying geographic applicability. In enactinq a statute, Congress should routinely consider inclusion of a provision enumerating the jurisdictions in which the statute is to apply. Just as persons drafting legislation now routinely consider whether to include a separability provision," an effective date provision, or an authorization of appropriations, those persons should also consider whether delineation of the qeographic applicability of the statute is advisable. Legislative *See office of the Plebiscite Ccmissioner, The , Plebiscite Commissioner Answers Som of Your Questions about the Plebiscite, the Covenant, and the Commonwealth, (1975), reprinted in Hearings before the Subcommittee on Territorial and Insular Affairs of the House CcFw-ittee on Interior and Insular7 =Ms--on H.J. Res. 549 et al. to Approve the "Covenant to Establish a Commonwealth of the Northern Mariana Islands," 94th Cong., lst Sess. 503, 514 (1975); Office of the Plebiscite. Commissioner, The Covenant to Establish a Ctmmonwealth of the Northern Mariana Islands in Political Union with the United States of America 2@21ained 2-3 (1975), reprinted in the forecited. Hearings at 543, 546-47. **A separability provision specifies that, in the event part of a statute is declared unconstitutional, the reminder of the statute remains in force. Black's Law Dictionary 1223 (5th ed. 1979).. See, for example, 12 U.S.C. 3716. - 50 - drafting checklists used by Senators, Representatives, committees, and staff should include a reminder to ascertain whether the statute's geographic applicability has been adequately specified. If Congress does not name specifically the jurisdictions in which a statute is applicable, substantial amounts of time and money may be expended in subsequent disputes over the statute's applicability. Costly litigation my result, as it often has in the past when the extent of a federal statute's reach is not clear from the statute's provisions. See, for example, United States v. Standard Oil Co., 404 U.S. 558 (1972); Garcia v. Friesecke, 597 F.2d 284 (1st Cir. 1979), certiorari denied, 444 U.S. 940 (1979); Kanazawa Ltd. v. Sound Unlimited, 440 F.2d 1239 (9th Cir. 1971); Van Camp Sea Food Co., 212 N.L.R.B. 537 (1974). Eventually, Congress may be asked to make specific that which was left uncertain when the statute was enacted. See, for example, Senate Report 987, 85th Cong., lst Sess. (1957), reprinted at 1957 U.S. Code Cong. & Ad. News 1756-58, explaining Public Law 85-231, S l(l), 71 Stat. 514 (1957), which overruled Vermilya-Brown Co. v. Connell, 335 U.S. 377 (1948). Further, the time when legislation is enacted will, in most cases, be the best time to determine whether a statute should apply to any particular area under the jurisdiction of the United States. For example, in some cases application of a statute may be grossly inappropriate to the isolated and insular character of a particular territory.* In other instances, failure to apply a statute to an area under the jurisdiction of the United States may create a loophole." Routinely considering the geographic applicability of a statute before it is enacted enables Conqre ss to address problems before they become acute.*** *See, for example, the discussion of the application of motor vehicle emission requirements of the Clean Air Act to the Northern Mariana Islands in the Commission's January 1982 interim report to Congress, at 54-61. "See, for example, U.S. Moves to Bar Issuance by Territories of Billions of Dollars in Arbitrage Bonds, Wall Street Journal, December 21, 1983, at 34. ***Ideally, the views of the Representative to the United States for the Commonwealth of the Northern Mariana Islands (as well as of the delegates to Congress from other territories) could be sought at that time. - 51 - The geographic reach of a statute may be clearly and specifically defined by the phrase "This Act is applicable to" followed by an enumeration of the jurisdictions to which the statute is to apply. For example: This -Act is applicable to the States of the United States and the District of Columbia. or This Act is applicable to the States of the United States, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the Virgin Islands, American Samoa, and the Northern Mariana Islands.* If the intent is to include all areas under the jurisdiction of the United States, the Canmission recamne-nds the following language: This Act is applicable to all areas under the 3urisdiction of the United States. *Statutes enacted after termination of the trusteeship may use "the Caumonwealth of the Northern Mariana Islands" instead of "the Northern Mariana Islands." Some statutes already applicable to the Northern Mariana Islands do refer to "the Commonwealth of the Northern Mariana Islands." See, for example, 33 U.S.C. S 151(c). Technically, however, the Northern Mariana Islands will not became a commonwealth of the United States until termination of the trusteeship. Covenant �� 101, 1003(c). To avoid any suggestion that a statute is not to became effective in the Northern Mariana Islands until termination of the Trusteeship Agreemnt, statutes enacted before termination and intended to apply in the Northern Mariana Islands immediately should use "the Northern Mariana Islands" rather than "the Commonwealth of the Northern Mariana Islands." If the statute is not to became effective in the Northern Mariana Islands until after termination, however, that intent should be specified more clearly than merely by use of the phrase "Commonwealth of the Northern Mariana Islands." See, for example, 16 U.S.C. 9 4601-8(b)(5): "the Cammorwealth of the Northern Mariana Islands (when such islands achieve Commonwealth status)." 52 (The Northern Mariana Islands is under the jurisdiction of the United States. Trusteeship Agreement, Art. 3; Covenant S� 101, 1003(c).) If the intent is to apply a statute not to all areas under the jurisdiction of the United States but to only some of those areas, the Commission recommends enumeration of the areas to which it is to apply. By naming each such jurisdiction, confusion is avoided over such questions as whether "Territories" includes unincorporated territories* or whether the phrase, "territories and possessions," includes "ccmmorwealths" such as Puerto Rico and, after termination of the trusteeship, the Northern Mariana Islands." The courts have held that the meanings of these phrases may vary according to the "character and aim" of a particular statute. Garcia v. Friesecke, 597 F.2d 284, 293 . (1st Cir. 1979), certiorari denied, 444 U.S. 940 (1979), quoting Puerto Rico v. Shell Co., 302 U.S. 253, 258 (1937). Enumerating the jurisdictions to which a statute is to apply ensures that a future court will not misread the "character and aim" of the statute to apply it in a jurisdiction not intended by Congress (or to not apply it in a jurisdiction in which Congress intended it to apply). Many existing federal statutes define their geographic applicability by defining "State". or "United States" -to include particular jurisdictions. In scme cases, however, the operative terms of the statute refer to neither the United States nor the States. Despite that' lapse, the Commission has concluded that inclusion of a particular jurisdiction in the definition of "United States" or of "State" for purposes of such a statute generally indicates congressional intent that the statute apply in that jurisdiction. See Rubenstein v. United States, 153 F.2d 127, 129 (D.C. Cir. 1946). Nonetheless, the Ccmmission believes clarity is favored by using the specific formulation "This Act is applicable to of rather than relying upon definitions of "United States" or state" to indicate the jurisdictions in which the statute is to apply. *Canpare U.S., Department of State, Bureau of Intelligence & Research, United States and outlying Areas 9 (Geographic Bulletin No. 5, April 1965) with United States v. Villarin Gerena, 558 F.2d 723, 724-26 (Ist Cir. 1977). **See, for example, Americana of Puerto Rico, Inc. v. Kaplus, 368 F.2d 431, 433-36 (3d Cir. 1966), certiorari denied, 386 U.S. 943 (1967). 53 RECOMMENDED CHANGES IN FEDERAL LAW A nonvoting delegate to the United States Congress. RecaTmndation. Legislation should be enacted to provide the Northern Mariana Islands representation in the United States Congress by conferring the status of nonvoting Delegate to the United States House of Representatives on the Resident Representative to the United States for the Northern Mariana Islands. The statutes. All legislative powers granted the Federal Goverrment by the United States Constitution are vested in the Congress of the United States, which consists of the Senate and the House Of Representatives. U.S. Const., Art. I, � 1. The members of the Senate and of the House of Representatives are elected by the citizens of the States of the United States. Id. S 2, cl. 1; Amend. XVII, amending Art. I,. S 3, cl.l. Present applicability. The United States Constitution contains no provision for representation in Congress of citizens residing in are as within the jurisdiction of the United States but not part of any State. Even prior to adoption of the Constitution, however, section 12 of the Ordinance of 1787--which established the pattern for subsequent congressional legislation on territorial government-author i zed, a deleqate to Congress from the Northdest Territories. 1 Stat. 52. The delegate selected was afforded "a seat in Congress with a right of debatinq, but not of voting." Id. Provision for a nonvoting delegate to Congress to represent areg-s within the United States that are not part of the United States has been ccmmn practice since that t ime. See generally E. Brown, The Territorial Delegate to Son _2ress and Other Essays 3-38 (1950); chapter 7, "The Deleqate in Territorial Relations," in E. Pomeroy, The Territories and the United States, 1861-1890 (rev. ed. 1969); chapter 7, section 3, "Status of Delegates and Resident Ccrmnissioner," in 2 L. Deschler, Deschler's Precedents of the United States House of Representatives (1977) (House Document 94-661). At the present time, the District of Columbia, Guam, the Virgin Islands, and American Sama are represented by nonvotinc .j "Delegates" - 54 - to the United States House of Representatives while Puerto Rico is represented by a nonvoting "Resident Commissioner." Delegates to the House of Representatives (including the Resident Ccmmissioner from Puerto Rico) provide their constituencies with a voice in the legislative process. Although they cannot vote on the floor of the House, they serve on ccmmittees and, unless the Rules of the House of Representatives provide otherwise, are permitted to vote in ccmmittee. They receive the same campensation, allowances, and benefits as do Members of the House of Representatives. I The Northern Mariana Islands is not represented in the Congress of the United States. Section 901 of the Covenant authorizes, and Article V of the Constitution of the Northern Mariana Islands provides for, election by the people of the Northern Mariana Islands of a Resident Representative to the United States. See also 1 Code of the Northern Mariana Islands SS 4101 et seq. (1984), as amended by Northern Mariana Islands Public Law 3-92 (1984). This representative, however, does not have the status of a nonvoting delegate to the United States Congress. Discussion. "No right is more precious in a free country than that of having a voice in the election of those who make the laws under which, as good citizens, we must live." Wesberry_v. Sanders, 376 U.S. 1, 17 (1964). See also ReVnolds v. Sins ' 377 U.S. 533, 555, 564-65 (1964); Gray v. Sanders, 372 U.S. 368, 381 (1963). Me Congress of the United States has plenary power to make the laws under which the people of the Northern Mariana Islands, as good citizens, must live. U.S. Const., Art. IV, S 3, cl. 2; Trusteeship Agreenvent, Art. 3. Nothing in the United States Constitution or in the Covenant, however, requires that the people of the Northern Mariana Islands be granted a voice in the United States Congress, to speak on the laws under which the people of the Northern Mariana Islands must live. Indeed, the population of the Northern Mariana Islands is such that were it able to elect a full-fledged Member in the House of Representatives, the Northern Mariana Islands would be disproportionately over-represented in the House. *Public Law 91-405, � 201, 84 Stat. 845 (1970), D.C. Code 9 1-401 (1981) (District of Columbia); 48 U.S.C. �� 1711-1715 (Guam and the Virgin Islands); id. �� 1731-1735 (American Samoa); id. SS 891-894 (Puerto Rico). - 55 - Provision of a delegate to the House of Representatives, coupled with the large measure of local self-government granted by Article I of the Covenant, constitutes a reasonable canprcrnise between the requirements of representative democracy and the realities of small population and distant location. Much that was said in support of creation of the office of Delegate to the United States House of Representatives from American Samoa applies with equal strength in favor of establishing an office of nonvoting delegate fran the Northern Mariana Islands: The justification for direct territorial representation for American Samoa in Congress goes back to 1790, wherein the Congress provided for a nonvoting delegate frcm "the territory south of the River Ohio," which later became the State of Tennessee. Since that time, scrne 30 other U.S. territories have been represented by nonvoting delegates to the Congress before they became States of the Union. Populations of the different territories have varied frcm as many as 5,000 to 259,000 when they were represented by nonvoting delegates. The rapidly changing econcmic and social conditions in both the continental United States and throughout the Pacific area provide a canpelling reason for direct representation of the Territory of American Samoa in the House of Representatives. Presently, the offshore areas are not affected by general legislation unless they are specif ically mentioned in the legislation or the legislation is made applicable to the territories and possessions of the United States. In many instances, the legislative objectives of the offshore areas range, inter alia, fran education and welfare assistance to medical and health insurance, housing, agr icultural assistance, unemployment canpensation, prevailing wage rates, small businesses, labor unions and management, immigration, airport construction assistance, foreign trade, ccmmercial fishing, highway and harbor construction assistance, air routes, water and electricity, oil and watch quotas, veterans benefits, and many others. Under provisions of [this legislation], a nonvoting delegate fran American Samoa can more effectively represent and interpret the needs, welfare and interests of the territory. Furthermore, the nonvoting delegate will carry the responsibility of maintaining the contacts and liaison with the various ccmmittees; of the Congress and the officials of the executive branch of the Federal Goverrment. Additionally, the nonvoting delegate will relieve other Members of Congress of the necessity of 56 dealing with individual problems and related subject areas that directly affect the interests of the Territory of American Samoa. [This legislation] is in keeping with the best of Anerican traditions to encourage qreater participation by the local residents in the affairs of their goverment. Over the years, Congress has continually provided greater self-goverment and responsibility for its territories. The enactment of [this legislation] would especially lessen any lingering impressions of American colonialism, as it is thought of in some quarters of the world. House Report 95-1458, at 3-4 (1978). Congress should now enact legislation to provide for nonvoting representation of the Northern Mariana Islands in the United States House of Representatives. Every area within the American political system that has a permanent population is represented in the Congress of the United States. The people of the Northern Mariana Islands have now done all that is required of them to becone part of that political system and Conqress, in approving the Covenant, has given its assent. To be sure, the Northern Mariana Islands has a smaller population than any of the jurisdictions now represented in Congress. Its population of 17,000 persons, however, is not of an order of magnitude different from Axerican Sama's population of approximately 31,000. As noted in the excerpt quoted from the House Report, above, nonvoting delegates have represented as few as 5,000 persons. The proposed legislation would confer the status of nonvoting delegate on the Resident Representative to the United States for the Northern Mariana Islands. This position was authorized by section 901 of the Covenant and has been established by Article V of the Constitution of the Northern Mariana Islands.* See also 1 Code of the Northern Mariana Islands �� 4101 et seq. (1984), as amended by Northern Mariana Islands Public Law 3-m@2 (1984). The negotiators of the Covenant drafted section 901 with a view toward the possibility that Congress might confer nonvoting delegate status on the Resident Representative. Pteport of the Joint Drafting Committee on the Negotiating Histo@y of the Covenant, at C-4 (1975), reprinted in Hearings before the Subcommittee on Territorial and Insular Affairs of the House Ccumittee on Interior and Insular Affairs on H.J. Res. 549 et al. to Approve the "Covenant to Establish a Commonwealth of *The Constitution of the Northern Mariana Islands was deEmed approved by Presidential Proclamation 4534 in 1977. 42 Fed. Req. 56593. 57 the Northern Mariana Islands," 94th Cong., lst Sess. 374, 406 (1975). See also Senate Report 94-433, The Covenant to Establish I a Ccrmnwealth of the Northern Mariana islands 65, 90 (1975). Sect ion 901 provides that the Resident Representative "must be a citizen and resident of the Northern Mariana Islands, at least twenty-f ive years of age, and, after termination of the Trusteeship Agreement, a citizen of the United States." Article V of the Constitution of the Northern Mariana Islands adds that the Resident Representative shall have been a resident and domiciliary of the Northern Mariana Islands for at least seven years immediately preceding the date of taking office and provides for popular election of the Resident Representative to a two-year term. The@ Delegates from Guam, the Virqin Islands, and American Samoa likewise must be at least twenty-five years of age on the date of their election and must be inhabitants of the territories frW which they are elected. 48 U.S.C. SS 1713, 1733. The Delegates from Guam and the Virgin Islands at election must have been citizens of the United States for at least seven years. Id. � 1713(b). The Delegate from NTrerican Samoa, where most resident7s-are nationals rather than citizens of the United States, is required to owe allegiance to the United States.* Id. 9 1733(b). The Delegates fran Guam, the Virgin Islands, and American Samoa are popularly elected and, at the time of election, may not be a candidate for any other office.. Id. SS 1711, 1713(d), 1732(a), 1733(d). The aualif ications and election - procedures for the office of Resident Renresentative to the United States for the Northern Mariana Islands are thus basically consistent with the qualifications and election procedures for the territorial Delegate offices. The legislation here proposed, which confers delegate status on the Resident Representative, establishes qualifications and election procedures for that office similar to those for the office of territorial Delegate. Because there is no inconsistency between the requirements in the proposed legislation and those in the Covenant, there is no need to amend either the Covenant or the Constitution of the Northern Mariana Islands." The proposed legislation does, *The distinction between "citizens" and "nationals" of the United States is not well-defined. Nationals--like citizens--owe allegiance to the United States and are entitled to its protection, but do not qualify for some rights and privileges granted by statute only to citizens. **To avoid the necessity of amendment of either of these fundamental documents, the proposed legislation also retains the title, "Resident Pepresentative," rather than substituting the more ccmrnon title, "Delegate." Puerto Rico's "Resident Camissioner" is a precedent for this variation in nanenclature. 58 - however, impose the additional requirEment that the Resident Representative, on the date of election, be a candidate for no other office. Regular general elections in the Northern Mariana Islands are held on the first Sunday in November in odd-numbered years. Constitution of the Northern Mariana Islands, Art. VIII, � 1 and Schedule on Transitional Matters � 10; Presidential Proclamation 4534, 42 Fed. Reg. 56593 (1977). The Resident Representative, under Northern Mariana Islands law, is elected at that time to a two-year term. Constitution of the Northern Mariana Islands, Art. V, �� 1, 2; Northern Mariana Islands Constitutional Convention, Analysis of the Constitution of the Commonwealth of the Northern Mariana Islands 124-25 (1976).F' -The Resident Representative takes office on the second Monday in January of the following year. Constitution of the Northern Mariana Islands, Art. VIII, � 4. By contrast, Representatives and Delegates to the Congress are elected on the first Tuesday after the first Monday in November in even-numbered years and take office on the third day in January of the following year. 2 U.S.C. � 7. Representatives and the Delegates frcm the District of ColLurbia, Guam, the Virgin Islands, and Aznerican Samoa serve two-year terms. D.C. Code � 1-401(a) (1981) (District of Coluumbia); 48 U.S.C. S 1712(a) (Guam and the Virgin Islands); id. � 1732(a) (American Samoa). The Resident Commissioner from Pu4_rto Rico, however, serves a four-year tenn. Id. q 891. The legislation here proposed allows the people of the Northern Mariana Islands to elect the Resident Representative as provided in their Constitution, even thougb the Resident Representative will be elected and take office in different years (and on different days) than the Representatives and other Delegates. The uniform federal election date was established in 1871 to make voting in more than one jurisdiction difficult and to prevent news of results in earlier elections from influencing the outcane in later elections. 45 Cong. Globe 112, 141 (1871).** These concerns are of little moment in the case of the Northern Mariana Islands at the present time. A few persons may in fact be able to vote for both the Resident Representative for the Northern Mariana Islands and a Representative *The Resident Representative's term may be increased to no more than four years by popular initiative. Constitution of the Northern Mariana Islands, Art. V, � 2. "Prior to 1871, each State set its own election date. Id. See U.S. Const., Art. 1, S 4, cl.l. - 59 - or Delegate from another jurisdiction. But voter registration requirements, the Resident Representative's limited powers in Congress, and the time and money required to travel between the Northern Mariana Islands and other jurisdictions make unlikely intentional efforts to subvert the electoral process by taking advantage of the discrepancy in election dates. As for preventing earlier election results from influencing the outcome in later elections, modern communications have made that goal elusive even when elections are held on the same day but in different time zones. Requiring election of the Resident Representative on the same day as the election of Representatives and other Delegates to the House of Representatives is a reasonable alternative to the proposal here made. But to achieve this uniformity the Northern Mariana Islands would either have to amend its constitution to change its regular general election from the first Sunday in November in odd-numbered years to the first Tuesday after the first Monday in November in even-numbered years or suffer the costs of holding an extra election every other year. (Mile a federal statute would supercede the provisions of the Constitution of the Northern Mariana Islands regarding election of the Resident Representative, it would not affect the provisions as they relate to election of other public officials in the Northern Mariana Islands. The extra election would still be required unless the people of the Northern Mariana Islands atnended their constitution.) Under the proposed legislation, the first Resident Representative with the status of nonvoting Delegate to the House of Representatives would be elected at the regular general election in the first odd-numbered year subsequent to enactment of the legislation. The effective date of the proposed legislation is not postponed until after termination of the trusteeship, even though the Covenant will not be fully implemented until that time. The date for termination of the trusteeship is not yet known, and may not arrive for several years. In the meantime, Congress will make many legislative decisions affecting the Northern Mariana Islands, decisions in which the Northern Mariana Islands should have a voice. Indeed it is in this period, when many members of Congress are little acquainted with the particular needs of the Northern Mariana Islands, that participation by the nonvoting Resident Representative may be most important. In embracing the Covenant, the people of the Northern Mariana Islands have already made their decision to be part of the United States. No purpose is served by delaying their election of a nonvoting Resident Representative to the United States House of Representatives until some uncertain date in the future when the trusteeship is finally terminated. 60 Proposed legislative language. The following language, if enacted by the United States Congress, would implement the Commission's recam-sendation: An Act to confer the status of nonvoting Delegate to the United States House of Representatives on the Resident Representative to the United States for the Northern Mariana Islands. Be it enacted by the Senate and House of Representatives of the United States of AmericTin Congress assembled, that the Northern Mariana Islands shall be represent@d in the United States Congress by the Resident Representative to the United States authorized by section 901 of the Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States of America (approved by Public Law 94-241, 90 Stat. 263). The Resident Representative shall be a nonvoting Delegate to the House of Representatives, elected as hereinafter provided. Sec. 2. (a) The Resident Representative shall be elected by the people qualified to vote for the popularly elected officials of the Northern Mariana Islands at the regular general election, on the day and month set by section 1 of Article VIII of the Constitution of the Northern Mariana Islands, in the first odd-numbered year subsequent to enactment of this Act and thereafter as provided in the Constitution of the Northern Mariana Islands. The Resident Representative shall be elected at large, by separate ballot, and by a majority of the votes cast for the office of Resident Representative. If no candidate receives such majority, on the fourteenth day following such election a runoff election shall be held between the candidates receiving the highest and the second highest number of votes cast for the office of Resident Representative. In case of a permanent vacancy in the office of Resident Representative by reason of death, res ignat ion, or permanent disability, the office of Resident Representative shall remain vacant until a successor shall have been elected and qualified. (b) The term of the Resident Representative shall commence on the second Monday of January following the date of the election. Sec. 3. Th be eligible for the office of 'Resident Representative, a candidate shall: (a) be at least twenty-f ive years of age on the date of the election; 61 (b) be a citizen of the United States, provided, however, that prior to termination of the Trusteeship Agreement for the former Japanese Mandated Islands, 61 Stat. 3301, the candidate may be a person def ined as a United States citizen or United States national in section 8 of the Schedule on Transitional Matters of the Constitution of the Northern Mariana Islands, as approved by Presidential Proclamation 4534 of October 24, 1977; (c) have been a resident and damiciliary of the Northern Mariana Islands for at least seven years prior to the date of taking office; (d) not be, on the date of the election, a candidate for any other office. Sec. 4. Acting pursuant to legislation enacted in accordance with the Constitution of the Northern 'Mariana islands, the Goverment of the Northern Mariana Islands will determine the order of names on the ballot for election of Resident Representative, the method by which a special election to fill a vacancy in the office of Resident Representative shall be conducted, the method by which ties between candidates for the office of Resident Representative shall be resolved, and all other matters of local application pertaining to the election and the office of Resident Representative not otherwise expressly provided for herein. Sec. 5. Until the Rules of the House of Representatives are amended to provide otherwise, the Resident Representative for the Northern Mariana Islands shall receive the same ccrnpensation, allowance, and benefits as a Member of the House of Representatives, and shall be entitled to whatever privileges and immunities that are, or hereinafter may be, granted to the nonvoting Delegate frcrn the Territory of Guam. Land grant colleges. Recxmendation. Legislation should be enacted to permit land-grant funding of a post-secondary educational institution in the Northern Mariana Islands. - 62 The statutes. The Morrill Act. The Morrill Act of 1862, now codified as sections 301 to 308 of title 7 of the United States Code, established the system of federal land-grant aid to State-supported colleges and universities. Each State was granted 30,000 acres of federal public land (or its equivalent in land scrip) for each Senator and Representat ive to which the State was entitled under the 1860 census. Revenue from the sale of these lands was to be invested in a perpetual fund, with only interest frcm the fund used to support qualified colleges and universities. A college or university, to qualify for land-grant support under the Morrill Act, must, first, have been established by the State; second, have as its principal object the teachinq of agriculture and "the n-echanic arts;" and, third, include military tactics as part of its curriculum. 7 U.S.C. S 304. Land-grant funds may not be used for the purchase, erection, or repair of buildings. Id. � 305. The Second Morrill Act. The Second Morrill Act, enacted in 1890 and now codirf ied at se ns 321 to 329 of title 7 of the United States Code, provides a flat annual grant of $50,000 to each State or Territory with a college or university established under the earlier Morrill Act. This grant is for use only in support of instruction in food and agricultural sciences. 7 U.S. C. � 322. Additional funds are authorized to be appropriated to States and designated territories and possessions for support of land-grant colleges and universities by a later amendment of the Second Morrill Act, the Bankhead-Jones Act of 1935, 7 U.S.C. S 329. These funds may be used in support of any of the permissible purposes of land-grant colleges and universities. Retirement programs. The authorized uses of federal land-qrant funds have been expanded to include employer contributions to qualified pension and retirement plans on behalf of land--qrant college employees. 7 U.S.C. S 331. The Smith-Lever Act. The Smith-Lever Act, now codified at sections 341 to 349 of title 7 of the United States Code, authorizes annual appropriations to States, Territories, and possessions for agricultural extension work. Dissemination of information on agriculture and home econamics under this program is carried out by land-grant colleges in cooperation with the United States DePartiTent of Agriculture. The Nricultural Research, Extension, and Teaching Policy Act. The Agricultural, Research, Extension, and Teaching Policy Act of 1977, as mended and now codified at sections 3101 to 3336 of title 7 of the United States Code, provides authorization for funding of a wide variety of agricultural research and extension programs. one of these programs contemplates a central role for land-grant colleges - 63 - and universities or the agricultural extension services established at land-qrant institutions. That program is the bicmass energy education and technical assistance program. See 7 U.S.C. 9 3129. In addition, the Act authorizes appropriations to land-grant institutions for agricultural and forestry extension, id. S 3221; for agricultural research, id. S 3222; and for a7c-quisition and improvement of research faFir'lities and equipment, id. � 3223. Other programs authorized b -v the Act do not require the existence of a land-grant institution, although such institutions are usually eligible to receive funding under the programs. These programs include matching grants to States for support of schools of veterinary medicine, 7 U.S.C. � 3151; grants to States and individual fellowships for higher education in food and agricultural sciences, id. @ 3152; awards to individuals for research or advanced studies in Y;od and agricultural sciences, id. � 3153; grants to institutions for research in agricultural chemicals, bicmass energy, and industrial hydrocarbons, id. S 3154; support of nutrition education, id. S 3175; matching grgin-ts to States and institutions for animal TTe-alth and disease research, id. �� 3195-3196; grants to institutions for solar energy research arj development, id. �� 3261-3262; grants to States for aquaculture development, id. � 3322; and grants to institutions for rangeland research, id. � 3333. Other statutes. An institution designated as a land-grant college or university is eligible to receive support under various other federal programs. Amng the activities so supported are agricultural experiment stations, under the Hatch Act of 1887, 7 U..S.C. �� 361a et seg. (chapter 14). Each State is entitled to receive support for experinent stations carrying on research in agricultural and rural development. . Land-qrant colleges and universities also may receive support for research in rural development, id. SS 2661 et seq., and forestry research, 16 U.S.C. SS 582a et seq. Land-qrgn-t 71'n-s t itut ions are entitled to receive standard sets of weights and measures from the Secretary of Camrrerce. 15 U.S.C. 201-203. Faculty and students at a land-grant institution are permitted to use a federal marine biological station in Florida. 20 U.S.C. 9 92. Present applicability. The Morrill Act. The original Morrill Act of 1862 is by its own te rms@ 'ap . plicable only to the States of the United States. See 7 U.S.C. �� 301-305. Section 506 of Public Law 92-318, 86 Stat. 235 (1972), as amended by section 1361(a) of Public Law 96-374, 94 Stat. 1367 (1980), however, confers land-qrant status on the College of the Virgin Islands, the Camunity College of Arerican Sama, the College of Micronesia, and the University of Guam. In lieu of land or land scrip, appropriations of $3,000,000 each to the Virgin Islands, Guam, American Samoa, and "Micronesia" are authorized for establishment of 64 perpetual funds, the interest from which is available for,support of the designated institutions. in conferring land-grant status on the College of Micronesia, Congress apparently thought it was making land-grant programs available in the Northern Mariana Islands. See 126 Cong. Rec. S12038-39 (daily ed., September 4, 1980). The College of Micronesia, however, was established by Trust Territory Public Law 7-62, a law not applicable to the Northern Mariana Islands because the Northern Mariana Islands had already been administratively separated frcm the rest of the Trust Territory when that law was enacted. Accordingly, while Public Law 7-62 provided representation to other Trust Territory jurisdictions on the College's board of regents, no provision was made for appointment of a mmber to represent the Northern Mariana Islands. And, while students frcm the Northern Mariana Islands may attend the College of Micronesia (just as they may *attend the University of Gum or Michigan State University), few in fact do enroll there. The Second Morrill. Act. The Virgin Islands, American Sawa, "Micronesia," and Guam are each entitled to receive under the Second Morrill Act the same amounts as if they were States. 7 U*S*C.. � 326a.* This entitlement, however, only extends to federal support of instruction in food and agricultural sciences. id. Less restricted additional funding under the Second Morrill AiF is also available to the several States, Puerto Rico, the Virgin Islands, and Gum. Td. � 329. Under section 502(a)(1) of the Covenant, aid under the Sec;Fn-d Morrill Act would be available on equivalent terms to the Northern Mariana Islands, were there a qualified institution in the Northern Mariana Islands. Retirement proqrams. The statutory permission to use land-grant funds for employer contributions to qualified pension and retirement plans on behalf of employees of land-grant institutions is given to the several States and to Guam. Accordingly, under section 502(a) of the Covenant, the Northern Mariana Islands would be able to use land-grant funds for retirement programs. *Entitlements for "Micronesia" and American Samoa were added in 1980. Public Law 96-374, � .1393(a), 94 Stat. 1367. On January 9, 1978, the effective date of the Covenant, however, aid under the Second Morrill Act was available to Guam. Accordingly, under section 502(a)(1) of the Covenant, the Northern Mariana Islands is entitled to treatment equivalent to that given Gum, that is, as a State. Whether the 1980 amendment, adding "Micronesia," was intended to modify that treatment is uncertain. The question is academic because no institution in the Northern Mariana Islands is eligible for land-grant designation at this time. 65 The Smith-Lever Act. One hundred thousand dollars is specifically authorized for payment to Guam under the Smith-Lever Act. 7 U.S.C. � 343. See also id. q, 349. Under section 502(a)(1) of the Covenant, the Northern Mariana Islands would be entitled to an equivalent amount for agricultural extension work, were there a qualified institution in the Northern Mariana Islands. ,The Agricultural Research, Extension, and Teaching Policy Act. "State" is defined, for purposes of the Agricultural Research, Extension, and Teaching Act, to include the Northern Mariana Islands. 7 U.S.C. S 3103(12). Accordingly, the Act is applicable to the Northern Mariana Islands just as it is to the several States. Other statutes. The Hatch Act of 1887, 7 U.S.C. SS 361a et seq., authorizing, among other things, support of research 7F agricultural experimnt stations run by land-grant institutions, is applicable to Guam. Id. �� 361a, 361c(b)(2). It is thus applicable to the Northern Maria@n_a Islands by operation of section 502(a)(1) of the Covenant, but obviously cannot provide support for a nonexistent institution. Research in rural development at land-grant institutions is supported by federal funds under sections 501 et s of Public Law 92-419 (as added by section 1444(a) of Public Law 97-98 (1981)), 7 U.S.C. �� 2661 et seq. This law is specifically applicable to the Northern Mariana@'_Islands. 7 U.S.C. 9 2666(b). Again, a land-grant institution is necessary for full implementation of the law in the Northern Mariana Islands. Federal support for forestry research at land-grant institutions is authorized by section 2 of Public Law 87-788 (1962), 16 U.S.C. 582a et seq. This law is also applicable to Guam, 16 U.S.C. 582a-7, and is thus applicable to the Northern Mariana Islands by operation of section 502(a)(1) of the Covenant. Forestry research in the Northern Mariana Islands cannot be supported, however, in the absence of a land-grant institution. Discussion. At. present most foods consumed in the Northern Mariana Islands are imported. Current agricultural production is a fraction of that in the 1930s. Increased agricultural production would permit satisfaction of local mrket demand and development of an export trade. The Northern Mariana Islands is particularly well-situated to provide tropical produce to Japan and other non-tropical industrial nations in the Western Pacific area. Research, education, and extension work in the food and agricultural sciences would be of obvious benefit to the Northern Mariana Islands in increasing agricultural production. 66 - The population of the Northern Mariana Islands in 1980 was about 17,000. The mall pcpulation limits the capability of the Northern Mariana Islands to support institutions of higher learning. The only postsecondary educational institution in the Northern Mariana Islands serving the local populace is the Northern Marianas College. This public catutunity college is unaccredited but, by contract with accredited institutions, offers accredited courses to students in the Northern Mariana Islands. Many federal laws authorizing funding of land-grant institutions are only technically applicable to the Northern Mariana Islands. No funds actually reach the Northern Mariana Islands because no institution there has been designated as a land-grant college or university. Until that designation is specifically permitted under federal law, the Northern Mariana Islands is effectively prevented from participating in land-grant programs. All other jurisdictions under the American flag participate in these programs and so, too, do the other jurisdictions within the Trust Territory of the Pacific Islands. To allow the Northern Mariana Islands to participate in these programs, provision must be made for designation of a land-grant institution in the Northern Mariana Islands. The legislation recamiended in this report makes such provision. The legislation proposed in this report does not condition land-grant assistance to the Northern Mariana Islands on the continued existence of the Northern Marianas College. The early history of the college is promising, but it is too soon to tell if the college will establish itself as a reasonably permanent institution. Accordingly, the proposed legislation allows the legislature of the Northern Mariana Islands to designate the institution to administer land-grant programs in the Northern Mariana Islands. While the legislature may designate the Northern Marianas College as that institution, the procedure permits another institution to be chosen without the necessity of involving Congress, should the legislature believe the college for any reason is unable to administer the land-grant programs. The proposed legislation extends to the Northern Mariana Islands treatment under the Morrill Act equivalent to that afforded Guam, and makes clear that the Northern Mariana Islands is not to be treated as part of Micronesia for purposes of that Act. That extension is consistent with the obligation of the United States under section 502(a) (1) of the Covenant to make applicable to the Northern Mariana Islands those federal laws providing financial assistance on the same terms as they apply to Guam. See also Covenant � 703(a). The Northern Mariana Islands would thus be authorized to receive a single appropriation of three million dollars as an endowment in lieu of public land, to be used for the maintenance of a land-grant institution in accordance with the Morrill Act. The proposed legislation also allows the Northern Mariana Islands to receive (like - 67 all other States and territories of the United States) a $50,000 annual grant for instruction in food and agricultural sciences under the second Morrill Act (7 U.S.C. S 322). 'Ihe Northern Mariana Islands, in the recommended legislation, also becomes eligible to receive an equal share of the annual national grant of $8,250,000, or $150,000, and an additional $20,000, or a total of $170,000, for support of its land-grant institution under the later amendment to the Second Morrill Act in the Bankhead-Jones Act, 7 U.S.C. S 329. Although the Smith-Lever Act now applies to the Northern Mariana Islands by operation of section 502(a)(1) of the Covenant, the proposed legislation again makes clear that the Northern Mariana Islands is entitled to treatment equivalent to that afforded Guam and is not to be considered as part of Micronesia. The authorization of appropriations under the Smith-Lever Act does not specifically mention the Northern Mariana Islands. See 7 U.S.C. � 343(b)(2). But section 502(a)(1) of the Covenant is itself an authorization of appropriations to the Northern Mariana Islands. The proposed legislation also eliminates for the Northern Mariana Islands the requirement that the Northern Mariana Islands match federal funds with its own very limited funds. Because the economy of the Northern Mariana Islands is less developed than that of most areas in the United States, fewer resources are available to the local government. Matching requirEments can prevent implementation in the Northern Mariana Islands of beneficial programs, such as the Smith-Lever extension program. No legislative changes are recommended with respect to the present law allowing use of land-grant funds for employer contributions to qualified pension and retirement plans on behalf of land-grant college employees. The only change recommended with regard to the Agricultural Research, Extension, and Teaching Policy Act removes the requirements that a college or university in the Northern Mariana Islands, in order to receive assistance, award a bachelor's degree or a h igher degree and be accredited by a nationally recognized accrediting agency or association. Given the small population of the Northern Mariana Islands, it may not be feasible or desirable to require an eligible institution to offer a bachelor's degree or a higher degree. Agricultural research and extension in the Northern Mariana Islands might well be conducted under the auspices of a ccmmunity college offering only an associate degree. The ccmmunity college might, for example, contract with the University of Guam for assistance in administering such programs. The application of national accreditation standards, which may be inappropriate to the Northern Mariana Islands in the first place, could operate to foreclose the very assistance needed by the Northern Mariana Islands to conform a fledgling postsecondary educational institution to those standards. - 68 - The proposed legislation applies to a land-grant institution in the Northern Mariana Islands all federal laws relating to the operation of or provision of assistance to a land-grant college in the Virgin Islands or Guam. The institution thus becomes eligible for support of research at an institution-run agricultural experiment station under the Hatch Act of 1887, 7 U.S.C. �� 361a et seq.;* for support of research in rural development, 7 U.S.C. �� T6_61 et seq.; and for forestry research grants, 16 U.S.C. �� 582a et seq. Its faculty and students are also permitted use of a f(;ae-ral marine biological station in Florida. 20 U.S.C. � 92. The Northern Mariana Islands is the only area under the permanent jurisdiction of the United States that does not have a land-grant institution. The proposed legislation, if enacted, would rEmedy that situation, would increase the availability of post-secondary education for residents of the Northern Mariana Islands, and should make a major contribution toward agricultural development in the Northern Mariana Islands. The United States has agreed to assist the Northern Mariana Islands "to achieve a progressively higher standard of living for its people as part of the American econanic camnunity and to develop the economic resources needed to met the financial responsibilities of local self-goverment." Covenant � 701. The United States has also agreed to "make available to the Northern Mariana Islands the full range of federal progrms and services available to the territories of the United States." Id. S 703(a). Enactment of the proposed legislation would further each of those objectives and is thus in partial fulfilIment of the obligations of the United States under the Covenant. *The Hatch Act, which provides financial assistance to Guam as well as the fifty States, is already applicable to the Northern Mariana Islands by operation of section 502(a)(1) of the Covenant. See 7 U.S.C. � 361a. The authorization of appropriations does not specifically mention the Northern Mariana Islands. Id. q 361c. But section 502(a)(1) of the Covenant is itself an 7uthorization of appropriations under the Act to the Northern Mariana Islands. The legislation proposed in this report makes explicit the authorization of appropriations to the Northern Mariana Islands. It also eliminates for the Northern Mariana Islands the requirement that the Northern Mariana Islands provide matching funds, on the sane rationale as that supporting elimination of the similar requirement under the Smith-Lever Act, above. - 69 Proposed legislative language. The following language, if adopted by the United States Congress, would implement the Commission's recommendation: An Act to authorize establishment of a larvJ-grant institution in the Northern Mariana Islands. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, that section 506 of Public Law 92-318, 86 Stat. 735, as amended, is further amended to read as follows: (a) The College of the Virgin Islands, the Community College of American Sc-ma, the College of Micronesia, the University of Guam, and an institution in the Northern Mariana Islands designated by the legislature of the Northern Mariana Islands shall be considered land-grant colleges established for the benefit of agriculture and mechanic arts in accordance with the provisions of the Act of July 2, 1862, as amended (7 U.S.C. SS 301-305, 307-308).. (b) In lieu of extending to the Virgin Islands, Guam, American Samoa, the Northern Mariana Islands, and the Trust Territory of the Pacific Islands (other than the Northern Mariana islands) those provisions of the Act of July 2, 1862, as amended, relating to donations of public land or land scrip for the endowment and maintenance of colleges for the benefit of agriculture and the mechanic arts, there is authorized to be appropriated $3,000,000 to the Virgin Islands, $3,000,000 to Guam, and $3,000,000 to the Northern Mariana Islands and an equal amount to American Samoa and to the Trust Territory of the Pacific Islands (other than the Northern Mariana Islands). Amounts appropriated pursuant to this section shall be held and considered to have been granted to the Virgin Islands, Guam, American Samoa, the Northern Mariana Islands, and the Trust Territory of the Pacific Islands (other than the Northern Mariana Islands) subject to the provisions of that Act applicable to the proceeds from the sale of land or land scrip. Sec. 2. Subsection (c) of section 1361 of Public Law 96-374, 94 Stat. 1367, is amended to read as follows: 70 - Any provision of any Act of Congress relating to the operation of or provision of assistance to a land-grant college in the Virgin Islands or Gum shall apply to land grant colleges in American Samoa, the Northern Mariana Islands and the Trust Territory of the Pacific Islands (other than the Northern Mariana Islands) in the same manner and to the same extent. Sec. 3. Section 5 of the Act of August 30, 1890, c.841, 26 Stat. 417 (the Second Morrill Act), as added by section 506(c) of Public Law 92-318, 86 Stat. 235, and as amended (7 U.S.C. S 326a), is further amended to read as follows: There is authorized to be appropriated annually for payment to the Virgin Islands, American Samoa, Guam, the Northern Mariana Islands, and the Trust Territory of the Pacific Islands (other than the Northern Mariana Islands) the amount they would receive under this Act if they were States. Sums appropr iated under this section shall be treated in the same manner and be subject to the same provision-, of law, as would be the case if they had been appropriated by the first sentence of this Act. Sec. 4. Section 22 of the Act of June 29, 1935, c.338, 49 Stat. 439, as mended (7 U.S.C. 9 329) is further amended-- (a) by striking out "and Guam" wherever it appears and inserting in lieu thereof "Guam, and the Northern Mariana Islands"; (b) by striking out "$8,100,000" and inserting in lieu thereof "$8,250,000"; and (c) by striking out "$4,360,000" and inserting in lieu thereof "$4,380,000". Sec. 5. The first sentence of section 3(b)(2) of the Act of May 8, 1914, c.79, 38 Stat. 372, as mended (7 U.S.C. S 343), is further amended by striking out "and Guam" and inserting in lieu thereof "Gum, and the Northern Mariana Islands". Sec. 6. Section 10 of the Act of May 8, 1914, c.79, 38 Stat. 372, as added by section M) of Public Law - 71 - 87-749, 76 Stat. 745, and as amended (7 U.S.C. S 349), is further amended to read as follows: The term "State" neans the States of the Union, Puerto Rico, the Virgin Islands, Gum, and the Northern Mariana Islands. Sec. 7. Notwithstanding subsection (4) of section 1404 of the National Agricultural Research, Extension, and Teaching PolicV Act of 1977, as amnded (7 U.S.C. � 3103(4)), an institution in the Northern Mariana Islands designated by the legislature of the Northern Mariana Islands as a land-grant college, pursuant to section 506(a) of Public Law 92-318 (86 Stat. 235) as amended by section 1 of this Act, shall not be required, in order to qualify as a "college" or "university" for purposes of the National Agricultural Research, Extension, and Teaching Policy Act of 1977, as amended, to (1) provide an educational program for which a bachelor's degree or any other hiqher degree is awarded, or (2) be accredited by a nationally recognized accrediting agency or association. Sec. 8. The first sentence of section 3(b)(2) of the Act of Auqust 11, 1955, c.790, 69 Stat. 671, as amended (7 U.S.C. S 361c(b)(2)), is further amnded by striking out "and Guam" and inserting in lieu thereof "Guam, and the Northern Mariana Islands". Residency requirerne t for naturalization of citizens of the Northern Mariana Islands who beccime nationals oF-tFe- United States on termination of the trusteeship. Recamendation. Citizens of the Northern Mariana Islands who elect to became nationals rather than citizens of the United States on termination of the trusteeship cannot subsequently be naturalized as citizens of the United States without establishing a residence in another part of the United States. Legislation should be enacted to allow residence in the Northern Mariana Islands to satisfy residency requirenents for naturalization of these nationals. The statutes. The nationality laws of the United States set forth the procedure for naturalization of an alien as a citizen of the United States. Fundamental prerequisites to naturalization for most aliens are legal admission into the United States, residency of at least - 72 - f ive (or, in the case of the spouse of a United States citizen, three) year-, in the United States, and an understanding of the English language and of the history and qovernment of the United States. 8 U.S.C. SS 1423, 1427, 1430. Discussion. On termination of the trusteeship, citizens of the Northern Mariana Islands will become citizens of the United States. Covenant 301, 1003 (c). Section 302 of the Covenant, however, allows citizens of the Northern Mariana Islands to elect to become nationals rather than citizens of the united States within six months af ter termination of the trusteeship.* Scme of those who decide then to become nationals may subsequently have second thoughts. A national may be naturalized as a citizen of the United States, but to do so the national must first become a resident of one of the fifty States, the District of Columbia, Puerto Rico, Guam, the Virgin Islands, or American Samoa. 8 U.S.C. SS 1101(29), (38); 1436. The national may not remain a resident of the Northern Mariana Islands if he or she decides to seek naturalization. Legislation is here proposed to allow persons electing United States nationality rather than United States citizenship pursuant to section 302 of the Covenant subsequently to seek naturalization without the necessity of leaving the Northern Mariana Islands. The proposed legislation also grants to the courts of record of the Northern Mariana Islands and the District Court for the Northern Mariana Islands jurisdiction to naturalize persons eligible for naturalization under the proposed legislation who reside within the Northern Mariana Islands. Proposed legislative language. The following language, if enacted by the United States Congress, would implement the Commission's reccrmneendation that legislation be enacted to allow citizens of the Northern Mariana Islands who elect to become nationals rather than citizens of the United States on termination of the trusteeship subsequently to be naturalized as citizens of the United States without establishing a residence in another part of the United States. *The distinction between "citizens" and "nationals" of the United States is not well-defined. Nationals--like citizens--owe allegiance to the United States and are entitled to its protection, but do not qualify for scme rights and privileges granted by statute only to citizens. - 73 An Act modifying residency requirements for naturalization as United States citizens of certain nationals of the United States residing in the Northern Mariana Islands. Be it enacted the Senate and House of Representatives of the United States of Averica in Congress assembled, that (a) a person who elects to became a national rather than a citizen of the United States pursuant to section 302 of the Covenant to Establish a Cammnwealth of the Northern Mariana Islands in Political Union, with the United States of America (approved by Public Law 94-241, 90 Stat. 263) may be naturalized subsequently as a citizen of the United States upon canpliance with applicable reguirements of the Immigration and Nationality Act, except that in petitions for naturalization filed under the provisions of this section residence and physical presence within the United States within the meaning of the Immigration and Nationality Act shall include residence and physical presence within the Northern Mariana Islands. (b) For purposes of the reguirements of judicial naturalization of persons eligible for naturalization under this section, the Northern Mariana Islands will be deemed to constitute a State as defined in subsection 101(a), paragraph (36) of the Immigration and Nationality Act (8 U.S.C. 5 1101(a)(36)). (c) The courts of record of the Northern Mariana Islands and the District Court for the Northern Mariana Islands shall have jurisdiction to naturalize persons who become eligible under this section and who reside within their respective jurisdictions. Nominations to the United States Military Ac2Ld United States .=, the Naval Academy, and the United States Air Force Academy. Recommendation. Legislation should be enacted to allow the Res ident Representative to the United States for the Northern Mariana Islands to ncminate one individual each frcm the Northern Mariana Islands to attend the United States Military Academy, the United States Naval Academy, arid the United States Air Force Academy at any one time. - 74 - The statutes. 1he academies. "The United States Military Academy is located at wETst -Point, New York. The course is of 4 years' duration, during which the cadets receive, besides a general education, theoretical and practical training as junior officers. Cadets who complete the course satisfactorily receive the degree of Bachelor of Science and a commission as second lieutenant in the Army." U.S. Government Manual 194 (1982). The United States Naval Academy in Annapolis, Maryland "offers a 4-year program of academic, military, and professional instruction for the training and education of young men and women for the naval services. Completion of the program normally leads to a commission in the United States Navy or the United States Marine Corps, and to one of seven designated Bachelor of Science degrees in engineering fields, plus an undesignated Bachelor of Science degree with major options in 11 fields." Id. at 210. The United States Air Florce Academy, in Colorado Springs, Colorado, "provides a 4-year educational curriculum for cadets that includes a baccalaureate level education in airmanship, related sciences, and the humanities." Id. at 178. Graduates receive the degree of Bachelor of Science ari-a commission as second lieutenant in the Air Force. 10 U.S.C. � 9353. The nominating process. Each Senator and each Representative in Congress is entitled to nominate up to five individuals to attend each of the service academies at any one time.* 10 U.S.C. 99 4342(a)(3),(4); 6954(a)(3),(4); 9342(a)(3),(4). A Senator's nominees must be from the same State as the Senator, and a Representative's nominees must be from that Representative's congressional district. Id. The Delegate to the House of Representatives from the bil-strict of Columbia is also entitled to select five nominees to attend each academy from the District. 10 U.S.C. �� 4342(a)(5), 6954(a)(5), 9342(a)(5). The Delegates in Congress from the Virgin Islands and Guam are each allowed one nominee to each of the academies at any one time. 10 U.S.C. SS 4342(a)(6),(9); 6954(a)(6),(9); 9342(a)(6),(9). The Resident Commissioner from Puerto Rico has five slots at each academy, and an additional slot at each is given the Governor of Puerto Rico. 10 U.S.C. �� 4342(a)(7), 6954(a)(7), 9342(a)(7). The Secretary of each service may nominate one person from American Samoa to that service's academy on the recommendation of the Governor of American Samoa. 10 *7he statutes governing the United States Coast Guard Academy do not provide for nomination of cadets by members of Congress. No statute requires that any proportion of Coast Guard Academy cadets be domiciled in particular jurisdictions. See generally 14 U.S.C. 181-195, especially � 182. - 75 - U.S.C. S 4342(a) (10), 6954(a) (10), 9342(a) (10). (The Governor of the Canal Zone was also entitled to one nominee at each academy. 10 U.S.C. SS 4342(a)(8), 6954(a)(8), 9342(a)(8).) Nominees selected from the States and territories by members of Congress and others, as outlined above, account for a large part of the enrollment at each academy. Provision is also made, however, for attendance at each academy of individuals selected by a variety of other methods. See generally 10 U.S.C. SS 4342, 6954, 9342. Actual appointment of persons to each of the academies is made by the President. 10 U.S.C. S� 4342(d), 6954(d), 9342(a). Appointment is conditional upon admission to the academy. Id. Admission in turn is dependent upon satisfaction of academic aiT physical qualification requirements. 10 U.S.C. �� 4346, 6958, 9346. Thus, nomination to any academy does not ensure admission. Nominees from the other territories. In 1962 Congress allowed the student body at each service academy to include at any one time one person from Guam, the Virgin Islands, or American Samoa. The candidate for each academy was to be nomingt-7;d by the Secretary of the concerned service from persons recommended by the territorial governors. Public Law 87-663, 76 Stat. 547. At that time, those qovernors were all appointed officials.* In 1973 the statutes were amended to allow Guam, the Virgin Islands, and American Samoa each to have one student at each service academy at any one time. t5U-nat ion of students from Guam and the Virgin Islands was henceforth to be made by each territory's Delegate to Congress, rather than by the Secretaries of the concerned services. Public Law 93-171, 87 Stat. 690. Congress had given Gum and the Virgin Islands the right to elect nonvoting Delegates to the House of Representatives in 1972. Public Law 92-271, 86 Stat. 118. The statutes establishing the authorized strengths of the service academies each continue to allow appointment of one nominee from American Samoa by the Secretary of the respective service on the recommendation of the Governor of American Samoa. Since enactment of those provisions in 1962, Congress has provided for representation of *The people of Guam in 1968 were granted the right to elect their own qovernor. Public Law 90-497, @ 1, 82 Stat. 842. The people of the Virgin Islands wre granted that right at the same time. Public Law 90-496, S 4, 82 Stat. 837. 1he people of American Samoa were given a similar right by order of the United States Secretary of the Interior in 1977. Secretarial Order 3009, September 13, 1977. (The Department of the Interior administers American Samoa pursuant to Executive order 10264, June 29, 1951, which in turn is issued pursuant to the authority granted by Congress in the Act of February 20, 1929, c.281, 45 Stat. 1253, 48 U.S.C. � 1661.) - 76 American Samoa in Congress by a nonvoting Delegate to the House of Representatives. Public Law 95-556, S 1, October 31, 1978, 92 Stat. 2078, 48 U.S.C. � 1731. The Delegate is entitled to the sane privileges and immunities as the Delegate from Guam. Id. � 5, 48 U.S.C. � 1735. One of those privileges would appear t6-be that of ncminating candidates for appointment to the service academies, but the governing statutes provide a distinct method of appointment. See 10 U.S.C. �9 4342(a)(10), 6954(a)(10), 9342(a)(10). Present applicability. officers in the armed forces of the United States must be citizens of the United States. 10 U.S.C. � 532(a)(1). In its January 1982 interim report to Congress, the Commission recommended enactment of legislation to treat citizens of the Northern Mariana Islands as citizens of the United States for purposes of this requirement. In 1983 Congress enacted Public Law 98-94, 97 Stat. 628. Section 1006 of Public Law 98-94 allows citizens of the Northern Mariana Islands to be camissioned as officers in the armed forces of the United States.* No provision has yet been made, however, to allow a citizen of the Northern Mariana Islands to qualify for an officer's commission by attending one of the service academies. The Ccmmission recommends enactment of legislation to allow the Resident Representative for the Northern Mariana Islands to ncminate one individual fran the Northern Mariana Islands to attend each of the service academies at any one time. Discussion. Admission to the United States Military Academy, the United States Naval Academy, and the United States Air Force Academy is an honor for the person admitted. The student at any of the academies is offered a fine education at little or no personal cost, with an officer's commission on graduation. Many academy graduates have gone on not only to serve with distinction in the armed forces of the United States but to distinguish themselves in other areas of endeavor. The authorized strength- of each of the service academies includes, in addition to students frcFn all the States, students from Puerto Rico, Guam, the ViLgin Islands, and American Sama. Adding one student from the Northern Mariana Islands to the authorized strength of each academy will provide the Northern Mariana Islands *A citizen of the Northern Mariana Islands otherwise qualified for an officer's ccmmission must indicate "in writing to a ccmmissioned officer of the Armed Forces of the United States an intent to beccime a citizen, aDd not a national, of the United States" on termination of the trusteeship. Public Law 98-941, � 1006(a), 97 Stat. 628 (1983). See Covenant � 302. - 77 - treatment equivalent to that afforded the other territories. Failure to make such a provision will isolate the Northern Mariana Islands as the only part of the American political family not entitled to at least one slot at each of the academies. The cross-section of our Nation's youth at each academy should include a student from the Northern Mariana Islands. Adding one student from the Northern Mariana Islands to the authorized strength of each academy would increase the number of students at each academy nominated according to their dcmicile from 2690 to 2691. wbile the population of the Northern Mariana Islands is admittedly small, nomination of students to the academies is not strictly based on the population of the jurisdictions fran which they are nominated. A single nominee from the Northern Mariana Islands to each of the academies is not meaningfully disproportionate to the fifteen nominees now allotted the least-populated States or the single nominee now alloted American Samoa at each academy. Finally, each nominee must met qualification standards for admission, so the quality of the student body will not be diluted by admission of a nominee from the Northern Mariana islands. The Northern Mariana Islands has no Senator, Representative, or Delegate in the United States Congress. Section 901 of the Covenant, however, allows appointment or election of a Resident Representative to the United States, pursuant to the Constitution or laws of the Northern Mariana Islands. Article V of the Constitution of the Northern Mariana Islands, in accordance with section 901, provides for election of a representative to the United States "to represent the Commonwealth in the United States and to perform those related duties provided by law." The 'legislation here proposed lodges in the Resident Representative authority similar to that now exercised by the Delegates to the United States Congress from Guam and the Virgin Islands.* Under the proposed legislation, the Resident Representative would be allowed to nominate one student to attend each of the academies at any one time. Education at the United States Military Academy, the United States Naval Academy, and the United States Air Force Academy is an iq:)ortant avenue toward a career of service to the Nation. Qualified students from the Northern Mariana Islands should be among those on that avenue. *Legislation recommended elsewhere in this report would confer the status of nonvoting Delegate to the United States Congress on the Resident Representative. - 78 Proposed legislative language. The following language, if enacted by the United States Congress, would implement the Commission reccmmndation to allow the Resident Representative to the United States for the Northern Mariana Islands to nominate one individual each from the Northern Mariana Islands to attend the United States Military Academy, the United States Naval Academy, and the United States Air Force Academy at any one time: An Act authorizing nomination of students from the Northern Mariana Islands to attend the United States Military Academy, the United States Naval Academy, and the United States Air Force Academy. Be it enacted bv the Senate and House of RepresenFa-tives of the United States of America in C3n-gress assembled, that subsection (a) of section 4342 of title 10, United States Code, is amended by striking the language following clause (10) and substituting therefor the following: (11) one cadet from the Northern Mariana Islands, nominated by the Resident Representative to the United States for the Northern Mariana Islands. Each Senator, Representative, and Delegate in Congress, including the Resident Commissioner from Puerto Rico, and the Resident Representative to the United States for the Northern Mariana Islands are entitled to nominate a principal candidate and nine alternates for each vacancy that is available to him under this section. Sec. 2. Subsection (f) of section 4342 of title 10, United States Code, is amended to read as follows: Each candidate for admission nominated under clauses (3)-(7), (9), (10) and (11) of subsection (a) must be domiciled in the State, or in the congressional district, from which he is nominated, or in the District of Columbia, Puerto Rico, Poerican Sawa, Guam, the Virgin Islands, or the Northern Mariana Islands, if nominated from one of those places. - 79 - Sec. 3. Section 4343 of title 10, united States Code, is amended by substituting "clauses (2)-(9) and (11) of section 4342(a)" for "clauses (2)-(9) of section 4342(a)." S I ec. 4. Subsection (a) of section 6954 of title 10, United States Code, is amended by striking the language following clause (10) and substituting therefor the following: (11) One from the Northern Mariana Islands, naminated by the Resident Representative to the United States for the Northern Mariana Islands. Each Senator, Representative, and Delegate in Congress, including the Resident Commissioner fran Puerto Rico, and the Res ident Representative to the United States for the Northern Mariana Islands are entitled to naminate a principal candidate and nine alternates for each vacancy that is available to him under this section. Sec. 5. subsection (a) of section 6956 of title 10, United States Code, is amended to read as follows: The Secretary of the Navy shall, as soon as possible after the first of June of each year, notify in writing each Senator, Representative, and delegate in Congress, and the Resident Representative to the United States for the Northern Mariana Islands of any vacancy that will exist at the Naval Academy because of graduation in the following year, or that may occur for other reasons, for which the member or delegate or resident representative is entitled to naninate a candidate and nine alternates. Sec. 6. Subsection (e) of section 6956 of title 10, United States Code, is amended by substituting "clause (2)-(9) and (11) of section 6954(a)" for "clauses (2)-(9) of section 6954(a)." sec. 7. Subsection (b) of section 6958 of title 10, United States Code, is amended to read as follows: Each candidate for admission nciminated under clauses (3)-(7), (9), (10) and (11) of 80 - section 6954(a) must be domiciled in the State, or in the congressional district, from which he is naninated, or in the District of Columbia, Puerto Rico, ATwrican Sawa, Guam, the Virgin Islands, or the Northern Mariana Islands, if naninated from one of those places. Sec. 8. Subsection (a) of section 9342 of title 10, United States Code, is amended by striking the language following clause (10) and substituting therefore the following: (11) one cadet from the Northern Mariana Islands, nominated by the Resident Representative to the United States for the Northern Mariana Islands. Each Senator, Representative, and Delegate in Congress, including the Resident Commissioner from Puerto Rico, and the Resident Representative to the United States for the Northern Mariana Islands are entitled to nominate a principal candidate and nine alternates for each vacancy that is available to him under this section. Sec. 9. Subsection (f) of section 9342 of title 10, United States Code, is amended to read as follows: Each candidate for admission nominated under clauses (3)-(7), (9), (10) and (11) of subsection (a) must be domiciled in the State, or in the congrssional district, from which he is nominated, or in the District of Columbia, Puerto Rico, Axnerican Samoa, Guam, the Virgin Islands, or the Northern Mariana Islands, if nominated from one of those places. Sec. 10. Section 9343 of title 10, United States Code is amended by substituting "clauses (2)-(9) and (11) of section 9342(a)" for "clauses (2)-(9) of section 9342(a)." - 81 - Conversion of national banks into banks organized under laws of the Northern Mariana Islands; me@ger of banks organized under laws of the Northern Mariana Islands into national banks. Reccnmndation. Legislation should be enacted to allow a national bank in the Northern Mariana Islands to convert into or consolidate or merge with a bank organized under the laws of the Northern Mariana Islands and to allow a bank organized under the laws of the Northern Mariana Islands to merge into a national bank. The statutes. National banks are chartered by the Federal Goverment. Chapter 2 of title 12 of the United States Code governs the organization, operation, and dissolution of national banks.* State goverments may also grant charters to banks. Present applicability. Chapter 2 of title 12 applies to the Northern Mariana Islands. Section 41 of title 12 provides that "the National Bank Act and all other Acts of Congress relating to national banks shall, insofar as not locally inapplicable on and after August 1, 1956, apply to Guam." See also 12 U.S.C. SS 42, 95(b)(2), 95a(3), 202. Chapter 2 is among those laws made applicable to Guam by section 41 and thus made applicable to the Northern Mariana Islands by operation of section 502(a)(1) of the Covenant. Guam and the Northern Mariana Islands are treated differently from other parts of the United States in an important respect. National banks in Guam and the Northern Mariana Islands may not be converted into State banks as may national banks in "any State, any Territory of the United States, Puerto Rico, or the Virgin Islands," *See the discussion of this chapter in the Title-by-title survey of the United States Code, below. - 82 - or in the District of Columbia. 12 U.S.C. �� 214, 214a.* Nor may State banks be consolidated or merged into national banks in Guan and the Northern Mariana Islands as they may in those other jurisdictions. Id. �� 215, 215b.** Discussion. Why national banks in the Northern Mariana Islands may not convert into or consolidate or merge with banks organized under the laws of the Northern Mariana Islands is not clear. Similarly obscure is why banks organized under the laws of the Northern Mariana Islands may not be merged into national banks. There seems to be no good reason for preventing banks in the Northern Mariana Islands from changing their status in the sane way that banks in all other Amrican jurisdictions (except Guam and Anerican Samoa) may change their status. Accordingly, legislation is here proposed to allow national banks in the Northern Mariana Islands to convert into or consolidate or merge with banks organized under the laws of the Northern Mariana Islands and to allow banks organized under the laws of the Northern Mariana Islands to be merged into national banks. Proposed legislative language. The following language, if enacted by the United States Congress, would implement this recommendation: An Act to allow national banks in the Northern Mariana Islands to convert into, consolidate, or merge with banks organized under the laws of the Northern Mariana Islands and to allow banks organized under the laws of the Northern Mariana Islands to be merged into national banks. *The term "Territory" here apparently refers to Alaska and Hawaii, which were not yet States when this legislation became law in 1950. Guam and the Virgin Islands then, as now, were unincorporated but organized territories of the United States. The nent ion of the Virgin Islands in the legislation without mention of Guam stronc ly implies that national banks in Guam (and, consequently, in the Northern Mariana Islands) cannot convert into State banks under the legislation. "Section 215b, like section 214, above, defines "State," to include the "Territories" and the "Virgin islands" but to omit Guam. Again the implication is that State banks in Guam (and, consequently, in the Northern Mariana Islands) may not be consolidated or merged into national banks under these provisions. - 83 - Be it enacted by the Senate and House of Representatives of the United States of America in CoTq_ress assembled, that Sec. 1. Conversion of national bank into bank organized under laws of the Northern Mariana Islands. Subsection (a) of section 1 of the Act of August 17, 1950, c.729, 64 Stat. 455, as amended (12 U.S.C. S 214(a)), is further amended by deletinq "the Virgin Islands," and inserting in lieu thereof "the Virgin Islands, or the Northern Mariana Islands,". Sec. 2. Mer2er of - bank organized under laws of the Northern Mariana Islands into national bank. Subse (2) of section 3 of the Act of November 7, 1918, c.209, 40 Stat. 1036, as added by section 20 of Public Law 86-230, 73 Stat. 457 (12 U.S.C. � 215b(2)), is amended by inserting immediately after the phrase "the Virgin Islands," the phrase "the Northern Mariana Islands,". Maximum amounts for federally-insured mortgages in the Northern Mariana Islands. Recommendation. The Secretary of Housing and Urban Development way increase the maximun amounts for federally-insured mortgages in Alaska, Guam, and Hawaii to allow for high construction costs in those areas. Legislation should be enacted to allow the Secretary similar discretionary authority to increase maximum amounts for federal ly-insured mortgages in the Northern Mariana Islands, where construction costs also can be substantially higher than prevailing costs in the forty-eight contiquous States. The statutes. Title II of the National Housing Act is codified as subchapter II in chapter 13 of title 12 of the United States Code.* Title II is: designed to improve housing standards and conditions by utilizing the best available means for achieving a sustained long-term residential construction program with a *See also the discussion of this subchapter in the Title-by-title survey of the United States Code, below. - 84 minimum expenditure of federal funds and a maximum reliance upon private business enterprise. To this end the [Federal Housing Administration (FRA)l insures mortgages on both new and existing one- to four-family hcmes, on properties destroyed or daimaged by major disasters, on sincile-family homes in suburban and outlying areas and small cattimmities, and on farm hcmes located on plots of f ive acres or more adjacent to a public highway. The FHA insures mortgages on large scale rental housing projects which are intended to aid the production of reasonably priced rental accommdations for families and mortgages on cooperative housing. To aid in the elimination of slums and bliqhted areas, the FHA insures mortgages to assist the financim] required for the rehabilitation of existing dwelling acccmrrodations and to assist the financing of housing required to relocate families which might be displaced as a result of slum clearance. Under Title II, the FHA also insures mortgages to aid in the provision of housing accammodations for servicemen in the Armed Forces of the United States. Federal Banking Law Reporter (CCH) 1572. Present akpplicability. "State" is defined to include Guam and the Trust Territory of the Pacific Islands for purposes of many programs authorized by this subchapter. See 12 U.S.C. �� 1707(d), 1709 (mortgage insurance); k@ id. � 1713(a)(7) (rental housing mortgage insurance); id. � 1715 (c) (mortgage insurance for housing in urban renewad- areas); id. � 17151(c) (mortgage insurance for housing for low and moder@a-te incame families and displaced families); id. S 1715y(b) (mortgage insurance for condcrniniums). All of the programs available in Guam by the terms of the authorizing statute or by regulations implementing the authorizing statute are available in the Northern Mariana Islands by operation of section 502(a) of the Covenant. One statute in subchapter II may not be applicable to the Northern Mariana Islands. Section 1715d of title 12 allows the Secretary of Housing and Urban Development to increase the maximum amounts for federally-insured mortages in Alaska, Guam, and Hawaii to allow for high construction costs in those areas. If this provision is characterized as a banking law, the Secretary already has the authority similarly to increase maximum amounts for federal ly-i nsured mortgages in the Northern Mariana Islands. Covenant S 502(a)(1). If the provision is not a banking law, the Secretary's authority to raise maximum amounts does not extend to the Northern Mariana Islands. 85 - Discussion. Construction costs, particularly for materials, are high in the Northern Ma 'riana Islands, just as they are in nearby Gum and in Alaska and Hawaii. Legislation is here proposed to confirm the authority of the Secretary of Housing and Urban Development to increase the maximum amounts for federal ly-i nsured mortgages in the Northern Mariana Islands. Proposed legislative language. The following language, if enacted by the United States Congress, would implement this recommendation: An Act authorizing the Secretary of Housing and Urban Development to increase maximum amounts for certain federally-insured mortgages in the Northern Mariana Islands. Be it enacted bV the Senate and House of Representatives of the United States of America in Congress assembled that section 214 of the Act of June 27, 1934, c.847, 48 Stat. 1246, as added by section 2(a) of the Act of April 23, 1949, c.89, 63 Stat. 57, and as amended (12 U.S.C. � 1715d), is further amended by deleting "or Hawaii" each time it appears and inserting in lieu thereof, "the Northern Mariana Islands, or Hawaii". Insurance of "public unit" accounts in federally-insured savings and loan associations. Recam-nendation When public funds are invested in federal ly-i nsured savings and loan associations, federal law permits establishment of separate, "public unit" accounts so that the maximum insurable cimount is not exceeded. Legislation should be enacted to allow the government of the Northern Mariana Islands to take advantage of this provision. The statutes. Subchapter IV in chapter 13 of title 12 of the United States Code creates the Federal Savings and Loan Insurance Corporation (FSLIC). The FSLIC, which is supervised by the Federal Home Loan Bank Board, insures savings deposited in savings and loan associations and similar thrift institutions, much as the Federal Deposit Insurance Corporation insures deposits in banks. Individual deposits of up to $100,000 are insured. 12 U.S.C. S 1728(a). - 86 Accounts established by various officers, employees, and aqents of Federal, State, and local governments lawfully investinq public funds in insured institutions, for purposes of detennininq whether the amount of the account exceeds the maximum insurable amount, are treated as separate from other accounts established by other officers, employees, or agents of the same government. 12 U.S.C. � 1724(b). Thus, a government may have on del)osit in a single savings and loan institution funds well in excess of $100,000. So long as those funds are deposited in distinct "public unit" accounts, none of which exceeds $100,000, all of the funds are insured. Present applicability. The FSLIC is required to insure the accounts of all federal ly-chartered savings and loan associations and savings banks. 12 U.S.C. S 1726(a). Federal ly@chartered savings and loan associations may be organized in the Northern Mariana Islands. 12 U.S.C. 5� 1464, 1466; Covenant � 502(a). Accordingly, the FSLIC is also required to extend its services to the Northern Mariana Islands. The FSLIC is also permitted to insure the accounts of savings and loan associations, building and loan associations, hornestead associations, and cooperative banks organized and operated according to the laws of a territory or possession in which they are chartered or organized. 12 U.S.C. � 1726(a). Since Guam is a territory or possession, the accounts of eligible institutions in Guam may be insured by the FSLIC. By operation of section 502(a) of the Covenant, so too may the accounts of eligible institutions in the Northern Mariana Islands. The government of the Northern Mariana Islands is not included in the list of governments entitled to establish public unit accounts, either directly or by operation of the Covenant. 12 U.S.C. 87 - S 1724(b).* (The goverment of "any Territory" is included in the list. "Territory" in this context must be considered to refer only to an incorporated territory of the United States, since unincorporated Puerto Rico and the Virgin Islands are listed separately. Guam is not included in the list and is not an incorporated "Territory." 48 U.S.C. S 1421a. Accordingly, public unit accounts are not available to the goverment of Guam and are not made available to the Northern Mariana Islands by operation of the Covenant.) Discussion. Public unit accounts enable a government to deposit funds in a federal ly-i nsured savings and loan institution without losing federal insurance coverage on total deposits of that qoverment in that institution in excess of $100,000. So long as individual public unit accounts do not exceed $100,000, the total of that goverment's deposits will remain insured. The government of the Northern Mariana Islands should have the sarne ability as do the governments of all States and of Puerto Rico and the Virgin Islands to establish separate public unit accounts in federally-insured savings and loan institutions." *Another provision in subebapter II specifies a $100,000, per account maximum insurable amount for public-funds accounts maintained by officers, employees, or agents of any territory or possession in an insured institution in that territory or possession. 12 U.S.C. � 1728(d)(1)(iv). Since Guam is a territory or possession, by operation of section 502(a) of the Covenant, the $100,000 maximum applies to public-funds accounts maintained by officers, employees, or agents of the Northern Mariana Islands at insured institutions within the Northern Mariana Islands. Section 1728(d)(1)(iv) does not explicitly allow such accounts to be treated separately fran other accounts established by other officers, employees, or agents of the Northern Mariana Islands for purposes of determining whether funds on deposit exceed the maximum insurable amount. Further, section 1728(d)(1)(iv) applies only to Northern Mariana Islands public accounts maintained at insured institutions within the Northern Mariana Islands. Section 1724(b), if made applicable to Northern Mariana Islands public accounts, would permit those accounts to be maintained at an insured institution within the Northern Mariana Islands or anywhere else in the United States. "The CamTassion's mandate does not extend beyond recamending changes in federal laws as they apply to the Northern Mariana Islands. Accordirply, no reccimiendation is here made as to whether the governments of Gum and American Samoa ought to have similar authority to establish public unit accounts. - 88 - Proposed legislative language. The following language, if enacted by the United States Congress, would implement this recanmendation: An Act to allow officers, employees, and agents of the government of the Northern Mariana Islands and its political subdivisions to establish public unit accounts in federally-insured savings and loan institutions. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, that subsection (b) of section 401 of the Act of June 27, 1934, c.847, 48 Stat. 1246, as amended (12 U.S.C. � 1724(b)), is further amended by inserting immediately after the phrase "of the Virgin Islands," the phrase "of the Northern Mariana Islands,". Farm Credit System Recommendation. Legislation should be enacted to allow the Federal Farm Credit Board to extend the services of the Farm Credit System to the Northern Mariana Islands if the Board determines extension to be feasible. The statutes. The Farm Credit System is comprised of Federal land banks and Federal land bank associations, Federal intermediate credit banks and production credit associations, and banks for cooperatives. Initially capitalized by the United States, the entire System is now owned by its users. The System is designed to provide adequate and dependable credit and closely related services to farmers, ranchers, producers or harvesters of aquatic products; persons engaged in providing on-the-farm services; rural homeowners; and to associations of farmers, ranchers, or producers or harvesters of aquatic products or federations of such associations Which operate on a cooperative basis and are engaged in marketing, processing, supply or business service functions for the benefit of their members. - 89 - U.S. Government Manual 477 (1982). The Farm Credit Administration supervises the Farm-Credit System. 12 U.S.C. S 2252. Most federal laws qoverning the Fam Credit System are found in chapter 23 of title 12 of the United States Code. Chapter 23 forepresents a camplete rewriting of the farm credit laws and a fundamental reworking of the statutory basis for the fam credit system." Historical Note following 12 U.S.C. q 2001. other provisions in title 12 affecting the Farm Credit System are found in chapter 7, Farm Credit Administration; chapter 7A, Agricultural MarketiM; and chapter 7B, Regional _@@Micultural Credit Corporations.* Present applicability. The Fam Credit System does not extend to Guam or the Northern Mariana Islands. Only Puerto Rico, of the jurisdictions outside the fifty States and the District of Columbia, is expressly within the System, although the Federal Farm Credit Board is authorized to take action to include the Virgin Islands within the System. 12 U.S.C. S 2221. See also 36 Op. Attly Gen. 326 (1930). Discussion. The Federal Farm. Credit Board in 1980 was given authority to extend the Farm Credit System to the Virgin Islands if extension is determined to be feasible under regulations of the Fam Credit Administration. Public Law 96-952, S 501, 94 Stat. 3437, 12 U.S.C. S 2221.** See also House Report 96-1287, at 23 (1980), reprinted in 1980 U.S. Code Cong. & Ad. News 7095, 7106. The United States promises, in ion 703(a) of the Covenant, to make available to the *Most of chapter 7 of title 12 was repealed by Public Law 92-181, 85 Stat. 583 (1971), which enacted chapter 23. A few provisions of chapter 7 remain in effect. See 12 U.S.C. SS 773, 931a, 1016(h), 1020c-1, 1020n-1, 1023a, 1131j. Chapter 7A, originally subchapter VII of chapter 7, also remains in effect, as does part of chapter 7B, originally subchapter VIII of chapter 7. Chapter 8, Adjustment and Cancellation of Farm Loans, and chapter 10, Local Agricultural-credit Corporations, Livestock--loan 22T22nies and Like Organizations; Loans to Individuals to Aid Information or to Increase _ Capital Stock, also govern aspects of the Farm Ur-eTi-t System. "The Federal Farm Credit Board has not yet extended the system to the Virgin Islands. See 12 C.F.R. �9 600.10(a), 613.3010 (1984). - 90 - Northern Mariana Islands the full range of programs and services available to the territories of the United States, including the Virgin Islands. Although ccmmercial agriculture in the Northern Mariana Islands is limited at this time, it is thought to have substantial potential for development. Ihe Northern Mariana Islands is particularly well-situated to provide tropical produce to Japan and other non-tropical industrial nations in the western Pacific area. Access to the Federal Farm Credit system could contribute to realization of that potential and to fulfillment of the obligation of the United States to assist in the econcFnic development of the Northern Mariana Islands. Covenant S 701. Accordingly, legislation is here proposed to give the Federal Farm Credit Board authority, like that given in the case of the Virgin Islands, to extend the Farm Credit System to the Northern Mariana Islands if extension is determined to be feasible under regulations of the Farm Credit Administration. Proposed legislative lan2!2age. The following language, if enacted by the United States Congress, would implement this recam-Lendation: An Act to authorize the Federal Farm Credit Board to extend the Farm Credit System to the Northern Mariana Islands. Be it enacted . by_ the Senate and House of Representatives of the United States of America in Congress assembled, that section 5.0 of Public Law 92-181, 85 Stat. 583, as amended by section 502 of Public Law 96-592, 94 Stat. 3437 (12 U.S.C. � 2221) is further amended by inserting the phrase "and the Northern Mariana Islands" after the phrase "the Virgin Islands of the United States" each time it appears. Escheat of abandoned money orders and traveler's checks. Recrmendation. Legislation should be enacted to allow the Northern Mariana Islands, like the States of the United States, to beccrne the owner of abandoned or unclaimed money orders, traveler's checks, and similar instruments purchased in the Northern Mariana Islands. The statutes. Chapter 26 of title 12 of the United States Code provides for escheat of any money order, traveler's check, or similar instrument, if the purchaser cannot be found, to the State in which it was - 91 - purchased pursuant to the escheat laws of that State. (Escheat laws, in general, give to the State ownership of abandoned or unclaimed property.) Before this chapter was enacted, abandoned or unclaimed money orders, traveler's checks, and similar instruments escheated to the State in which the bank or other issuer of the obligation to pay was domiciled. See 120 Cong. Rec. 4673, 4679, 19206 (1974). Present applicability. The geographic reach of this chapter is defined neither by the statutes nor by their legislative history. In the absence of any such definition, the chapter is not applicable to Gucm or the Northern Mariana Islands. Discussion. There is no reason why the Northern Mariana Islands should not be permitted, like the States, to become the owner of abandoned or unclaimed money orders, traveler's checks, and similar instruments purchased in the Northern Mariana Islands. Legislation is here recamended to make this chapter applicable to the Northern Mariana Islands. Proposed legislative language. The following language, if enacted by the United States Congress, would implement this reccmmendation: An Act to treat the Northern Mariana Islands as a State for purposes of the law permitting a State to become the owner of abandoned money orders or traveler's checks purchased in that State. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, that the Northern Mariana Islands shall be considered a "State" for purposes of sections 601, 602, and 603 of Public Law 93-495, 88 Stat. 1500 (12 U.S.C. �� 2501, 2502, and 2503). Northern Mariana Islands banks' particilLation in domestic markets. Recomendation. Legislation should be enacted to make clear that banks organized under the laws of the Northern Mariana Islands are eligible to establish Federal branches or agencies. - 92 - 1'he statutes. Chapter 32 of title 12 of the United States Code allows a foreign bank to establish one or more Federal branches or agencies in any State in which it is not operating a branch or agency pursuant to State law if it is not prohibited fran doing so by State law. Foreign banks may only engage in interstate banking to the extent dcmestic banks are permitted to so engage. 12 U.S.C. � 3103. Federal branches of foreign banks accepting any deposits of less than $100,000 are generally required to obtain insurance fran the Federal Deposit Insurance Corporation. Id. q 3104. And Federal branches and Federal agencies of foreign S@n-ks are generally subject to the supervisory authority of the Board of Governors of the Federal Reserve SystEm. Id. S 3105. Present applicability Chapter 32 defines a "foreign bank" to include banks "organized under the laws of a foreign country, a territory of the United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands." 12 U.S.C. S 3101(7). "State," on the other hand, is defined to include only the fifty States and the District of Columbia.* Because this chapter was enacted after January 9, 1978, the treat:ment of banks organized under the laws of Guam as foreign banks does not operate to make banks organized under the laws of the Northern Mariana Islands foreign banks for purposes of this chapter. It is possible to view banks organized under the laws of the Northern Mariana Islands as banks organized under the laws of a foreign country. See, for example, Callas v. United States, 152 F. Supp. 17 (E.D.N.Y. 1957), affirmed, 253 F.2d 838 (2d. Cir. 1958), certiorari denied, 357 U.S. 936 (1958) (Trust Territory of the Pacific Islands is a foreign country for purposes of the Federal Thrt Claims Act). On termination of the trusteeship, however, the Northern Mariana Islands will clearly be under the sovereignty of the United States. Covenant �� 101, 1003(c). Section 105 of the Covenant requires that legislation enacted after January 9, 1978, that is not applicable to the several States specifically name the Northern Mariana islands if it is to apply to the Northern Mariana Islands. while chapter 32 is certainly applicable to the several States, it applies differently to *These definitions are similar to those in chapter 6 of title 12, governing foreign banking. - 93 - the States than it does to the territories. The Northern Mariana Islands will become a territory of the United States on termination of the trusteeship. Section 105 of the Covenant may operate at that time to prevent banks organized under the laws of the Northern Mariana Islands from being treated as foreign banks eligible to establish Federal branches or agencies pursuant to this chapter. Discussion. Banks operating in foreign countries and banks operating in territories of the United States are treated identically for purposes of chapter 32. The Northern Mariana Islands, moving from the status of a foreign country to that of a territory, should not be treated differently. Chapter 32 allows a reading permitting banks organized under the laws of the Northern Mariana Islands to be treated as foreign banks eligible to establish Federal branches or agencies, but it also allows a contrary reading. Section 105 of the Covenant raises further uncertainties as to the chapter's applicability to the Northern Mariana Islands after termination of the trusteeship. These ambiguities should be resolved so that banks organized under the laws of the Northern Mariana Islands are clearly eligible to establish Federal branches or agencies pursuant to chapter 32, both before and after termination of the trusteeship. Proposed legislative language. The followimj language, if enacted by the United States Congress, would implement this recommendation: An Act to amend the application of the International Ranking Act of 1978 to the Northern Mariana Islands. Be it enacted @y the Senate and House of Representatives of the United States of America_ in Congress assembled, that paragraph (7) of subsection (b) of section 1 of Public Law 95-369, 92 Stat. 67 (12 U.S.C. S 3101(7)), is amended by deleting "or the Virgin Islands," and inserting in lieu thereof "the Virgin Islands, or the Northern Mariana Islands,". Surveillance of ocean areas. Recommendation. Congress sbould emphasize to the executive branch of the United States Goverriment the importance of patrolling ocean areas within two hundred miles of the coastlines of the Northern Mariana Islands and - 94 - monitoring foreign economic activity within that area. Congress should also ensure that sufficient funds are appropriated to the executive branch so that the United States Coast Guard can patrol these waters frequently. Legislation should be enacted authorizing the Coast Guard to utilize, on a reimbursable basis or otherwise, the personnel and resources of other federal agencies and of the government of the Northern Mariana Islands in patrolling these waters. The statutes. The United States Coast Guard now has statutory authority to "enforce or assist in the enforcement of all applicable Federal laws on and under the hiqh seas and waters subject to the jurisdiction of the United States." 14 U.S.C. � 2. "The Coast Guard may make inquiries, examinations, inspections, searches, seizures, and arrests upon the high seas and waters over which the United States has jurisdiction, for the prevention, detection, and suppression of violations of laws of the United States." Id. � 89.* Present applicability. The Coast Guard's current statutory law-enforcement authority extends to the high seas and waters adjacent to the Northern Mariana Islands. (The Northern Mariana Islands and its territorial waters are subject to the jurisdiction of the United States. Trusteeship Aareement, Art. 3; Covenant SS 101, 1003(c).) For many years, Coast Guard vessels have made occasional patrol voyages through the Trust Territory, including the Northern Mariana Islands. Discussion. Opposition to application of the Magnuson Fishery Conservation and Management Act to the Northern Mariana Islands is widespread in the Northern Mariana Islands. One of the reasons for this opposition is that the Federal Government is widely perceived as making little effort to ensure that the Act is enforced in waters adjacent to the *In addition, the Coast Guard is responsible for enforcement of the Maqnuson Fishery Conservation and Management Act (FCMA). 16 U.S.C. S 1861(a). In a separate recommendation, however, the Commission has proposed that the FCMA not apply to waters adjacent to the Northern Mariana Islands. - 95 - Northern Mariana Islands. Foreign f ishing vessels are seen much more frequently in those waters by residents of the Northern Mariana Islands than are Coast Guard vessels. Those foreign vessels may be engaged in no illegal activity: The principal fish sought in those waters is tuna, and the United States regards the taking of tuna within the exclusive econcmic zone as legal, so long as it is done outside territorial waters. Without effective surveillance, however, the residents of the Northern Mariana Islands do not know whether foreign vessels are intruding in territorial waters, whether they are taking tuna or other fish in those waters, or whether they are taking other fish in the exclusive econcmic zone. Anecdotal evidence suggests that these vessels not only trespass in the territorial waters of the Northern Mariana Islands but even send landing parties onto uninhabited islands of the Northern Marianas chain.* The resources available to the Coast Guard in the western Pacific are admittedly scanty. A Coast Guard cutter and a buoy tender based on Guam are assigned to patrol not only the Northern Mariana Islands but also the entire Trust Territory of the Pacific Islands. The Trust Territory of the Pacific Islands covers an ocean area larger than the forty-eight contiguous States of the United States. See New Buoys Light the Way for Ships Marianas Variety, February 18, 1583, at 5. The Northern Mariana Islands is in the process of beccming part of the American political family, under the sovereignty of the United States. Covenant 101. As such, its resources are entitled to the s&yte protection given the resources of other areas under the jurisdiction of the United States. The Cammission does not suggest the level of protection that should be provided for the ocean areas by the Coas t Guard. The Ccmmission believes, however, that current protection of the resources of the Northern Mariana Islands, including the resources within two hundred miles of its coastlines, is inadequate. The legislation here proposed declares the need for increased Coast Guard surveillance of ocean areas within two hundred Tniles of the coastlines of the Northern Mariana Islands. The legislation also allows the Coast Guard to utilize, on a reimbursable basis or otherwi se, the personnel and resources of other federal *Scmewhat unsettling to residents of the Northern Mariana Islands are suggestions that the United States has agreed with Japan that Japan should be principally responsible for the defense of sea lanes in the western Pacific between Guam and Japan. The Northern Mariana Islands, of course, are directly between Guam and Japan. See What's Guam's Role in Sea-Lane Defense, Pacific Daily News (Guam), March 15, 1983, at 20; 'Japanese to Study Guarding Sea Lane, New York Times, January 21, 1983, at A4. 96 - agencies--including the Department of Defense--and of the government of the Northern Mariana Islands to carry out that surveillance.* Proposed legislative language. The following language, if enacted by the United States Congress, would implement this recommendation: An Act to provide for increased surveillance of the coastal waters and exclusive economic zone adjacent to the Northern Mariana Islands. Be it enacted by the Senate and House of RepresenEa-tives of the United States of America in Congress assembled, that the Congress finds and declares that: (a) The Northern Mariana Islands, on termination of the T'rusteeship Agreement between the United States and the United Nations, will become a self-governing commonwealth in political union with and under the sovereignty of the United States, pursuant to section 101 of the Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States of America (as approved by Public Law 94-241, 90 Stat.@263 (1976)). (b) 'The United States is obligated to protect the resources of the Northern Mariana Islands, including those resources found within two hundred miles of the coastlines of the Northern Mariana Islands, against unlawful exploitation by nationals or residents of other nations. (c) The United States, to fulfill its obligation to the people of the Northern Mariana Islands, should increase its surveillance of all ocean areas within two hundred miles of the coastlines of the Northern Mariana Islands. In particular, the United States should ensure that all applicable federal laws, including those governing the exploitation of marine resources, are enforced within those areas. *The legislative language allowing the Coast Guard to utilize the personnel and resources of other agencies, including the Department of Defense, is modelled on section 1861(a) of title 16, United States Code. - 97 - Sec. 2. The Secretary of the Department in which the Coast Guard is operating may, by agreement, on a reimbursable basis or otherwise, utilize the personnel, services, equipiment (including aircraft and vessels) and facilities of any other Federal agency, including all elements of the Department of Defense, and of the Government of the Northern Mariana Islands in patrolling waters within two hundred miles of the coastlines of the Northern Mariana Islands. Investment companies. Reccmmendation. The Investment Canpany Act of 1940, which requires registration of mutual funds and other investment ccmpanies and otherwise regulates their activities, is now applicable to the Northern Mariana Islands. Legislation should be enacted to exempt investment ccFnpanies organized and doing business only in the Northern Mariana Islands frcm the provisions of this Act. A similar exemption already exists for investment canpanies organized and doing business only on Guam or only in any other single territory of the United States. The statutes. Congress enacted the Investment Ccmpany Act of 1940, chapter 2D of title 15 of the United States Code, to control improper investments and securities trading abuses by investment companies, such as mutual funds, and investment advisers. All investment canpanies and most investment advisers must register with the Securities and Exchange Catatission (SEC) in order to engage in securities transactions using the mails or any means of interstate cam%rce. 15 U.S.C. SS 80a--7, 80a--8, 80b-3. A wide variety of acts and practices are proscribed by this chapter in an attEmpt to prevent investment canpanies and advisers fran taking unfair advantage of investors. Present Mlicability "State" is defined, for purposes of chapter 2D, to include the possessions of the United States. 15 U.S.C. SS 80a-2(a)(39); 80b-2(a)(19). Guam is a possession of the United States. Accordingly, by operation of section 502(a)(2) of the Covenant, the Northern Mariana Islands is a "State" for purposes of chapter 2D. Invesb,nent companies organized and doing business in a possession of the United States are exempt fran chapter 2D so long as - 98 - they do not issue securities to a resident of another State. 15 U.S.C. 9 80a-6(a)(1). Although investmnt companies organized and doing business on Guam are eligible for this exemption, chapter 2D applies to the Northern Mariana Islands as it does to the several States. Covenant � 502(a)(2). Accordingly, all investment companies organized and doing business in the Northern Mariana Islands must ccmply with the registration and other requirements of chapter 2D. Discussion. Investment ccmpanies; organized and doing business solely in the Northern Mariana Islands should be exempt from the provisions of chapter 2D, just as are similar firms organized and doinq business solely on Guam (or in any other single territory of the United States). There may be good reasons for subjecting all investment companies in the territories to the extensive regulation imposed by this chapter. Subjecting investment companies in the Northern Mariana Islands to that requlation while exemptinq similar firms on Guam would give Cie firms on Guam an unfair campetitive advantage over their counterparts in the Northern Mariana Islands. The exemption frcm chapter 2D for investment ccmpanies in particular territories is lost if the campany sells its shares to a resident of any State or territory other than that in which the company is organized. 15 U.S.C. 9 80a-6(a)(1). Consequently, the exemption does not provide a loophole through which residents of other parts of the United States can escape the operation of this chapter. Legislation is here prcposed to grant investment companies in the Northern Mariana Islands the saTW exemption frcm. chapter 2D enjoyed by investment canpanies on Guam and in the other territories.* Proposed legislative language. The following language, if enacted by the United States Congress, would implement this reccmmendation: An Act to exempt certain investment ccrnpanies in the Northern Mariana Islands fran the Investment Company Act of 1940. Be it enacted the Senate and House of Representatives of the United States of America in Congress *The SBC could grant this exemption through exercise of its regulatory authority. 15 U.S.C. S 80b-6a. See 17 C.F.R. 99 275.0 et seq. (1984). - 99 - assembled, that section 6 (a) (1) of the Investment Campany Act of August 22, 1940, c. 686, 54 Stat. 789 (15 U.S.C. � 80a-6(a)(1)), is amended by inserting "the Northern Mariana Islands," immediately before "the Virgin Islands,". Autcmobile Dealers pay in Court Act. Reccmendation. Federal law protects autamobile dealers in the United States against certain unfair practices by autcmbile manufacturers in the performance or termination of franchise agreements. legislation should be enacted to extend the same protections to auton-obile dealers in the Northern Mariana Islands. The statute. Chapter 27 of title 15 of the United States Code contains the Autombile Dealers Day in Court Act. That Act authorizes an autcmobile dealer to bring a lawsuit against an automobile manufacturer if the manufacturer fails to act "in a fair and equitable manner" in perfon-ning or ten-ninating a franchise agreement between the manufacturer and that dealer. The Act is intended to counterbalance the econamic advantages which manufacturers have over their dealers. Present applicability. "Automobile dealer" is defined, for purposes of chapter 27, to include any dealer "resident in the United States or in any Territory thereof or in the District of Columbia." 15 U.S.C. 9 1221(c). Any autcmobile, manufacturer "engaged in camrerce" is subject to the Act. Id. S 1221(a), (b). "Ccrmnieerce" is defined to include ccm-nerce among The several States, in any TL-rritory of the United States, and between any State or Territory and any foreign nation. id. 1221(d). Chapter 27 was enacted in 1956. At that time, the Organic Act of Guam provided that federal legislation did not apply to Guam unless it applied to Guam by name or by use of the term "possession." Act of August 1, 1950, c.512, S 25(b), 64 Stat. 390, 48 U.S.C.A. S 1421c(b) (1952), repealed by Public Law 90-497, S 7, 82 Stat. 842 (1968). Chapter 27 is consequently not available to autombile 100 - dealers resident on Gum* and is not made available to automobi.L, dealers resident in the Northern Mariana Islands by operation of the Covenant. Discussion. Automobile dealers in the Northern Mariana Islands, are distant fran manufacturers and sell in a market extremely limited by the total population of ap 17,000 persons in the Northern proximately Mariana Islands. They are thus even more at a disadvantage in bargaining with manufacturers than are dealerships in other parts of the United States. Legislation should be enacted to give automobile dealers in the Northern Mariana Islands the same protection against threats, coercion, and intimidation given dealers in the States and Territories of the United States. Legislation is here proposed to *One passage in the legislative history of chapter 27 indicates Congress may have intended "I'Lerritory" to encompass any area under the jurisdiction of the United States: This amendment limits the riqht to bring suit in the district courts of the United States to dealers resident in the United States or its Territories. The record before the ccmmittee was concerned only with coercive practices by manufacturers with respect to the United States dealers. The camittee has no information with respect to such practices involving dealers situated in foreign countries. House Report 2850, 84th Cong., 2d Sess. (1956), reprinted at 1956 U.S. Code Cong. & Ad. News 4596, 4601. Further, in Volkswagen Interamericana, S.A. v. Rohlsen, 360 F.2d 437 (1st Cir. 1966), certiorari denied, 3 U.S. 919 (1966), the court held the chapter's remedies available to an automobile dealer in the Virqin Islands without discussing whether the Virgin Islands is a "Territory" within the meaning of the chapter. The Virgin Islands and Gum were both organized, but unincorporated, territories at the time chapter 27 was enacted. The holding of the Rohlsen case and the rather tentative passage from the legislative history of chapter 27 might be sufficient to support the applicability of the chapter to autcmobile dealers resident in Guam in the absence of the requirement imposed by the Orqanic Act of Gum (that Gum be mentioned by name or by use of the, term 'possession" in federal laws ap .plicable to Guam). Because of that requirement, however, neither Rohlsen nor the legislative history can be read to make chapter 27 ap@"p-licable to Guam. - 101 - provide that protection.* Proposed legislative language. The following language, if enacted by the United States Corpress, would implement this recommendation: An Act to make the Automobile Dealers Day in Court Act applicable to the Northern Mariana Islands. Be it enacted !@X the Senate and House of Representatives of the United States of America 711-n -Congress assembled, that section 1 of the Act of August 8, 1956, 70 Stat. 1125 (15 U.S.C. 9 1221), is amended by adding thereto a new subsection to read as follows: (f) The term "Territory" shall include the Northern Mariana Islands. Fishery trade officers; Department of Commerce. Reccnmndation. The United States Department of Commerce, among other functions, is given the duty "to foster, promote, and develop the foreign and domestic commerce jand] the mining, manufacturing, and fishery industries of the United States." In addition, the Secretary of Commerce appoints fishery trade officers to serve abroad to "promote United States fishing interests." Legislation should be enacted to confirm and ensure that the Northern Mariana Islands is considered part of the United States for purposes of these provisions. The statutes. Chapter 40 of title 15 of the United States Code establishes the United States Department of Commerce. The Department of Commerce encourages, serves, and promotes the Nation's international trade, econmic growth, and technological advancement. Within this framework and *The proposed legislation does not extend chapter 27 to Gum nor does it address the applicability of the chapter to other offshore areas such as American Samoa. This Commission's mandate is limited to recommending changes in the applicability of federal laws only to the Northern Mariana Islands. - 102 - together with a policy of pranotinq the national interest through the encouragement of the competitive, free enterprise system, the Department provides a wide variety of programs. It offers assistance and information to hel T) increase exports, administers programs to prevent unfair foreign trade competition, provides social and economic statistics and analyses for business and goverment planners, assists in the development and maintenance of the U.S. merchant marine, provides research and sup ort for the _p increased use of scientific, engineering, and technoloqical development, grants patents and reqisters trademarks, provides assistance to promote domestic economic development, seeks to improve understanding of the Earth's physical environment and oceanic life, promotes travel to the United States by residents of foreiqn countries, and assists in the growth of minority businesses. U.S. Government Manual 131 (1982). Present applicability. Chapter 40 establishes an agency within the executive branch of the Federal Government. The agency's geographic jurisdiction is coextensive with the geographic applicability of the laws it administers. Many of those laws apply in the Northern Mariana Islands. Of particular interest to the Northern Mariana Islands is a provision authorizinq the appointment of fishery trade officers "who shall serve abroad to promote United States fishing interests." 15 U.S.C. S 151lb(a). In effect, these officers are "salesmen for American fish products." House Report 96-1243, part II, at 37 (1980). (one such officer is assigned to Tokyo. Id. � 151lb(b).) Whether fishing interests in the territories and pc;ssessions of the United States, in general, and in the Northern Mariana Islands, in particular, are considered United States fishing interests for purposes of this provision is not specified.* *Fishery trade officer positions were established by section 211 of the American Fisheries Promotion Act, title II of Public Law 96-561, 94 Stat. 3275, 3287, 3290-91 (1980). other provisions in that Act are specifically applicable to the Northern Mariana Islands. See id. �� 210, 220. Those provisions, like section 211, are gener;lly concerned with fisheries, but are amendments to other existing legislation. Section 211 creates a new progran and does not amend existing legislation. A conclusion that fishery trade officers must represent the fisheries interests of the Northern Mariana Islands because other provisions in the Amrican Fisheries Promotion Act apply to the Northern Mariana Islands is thus not strongly supported by the language of that Act. - 103 - The Department of Ccnmx--rce is also assigned the duty "to foster, prcmote, and develop the foreign and domestic camweerce, [and) the mining, manufacturing, and fishery industries of the United States." Id. � 1512. Whether the territories and possessions, in general, or The Northern Mariana Islands, in particular, are considered as part of the United States for purposes of this provision is likewise not specif ied. Discussion. The duties of the Department of Ccmmerce to develop the ccmmerce and industry of the United States and of the Department's fishery trade officers to promote United States fishing interests may easily be construed to encompass the ccmn-ercial, industrial, and fishing interests of the Northern Mariana Islands. But the ccrmrtercial, industrial, and fishing interests of the Northern Mariana Islands might just as easily be ignored.* The Northern Mariana Islands is less developed econcmically than the States of the United States and thus has a correspondingly greater need for the assistance of the Department of Camerce. The fishing industry of the Northern Mariana Islands, seen as one of the more promising avenues to econamic development, may stand particularly to benefit frcm the efforts of the fisheries trade officers, especially the officer in Japan, which is relatively close to the Northern Mariana Islands and with which the Northern Mariana Islands has longstanding ties. Legislation is here reccrmiended to confirm and ensure that the Northern Mariana Islands is considered part of the United States for purposes of these provisions. The proposed legislation is not intended to belittle past efforts of the Department of Ccmmerce to assist in the econamic development of the Northern Mariana Islands. See, for example, Investment Team Arriving, Pacific Daily News (Guam), Focus supplement, August 3, 1984, at 1; Pacific Basin Development Conference, Econamic Growth and Development Through Unity 1, 4-5, 26 (1980). R@ther, the intention is to insure that the ccmmercial, industrial, and fishing interests of the Northern Mariana Islands will always be considered as legitimate beneficiaries of the efforts by the Department and its fisheries trade of f icers. Enactment of the recammended legislation is consistent with the obligation of the United States, pursuant to section 701 of the Covenant, to assist in the econcmic development of the Northern Mariana Islands. *The sane is true for the camyerce, industry, and fishing interests of Guan and other territories and possessions. This Commission's mandate, however, extends only to recanmending changes in federal legislation as it applies to the Northern Mariana Islands. - 104 Proposed legislativelanguage. The following language, if enacted by the United States Congress, would implement this reccmmendation: An Act to ensure that canmercial, industrial, and fishing interests in the Northern Mariana Islands are prcmoted by the United States Department of Ccnrerce and its fisheries trade officers. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, that the Northern Mariana Islands shall be considered as part of the United States for purposes of section 211 of Public Law 96-561, 94 Stat. 3275 (15 U.S.C. � 1511b), and section 3 of the Act of February 14, 1903, c. 552, 32 Stat. 825, as amended (15 U.S.C. � 1512). Restrictions on garnishment. Recammendation. Legislation should be enacted to clarify and confirm the applicability to the Northern Mariana Islands of provisions in the Consumer Credit Protection Act restricting the garnishment of wages. The statutes. Subchapter II of chapter 41 of title 15 of the United States Code contains title II of the Consumer Credit Protection Act. Subchapter II restricts the ability of a creditor to obtain part of a debtor's wages by court order to pay of f a debt. No more than 25 percent of the debtor's wages or no more than the amount by which the debtor's wages exceed thirty times the federal minimum wage, whichever is less, may be taken. If the debt is for support of another person pursuant to court order, a larger percentage may be taken. The restrictions do not apply to State or federal tax debts or to certain debts under the jurisdiction of a bankruptcy court. A principal purpose of the restrictions on wage garnishment is to r educe the number of wage earners f iling for bankruptcy under the federal bankruptcy laws. House Report 1040, 90th Cong., Ist Sess., at 20-21 (1968). Present appl cability. Neither subchapter II nor regulations issued thereunder, 29 C.F.R. part 870 (1984), specify the jurisdictions in which the subchapter is applicable. 105 - No court of the United States may authorize any garnishment in violation of this subchapter. 15 U.S.C. S 1673(c). The District Court for the Northern Mariana Islands is a court of the United States. 48 U.S.C. � 1694. Accordingly, that court may not enforce any such garnishment. No State court or officer or agency may authorize any garnishment in violation of the subchapter. "State," however, is not defined. The legislative history of subchapter II shows that Congress did not intend that unlawful garnishment be allowed in a State court while barred in a federal court in the same jurisdiction. 114 Cong. Rec. 1840 (1968) (statenent of Representative Reuss, a prominent supporter of the legislation). Accordingly, "State" should be defined expansively to include any jurisdiction in which a court of the United States sits. Under that rationale, the Northern Mariana Islands is a "State" for purposes of subchapter II and courts and officers of the goverment of the Northern Mariana Islands may not authorize any garnishment in violation of the provisions of the subchapter. That conclusion, however, does not mean that all provisions of subchapter II apply in the Northern Mariana Islands. Section 1674 of title 15, for example, imposes a criminal penalty on any employer who discharges an employee because the employee's earnings were garnisheed for a single indebtedness. (Discharge is not prohibited if the employees' earnings are garnisheed a second time for a different debt.) Nothing in subchapter II indicates whether an employer in the Northern Mariana Islands might be subject to this penalty. A statute containing criminal penalties must be construed narrowly, so that persons subject to the statute have fair notice that violations may result in fines or imprisonment. 3 Sutherland, Statutes and Statutory Construction 9 59.03 (C. Sands ed. 1974). Consequently, at least the criminal penalty provision in subchapter II should be considered inapplicable to the Northern Mariana Islands. Discussion. Subchapter II should be either entirely applicable or entirely inapplicable in the Northern Mariana Islands. A principal purpose of the subchapter is to prevent differing local garnishment laws from altering the uniform applicability of the federal bankruptcy laws to all parts of the United States. 15 U.S.C. S 1671(a)(3). This Camnission has concluded that the federal bankruptcy laws should apply in the Northern Mariana Islands as they do elsewhere in the United States. Enactment of legislation to ensure the applicability of all of subchapter II to the Northern Mariana Islands will further that objective. Applying subchapter II to the Northern Mariana Islands will protect employees in the Northern Mariana Islands from excessive - 106 - garnishment and from discharge from employment for garnishment for a single debt. Employers will retain the right to discharge the Employee if the employer must make deductions fran the employee's earnings for a second debt. Creditors will retain the right to garnishee earnings in payment of debts, but subject to exemption of a portion of those earnings. The maximum portion of an Employee's earnings subject to garnishment is determined partly by reference to the federal minimum wage requirement. 15 U.S.C. @ 1673(a). Exempt from garnishment is 75 percent of the employee's net weekly earnings or 75 percent of the federal minimum wage for a 40 hour week, whichever is greater. The federal minimum wage requirenent, however, is not generally applicable to the Northern Mariana Islands. Covenant �� 502(b), 503(c). The federal minimum wage is $3.35 per hour while the minimum wage in the Northern Mariana Islands is $2.15 per hour. 29 U. S. C. � 206(a) (1); 4 Code of the Northern Mariana Islands � 9221 (1984). Thus, if the federal standard applies, only earnings in excess of $100.50 per week are subject to garnishTmnt. If the Northern Mariana Islands standard applies, earnings in excess of $64.50 are subject to garnishment. Although the exemption from garnishnent in subchapter II is phrased in terms of earnings, the obvious intent is to allow the employee to retain enough earnings to purchase the necessities of life: food, shelter, and so forth. While earnings in the Northern Mariana Islands are generally less than in other parts of the United States, there is no evidence that the costs of necessities are also less. Accordingly, the proposed legislation, in ensuring the applicability of subchapter II to the Northern Mariana Islands, does not substitute the Northern Mariana Islands minimum wage standard for the federal minimum wage standard in determining earnings exempt from garnishment in the Northern Mariana Islands. The effect of not changing the standard may be to reduce somewhat the availability of consumer credit in the Northern Mariana Islands. Proposed legislative language. The following language, if enacted by the United States Congress, would implement this recammndation: An Act to clarify and confirm the applicability to the Northern Mariana Islands of provisions in the Consumer Credit Protection Act restricting the garnishment of wages. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, that section 302 of Public Law 90-321, 82 Stat. 146 (1968) (15 U.S.C. � 1672), is aTmnded by adding a new subsection, to read: - 107 (d) The term "State" includes the Northern Mariana Islands; Ovemployers, " "employees," and "earnings" within the Northern Mariana Islands are subject to the provisions of this title. Fair Credit Reporting Act. Reccomendation. Legislation should be enacted to clarify and confirm the applicability to the Northern Mariana Islands of the Fair Credit Reporting Act, which regulates the conduct of credit reporting agencies. The statute. Subchapter III of chapter 41 of title 15 of the United States Code contains the Fair Credit Reporting Act of 1970. That Act is designed to encourage the use of fair and impartial procedures by firms that evaluate and report on the credit worthiness of consumers and to allow consumers to protect themselves against the circulation of inaccurate information about their credit worthiness. The subchapter does not apply to business credit reports. The purposes for which consumer credit reports may be used and the persons to whcm such reports may be disclosed are restricted by the subchapter. Credit reports may not contain stale information. A credit reporting f irm 'must disclose to a consumer on request most information and most information sources regarding that consumer and give the consumer an opportunity to correct or dispute the accuracy of information regarding that consumer's credit worthiness. Present applicability. The geographic applicability of subchapter III is not specified by the provisions of the subdhapter, by its legislative history, by regulations issued pursuant to the subchapter, or by any court decision.* The Fair Credit Reporting Act, contained in subchapter III, is an amendment of the Consumer Credit Protection Act. Public *'$Consumer reporting agencies" subject to the subchapter are defined to include those which use "any means or facility of interstate ccmmerce for the purpose of preparing or furnishing" a credit report. 15 U.S.C. S 168la(f). "Interstate ccnumrce, however, is not defined for purposes of the subchapter. - 108 - Law 91-508, � 601, 84 Stat. 1114, 1128 (1970). Prior to the addition of the Fair Credit Reporting Act, the Consumer Credit Protection Act contained only subchapters I and II of this chapter (some provisions of which have been subsequently amended). Subchapter I is clearly applicable to the Northern Mariana Islands.* Subchapter II is probably also applicable, although legislation is reccmmended above to confirm that applicability. Consequently, subchapter III could be regarded as an amendment to a statute applicable to the Northern Mariana Islands and, therefore, as itself applicable to the Northern Mariana Islands. 'That conclusion may, however, be attacked on three arounds. First, the subject matter of subchapter III is sufficiently distinct frcm that of subchapters I and II to make it an amendment in name only. Second, the provision determinative of the Cleographic applicability of subchapter I is specifically applicable only to that subchapter. 15 U.S.C. � 1602(a). Likewise, the provision frcrn which is drawn the conclusion that subchapter II probably applies to the Northern Mariana Islands is also specific to the other provisions of that subchapter rather than general. Id. S 1673(c). Ibird, subchapter III contains a criminal penalty or obtaining information fram a consumer reporting agency under false pretenses. Id. � 1681q. A statute containing criminal penalties must be constr6W narrowly, so persons subject to the statute have fair notice that violations may result in fines or imprisonment. 3 Sutherland, Statutes and Statutory Construction � 59.03 (C. Sands ed. 1974). For al I these reasons, subchapter III, the Fair Credit Reporting Act, should not be considered applicable to the Northern Mariana Islands as an amendment to the Consumer Credit Protection Act. Discussion. A consumer in the Northern Mariana Islands has the sane interest as consumers elsewhere in the United States in protecting himself or herself against the circulation of inaccurate information about his or her credit standing. In practice, consumers in the Northern Mariana Islands may have their credit evaluated by credit reporting agencies in the United States. In many cases, those consumers may seek credit from firms in the United States, such as credit card issuers and mail order merchants. Legislation should be enacted to ensure that subchapter III, the Fair Credit Reporting Act, protects the rights of consumers in the %.rthern Mariana Islands and governs the conduct of any credit reporting agencies established in the Northern Mariana Islands. Legislative language to achieve that end is here proposed. Proposed legislative language. 'The following language, if enacted by the United States Congress, would implement this recarlmndation: *See the discussion of chapter 41 of title 15 of the Title-by@title survey, below. - 109 An Act to clarify and conf irm the applicability of the Fair Credit Reporting Act to the Northern Mariana Islands. Be it enacted by the Senate and House of Representatives of the United States of knerica. in Congress assembled,, that subsection (b) of section 603 of Public Law 90-321, 2 Stat. 146 (1968), as added by section 601 of Public Law 91-508, 84 Stat. 1114 (1970) (15 U.S.C. S 168la(b)), is amended by deleting the final period and adding the following: and includes persons in the Northern Mariana Islands.". Electronic Fund Transfer Act. Recommendation. Legislation should be enacted to clarify and confirm the applicability to the Northern Mariana Islands of the Electronic Fund Transfer Act, which establishes the rights and duties of persons and institutions using electronic fund transfer systems, such as autcmated bank teller machines and cash dispensing machines. The statute. Subchapter VI of chapter 41 of title 15 of the United States Code contains the Electronic Fund Transfer Act. The subchapter regulates electronic fund transfers, for example, fund transfers by mans of autaTated teller machines and cash dispensing machines. The subchapter requires financial institutions to provide written documentation of all such transfers to consumers, limits the consumer's liability for unauthorized electronic fund transfers, and otherwise defines the rights, duties, and liabilities of persons and institutions using electronic fund transfer systems. Presentapplicability. Any State is given the right to seek to substitute its- own regulatory regim for that imposed by this subchapter. 15 U.S.C. � 1693r. Because that right is only useful where the subchapter is applicable, the subchapter is applicable in all States. "State" is defined for purposes of the subchapter to include, among other jurisdictions, "any State, territory, or possession of the United States." Id. � 1693a(10). See also 12 C.F.R. � 205.2(k) (1984). While Guam is a territory or possession of the United States, subchapter VI was enacted after January 9, 1978, the effective date of section 502 of the Covenant. Accordingly, the - 110 - subchapter is not made ap licable to the Northern Mariana Islands by _p section 502 of the Covenant.* Discussion. Electronic fund transfers enable sums of money, large and %mll, to be transferred over large distances. Ccnputers and electronic technology are used instead of checks and other paper documents to move money. Electronic fund transfer technology may be particularly advantageous to the Northern Mariana Islands. The movement of *Subchapter VI was enacted as the Electronic Fund Transfer Act, title XX of Public Law 95-630, 92 Stat. 3641, 3728, on November 10, 1978. Section 502 of the Covenant applies to laws "in existence on the effective date of [section 502, January 9, 1978,1 and subsequent amendments to such laws." Technically, the Electronic Fund Transfer Act was added to a law in existence on January 9, 1978, the Consu M-r Credit Protection Act, and might be regarded as a post-January 9, 1978, amendment to that Act. The Consumer Credit Protection Act is largely coextensive with the six subchapters of chapter 41. The applicability of at least two of those subchapters to Guam (and by operation of section 502 to the Northern Mariana Islands) is clear. See the discussions of subchapters I and V of chapter 41 of title 15 in the Title-by-title survey of the United States Code, below. Accordingly, subchapter VI could be regarded as applicable to the Northern Mariana Islands as a subsequent amendment to a statute applicable (at least in part) to Guam and in existence on January 9, 1978. Three factors militate aqainst the conclusion that subchapter VI is applicable to the Northern Mariana Islands as an amendment to the Consuner Credit Protection Act. First, the subject matter of the Electronic Fund Transfer Act differs substantially from that of other portions of the Consumer Credit Protection Act, making it an amendment in name only. Second, the Electronic Fund Transfer Act contains its own definition of "State," a strong indication that the geographic applicability of the Act is to be determined independently fran that of the other parts of the Consumer Credit Protection Act. Third, criminal penalties are imposed for violation of the Electronic Fund Transfer Act. 15 U.S.C. 9 1693n. A statute containing criminal penalties must be construed narrowly, so persons subject to the statute will have fair notice that violations may result in fines or imprisonment. 3 Sutherland, Statutes and Statutory Construction � 59-03 (C. Sands ed. 1974). For all these reasons, the Electronic Fund Transfer Act should not be considered applicable to the Northern Mariana Islands as an amendment to the Consumer Credit Protection Act. - ill - checks and other paper documents between the Northern Mariana Islands and other parts of the United States (or other parts of the world) can require several days, or more, because of the location of the Northern Mariana Islands. Electronic fund transfers, however, may be made by telephone. Since the Northern Mariana Islands is telephonically connected with the rest of the world by space satellite, funds may be transferred electronically between the Northern Mariana Islands and most world ccmnercial centers almost instantaneously. Subchapter VI, however, is primarily concerned with the rights of consumers in electronic fund transfers. 15 U.S.C. S 1693(b). Consumers in the Northern Mariana Islands should have the sane rights with respect to electronic fund transfers as do consumers elsewhere in the United States. Subchapter VI is applicable to Guam and all other territories and possessions of the United States. Id. 1693a(10). Its legislative history does not indicate why the 7ubchapter was not also applied to the Northern Mariana Islands. See 1978 'U.S. Code Cong. & Ad. News 9273, 9403 et seq. A fair guess is that, when the subchapter was enacted, only ten months after the effective date of section 502 of the Covenant, the persons drafting the subchapter were not aware additional language was necessary to make it applicable in the Northern Mariana islands. That additional language is here proposed. Proposed legislative language The following language, if enacted by the United States Congress, would implement this recamnendation: An Act to make the Electronic Fund Transfer Act applicable to the Northern Mariana Islands. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, that section 903(10) of Public Law 90-321, 82 Stat. 146 (1968), as added by section 2001 of Public Law 95-630, 92 Stat. 3641 (1978) (15 U.S.C. 9 1693a(10) ), is amended by inserting "the Northern Mariana Islands," immediately after "the Cam:morwealth of Puerto Rico,". 112 - Petroleum Marketing Practices Act. Recomendation. Legislation should be enacted to make applicable to the Northern Mariana Islands a federal statute protecting gasoline and diesel fuel distributors and service stations fran arbitrary or discriminatory termination or nonrenewal of their franchises by their suppliers. The legislation should also make applicable to the Northern Mariana Islands provisions in the same statute requiring sellers of gasoline to disclose the octane rating of that gasoline. The statutes. The Petroleum Marketing Practices Act is found in chapter 55 of title 1.5 of the United States Code. Chapter 55 protects gasoline and diesel fuel distributors and service stations, frcrn arbitrary or discriminatory termination or nonrenewal of their franchises by their suppliers. The chapter is intended to counterbalance the econanic advantages refiners and suppliers have over their distributors and dealers. Chapter 55 also requires disclosure of standard gasoline octane ratings by refiners, distributors, and dealers. The purpose of the octane disclosure requirements is to allow an operator of a motor vehicle to avoid buying gasoline with a higher octane than is necessary for that vehicle. Not only does the operator save money, but petroleum is conserved on a national scale since more crude oil is required to produce higher octane gasoline. See generally Senate Report 95-731, at 877-79 (1978). Present applicability. The franchise protection provisions of chapter 55 are directed toward any "franchisor engaged in the sale, consignment, or distribution of motor fuel in ccmmerce." 15 U.S.C. � 2802(a). The octane disclosure requirements are likewise directed at refiners and dealers who distribute gasoline in cam-nerce. Id. � 2822(a), (b). See also id. 9 2822(e). The octane disclosure i;;@uirEments are also directed7t "each gasoline retailer," without qualification. id. S 2822(c). Tcmmerce" is defined, for purposes of the franchise protection and octane disclosure provisions of chapter 55, to include "cCmmerce between any State and any place outside of such State." id. �� 2801(18), 2821(13). Further, all "States" are prohibited 675m enacting laws imposing franchise protection or octane disclosure requirements different frcm those in chapter 55, strong evidence that - 113 the chapter is to apply in all "States." Id. �� 2806, 2824. "State" in turn is defined to include, among other--j'rur i sd ict ions, the several States and Guam. Id. �� 2801(19), 2821(14). Chapter 55 was enacted, however, after the@-effective date of section 502 of the Covenant, so the chapter is not made applicable to the Northern Mariana Islands by operation of that section. "State" also includes, for purposes of chapter 55, "any other camnonwealth, territory, or possession of the United States." 15 U.S.C. �� 2801(19), 2821(14). abe Northern Mariana Islands is not now a ccmmonwealth, territory, or possession of the United States. On termination of the trusteeship, however, the Northern Mariana Islands will became a canmonwealth of the United States. Covenant �� 101, 1003(c). At that time, chapter 55 will becane applicable to the Northern Mariana Islands.* Discussion. All retailers of gasoline and diesel fuel in the Northern Mariana Islands rely upon a single supplier. For the foreseeable future, total motor fuel sales volume in the Northern Mariana Islands is unlikely to be sufficient to attract a second supplier. No canplaints are known to have been made by gasoline retailers about the existing supplier. Nonetheless, gasoline retailers in the Northern Mariana Islands are particularly vulnerable to arbitrary or discriminatory franchise actions by the supplier because they have no alternate supplier to which to turn. The interests of those retailers should be protected now rather than only upon termination of the trusteeship. Operators of motor vehicles in the Northern Mariana Islands should also be able to rely on octane ratings posted at the gasoline pmp, so they can avoid buying a higher octane than is necessary for their vehicles. To the extent the choice of gasoline grades in the *The reference to "any other Ccnumnwealth" in the definition of "State" could be deemed a reference to the Northern Mariana Islands, since it is the only foreseeable "ccmmonwealth" other than Puerto Rico, already specifically mentioned in the definition. But see section 3371(h) of title 16, U.S.C.: "The term 'State' means any of the several States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, Northern Mariana Islands, American Samoa, and any other territory, commonwealtht or possession of the United States." (Emphasis added.) If the intent is to include the Northern Mariana Islands, a second question arises: Is the Northern Mariana Islands included before termination of the trusteeship, when it is not yet a commonwealth under section 101 of the Covenant? - 114 - Northern Mariana Islands is limited, posted octane ratings will also be useful to persons deciding which motor vehicle to purchase. Legislation is here proposed to expand the definition of "State" to include the Northern Mariana Islands for purposes of chapter 55. If that legislation is enacted, the franchise protection provisions and the octane disclosure requirements of the chapter will beccme applicable to the Northern Mariana Islands immediately, rather than on termination of the trusteeship. Proposed legislative language. The following language, if enacted by the United States Congress, would implement this recanmendation: An Act to make the Petroleum Marketing Practices Act applicable to the Northern Mariana Islands. Be it enacted bv the Senate and House of Representatives of the United States of America in Congress assembled, that subsection 19 of section 101 and subsection 14 of section 201 of Public Law 95-297, 92 Stat. 322 (1978) (15 U.S.C. �� 2801(19), 2821(14)), are amended by inserting in each "the Northern Mariana Islands," immediately after "Guam, The Magnuson Fishery Conservation and Management Act. Recammendation. Legislation should be enacted (1) to def ine "State," for purposes of the Magnuson Fishery Conservation and Management Act, to exclude the Northern Mariana Islands, thereby making that Act clearly inapplicable to the Northern Mariana Islands; and (2) to exclude the Northern Mariana Islands as a constituent State of the 'Kbstern Pacif ic Regional Fishery ManageTent Council, but allow the Governor of the Northern Mariana Islands to designate a nonvoting observer to the Council. The statute. The Magnuson Fishery Conservation and Management Act (FCMA) was enacted in 1976 to protect, conserve, and enhance the fisheries resources of the United States. The FCMA, 16 U.S.C. �� 1801 et seq., extends the exclusive fisheries zone of the United States frcm 12 to 200 miles and provides for the development of regional fishery management plans and regulations to govern fishing within that zone. - 115 - Under the FCMA, regional fishery management councils are responsible for preparing management plans for each fishery within their designated geographical areas. Id. S 1852(h)(1). Fishery management plans are aimed at preventing overfishing and depletion of the fishery. Id. � 18 51. Foreign f ishing vessels are issued permits only for that portion of the optimum yield, as defined in the plan, that will not be harvested by United States vessels. Id. S 1821(a)(3), (d)(2). Regional fishery management councils, amiong other functions, also review applications for foreign fishing permits in their areas of authority. Id. � 1852(h)(2). The FCMA does not purport to regulate tuna fisheries within the 200-mile exclusive fisheries zone of the United States. id. �� 1802(14), 1813. The United States regards tuna as a higFh-ly migratory species subject to regulation only by international aareement.* See 16 U.S.C. S� 1801(b)(1)(A), 1801(b)(2). Present applicability Prior to January 12, 1983, the applicability of the FCMA to the Northern Mariana Islands was the subject of litiqation and much controversy." on that date United States Public Law 97-453 became law. 96 Stat. 2481. That law amends the FCMA to provide the Northern Mariana Islands voting membership on the Western Pacific Regional Fishery Management Council. Id. � 5, amending 16 U.S.C. � 1852(a)(8). The legislative histir-y of Public Law 97-453 establishes that, whatever the applicability of the FCMA to the Northern Mariana Islands prior to passage of Public Law 97-453, the FCMA became clearly applicable to the Northern Mariana Islands on *Tuna fisheries are the subject of a separate Ccmmission recamae-ndation, below. **'Ihe Executive Director of the Ccomission was previously associated with the law firm representing the plaintiffs in litigation asserting the inapplicability of the FCMA to the Northern Mariana Islands, although he was not attorney of record for plaintiffs. 116 - January 12, 1983. House Report 97-549, at 17-18 (1982), reprinted in 1982 U.S. Code Cong. & Ad. News 4320, 4330-31.* Discussion. Why the Northern Mariana Islands should be treated differently Special treatment of the Northern Mariana Islands with respect to the FCMA is justified on a number of grounds. First, fisheries resources account for a disproportionately large share of the total natural resource base available to the people of the Northern Mariana Islands. By comparison, in other parts of the United States, even where fisheries are an important industry, a variety of other natural resources contribute to the well-being of the local population. Accordingly, the people of the Northern Mariana Islands have a correspondingly greater interest in obtaining financial benefit from fishing operations in adjacent waters. Second, throughout their history the peoples of the Northern Mariana Islands have claimed, defended, and harvested the marine resources of the ocean extending to distances in excess of 200 miles. See generally M. Nakayama & F. Ramp, Micronesian Navigation,, Island Empires and Traditional Concepts of Ownership of the Sea (1974). If the FCMA is applied to the Northern Mariana Islands, the government of the Northern Mariana Islands loses all authority to regulate foreign fishing within the fishery conservation zone. 16 U.S.C. 1812, 1856(a). Third, the other areas of the Trust Territory are realizing substantial benefits from the sale of access rights to foreign *Even though the FCMA is thus applicable to the Northern Mariana Islands, the argument has been made that it cannot become effective there until termination of the trusteeship, when the Northern Mariana Islands will come under the sovereignty of the United States. See Covenant �� 101, 1003(c). The fishery conservation zone to which the FCKA applies is defined as "a zone contiguous to the territorial sea of the United States." 16 U.S.C. � 1811. Until the United States assumes sovereignty over the Northern Mariana Islands, the argument goes, there will be no territorial sea of the United States adjacent to the Northern Mariana Islands and, consequently, there can be no fishery conservation zone adjacent to the Northern Mariana Islands. - 117 - fishermen.* The Northern Mariana Islands should not be penalized by comparison because it chose a closer association with the United States." The fisheries resource. The development of commercial fisheries in the waters surroundll-nq- the Northern Mariana Islands is widely considered as one of the most promising approaches to the economic advancement of the Northern Mariana Islands.*** At present, commercial fishery operations based in the Northern Mariana Islands are quite limited and the value of seafood imports to the Northern Mariana islands exceeds the value of the local catch. Ccrmwnwealth of the Northern Mariana Islands, Fisheries Development Plan 4-5, 7 (1981). Nonetheless, the potential for future development is demonstrated by the high level of current activity by Japanese, Korean, and Taiwanese fishing vessels in the waters adjacent to the *Under the proposed Compact of Free Association between the United States, the Marshall Islands, and the Federated States of Micronesia, the latter two governments are expressly granted the capacity to conduct their own foreign affairs "relating to law of the sea and marine resources matters, including the harvesting, conservation, exploration or exploitation of living and non-livinq resources from the sea, seabed or subsoil to the full extent recognized under international law". q 121(b)(1), reprinted in 131 CoM. Rec. S2815, S2816 (daily ed. March 7, 1985). **It has been argued that, in negotiating a closer political association with the United States, the Northern Mariana Islands gave up control of its ocean resources in exchange for greater par-ticipation in other federal proqrams and benefits than will be enjoyed by the other, more loosely-associated areas of the Trust Territory. At the time the Covenant was negotiated and, subsequently, approved by the United States Congress, however, Congress had yet to enact the FCnk, claiminc j for the United States a 200-mile exclusive fishery conservation zone. When the extent of the United States claim became clear, the Northern Mariana Islands asserted its own claim to primary control over marine resources within 200 -miles of its territorial waters. See Northern Mariana Islands Public Law 2-7 (1980), 2 Code of the Northern Mariana Islands �� 1101 et seg. (1984). See also Constitution of the Northern Mariana Islands, Art. XIV, � 1 (1978). ***See Robert R. Nathan Associates, Inc., Assessment of Current and Prospective Socio-econamic Conditions in the Coumonwealth of Me- Northern Mariana Islands 15, 18, 89 (1980). - 118 - Northern Mariana Islands and by the substantial Japanese fishery based in the Northern Mariana Islands before the Second World War. Id. at 4, 7. See also Ship Charts Prime Fish Areas, Pacific Daily We-ws (Guam), May 17, 1982, at 2; Ship Finds Healthy Fishinq Spots, id., April 27, 1982, at 3. Rights of United States fishing vessels in waters adjacent to the Northern Mariana Islands. Making the FCMA inapplicable to the Northern Mariana Islands does not allow the Northern Mariana Islands to exclude United States fishing vessels. Any Northern Mariana Islands attempt to prevent United States vessels fram fishing in waters adjacent to the Northern Mariana Islands would run afou I of the Privileges and Immunities Clause of the United States Constitution. In Mullaney v. Anderson, 342 U.S. 415 (1952), the Supreme Court held the Territory of Alaska's higher license fee for nonresident ccmirercial fisherman--not justified by higher costs of enforcing the licensing statute against those nonresidents--unconstitutionally abridged the privileges and immunities of citizens of the States. See also Hicklin v. Orbeck, 437 U.S. 518, 526 (1978), citing Mullaney with approval. The Northern Mariana Islands, under section 501(a) of the Covenant, is obliged to respect those same privileges and immunities. Regional fishery man@2ement council membership. The Northern Mariana Islands is now included in th Western Pacific Fishery Management Council with Hawaii, Guam, and American Samoa. 16 U.S.C. S 1852(a)(8). If the Northern Mariana Islands is not covered by the FCMA, it should also cease to be a voting member of the regional council. Accordingly, the proposed legislation returns the Western Pacific Council to the membership it had before the Northern Mariana Islands was made a mapber.* In order to keep the Northern Mariana Islands abreast of fisheries developments that may be of concern to the Northern Mariana Islands, the proposed legislation allows the Governor of the Northern Mariana Islands to designate a nonvoting observer on the Western Pacific Council. Proposed legislative language. The following language, If enacted by the United States Congress, would implement the Ccmnission's recamTendation: An Act to amend provisions of the Magnuson Fishery *This would eliminate not only the Northern Mariana Islands representative but also an additional at-large representative added to keep an odd number of members on the council. See House Report 97-549, at 18 (1982), reprinted in 1982 U.S. Code Cong. & Ad. News 4320, 4331. - 119 - Conservation and Manaqement Act with regard to the Northern Mariana Islands. Be it enacted by the Senate and House of Representatives of the United States of America in Congress asserbled, that subsection 21 of section 3 of the Magnuson Fishery Conservation and Management Act, as amended (16 U.S.C. S 1802(21)), is further anended to read as follows: The term "State" mans each of the several States, the District of Columbia, the Ccmmnwealth of PLerto Rico, Amrican Samoa, the Virgin Islands, Guam, and any other territory or possession of the United States, except the Northern Mariana Islands. Sec. 2. Paragraph (8) of subsection (a) of section 302 of the Maqnuson Fishery Conservation and Management Act, as amended (16 U.S.C. S 1852(a)(8)), is further amended to read as follows: (8) Western Pacific Council.--The Western Pacific Management Council shall consist of the State of Hawaii, Amrican Samoa, and Guam and shall have authority over the fisheries in the Pacific Ocean seaward of such States. `Ihe Western Pacific Council shall have 11 voting members, including 7 appointed by the Secretary pursuant to subsection (b)(2) of this section (at least one of whom shall be appointed from each of the following States: Hawaii, American Sama, and Guam). The Western Pacific Council shall also have a nonvoting observer who shall be appointed by and serve at the pleasure of the Governor of the Northern Mariana Islands. Tuna fisheries. Recommendation. Legislation should be enacted (1) to require the Secretary of State, upon the request of and in cooperation with the governor of the Northern Mariana Islands, to negotiate and conclude international fisheries agreements for the conservation and managemnt of tuna in waters adjacent to the Northern Mariana Islands; and (2) to require - 120 that the benefits accruing fran any such agreements be paid to the government of the Northern Mariana Islands. The statutes. The United States takes the position that tuna (and only tuna) is a highly migratory species of fish, not subject to regulation by the nation in the waters of which the tuna are found, but only by international agreement. See 16 U.S.C. 1801(b)(1)(A), 1801(b)(2). Consistently with this position, the Magnuson Fishery Conservation and Management Act (FCMA) does not apply to tuna. 16 U.S.C. �� 1802(14), 1813.** Currently, no federal statute or international agreement qoverns the taking of tuna in waters adjacent to the Northern Mariana Islands. *To the contrary, the Convention on the Law of the Sea, adopted in April 1982 by the Third United Nations Conference on the Law of the Sea, allows coastal nations to regulate tuna within their exclusive economic zones (which are largely defined in the same manner as is the fishery conservation zone established by the Magnuson Fishery Conservation and Management Act). See article 57 of the Convention, reprinted in 21 International Legal Materials 1245 (1982). See also id. arts. 61-62; Burke, Highly Migratory Species in the New Law of tITe-Sea, 14 Ocean Development and International Law 273 (1984); Burke, U.S. Fishery Man@2ement and the New Law of the Sea, 76 American Journal of International Law 24, 41-45 (1982). The Convention does, however, encourage regional cooperation in the conservation and management of highly migratory species, which are defined to include tuna. See article 56 and annex I of the Convention. President Reagan has announced that the United States will not sign the Convention as adopted, although the treatment of tuna resources was not given as a reason for rejecting the Convention. See 18 hbekly Compilation of Presidential Documents 887-88 (1982). "Passage of the FCMA was opposed by American tuna fishermen, who feared unilateral action by the United States "would trigger further unilateral action on the part of certain foreign nations off whose shores they fish, preventing their continued fishing in such waters, and causing the demise of their (industry]." House Report 94-445, at 23 (1975). Tuna was exempted from regulation under the FCMA to allay this opposition. Id. at 43. - 121 - Discussion. The tuna resource. Tuna is the most exploited f ish in Micronesian waters. Participation in the tuna fishery is the objective of foreign fishing interests that pay other Trust Territory entities for rights to fish in their waters.* Recent studies conducted pursuant to the Central, Western and South Pacific Fisheries Development Act, 16 U.S.C. SS 758e et seq., have revealed a potentially significant albacore resource in the Western Pacific, with estimates of an annual yield between 16 and 20 million pounds and a value of up to $23.4 million. House Report 97-549, at 19-20 (1982), reprinted in 1982 U.S. Code Cong. & Ad. News 4320, 4332-33. nis discovery has led the@_-United States tu-n-a-7leet to make a major ccmmitment in the area: ". . . over 12 percent of the entire United States tuna fleet, representing over 20 percent of its capacity, has redirected its efforts to these areas. This situation has provided the necessary relief to the United States tuna fleet from the political uncertainties in the traditional Eastern Pacific ocean fishery." Id. at 20. See also ITC Rejects Proposal to Increase Tariffs on Some Canned Tuna, Wall Street Journal, July 26, 1984, at 10; Orbach, Fishing in Troubled waters: The U.S. Tuna Seine. Fleet in the Pacific, 22 Environment 32 (1980). Why the Northern Mariana Islands should be treated differently. Special treatment of the Northern Mariana Islands with respect to tuna fisheries is justified on a number of grounds. First, tuna resources account for a disproportionately large share of the total natural resource base available to the people of the Northern Mariana Islands. By ccinparison, in other parts of the United States, even where tuna is an hnportant industry, a variety of other natural resources contribute to the well-being of the local population. Accordingly, the people of the Northern Mariana Islands have a correspondingly greater interest in otaining financial benefit frcm tuna fishing operations in adjacent waters. *The constituent parts of the Trust Territory of the Pacific Islands other than the Northern Mariana Islands are the Republic of the Mar-shall Islands, the Republic of Palau, and the Federated States of Micronesia. Each of these governments has been able to neqotiate lucrative fisheries agreements with foreign fishing interests. For example, in April 1982 Japanese interests agreed to pay the Federated States of Micronesia approximately $2.35 million for one year's fishing rights in the waters of the Federated States and, in addition, to provide about $150,000 worth of fisheries-related goods and services. A similar agreement allowed Japanese fishing boats to fish in the waters of the Marshall Islands for one year in exchange for a cash payment of $1.25 million. - 122 - Second, throughout their history the peoples of the Northern Mariana Islands have claimed, defended, and harvested the marine resources of the ocean extending to distances in excess of 200 miles. See generally M. Nakayama & F. Ramp, Micronesian Navigation, Island Empires and Traditional Concepts of Ownership of the Sea (1974). Third, the other areas of the Trust Territory are realizing substantial benefits from the sale to foreign fishermen of access rights to the tuna fishery. The Northern Mariana Islands should not be penalized by comparison because it chose a closer association with the United States. Negotiation of international fisheries agreements. Under the trusteeship, the United States is generally responsible for representing the Trust Territory of the Pacific Islands, including the Northern Mariana Islands, in its relationships with other nations of the world. Trusteeship Agreement, Arts. 3, 8(4), 10, 11(2). On termination of the trusteeship, the United states assumes "complete responsibility for and authority with respect to matters relating to foreign affairs and defense affecting the Northern Mariana Islands." Covenant �9 104, 1003(c). Accordingly, any fisheries agreEments affecting waters adjacent to the Northern Mariana Islands must be negotiated by the United States. The negotiation of international fisheries agreEments affecting the fishery conservation zone of the United States is an important part of the FCMA. 16 U.S.C. �� 1822, 1823. The Secretary of State, under the FCMA, is specifically authorized to negotiate international fisheries agreEments affecting tuna. Id. S 1822(a)(4)(B).* The legislation here proposed requires the Secretary of State, independently of the FCMA,** upon the request of and in cooperation with the governor of the Northern Mariana Islands, to negotiate and conclude one or more international fisheries agreEments for the conservation and managenent of tuna in waters adjacent to the *See, for example, Camie- nt, Territorial Waters-Agreement Providing for the Issuance of International Licenses for Fishing Tuna in the Eastern Pacif ic Ocean--An Attempt at Uniformity in an Area where Conflicting Jurisdictional Claims have Created Tensions and Conflicts, 14 Georgia Journal of International and Comparative Law 235 (1984). **In its separate recommendation on the FCMA, the Commission proposes that the FCMA be made inapplicable to the Northern Mariana Islands. - 123 - Northern Mariana Islands.* To ensure that the interests of the Northern Mariana Islands are taken into account during the negotiation of such an agreement or agreements, the proposed legislation allows the governor of the Northern Mariana Islands to designate an observer to attend all negotiating sessions. The legislation also requires that the benefits accruing fran any such agreements be paid to the goverment of the Northern Mariana Islands." *Such negotiations might lead to regional fisheries agreements, such as that establishing the Inter-Awerican Tropical Tuna Ccmmission. See 1 U.S.T. 230, T.I.A.S. 2044 (1949). The Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau--all constituent parts of the Trust Territory of the Pacific Islands--participated in negotiation of the Nauru Agreement Concerning Co-operation in the Management of Fisheries of Ccmron Interest, initialled at Port Moresby, New Guinea, in 1981. The agreement was also initialled by Papua New Guinea and the Republic of Kiribati and, in addition, identifies the Solcmon Islands and the Republic of Nauru as parties. "Precedent for requiring such benefits to be paid to the goverment of the Northern Mariana Islands may be found in section 703(b) of the Covenant, which provides for paynent to the government of the Northern Mariana Islands of certain federal taxes and fees derived frcm the Northern Mariana Islands. The Ccmmittee on Interior and Insular Affairs of the United States House of Representatives stated that this subsection provides that the federal goverment will pay to the Government of the Northern Marianas, to be expended for the benefit of the people of the Northern Marianas as the local government determines, the proceeds of essentially all taxes and duties and fees collected with respect to the Northern Marianas, other than those which relate to social security benefits. House Report 94-364, at 12-13 (1975). See also Senate Report 94-433, at 85 (1975). - 124 - .-toposed legislative language. The following language, if enacted by the united States Congress, would implement this reccmmendation: An Act to encourage international agreement on the conservation and manageiment of tuna in waters adjacent to the Northern Mariana Islands; and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of Americain Congress assembled, that the Congress finds and declares the following: (a) In the Covenant to Establish a CcmmDnwealth of the Northern Mariana Islands in Political Union with the United States of Amrica (approved by Public Law 94-241, 90 Stat. 263 (1976)), the United States agreed to assist in developing the economic resources of the Northern Mariana Islands for the benefit of the inhabitants of those islands. (b) Tuna in waters adjacent to the Northern Mariana Islands are a valuable and renewable resource, which can contribute to the food supply, econany, and health of the Northern Mariana Islands and of the Nation as a whole. (c) Foreign fishing vessels catch substantial quantities of tuna in waters adjacent to the Northern Mariana Islands, but neither the Northern Mariana Islands nor the United States derive revenues frcrn tuna caught by those vessels. (d) Negotiation of an international agreement or agreements to conserve and manage tuna in the Western Pacific Ocean, including those waters adjacent to the Northern Mariana Islands, is in the best interests of the United States and the Northern Mariana Islands. Sec. 2. (a) The Secretary of State shall, upon the request of and in cocperation with the Governor of the Northern Mariana Islands, initiate and conduct negotiations for the purpose of entering into one or more international fisheries agreements for the conservation and managemnt of any highly migratory species of fish within the fishery conservation zone of the Northern Mariana Islands or any - 125 - appropriate region that includes that fishery conservation zone. The Governor of the Northern Mariana Islands shall be entitled to designate an observer, who shall serve at the pleasure of the Governor, to attend those negotiations. (b) All payments or other consideration received pursuant to any agreement concluded under the authority granted by subsection (a) of this section and attributable to the taking of fish, or to the right to take fish, by the vessels of foreign nations within the fishery conservation zone of the Northern Mariana Islands shall be paid to the Goverrment of the Northern Mariana Islands. (c) For purposes of this section, the fishery conservation zone of the Northern Mariana Islands shall be defined in relation to the Northern Mariana Islands in the sane manner as the fishery conservation zone of the United States is defined in relation to the United States by the Magnuson Fishery Conservation and Management Act. (d) For purposes of this section, the term "highly migratory species" means species of tuna which, in the course of their life cycle, spawn and migrate over great distances in waters. of the ocean. Importation of fruit bats. Recommendation. Legislation should be enacted to make inapplicable to the Northern Mariana Islands the prohibition in the federal criminal laws of importation of "flying foxes" or fruit bats of the genus Ptercpus The statute. Section 42(a) of title 18 of the United States Code makes criminal the importation into the United States of various wildlife species considered "injurious to human beings, to the interests of agriculture, horticulture, forestry, or to wildlife or the wildlife resources of the United States." Among the prohibited species are the "so-called flying foxes' or fruit bats of the genus Pteropus." Present applicability Section 42(a) bars the importation of injurious wildlife into the United States or any of its territories or possessions. Guam is - 126 - a territory or possession of the United States. Accordinqly, by operation of section 502(a)(2) of the Covenant, injurious wildlife--including fruit bats of the genus Pteropus -qn-ay not be imported into the Northern Mariana Islands. Discussion. Fruit bats of the genus Pteropus are a highly-prized gourmet delicacy in the Northern Mariana Islands. Although Pteropus is native to the Northern Mariana Islands, fruit bats are extremely scarce there. They are, however, plentiful in other parts of the Pacific. Importation of fruit bats into the Northern Mariana Islands presents little risk of injury to the environment or other wildlife, since few if any will escape the cookinq pot. In the unlikely event proliferating fruit bats become a problem, the local legislature can enact appropriate legislation. Accordingly, the legislation proposed in this report makes the prohibition against importation of fruit bats inapplicable to the importation of fruit bats into the Northern Mariana Islands. Proposed legislative langua2e. The following language, if enacted by the United States Congressp would implement this recommndation: An Act to amend section 42 of title 18 of the United States Code to permit the importation of certain fruit bats into the Northern Mariana Islands. Be it enacted @y the Senate and House of Representatives of the United States of America-irn- Congress assembled,. that su section (a) of section 42 of title 18, United States Code, is amnded by redesignating present paragraph (5) as paragraph (6) and by inserting a new paragraph (5), to read as follows: Nothing in this subsection shall restrict the importation of the species of so-called "flying foxes" or fruit bats of the genus Ptercpus into the Northern Mariana Islands. Customs crimes. Recaumendation. Because the Northern Mariana Islands is not part of the custans territory of the United States, legislation should be enacted to make inapplicable to the Northern Mariana Islands provisions in title - 127 - 18 of the United States Code making criminal certain offenses against the customs laws of the United States. The statutes. Chapter 27 of title 18 of the United States Code makes crim inal smuggling and other conduct intended to evade payment of custcms duties or other restrictions on the importation of articles into the United States. Three other scattered sections of title 18 also make criminal certain offenses against the customs laws of the United States. They are section 496, making criminal the forgery or counterfeiting of documents related to the entr "y of imports or the collection of duties; section 1364, making criminal injury to or destruction of articles to be exported to foreign countries; and section 1915, making criminal the unauthorized ccmpromise of a customs claim by an officer of the United States. Closely related to enforcement of the custcm laws is the criminal prohibition of section 2279 of title 18, forbidding persons not in the service of the United States frcm boarding a vessel just prior to its arrival in port. Present applicability. Most federal criminal statutes protect specific federal interests and are of universal application throughout the territorial limits of the United States. The territorial limits of the United States are defined to include all places subject to the jurisdiction of the United States. 18 U.S.C. � 5. Guam is subject to the jurisdiction of the United States, and thus to federal criminal laws. See United States v. Santos, 623 F.2d 75, 77 (9th Cir. 1980); United States v. Taitano, 442 F.2d 467, 469 (9th Cir. 1971), cerCiorari denied, 404 U.S. 852 (1971). The federal criminal laws are therefore applicable to Guam and the several States and, by operation of section 502(a)(2) of the Covenant, are consequently now applicable to the Northern Mariana Islands. Certain sections of chapter 27 of title 18, making criminal smuggling and other custcms law violations, are inapplicable, by their own terms, to Guam and other named areas outside the custcms territory of the United States. See 18 U.S.C. S� 542 (entry of goods by means of false statements), 544 (relanding of goods), and 546 (smuggling). The Northern Mariana Islands is also outside the customs territory of the United States. Covenant � 603(a). But because the Northern Mariana islands is not specifically named, these sections and the remainder of chapter 27 are applicable to the Northern Mariana Islands under the general proposition that federal criminal statutes are applicable in all areas subject to the - 128 - jurisdiction of the United States.* Under that same general proposition, the other provisions in title 18 making criminal certain offenses against federal customs laws are also applicable to the Northern Mariana Islands. Discussion. The Northern Mariana Islands is not within the customs territory of the United States. Covenant S 603(a). Because the Northern Mariana islands administers its own customs territory, snuggling and other offenses against its customs laws should be defined and punished pursuant to the laws of the Northern Mariana Islands, not pursuant to federK law. Accordingly, legislation is here proposed to make chapter 27 (�� 541-552) and sections 496, 1364, and 1915 of title 18 inapplicable to the entry of goods or articles into the Northern Mariana Islands or to the export of goods or articles therefrom. The proposed legislation also allows officers and employees of the government of the Northern Mariana Islands in the perfon-Pance of their official duties to board vessels prior to arrival in ports of the Northern Mariana Islands, notwithstanding section 2279. Thus, the proposed legislation allows harbor pilots, customs officials, and law enforcement officers to board vessels as necessary prior to their arrival in ports of the Northern Mariana Islands." *A statute is applicable to the Northern Mariana Islands if it is applicable to the several States and Guam. Covenant � 502(a)(2). The converse, however, is not true. A statute applicable to all areas subject to the jurisdiction of the United States is not inapplicable to the Northern Mariana Islands simply because it is inapplicable to Guam. "Several provisions in other chapters of part I of title 18 call for seizure and forfeiture of contraband and other specified property in the same manner as property is seized and forfeited under federal customs laws. See 9S 1955(d) (property used in illegal gambling operations); 1963(c) (property used in and ownership interests i n racketeer influenced and corrupt organizations); 2274 (vessels used for illegal purposes); 2513 (illegal wiretapping and eavesdroppinq devices). Even though the Northern Mariana Islands is outside the customs territory of the United States and federal customs laws generally do not apply to the Northern Mariana Islands, the seizure and forfeiture provisions of those laws are applicable to the Northern Mariana Islands to the extent they are incorporated by reference in the above-mentioned criminal statutes. See generally The Brazil, 134 F.2d 929 (7th Cir. 1943). The legislation here proposed does not alter that applicability. (The seizure and forfeiture provisions of the federal customs laws are found in part V of chapter 4 in title 19 of the United States Code. See especially 19 U.S.C. SS 1604-1618.) - 129 - Proposed legislative language. The following language, if enacted by the United States Congress, would implement the Comaission's recanTendation: An Act to make inapplicable to the Northern Mariana Islands certain provisions in title 18 of the United States Code regarding offenses against the customs laws of the United States. Be it enacted by the Senate and -- House of Representatives of the United States of America in ess assembled, that chapter 27 of title 18, United States Code, is amended by-- (a) adding to the table of contents thereof the following: Sec. 553. Imports to and exports from the Northern Mariana Islands. and (b) adding thereto a new section, to read as follows: � 553. Importsto and exports from the Northern Mariana Islands. This chapter and sections 496, 1364, and 1915 of this title shall not apply to the entry of goods or articles into the Northern Mariana Islands nor to the export of goods or articles therefrom. Sec. 2. Section 2279 of title 18, United States Code, is amended by adding thereto a new paragraph, to read as follows: Nothing in this section shall restrict officers or employees of the Government of the Northern Mariana Islands, in the perfotmance of their official duties, fran boarding any vessel about to arrive at any port of the Northern Mariana Islands. - 130 - Exportation of arms, liquors, and narcotics to Pacific Islands. Recommendation. An obsolete federal law prohibiting the export of arms, liquor, and narcotics to certain "uncivilized" Pacific islands should be repealed. The statute. Section 969 of title 18 of the United States Code, derived frcm a 1902 statute, imposes criminal penalties on anyone "subject to the authority of the United States" who gives or sells arms, liquor, or narcotics to "any aboriginal native of any of the Pacific Islands" in a specified area unless the island is "in the possession or under the protection of [a] civilized power." The object of the statute, which was strongly supported by missionary societies, was to avoid sales "for the purpose of so infuriating these tribes that they may kill the civilized portion of the people that are on those islands." 35 Conq. Rec. 1202 (1902). Present applicability. The area in which the gift or sale of arms, liquor, or narcotics is prohibited includes all of Micronesia (including the Northern Mariana Islands), Melanesia, and Polynesia (except Easter Island). Discussion. Persons in the Northern Mariana Islands are subject to the authority of the United States. Trusteeship Agreement, Art. 3; Covenant SS 101, 1003(c). Presumably, the authors of this legislation would concur that the Northern Mariana Islands is now under the protection of a civilized power. The statute could conceivably be applied, however, to persons in the Northern Mariana Islands exporting, for example, liquor to other island nations. This law should be repealed as obsolete. Proposed legislative language. The following language, if enacted by the United States Congress, would implement this recam-endation: An Act to repeal an obsolete provision in title 18 of the United States Code, prohibiting the exportation of arms, liquors, or narcotics to certain aboriginal natives of Pacific Islands. Be it enacted the Senate and House of Representatives of the United States of America in Congress assembled, that chapter 45 of title 18, United States Code, is amended by"- - 131 - (a) striking from the table of contents thereof the following: Sec. 969. -tation of arms, liq@ors, and narcotics to' Pacifio Islands. and (b) by repealing section 969. LotterV prohibitions. Reconmndation. Lotteries are ccmmnly used in the Northern Mariana Islands to raise funds for charitable purposes. Legislation should be enacted to modify the applicability to the Northern Mariana Islands of provisions in the federal criminal laws prohibiting lotteries. Similarly, provisions in the federal postal laws making certain lottery materials unmailable should be modified to exempt mail to an address within the Northern mariana Islands for a lottery conducted in the Northern Mariana Islands by a nonprofit orqanization for religious, charitable, educational, or benevolent purposes. The statutes. Chapter 61 (sections 1301 to 1304) of title 18 of the United States Code makes criminal, among other things, the use of the rails and ccmmn carriers to further lottery enterprises. Chapter 30 (sections 3001 et seg.) of title 39 of the Code makes certain lottery materials@--nonmailable. Present applicability. The criminal penalties of title 18 are triggered whenever illegal lottery materials are brought into the United States, given to a camnDn carrier for carriage, carried in interstate or foreign ccmmerce, or mailed. 18 U.S.C. �� 1301-1302. Federally@-licensed radio stations are also prohibited frcm broadcasting lottery information or advertisements. Id. � 1304. The territorial limits of the United States are defined, for purposes of all of title 18, to include every place subject to the jurisdiction of the United States. 18 U.S.C. S 5. Gum. is subject to the jurisdiction of the United States, and thus to federal criminal laws. See United States v. Santos, 623 F.2d 75, 77 (9th - 132 - Cir. 1980); United States v. Taitano, 442 F.2d 467, 469 (9th Cir. 1971), certiorari denied, 404 U.S. 852 (1971). The United States, for purposes of the federal criminal laws, therefore includes Guam and the several States and, by operation of section 502(a)(2) of the Covenant, the Northern Mariana Islands. Further, "interstate cammrce" is defined, for purposes of title 18, to include "camie-rce between one State, Territory, Possession, or the District of Columbia and another State, Territory, Possession, or the District of Columbia." 18 U.S.C. � 10. Guam is a "Territory" or "Possession" of the United States so interstate cclmTerce. inc ludes camerce among the several States and Guam. By operation of section 502(a)(2) of the Covenant, interstate ccmmerce also includes camTerce among the several States, Guam, and the Northern Mariana Islands. Thus, statutes--like the lottery prohibitions--making a particular activity criminal if it affects interstate or foreign ccmmerce are applicable to activities affecting camTerce crossing the borders of the Northern Mariana Islands. Radio stations in the Northern Mariana Islands must be licensed by the Federal Cammunications Catutission. 47 U.S.C. S 301; Covenant � 502(a)(2). Those stations are consequently also subject to the prohibition on broadcast of lottery information or advertisements. The federal postal laws are also applicable to the Northern Mariana Islands. Section 403(a) of title 39 of the United States Code requires the Postal Service to "receive, transmit, and deliver" the mails "throughout . the United States, its territories and possessions" and to "serve as nearly as practicable the entire population of the United States." Guam is a territory or possession of the United States. Accordingly, by operation of section 502(a)(2) of the Covenant, the Northern Mariana Islands is also among the jurisdictions served by the Postal Service. And, in fact, the Northern Mariana Islands has been served by the United States Postal Service through the many years it has been part of the Trust lbrritory of the Pacific Islands.* Consequently, chapter 30 of title 39 of the Code, making certain lottery materials nonmailable, is applicable to the Northern Mariana Islands. Discussion. Bingo, raffles, lotteries, and other games of chance are popular and widespread in the Northern Mariana Islands. Funds are raised for a variety of charitable and other worthwhile purposes through these means. But, if a church official on Tinian orders raffle tickets to *See section 225.1(e) of title 39, C.F.R. (1983), including the Trust lbrritory within the Western Region of the Postal Service. - 133 - be printed on Saipan and has those tickets shipped fran Saipan to Tinian on a ccmmuter airline, the official would violate these federal statutes. if a local newspaper carrying an advertisement announcing a "Las Vegas night" with games of chance, sponsored by a local service club to raise money for charity, is deposited in the Tmil, the newspaper is also in violation of the law. Legislation is here proposed to make the criminal prohibitions inapplicable to any lottery conducted in the Northern Mariana Islands by a nonprofit organization for religious, charitable, educational, or benevolent purposes.* Pr222sed legislative la M age The following language, if enacted by the United States Congress, would implement this reccmmendation: An Act to exempt certain nonprofit organizations in the Northern Mariana Islands fran prohibitions on the distribution of certain lottery materials. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, that chapter 61 of title 18, United States Code, is amended by-- (a) adding to the table of contents thereof the following: Sec. 1308. Certain lotteries in the Northern Mariana Islands. and *The government of the Northern Mariana Islands is authorized to conduct a public lottery. Northern Mariana Islands Public Law 3-60, 1 Code of the Northern Mariana Islands S 9301 (1984). Lotteries conducted by a State are exempted fran most of the anti-lottery provisions of title 39. 39 U.S.C. 3005(d). They are also exempted fran similar provisions in the federal criminal laws. 18 U.S.C. S 1307. "State" is defined, for purposes of these exemptions, to include the territories and possessions of the United States. 39 U.S.C. � 3005(d); 18 U.S.C. 9 1307(c). Guam is a territory or possession of the United States. Accordingly, by operation of section 502(a)(2) of the Covenant, any lottery conducted by the goverrunent of the Northern Mariana Islands pursuant to Northern Mariana Islands Public Law 3-60 is entitled to these exemptions. - 134 - (b) adding a new section thereto, to read as follows: 1308. Certain lotteries in the Northern Mariana Islands. (a) Nothing in this chapter shall prohibit an advertisement, a list of prizes, or information concerning a qualified lottery conducted in the Northern Mariana Islands in accordance with the laws of the Northern Mariana Islands: (1) disseminated in a newspaper published in the Northern Mariana Islands, or (2) broadcast by a radio or television station licensed to a location in the Northern Mariana Islands. (b) Nothing in this chapter shall prohibit the transportation or mailing to addresses within the Northern Mariana Islands of equipment, tickets, or materials concerning a qualified lottery conducted in the Northern Mariana Islands in accordance with the laws of the Northern Mariana Islands. (c) For the purposes of this section "qualified lottery" mans a lottery conducted by a nonprofit organization for religious, charitable, educational, or benevolent purposes, in which no part of the gross receipts derived therefram inures to the benefit of any private shareholder, member, or employee of such organization except as ccrnpensation for actual expenses incurred by that person in the conduct of the lottery. - 135 - Sec. 2. Section 3005 of title 39, United States Code, is amended by adding a new section (f) thereto, to read as follows: (1) Nothing in subsection (a) of this section shall prohibit the mailing to addresses within the Northern Mariana Islands of equipment, tickets, or materials concerning a qualified lottery conducted in the Northern Mariana Islands. (2) For the purposes of this section, "qualified lottery" means a lottery conducted by a nonprofit organization for religious, charitable, educational, or benevolent purposes, in which no part of the gross receipts derived therefrom inures to the benefit of any private shareholder, member, or Employee of such organization except as compensation for actual expenses incurred by that person in the conduct of the lottery. Technical amendments to title 18 of the United States Code, Crimes and Criminal Procedure. Recommendation. A number of technical amendments should be made to provisions in title 18 of the United States Code, Crimes and Criminal Procedure, to confirm that the government and residents of the Northern Mariana Islands have the same rights and duties under those provisions as do other jurisdictions and persons subject to those laws. Discussion. The term "State" is not defined for purposes of title 18 and may be taken to mean only the States of the Union. Yet in context the right given or duty imposed on a State is equally appropriate to give to or impose on the Northern Mariana Islands.* Thus, section 245(c) of title 18 protects State law enforcement officers lawfully carrying *The rights and duties also are appropriate -for other areas, such as Gum, subject to the jurisdiction of the United States, but the mandate of this Commission does not extend to recommending changes in the applicability of federal laws to areas other than the Northern Mariana Islands. - 136 - out their duties from prosecution for certain civil rights offenses. Section 402 allows certain offenses against State laws to be punished as criminal contempt if they also violate a federal court order. Section 659 makes clear that States, as well as the United States, may prosecute theft or embezzlement of interstate or foreign freight shipments and that conviction or acquittal on the merits under State law bars a subsequent federal prosecution for the same act or acts. Section 1761(b) of title 18 exempts from the prohibition against transportation of prison-made goods in interstate or foreign cowwrce goods manufactured for use by a State government. Section 1901 makes criminal trading in the funds or debts or public property of a State by a federal officer engaged in collection or disbursement of federal revenues. The legislation proposed herein defines "State" to include the Northern Mariana Islands for purposes of each of these sections. The protection of persons and property and the preservation of the peace within a State or territory are, generally speaking, functions of the State or territorial goverrment. Federal criminal laws enacted by Congress for these purposes operate only in the so-called "special maritime and territorial jurisdiction of the United States," where State or territorial governments lack jurisdiction. See Caha v. United States 152 U.S. 211, 215 (1894). Section 7 of title 18, defining the "special maritime and territorial jurisdiction of the United States," has been interpreted to include within that jurisdiction only areas within which the United States exercises exclusive jurisdiction, for example, a military installation, and areas outside of the United States where no recognized system of law and order obtains. EX parte Mulvaney 82 F. Supp. 743, 744 (D. Hawaii 1949). Thus, the then Territory of Hawaii was held not to be within the special maritime and territorial jurisdiction of the United States. Id. See also Watts v. United Statts-1 1 Wash. T. 288, 296-301 (1870), holding the then Territory of Washington the equivalent of a State so that crimes ccmitted there were not committed in an area within the sole and exclusive jurisdiction of the United States. By the same reasoning, the Northern Mariana Islands is not within the special maritime and territorial jurisdiction of the United States. But see also WVnne v. United States, 217 U.S. 234 (1910), holding, under a predecessor statute, that a murder committed on a ship in Honolulu harbor, within the jurisdiction of the Territory of Hawaii, was not within the jurisdiction of a "State" and, thus, could be prosecuted by the United States. None of the judicial decisions specifically addresses the situation of the Northern Mariana Islands or, even, of any unincorporated territory. Accordingly, legislation is here proposed to make clear that the Northern Mariana Island is to be treated, for - 137 - purposes of section 7 of title 18, as a State, not within the special maritime and territorial jurisdiction of the United States and that, consequently, crimes such as homicide, arson, rape, and robbery, if they involve no federal interest, are punishable under the laws of the Northern Mariana Islands, not under federal laws. In two other sections of title 18, "State or Territory" is used without elaboration, so that whether Guam and, by way of section 502(a)(2) of the Covenant, the Northern Mariana Islands are included is uncertain. Again, the right given to or the duty imposed on the "State or Territory" is equally appropriately given to or imposed on the Northern Mariana Islands. Section 1715 allows firearms to be mailed to officers of a State or Territory "whose official duty is to serve warrants of arrest or ccmmitments" or to "watchmen engaged in guarding the property" of a State or Territory. Section 1716 allows switchblade knives to be mailed to employees of the government of a State or Territory for use in government activities. The proposed legislation allows the Northern Mariana Islands to be treated as a State or Territory for purposes of sections 1715 and 1716. Section 1114 of title 18 makes criminal the killing of a wide variety of enumerated officers and employees of the United States. Among those officers and employees are "any employee of the Department of Agriculture designated by the Secretary of Agriculture to perform any function in connection with- any program of Puerto Rico, Gum, the Virgin Islands of the United States, or the District of Columbia, for the control or eradication or prevention of the introduction or dissemination of animal diseases . . - ." The proposed legislation adds the Northern Mariana Islands to the list of jurisdictions mentioned by name in this portion of section 1114. Proposed legislative language. The following language, if enacted by the United States Conqress, would implement the Ccmmission's reccnmendation: An Act to revise and clarify the applicability of certain federal criminal statutes to the Northern Mariana Islands. Be it enacted the Senate and House of Representatives of the United States of America in @@ress assembled, that the Northern Mariana Islands shall E;T considered a "State" for purposes of sections 7, 245(c), 402, 659, 1761(b), and 1901 of title 18, United States Code. Sec. 2. The Northern Mariana Islands shall be considered a "State" or "Territory" for purposes of sections 1715 and 1716 of title 18, United States Code. - 138 - Sec. 3. section 1114 of title 18, United States Code, is amended by inserting after "Guam," the phrase "the Northern Mariana Islands,". 1he Higher Education Act. Recamnendation. Legislation should be enacted to establish a block grant for higher education programs in the Northern Mariana Islands. This block grant will replace the Northern Mariana Islands' share of funds appropriated each year by Congress under various financial assistance programs funded under the Higher Education Act. The statute. The goal of the Higher Education Act, as amended, codified at sections 1001 et tS. of title 20, United States Code, is to achieve equal educational cpportunity through federal support of postsecondary education. See, for example, House Report 96-520, at 4-5 (1979). To fulfill that goal the Act provides financial assistance to State and local education agencies and institutions of higher education for a variety of purposes: to strengthen developing institutions; to provide assistance to disadvantaged students; to improve library resources; to provide training for faculty and staff; and to develop specific academic prograns.* Financial assistance to these agencies and institutions is provided in some cases on the basis of a statutory formula, based on the number of students enrolled in institutions of higher education, and in other cases on the basis of grant applications that canpete with other applications fran throughout the United States. The former type of assistance is known as "formula" grants; the latter type is known as "discretionary" grants. Present Applicability The Higher Education Act is expressly applicable to the Northern Mariana Islands. 20 U.S.C. S 1141(b). The applicability of the Act to the Northern Mariana Islands qualifies the Northern Mariana *The Act also provides assistance directly to students through basic (and supplemental) educational opportunity grants, and direct and guaranteed student loans. That assistance is not addressed here. - 139 - Islands for financial assistance through formula and discretionary grants programs on the same basis as the several States. Discussion. Legislation is proposed in this report that would require the Secretary of Education to allocate annually to the Northern Mariana Islands a block grant to represent the Northern Mariana Islands' share of f unds available through various discretionary and formula grant programs under the Higher Education Act. This grant would be available to meet the postsecondary educational needs and priorities of the Northern Mariana Islands. Its expenditure would not be limited to purposes permitted under the Act; the block grant would be available for any legitimate use furthering postsecondary education within the Northern Mariana Islands. Public Law 96-374, 94 Stat. 1495 (1980), authorized an analysis of the educational needs of insular areas and required the Secretary to report to Congress "with respect to the most appropriate form of federal postsecondary assistance . . . ." 20 U.S.C. S 1441(b). The study that resulted, Postsecondary Education in the U.S. Territories,* confirmed the perception of Congress that educational needs in the insular areas are unique. With respect to the needs of the insular areas, including the Northern Mariana Islands, the study found that: The school age population is rising rapidly; The general educational level is much lower than in the fifty States; 1he economies, governments, and postsecondary institutions are in early stages of development; Postsecondary education costs are higher than in the States; and The financial resources of the insular areas are few. *The study, prepared under contract with the United States Department of Education by Urban Systems Research & Engineers, was completed in May 1982. This study has been highly praised by the Pacific Postsecondary Education Council, which consists of representatives of the postsecondary institutions in Guam, American Sarma, the Northern Mariana Islands, and the Trust Territory of the Pacific Islands. See Pacific Postsecondary Education Council, Recommendations for Postsecondary Education in the U.S. Territories 2-3 (1982). 140 - Postsecondary Education in the U.S. Territories ii-iii. With respect to federal assistance currently available to insular areas for postsecondary educational needs, the study found that: Federal grants do not fit the fundamental development needs of territorial colleges; Federal matching requirements sometime s discourage territorial participation; Federal regulations and procedures are sometimes inappropriate; Federal support activities--particularly training and technical assistance--are inadequate; and Territorial colleges are often at a competitive disadvantage for discretionary grants and, therefore, do not receive their "fair share" of federal aid. Id. at viii. Postsecondary educational needs in the Northern Mariana Islands are more basic than in other insular areas. Although the Northern Mariana Islands since 1976 has had a community college, the Northern Marianas College, that institution--unlike institutions in other insular areas--has no permanent facility, no college library, and, most importantly, no accreditation.* Without accreditation, it is almost impossible to receive federal assistance. Without federal assistance, the school is severely handicapped in fulfilling its primary mission of assisting the assimilation of the people of the Northern Mariana Islands into the American political family. Ld. Appendix, at 79. In sun, federal grant programs are not now designed to meet the varied range of postsecondary educational needs of the Northern Mariana Islands, in spite of various legislative initiatives. 'f he Northern Marianas College, for instance, cannot qualify for any Higher Education Act grants because it lacks accreditation. 20 U.S.C. S 1141(a). Without funds for its developrwnt, the institution's chances for accreditation remain slim. *The Northern Marianas College, by contract with accredited institutions, does offer accredited courses to. students in the Northern Mariana Islands. - 141 - Several laws enacted by Congress in the last few years have recognized the special needs and characteristics of insular areas, including the Northern Mariana Islands. Public Law 95-134, 91 Stat. 1159, as amended, permits (but does not require) federal agencies to consolidate federal grant programs for the insular areas. 48 U.S.C. S 1469a. The authority was intended to reduce and simplify for local governments the administrative and financial burdens associated with federal assistance programs. More recently, section 1201 of the Education Amendments of 1980, Public Law 96-374, 94 Stat. 1495, expressly recognizing the specific educational needs of the insular areas, provides discretionary authority for the Secretary of Education to modify assistance programs available to the insular areas under the Higher Education Act. 20 U.S.C. � 1144a(a). The Secretary, however, has not undertaken to consolidate higher education programs, either under the general authority of Public Law 95-134 or under the more specific authority of the Education Amendments of 1980. See generally U.S. General Accounting Office, Limited _ Progress Made in Consolidating Grants to Insular Areas (Report GGD-81-61; 1981). The Department of Education has permitted consolidation of programs available to insular areas under laws other than the Higher Education Act. 34 C.F.R. SS 76.125-76.135 (1981). only formula grant programs, however, have been included among the programs that may be consolidated; discretionary grant programs have not been included. Id. � 76.125. Discretionary grants by definition are awarded on 9-campetitive basis. Consequently, until the ccimpetition has taken place, the portion of the total discretionary grants to be received by a particular jurisdiction is unknown. Since the portion of the total is unknown, it cannot be consolidated with other programs. Th consolidate a discretionary grant program with another program, it is therefore necessary prior to the competition to reserve for the recipient jurisdiction a portion of the funds available. Concurrently, that jurisdiction becames ineligible to compete for the remaining funds available under the program. For that particular jurisdiction, the discretionary grant program is converted to a set-aside fund, easily consolidated with other programs. most programs funded under the Higher Education Act are discretionary grant programs. Consolidation of only the formula grant programs under the Act would not affect the majority of funds available under the Act. Furthermore, even if programs under the Act were consolidated, the Public Law 95-134 authority restricts the use of consolidated funds to the purposes of any one or more of the programs so - 142 - consolidated. 48 U.S.C. � 1469a(c). That is, consolidation of Higher Education Act funds under existing law would restrict the Northern Mariana Islands to one or more of those specific Higher Education Act purposes. Many postsecondary educational needs of the Northern Mariana Islands can be satisfied by spending funds for one or more of the specified purposes. Others, however, cannot be met in this way. See Pacific Postsecondary Educational Council, Recommendations for Postsecondary Education in the U.S. Territories 32-33 (1982). Programs under the Act are designed primarily for the several States. Conditions in the Northern Mariana Islands are quite different, and different responses to those conditions are apprcpriate. For example, in the several States, postsecondary enrollment is declining and some postsecondary physical facilities are no longer needed. By contrast, the Northern Mariana Islands has a young, growing pcpulation and virtually no physical facilities for postsecondary education. Consolidation alone does not allow the Northern Mariana Islands to design wholly new programs to better respond to the unique postsecondary educational needs of the islands.* Id. Accordingly, the legislation proposed in this report requires the Secretary of Education to make a block grant annually to the Northern Mariana Islands to replace the various formula and discretionary grant programs funded under the Higher Education Act. This grant would give the Northern Mariana Islands clear responsibility for its own postsecondary programs, would simplify administration, and, most importantly, would allow the Northern Mariana Islands to design and implement programs to fit its own particular needs. The legislation proposed in this report waives expressly any matching requirements otherwise authorized by law. By requiring a jurisdiction to match Federal funds with its own funds, the Federal Government attempts to obtain a larger program than the Federal funds alone can support. Matching requirements have been criticized as ineffective. See U.S. General Accounting Office, Proposed Changes in Federal Matching and_Maintenance of Effort Requirements for State and Local Governments (Report GGD-81-7; 1980). A principal criticism is that " [a] strong matching requirement may screen out those governments most in need of a programs but least able to f inance a match." Id. at iii. The insular areas and, particularly, the Northern DG-riana Islands, are awng those jurisdictions least able to *Public Law 96-374 also provides the Secretary with authority to modify Higher Education Act programs "to adapt such programs to the needs . . . of the Northern Mariana Islands. " The authority to modify, however, probably cannot be read as authority to create wholly new programs. 143 - f inance a match. See Pacific Postsecondary Education Council, Reccmrk--ndat ions for Postsecondary Education in the U.S. Territories 21-22 (1982). Congress recognized this when it enacted section 601 of Public 'Law 96-205, 94 Stat. 90, 48 U.S.C. q. 1469a note, to waive for the Northern Mariana Islands and American Samoa matching requirements otherwise applicable to federal grant programs. Small insular areas had not been participating in programs requiring a local matching share because local governments could not devote a portion of their limited revenues to meeting the matching requirrzment. Matching requirements were therefore eliminated for programs requiring a loca 1 matching share of less than $100,000. (The figure was increased from $100,000 to $200,000 in 1983. Public Law 98-213, � 6, 97 Stat. 1459.) The legislation here proposed goes further, with respect to the Higher Education Act, by eliminating matching fund requirements without regard to the amount of matching funds required. The logic in favor of elimination of the requirement is at least as strong when a large match, rather than a small match, is required.* The legislation proposed in this report does not condition Higher Education Act assistance to the Northern Mariana Islands on the continued existence of the Northern Marianas College. The early history of the college is promising, but it is too soon to tell if the college will establish itself as a permanent institution. Accordingly, the proposed legislation allows the Board of Education of the Northern Mariana Islands to designate the institution to administer Higher Education Act funds in the Northern Mariana Islands. While the Board may designate the Northern Marianas College as that institution, the procedure permits another institution to be chosen without the necessity of involving Congress, should the Board believe the CULUtUnity college for any reason is unable to administer the funds. The proposed legislation also waives accreditation requirements for the Northern Marianas College (or any other recipient institution designated by the Board of Education of the Northern Mariana Islands). The application of national accreditation standards, which may be inappropriate to the Northern Mariana Islands in the first place, could operate to foreclose the very assistance needed by the Northern Mariana Islands to conform a fledgling postsecondary educational institution to those standards. The legislation here proposed also makes the Northern Marianas College (or any other *Elimination of matching requirements also eliminates administrative problems in consolidating grant programs containing matching requirements with other grant programs lacking such requirements. - 144 - institution designated by the Board) the recipient of the grant and provides that block-grant funds remain available until expended.* The block grant authorized by the proposed legislation would consist of two camponents. one ccmponent would be equal to the entitlement of the Northern Mariana Islands under all formula grants otherwise available under the Higher Education Act. The proposed legislation then would add to the funds available fram formula programs .33% of any funds appropriated by the Congress for discretionary grant programs under the Act." The proposed legislation also would guarantee the Northern Mariana Islands any minimum share of discretionary grant funds guaranteed to all jurisdictions if that minimum share were greater than .33 percent. The expenditure of the block grant by the recipient institution would be subject to federal audit under existing legislation. See 48 U.S.C. � 1469b. Further, the proposed legislation expressly reserves the right of the Secretary of Education to provide adequate procedures for accounting for, auditing, evaluating and reviewing any programs or activities funded by the block grant. The proposed *Providing that block-grant funds remain available until expenditure is consistent with similar treatment afforded the Northern Mariana Islands and other areas under the other grant-consolidation statutes. See Public Law 96-205, � 602(b), 94 Stat. 84 (1980); Public Law 95-348, 99 3(b)(2), 8, 92 Stat. 487 (1978). "This percentage is derived frcm and is the same as the percentage of funds received by the %rthern Mariana Islands from the total funds granted nationally in fiscal year 1982 under the Education Consolidation and Improvement Act of 1981, Public Law 97-135. Of $455,616,000 granted nationally, the Northern Mariana Islands received $1,505,000 or .33%. (The national figure may be found on page 3 of the October 25, 1982, issue of Education Daily; the data for the Northern Mariana Islands was provided by the office of the Representative- to the United States for the Northern Mariana Islands in a telephone conversation on November 3, 1982). Based on fiscal year 1981 appropriation figures contained in the 1982 Catalog of Federal Dmiestic Assistance, .33% would have provided the Northern Mariana Islands with approximately $1.1 million in Higher Education Act funds for the discretionary camponent of the block grant, had the legislation here proposed then been in effect. Taking into consideration proposed funding reductions and the 1983 budget estimates contained in the 1982 Catalog, this percentage would have provided the Northern Mariana Tslands approximately $638,000 in fiscal year 1983. - 145 - legislation also makes clear that the Secretary may provide to the Northern Mariana Islands technical assistance that is otherwise available under the Act. Not all programs authorized under the Act would be included in the block grant. Excluded would be those that, provide financial assistance directly to students, such as the student loan programs and basic educational cpportunity grants. These programs would continue to be administered as they have been in the past. Proposed legislative langu22e The following language, if enacted by the United States Congress, would implement the Camission's recammendation: An Act to create a block grant for financial assistance of postsecondary educational needs in the Northern Mariana Islands. Be it enacted bV the Senate and House of Representatives of the United States of America in Congress assembled, that the Secretary of Education shall ma available annually to the Northern Mariana Islands a block grant for postsecondary educational needs in the Northern Mariana Islands. The block grant shall be made frcrn appropriations authorized under the Higher Education Act and shall consist of: (a) An amunt equal to the amunts of any funds that would otherwise be allotted to the Northern Mariana Islands or any institution of higher education in the Northern Mariana Islands on the basis of a formula prescribed by the Act, including, but not limited to funds allotted under: (1) section 112 of the Act, as added by section 101(a) of Public Law 96-374, 94 Stat. 1367 (20 U.S.C. 1012) (education outreach programs); (2) section 415A of the Act, as added by section 131(b)(1) of Public Law 92-318, 86 Stat. 235, and as amended (20 U.S.C. � 1070c) (State student incentives); and (3) sections 419 and 420 of the Act, as added by section 1001(a) of Public Law 92-318, 86 Stat. 235, as - 146 amended (20 U.S.C. SS 1070e and 1070e-1) (assistance to institutions of higher education). (b) Thirty-three hundredths of one percent of any funds appropriated by Congress under the following authorizations: (1) Section 119 of the Act, as added by section 101(a) of Public Law 96-374, 94 Stat. 1367 (20 U.S.C. � 1019) (education outreach progrms), to the extent of the ten per centum of such funds apportioned for discretionary grants or contracts pursuant to section 116 of the Act, as added by section 101(a) of Public Law 96-374 (20 U.S.C. S 1016); (2) Sections 201 and 347 of the Act, as added by sections 201 and 301 of Public Law 96-374, 94 Stat. 1367 (20 U.S.C. �� 1021 and 1069c) (college and research library assistance and library training research, strengthening institutions, and aid to institutions with special needs); (3) Section 417A of the Act, as added by section 131(b)(1) of Public Law 92-318, 86 Stat. 235, and as amended (20 U.S.C. � 1070d) (special programs for students frcm disadvantaged backgrounds); (4) Section 531 of the Act, as added by section 153 of Public Law 94-482, 90 Stat. 2081, and as amanded (20 U.S.C. � 1119) (teacher training programs); (5) Sections 546, 607, and 613 of the Act, as added by sections 505(a) and 601(a) of Public Law 96-374, 94 Stat. 1367 (20 U.S.C. 1119b-5, 1127, and 1130b) (training for elementary and secondary school teachers to teach handicapped children, and international education programs); - 147 - (6) Section 702 of the Act, as added by section 701 of Public Law 96-374, 94 Stat. 1367 (20 U. S. C. � 1132a-1), but only to the extent it authorizes appropriation of grant funds (grants for the construction, reconstruction, and renovation of undergraduate and graduate academic facilities); (7) Section 801 of the Act, as added by section 129(b) of Public Law 94-482, 90 Stat. 2081, and as amended (20 U.S.C. 1133) (cooperative education); (8) Section 901 of the Act, as added by section 181(a) of Public Law 92-318, 86 Stat. 235, and as amended (20 U.S.C. � 1134) (grants to institutions of higher education); and (9) Sections 942, 953, 1005, and 1102 of the Act, as added by sections 904, 905, 1001(a), and 1101 of Public Law 96-374, 94 Stat. 1367 (20 U.S.C. �� 1134m, 1134p, 1135a-3, and 1136a) (assistance for training in the legal profession, law school clinical experience programs, fund for the improvement of postsecondary education, and urban grant university program). If all jurisdictions entitled to receive funds appropriated pursuant to the authorizations listed in subsection (b) of this section are entitled to receive a minimum amount of funds pursuant to any such authorization and that minimum amount is greater than thirty-three hundredths of one percent of that authorization, then that minimLun amount shall be substituted for thirty-three hundredths of one percent for each such authorization in determining the total amount of the block grant. Sec. 2. The block grant authorized under section 1 of this Act shall be made available directly to a college or ccmmunity college established or to be established by the Government of the Northern Mariana Islands and designated by the Board of Education of the Northern Mariana Islands as - 148 - the recipient of the block grant for purposes of meeting postsecondary educational needs in the Northern Mariana Islands. The block grant shall not be restricted in use to only those uses permitted under the Higher Education Act. Nothing in this section shall preclude the Secretary of Education fran providing adequate procedures for accounting for, auditing, evaluating, and reviewing any programs or activities receiving benefits fran the block grant authorized under section 1 of this Act or fran providing technical assistance otherwise available under the Higher Education Act. Sec. 3. The institution designated as recipient of the block grant pursuant to section 2 of this Act shall receive the block grant without regard to whether it is accredited. No funding otherwise available under the Act shall be denied the institution because it lacks accreditation. The Secretary of Education shall waive any requirement for matching funds otherwise required by the Act to be provided by the Northern Mariana Islands or by any institution of higher education in the Northern Mariana Islands. Sec. 4. Nothing in this Act shall preclude the Northern Mariana Islands, or any institution of higher education' in the Northern Mariana Islands, fran receiving assistance under the Higher Education Act if that assistance is available under a program or programs not included in determining the amount of the block grant available to the Northern Mariana Islands pursuant to section 1 of this Act. Sec. 5. The Higher Education Act or "the Act," as used herein, means the Higher Education Act of 1965, 79 Stat. 1219, as amended (20 U.S.C. �9 1001 et seq ). Sec. 6. Any funds required to be made available under this Act shall remain available until expended.. Northern Mariana Islands financial institutions as federal depositaries. Reocmmendation. The Secretary of the Treasury currently has authority to designate financial institutions in territories and possessions of the United States as depositaries to receive deposits of federal funds. Legislation should be enacted to give the Secretary similar - 149 authority to designate financial institutions in the Northern Mariana Islands as federal depositaries. The statute. Section 3303(b) of title 31 of the United States Code allows the Secretary of the Treasury to desionate financial institutions in territories and possessions of the United States to receive deposits of federal funds. Present applicability. Although Guam is a territory or possession, section 3303(b) does not apply to the several States. Consequently, the Covenant does not extend the Secretary's authority to include designation of financial institutions in the Northern Mariana Islands as depositaries; of federal funds. Discussion. The Secretary of the Treasury, in order to carry out the business of the United States, should be authorized to designate depositaries in the Northern Mariana Islands to receive deposits of federal funds, just as the Secretary is authorized to designate such depositaries in the territories and possessions of the United States. Legislation is proposed below to amend section 3303(b) of title 31 to allow the SecretarV to designate such depositaries in the Northern Mariana Islands. Proposed legislative, language. The following languaqe, if enacted by the United States @ongress, would implement this recanmndation: An Act to allow the Secretary of the Treasury to designate financial institutions in the Northern Mariana Islands as depositaries for federal funds. Be it enacted the Senate and House of 0 r RepresentaFl-v-esof the United States of knerica in R!@, ess assembled, that subsection (b) of section 3303 of title 3T,- United S ates Code, is amended by deleting the phrase "and in territories and possessions of the United States" and inserting in lieu thereof ", in territories and possessions of the United States, and in the Northern Mariana Islands." - 150 - Issuance of substitute federal checks. Recommendation. Legislation should be enacted to allow the issuance of substitute checks to replace checks drawn on federal funds on deposit in the Northern Mariana Islands when the original check is lost, stolen, or destroyed. Existing law allows issuance of substitute checks to replace checks drawn on federal funds on deposit in Gumn or in other territories and possessions. The proposed treatment would establish identical procedures for the Northern Mariana Islands, Guam, and the other territories and possessions. The statute. Section 3331(c) of title 31 of the United States Code authorizes the issuance of substitute checks to replace lost, stolen, or destroyed checks when the original check was drawn on federal funds on deposit in a territory or possession or in a foreign country. Present applicability The Northern Mariana Islands is now neither a territory or possession nor a foreign country. Although section 3331(c) is applicable when the original check is drawn on a depositary on Gum, it is not applicable to the several States. Consequently, the Covenant does not make section 3331(c) applicable to the replacEMent of checks drawn on federal funds on deposit in the Northern Mariana Islands. Discussion. The Northern Mariana Islands should be treated as are the territories and possessions of the United States, including Guam, and foreign countries for purposes of issuance of substitute federal checks. Legislation is proposed below to provide that treatment to the Northern Mariana Islands. Proposed legislative language. The following language, if enacted by the United States Congress, would implement this recam-endation: An Act to allow issuance of substitute checks to replace checks drawn on federal funds on deposit in the Northern Mariana Islands when the original check is lost, stolen, or destroyed. - 151 - Be it enacted !@Y the Senate and House of Representatives of the United States of America in @@gress assembled, that subsection (c) of section 3331 of title 31-, United States Code, is amended by inserting the phrase "or the Northern Mariana Islands" immediately af ter the phrase Via territory or possession of the United States". Federal employee allotments to Northern Mariana Islands credit unions. Recomendation. Federal employees may allot portions of their pay to accounts in banks and savings and loans in the United States, the territories or possessions, or the Northern Mariana Islands. They may also make allotments to accounts in credit unions chartered under federal or State law. They may not, however, make an allotment to an account in a credit union chartered under the laws of the Northern Mariana Islands. Legislation should be enacted to correct this discrepancy and allow credit unions chartered under the laws of the Northern Mariana Islands to be treated as are credit unions chartered under the laws of other American jurisdictions. The statute. Section 3332 of title 31 of the United States Code authorizes federal employees to have part of their Day sent to certain financial orqanizations. An orqanization eligible to receive such an allotment may be "a bank, savings and loan association or similar institution, or a credit union chartered by the United States Government or a State." 31 U.S.C. q, 3332(a). Regulations implementing section 3332 apply the requirEment of a federal or State charter only to credit unions and not to the other financial institutions mentioned. 31 C.F.R. S 209.2(b) (1983). Present applicability. Since "State," for purposes of section 3332, is not defined to include territories or possessions, the Covenant does not operate to pennit a federal employee under that section to designate a credit union chartered under the laws of the Northern Mariana Islands to receive a pay allotment. Discussion. Credit unions chartered under the laws of the Northern Mariana Islands ought to be eligible to receive pay allotments fran federal - 152 - employees, just as are credit unions chartered by the Federal Government or a State.* Legislation is proposed below to grant that eligibility to credit unions chartered under the laws of the Northern Mariana Islands. Proposed legislative language. The following language, if enacted by the United States Congress, would implement this reccmmendation: An Act to allow credit unions chartered under the laws of the Northern Mariana Islands to receive pay allotments fran federal Employees. Be it enacted by the Senate and House of Representatives of the United States of AmericWMin -Congress assembled, that subsection (a) of section 3332 of title 31, United States Code, is amended by adding thereto the following sentence: "State", for purposes of this subsection, includes the Northern Mariana Islands. Public participation in block grant proposals. Recamteendation. The Northern Mariana Islands is eligible to receive various block grants pursuant to the Omnibus Budget Reconciliation Act of 1981. Current law applicable to each jurisdiction eligible for these grants other than the Northern Mariana Islands requires the jurisdiction to take certain steps to enccurage local public participation in formulation of proposals for use of the grants and to ensure that the funds are spent as intended. Legislation should be enacted to make these requiremnts applicable to the Northern Mariana Islands as well. The statutes. Chapter 73 (sections 7301 et seq.) of title 31 of the United States Code requires States to prepare an annual report on uses *Credit unions chartered under the laws of Guam and other territories and possessions should be similarly eligible. This Cammission, however, is only charged with reconmending changes in federal laws as they apply to the Northern Mariana Islands. - 153 - proposed for block grant funds received from the Federal Governmentr to conduct a public hearing on that report, and to audit the expenditure of block grant funds received. "Block grants" are defined to include any amounts directly allocated to a State for discretionary use by the State pursuant to the Omnibus Budget Reconciliation Act of 1981, Public Law 97-35, 95 Stat. 357. These block grants include grants funded by various health care block grant programs, 42 U.S.C. �� 300w et s 701 et by the community services block grant program, id. 9901 et and the education block grant program, 20 U.S.C. !R- 3801 et seq-- Presentapplicability "State" is defined, for purposes of chapter 73, to include the territories and possessions of the United States. Since chapter 73 was enacted after January 9, 1978, the Northern Mariana Islands is not included in this definition of "State" by operation of section 502(a) of the Covenant. Accordingly, the requirements of chapter 73 do not apply to block grants to the Northern Mariana Islands. Discussion. At least some of the block grants to which chapter 73 applies are available to recipients in the Northern Mariana Islands. See, for example, 20 U.S.C. � 3875(a)(1); 42 U.S.C. S 9902(4). The requirements of chapter 73 apply to all jurisdictions eligible to receive the block grants subject to the chapter, except the Northern Mariana Islands. No good reason favors exempting the Northern Mariana Islands from these requirements. The current exemption was almost certainly inadvertent. Accordingly, legislation is proposed below to treat the Northern Mariana Islands in the same manner as all other jurisdictions for purposes of chapter 73. PrM2sed_legislative language. The following language, if enacted by the United States Congress, would implement this rec"nmendation: An Act to apply to the Northern Mariana Islands certain requirements for public participation in the formulation of block grant proposals. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, that subsection (2) of section 7302 of title 31, United States Code, is avended by deleting the phrase "and territories and possessions of the United States." and inserting in lieu thereof the phrase ", territories and possessions of the United States, and the Northern Mariana Islands.". 154 - The Rivers and Harbors Act. Reccmnendation. Legislation should be enacted to conf irm the applicability of the Rivers and Harbors Act of 1899 to the Northern Mariana Islands. The statute. The Rivers and Harbors Act of 1899, 33 U.S.C. �,.9 401 et gives to the Secretary of the Army, acting through the Army Eo-rps of Engineers (Corps), jurisdiction over dredge, fill, and similar activities affecting navigable waters of the United States, including coastal waters, rivers, and other waterways usable for ccmmercial navigation. Permits must be secured frcm the Corps in order to dredge, excavate, fill, or build in navigable waters if the proposed construction would interfere with navigation.* Permit applications are normally processed through t he Corps' District Engineer concurrently with the processing of other required Federal, State, and local permits. The District Engineer takes into account State and local land and water policies and, absent overriding national interests, generally will issue a permit on receipt of a favorable State determination. 33 C.F.R. � 320.4 (1984). The Corps is also responsible for the issuance of grants to States for such projects as aquatic plant control, beach erosion control, and flood control and bridge and coastal protection works." *Under the Clean Water Act, 33 U.S.C. �� 1251 et @M., permits must also be approved by the Corps--applying EPA sta-ndards--for any dredge or fill activity in MZ waters of the United States. Acts that the Corps of Engineers considers in its permit process but not discussed here are the National Environmental Policy Act, 42 U.S.C. 4321 et s .; the Endangered Species Act, 16 U.S.C. 1531 et Leq ;a@.; the Fish and Wildlife Coordination Act, 16 U.S.C. 661 et tM.; the Preservation of Historical and Archeological Data Act 7 1974, 16 U.S.C. �� 469 et tta.; the National Historic Preservation Act, 16 U.S.C. 99 470 q:_t2a_.; the Marine Mammal Protection Act, 16 U.S.C. �� 1361 et and the Wild and Scenic Rivers Act, 16 U.S.C. 9� IZ78 et seq. See 33 C.F.R. parts 320-329 (1984). "Flood control projects are funded through the various Flood Control Acts. 33 U.S.C. �,q 701 et seq. Planning assistance is also available through the Water Reioiices Development Act, 42 U.S.C. 1962d et sea. - 155 - (The Corps also grants monies under other River and Harbor Acts for small navigation projects and for the protection, clearing, and straightening of channels.) Present applicability The Rivers and Harbors Act of 1899 applies to any "navigable water of the United States." 33 U.S.C. S 401. The Rivers and Harbors Act can be held applicable to navigable waters of the Northern Mariana Islands for two reasons. First, there is a presumption that Congress has exercised its extensive reach under its interstate and foreign ccmmerce powers under the Constitution, a reach that would Embrace the Northern Mariana Islands. See Kaiser Aetna v. United Stat2g, 444 U.S. 164 (1979). Second, the Corps of Engineers routinely issues permits under the Rivers and Harbors Act in the Northern Mariana Islands. See, for example, U.S. Army Corps of Engineers, Letter of Permission No. PODCO-01592-S (December 8, 1980). Administrative interpretations are accorded deference in construing statutes. See, for example, Sawczyk v. United States Coast Guard 499 F. Supp. 1034 (D.N.Y. 1980). See also Sutherland, Statutes and Statutory_ Construction S 49.06 (C. Sands ed. 1973). The present applicability of the Act to the Northern Mariana Islands is not, however, entirely clear. The navigation laws have been expressly extended to Puerto Rico and the Virgin Islands. 48 U.S.C. SS 749, 1399, 1405c. The specific application of the navigation laws to those territorial areas suggests nonapplicability of the laws to territorial areas to which they have not been specif ically applied. The Ccmmission on the Application of Federal Laws to Guam concluded those laws were applicable to Guam but, because of the express provision for the Virgin Islands, recam-nended Congress enact similar explicit legislation for Guam. Report of the Cammission on the Application of Federal Laws to Guam House Document 212, 82d Cong., lst Sess. (1951), at 6-7. (Congress did not act on that recam-L-ndation.) Discussion. The econany of the Northern Mariana Islands is highly dependent on waterborne transportation. Since the islands are small and limited in resources, many goods, including essential foodstuffs, arrive by ship. The embryonic fisheries industry, of course, depends on fishing vessels. Thurists ply the water in glass-bottcm sightseeing boats and charter sport fishing vessels. Many local citizens use watercraft of one sort or another for fishing or recreation. Given the importance of waterborne transportation in the Northern Mariana Islands, harbors and navigational channels obviously should be protected against destruction or encroach:ment. 156 - One may grant that care is necessary to prevent detrimental effects on navigation, but still argue that this care may be required by local legislation of the Northern Mariana Islands rather than by applying federal laws to the Northern Mariana Islands. The inhabitants of the Northern Mariana Islands may have a better understanding of the environmental relationships in the islands than do scientists or federal officials far away. Further, the process of applying for permits under federal environmental and navigational laws has been criticized, both in the Northern Mariana Islands and elsewhere, as unduly burdenscme and time-consuming. Delays are magnif ied for the Northern Mariana Islands by the distance of the islands fran decision-making officials. Despite these considerations, the Cmnission reccmwnds the continued application of the Rivers and Harbors Act to the Northern Mariana Islands. While islanders may have a good understanding of traditional environmental relationships in their islands, the application to island areas of develcpment technology perfected on continental land masses calls for different types of knowledge. Intensive, sophisticated research may be necessary to determine whether plans for a proposed developiment are reasonably consistent with protection of harbors and navigation channels. While the local government in the Northern Mariana Islands may be able to obtain such research fran time to time on a contractual basis, it cannot duplicate on an ongoing basis the routine in-house expertise of the Army Corps of Engineers. The Commission does not suggest means for expediting the review of permit applications fran the Northern Mariana Islands. Streamlining the permit process may well be necessary, but the protection of federal laws requiring permits should not be eliminated by making those laws inapplicable to the Northern Mariana Islands. Rather, officials administering those laws should be encouraged toward greater efficiency. For example, in a praiseworthy development, the Army Corps of Engineers has recently issued a general permit authorizing the maintenance clearing of rivers, streams, storm drains, and beach areas in the Northern Mariana Islands without the necessity of obtaining specific permits for each activity. U.S. Amy Corps of Engineers, General Permit PODOO-O GP 82-1 (1982). As noted above, the Ccmmission on the Application of Federal Laws to Guam concluded that the Rivers and Harbors Act is applicable to Guam. Because of the provision expressly applying the Act to the Virgin Islands, however, that Ccmmission recommended Congress enact a similar provision for Guam. On the same rationale, legislation is - 157 - here reccmmended confirming the Act's applicability to the Northern Mariana Islands.* Proposed legislative language. The following language, if enacted by the United States Congress, would confirm the applicability of the Rivers and Harbors Act of 1899 to navigable waters in and adjacent to the Northern Mariana Islands. An Act to confirm the applicability of the Rivers and Harbors Act of 1899 to the Northern Mariana Islands. Be it enacted by the Senate and House of Representatives of the United' States of America .in ss assembled, that the applicability of the Act of March 3, T8-99,c.425, 30 Stat. 1151, as amended (33 U.S.C. S5 401 et seq.), to the Northern Mariana Islands is confirmed. Judicial venue under the Clean Water Act, the Ocean ing Act, and the Ocean Thermal Enerqy_Conversion Act. Reccomendation. Legislation should be enacted to make the District Court for the Northern Mariana Islands the proper forum for lawsuits arising in the Northern Mariana Islands (or in which the defendants are in the Northern Mariana islands) under the Clean Water Act, the Ocean Dumping Act, and the Ocean Thermal Energy Conversion Act. The statutes and their present applicability. Provisions in the Clean Water Act, the Ocean Dumping Act, and the Ocean Thermal Energy Conversion Act make the District Court of Guam or the United States District Court for the District of Hawaii the proper form for lawsuits under those Acts arising in the Trust Territory of the Pacific Islands (or in which the defendants are in *Unlike the recommendation of the Guam Catutission, however, this recamnendation does not address other laws for the protection and improvement of navigable waters. 158 - the Trust Territory of the Pacific Islands).* 33 U.S.C. @q 1321(n), 1322(m) (Clean Water Act); 1402(g) (Ocean Dumping Act); 42 U.S.C. � 9153(c) (Ocean Thermal Energy Conversion Act). Since the Northern Mariana Islands is part of the Trust Territory, lawsuits under those acts arising in the Northern Mariana Islands (or in which the defendants are in the Northern Mariana Islands) must be filed in the District Court of Guam or the United States District Court for the District of Hawaii." Discussion. The Northern Mariana Islands now has its own federal court, the District Court for the Northern Mariana Islands. 48 U.S.C. �� 1694-1694e. That court has all the jurisdiction of a District Court of the United States. Id. � 1694a(a). The District Court for the Northern Mariana Islands should be made the proper forum for lawsuits arising in the Northern Mariana Islands (or in which the defendants are in the Northern Mariana Islands) under the Clean Water Act, the Ocean Dumping Act, and the Ocean Thermal Energy Conversion Act. Pr2Msed legislative laMage. The following language, if enacted by the United States Congress, would implement this recamendation: An Act to designate the District Court for the Northern Mariana Islands as the appropriate venue for certain actions under the Clean Water Act, the Ocean Dunping Act, and the Ocean Thermal Energy Conversion Act. *The substantive provisions of the Clean Water Act and their present applicability to the Northern Mariana Islands are discussed under chapter 26 of title 33 of the United States Code, in the Title-by-title survey section of this report. The Ocean Dumping Act is similarly discussed under chapter 27 of title 33 in the Title-by-title survey, while the Ocean Thermal Energy Conversion Act is treated under chapter 99 of title 42 in the survey. "Such actions under the Clean Water Act may be filed in either the District Court of Guam or the United States District Court for the District of Hawaii. 33 U.S.C. �� 1321(n), 1322(m). Such actions under the Ocean Dumping Act must be filed in the United States District Court for the District of Hawaii. Id. � 1402(g). Such actions under the Ocean Thermal Energy Conversion Act must be filed in the District Court of Guam. 42 U.S.C. � 9153(c). See also id. 9102(15). 159 - Be it enacted bV __ the Senate and House of Representatives of the United States of America in Conqress assembled, that Sec. 1. Judicial venue under the Clean Water Act. (a) Subsection (n) of section 311 of the Act of June 30, 1948, c.758, 62 Stat. 1155, as added by section 2 of Public Law 92-500, 86 Stat. 816, and as amended (33 U.S.C. S 1321(n)), is further amended: (1) by striking "Trust Territory of the Pacific Islands" wherever it appears and inserting in lieu thereof "Trust Territory of the Pacific Islands (other than the Northern Mariana Islands)"; and (2) by inserting a new sentence after the second sentence thereof, to read as follows: In the case of the Northern Mariana Islands, such actions may be brought in the District Court for the Northern Mariana Islands. (b) Subsection W of section 312 of the Act of June 30, 1948, c.758, 62 Stat. 1155, as added by section 2 of Public Law 92-500, 86 Stat. 816, and as amended (33 U.S.C. � 1322(m)), is further amended: (1) by striking "Trust Territory of the Pacific Islands" wherever it appears and inserting in lieu thereof "Trust Territory of the Pacific Islands (other than the Northern Mariana Islands)"; and (2) by inserting a new sentence after the first sentence thereof, to read as follows: In the case of the Northern Mariana Islands, such actions may be brought in the District Court for the Northern Mariana Islands. Sec. 2. Judicial venue under the Ocean Dumping Act. Subsection (g) of section 3 of 1972, Public Law 92-532, 86 Stat. 1052, as amended (33 U.S.C. S 1402(g)), is further anended: 160 (1) by inserting af ter "Puerto Rico," the following: "The District Court for the Northern Mariana Islands,"; and (2) by inserting after "Trust Territory of the Pacific Islands" the following: "(other than the Northern Mariana Islands)". Sec. 3. Judicial venue under the Ocean Thermal Energy Conversion Act. Subsection (c) of se-F-i"37303 of Public Law 96-320, 94 stat. 974 (42 U.S.C. � 9153(c)), is amended by deleting the period after "District of Hawaii" and inserting in lieu thereof ", and in the case of the Northern Mariana Islands, the appropriate court is the District Court for the Northern Mariana Islands.". Medicaid. Recommendation. Legislation should be enacted to authorize the Secretary of Health and Human Services to waive or modify particular requirements of the Medicaid program otherwise applicable to the Northern Mariana Islands. The statute. Subchapter XIX of chapter 7 of title 42, United States Code M 1396 et seg ), contains title 19 of the Social Security Act, creating the Medicaid program. The program authorizes Federal grants to States for medical assistance to low-income persons who are age 65 or over, blind, disabled, or members of families with dependent children. The program is jointly financed by the Federal and State governments and administered by States. Within broad Federal rules, each State decides * eligible groups, types and range of services, payment levels for set-vices, and administrative and operating procedures. Payments for services are made directly by the State to the individuals or entities that furnish the services. 42 C.F.R. S 430.0(a) (1984). States participating in the Medicaid progran must submit a medical assistance plan to the United States Department of Health and Human Services for approval and, thereafter, in providing assistance must comply with that plan. 42 U.S.C. SS 1396, 1396c. Eligible - 161 - individuals needing financial assistance apply to the State or local agencies designated in the State plan. Medical services, in most instances, may then be obtained fran any institution, doctor, or other person qualified to perform the services. Id. � 1396a(a) (23). Present applicability. The definition of "State" for purposes of this subchapter was amended in 1981 to include the Northern Mariana Islands, thereby making the Medicaid progran available to the Northern Mariana Islands. Public Law 97-35, � 2162(a)(1), 95 Stat. 358, 42 U.S.C. S 1301(a)(1). See also 42 C.F.R. part 435 (1984).* Although generally treated as States for purposes of the Medicaid program, the Northern Mariana Islands and other insular areas of the United States are subject to two rules not applicable to the States. First, total federal payments under the Medicaid progran in any fiscal year may not exceed an amount specified by statute. 42 *Even before the 1981 amendment, the Medicaid program was legally available to the %.rthern Mariana Islands. Section 502(a)(1) of the Covenant makes applicable to the Northern Mariana Islands as of January 9, 1978, "those laws which provide federal services and financial assistance prograns . . . as they apply to Guam." Medicaid assistance has been available on Guam since the inception of the progran in 1965. Public Law 89-97, � 121(c)(1), 79 Stat. 286, 352 (1965). Sect ion 139 6a (b) (4) of title 42 requires States receiving Medicaid grants to impose no citizenship requirement on eligibility for assistance that would exclude United States citizens. In its January 1982 interim report to the United States Congress, the Ccmmission recom-ended enactment of legislation to treat citizens of the Northern Mariana Islands as citizens of the United States for purposes of this requirement. Section 18 of Public Law 98-213, which was signed into law in December 1983, provides that United States citizenship requirements in federal laws applicable to the Northern Mariana Islands do not bar citizens of the Northern Mariana Islands from receiving federal services or financial assistance under those laws. Financial assistance under Medicaid is thus now available to citizens of the Northern Mariana Islands wherever they may be in the United States. - 162 - U.S.C. S 1308(c). For the Northern Mariana Islands the "can" on annual federal payments is $550,000. Id.* Second, for the Northern Mariana Islands (and Puerto Rico, the Virgin Islands, Guam, and American Samoa), the Federal (bvernnent pays fifty per cent of the costs of services provided under an approved Medicaid plan. Id. � 1396d(b). For all other eligible jurisdictions, the federal contribution ranges from fifty percent to eiqhty-tbree percent of the costs. The poorer States receive a greater percentaqe of total costs from the Federal Goverruent while the more affluent States receive a lesser percentage." The Northern Mariana Islands has an approved Medicaid plan and is providing financial assistance to qualified individuals. Medicaid assistance in the Northern Mariana Islands is administered by the Northern Mariana Islands Department of Public Health and Environmental Services. Northern Mariana Islands Public Law 1-8, � 3(d) (1978), 1 Code of the Northern Mariana Islands S 2603(d) (1984).@ Discussion. Health care in the Northern Mariana Islands. In general, the health of the people of the Northern Mariana islands is cruite good. An infant mortality rate sixty percent higher than that in the United States, however, is the principal contributor to a crude death rate *Annual Medicaid expenditures in the Northern Mariana islands apparently have not yet been sufficiently large to brinc "cap" g the into operation. This situation way change when a new hospital is completed, makinq qualified persons eligible for the first time to receive Medicaid assistance for inpatient medical services in the Northern Mariana Islands. See the discussion, Health care in the Northern Mariana Islands, below. Indeed, the "cap" may be reached before the new hospitg-lis opened. See the discussion, "The 'cap"', below. The upper limits for the other insular areas are: Puerto Rico-$63,400,000; Virgin Islands--$2,100,000; Gum.--$2,000,000; and American Samoa--$1,150,000. 42 U.S.C. � 1308(c). The limits are roughly related to the population of each area. "Congress may provide that persons in the territories receive less assistance from federally-funded programs than similarly situated persons in the States without violating constitutional guarantees of equal protection. Harris v. Rosario, 446 U.S. 651 (1980). - 163 - twenty percent greater than in the United States. See Robert Mytinger Associates, Inc., New Directions for Health Services for the Ccunonwealth of the Northern Mariana Islands 3 (1980) (Mytinger SL@@Z). The principal hospital in the Northern Mariana Islands, Dr. Torres Hospital on Saipan, has been characterized as "woefully inadequate. " 125 Cong. Rec. 10090, 10092 (1979) (remarks of Representative Phillip Burton). The hospital cannot meet the standards for Medicaid payments for inpatient medical services. See U.S. Department of Health, Education & welfare, Statement of Deficiencies and Plan of Correction: Dr. Torres Hospital, Sai2an, Northern Marianas (February 9, 1979). In 1980,- the United States Congress authorized construction of a new hospital on Saipan. Public Law 96-205, � 202, 94 Stat. 84. monies have been appropriated pursuant to that authorization, and construction of the new hospital is now under way. Health care is in large part provided by personnel employed by the government of the Northern Mariana Islands. A private dental clinic operated by the Seventh-Day Adventists, a private optcmetrist, and a number of traditional healers (suruhana) also provide health care. The principal goverrment health care facilities are the 84-bed Dr. Torres Hospital and four small dispensaries on Saipan, a 12-bed sub-hospital on Rota, and a four-bed sub-hospital/dispensary on Tinian. Mytinger Study 35, 38, 40. The geographic location of the [Northern Mariana Islands] contributes to extraordinarily high costs of training, employing and retaining health personnel. Its isolation contributes to inordinate costs of importing medical technology and building materials. The small population base and low volume of use of highly specialized medical services makes it impossible to provide the desired mix of high technology medical services on site. This, in turn, generates increasing costs for care and transport of patients to medical facilities abroad (in Gum, Hawaii and the U.S. mainland). Id. at 11. Throughout administration of the Trust Territory of the Pacific Islands by the United States, medical care has been 'provided the people of the Northern Mariana Islands by the goverrment at fees that reflect only a small portion of the actual costs of that care. The government of the Northern Mariana Islands inherited this system of health care financing. Although efforts are under way to bring fees for medical services more into line with the costs of those services, these efforts are hampered by the inability of many persons in the less-developed econany of the Northern Mariana Islands to pay a larger share of the costs. - 164 Referrals. Current regulations include among the expenses cover;3 by M icaid transportation and other related travel expenses determined to be necessary to secure medical examinations and treatment. 42 C.F.R. � 440.170(a)(1)(1984). Included are the cost of transportation "by ambulance, taxicabF ccmmon carrier, or other appropriate means. . . . [t1he costs of meals and lodging en route to and frcm medical care, and while receiving medical care; and . . . [t1he cost of an attendant to acccimpany the [patient], if necessary, and the cost of the attendant's transportation, meals, lodging, and, if the attendant is not a member of the recipient's family, salary." Id. S 440.170(a)(3). Thus, Medicaid assistance is now available for eligible patients fran the Northern Mariana Islands who must be referred to health care facilities in Guam, Hawaii, or other jurisdictions for diagnosis or treatment that cannot be provided within the Northern Mariana Islands. The need for off-island medical referral will not be substantially reduced by canpletion of the new hospital on Saipan. That hospital, while meeting Medicaid standards for inpatient medical care, will not significantly raise the level of professional care available in the Northern Mariana Islands. Patients who now require more sophisticated examination or treatnent in Guam or Hawaii will continue to be examined or treated in Guam or Hawaii. For the foreseeable future, referral of patients will continue to impose a heavy financial burden on the Northern Mariana Islands not incurred in most United States jurisdictions.* The proposed waiver authority. Three characteristics distinguish the Northern Mariana Islands frcrn most jurisdictions where Medicaid is available: (1) the small population of the islands; (2) the dual role of the government as administrator of the Medicaid program and as principal provider of medical services; and (3) the subsidy of health care by the government from its general revenues. --small population. The Northern Mariana Islands has a small population ccrnpared to that of the States and other jurisdictions eligible to participate in the Medicaid program. As a consequence, the number of persons with the talent and education to ensure that the Northern Mariana Islands meets all requirements for participation in the Medicaid program is limited. Even more than in other areas, these persons should not be diverted fran more productive enterprise to ccimpliance paperwork unless absolutely necessary to achieve the purposes of the Medicaid progran in the Northern Mariana Islands. *See generally U.S. General Accounting Office, the Cost of Medical Referral Programs in Micronesia and American Samoa (Report GAO/NSIAD-84-139; 1984). - 165 --dual role of government. The goverrTnent of the Northern Mariana Islands, as principal provider of health services, is the principal recipient of Medicaid payments. At the same time, as administrator of the Medicaid program, it pays for these services. In effect, the government pays itself. There consequently may be opportunities to eliminate Medicaid requirements governing relationships between state Medicaid agencies and providers of medical services that deal with each other at arm's length. --government subsidy. Hospitals are normally paid by Medicaid no more than their customary charge for inpatient services provided. 42 U.S.C. � 1396b(i)(3).* when, as in the Northern Mariana Islands, public institutions provide inpatient hospital services free of charge or at nominal charge, those institutions may be paid no more than the amount Department of Health and Human Services regulations determine will provide fair canpensation to the institution for the services rendered. Id. Those regulations allow the institution to receive payment "at the same rate that would be used if the provider's charges were equal to or greater than its costs." 42 C.F.R. � 447.271 (1984). Additional upper limits on Medicaid payments are based on principles of reimbursement established under the Medicare program. Id. @� 405.401 et seq., 447.253(b)(2). American Samoa also hi-s a small population, a government that is the principal provider of health services and administrator of the Medicaid program, and a government-subsidized health care system. Additionally, the medical care system of American Samoa is of about the same sophistication as that of the Northern Mariana Islands. MytinQer Study 146. The Medicaid program was extended to knerican Samoa in 1982. Public Law 97-248 S 136(a), 96 Stat. 324, 42 U.S.C. S 1301(a)(1). In extending the program to American Samoa, Congress authorized the Secretary of Health and Hurran Services to waive or modify any requirement of the Medicaid program except the requirements that (1) American Saffoa provide matching funds, (2) annual federal expenditures be subject to the statutory "cap" of $750,000 (subsequently raised to $1,150,000), and (3) expenditures be for health services covered by the program. 42 U.S.C. S 1396a(j). Note that the Secretary is not required to grant all requests for waivers or modifications of Medicaid requirEments applicable to Amer ican Samoa. The only reason given for American Samoals special treatment in the legislative history of Public Law 97-248 is "the unique circumstances in the health systEm in American Samoa." House Conference Report 97-760, at 441 (1982). Those unique circumstances no doubt include its small population, the dual role of the goverrment as principal provider of health services and as *Medicaid payments to hospitals must also be reasonable. 42 U.S.C. � 1396a(a)(13)(A). See also 42 C.F.R. � 447.250 (1984). 166 - administrator of the Medicaid program, and goverment subsidy of health care. The same circumstances justify grantinq the Secretary of Health and Human Services authority similarly to waive or modify requirements of the Medicaid program as it applies to the Northern Mariana Islands. Legislation is here proposed to accomplish that end. A bill, the Health Care Financing Amendments of 1983, pending before the 98th Congress, would have extended the treatment accorded American Samoa to Puerto Rico, the Virgin Islands, Guam, and the Northern Mariana Islands. S. 643 and H.R. 2576, 98th Cong. , lst Sess. S 227 (1983).* This bill was supported by the Health Care Financing Administration, the agency within the United States Department of Health and Human Services that administers the Medicaid program. The first section in the legislative language proposed in this recommendation is drawn frcm that bill.** Freedcm-of-choice requirements. In general, State plans for Medi assistance must allow individuals eligible for that assistance to choose any hospital, doctor, or other institution or person qualified to provide the medical services needed. 42 U.S.C. S 1396a(a) (23). (Some exception and waivers fran this requirement are pemitted. See id. � 1396n.) In 1975, Congress provided that the plans for Puerto Rico, the Virgin Islands, and Guam need not permit individuals eligible for Medicaid assistance freedam to select their own medical providers. Public Law 94-48, 9 2, 89 Stat. 247, 42 U.S.C. S 1396a(a) (23). Congress noted that each of these jurisdictions "had in place before Medicaid a well-developed public health care system, used by most of the population" and concluded that exemption "from the freedorn-of -choice requirement would allow them to determine how to utilize their own limited dollars in meeting the health needs of the large eligible population." House Report 94-327, at 3 (1975). See also 121 Cong. Rec. 20930-31 (1975). The Northern Mariana Islands similarly has a public health care system used by most of the population. At present, few alternatives *H.R. 2576 is identical to S.643. "This Commission is charged only with recommending changes in federal laws as those laws affect the Northern Mariana Islands. Accordingly, the legislative language proposed herein does not address the operation of the Medicaid program in Puerto Rico, the Virgin Islands, and Guam. - 167 - to that system are available so, even if the Medicaid recipient has a legal right to choose any provider of health care, the public health care system will in most cases be the provider. Medicaid is a law providing federal financial assistance. Accordingly, by operation of section 502(a)(1) of the Covenant, Medicaid applies to the Northern Mariana Islands as it does to Guam. Consequently, the Northern Mariana Islands--like Guam--needs not permit individuals eligible for Medicaid assistance freedom to select their own medical providers. Because the Northern Mariana Islands is exempted from the freedcrn-of -choice requirement, physicians and other providers of health care may be discouraged from establishing practices in the Northern Mariana Islands, since they may not be eligible to receive Medicaid payments for services provided. The establishmnt of private-sector health care in competition with the government system could stimulate improvements in the quality of health care offered by the governmant system.. on the other hand, if other sources of medical assistance do become established in the Northern Mariana Islands, and the freedom-of -choice requirement were in effect, many persons would be likely to resort to those other sources. The diversion of patients from public to private health care would affect the financing of health care in the Northern Mariana Islands. The Niorthern Mariana Islands's fifty percent share of Medicaid costs (and 100 percent share of those costs after the "cap" is reached) would be paid by the Northern Mariana Islands to the private sector rather than to the goverment's own health care system for those patients. Whether the Northern Mariana Islands ends up paying less for total health care because freedan-of -choice is not permitted depends upon a number of factors. Among these factors are: (1) Whether economies of scale in the goverriment health care system are significantly diminished by the diversion of patients to the private sector; (2) Whether Medicaid reimbursements for patients in the governmental health care system cover all reasonable costs of care (or, conversely, whether part of the costs of care for Medicaid recipients is paid by government subsidy not reimbursed by Medicaid, in which case the Federal Government would not be contributing 50 percent of the costs of that part); (3) Whether private health care can be provided at less cost to the patient than unsubsidized governmental health care. No recommendation is made here to apply the freedom-of -choice requirement to the Northern Mariana Islands. - 168 Standard-of-care requirements. Dr. Torres Hospital, the principal hospital in the Northern Mariana Islands, cannot meet the standards for Medicaid payments for inpatient hospital services. Inpatient hospital services may only be furnished by hospitals meetirp requirements for participation in Medicare. 42 C.F.R. 440-10(a)(3)(iii) (1984). Those requirements are set forth in section 1395x(e) of title 42, U.S.C., and in sections 405.1011 et seq. of title 42, C.F.R. (1984). [The] conditions for participation are included to provide assurance that participating institutions are safe, that they have facilities and organization necessary for the provision of adequate care, and that they exercise their responsibilitv to discourage improper and unnecessary utilization of their services and facilities . . . . . Ib allow payments to institutions for services of lower quality than are now generally acceptable might reduce the incentive for establishing hiqh-quality institutions or for maintaining high standards where they now exist. Senate Report 404, 89th Cong., Ist Sess. (1965), reprinted in 1965 U.S. Code Cong. & Ad. News 1943, 1969. Thus, even though -oersons in the Northern Mariana Islands may be eligible for inpatient Medicaid assistance, they cannot receive that assistance in the Northern Mariana Islands because no hospital is qualified to provide inpatient care under the Medicaid program. The persons needing inpatient services obtain those services at Dr. Torres Hospitalf but receive no Medicaid assistance in paying for those services. At present, denial of Medicaid assistance for inpatient hospital care to eligible persons in the Northern Mariana Islands does not cause great hardship to those persons. The government pays most costs of hospital care from its own general revenues, so fees charged to individuals are low. Myti!22er Study 4. while individuals do not suffer unduly because Medicaid tance is not available for inpatient care at Dr. Torres, the financial burden on the government of the Northern Mariana Islands of subsidizing health care would be alleviated if Medicaid assistance were available for that inpatient care. The new hospital under construction is expected to meet Medicaid standards for inpatient care. Conseauently, when that hospital is opened, eligible persons will be able to receive Medicaid assistance for inpatient care in the Northern Mariana Islands. The legislation proposed in this recommendation would allow the Secretary of Health and Human Services to exempt the Northern Mariana Islands from standard-of-care requirements. Because these - 169 - requirements protect human health and safety, wholesale exemption from all standard-of -care requirements would be unlikely. The authority granted would, however, allow selective exemption frcm. particular requirements if the Secretary were convinced an exerrption was justified. The "cap" and percentage limitations. The legislation proposed herein does not allow the Secretary of Health and Human Services to alter the "cap" on federal Medicaid assistance to the Northern Mariana Islands or the recTuiren-ent that the Northern Mariana Islands provide matching funds. If the Northern Mariana Islands were a State of the Union, there would be no statutor i ly- imposed upper limit to federal Medicaid assistance. As a State, too, the Northern Mariana Islands would certainly be among the poorest States, entitled to rece ive a federal contribution of 83 percent of total Medicaid costs. Likewise, were Puerto Rico, Guam, the Virgin Islands, and Azerican Samoa States of the Union, they too would receive substantially larger sums in federal Medicaid assistance. ---Off-island transportation and travel for referred patients. As noted earlier, payments to the Northern Mariana Islands under the Medicaid program are now authorized for transportation and other related travel expenses determined to be necessary to secure medical examinations and treatment. The limited medical care that can be made available in the Northern Mariana Islands (due to its small population) and the distance to locations where more sophisticated care is available make transportation and other travel expenses a disproportionately larqe element in the medical budget of the Northern Mariana Islands. Once the ceiling has been reached, whether a Medicaid-eliqible natient can be referred off-island for necessary medical care depends upon whether the Northern Mariana Islands has sufficient local resources to pay all (rather than fifty percent of) transportation and other travel-related expenses. The Northern Mariana Islands is a relatively poor jurisdiction, and inability to pay these costs is likely, on some occasions at least, to result in delay or denial oif needed medical services to some Medicaid-eligible patients. Federal participation in transportation and related travel costs for Medicaid patients in the fifty States is, of course, subject to no ceiling. The Commission considered reccmrrending to Congress enactment of legislation providim that the ceilinc .j on Medicaid payments to the Northern Mariana Islands not apply to transportation and other travel expenses for off-island medical care. Because of the increase in the - 170 - ceiling made by Public Law 98-369, however, the Comm-ission decided that such legislation is not now necessary.* "enhanced-match" programs. Within Medicaid are a number of programs for which the Federal Government contributes a substantially larqer share of total costs, in or-der to encourage jurisdictions to participate in those programs. These "enhanced-oatch" programs, and the percentage the Federal Government pays for each, are: (1) compensation and training of skilled medical personnel and support staff--75 1)ercent (42 U.S.C. 1396b(a)(2)); (2) design, development, or installation of mechanized claims processinq and information retrieval systems--90 percent (id. � 1396b(a)(3)(A)(i)); *Section 2365 of Public Law 98-369, the Deficit Reduction Act of 1984, 98 Stat. 494, 1108, amended section 1108(c) of the Social Security Act, 42 U.S.C. � 1308(c), to raise the ceiling for the Northern Mariana Islands from $350,000 to $550,000. The legislation considered by the Commission would have removed a federal constraint that reduces the opportunity for Medicaid patients in the Northern Mariana Islands to receive necessary medical services, a constraint that does not affect Medicaid patients residing in the fifty States. The legislation would not have encouraged unnecessary medical referrals, since the Northern Mariana Islands still would be required to contribute fifty percent of the transportation and related travel costs. The costs of the actual medical services at the off-island facility would have remained subject to the ceiling on total annual Medicaid payments to the Northern Mariana Islands. Referrals would have to have been certified as medically necessary, and those certifications would have been subject to federal audit. See 42 U.S.C. 9 1396a(42). Removing the ceiling for transportation and related travel expenses would also eliminate any incentive for the Northern Mariana Islands to attempt to establish within the Northern Mariana Islands sophisticated health care facilities equivalent to those in more populated areas. Such facilities would be likely to be underutilized and, consequently, economically wasteful. - 171 - (3) operation of mechanized claims processing and information retrieval systems--75 percent (.id. � 1396b(a)(3)(B)); (4) family planning services--90 percent (id. � 1396b(a)(5)); and (5) fraud control--90 percent during the first three years, 75 percent thereafter (id. � 1396b(a)(6)). The Northern Mariana Islands is now eligible to receive federal funding for these programs at the higher percentages; the fifty percent limitation on federal participation in Medicaid costs in the Northern Mariana Islands does not apply to these programs. See id. �� 1396b(a), 1396d(b). But, if the Northern Mariana Islands Flas already reached its ceiling, it cannot receive any further federal Med ica id payment s. Medical care for eligible patients will generally have the first claim on federal Medicaid dollars available to the Northern Mariana Islands. The ceiling thus limits Northern Mariana Islands participation in those Medicaid programs for which Congress--through the enhanced percentage s--has specifically intended to encourage participation. The Commission considered recammnding to Congress enactment of legislation making the annual limitation on federal Medicaid programs to the Northern Mariana Islands inapplicable to these "enhanced-match" programs. Again, however, because of the increase in that annual limitation by Public Law 98-369, the Ccnmission decided that such legislation is not now necessary. -another option: treatment as a State. In principle, treating the medically needy in the NortFern Mariana Islands and other less develcped territories less generously than the medically needy in the States does not seem justified. To accord the territories equal treatment with the States would require both rEmoval of the ceiling_s on federal Medicaid payments and application of the funding formula applicable to the States, requiring a larger percentage of Medicaid costs to be paid by the Federal Government in poorer jurisdictions than is paid in wealthier jurisdictions. Wbre the territories treated as are the States, they would receive substantially larger sLuns in federal Medicaid assistance. For the. Northern Mariana Islands, Guam, the Virgin Islands, and American Samoa, the costs to the Federal Goverment of equal treatment would appear to be relatively insignificant. For Puerto Rico, with its much larger population, however, the costs of parity would be substantial. - 172 - Proposed legislative language. The following language, if enacted by the United States Congress, would implement this recommendation: An Act to authorize the Secretary of Health and Human Services to wa ive certain medicaid requirements otherwise ap .plicable to the Northern Mariana Islands; and for other purposes. Be it enacted @y the Senate and House of Representatives of the United States of America in Congress assembled, that section 190@(j) of the Social Security Act, as amended (42 U.S.C. � 1396a(j)), is further amended by inserting before "American Samoa" each place it occurs "the Northern Mariana Islands and". Submerged lands. Recamiendation. Legislation should be enacted to convey to the Northern Mariana Islands any property rights of the United States in lands permanently or periodically covered by tidal waters within three geographical miles of the coastlines of the Northern Mariana Islands. The proposed legislation is similar to laws already enacted to convey federal interests in submrged lands to the States of the Union, Guam, the Virgin Islands, and American Samoa. The legislation would be without prejudice to any claims the Northern Mariana Islands may have to submerged lands seaward of those conveyed by the legislation. The legislation should become effective on termination of the trusteeship, when sovereignty over the Northern Mariana Islands becoms vested in the United States. The submerged lands statutes and their present applicability to the Northern Mariana Islands. Submerqed lands are lands covered by water. Althouqh lands beneath rivers, streams, and lakes are submerced lands, the focus here is on lands underlying the ocean. In 1947 the Supreme Court of the United States decided that revenues from oil obtained frcrn. wells drilled into submerged lands within three miles of the coast of California belonged not to the State of California but to the Federal Government. United States v. California, 332 U.S. 19 (1947). The Court found that dominion over seabed resources adjacent to the nation's coastlines is essential to national defense and the conduct of foreign affairs and that, consequently, State governments have no title to those resources. - 173 - See also United States v. Maine, 420 U.S. 515, 522-23 (1975) United States v. Louisiana, 339 U.S. 699, 704 (1950). In 1953 the United States Congress reacted to the Supreme Court decisions finding submerged lands did not belong to the States by enacting the Submerged Lands Act. Act of May 22, 1953, c.65, 67 Stat. 29, now codified at 43 U.S.C. �� 1301 et seg. The Submerged Lands Act conveyed all proprietarv interists of the Federal Goverment in submerged lands to the States. Only States of the Union received title to submerged lands pursuant to the Submrged Lands Act. In 1974 Congress enacted legislation similarly conveying, with specified exceptions, all interests of the Federal Government in the submerged lands of Guam, the Virqin Islands, and American Samoa to the governments of those territories. Public Law 93-435, 88 Stat. 1210, now codified at 48 U.S.C. �� 1705 et seg. In 1980 legislation was enacted to confirm Puerto Rico's tirTle to the submerqed lands adjacent to that island. Public Law 96-205, � 606(a), 94 Stat. 84, further amending Act of March 2, 1917, c.145, � 8, 39 Stat. 951, now codified as amended at 48 U.S.C. � 749. No federal legislation to date has addressed specifically ownership of submerged lands adjacent to the Northern Mariana Islands. Discussion. Introduction. Wbether the Federal Goverment or the qovernment of the Northern Mariana Islands owns submerged lands adjacent to the Northern Mariana Islands is important for two purposes, that of deterfnininq which government is entitled to any revenues that may be derived from those submerged lands and that of determining which government will control the pace at which the subTeroed lands are developed, should there be any impetus for such development. If the Northern Mariana Islands owns the subrmrqed lands, any revenues from their develcoment will go into the treasury of the @brthern Mariana Islands where they will be available for appropriation by the elected representatives of the people of the Northern Mariana Islands. If the Federal Government is the owner, the United States Congress, in which the Northern Mariana Islands is not represented, will appropriate those revenues. At the present time, there is no commercial exploitation of the submerged lands adjacent to the Northern Mariana Islands, so the question of who owns the submerged lands is academic for the moment. The seabed and its subsoil adjacent to the Northern Mariana Islands may, however, contain valuable manganese nodules and 174 petroleum and other mineral deposits. Ccmmercial exploitation is not expected in the near future, at least in part because of the great depth of the overlying ocean. See generally Claque, Bischoff, & Howell, Nonfuel Mineral Resources of the Pacific Exclusive Econcinic Zone in U.S. Dep't of Ccimmerce, National Oceanic and Atmospheric Administration, Exclusive Economic Zone Papers (reprinted from Proceedings of OCEANS 184 Conference organized by the Marine TLzchnoloqy Society and the Institute of Electrical and Electronics Engineers Council on Oceanic Emineering; 1984); Cronan, Deep-Sea Nodules: Distribution and Geochemistry in G. Glasby, Marine Manganese 22posits 11, 13-14 (1977); Nordquist & Moore, Emerging Law of the Sea: Issues in the Mariana Islands, 7 Journal of International Law & Econamics 43, 55 (1972); V. McKelvey, et al., Subsea Mineral Resources and Problems Related to their Development 8 (1 J. S. Geological Survey Circular 619; 1969); Ship to Search Oceans for Riches, Pacific Daily News (Guam), June 15, 1983, at 2. Submerged lands and the United States Exclusive Economic Zone. On March 10, 1983, President Reagan claimed for the United States an Exclusive Econanic Zone contiquous to the territorial sea "of the United States, the Commonwealth of Puerto Rico, the Ccmmonwealth of the Northern Mariana Islands (to the extent consistent with the Covenant and the United Nations Trusteeship Agreement), and United States overseas territories and possessions." Presidential Proclamation 5030, 48 Fed. Reg. 10605. "The Exclusive Economic Zone extends to a distance 200 nautical miles frcm the baseline fran which the breadth of the territorial sea is measured" except where that boundary would conflict with the maritime boundary of another nation. Id. Within the Exclusive Econcmic Zone, the United States claims exclusive jurisdiction--as against other nations--over the resources of the seabed and subsoil (as well as of the overlying waters). The statements acccmpanying the claim of an Exclusive Economic Zone shed no light on the parenthetical qualification of that claim Ansofar as it affects the ocean and seabed surrounding the Northern Mariana Islands. See U.S. Dep't of State, Bureau of Public Affairs, Oceans Policy and the Exclusive Econcmic Zone (Current Policy 471, March 10, 1983). The apparent intent of that qualification is, however, to postpone the actual assertion of sovereignty over the Exclusive Economic Zone surrounding the Northern Mariana Islands until termination of the trusteeship, when the Northern Mariana Islands will ccme under the sovereignty of the United States. Covenant SS 101, 1003(c). At the same time, asserting the claim on March 10, 1983, rather than delaying assertion of the claim, until termination of the trusteeship, places other nations on notice that the ocean. area surrounding the Northern Mariana Islands is not available for exploitation by any other nation. The claim of an Exclusive Economic Zone is a claim by the United States as against other nations. States and territories under the sovereignty of the United States may not claim resources lying - 175 seaward of the Zone, since such a claim would amount to an extension of national sovereiqnty and intrude on the prerogative of the Federal Goverment to conduct the international relations of the United States. United States v. California, 381 U.S. 139, 168 (1965); United States v. Louisiana, 363 U.S. 1, 35 (1960); Gross, ne Maritime Boundaries of the S@ates, 64 Michigan Law Review 639, 644-45 (1966). The United States' claim of an Exclusive Econcmic Zone does not purport to allocate rights within the Zone between the Federal Goverment and State or territorial goverments. Thus, the claim of the Exclusive Economic Zone adjacent to the Northern Mariana Islands by the Federal Goverment does not, in and of itself, foreclose claims bv the %.rthern Mariana Islands to ownership of submerged lands and seabed resources within the Zone after termination of the trusteeship. (The Northern Mariana Islands will, however, be foreclosed from making any claim to submerged lands or seabed resources lying seaward of the Zone.) .Ownership of - submeLged lands in the Northern Mariana Islands prior to termination of the trusteeship. Until termination of the trusteeship, the United States has no claim to ownership of submerged lands in the Northern Mariana Islands. Such a claim would be inconsistent with the position of the United States as Administering Authority for the Northern Mariana Islands under the Trusteeship Agreement. Under the statutory law of the Trust Territory of the Pacific Islands, all lands belcw the ordinary high water mark (with specified exceptions) belorged to the goverment of the Trust Territory of the Pacific Islands. 67 Trust Territory Code � 2 (1980).* In 1974 the United States Devartment of the Interior provided for the transfer of public lands frcm the ciovernment of the Trust Territory of the Pacific Islands to legal entities in each of the constituent districts of the Trust Territory, including what is now the Northern Mariana Islands. Department of the Interior Order 2969, (December 28, 1974).** Specifically included among the public lands *The highest court of the Trust Territory, the Appellate Division of the High Court, has held that this statutory law, in scme instances at least, could not divest private individuals or clans of their owner-ship of submerged lands under Micronesian custcmary law. Ungeni v. Trust Territory of the Pacific Islands, 8 Trust Territory Reports- (Civil Appeal 284, August 22, 1983). - "The Department of Interior at that time had all executive, legislative, and judicial authority for the Trust Territory of the Pacific Islands, including the Northern Mariana Islands. 48 U.S.C. 1681(a); Executive Order 11021, 3 C.F.R. 600 (1959-63 ccupilation). 176 - to be transferred were "lands defined as public lands by Section 2, Title 67, of the Trust Territory Code," that is, the lands ;el*ow* the ordinary high water mark. Id. S 2(c)(1). By its Act 100-75, the Marianas District Leqislature in 1975 established the Marianas Public Land Corporation to receive public lands pursuant to Department of the Interior Order 2969. See generally Romisher v. Marianas Public Land Corp. (Nortbern Mariana Islands, Commonwealth Trial Court, Civil Action 83-401, December 28, 1983), slip opinion, at 5-6. In 1976, shortly after approval of the Covenant by the Congress of the United States, the government of the Northern Mariana Islands was separated frcm that of the rest of the Trust Territory. Department of the Interior Order 2989 (April 1, 1976). The order separatinq the Northern Mariana Islands provided that, with certain exceptions, public lands in the Northern Mariana islands, not previously transferred to a district legal entity pursuant to Department of the Interior Order 2969, vested in the Resident Ccmnissioner.* On January 9, 1978, the Constitution of the Northern Mariana islands became effective*** Section I of Article XI of that Constitution provides: Public Lands. The lands as to which right, title or interest have been or hereafter are transferred fran the Trust Territory of the Pacific Islands to any legal entity in the Ccmironwealth under Secretarial order 2969 prcmulgated by the United States Secretary of the interior on December 26, 1974, the lands as to which right, title or interest have been vested in the Resident Ccmmissioner under Secretarial Order 2989 prcrnulqated by the United States Secretary of the Interior on March 24, 1976, the lands as to which right, title or interest have been or hereafter are transferred to or by the goverment of the Northern Mariana Islands under article VIII of the Covenant, and the submerqed lands off the coast of the *The Resident Camissioner was the titular head of the executive branch of government in the Northern Mariana Islands between the administrative separation of the Northern Mariana Islands and January 9, 1978, when the Constitution of the Northern Mariana Islands became effective. "The Constitution of the Northern Mariana Islands was deEmed approved by Presidential Proclamation 4534, 42 Fed. Reg. 56593 (1977). 177 Camronwealth to which the Canmonwealth now or hereaf ter may have a claim of ownership under United States law are public lands and belong collectively to the people of the Commorwealth who are of Northern Marianas descent. Section 2 of the same document provides: The management and disposition of submerged lands of f the coast of the Commonwealth shall be as provided by law. Finally, section 801 of the Covenant provides that "falll right, title, and interest of the Govermient of the Trust Territory of the Pacific Islands in and to real property in the Northern Mariana Islands" will- be transferred, no later than on termination of the trusteeship, to the qovernment of the Northern Mariana Islands. The Northern Mariana Islands has asserted ownership over its submerged lands by requiring licenses for exploration for, development, or extraction of petroleum or mineral deposits "in submerqed lands of the Northern Mariana Islands." Northern Mariana Islands Submerqed Lands Act, Northern Mariana Islands Public Law 1-23 (1979), 2 Code of the Northern Mariana Islands q@ 1211 et seq. (1984). ownership of submerged lands in the Northern Mariana Islands after termination of the trusteeship. On terminatiron of the trusteeship, sov ereianty over the Northern Mariana Islands will beccme vested in the United States. Covenant �� 101, 1003(c). At that time, ownership of the submerqed lands adjacent to the Northern Mariana Islands beccmes uncertain. Substantial arguments favor the proposition that the Northern Mariana Islands will continue to be the owner of those submerged lands at that time. There is, however, respectable arqLurent to the contrary, that the Federal Government and not the Northern Mariana Islands will be the owner at that time. The legislation here proposed resolves the issue, as it has been resolved for all other permanently-inhabited jurisdictions under the American flag, by conveyincl any and all interests the United States may have in defined submerged lands in the Northern Mariana Islands to the Northern Mariana Islands on termination of the trusteeship. In United States v. California, 332 U.S. 19, 34 (1947), the Supreme Court found ownership of submerged lands to be "a function of national external sovereiqnty." The Northern Mariana Islands on termination of the trusteeship will come under the national external sovereignty of the United States. Covenant �� 101, 1003(c). Further, the Supreme Court in that case found national dcminion over the submerqed lands to be essential to national defense and foreign affairs. on termination of the trusteeship, the "United States will have complete responsibility for and authority with respect to 178 - matters relating to foreiqn affairs and defense affectim the Northern Mariana Islands." Id. � 104, 1003(c). At first blush, r- ownership of submerged lands in the Northern Mariana Islands would appear to become vested in the United States on termination of the trusteeship.* That the Northern Mariana Islands is now the owner of the submerged lands adjacent to its shores does not man its ownership will survive termination of the trusteeship. The State of Texas, prior to its admission to the Union, was an independent nation. As such, Texas owned the submerged lands adjacent to its coastline. Nonetheless, when Texas became a part of the United States, she relinquished her sovereignty and, by that relinquishment, her proprietary claims to the submerged lands adjacent to her shores. United States v. Texas, 339 U.S. 707, 717-18 (1950). But a strong argument in favor of continued ownership by the Northern Mariana Islands of adjacent submerged lands after termination of the trusteeship is found in section 801 of the Covenant. That section, it will be recalled, provides that real property interests of the Trust Territory of the Pacific Islands in the Northern Mariana Islands will be transferred to the Northern Mariana Islands no later than on termination of the trusteeship. Under the law of the Trust Territory, submerged lands are real property. Ngiraibiochel v. Trust Territory of the Pacific Islands, 1 Trust Territory Reports 485, 490 (High Court Trial Division Palau 1958).** The goverment of the Trust Territory of the Pacific Islands is a creature of the government of the United States. 48 U.S.C. � 1681; Executive Order 11021, 3 C.F.R. 600 (1959-63 compilation); Department of the Interior Order 2918. For the United States to agree in the Covenant that the goverment of the Trust Territory of the Pacific Islands should transfer title to the Northern Mariana Islands on or before termination of the trusteeship, only to have *See, adopting this view, the U.S. Department of the Interior memorandum entitled "Submerged Lands--Northern Mariana Islands," from C. Brewster Chapman, Associate Solicitor, Territories, to Director, office of Territorial Affairs (June 29, 1978). See generally Note, Statehood and the Equal Footing Doctrine: The Case for Puerto Rican Seabed Rights, 88 Yale Law Journal 825 (1979). "The judges of the High Court are appointed by and serve at the pleasure of 'the United States Secretary of the Interior. Department Of the Interior Order 2918, part IV. - 179 title revert to the United States on that date under the doctrine of United States v. Texas, above, makes little sense.* For submrqed lands within three geographical miles of the coastlines of the Northern Mariana Islands, the legislation here proposed eliminates arguments over ownership after termination of the trusteeship. Any interests the United States my have at that time are quitclaimed to the Northern Mariana Islands by the proposed legislation. If the Northern Mariana Islands is already the owner of those lands, it gains nothing additional fran the legislation. If, under United States v. California, above, the United States becomes the owner of those submerged lands on termination of the trusteeship, all of its interests are immediately reconveyed to the Northern *Department of the Interior Orders 2969 and 2989, discussed above, make clear that the public lands of the Northern Mariana Islands include lands below the high water mark. If section 801 of the Covenant stood alone, it could be argued that only public lands above the high water mark ("fast lands") are transferred by its provisions. Section 28 of the Organic Act of Guam, 48 U.S.C. � 1421f, transferred certain real property of the United States in Guam to the government of Guam. In a 1958 opinion the Solicitor of the United States Department of Interior held that the real property transferred by section 28 did not include submrged lands, at least in part because Congress in enacting section 28 did not declare in definite terms any intention that "real property" include submerged lands. 65 Decisions of the U.S. Dep't of Interior 193, 197. Because neither section 801 nor its negotiating history mentions submerged lands, it can be arqued--with the Department of the Interior opinion as precedent--that section 801 transfers only fast lands. The Ngiraibiochel decision of the Trust Territory High Court, mentioned above, holding submerged lands to be real property, is one answer to this argument. Another answer is found in the section of the Covenant immediately following section 801. Section 802(a) obligates the goverment of the Northern Mariana Islands to lease to the Goverment of the United States, among other areas, certain lands on Tinian Island and on Farallon de Medinilla Island and "the waters immediately adjacent thereto." The clear implication is that waters immediately adjacent to the islands of the Northern Mariana Islands belong to the Northern Mariana Islands and not to the United States, since the United States would have no need to lease what it already owns. See also Northern Mariana Islands Public Law 3-40 (1983), 2 Code of the Northern Mariana Islands �� 1411-1413 (1984). Against this implication, however, it can be argued that the provision for leasing of adjacent waters was necessary for periods prior to termination of the trusteeship, when the United States would have no claim as sovereign to waters in the Northern Mariana Islands. - 180 - Mariana Islands. The lec gislation here proposed thus follows the track already laid by Conqress in conveying submerged lands to the States and to other territories. The seaward extent of the submej@qed lands of the Northern Mariana Islands. The proposed legislation conveys to the Northern Mariana Islands whateve r interests the United States may have in submerged lands between the high water mark and a line three geographical miles* distant fran the coastlines of the Northern Mariana Islands. The proposed legislation expressly disclaims any ef fects on rights the Northern Mariana Islands may have in the seabed and its subsoil seaward of the three-mile line. The United States claims, as its territorial sea, waters within three geographical miles of its coastlines. See U.S. Executive Office of the President, Wbite House Fact Sheet on United States Oceans Policy (March 10, 1983), reprinted in part at 77 American Journal of International Law 619, 622-23 (1983). In conveying submerged lands to the States of the United States, Congress included all submerged lands within three geographical miles of the coast of each State." Submerged lands seaward of these boundaries which 11appertain to the United States and are subject to its jurisdiction and control" are termed "the outer Continental Shelf." 43 U.S.C. 9 1331(a). Real property interests in the Outer Continental Shelf are vested in the United States and not in the States by the Outer Continental Shelf Lands Act. Id. �� 1331 et sea., especially "One geographic (or marine or nautical) mile equals approximately 1.15 statute (or land or English) miles. one league equals three geographic miles or approximately 3.45 statute miles." United States v. California, 381 U.S. 139, 180 n.4 (1965). "For States on the Gulf of Mexico, the congressional conveyance included submerged lands in the Gulf to which the State had an historical claim beyond the three-mile limit. In no event, however, did the conveyance include submerqed lands more than three marine leagues into the Gulf. 43 U.S.C. � 1301(a), (b). - 181 - 1332(l), 1332(3), 1333(3).* The Outer Continental Shelf Lands Act *A continental shelf is "a shallow submarine plain of varyincl width forming a border to a continent and typically ending in a steep slope to the oceanic abyss." Webster's New Collegiate Dictionary 243 (1979). In 1945 President TrGgn-claimed United States jurisdiZtion over the continental shelf contiguous to the United States and the seabed (and f isheries) resources of that shelf. Presidential Proclamation 2667, 3 C.F.R. 67 (1943-48 canpilation). "The Truman Proclamation specified no outer limits to jurisdiction, but an acccinpanyi ng press release referred to the 100-fathom or 600-foot depth line . " Krueger & Nordquist, The Evolution of the 200-Mile Exclusive Economic Zone: State Practice in the Pacif Tc @Basin, 19 Vir-r-ginia Journal of Int@Tr@national Law 321, 325 (1979). "The 100-fathom and 600-foot depths are approximate equivalents of the 200-mter depth line provided in article 1 of the Convention on the Continental Shelf, done Apr. 29, 1958, 15 U.S.T. 471, T.I.A.S. No. 5578, 499 U.N.T.S. 311." Id. n.21. The United States is a party to that multilateral treaty. The Outer Continental Shelf Lands Act does not further define the seaward extent of the continental shelf. In the Deep Seabed Hard Mineral Resources Act, 30 U.S.C. �,q 1401 et seq., 1403(2), however, the seaward extent of the "Continental Sheff-" is set at the 200-meter depth line "or, beyond that limit, to where the depth of the superjacent waters admits of the exploitation of the natural resources of such submarine area." . (The "deep seabed," which that Act regulates, is that part of the seabed lying outside of national exclusive econcmic zones. Id. �� 1401(a)(5), 1403(4).) The application of the Truman Proclamation to submerged lands adjacent to mid-ocean islands is problematic at best, since whatever "shelf" those islands may have is certainly not "continental." Submerged lands more than three miles seaward of the State of Hawaii, however, if they "appertain to the United States and are, subject to its jurisdiction and control" fall within the definition of "outer Continental Shelf" for purposes of the Outer Continental Shelf Lands Act. 43 U.S.C. 9 1331(a). (Whether there are in fact submerqed lands adjacent to Hawaii that fall within the statutory definition has not been investigated in preparing this recamxendation.) In the Northern Mariana Islands, the sea floor generally drops off quite precipitously outside island shores or frincling reefs, so that the 600-foot depth line is often within three geographical miles of the. coastline. See, for example, Cloud, Submarine Topography and Shoal-Water Ecol2a, in U.S. Geological Survey, Geology of Saipan, Ra-T-17-ana Islands 361, 364 and plate 121 (Professional Paper 280; 1958). - 182 does not apply, however, to submerqed lands seaward of the boundaries of territories and possessions of the United States, but only to submerqed lands seaward of the States. Id. �� 1301(a), (g); 1331(a). The legislation conveying submerged lands to Guam, the Virgin Islands, and American SaToa likewise limited the lands conveyed to those within three geographical miles of the coastlines of those territories. 48 U.S.C. 1705(a). That legislation, like the leqislation here proposed, provided that the status of lands beyond the three-mile limit would not be affected by the legislation. Td. 1706(d).* The Northern Mariana. Islands Submerged Larris Act, as amended by the Northern Mariana Islands Marine Sovereignty Act, includes as submerged lands of the Northern Mariana Islands all lands below the ordinary high water mark extending seaward to the outer limit line of the exclusive econcmic zone established pursuant to the Marine Sovereignty Act of 1980 or to any line of delimitation between such zone and a similar zone of any adjacent State. Northern Mariana Islands Public Law 1-23 (1980), � 3(a), as amended by Northern Mariana Islands Public Law 2-7, @ 17(b) (1980), 2 Code of the Northern Mariana Islands 9 1212(a) (1984). The exclusive econcmic zone is described in the marine Sovereignty Act as follows: The inner limit of the [exclusive econornic] zone shall be the outer limit of the territorial sea . . . . [Tlhe outer limit of the zone is the line every point of which is at a distance of 200-miles frcm the nearest point of [archipelagic] baselines. Northern Mariana Islands Puhlic Law 2-7, � 12(a) (1980), 2 Code of the Northern Mariana Islands � 1124(a) (1984). The territorial sea in turn "shall have a breadth of twelve miles. The inner limit of the territorial sea shall be the archipelagic baselines . . . . Northern Mariana Islands Public Law 2-7, � 8, 2 Code of the Northern *The purpose of this provision, however, was "to preclude the possible establishment of a doctrine contrary to existing law pertaining to the United States ownership of the Outer Continental Shelf." Senate Report 93-1152 (1974), reprinted at 1974 U.S-. Code Cong. & Ad . News 5464, 5465. While it is difficult t see how conveyance of submerged lands within the three-mile limit could affect ownership of the Outer Continental Shelf, the implication is clear that the Shelf adjacent to Guwn,, the Virgin Islands, and American Samoa is owned by the United States. - 183 - Mariana Islands � 1123 (1984).* *Section 6 of the sere law, 2 Code of the Northern Mariana Islands � 1121, provides, in pertinent part: ". . . (b) The baselines shall be drawn in straight line segments and shall join the outermost points of the outermost islands and drying reefs of the Commonwealth; PROVICED, that the ratio of the area of the water to the area of the land (including as land all waters lying within the fringing reefs of any island, the waters of any laqoon, and the waters surrounded by the islands of Maug) shall not exceed nine to one. " (c) The lenqth of any baseline shall not exceed one hundred miles, except that up to three percent of the total number of baselines may exceed that length, up to a maximum length of 125 miles. " (d) The drawing of such baselines shall not depart to any appreciable extent from the general configuration of the archipelago. 11 (e) The baselines shall be drawn to and from low-tide elevations, except that no low-tide elevation situated at a distance more than twelve miles from the nearest island shall be the end point of any baseline unless it is marked by a lighthouse or similar installation which is permanently above sea level." The United States Department of State has rejected the contention that territorial waters may be measured from archipelagic baselines. "The United States' position is that under international law the territorial sea and other maritime jurisdictions are to be drawn around each island." U.S. Dep't of State, Digest of United States Practice in International Law: 1978, at 943 (1�80). The archipelagic baselines adopted by the Northern Mariana Islands are in substantial conformity with those sanctioned by Article 7 of the United Nations Convention on the Law of the Sea (1982), reprinted at 21 International Legal Materials 1261, 1278-79 (1982). The United States, however, has declined to become a party to the Convention, principally because of dissatisfaction with provisions in the Convention for international control of seabed mining. 18 Weekly Compilation of Presidential Documents 887-88 (1982). Even though the United States did not sign the Convention, it recognizes that much that is in the Convention states current international law. The United States, however, has apparently not taken a position since the Convention was opened for signing on the validity of archipelagic baselines as a matter of international law. See Hearip@s on U.S. Fore gn Policy and the Law of the Sea before the House Committee on Foreign Affairs, 97th Cong. , 2d Sess. 95 (1982)' (statement of James L. Malone, Assistant Secretary of State, Bureau of Oceans, Environment, and International Scientific Affairs and President's Special Representative for the Law of the Sea Conference). - 184 - The Northern Mariana Islands in its own legislation thus claims jurisdiction and control over submerged lands well outside the three-mile limit defining the outer limit of the submerged lands quitclaimed by the United States in the leoislation here oroposed. The proposed legislation is not intended to either dispute or confirm that claim.* The coastlines from which the submerged lands of the Northern Mariana Islands are measured. The proposed legislation measures the three-mile limit, d;?@ininq the extent of the submerged lands conveyed, fram the "coastlines" of the Northern Mariana Islands. In this, the proposed legislation follows the model of the earlier legislation conveying submerged lands to Guam, the Virgin Islands, and Amrican Samoa. See 48 U.S.C. q 1705(a). The proposed legislation thus differs, at least in terminology, from the Northern Mariana Islands marine Sovereignty Act, which uses "archipelagic baselines" to determine the extent of submerged lands." Coral reefs lie adjacent to but often at some distance from island shores throughout the Northern Mariana Islands. Whether the extent of submerged lands is measured from the shore of an island or frcrn its fringing reef can make a substantial difference in the location of those submerged lands. The term "coastlines," as used in the United States Submerged Lands Act, is defined as it is in the Convention on the Territorial Sea and the Contiguous Zone, 15 U.S.T. pt.2, at 1606, T.I.A.S. 5639 (1958), a multilateral treaty to which the United States is a party.*** United States v. Louisiana, 394 U.S. 11, 40 (1969). *As an alternative to the proposed legislation, a bill could be drafted to convey to the Northern Mariana Islands all interests of the United States in the Exclusive Econcrnic Zone, insofar as that Zone is measured fram the coastlines of the Northern Mariana Islands. As discussed above, the Northern Mariana Islands may already have a claim to ownership of the submerged lands in that area. If that is the case, the conveyance is unnecessary. If that is not the case, such a conveyance to the Northern Mariana Islands would surely give rise to demands for similar legislation by other territories and, perhaps, by the States as well. **See the second preceding footnote. ***This Convention is also applicable to the Trust Territory of the Pacific Islands, and thus, to the Northern Mariana Islands. U.S. Dep't of State, Trust Territoa of the Pacific Islands: 1980, at 135, 142 (1981). - 185 Article 3 of the Convention, in delineating the breadth of the territorial sea of a nation, provides that "the normal baseline for measurinq the breadth of the territorial sea is the low-water line along the coast . . . . " Article 11 of the Convention specifies how the territorial sea is measured when there are offshore areas, like coral reefs, above water at low tide but below water at high tide: 1. A low-tide elevation is a natural ly-formed area of land which is surrounded by and above water at low-tide but submerged at high tide. TAbere a low-tide elevation is situated wholly or partly at a distance not exceeding the breadth of the territorial sea from the mainland or an island, the low-water line on that elevation may be used as the baseline for measuring the breadth of the territorial sea. 2. where a low-tide elevation is wholly situated at a distance exceeding the breadth of the territorial sea from the mainland or an island, it has no territorial sea of its own. See generally 4 Whiteman,.Diqest of International Law S 9 (1965). The United Nations Convention of the Law of the Sea distinguishes reefs frorn. low-tide elevations. See Lee, The New Law of the Sea and the Pacific Basin, 12 Ocean Development & International Law 247, 249 (1983). Low-tide elevations are defined exactly as they are in the Convention on the Territorial Sea and the Contiguous Zone. United Nations Convention on the Law of the Sea, Art. 13, reprinted at 21 International Legal Materials 1261 (1982). Reefs, however, are treated separately: In the case of islands situated on atolls or of islands having fringing reefs, the baseline for measuring the breadth of the territorial sea is the seaward low-water line of the reef, as shown by the appropriate symbol on charts officially recognized by the coasta 1 State. Id. Art. 6. As noted earlier, however, the United States has 'je-clined, for other reasons, to become a party to this multilateral treaty. Exceptions in the proposed legislation. The legislation conveyinq the interests of the United States in submerged lands adjacent to Guam, the Virgin Islands, and American Samoa excepts several cateqories of submerged lands from the lands conveyed to those territories. 48 U.S.C. 1705(b). The legislation here proposed excludes only submerged lands under lease to the United States for defense Purposes from the general conveyance to the Northern Mariana Islands for so long as those lands are leased. See Covenant �,� 802-803. - 186 - The categories excluded frcm the conveyances of submerged lands to the other territories are generally not relevant to the Northern Mariana Islands. The original exclusion of oil, gas, and other minerals was effectively repealed by section 607(a) of Public Law 96-205, 94 Stat. 84 (1980), 48 U.S.C. � 1705(d). See 48 U.S.C. S 1705(b) (i).* The United States owns no property in the Northern Mariana Islands on the shoreline, so there is no reason to exclude adjacent submerged lands. See id. S 1705(b)(ii). Nor are there any subn-er( ged lands in the North@rn Mariana Islands that have been filled,. reclaimed, or improved by the United States for its own use. See id. � 1705(b) (iv), (v). No submerged lands in the Northern MariZa- Islands are within any national oark, monument, or reservation, or within the administrative responsibility of any f ederal agency. See id. � 1705(b) (vi), (viii), (x), (xi). Finally, the conveyance in thi proposed legislation is subject to all valid existing rights, so exclusion of submerged lands lawfully acquired by persons other than the United States through purchase, gift, exchange, or otherwise would be redundant. See id. � 1705(a), (b)(ix). Effective date of the prop!osed legislation. The effective date of the proposed legislation is the date of termination of the trusteeship. This date is chosen to ensure that whatever interests in submerged lands in the Northern Mariana Islands the United States may acquire when the Northern Mariana Islands ccmes under the sovereignty of the United States on termination of the trusteeship will be reconveyed immediately to the Northern Mariana Islands. If the legislation became effective before termination of the trusteeship, it would not convey any interests acquired by the United States on the date of termination. Lawful uses of the high seas unaffected by the 2roposed 1@gi!sd-ation. The proposed legislation does not af fect the paramount right of the Federal Government to control the ocean overlying the conveyed submerged lands for purposes of national defense, ccmmerce, and the conduct of foreign affairs nor does it affect non-resource-related freedcrns of the high seas, such as freedan of navigation and overflight, and other internationally lawful uses of the seas. See, for example, Illinois Central Railroad Co. v. Illinois, 146 U.S. 387, 435, 452-53 (1892). *in any case, there are no cam-ercially exploited deposits of oil, gas, or other minerals in the Northern Mariana Islands. 187 - Proposed legislative language. The following lanquaqe, if enacted by the United States Congress, would implement the Commission's recommendation: An Act placing certain submerged lands within the jurisdiction of the government of the Ccim-nonwealth of the Northern Mariana Islands. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, that, subject to valid existing rights, the United States releases, relinquishes, and conveys to the Ccmmonwealth of the Northern Mariana Islands any and all right, title, and interest it may have in submerged lands within the boundaries of the Ccmmonwealth of the Northern Mariana Islands, to be administered in trust for the benefit of the people thereof. Sec. 2. For purposes of this Act, (a) "Submerged lands" shall include: (1) all lands permanently or periodically covered by tidal waters up to but not above the ordinary hiqh water mark as heretofore or hereafter modified by accretion, erosion, and reliction, and seaward to a line three geographical miles distant from the coastlines of the Ccmmonwealth of the Northern Mariana Islands. (2) all filled in, made, or reclaimed lands which were formerly lands described in paragraph (1) of this subsection; and (3) all improvements on and all natural resources on or within lands described in paragraphs (1) and (2) of this subsection. (b) "Covenant" shall man the Covenant to Establish a Ccn=nwealth of the Northern Mariana Islands in Political union with the United States of America, as approved by Public law 94-241, 90 Stat. 263 (1976). 188 sec. 3. There are excepted from the transfer made by section 1 of this Act any and all submerged lands leased to the Goverment of the United States pursuant to sections 802 and 803 of the Covenant for so long as such lands are leased. Sec. 4. Nothing contained in this Act shall af fect such rights, if any, the CaTimonwealth of the Northern Mariana Islands may have in the seabed and its subsoil, and their natural resources, more than three geographical miles distant from the coastlines of the Cam--onwealth of the Northern Mariana Islands. Sec. 5. This Act shall beccxne effective on establishment of the Commonwealth of the Northern Mariana Islands pursuant to sections 101 and 1003(c) of the Covenant. Government depository libraries. Recommendation. Legislation should be enacted to allow the governor of the Northern Mariana Islands to designate a library in the Northern Mariana Islands as a depository for publications of the United States Government. The statutes. To help fulfill its responsibility to inform the public on the policies and programs of the Federal Government, Congress established the Depository Library Program. This program is based upon three principles: (1) with certain sT)ecified exceptions, al 1 government publications shall be made available to depository libraries; (2) depository libraries shall be located in each state and congressional district in order to make government publications widely available; and (3) these government publications shall be available for the free use of the general public. Chapter 19 of title 44 of the U.S. Code is the authority for the establishnent and operation of the depository program. Joint Ccmmittee on Printing, U.S. Congress, Goverment Depository Libraries 1 (rev. ed. 1981). There are more than 1400 congress ionally-des ignated depository libraries throughout the United States. Id. at v. - 189 - Present applicability. At the present time chapter 19 does not specifically authorize designation of a depository library in the Northern Mariana Islands. Designation of depository libraries in the fifty States and in Puerto Rico, Guam, the Virgin Islands, and American Samoa is permitted by section 1905 of . title 44. Section 502(a) (1) of the Covenant makes applicable to the Northern Mariana Islands those laws of the United States which provide federal services in the same way as they apply to Guam. The specific enumeration in section 1905 of officials entitled to designate libraries as depositories might be seen, however, as prevailing over the more general provision of the Covenant.* Since it is desirable to allow designation of a depository library in the Northern Mariana Islands, amendment of section 1905 is advisable. Discussion. Establishing a depository library in the Northern Mariana Islands would provide a local source of currently hard-to-find, but basic, government documents, for example, the Code of Federal Regulations and the United States Statutes at T-arqe. Designation of a library as a depository might provide the impetus for development of a more comprehensive and useful library than any now existing in the Northern Mariana Islands. Designation of such a library would also further the congressional objective in establishing the depository library program, assuring that the public has access to information about its government. indeed, the public in the Northern Mariana Islands, the newest area of the United States, may have a greater need for information on the basic functions of the government. Whether any institution in the Northern Mariana Islands is now capable of maintaining a depository library is uncertain. A library, to be designated as a depository, must contain at least 10,000 books, other than government publications. 44 U.S.C. � 1909. Establishment and maintenance of a library costs money, particularly in the *Section 502(a)(2) of the Covenant makes applicable to the Northern Mariana Islands those laws applicable to Guam and the fifty States as they apply to the several States. Designations of depositories in the several States are made by members of Congress frcm those States. 4 4 U. S. C. � 19 0 5. There are no members of Congress from the Northern Mariana Islands, so section 1905 cannot be applied to the Northern Mariana islands as it is applied to the several States. - 190 - tropical climate of the Northern Mariana Islands. Further, there are two depository libraries on Guam, the Nieves M. Flores Memorial Library and the Robert F. Kenned.v memorial Library at the University of Guam.* Joint Committee on Printinq, U.S. Congress, Government Depository Libraries 28 (rev. ed. 1981). Overall, it might be less expensive for the users of such a library who reside in the Northern Mariana Islands to travel to the libraries on Guam than for the Northern Mariana Islands to rmintain its own librarv. That travel for the individual user, however, would be expensive, involving airline travel and a probable overnight stay, and many potential users could not in fact afford to make such a trip. The Northern Mariana Islands should be able to decide whether it wants a depository librarv, and any obstacles in the federal laws to establishment of such a depository should be removed. The governing statute, section 1905 of title 44, United States Code, does not require, but merely permits, designation of libraries by the officials named for each State and territory. Those officials have no obligation to make such a designation. Further, a library designated as a depository need not accept all goverment publications. The depository may select only those publications it wants. 44 U.S.C. �� 1904-1905, 1913. In section 703(a) of the Covenant, the United States promises "to make available to the Northern Mariana Islands the full range of federal programs and services available to the territories of the United States." The depository library program, available in Puerto Rico, Guam, the Virgin Islands, and American Samoa, should be make available in the Northern Mariana Islands. Legislation proposed by the Commission in this report lodges the power to designate a library in the Northern Mariana Islands as a depository in the governor of the Northern Mariana Islands. In Guam., the Virgin Islands, and American Samoa, the governor has this power. 44 U.S.C. S 1905. Those precedents are followed here.** *The University of Guam is a land-grant college. Public Law 92-318, � 506(a), 86 Stat. 350 (1972), 7 U.S.C. � 301 note. As such, it is a depository for Goverment publications. 44 U.S.C. 5 1906. "Designation of depository libraries in the various States is made by mernbers of Congress fram those States. 44 U.S.C. � 1905. Similarly, designations for Puerto Rico are made by Puerto Rico's Resident Ccmmissioner in Congress. Id. Section 1905 in its present form was enacted before passage of legislation giving Guam, the Virgin Islands, and American Samoa nonvoting Delegates in Congress. Should section 1905 ever be amended to transfer the designating power for those territories frcin the governors to the Delegates, consideration might be given to transferring the similar power for the Northern Mariana Islands to the Representative to the United States for the Ccmmonwealth of the Northern Mariana Islands. - 191 - Proposed LiLqislative laMage. The Following languaqer if enacted by the United States Congress, would implement the Commission's recommendation: An Act to authorize the Governor of the Northern Mariana Islands to designate a library in the Northern Mariana Islands as a depository for publications of the United States Goverment. Be it enacted by _ the Senate and House of Representatives of the United States of America in Congress assembled, that (a) Section 1905 of title 44, United States Code, is amended: (1) by deletinq, in the first sentence, the phrase "and the Virgin Islands," and insertim in lieu thereof ", the Virqin Islands, and the Northern Mariana Islands,"; and (2) by amending the last sentence to read as follows: The Commissioner of the District of Columbia may desiqnate two depository libraries in the District of Columbia, the Governor of Guam,, the Governor of American Samoa, and the Governor of the Northern Mariana Islands may each designate one depository library in Guam-, Amrican Samoa, and the Northern Mariana Islands, respectively, and the Governor of the Virqin Islands may designate one depository library on the island of Saint Thomas and one on the island of Saint Croix. (b) Section 1909 of title 44, United States Code, is amended by inserting after the phrase "American Samoa," each time it appears the phrase "the Northern Mariana Islands,". - 192 - Enforcement of federal laws in the Northern Mariana Islands. Recommendation. Legislation should be enacted to conf inn the authority of the government of the Northern Mariana Islands to enforce federal laws in the Northern Mariana Islands. The legislation should also authorize federal financial and technical assistance to the government of the Northern Mariana Islands in enforcing federal laws in the I\br-thern Mariana Islands. Discussion. Enforcement of federal laws in the Northern Mariana Islands. The Northern Mariana Islands has a small population and is ant frcm mst parts of the United States. Even though many federal laws do, and should, apply in the Northern Mariana Islands, federal agencies entrusted to administer those laws often have neither personnel nor facilities in the Northern Mariana Islands. In some instances, transactions or activities subject to a particular law may justify assignment of federal personnel to the Northern Mariana Islands and the establishment of agency offices there. In many cases, however, transactions or activities subject to the law may be so few or infrequent that the agency will be reluctant to assign personnel to or establish permanent offices in the Northern Mariana Islands. In some of those cases, the federal aqency may be able to bring personnel frcm Guam, Hawaii, or the west coast of the United States on a temporary basis frcm- time to time to carry out its responsibilities in the Northern Mariana Islands. If neither the temporary nor permanent assigrrnent of federal personnel to the Northern Mariana I slands to enforce a particular federal law applicable in the Northern Mariana Islands is feasible, the law must either be enforced by the govermrent of the Northern Mariana Islands or qo unenforced. In many cases federal laws can be enforced by agencies of the goverrureant of the Northern Mariana Islands in conjunction with their own responsibilities at little additional expense. Federal laws controlling the mvement of goods across borders of the United States provide a good example of federal laws that may be best enforced by the qoverrment of the Northern Mariana Islands. For purposes of many of these federal laws, "United States" includes the Northern Mariana Islands, so that shipments of goods into the Northern Mariana Islands are subject to thosc- laws. See, for example, 7 U.S.C. �� 154-163 (nursery stock); 15 U.S.C. � 1273 (hazardous substances); 21 U.S.C. �� 951-969 (narcotics); 26 U.S.C. 5844 (firearms); 46 U.S.C. � 1461 (boats and boating equipment). The borders of the United States are generally controlled by the United States Custcms Service. 19 C.F.P. �� 161.0-161.2 (1983); U.S. - 193 - Government Manual 429-31 (1982). Of f icials of other federal agencies, such as the Fish and Wildlife Service of the Department of the Interior and the Animal and Plant Health Inspection Service of the Department of Agriculture, also control qoods entering the United States. See, for example, 9 C.F.R. parts 91-97 (1984); 50 C.F.R. part 14 (1984). The Northern Mariana Islands, however, is outside the custams territory of the United States. Covenant S 603(a). The United States Customs Service and other federal agencies do not assign personnel to ports of entry in the Northern Mariana Islands. They thus do not control the movement of goods into the Northern Mariana Islands. Officials of the governmnt of the Northern Mariana Islands perform that function. Accordingly, if federal laws applicable to the -Northern Mariana Islands are to be enforced at the borders of the Northern Mariana Islands, either employees of the federal agencies charged with enforcenent of those laws must be assigned to the Northern Mariana Islands or Employees of the government of the Northern Mariana Islands must be allowed to enforce those laws. In most cases, efficiency will favor allowing employees of the government of the Northern Mariana Islands already enforcing laws of the Northern Mariana Islands at ports of entry to enforce federal laws controlling goods entering the Northern Mariana Islands as well. The authority of the government of the Northern Mariana Islands to enforce federal laws. 'The present authority of the qoverrment of the Northern Mariana Islands to enforce federal law applicable to the Northern Mariana Islands is not altogether clear. States of the United States are encouraged to cooperate in enforcing federal criminal laws. United States v. Chadwick, 415 F.2d 167, 171 (10th Cir. 1969).* And State courts canmonly enforce federal laws in civil lawsuits: Nothing in the concept of our federal systern prevents state courts frcm, enforcing rights created by federal law. Concurrent jurisdiction has been a cam-on phencmenon in our judicial history, and exclusive federal court Jurisdiction over cases arising under federal law has been the exception rather than the rule. . . . [0) ur judqrent [has] been * * * to affirm the rState court] jurisdiction, where it is not excluded by express provision, or by incanpatibility in its exercise arisinq frcm the nature of the particular case. Charles Dowd Box Co. v. Courtney, 368 U.S. 502, 507-08 (1962). See *But offenses against the United States may not be prosecuted in State courts. Tennessee v. Davis, 100 U.S. 257 (1890). - 194 - also Claflin v. Houseman, 93 U.S. 130, 137 (1876).* In other cases upholding State power to enforce or implement federal laws, State enforcement or implementation has been pursuant to specific congressional authorization. Thus, in American Horse Protection Association v. Frizzell, 403 F. Supp. 1206, 1221-22 (D. Nev. 1975), the court held a formal agreement between the United States and the State of Nevada did not constitute an illegal delegation of federal ranagement responsibilities to State officials. The court relied, however, on specific authorization for such agreements in the federal statute to be enforced under the agreement. Similarly, in Oklahoma v. Federal Energy Regulatory Commission, 494 F.Supp. 636, 660 (W. D. Okla. 1980), affirmed, 661 F.2d 832 (10th Cir. 1981), certiorari denied, 457 U.S. 1105 (1982), the court held that the federal government may delegate implementation of federal programs to states willing to canply," and, in the cases discussed therein as precedent, stated the delegation of federal power was specifically authorized in the acts of Congress establishing the various programs. Even though some cases upholding State power to enforce federal laws rely on specific provision by Congress for State enforcement, no cases have been found denying States power to enforce a federal law in the absence of such a provision. Further, no policy is served by denying States power to enforce federal laws. And, if States do have power to enforce federal laws, so also should territories and possessions. See United States ex rel. Gereau v. Henderson, 526 F.2d 889, 894 (5th Cir. 1976), following Duncan v. Madigan, 278 F.2d 695, 696 (9th Cir. 1960), certiorari denied, 368 U.S. 919 (1961). Against these judicial precedents, however, are two decisions of the District Court of Guam that appear to hold that, in the absence of specif ic congressional authorization, the verment of Guam has _go no power to enforce federal laws. In one case, Ex parte Rogers, 104 F. Supp. 393 (1952), the District Court found that authorization in a provision in Guam's Organic Act. The court implied that, but for that provision, the government of Guam would have no power to enforce the federal law at issue in that case. In the other case, Pacific Construction Co. v. Branch, 428 F. Supp. 727 (1976), the District Court, making no mntion of the provision in the Organic Act relied upon by the Rogers court, found invalid efforts of the government of Guam to en rce the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. �� 136 et seq. In the Rogers case, the District Court of Guam held: *Where Congress expressly gives State courts specific powers to enforce a federal law, the State courts clearly may exercise those powers unless prohibited fran doing so by State legislation. Holmgren v. United States, 217 U.S. 509, 517 (1910). - 195 - The Governor of Guam has the residual authority to enforce the immiqration laws of the United States in def ault of performance by the Immigration and Naturalization Service of the United States. The residual authority is exercised, not as agent of the Immigration and Naturalization Service, but pursuant to section 6b of the Organic Act of Guam, providinq that the governor of Guam "shall faithfully execute the laws of the United States applicable to Guam." (The present Organic Act provides that the governor "shall be responsible for the faithful execution of the laws of the United States applicable in Guam." 48 U.S.C. 1422.) The governor of the Virgin Islands is also charqed with "faithful execution of . . . the laws of the United States applicable in the Virgin Islands." 48 U.S.C. � 1591. Similar provisions existed in now-repealed or obsolete organic legislation for Puerto Rico and the Territories of Alaska and Hawaii. @ct of March 2, 1917, c.145, � 12, 39 Stat. 951, as amnded by Act of May 17, 1932, c. 190, 47 Stat. 158 (Puerto Rico); Act of June 6, 1900, c.786, S 2, 31 Stat. 321 (Alaska); Act of April 30, 1900, c.339, F 67, 31 Stat. 141 (Hawaii). The governor of the Northern Mariana Islands occupies a post created not by federal law, but by the Constitution of the Northern, Mariana Islands.* Section I of article III of that document provides only that "The executive power of the CcmTonwealth shall be vested in' a governor who shall be responsible for the faithful execution of the *Pursuant to section 202 of the Covenant, the Constitution of the Northern Mariana Islands was deemed approved by the Government of the United States in Presidential Proclamation 4534, 42 Fed. Peg. 56593 (1977). 196 - laws." Nothing in the Covenant or in other federal statutes specifically confers power on the governor of the Northern Mariana Islands, ccmparable to that given the qovernor of Guam by the Organic *The position of governor of Puerto Rico is also created by local constitution rather than federal law. Section 4 of article 4 of the Constitution of Puerto 'Rico provides only that "The Governor shall execute the laws and cause them to be executed" and does not specify whether that authority extends to execution of federal law. The Constitution of the Ccmmonwealth of Puerto Rico was amended and then approved by the United States Conqress by Joint Resolution of July 3, 1952, c.567, 66 Stat. 327, and is reprinted following section 731d of title 48, United States Code. See also 48 U.S.C. SS 73lb-731d. 1"he governor of American Samoa has no sDecific authority under federal law or the laws of ATrerican Samoa to enforce or execute federal laws. See 48 U.S.C. � 1661(c); Executive Order 10264, 16 Fed. Reg. 6419 (1951); Departmnt of the Interior Order 3009 (1977); American Samoa Code � 4.0111 (1981). - 197 - Act of Guam, to "faithfully execute the laws of the United States" applicable in the Northern Mariana Islands.* In the Pacific Construction Co. case, the right of the Guam Environmental Protection Agency to enforce its own regulations implementing the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. @� 136 et sea., was successfully challenged. The court found that the A&T (To-es not grant to the States (including, for *An early draft of the Covenant prepared by United States negotiators provided that "the Executive [branch of the government of the Northern Mariana Islands] shall be responsible for the execution of the laws of the United States applicable in the Marianas." The Northern Mariana Islands negotiators rejected that provision on the ground "that it would be inappropriate to charge one government entity like the Commonwealth with executing the laws of another." Marianas Political Status Canmission, Memorandum for United States Delegation: Explanation of Agreement to Establish a Self-Governing Ccmmnwealth of the Mariana Islands in Political Union with the United States of Xnerica (May 16, 1974). The proposal of this Cmnission, however, does not require the governor to enforce federal law; it only grants the governor permission to do so. The governor would be under no obligation to enforce federal law. A ccrnment on an earlier draft of the legislation proposed by the Ccmmission sug gested that allowing the elected governor of the Northern Mariana Islands to enforce federal laws might conflict with the Appointments Clause, Article II, Section 2, Clause 2, of the United States Constitution. That clause specifies the manner in which officers of the United States are to be appointed. The governor of the Northern Mariana Islands is not appointed pursuant to that clause. Nothinq in the Appointments Clause specifically provides, however, that federal laws -may be enforced only by officers of the United States. Federal laws allowing State officials (who, of course, are not appointed pursuant to the Appointments Clause) to enforce those laws are not uncamron. See, for example, 16 U.S.C. �� 959(b) (Tuna Conventions Act of 1950), 1379(k) (Marine Mammal Protection Act of 1972), 1861 (Magnuson Fishery Conservation and Manaqement Act). See also Oklahoma v. Federal Energy Regulatory Cammission and American Horie-Protection Association v. Frizzell, above. The authority granted the governor of the Northern Mariana Islands in the Commission's proposed legislation is subordinate to that exercised by officers of the United States. The plenary powers granted Congress by Article IV, Section 3, Clause 2, of the United States Constitution are sufficient to sustain the proposed legislation. - 198 - purposes of the Act, Guam) power to limit and inspect pesticides imported fran a foreign country. The court noted that the Act delegates the power to control imports to the Secretary of the Treasury. Imports into Guam, however, are controlled not by the Secretary of the Treasury (acting through the United States Customs Service), but by the government of Guam. 19 C.F.R. � 7.8 n.5 (1983). While the Act authorizes cooperative arrangements- between the Federal Government and a State for enforcement of the Act, the Federal Goverment had entered into no such arrangement with the goverment of Guam. The court concluded, "If the Tkarritory of Guan, desires to enforce the Federal Insecticide, Fungicide, and Rodenticide Act, it must do so within the confines of that Act." 428 F. Supp. at 728. The court made no mention of the duty of the governor of Guam, under the Organic Act for Guam, to faithfully execute federal laws applicable to Guam.* Given the uncertainties in the controlling case law and the specific grants to the governors of Guam and the Virgin Islands of the power to execute federal laws, doubts may exist as to whether the governor of the Northern Mariana Islands may enforce federal laws. Accordingly, legislation is here proposed to confirm the authority of the government of the Northern Mariana Islands to enforce federal laws applicable in the Northern Mariana Islands. The proposed legislation does not in any way limit the authority of the Federal Goverment and its agencies independently to enforce federal laws in the Northern Mariana Islands. The proposed legislation also makes clear that, if a federal agency charged with the enforcement of a particular federal law and the governmant of the Northern Mariana Islands disagree as to how that law is to be enforced, the federal agency's views are controlling. Financial and technical assistance in enforcing federal laws in the Northern Mariana Islands. The United States does not reimburse the government of the Northern Mariana Islands for expenses incurred by the Northern Mariana Islands in enforcing federal laws at or within its borders. Mile the people of the Northern Mariana Islands may be the principal beneficiaries of such enforcement, the costs of *The authority of goverment of Guam customs inspectors to enforce federal laws has recently been questioned. See Customs Can't Halt Bogus Items, Pacific Daily News (Guam), July 29, 1982, at 26; Gold Taels Allowed in States-Scimtimes, id., April 11, 1982, at 1. - 199 - enforcinci federal laws principally benefitting the peoples of Hawaii or Nebraska, for example, are borne by the United States, not by the governments of Hawaii or Nebraska. See Customs Rules Disputed, Pacific Daily News (Guam), October 9, 1981, at 3. Federal agencies consequently should be permitted to reimburse the goverment of the Northern Mariana Islands for costs incurred by that government in enforcinq federal laws in the Northern Mariana Islands. Section 1681(b) of title 48 of the United States Code authorizes any federal agency to provide technical assistance to the Trust Territory of the Pacific Islands "under any program administered by such agency." That provision may be broad enouqh to allow technical assistance to the government of the Northern Mariana Islands in enforcing federal laws." The technical assistance available under section 1681(b), however, is limited in three ways. First, technical assistance to the qoverrrnent of the Northern Mariana Islands under section 1681(b) must be requested by the Secretary of the Interior. Second, in any fiscal year, for all parts of the Trust Territory, it may not exceed $150,000 in nonreimbursable costs. Third, costs of technical assistance are charqed to congressional appropriations for the Northern Mariana Islands, not to appropriations for the federal agency. The legislation here proposed authorizes federal agencies charged with enforcement of particular laws to enter into memoranda of understanding with the qovern-nent of the Northern Mariana Islands for the provision of financial and technical assistance to that goverment in enforcing those laws. Technical assistance is not limited as it would be under section 1681(b) of title 48. Rather, the terms of both the financial and the technical assistance to be provided the government of the Northern Mariana Islands by any federal agency are left to negotiation between that goverment and the agency.*** *See also 48 U.S.C. � 1469d(a). "Even though the goverment of the Trust Territory remains in existence, many of its functions have been distributed to the emerging governments of its constituent entities, including the government of the Northern Mariana Islands. The goverrment of the Northern Mariana Islands should be eligible for assistance under section 1681(b) as a successor to the government of the Trust Territory. ***The financial and technical assistance provisions in the proposed legislation are modelled on section 1421c, of title 48 of the United States Code, authorizing the Secretary of Agriculture to provide financial and technical assistance to the government of Gum for improving fire control, watershed protection, and reforestation. - 200 - Proposed legislative language. The following language, if enacted by the United States Congress, would implement the Ccimmission's reccnmendation: An Act to authorize the Governor of the Northern Mariana Islands to enforce laws of the United States applicable in the Northern Mariana Islands; and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assemblied, that the Governor of the Northern Mariana Islands is authorized to enforce or execute in the Northern Mariana Islands any federal law applicable to the Northern Mariana Islands, provided, however, that, in enforcing or executing any such federal law, the authority exercised by the Governor shall be subject to any direction or control exercised by the federal agency principally charged with the enforceiyient or execution of that law or, if no federal agency is so charged, by the United States Department of Justice. Se c. 2. The authority granted to the Governor of the Northern Mariana Islands by section 1 of this Act may be delegated by the Governor to any officer or Employee of the Governmeent of the Northern Mariana Islands, either directly, or indirectly by one or more redelegations of authority. S I ec. 3. Any agency of the Federal Government is authorized to provide financial and technical assistance to the Government of the Northern Mariana Islands in enforcing or executing within the Northern Mariana Islands federal laws normally enforced or executed by that agency. Any program for financial and technical assistance as authorized -by this section shall be developed in cooperation with the Governuent of the Northern Mariana Islands and shall be covered by a memorandum of understanding agreed to by the Government of the Northern Mariana Islands and the concerned agency. RE)COMMENDED TEMPORARY CHANGES IN FEDERAL T-AW PENDING TERMINATION OF THE TRUSTEESHIP The Ccimmission recamte-nds several changes in the applicability of federal laws pending termination of the trusteeship. Men the trusteeship ends, the proposed changes will no longer be necessary, because of the changes in the legal status of the Northern Mariana Islands and its citizens that will occur at that time. - 201 - The date for termination of the trusteeship is not yet known. Durinq the possibly lengthy period between now and the end of the trusteeship, the application of several federal laws to the Northern Mariana Islands should be altered. The recam-ended changes are discussed below. As with the changes in federal laws previously recanmended in this report, the reccwmended changes below are discussed in the order in Wh ich the law that is the subject of the recammndation appears in the United States Code. Permanent resident status in the United States for aliens who are immedlate relatives 7_711-t-11-z-ens of the Northern Mariana islaiTds. Recommendation. Leqislation should be enacted to allow citizens of the Northern Mariana Islands to petition for permanent resident status in the United States for their immediate relatives. The statutes. Aliens enterinq the United States are classified, first, as immigrants or nonimmiqrants. Nonimmigrants are aliens who enter the United States only temporarily, without any intention of permanently leaving their native countr - Tourists, diplomts, and students are y among those admitted into the United States as nonimmigrants. 8 U.S.C. q 1101(15). Immigrants, by contrast, are aliens who intend to reside permanently in the United States. Under present law, no more than 270,000 immigrants frcm all parts of the world may enter the United States each year. 8 U.S.C. 1151(a). No more than 20,000 immigrants from any particular country (and no more than 600 frcm a particular colony or dependency of a foreign nation) may be admitted in any given year. Id. � 1152. Not subject to these numerical limitations are immigrants who are immediate relatives of a United States citizen, and certain refugees and special immigrants. Id. � 1151. "Immediate relatives" are defined to include only the @F`Ildren and spouse of the citizen and, if the citizen is at least twenty-one years of age, his or her parents. Id. � 1151(b). Present applicability. The immigration laws of the United States do not apply to the @brthern Mariana Islands. Covenant � 503(a). Nonetheless, persons in the Northern Mariana. Islands, like all other persons outside the immigration boundaries of the United States, are governed by those laws when they seek to enter or reside in the United States. - 202 - On termination of the trusteeship, citizens of the Northern Mariana Islands who have then become citizens of the United States, pursuant to Article III of the Covenant, may petition for admission into the United States of their immediate relatives--children, spouses, and, if the citizen is at least twenty-one years old, parents. Tint il termination of the trusteeship, however, the Immigration and Naturalization Service cannot accept petitions to grant permanent resident status to aliens who are immediate relatives of citizens of the Northern Mariana Islands. Only United States citizens may petition for the grant of permanent resident status to immediate relatives. 8 U.S.C. � 1151(a), (b); Memorandum from D. Crosland, General Counsel, Immiqration and Naturalization Service, to S. Isenstein, Assistant Commissioner for Adjudications, Immigration and Naturalization Service (Sept. 20, 1978). Thus, immediate relatives of citizens of the Northern Mariana Islands, with few exceptions, can enter the United States only as temporary visitors or as immigrants subject to the numerical quotas applicable to their countries of origin. Discussion. A number of families in the Northern Mariana Islands are composed partly of citizens of the Northern Mariana Islands and partly of persons who are citizens of other nations. These families are subject to hardship and/or separation should a member of the family who is a citizen of the Northern Mariana Islands desire to reside in the United States for schooling, employment, or other reasons. In other cases, a citizen of the Northern Mariana Islands may feel forced to choose between marriage to an alien spouse and education or employment in the United States. Although the number of persons affected is small, the hardship involved has been brought to the attention of the Catutission's staff on several occasions. Legislation is here proposed to allow citizens of the Northern Mariana Islands to petition for permanent resident status for their immediate relatives. The Commission desires to proceed conservatively in recommending any legislation expanding the cateqories of persons ultimately eligible for United States citizenship. Accordingly, the Commission proposes that petitions may be f iled on behalf of only those persons who, as of the date the proposed legislation is introduced in Congress, are immediate relatives of citizens of the Northern Mariana Islands. (Another date could be substituted for the date of introduction as a cutoff date.) On full implenentation of the Covenant, at termination of the trusteeship, citizens of the Northern Mariana Islands will become citizens of the United States. (They will then have this right to 203 - petition under existing law, as United States citizens.*) The date for termination of the trusteeship is not yet known; consequently, the number of aliens who might becane immediate relatives of citizens of the Northern Mariana Islands is also unknown. Allowing petitions to be filed on behalf of those aliens who are immediate relatives of citizens of the Northern Mariana Islands as of a specified cutoff date will eliminate a difficult situation for a small number of people at no significant cost to the United States. Should termination of the trusteeship be unduly delayed, subsequent legislation can deal with the situation of those aliens who, after the cutoff date in this proposed legislation, becane immediate relatives of citizens of the Northern Mariana Islands. The proposed legislation by its own terms expires on termination of the trusteeship, when it will no longer serve any purpose. A "citizen of the Northern Mariana Islands" is defined, for purposes of the proposed legislation, as a person who qualifies as a United States citizen or a United States national under section 8 of the Schedule on Transitional Matters of the Constitution of the Northern Mariana Islands. The Constitution of the Northern Mariana Islands came into effect on January 9, 1978, after approval by the President of the United States. See Proclamation 4534, 43 Fed. Reg. 56593 (Oct. 24, 1977). Pr222sed legislative lanqu@tge. The following language, if enacted by the United States Congress, would implement this recommendation: An Act to allow citizens of the Northern Mariana Islands to petition for permanent resident status for their immediate relatives. Be it enacted by the Senate and House of Representatives of the United States of knerica in Congress assembled that (a) persons who, on the date of introduction of this Act, are immediate relatives of citizens of the Northern Mariana Islands shall be treated as though they wre immediate relatives of citizens of the United States for purposes of the immigration laws of the United States. Any citizen of the Northern Mariana Islands claiming that an alien is entitled to an immediate relative *Scrne citizens of the Northern Mariana Islands may choose to become nationals rather than citizens of the United States at that time. Covenant S 302. Nationals do not have the right to petition for admission of their immediate relatives as permanent residents. - 204 - status under section 201 (b) of the Immigration and Nationality Act may file a petition with the Attorney General of the United States for such classification. (b) For purposes of this section, "citizens of the Northern Mariana Islands" are those persons defined as United States citizens or United States nationals in section 8 of the Schedule on Transitional Matters of the Constitution of the Northern Mariana Islands, as approved by Presidential Proclamation 4534 of October 24, 1977. (c) This section shall expire upon the establishment of the Commonwealth of the Northern Mariana Islands. National Consumer Cooperative Bank. Recomendation. Legislation should be enacted to allow the National ConsLmer Cooperative Bank to make its loans and services available to eligible cooperatives in the Northern Mariana Islands. The statutes. Chapter 31 of title 12 of the United States Code establishes the National Consumer Cooperative Rank to provide "credit and technical assistance to eligible cooperatives that [provide] goods, services, housing, and other facilities to their members as ultimate consLrners." U.S. Goverment Manual 648 (1982). Present applicability. The National Consumer Cooperative Bank is authorized to make loans and offer its services in, among other jurisdictions, the territories and possessions of the United States. .12 U.S.C. � 3011. Although Guam is a territory or possession of the United States, the statute creating the Bank was enacted after January 9, 1978, so that the statute is not made applicable to the Northern Mariana Islands by section 502(a) of the Covenant. Consequently, the Bank may not now make loans or offer services in the Northern Mariana Islands. On termination of the trusteeship, when the Northern Mariana Islands becomes a territory of the United States, this chapter will becane applicable to the Northern Mariana Islands. See Puerto Rico - 205 v. Shell Co., 302 U.S. 253, 257 (1937); United States v. Villaril Gerena, 553 F.2d 723, 724-26 (lst Cir. 1977). Discussion. The loans and services of the National ConsLmr Cooperative Bank should be available to eligible cooperatives in the Northern Mariana Islands. Congress has found that user-owned cooperatives are a proven method for broadening ownership and control of the economic orclanizations, increasing the number of rarket participants, narrowing price spreads, raising the quali.ty-of goods and services available to their membership, and building bridges between producers, and consLners, and their members and patrons. 12 U.S.C. 9 3001. Enabling the National ConsLure-r Cooperative Bank to provide loans and technical assistance to eligible cooperatives in the Northern Mariana Islands is consistent with both the oblioation of the United States to foster the econanic development of the Northern Mariana Islands and the promise of the United States to 'Omake available to the Northern Mariana Islands the full range of federal programs and services available to the territories of the United States." Covenant r*@ 701, 703(a). Accordinalv, even though this chapter will become applicable to the Northern Mariana Islands on termination of the trusteeship, legislation is proposed in this report to make the loans and services of the National Consumer Cooperative Bank irmediately available to eligible cooperatives in the Northern Mariana Islands. Proposed legislative language. The following lar)quaqe, if enacted by the United States Congress, would implement this reccmmendation: An Act to allow the National Consu-ner Cooperative Bank to make its loans and services available to eligible cooperatives in the Northern Mariana Islands. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, that the fifth sentence of section 101 of Public Law 95-3@1, 92 Stat. 499, as amended (12 U.S.C. S 3011), is further amended by deleting "and in the Canmonwealth of Puerto Rico." a nd insertinq in lieu thereof "in the Comwnwealth of Puerto Rico, and in the Northern Mariana Islands.". 206 Dspository Management Interlocks Act. Recommendation. Legislation should be enacted to extend the protections of the Depository Management Interlocks Act to the Northern Mariana Islands. The statutes. Chapter 33 of title 12 of the United States Code prohibits management officials of depository institutions or depository holding canpanies from serving as management officials of other such institutions (except affiliates) within the same geographic area. Depository institutions include banks, trust companies, savings and loan associations, and credit unions, among other organizations. 12 U.S.C. � 3201(l). Depository holdial companies include bank holdinq companies and savings and loan holding companies. Id. � 3201(2). The House Committee on Banking, Finance and Urban Affairs, in its report on this legislation, noted that "the public's interest is served by competition and that this is particularly important in an industry where competition is already diminished by limited chartering and other regulatory protections." House Report 95-1383, at 14 (1978). The committee further noted thatt [aInticompetitive interlocks can have an impact on the flow of credit and financial policies and practices to the detriment of camunities, neighborhoods, small businessmen, home buyers, farmers, consuTers, and others in need of credit on the best terms possible. id. Present applicability. The prohibitions of chapter 33 against management interlocks do not apply to depository institutions or depository holding companies which do not do business in any State of the United States, the District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands. 12 U.S.C. S 3204(4). Thus, by the terms of the chapter, the prohibitions against management interlocks do not apply to depository institutions or depository holding companies doing business only within the Northern Mariana Islands. Although depository institutions and depository holding companies on Guam are subject to the chapter's prohibitions, section 502(a) of the Covenant does not make those prohibitions applicable to similar organizations in the Northern Mariana Islands. The chapter was enacted after January 9, 1978, and thus is not affected by section 502(a) of the Covenant. 207 - On termination of the. trusteeship, when the Northern Mariana Islands becomes a territory of the United States, this chapter will become applicable to the Northern Mariana Islands. See Puerto Rico v. Shell Co., 302 U.S. 253, 257 (1937); United States v. Villarin Gerena, 553 F.2d 723, 724-26 (lst Cir. 1977).' Discussion. Borrowers in the Northern Mariana Islands should be afforded the saine protections against anticompetitive practices as borrowers in other parts of the United States. Even though this chapter will become applicable to the Northern Mariana Islands on termination of the trusteeship, leqislation to make the chapter iTmuediately applicable to the Northern Mariana Islands is appropriate and is here proposed. Proposed legislative language. The following language, if enacted by the United States Congress, would implement this recommndation: An Act to extend the protections of the Depository Manaciemnt Interlocks Act to the Northern Mariana Islands. Be it enacted by the Senate and House of Representatives of the United States of America in ress assembled, that subsection (4) of section 205 of Public Law 95-00, 2 Stat. 3641 (12 U.S.C. S 3204(4)), is avended by deleting "or the Virgin islands" and inserting in lieu thereof "the Virqin Islands, or the Northern Mariana Islands". Right to financial privacy. Reconrendation. Legislation should be enacted to make the Right to Financial Privacy Act of 1978 applicable to the Northern Mariana Islands. The statutes. The Right to Financial Privacy Act of 1978 is found in chapter 35 of title 12 of the United States Code. This chapter limits the access of federal officials to the records of financial institutions pertaining to particular customrs and specifies the procedures that - 208 - federal officials must follow when they have a legitimate reason see those records. Present applicability. This chapter protects the customer records of financial institutions located in, among other jurisdictions, any State or territory of the United States or Guam. 12 U.S.C. q 3401(l). Thus, by the terms of the chapter, the records of financial institutions in the Northern Mariana Islands are not protected. Althouah the records of financial institutions on Guam are protected, section 502(a) of the Covenant does not extend those protections to the records of financial institutions in the Northern Mariana Islands. The chapter was enacted after January 9, 1978, and thus is not affected by section 502(a) of the Covenant. On termination of the trusteeship, when the Northern Mariana Islands beccmes a territory of the United States, this chapter will becane applicable to the Northern Mariana Islands. See Puerto Rico v. Shell Co., 302 U.S. 253, 257 (1937); United States v. Villarin Gerena, 553 F.2d 723, 724-26 (Ist Cir. 1977). Discussion. The records of financial institutions located in the Northern Mariana Islands should be available to federal officials on the same terms and under the same conditions as are the records of financial institutions elsewhere in the United States. Residents of the Northern Mariana Islands, who are the principal customers of financial institutions in the Northern Mariana Islands, should be entitled to the same expectations of privacy in their dealings with financial institutions as are residents of other parts of the United States. Even though this chapter will beccrne applicable to the Northern Mariana Islands on termination of the trusteeship, the, date of that termination is so uncertain that legislation ought to be enacted making this chapter immediately applicable to the Northern @lariana Islands. Proposed legislative language. The following language, if enacted by the United States Congress, would implement this recanmendation: An Act to make the Right to Financial Privacy Act applicable to the Northern Mariana Islands. - 209 Be it enacted @y the Senate and House of E2presentat'lves of the United States of America in Co@gress assembled, that subsection 1 of section 1101 of Public Law 95-630, 92 Stat. 3641 (12 U.S.C. q3401(l)), is amended by deleting "or the Virgin Islands;" and inserting in lieu thereof "the Virgin Islands, or the Northern Mariana Islands;% Creation of special United States passport for citizens of the Northern Mariana Islands. Recommendation. Legislation should be enacted to grant the Secretary of State authority to issue special United States passports to citizens of the Northern Mariana Islands confirming their privilege to enter and to reside and be employed in the United States without restriction. The statute. A passport is a "travel document issued by ccmpetent authority showing the bearer's, origin, identitY, and nationality 8 U.S.C. � 1001(a)(30). A United States passport is a request to "foreign pouers" (1) to allow the bearer to enter and to pass freely and safely, and (2) to recognize the right of the bearer to the protection and services of American diplcmatic and consular officers. United States v. Laub, 385 U.S. 475, 481 (1966). In recent times, the passport has become a control mechanism over the entry and exit of citizens, crucial to mos t Un i ted States citizens crossing international borders. Kent v. Dulles, 357 U.S. 116, 129 (1958). In addition, because passp(;r-ts @include photographs of the bearer and are issued by the national goverment, they are widely accepted within the issuing nation as a ffeans of identification. United States passports are issued under the authority of the Secretary of State. 22 U.S.C. � 211a. They are issued only to persons owing allegiance to the United States. Id. q 212. Present applicability. Citizens of the Northern Mariana Islands are not now citizens of the United States. They are citizens of the Trust 'Parritory of the Pacific islands, aliens under United States law. As such, they do not owe allegiance to the United States and, consequently, are not entitled to a United States passport under sections 211a and 212 of title 22 of the United States Code. On full implementation of the Covenant, citizens of the Northern - 210 - Mariana Islands will beccme citizens of the United States. Covenant � 301. At that time they will be entitled to United States passports.* Discussion. United States diplomatic and consular protection of citizens of the Northern Mariana Islands. Article 11(2) of the Trusteeship Agreement, under which the United States administers the Northern Mariana Islands, obligates the United States to provide diplcmatic and consular protection to citizens of the Trust Territory travelling outside the Trust Territory or the United States. Section 4 of title 53 of the Trust Territory Code (1966 edition) implies that the High Commissioner of the Trust Territory has the authority to issue passports to citizens of the Trust Territory. The High Cawissioner in fact has issued such passports for many years, and continues to do SO. The High Commissioner's authority in the Northern Mariana Islands was abrogated on the January 9, 1978, establishment of constitutional government in the Northern Mariana Islands under the Covenant. Nonetheless, the only passport showing entitlement to the diplcmatic and consular services of the United States overseas that citizens of the Northern Mariana Islands presently may obtain is a Trust Territory of the Pacific Islands passport, issued by a Trust Territory goverment wtiich otherwise exercises no goverrTnental functions for the Northern Mariana Islands. Entry into the United States. on establishment of constitutional governmen7l-n -the Northern Mariana Islands on January 9, 1978, the United States committed itself to allow citizens of the Northern Mariana Islands freely to enter and to reside and work in the United States." The document principally used to establish Northern Mariana Islands citizenship on entry into the United States is a Certificate of Identity, issued by the qovernment of the, Northern Mariana Islands.*** This document does not bear the *Within the followinq six months, such persons may elect to beccine United States nationals rather than United States citizens by making a prescribed declaration under oath. Covenant � 302. Such an election would not affect their eligibility for a passport under sections 211a and 212 of title 22. **See cable from F. Potter, U.S. Immigration and Naturalization Service, Washington, D.C., to the Service's field offices (January 4, 1978); Smith v. Pangelinan, 651 F.2d 1320, 1323, 1324, 1325 (9th Cir. 1981). ***See sources cited in the preceding footnote. The certificate of identity is issued pursuant to Northern Mariana Islands Public Law 1-6 (1978), 3 Code of the Northern Mariana Islands H 4111 et seq. (1984). - 211 - imprimatur of the United States Government and its acceptability while sanctioned in a cable to field offices of the Immigration and Naturalization Service, has not been recognized in the United States Code or the Code of Federal Regulations. Further complicatim entry into the United States for citizens of the Northern Mariana Islands is section 212.1(d) of title 8 of the Code of Federal Regulations (1985):* A visa and a passport are not required of a native and resident of the Trust Territory of the Pacific Islands who has proceeded in direct and continuous transit frcm the Trust Territory to the United States. This regulation implies that a visa and a passport are required of someone from the Trust Territory (including t he Northern Mariana Islands) if that person is not in direct and continuous transit.from the Trust Territory to the United States. Thus, a citizen of the Northern Mariana Islands entering the United States fram, say, Canada may be asked not only for a Trust Territory passport, but also for a visa frcm a United States consular officer. Identification. Neither the Trust Territory passport nor the Northern Mariana Islands Certificate of Identity is an ideal means of identification for citizens of the Northern Mariana Islands in the United States. Neither document is issued under the apparent authority of the United States Government. Employers, school officials, local government employees, and others in the United States to whom it may be necessary to present identification are seldam familiar with either the Trust Territory of the Pacific Islands or the Northern Mariana Islands and are even less cognizant of the privileges accorded citizens of those jurisdictions in the United States. While citizens of the Northern Mariana Islands are guaranteed the privileqes and immunities of citizens of the several States under section 301 of the Covenant, to establish those privileges and immunities they rrust not only prove their Northern Mariana Islands citizenship, but also their special status under the Covenant. Even then, a skeptical official pressed for time may deny *See also 22 C.F.R. S 41.6(d) (1984), which is identical in language. 212 - to them. privileges or immunities to which they are entitled.* The proposed special passport. The special passport proposed herein would be issued by the Secretary of State and would identify the bearer as a citizen of the Northern Mariana Islands, not as a citizen of the United States. A "citizen of the Northern Mariana Islands" for purposes of the proposed legislation is defined therein as a person who qualified as a United States citizen or a United States national under section 8 of the Schedule on Transitional Matters of the Constitution of the Northern Mariana Islands. The Constitution of the Northern Mariana Islands came into effect on January 9, 1978, after approval by the President of the United States. See Proclamation 4534, 42 Fed. Req. 56593 (October 24, 1977). Like the Trust Territory passport, the special passport would recite the right of the bearer to the diplomatic and consular protection of the United States while in foreign countries. Like the identification cards issued to aliens lawfully admitted to permanent residence in the United States, the special passport would recite the right of the bearer to reside permanently and work in the United States. In all other respects, the proposed special passport would be subject to the rules, regulations, and fees applicable to passports issued by the Secretary of State pursuant to section 211a of title 22 of the United States Code. The policy of the United States Immiqration and Naturalization Service allows citizens of the Northern Mariana Islands freely to enter and to reside and work in the United States. In the early months of 1981, this policy was temporarily reversed, to the great consternation of citizens of the Northern Mariana islands. The public outcry was vehement and the earlier policy was quickly reinstated. The temporary reversal of policy was attributable in Part to a lack of clear and specific statutory authority, beyond the general languaqe of the Covenant, for the earlier policy. The legislation here recamTended would provide that clear and specific authority. Only until full implementation of the Covenant is legislation necessary for citizens of the Northern Mariana Islands to obtain a passport frcrn the Secretary of State. For this reason authority for *Should current efforts to penalize employment of illegal aliens in the United States be enacted into law, the need for acceptable identification becanes more critical. The average employer may be forgiven for not knowing the peculiar citizenship status of citizens of the Northern Mariana islands and, thus, for opting in favor of not hiring--and not risking criminal penalties--over spendinq time and money to verify that citizens of the Northern Mariana Islands can be hired. See, for example, S. 529, 98th Cong., lst Sess. � 101 (1983). - 213 issuance of a special passport under the reccmmended legislation expires at that time. (Section 217a of title 22 limits the validity of passports to five years, so no passport issued under the proposed legislation could be valid for more than five years after full implementation of the Covenant.) Full implementation of the Covenant will occur when the United Nations trusteeship pursuant to which the United States presently administers the Trust Territorv of the Pacific Islands, including the Northern Mariana Islandsil is terminated. Covenant � 1003(c). The date for termination of the trusteeship is not yet known. During the possibly-lengthy period between now and the end of the trusteeship, a special passport issued by the Secretary of State would be very useful to citizens of the Nbrthern Mariana Islands travelling overseas, or enterinp, residing, or seeking employment in the United States. Proposed legislative language. The following language, if enacted by the United States Congress, would implement the Ccrvission's recammendation: An Act to authorize the issuance of special United States passports to citizens of the Northern Mariana Islands. Be it enacted the Senate and House of -1 -Conqm ,Representatives of the United States of America in ss assembled, that the Secretary of State or persons designated by the Secretary of State shall issue special United States passports to citizens of the Northern Mariana Islands, notwithstandinq section 4076 of the Revised Statutes of 1878, as amended (22 U.S.C. � 212). 7hese passports shall recite the privilege of citizens of the Northern Mariana Islands to enter, and to reside and be employed in the United States, and to enjoy the diplomatic and consular protection of the United States in foreign countries. Se c. 2. For purposes of this Act, "citizens of the Northern Mariana Islands" are those persons defined as United States citizens or United States nationals in section 8 of the Schedule on Transitional Matters of the Constitution of the Northern Mariana Islands, as approved by Presidential Proclanation 4534 of October 24, 1977. Sec. 3. This Act shall expire upon the establishment of the Ccrnnonwealth of the Northern Mariana Islands. 214 TITLE-BY-TITLE SURVEY OF THE UNITED STATES CODE As noted in the introduction to this Report, the Ccmmission has focussed on existing problems in the application of particular federal laws to the Northern Mariana Islands and has not proceeded sequentially frcm title I throuqh title 50 of the United States Code. Recam-endat ions for legislation to resolve problems in the application of particular federal laws to the Northern Mariana Islands are contained in the preceding section of this report. In this title-by-title survey, the Ccimmission collects its work on the various parts of the United States Code for which the Ccimmission has reccmmended no legislation. In some instances the Ccmrsission affirmatively reccmmends that the status quo be maintained. For other statutes, the Cammission merely briefly describes the statute and notes whether or not the statute is now applicable to the Northern Mariana Islands. For yet other statutes, a brief discussion of the pros and cons of applying the statute is included. The Cammission did not examine the entire United States Code, preferring to devote time to addressing specific problem areas and to omit detailed study of parts of the Code very unlikely to be troublesome to the Northern Mariana Islands, for example, title 36 on Patriotic Societies and Cbservances. For those titles not discussed in detail in the survey below, the extent to which the Camission examined the title is indicated. The title-by-title survey follows the organization of the United States Code. Accordingly, while the survey has neither a detailed table of contents nor an index, the detailed table of contents and index of the United States Code may be used to locate particular subjects in the survey. The Ccimission anticipates that most users of this survey will look only at statutes of particular interest to them, and will not read the entire survey. For this reason, the Ccimmission has allowed a certain amount of redundancy, particularly in discussing the present applicability of statutes, so that the reader will not have to pursue a chain of cross-references through the discussion of other statutes in order to understand the conclusions of the Commission. The summaries of statutes given in the survey are intended only to give the gist of each statute. The summaries do not describe each provision, each condition, and each qualification in the statute. For these det:ails, the reader must consult the statute itself. 215 TITLE 1. GENERAL PROVISIONS. The statutes. This title of the Unitecl States Code governs the formalities of enacting and publishing laws of the United States and sets forth certain rules for construction of those laws. Present a22licability. By reason of its subject matter, title 1 is generally applicable to all areas subject to the law-making authority of the United States. The Northern Mariana Islands is subject to that law-making authority. Trusteeship Agreement, Art. 3; Covenant �� 101, 1003(c). Two minor questions of applicability are raised by provisions in title 1. Section 2 defines "county," as used in the laws of the United States, to include a parish or any other equivalent subdivision of a State or Territory of the United States. A question exists as to whether the highest level of political subdivision in the Northern Mariana Islands, the municipality, would qualify as a "county" under section 2. Resolution of that question depends on whether Guam is a "Territory" within the meaning of section 2. If it is, the Northern Mariana Islands would be afforded equivalent treatment by operation of section 502(a)(2) of the Covenant, and the municipalities of the Northern Mariana Islands would qualify as "counties" for purposes of the laws of the United States. Section 204 of title I specifies the evidentiary effect of the United States Code, the District of Columbia Code, and their supplements in the courts, tribunals, and public offices of, among other places, each- State, Territory, or insular possession of the United States. Guam is a "Territory" or "insular possession" of the United States. Accordingly, by operation of section 502(a)(2) of the Covenant, the evidentiary rules set forth in section 204 are applicable in the courts, tribunals, and public offices of the Northern Mariana Islands. TITLE 2. THE ODNGRESS. The statutes. All legislative powers granted the Federal Goverment by the United States Constitution are vested in the Congreis of the United - 216 - States, Wb ich consists of the Senate and the House Of Representatives. U.S. Const., Art. I, � 1. The members of the Senate and of the House of Representatives are elected by the citizens of the States of the United States. Id. � 2, cl. 1; Amend. XVII, amendinci Art. I, � 3, cl.l. Title 2 collects statutes governing the election of Senators and Representatives, the leadership and organization of the two houses of Congress, the conduct of congressional business, the compensation and expenses of members, and the functions of such congressional adjuncts as the Library of Congress. Present applicability. The United States Constitution contains no provision for representation in Congress of citizens residing in areas within the jurisdiction of the United States but not part of any State. Provision for a nonvoting delegate to Congress to represent areas within the United States that are not States of the United States has been ccrnmon practice since the Ordinance of 1787. Discussion. See the reccimxendation, A nonvoting delegate to the United States Congress, in the Recommeridations section of this report. TITLE 3. THE PRESIDENT. The statutes. This title contains statutes governing the presidency of the United States. The title specifies how presidential elections are to be conducted and the procedure to be followed should a vacancy occur in the office of President. The title also sets comr@eansation and expense allowances for the President and Vice President, and authorizes staff and office expenditures for each. The title authorizes Secret Service protection for the President, Vice President, and others. Finally, title 3 authorizes the President to delegate the performance of presidential functions to subordinate officials. Present applicability. The President, as the head of the executive branch of the government of the United States, has ultimate authoritv for all federal executive branch activity within the Northern Mariana Islands. 217 - Most citizens of the Northern Mariana Islands will become citizens of the United States on termination of the trusteeship. Covenant SS 301, 1003(c). At that time, however, they will not become eligible to vote for the President of the United States (unless they first leave the Northern Mariana Islands and become residents of one of the States). The President (and the Vice President) are elected through the electoral college. The electoral college, under Article II, Section 1, Clause 2 of the United States Constitution, is composed of electors appointed by each State in a number equal to the number of Senators and Representatives from that State. See also 3 U.S. C. � 3. No provision exists in the Constitution for appointment of electors from the territories, although the Twenty-third Amendment to the Constitution allows the District of Columbia to appoint members to the electoral college as though it were a State. See also 3 U.S.C. � 21. Discussion. Denying United St -ates citizens residing in territories of the United States the right to vote in presidential elections is inconsistent with a fundamental premise of democracy, that the right to govern rests on the assent of the governed. Denying them that right, however, is not inconsistent with the Constitution. Indeed, the Constitution does not grant citizens the right to vote, but leaves to the States who shall vote. In 1982 the Attorney General of Guam filed an action seeking for United States citizens residing on Gum the right to vote in presidential elections, noting that United States citizens residing overseas are able to vote in those elections. See 42 U.S.C. � � 19 73dd et seq. (Citizens overseas, however, are able to vote only by absentee ballot in the State in which they were last domiciled.) The Guam lawsuit was dismissed, based on the express provisions of the Constitution governing the electoral college. The dismissal was affirmed by the United States Court of Appeals for the Ninth Circuit. Attorney General of Territory of Guam v. United States, 738 F.2d 1017 (1984), certiorari denied, 53 U.S.L.W. 3592 (February 19, 1985) (No. 84-666). See also Sanchez v. United States ', 376 F. Supp. 239 (D.P.R. 1974); District Jud2e Dismisses Case for Presidential Votel, Pacific r)aily News (Guam), February 19, 1983, at 3. Citizens of the United States residing in the Northern Mariana Islands (after termination of the trusteeship) and in other territories and possessions should have the right to vote in - 218 - presidential elections. Amendment of the United States Constitution is necessary, however, to grant them that right.* TITLE 4. FLAG AND SEAL, SEAT OF GOVERNMENT, AND T14E STATES. The statutes. This title collects statutes describing the flag and seal of the United States, fixing the national capital in the District of Columbia, governing certain relations between the Federal Goverment and the States, and providing for the publication of official papers of the Territories from which States of the United States were formed. Among the statutes governing relations between the Federal Government and the States are provisions allowing any State to apply gasoline taxes and sales taxes on transactions occurrina on military bases and other federal lands within the State. State income taxes may also be levied on persons residing on or receiving income from federal areas and on federal employees. Under Article I, Section 10, Clause 3 of the United States Constitution, the consent of Congress is necessary before two or more States may enter into any agreEment with each other. Section 112 of title 4 grants blanket congressional consent for agreements between States for the prevention of crime and the enforcement of State criminal laws. Finally, section 113 of title 4 prohibits States in which members of Congress reside in order to attend sessions of Congress from levying income taxes on those members (unless the member represents that State or a political subdivision thereof). In effect, this provision prevents the District of Columbia and the neighboring States of Maryland and Virginia from taxing the incom of members of Congress who represent other jurisdictions but who reside in the District of Columbia, Maryland, or Virginia in order to attend Conqress. Present applicability. Most of title 4 is concerned with national attributes of the United States: the flag, the seal, and the national capital. These *One proposed constitutional amendment would have allowed a single electoral vote to be shared by American Samoa, Guam, the Virqin Islands, and the Northern Mariana Islands. House Joint Resolution 161, 97th Cong., Ist Sess. (1981). That proposal, however, was never reported out of committee in the House of Representatives. - 219 - statutes apply to the United States itself and not to particular geographical or political subdivisions of the United States. @10 purpose is served by attempting to determine their particular applicability to the Northern Mariana Islands. The national flag that flies in the Northern Mariana Islands is identical to the flag that flies in Washington, D.C. and to the flag flown in foreign countries when the flag of the United States is displayed-. The provisions of title 4 governing the taxing powers of the States over federal employees and other federal ly-af fected persons or transactions either specifically treat Guam in the same manner as a State or treat all territories and possessions of the United States as States are. treated. 4 U.S.C. �� 104(c), 110(d). Since Gum is a territory or possession, by operation of section 502(a)(2) of the Covenant, the Northern Mariana Islands may tax federal employees and other federal ly-af fected persons or transactions in the same manner as may the States. "State" is also defined to include Guam for purposes of the statute granting congressional consent to interstate compacts for criminal law enforcement. Id. � 112(b). Accordingly, by operation of section 502(a)(2) of th7e-Covenant, the Northern Mariana Islands may be a party to such compacts. Legislation recam-nended in this report would provide the Northern Mariana Islands a nonvoting delegate in the United States House of Representatives.* That leqislation accords to the delegate "whatever privileges and immunities that are, or hereinafter may be, granted to the nonvoting Delegate from the Territory of Guam." Section 113 of title 4, exempting most members of Congress from income taxes imposed by Maryland, Virginia, and the District of ColLuibia, defines "Member of Congress" to include the delegate from Guam. 4 U.S.C. � 113(b)(1). Accordingly, if the legislation recommended by the Commission is enacted, the delegate from the Northern Mariana Islands would also be entitled to this exemption from State income taxes. TITLE 5. GOVERNMENT ORGANIZATION AND EMPLOYEES. The 40 chapters of title 5 are divided among three parts. Part I contains laws generally applicable to aqencies of the Federal Governpent. Part II sets forth the structure of the federal civil *See the recamtneendation, A nonvoting delegate to the United States Congress, in the Recommendations section of this report. - 220 - service system and also includes portions of the Patch Act, restricting the political activities of State and local employees. Part III establishes employment conditions, ccrnpensation, and fringe benefits for the f ederal work force, and includes Hatch Act restrictions on the political activities of federal employees. PAPT I. THE AGENCIES GENERALLY. The statutes. The first part of title 5 concerns general agency matters, including the organization of the executive branch (chapter 1), the powe rs of federal agencies to issue regulations and delegate authority (chapter 3), administrative procedures (chapter 5), judicial review of agency action (chapter 7), and reorganization of executive agencies to improve efficiency (chapter 9).* Provision is also made for analysis of regulatory functions by agencies so that flexible approaches to rule-making and regulation may benefit small businesses and other small orc*ianizations and governmental jurisdictions (chapter 6). Chapters 5 and 7, governing administrative procedures and judicial review of agency action, are particularly important, and are discussed in greater detail below. Chapters 5 and 7 contain the Administrative Procedure Act (APA-).** 5 U.S.C. �� 551 et seg. , 701 et seq. The APA is perhaps the most important provision in federal law for individuals who seek to understand the basis for administrative actions or to obtain redress from agency actions. Me JAPA provides "greater uniformity and standardization of administrative practice amorp the diverse agencies whose custcms had [previously] departed widely frcm each other." Wong Yang Sung v. McGrath, 339 U.S. 33, 41 (1949). "Plore fundamental, however, was the purpose to curtail. and change the practice of embodying in one person or agency the duties of prosecutor and judge." Id. Chapter 5 requires public notice of agency actions, usuall -y through publication in the Federal Register. 5 U.S.C. 5� 552, 553. Section 552 includes the Freedom of Information Act, which makes *Title 5 originally contained only odd-numbered chapters; newer legislation has been inserted as even-numbered chapters. "Chapter 5 also creates the Administrative Conference of the United States to reccrmyeand improvements in the procedures of Federal agencies. 5 U.S.C. �� 571 et seq. - 221 - information in the possession of government agencies generally available to the public, unless the information falls within certain narrowly defined exemptions. Other provisions require agencies to protect the privacy of information on individuals, id. S 552a;* to hold open meetings, id. � 552b;** and to conduct fair hearings and reviews of their actions, id. �� 554-558. Chapter 7, also part of the APA, provides statutory authority for judicial review of agency actions. Usually, persons must exhaust any administrative remedies that exist before they may go to court.*** Chapter 7 establishes not only the right of review in most cases, 5 U.S.C. 702, but also the manner of review and the relief available. Id. 703-706. As stated by one author: The basic reinedy aqainst illegal administrative action is judicial review. A person aggrieved by an agency decision or other act may challenge its legality in the courts. In the American system, where even legislative action is subject to judicial control, there has never been any question of the propriety of judicial review of agency action. Judicial review is the balance wheel of administrative law. It enables practical effect to be given to the ultra vires theory upon which administrative power is based. "When Congress passes an Act empowering administrative agencies to carry on governmental activities, the power of those agencies is circumscribed by the authority granted." The responsibility of enforcing the limits of statutory grants of authority is a judicial function; when an agency oversteps its legal bounds, the courts will intervene. without judicial review, statutory limits would be naught but empty words. B. Schwartz, Administrative Law 429 (1976) (footnotes omitted), in turn quoting from Stark v. Wickard, 321 U.S. 288, 309 (1944). Present 2Mlicability Chapters I and 3 of title 5, establishing the organization of the Federal Government and delineating the powers of federal *This section was enacted by the Privacy Act of 1974. "This section was enacted by the Government in the Sunshine Act of 1976. ***See, for example, 1 B. Mezines, J. Stein & J. Gruff, Administrative Law � 1.01[31 (1982). - 222 - agencies, contain no provisions describing the geographic applicability of those chapters. The nature of the provisions in those chapters is such, however, that it is generally of no import whether those provisions are considered applicable or inapplicable. One provision, however, deserves ccmment: Section 304 authorizes federal agency heads to obtain subpenas in certain cases frcm "a judge or a clerk of a court of the United States" to ccmpel testimony frcm a witness within the jurisdiction of that court. The District Court for the Northern Mariana Islands was created by a law of the United States, Public Law 95-157, 91 Stat. 1265 (1977), and has the jurisdiction of a district court of the. United States, id. � 2, 48 U.S.C. S 1694a. Accordingly, it is a court of the United States from which a federal agency head may obtain a subpena to canpel testimony from any witness found within the Northern Mariana Islands pursuant to section 304 of title 5. The Administrative Procedure Act, including its freedcrn of information provisions, contained in chapters 5 and 7 is generally not limited geographically and applies to federal agencies wherever they operate, although with enumerated limitations.* Constructores Civiles de Centroaffnerica, S.A. v. Hannah 459 F.2d 1183 (D.C. Cir. 1972) (federal agency actions in foreign country reviewable under APA); RalpLo v. Bell, 569 F.2d 607 (D.C. Cir. 1977) (federal agency actions in Trust Territory of the Pacific Islands reviewable under APA). See also People of Sai2an v. United States Department of Interior, 502 F.2d 90 (9th Cir. 1974), certiorari denied, 420 U.S. 1003 (1975). Several provisions in chapter 5 merit particular ccrm-rkent. Section 500 allows lawyers admitted to practice before the highest court of a State also to practice before federal agencies. "State" is defined to include any territory or possession of the United States and thus includes Guam. By operation of section 502(a)(2) of the Covenant, lawyers admitted to practice before the highest court of the Northern Mariana Islands also may practice before federal agencies. The provisions of section 552a, controlling access to government records on individuals, define "individual" to mean a citizen of the United States or an alien lawfully admitted for permanent residence. Id. � 552a(a)(2). Since most citizens of the Northern Mariana Fs-lands are neither citizens of the United States nor permanent resident aliens, they could be denied the Privacy Act protections contained in this section. For this reason, the Ccmmission in its January 1982 interim report to the United States Congress, *See, for example, 5 U.S.C. �� 551(l)(A)-(H); 552(b); 701(a), (b)(1)(A)-(H). - 223 - recaTaTended enactment of legislation to treat citizens of the Northern Mariana Islands as citizens of the United States for purposes of this requirement. In 1983 Congress enacted Public Law 98-213, 97 Stat. 1459. Sections 19 to 23 of that statute allow the President by proclamation to declare that citizenship requirements in particular federal laws are not applicable to citizens of the Northern Mariana Islands. In 1984 the President removed for citizens of the Northern Mariana Islands the citizenship restriction of section 5 52a (a) (2). Presidential 'Proclamation. 5207, � 5(b), 49 Fed. Reg. 24365. Subchapter III (sections 571 to 576) of chapter 5 establishes the Administrative Conference of the United States to study and make recommendations on improving the administrative procedures of federal agencies. RecomTieandat ions of the Administrative Conference put into effect by the President, Congress, or particular federal agencies will affect the Northern Mariana Islands to the extent the particular administrative procedure that is the subject of the recommendation affects the Northern Mariana Islands. PART II. CIVIL SERVICE FUNCTIONS AND RESPONSIBILITIES. The statutes. Chapters 11 to 13 of title 5 create the Office of Personnel Management and the Merit Systems Protection Board. The Off ice of Personnel Management (OPM) is a successor to the Civil Service Commission. It administers the mrit system for federal employment, governing the recruiting, examining, training, and promoting of f ederal personnel. U.S. Government Manual 578-81 (1982). The Merit Systems Protection Board, an agency separate from OPM, also succeeds to certain functions of the Civil Service Commission. The Board protects the integrity of the federal merit system and the rights of federal workers. Id. at 544-46. Chapter 15 regulates the political activity of certain State and local employees. The chapter is part of the Hatch Act, discussed below, and circumscribes the political activity of employees of federally funded State programs or agencies. Violations of this provision result in agency withholding of grants or loans equivalent to the pay of the individual involved. See 5 C.F.R. part 151 (1984). Present a22licability. The geographical area of operations of the Office of Personnel Management and the Merit Systems Protection Board are not defined by statute. But the jurisdiction of these agencies extends to all federal civil servants, although the agencies may treat employees differently depending upon, amng other things, their place of employment. - 224 the restrictions on "State" is def ined, for purposes Of the political activities of State and local emv ')loyees, to include territories ard possessions of the United States. 5 U.S.C. � 1501(l). Since Guam is a territory or possession of the United states, by operation of section 502(a)(2) of the Covenant, the restrictions also apply to employees of programs of the government of the Northern Mar,.Lana Islands and its local subdivisions receiving federal funds. PART III. EMPLOYEES. The statutes. Seven subparts in part III of title 5 set forth rules governing the working conditions, compensation, and fringe benefits of federal civil service employees. The subparts cover these categories: hiring and retention, performance criteria, pay rates and allowances, work hours, employee relations, adverse actions and appeals, worker's compensation, retirement, unemployment, and life and health insurance. The Office of Personnel Management administers the entire system. 5 U.S.C. �� 2101 et secT. This part of title 5 also includes the portions of the Hatch Act that prevent federal employees frarn acting in their official capacity to influence elections and fran taking an active part in political campaigns. 5 U.S.C. � 7324. See also 5 C.F.P. part 733 (1984). The Act does not prohibit participation in nonpartisan politics, such as in elections in which no political party candidates run or on questions--such as referenda, constitutional amendments, and the like--not identified with a political party. 5 U.S.C. S 7326. Present applicability. Part III governs the internal workings of the Federal Govern-nent and generally contains no provisions specifying geographic applicability. In some instances, however, the statutes contained in part III do specifically mention the territories and possessions of the United States. Since Guam. is a territory or possession, those statutes, by operation of section 502(a) (2) of the Covenant, are generally applicable to the Northern Mariana Islands. One sect ion, for excaunple, provides that oaths of off ice may be administered in territories and possessions pursuant to local law. 5 U.S.C. 5 2903. Another requires examinations for the civil service register to be held in each State and territory or possession at least twice a year. 5 U.S.C. �� 3305. Other provisions allow aaencies to assign personnel to State agencies, which are defined to include agencies of territories and possessions. 5 U.S.C. �� 3371 et seq. Federal agencies are allowed to recruit personnel for employment in overseas areas without regard to the usual civil service - 225 - requirements. 5 C.F.R. parts 8, 301 (1984). overseas areas are defined as those areas not part of the continental United States, Alaska, Hawaii, Puerto Rico, the Virgin Islands, or the Isthmus of Panama. Id. � 8. 4. Guam and the Northern Mariana Islands are thus considered-as overseas areas for purposes of recruitment. For mos t civil service purposes, however, Guam is not considered an overseas area. Td. S 210.102(b)(9). By operation of section 502(a)(2) of the CovenanI7 if a law does not treat Guam and the several States as an overseas area, the Northern Mariana Islands also is not an overseas area for purposes of that law. Accordingly, while Gum and the Northern Mariana Islands are treated as overseas areas for purposes of recruitment of federal civil service employees, they are treated in the same manner as the States of the United States in virtually all other matters affecting federal civil service employment. Thus, although ccrnpetitive examinations for listing on the civil service registers of persons available for federal employment must be given in the Northern Mariana Islands at least twice each year (if there are persons who have applied to take the examination), 5 U.S.C. H 3305, appointments to federal civil service positions in the Northern Mariana Islands (and Guam) need not be made from those registers. 5 C.F.R. �� 8.2, 8.4 (1984). (Persons so appointed, however, do not acquire "competitive status" in the civil service sys tem. Id. S 8. 2. ) The Federal Goverment generally requires United States citizenship for employment in the civil service. Executive Order 11935 (1976), 5 C.F.R. � 7.4 .(1984), reprinted in note following 5 U.S.C. � 3301.* See also 5 C.F.R. � 338.101 (1984). In overseas areas, however, persons who are not citizens of the United States may be recruited and aTiployed by the Federal Goverment. Td. q 8.3. Pending termination of the trusteeship, when citizens of tFe Northern Mariana Islands become citizens of the United States, this provision allows employment of citizens of the Northern Mariana Islands in federal civil service positions in the Northern Mariana Islands (and in other overseas areas, including Guam). The provision also allows the Federal Goverment to employ in the Northern Mariana Islands individuals who are citizens of neither the United States nor the Northern Mariana Islands. 'Prohibiting persons who are not United States citizens fran working for the federal civil service most affects those citizens of the Northern Mariana Islands wfio want to work for the Federal Government in the United States proper. Other provisions in part III of title 5 allow only citizens of the United States to receive a *The constitutionality of this executive order was upheld in Vergara v. Hampton, 581 F.2d 1281 (7th Cir. 1978), certiorari denied, 441 U.S. 905 (1979). - 226 - variety of federal employment benefits. 11hese provisions have already been discussed in the Ccmmission's January 1982 interim report to the United States Congress.* In its interim report, the Ccmmission reccmmended enactment of legislation to treat citizens of the Northern Mariana Islands as citizens of the United States for purposes of these requirements. In 1983 Congress enacted Public Law 98-213, 97 Stat. 1459. Sections 19 to 23 of that statute allow the President by proclamation to declare that citizenship requirements in particular federal laws are not applicable to citizens of the Northern Mariana Islands. In 1984 the President removed for citizens of the Northern Mariana Islands the citizenship restrictions in these sections. Presidential Proclarotion 5207, � 2(a), 49 Fed. Reg. 24365. The prohibitions of political activities apply to all federal workers, including those in the territories. See, for example, Soldevila v. Secretary of Agriculture of the United States, 512 F.2d 427 (1st Cir. 1975) (Puerto Fico). Since Guair is a territory, by operation of section 502(a)(2) of the Covenant, those prohibitions also apply to federal workers in the @brthern Mariana Islands. [TITLE 6. SURETY BONDS.] This title was repealed in its entirety in 1982. Public Law 97-258, 9 5(b), 96 Stat. 877, 31 U.S.C. App. Federal laws on surety bonds are now found in chapter 93 (�� 9301 et seq.) of title 31 of the United States Code. TITLE 7. AGRICULTURE. The statutes. Agriculture has always been one of the most important econcrnic activities in the United States. Although the United States has shifted frcm an agricultural to an industrial econany, that shift is due in large part to the phenomnal productivity of American agriculture. The farming sector not only -feeds the people of the United States well; it enables the United States to be the world's leadinq exporter of foodstuffs. *Several of the more important provisions reauire Employees to be United States citizens to receive civil service annual and sick leave bene"f its, 5 U.S.C. � 6301; to have certain collective bargaining and labor rights, id. � 7103; to be eligible for civil service unemployment benef its,-id. S 8501; and to participate in federal Employee life and health insurance plans, id. �� 8701, 8901. - 227 - The Federal Goverment, principally through the Department of Agriculture, plays an important role in American agriculture. The Department of Agriculture (USDA) . . . works to improve and maintain farm income and to develop and expand markets abroad for agricultural products. The Department helps to curb and to cure poverty, hunger, and malnutrition. it wurks to enhance the environment and to maintain our production capacity by helping landowners protect the soil, water, forests, and other natural resources. Rural development, credit, and conservation prograns are key resources for carrying out national growth policies. USDA research findings directly or indirectly benefit all Americans. The Department, through inspection and grading services, safeguards and assures standards of quality in the daily food supply. U.S. Government Manual 94 (1982). The Federal Goverment "support[s] farm inccmes through direct payments to farmers, controls on output, price supports, and the provision of storage and marketing facilities." 18 Encyclcpaedia Britannica Macropaedia, United States of America 905, 935 (15th ed. 1980).* Present applicability. Sane chapters of the title 7 are now applicable to the Northern Mariana Islands while others are not. In 1980 the United States Congress enacted Public Law 96-597, 94 Stat. 3477. Section 601(c) of that law, now codified as section 1469d(c) of title 48 of the United States Code, authorizes the Secretary of Agriculture "to extend, in his discretion, programs administered by the Department of Agriculture to Guam, the Northern Mariana Islands, the Trust Territory of the Pacific Islands, the Virgin Islands, and American Sawa" and "to waive or modify any statutory requirements relating to the provision of assistance under such programs when he deems it necessary in order to adapt the programs to the needs of the respective territory . . . ." The administration of any progran extended to a territory must be governed by a memorandum of understanding between the territorial goverment and the Department of Agriculture. Public Law 96-597 thus permits the extension of any Department of Agriculture program to the Northern Mariana Islands without *Other federal laws affecting agriculture are found in title 16, Conservation, and title 21, Food and Drugs. 228 - further action by the United States Congress. (Prior notice of extension of a federal agricultural program to a territory, and of any waiver or modification of program requirements for a territory, must be given to congressional committees that oversee agriculture and the territories. 48 U.S.C. � 1469d(c).) Discussion. In the years between World Wars I and II agriculture was the mainstay of the Northern Marianas' economy. By 1937, a reported 36,900 acres, or nearly one third of a total land area of 116,400 acres, were under cultivation producing sugar cane, vegetables, fruits, coffee, and other crops. Vegetable production amounted to nearly 19,900 tons and fruit production to more than 460 tons in that year. Farm livestock included 24,100 swine and 14 r-110 cattle. Japanese-run commercial farms, as well as smaller family units integrating crop and animal production (often operated by Okinawan or Korean settlers), accounted for much of the agricultural activity. Even though many families in the Northern Marianas continue to maintain small farm featuring an acre of tree crops (fruits and coconut), vegetable gardens and a few small livestock (chickens, aoats, pigs) to supplement family income, agriculture has become an economic activity of only secondary importance. A total of only about 600 acres are now under cultivation in the CNMI, and no more than 22,500 acres are in grazing. Livestock consist of approximately 2,500 swine and 7,300 cattle, most accounted for by the 7,000-acre Bar K Ranch in Tinian, owned by the Micronesian Development Corporation of Guam. There are probably fewer than 75 full time commercial farmers or ranchers throughout the Commonwealth, including individuals employed as farm laborers. Robert R. Nathan Associates, Inc... Assessment of Current and Prospective Socio-econamic Conditions in the Commonwealth of the Northern Mariana Islands 12 (1980). Sales of crops grown in the Commonwealth amounted to about 822,800 pounds in FY 1982, of which vegetables accounted for 763,800 pounds, fruits for 38,100 pounds, and staple crops for 20,900 pounds. Cucumbers, watermelons, and other melons make up the bulk of this volume. Local buyers are hotels and retail stores. Military facilities and retail stores in Gua-n are buyers of CNMI export products. It is estimated that recorded commercial sales currently represent about 80% of total crop production in the Ccimmonwealth. - 229 In FY 1982 total commercial sales of vegetables, fruits, and staple crops represented only 40 percent of the 1,940,000 pounds of these sane commodities marketed in FY 1977, and about 38% of the 2,047,000 pounds of these commodities marketed in FY 1973. much of this decline results from a precipitous drop in export sales to Guam, the CNMI's only export market, amounting to a million pounds or more. Sales levels for animal products have also been variable. Sales of mat, primarily beef, stood at 300,000 pounds in FY 1982, but have fluctuated between 200,000 pounds and 450,000 pounds over the past seven years. Milk production reached a level of over 92,000 gallons in FY 1982, roughly six years after the establishment of a dairy herd on Tinian in FY 1976. All milk and almost all recorded meat sales are gene-rated by the Micronesian Development Corporation's Bar K Ranch on Tinian, and the major portion of this production (milk, 81%; mat, 92%) is currently exported to Guam. Commonwealth of the Northern Mariana Islands, Overall Economic Development Strategy 20-21 (1983). Much of the food now consumed in the Northern Mariana Islands is imported. Consequently, the Northern Mariana Islands itself provides a market for increased agricultural production. In addition, the Northern Mariana Islands is well-situated to provide tropical agricultural products to population centers in Japan and other far eastern countries. M-ade barriers in Japan, however, severely restrict the importation of agricultural products to that nation.) The record of agricultural production in the Northern Mariana Islands during the Japanese administration of the islands is ample evidence of the potential role of agriculture in the economic development of the Northern Mariana Islands. The Commission's recommendation, Land-,Eant colleges, in the RecoTuwndations section of this report, discusses chapters 13, 14, and 64 of title 7. Chapters 1, 2, 3, 4, 6,* 7, 7A, 7B, 8, 8A, 9, 10, 11, and 12 of title 7 are discussed below. The Commission's staff examined the remaining chapters in title 7, but did not compile and edit its research for inclusion in this report. No significant problems in the application of these chapters to the Northern Mariana Islands were uncovered by the staff's research or otherwise brought to the Commission's attention. *Chapter 5 of title 7 has been repealed. - 230 - Chapter 1. CommoditV Exchanges. The statutes. "Ccmmodi ties," as the tetm is used in this chapter, include a wide variety of agricultural products, such as wheat, rice, eggs, corn, livestock, peanuts, soybeans, and cotton. See 7 U.S.C. � 2. Dealers in commodities cam-only bargain to deliver a given quantity of a particular commodity at a specified price on a fixed date in the future. These arrangements, or "futures contracts," are traded at commodity exchanges much as stocks are traded at stock exchanges. This chapter regulates camnodity trading and the commodities exchanges, largely by mans of the Comrmdity Futures Trading Commission (CFTC). The Commission's regulatory and enforcement efforts are designed to ensure that the futures trading process is fair and that it protects both the rights of customers and the financial integrity of the marketplace. The CFTC approves the rules under which an exchange proposes to operate and mnitors exchange enforcement of those rules. It reviews companies and individuals who handle customer funds or give trading advice. The Commission also protects the public by enforcing rules that require that customer funds be kept in bank accounts separate from accounts maintained by firms for their own use, and that such customer accounts be marked to present market value at the close of trading each day. U.S. Government Manual 464 (1982).* Present applicability. The practices and transactions regulated by this chapter are generally defined by reference to their effects on interstate camerce. See, for example, 7 U.S.C. �� 6a, 6b, 6c, 6h, 6m, 6o, 9, 13b. "Interstate canmerce" is defined to include cammrce within any Territory or possession or between any Territory or possession and any place outside of that Territory or possession. Id. S 2. Since Guam is a Territory or possession of the United States, by operation of section 502(a) (2) of the Covenant, cammrce within the Northern Mariana Islands or between the Northern Mariana Islands and any other place is interstate commerce subject to this chapter. Accordingly, *The Commission's jurisdiction extends as well to futures trading in nonagricultural ccmmdities, such as precious metals and foreign currencies. Id. - 231 - transactions in ccmmodities futures in the Northern Mariana Islands must meet the requiremnts of this chapter and are subject to regulation by the Ccnmdity Futures Trading Commission. Chapter 2. Cotton Standards. and Chapter 3. Grain Standards. The statutes. These two chapters authorize the Secretary of Agriculture to establish official quality and weight standards for cotton and grains and to administer a systEm of inspection and weighing to standardize c lass i f icat ions and insure quality. The Aqriculture Marketing Service within the Department of Agriculture is charged with these functions. Present ap2licability. only cotton produced in the continental United States is subject to the standards established by chapter 2. 7 U. S. C. � 6 2. The Northern Mariana Islands, of course, is not within the continental United States. In any case, no cotton is grown in the Northern Mariana Islands. "United States" and "State" are defined, for purposes of chapter 3, regulating grains, to include the territories and possessions of the United States. Id. � 75(d),(e). Guam is a territory or possession. Accordingl7y, by operation of section 502(a)(2) of the Covenant, the Northern Mariana Islands is a "State" for purposes of chapter 3, and grains shipped to or frcm the Northern Mariana Islands must comply with the requirements of the chapter. Chapter 4. Naval Stores. The statutes. This chapter authorizes the Secretary of Agriculture to set standards for spirits of turpentine and rosins and to classify and grade those "naval stores." Naval stores sold in ccmmrce must be designated by reference to those standards. Present applicability "Camnerce" is defined, for purposes of this chapter to include ccmmrce between States, Territories, or possessions and any place outside thereof as well as within Territories or possessions. 7 U.S.C. � 92(l). Guam is a Territory or possession, so the chapter is - 232 - applicable to Gum and the several States. Under section 502(a)(2) of the Covenant, laws applicable to Guam and the several States apply to the Northern Mariana Islands as they do to the several States. Accordingly, "ccmmerce" for purposes of this chapter includes camnerce between the Northern Mariana Islands and any place outside of the Northern Mariana Islands, but does not include camie-rce totally within the Northern Mariana Islands. Consequently, spirits of turpentine and rosins brought into the Northern Mariana Islands frcm other places and sold there must conply with the standards established by this chapter. Chapter 6. Insecticides and Envirorffnental Pesticide Control. The statutes. This chapter is the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), as amended. FIFRA requires the registration of pesticides (the generic term for insecticides, fungicides, and rodenticides) by the Envirormntal Protection Agency. 7 u.s.c. � 136a. Applicators of certain pesticides must be certified, and producers and sellers of pesticides must keep specified records. Id. 136b et s (Applicators may be certified by State goverrmeTts, Leq. pursuant to programs approved by the Envirorinental Protection Agency. Id. � 136b(a)(2).) If the prescribed procedures are not followed, @-esticides may be seized by the Envirormental Protection Agency. Id. � 136k. Present applicability. The requirements of the Act apply to pesticides in any State. See, for example, 7 U.S.C. �� 136a(a), 136b(a), 136e(a). "State" is defined, for purposes of this chapter, to include Guam and the Trust Territory of the Pacific Islands. Td. � 136(aa). See also Pacific Construction Co. v. Branch, 428 F. Supp. 727, 728 (D-. Guam 1976). Accordingly, by operation of section 502(a)(2) of the Covenant, the requirEments of the chapter are applicable to the Northern Mariana Islands. Cha2ter 7. Insect Pests Generally. The statutes. This chapter authorizes the Secretary of Agriculture, independently or in cooperation with State agencies and countries in the Western Hemisphere, to carry out measures to "detect, eradicate, suppress, control, or to prevent or retard the spread of plant pests." The Secretary is also authorized to provide for inspection of plants or plant products being exported frcm the United States and - 233 - to certify those plants and plant products as free fran plant pests. 7 U.S.C. N 147a(e). Present applicability. "State" is defined, for purposes of this chapter, to include the territories and possess ions of the United States. 7 U.S.C. � 147a(d)(3). Since Guam is a territory or possession, by operation of section 502(a)(2) of the Covenant, the Northern Mariana Islands is a "State" for purposes of this chapter. Accordingly, the Secretary of Agriculture, independently or in cooperation with Northern Mariana Islands authorities, may act against plant pests in the Northern Mariana Islands and may certify plants or plant products exported from the Northern Mariana Islands as free from plant pests. Discussion. One reason for enactment of Public Law 96-597, giving the Secretary of Agriculture discretion to apply agricultural programs to the Northern Mariana Islands that might otherwise not apply, was concern about melon fly infestation. See Staff of Subcommittee on Public Lands and National Parks of the House Committee on Interior and Insular Affairs, 98th Cong., lst Sess., 'Me Trust Territory of the Pacific Islands: An Analysis of Crucial Issues 60 (Catut. Print No. 3, 1983). Cha2ter 7A. Golden Nematode. The statutes. This chapter grants authority to the Secretary of Agriculture to act against the golden nematode, a pest that harms potatoes and tomatoes. If necessary, crops may be inspected and quarantined. 7 U.S.C. S 150b. Planting restrictions and destruction of crops may take place if authorized by State law. Id. � 150d. Present a22licability. Chapter 7A offers no guidance as to its applicability to the Northern Mariana islands. Quarantine regulations promulgated by the Animal and Plant Health Inspection Service of the United States DeparbTLent of Agriculture to enforce the chapter prohibit the movement of plants and other materials that may contain golden nematodes from any quarantined State into or through any other State. 7 C.F.R. �� 301.85(b), 301.85-1(i) (1985). "State" is defined to include "any State, territory, or district of the United States." Id. � 301.85-2(u). Guam is a territory of the United States. 48 97S.C. � 1421a. Accordingly, by operation of section 502(a)(2) of the Covenant, the Secretary of Agriculture's authority to control qolden nematodes extends to the Northern Mariana Islands. - 234 - Chapter 7B. Plant Pests. The statutes. This chapter prohibits the movement of plant pests into the United States or "interstate" within the United States. 7 U. S. C. � 150bb. The Secretary of Agriculture is authorized to issue regulations controlling the movement of "products and articles of any character" that may contain plant pests. Id. � 150ee. Department of Agriculture employees are authorized to ii7s@ct persons and vehicles travelling into the United States or interstate without first obtaining a search warrant and to seize products or articles containing plant pests. Id. � 150ff. Present a22licability. "United States" is defined for purposes of this chapter to include "Territories" and "possessions." 7 U. S. C. S 150aa(e). "Interstate" is def ined to include movement to and from "Territories" or "possessions. " Id. � 150aa(f). Guam is a Territory or possession. Accordir-67y, by operation of section 502(a)(2) of the Covenant, the prohibitions and restrictions of this chapter apply to plant pests and products or articles that may contain plant pests moving in or out of the Northern Mariana Islands. Cha2ter 8. Nursery Stock and Other Plants and Plant Products. The statutes. This chapter, known as the Nursery Stock Quarantine Act and also as the Plant Quarantine Act, forbids importation of nursery stock (plants, seeds, bulbs, cuttings, and similar items) into the United States except by permit. 7 U.S.C. q 154. Nursery stock imported or shipped interstate must meet certain labelling requirements. id. � 157. The Secretary of Agriculture may restrict importation iTto the United States of other plants and plant materials in order to keep out plant diseases and pests. Id. �� 156-159. Present applicability "United States" is not defined in chapter 8, but the chapter is clearly intended to apply to "Territories" of the United States. See 7 U.S.C. �� 156, 158, 159, 161, 163. Regulations of the Department of Agriculture for enforcement of this chapter and other laws define "United States" to include the Northern Mariana Islands. 7 C. F. R. 318.13-1(o) (1985). See also 7 C.F.R. 352.1(b)(31)(1985), defining "United states" to include the several States and Guam. Under these administrative definitions, the chapter--directly and by virtue of section 502(a)(2) of the Cove nant--appl i es in the Northern Mariana Islands. 235 - The Animal and Plant Health Inspection Service of the Department of 'Agriculture has implemented this chapter, the Federal Plant Pest Act, and other legislation in combined regulations. See 7 C.F.R. parts 300 et @. (1985). Of particular interest among these regulations are sections, 318.82 et governing the movement of plants and plant materials from Tuam to other parts of the United States. (Note, however, that under section 502(a)(2) of the Covenant, the Northern Mariana Islands is to be treated not like Guam, but like the States of the Union.) Section 319.37-2 of title 7, C.F.R. (1985), promulgated under the authority of the sane legislation, prohibits importation into the United States of a wide variety of plants and plant products (subject to certain exceptions). "United States" is defined, for purposes of section 319.37-2, specifically to include the Northern Mariana Islands. 7 C.F.R. � 319.37-1 (1985). Among the plant articles prohibited are all parts except seeds from all species of the genus Areca, which includes the betel nut palm. Betel nut is cam-only imported to the Northern Mariana Islands from the Yap and Palau Islands. Since, however, only the seed of the betel nut is imported, the prohibition does not affect the importation of betel nut into the Northern Mariana Islands. Coconuts for planting purposes may only be imported into the United States (including the Northern Mariana Islands) after issuance of a federal permit. Id. � 319.37-3(a)(4). Chapter 8A. Rubber. The statutes. This chapter, originally enacted in 1942 as a wartime measure, authorizes the Secretary of Agriculture to investigate the possibility of producing rubber from guayule and other plants in order to reduce national dependence on latex rubber. 7 U.S.C. 171, 178. Present applicability The focus of this chapter is on development of alternative sources of rubber in North America or the Western Hemisphere. 7 U.S.C. S� 171(2), 171(3), 171(8), 178a(d). Grants may be made to States to further the purposes of the chapter. Id. SS 178g(a), 178h(a). "State" is defined to include only the ff-fty States, the District of Columbia, and Puerto Rico. Id. S 17 8a (a) . Thus, the government of the Northern Mariana Islands is not eligible to receive grants under the chapter (unless the Secretary of Agriculture exercises his or her authority, under 601(c) of Public Law 96-597, 94 Stat. 3477 (1980), to make those grants available to the Northern Mariana Islands). Nothing in the chapter, however, prohibits federal 236 - sponsorship of other activities furthering the purposes of the chapter frcrn being undertaken within the Northern Mariana Islands. Chapter 9. Packers and Stockyards. The statutes. This chapter regulates the business practices of packers, stockyard owners and dealers, and poultry handlers and dealers to protect the public from unfair, discriminatory, or deceptive practices. Present applicability. Packers, stockyards, and poultry handlers and dealers moving agricultural products "in ccnwerce" are subject to the provisions of this chapter. "Ccmmerce" is defined to include cam-L-rce between States, Territories, or possessions and any place outside thereof as well as within Territories or possessions. 7 U.S.C. �� 182(6), 183. Gum. is a Territory or possession, so the chapter is applicable to Guam and the several States. Under section 502(a)(2) of the Covenant, laws applicable to Guam and the several States apply to the Northern Mariana Islands as they do to the several States. Accordi ng ly, "cmrerce" for purposes of this chapter includes ccmmerce between the Northern Mariana Islands and any place outside of the Northern Mariana Islands, but does not include cmwerce totally within the Northern Mariana Islands. Consequently, packers, stockyards, and poultry handlers and dealers moving agricultural products in or out of the Northern Mariana Islands are subject to this chapter. Packers, stockyards, and poultry handlers and dealers in the Northern Mariana Islands whose agricultural products are produced or raised and consumed solely within the Northern Mariana Islands are not subject to the chapter. Chapter 10. Warehouses. The statutes. This chapter authorizes the licensing and regulation of bonded warehouses for the storage of agricultural products and requires inspection and grading of products stored in bonded warehouses in accordance with quality and value standards established by the Secretary of Agriculture. The chapter does not require that agricultural products be stored only in bonded warehouses. on delivery of goods to a bonded warehouse, the owner of the goods is given a receipt by the warehouse operator. 7 U.S.C. � 259. The warehouse receipt can then be transferred to another person, 4ho by the transfer takes title to or a security interest in the products in the warehouse. 78 Am. Jur. 2d, Warehouses q 53 (1975). Itie - 237 - original owner of the goods receives cash or credit in return for the transfer of the receipt. The warehouse receipt thus provides the agricultural producer a means of quickly turning his or her products into purchasi nq power. Receipts from a licensed, bonded warehouse are more acceptable than receipts frcm warehouses that are not licensed and bonded. Present applicability. Warehouses eligible for licensinq under this chapter include any warehouse "in which any agricultural product is or may be stored for interstate or foreign ccmTrerce, or, if located within any place under the exclusive jurisdiction of -the United States, in which any aqricultural product is or may be stored." 7 U.S.C. F. 242. Guam is within the exclusive jurisdiction of the United States. Accordingly, warehouses in Cum as well as in the several States may be licensed pursuant to this chapter. Under section 502(a)(2) of the Covenant, warehouses in the Northern Mariana Islands may also be licensed, but only those warehouses that if located in one of the States could be licensed. Consequently, only those warehouses in the Northern Mariana Islands in which agricultural products are or may be stored for interstate or foreign camTerce are eligible for licensing as bonded warehouses. Chapter 11. Honeybees. The statutes. This chapter prohibits (with some exceptions) the importation into the United States of honeybees and honeybee semen, in order to protect the United States honeybee population from diseases and parasites and to protect the genetic integrity of that population. See 7 U.S.C. 5 281. Present applicability. The territorial extent of the United States for purposes of this law is not defined. Deparbrent of Aqriculture regulations implementing the law, however, define "United States" to include the several States and Guam. 7 C.F.R. � 322.6 (1985). Under this administrative definition, the prohibitions against honeybee imports, by virtue of section 502(a) (2) of the Covenant, control imports into the Northern Mariana Islands as well. Chapter 12. Associations of Agricultural Products Producers. The statutes. This chapter allows persons engaqed in the production of agricultural products to form cooperative associations for - 238 - processing, handlinq, and marketing agricultural goods without violating the antitrust laws. The Secretary of Aqriculture is to ensure that monopolization, restraint of trade, or price fixinq do not occur. See 7 U.S.C. �� 291, 292. Present applicability. Although this chapter does not specify its applicability to the Northern Mariana Islands, the chapter is applicable there. The antitrust laws apply wherever the powers of Congress reach. United States v. Standard Oil Co., 404 U.S. 558 (1972). Congress has the power to make federal laws applicable to the Northern Mariana Islands, so the antitrust laws are applicable to the Northern Mariana Islands. This chapter, since it grants exemptions from the antitrust laws, must be construed to extend wherever those laws extend. 2A Sutherland, Statutes and Statut2a Construction � 51.02 (4th ed. Sands 1973). cordEngly, farmers' cooperatives in the Northern Mariana Islands are entitled to the qualified immunity frcm the antitrust laws granted by this chapter. Chapter 13. Agricultural and Mechanical Colleges. and Chapter 14. Agricultural and Experiment Stations. and Chapter 64. Agricultural Research, Extension, and Teaching. Note. Chapters 13, 14, and 64 of title 7 are discussed in the 1, calatission's recarmendation, Land grant colleges, in the Reccnrendations section of this report. TITLE 8. ALIENS AND NATIONALITY. Note. The provisions of chapters 1 through 11 of this title have been repealedr cmitted as obsolete, or transferred to other parts of the Code. In addition to the discussion of title 8, below, see the Camission's recammndations, Residency requirement for naturalization of citizens of the Northern Mariana Islands who become nationals of the United States on termination of the trusteeship and Permanent resident status in the United States for aliens who are immediate relatives of citizens -of the Northern Mariana Islands. Also related to the discussion below is the Ccuuni ss ioFrs recanmendation, Creation of a s22cial pass, port for citizens of the Northern Mariana Is! nds. All three recanmendations are in the Recommendations section Of this report. - 239 - Late in the Catatission's life, two questions related to title 8 were brought to the Ccmmission's attention. The Catmission did not have sufficient time or resources to examine these auestions carefully. Accordingly, no recam-nendat ions are made with respect to those questions in this report. The first question is whether legislation should be enacted addressing the status of persons who are entitled to permanent residency in the Northern Mariana Islands but who will not, on termination of the trusteeship, be entitled (like other residents of the Northern Mariana Islands) to United States citizenship or nationality. The number of such persons is not certain, but may be as high as two or three hundred. The second question is whether legislation should be enacted to preserve the control granted the Northern Mariana Islands over its own immigration law by section 503(a) of the Covenant. Such legislation is necessary, it has been argued, to prevent United States discrimination, by quotas or otherwise, against products of the Northern Mariana Islands because of the participation of foreign workers in the manufacture of those products. The statutes. The immigration laws. The power to control the entry of aliens into its territory is fundamental to a nation's sovereignty. The immiqration laws of the United States specify the categories of aliens that may enter the United States, the procedures for determining which aliens within each category may enter, the documents each alien must obtain prior to entry, and the length of time each alien will be permitted to remain within the United States. The immigration laws also contain provisions for the exclusion or deportation of aliens not meeting requirements for entering or remaininq in the United States. Aliens entering the United States are classified, first, as immigrants or nonimmiqrants. %nimmigrants are aliens who enter the United States only temporarily, without any intention of permanently leaving their native country. Tourists, diplomats, and students are amonq those admitted into the United States as nonimmigrants. 8 U.S.C. 6 1101(15). Immiqrants, by contrast, are aliens who intend to reside permanently in the United States. Under present law, no more than 270,000 immigrants from all parts of the world may enter the United States each year. 8 U.S.C. � 1151(a). No more than 20,000 immigrants frcm any particular country (and no more than 600 frcm a particular colony or dependency of a foreign nation) may be admitted in any given year. Id. � 1152. Not subject to these numerical limitations are immigrants who are inm-ediate relatives of a United States citizen, and certain - 240 - refugees and special iTnmiqrants. Id. � 1151. "Immediate relatives" are def ined to. include only the 0711dren and spouse of the citizen and, if the citizen is at least twenty-one years of aae, his or her parents. Id. � 1151(b). The immigration laws allow other immigrant aliens to enter the United States, subject to the numerical quotas, based on a hierarchy of preferences. The preferences are based on two principal policy qoals: the reunification of families and the attraction of persons with needed skills. Id. � 1153. Only when all persons meeting the requirements for a hiTher preference have been granted visas allowing entry into the United States are 'persons meeting the requirements of a lower preference given visas, if the applicable numerical limits have not been reached. The nationality laws. The Fourteenth Amendment to the United States Constitution establishes that all persons born or naturalized in the United States, and subject to the jurisdiction of the United States, are citizens of the United States.* The nationality laws give substance to the constitutional provision by specifying which persons are born in the United States and subject to its jurisdiction. Those laws now provide, in general, that persons born in the fifty States of the Union, the District of Columbia, Puerto Rico, the Virgin Islands, and Guam are born in the United States and are thus citizens of the United States. 8 U.S.C. �� 1101(38), 1401, 1402, 1404, 1406-1407. Persons born in American Samoa are generally nationals, but not citizens, of the United States. ** Id. �� 1101(a) (29), 1408. Persons born in the Trust Territory of The Pacific Islands are generally neither citizens nor nationals of the United States. The nationality laws also set forth the procedure for naturalization of an alien as a citizen of the United States. Fundamental prerequisites to naturalization for most aliens are legal admission into the United States, residencv of at least five (or, in the case of the spouse of a United States citizen, three) years in the United States, and an understanding of the English lanquage and *Not "subject to the jurisdiction of the United States" are the children of foreicn diplomats and the children--should the case ever arise--of alien enemies in hostile occupation of some part of the United States. "The distinction between "citizens" and "nationals" of the United States is not well-,@efined. Mationals--like citizens--owp alleoiance to the United States and are entitled to its protection, but do not (-Tualifv for some riqhts and privileqes aranted hv statute onlY to citizens. - 241 - of the history and goverrment of the United States. 8 U.S.C. SS 1423, 1427, 1430. Present applicability. The Covenant addresses the applicability of the immigration and naturalization laws of the United States to the Northern Mariana Islands in sc .me detail.* Citizens of the Northern Mariana Islands, on termination of the trusteeship, will beccime citizens of the United States." Covenant P4 S 301, 1003(c). with certain specified exceptions, however, the immigration and naturalization laws of the United States do not apply to the Northern Mariana Islands. Id. �� 503(a), 1003(a). Subject to the exceptions, the Northern Marigna Islands for all practical purposes may be considered as outside the United States for purposes of the immigration and naturalization laws. The exceptions to the general rule of inapplicability are set out in section 506 of the Covenant. That section, however, does not becane effective until termination of the trusteeship. Covenant S 1003(c). Until termination of the trusteeship, the federal immigration and naturalization laws are entirely inapplicable to the Northern Mariana Islands. On termination of the trusteeship, the Northern Mariana Islands will be subject to certain provisions of the Immigration and Nationality Act. Under section 303 of the Covenant, persons born in the Northern Mariana Islands (and subject to the jurisdiction of the United States) after termination of the trusteeship will be citizens of the United States at birth. Section 506(b) of the Covenant makes the Northern Mariana Islands part of the United States for purposes *The Covenant refers to the "immigration and naturalization laws" and to the "Immigration and Nationality Act." Covenant �� 503(a), 506(a). The Immigration and Nationality Act is administered largely by the Immigration and Naturalization Service. Although grovisions for naturalization are but one aspect of the nationality laws, the "immigration and naturalization laws" and the immigration and Nationality Act, as amended from time to time, are identical. "Within the following six months, however, any such person may elect to beccup, a national, rather than a citizen, of the United States by making a prescribed declaration under oath. Covenant S 302. - 242 - of provisions in the Immigration and Nationality Act that specify which persons born outside the United States are United States citizens. finder those provisions, a child born, say, in Japan to parents, one of wham is a Japanese citizen and the other of whom is a United States citizen, will be a citizen of the United States at birth if the United States citizen parent has spent at least ten years in the United States prior to the child's birth. If the Northern Mariana Islands were not considered a part of the United States for purposes of these provisions, the child would not be a citizen of the United States if the United States citizen parent had resided in the Northern Mariana Islands rather than in sane other part of the United States for the requisite period of time. Section 506(c) of the Covenant allows immediate relatives of United States citizens* lawfully admitted to permanent residence. in the Northern Mar-iana Islands at the termination of the trusteeship to be presumed admitted as lawful permanent residents of the United States without the necessity of ccmplying with the usual procedures for admission under the Immigration and Nationality Act. The imniediate relative may subsequently seek naturalization as a United States citizen pursuant to the provisions of that Act (which otherwise, as noted above, is generally not applicable to the Northern Mariana Islands). Immediate relatives of United States citizens residing in the Northern Mariana Islands who do not become residents of the Northern Mariana Islands before termination of the trusteeship may beccrne residents of the Northern Mariana Islands under the laws of the Northern Mariana Islands. If, however, an immediate relative desires ultimately to beccime a citizen of the United States, he or she must make a formal claim of immediate relative status under federal law** and follow the procedures established by the federal naturalization laws. Covenant 506(c). See also Marianas Political Status *As noted earlier, immediate relatives are defined to include only the children and spouse of the United States citizen and, if the citizen is at least twenty-one years of age, his or her parents. 8 U.S.C. S 1151(b). **In fact, the alien's United States citizen relative files the petition for classification of the alien as an immediate relative. 8 U.S.C. S 1154(a). - 243 - Commission, Section by Section Analysis of the Covenant 63-65 (1975).* Section 506(c) also assures that the time immediate relatives reside in the Northern Mariana Islands after termination of the trusteeship will count toward satisfaction of the - residency requirements for naturalization by defining the Northern Mariana Islands as a State for the purposes of those requirements (but only for immediate relatives covered by section 506(c)). Finally, section 506(c) allows courts of the Northern Mariana Islands and the District Court for the Northern Mariana Islands to naturalize immediate relatives as United States citizens when all requirements for naturalization have been satisfied. Section 506(d) of the Covenant provides that the loss of nationality provisions of the DTnigration and Nationality Act will apply to all persons who become United States citizens or nationals by operation of the Covenant. These laws generally apply to all United States citizens and nationals, whether native-born or naturalized. See 8 U.S.C. �� 1481 et seq. United States nationality (and citizenship) may be lost by a variety of means, for example, by voting in a foreign election, by serving in the armed forces of a foreign state, or by being naturalized as a citizen of another nation. Id. Discussion. Entry of persons into the Northern Mariana Islands--citizens of the United States. Section 501(a) of the Covenant makes applicable to the Northern Mariana Islands section I of the Fourteenth Amendment to the Constitution of the United States. Among other things, section I prohibits any State--and by virtue of section 501(a) of the Covenant, the Northern Mariana Islands--frcm making or enforcing "any law which shall abridge the privileges or immunities of citizens of the United States." Among the privileges and immunities of citizens of the United States is the right to travel. Hicklin v. Orbeck, 437 U.S. 518, 524-25 (1978); Ward v. Maryland 12 Wall. (79 U.S.) 418 (1871). Thus, the Northern Mariana Islands may not (and does not) control the entry of United States citizens into the Northern Mariana Islands. *The Analysis is reprinted in Hearings on the Covenant to Establish the Commonwealth of the Northern Mariana Islands before the Subcommittee on Territorial and Insular Affa!F-s of the House Committee on Interior and Insular AffaiEs, 94th Cong., lst Ses;_. (1975), at 626, and in Hearings on the Northern Mariana Islands before the Senate Committee on Interior and Insular Affairs, 94th Gong., lst Sess. (1975), at 356. - 244 - Admission of persons into the Northern Mariana Is lands- immigrant aliens. Twenty thousand immigrants per year may enter the United States from any single nation. The Northern Mariana Islands was excluded from the ambit of the federal immigration laws by the Covenant because of fear the islands' small population would be overwhelmed by groups of aliens from neighboring countries entering the United States under United States numearical quotas and settling in the Northern Mariana Islands. [A] number of small Asian developing countries [have] close historical ties to the United States and . . . varying levels of political instability--e.g., South Korea, the Philippines, Taiwan and Vietnam. most already have more or less well-established patterns of out-migration to the Un i ted States, with the Philippines and South Korea routinely oversubscribing available visas. Threats of international hostilities, civil war or internal convulsions face many of these countries more or less vividly. If such developments were to occur, strong pressures would arise for admission of large numbers of refugees, as in the recent cases of Vietnam, Cambodia, and Laos. English is a relatively popular second language in most of these countries. Teitelbaum, Right versus Right: Immi!2ration and Refugee Policy in the United Statesf 59 Foreign Affairs 21, 28 (1980). Were the Northern Mariana Islands subject to federal immigration laws, a substantial portion of the immigrants from these nations could be expected to settle' each year in the Northern Mariana Islands because of its pr ox im i ty to their home country (and the consequent savings in initial travel costs as well as costs for later visits) and, in some cases, because of its similarity in climate to their home country. In addition, the ability of the federal Immigrat ion and Naturalization Service to prevent the entry of illegal aliens has been much criticized in recent years. See, for example, Immi2ration Service Has Mammth Task, Minimal Resources, Wall Street Journal, May 9, 1985, at 1; Select Commission on immigration and Refugee Policy, U.S. Immigration PoliSy-and the National Interest 46 (1981) (Select Commission _ReLDort); Teitelbaum, Ri!3ht -versus Right: Dii@igration_ and Refygee__ Policy in the United States, 59 Foreign Affairs 21, 29-31 (1980); U.S. Comptroller General, Effectively Enforcing Immigration Laws (Report GGD-81-4; 1980). The combination of legal and illegal immigration could soon render the indigenous Northern Mariana Islands population a minority in its native islands. The experience of Hawaii is instructive in this regard. Statistics show the native Hawaiian population is significantly outnumbered in its own homeland: as of 1980 only 19 percent of the Hawaiian population is actually native Hawaiian (and this includes persons who are only part Hawaiian). on every major social - 245 - i nd icatoreducat ion, income, employment, and health--the native population is behind other groups residing in the State. Native Hawaiians Study Ccmmission, Report of the Culture, Needs_ and Concerns of Native Hawaiians 11-13, 38-42, 45-60 (1983). By contrast, American Samoans remain in control of their island group, largely because they have retained control over immigration.* The recent report of the Select Ccmmission on Immigration and Refugee Policy generally endorses special treatment for territories and, specifically, for the Northern Mariana Islands in allowing local control of immigration. Select Commission Report 293, 295, 298. A special problem is presented by immigrants lawfully admitted into the United States as peennanent residents. The States of the United States are prohibited by the Constitution from erecting barriers that in one way or another restrict the right of aliens to travel. nus, States not only are prohibited frcro. denying aliens entry across their borders, but cannot deny those aliens the right to gainful employment. Takahashi v. Fish and Came Commission, 334 U.S. 410 (1948); Traux v. Raich, 239 U.S. 33 (1915); Yick Wo v. Hopkins, 118 U.S. 3071886). The constitutional restrictions apply to the States, however, not to the Federal Government. The F ederal Goverruneent has broad powers over immigration and naturalization, and may restrict the conduct of aliens in ways the States may not. See Matbews v. Diaz, 426 U.S. 67, 73-80 (1976); DeCanas v. Rica, 424 U.S. 351 (1976). In this context, it is important to note that the power of the Northern Mariana Islands to control its own immigration is a power expressly delegated to the Northern Mariana Islands by the Federal (-bvernment (by approvinq the Covenant in a public law).** The Northern Mariana Islands' control over its own immigration, *See title 41 of the American Sama Code Annotated (1981). The American Samoa Code is promulgated under authority delegated by Congress to the President, 48 U.S.C. � 1661(c); by the President to the Secretary of the Interior, Executive Order 10264 (June 29, 1951); and by the Secretary to the Government of American Samoa, Department of the Interior Order 3009 (1977). "The immigration boundary between the Nbrthern Mariana Islands and the reminder of the United States is thus sanctioned by Congress. It is therefore distinguishable from the "intennediate border" the Commonwealth of Puerto Pico sought to erect between itself and the United States without the approval of Congress. The United States Supreme Court held that intermediate border an unconstitutional assumption of sovereign authority by Puerto Rico. Torres v. Puerto Rico, 442 U.S. 465 (1979). See also Barusch v. Calvo, 685 F.2d 1199 (9th Cir. 1982); United 'States v. Chabot, 531 F. Supp. 1063 (D.V.I. 1982). - 246 - approved by Congress, is also supported by the cleneral and plenary congressional authority over the territories, derived from Article IV, Section 3, Clause 2, of the Constitution. 2 B. Schwartz, Commentary on the Constitution of the United States 290-91 (1963). Congress may exercise that authority to treat the territories differently from the States of the Union so long as there is a rational basis for its actions. Harris v. Rosario, 446 U.S. 651 (1980) (per curiam). A principal objective in allowing the Northern Mariana Islands its own immigration laws is to prevent undue concentration of new immigrants to the United States in the Northern Mariana Islands. To the extent i:mmiqrants can circumvent Northern Mariana Islands immigration laws by first entering the United States and then proceeding to the Northern Mariana Islands, that objective will be thwarted and the Northern Mariana Islands will he in much the same position as if United States immigration laws applied to the Northern Mariana Islands. Vnere is, consequently, a rational basis for the congressional decision to allow the Northern Mariana Islands to control the entry of aliens into the Northern Mariana Islands, whether or not those aliens have previously been lawfully admitted into the United States. A special situation is presented by aliens lawfully admitted into the United States as immediate relatives of United States citizens. T\b recommendation is here made for enactment of federal legislation to allow this category of aliens freely to enter and to reside and be employed in the Northern Mariana Islands. Should the irnmiqration laws of the Northern Mariana Islands not accord such a status to the immediate relatives of United States citizens, federal legislation might become appropriate. Entry of persons .nto the Northern Mariana Islands--noniroicirant aliens. The principal categories of nonimmigrant aliens admitted into the Northern Mariana Islands at the present time are tourists and skilled workers. Tourism is the ma3or industry of the Northern Mariana Islands. Tourism is Promoted if visa and other entry requirements for visitors are as convenient as possible. Convenient entry for tourists is more likely if admission is locally controlled. Business firms in the Northern Mariana Islands rely upon temporary alien workers to perform services and labor if unemployed persons capable of performing that service or labor are not available locally. These workers are particularly important in the construction industry. The importation and utilization of these workers is controlled by the local law of the Northern Mariana Islands. Were the federal Immigration and Nationality Act made applicable to the Northern Mariana Islands, the importation and - 247 - utilization of these workers would be a part of the federal H-2 program. * The construction industry on Guam, where the Immigration and Nationality Act does apply, has canplained that imposition of "adverse effect wage rates" by the United States Department of Labor, raising the wages that must be paid to H-2 workers with the intent of encouraging Employment of United States residents, has in fact stifled construction on Guam by raising its cost without increasing employment of United States residents. The Northern Mariana Islands thus has a strong interest in maintaining local control over the entry of nonimmigrant aliens into the Northern Mariana Islands. Entry of persons into the United States-citizens of the Northern Mariana Islands. On establishnent of constitutional govermneent in the Northern Mariana Islands on January 9, 1978, the United States committed itself to allow citizens of the Northern Mariana Islands freely to enter, reside, and work in the United States." On termination of the trusteeship, when citizens of the Northern Mariana Islands become citizens (or nationals) of the United States, they will have the constitutional right to enter, reside, and work in the United States. For the period prior to termination of the trusteeship, this Ccmmission has recamnended enactment of legislation authorizing the issuance of special United States passports to citizens of the Northern Mariana Islands. Those passports would recite the r-rivilege of citizens of the Northern Mariana Islands to enter and to reside and be employed in the United States. See the recamne-ndation, Creation ofa special_United States passport for citizens of the Northern Mariana Islands, in the Reccmrrendations section of this report. Entry of -persons into the United States-aliens. Aliens travelling to the United States from the Northern Mariana Islands are subject to the same procedures and controls under the immigration and nationality laws of the United States as are aliens entering the United States frcm other parts of the world. An alien permitted by the government of the Northern Mariana Islands to enter or to reside in the Northern Mariana Islands has obtained no right to enter or *So-called because authorized under section 101(a)(5)(H)(ii) of the Immigration and Nationality Act, 8 U.S.C. � 1101(a)(5)(H)(ii). **See cable frcm F. Potter, U.S. Immigration and Naturalization Service, Washington, D.C., to the Service's field offices (January 4, 1978); Smith v. _PangelLnan, 651 F.2d 1320, 1323, 1324-25 (9th Cir. 1981). 0 - 248 - reside in other parts of the United States. The alien remains outside the boundaries protected by the federal immigration and nationality 1aws. In this report the Commission recommends that an alien who is an immediate relative of a citizen of the Northern Mariana Islands be a1lowed to enter and to reside and he employed in the United States on the petition of the Northern Mariana Islands relative. See the recommendation, Permanent resident status in the United States for aliens who are immediate relatives of citizens of the Northern Mariana Islands, in the Recommendations section of this report. Naturalization as a citizen of the United States--aliens. As noted above, the naturalization laws of the United States in general do not apply to the Northern Mariana Islands, and aliens lawfully admitted to reside permanently in the Northern Mariana Islands have no claim either to admission into the United States or to satisfaction of the residency requirements for United States citizenship. Effective on termination of the trusteeship, a few provisions of the naturalization laws, will. become applicable to the Northern Mariana Islands, again as discussed above. Only one minor ambiguity appears in connection with the applicability of the naturalization laws to aliens in the Northern Mariana Islands. On termination of the trusteeship, -aliens who are immediate relatives of citizens of the United States (including immediate relatives of citizens of the Northern Mariana Islands who at that time become citizens of the United States) and who are lawful permanent residents of the Northern Mariana Tslands are presumed admitted as lawful permanent residents of the United States. Covenant S 506(c). Not entirely clear, however, is whether their residency, for purposes of meeting the durational residency requirements for naturalization, is deemed to have commenced on the date of termination of the trusteeship or on the earlier date of their admission to permanent residence in the Northern Mariana Islands.* Section 506(a) of the Covenant provides that the Northern Mariana Islands will be deemed a part of the United States for purooses of section 506(c) only on the effective date. of section 506. That effective date is on the termination of the, trusteeship. Covenant S 1003(c). Accordingly, for purposes of meeting the durational. requirements, residency must. be deemed to start on termination of the trusteeship rather than on any earlier date when the alien became a lawful permanent resident of Nortbern Mariana Islands. No legislation is here proposed to change the date on which *Absent the effect of any provisions of the Covenant, residence in the Trust Territory of the Pacific Islands is not considered residence in the United States for purposes of satisfying the durational requirements for naturalization. In re Reyes, 140 F. Supp. 130 (D. Hawaii 1956). - 249 - residency for naturalization purposes commences for this category of aliens. An alien lawfully admitted into the United States for permanent residence who is not an immediate relative of a United States citizen may not count time spent in the Northern Mariana islands--assu-ning the alien has been admitted there by the governTwnt of the Northern Mariana Islands--toward satisfaction of the durational residency requirement for naturalization as United States citizen. The Northern Mariana Islands is considered part of the United States for purposes of the durational residency requirement only for those aliens who are imTediate relatives of United States citizens. Covenant S 506. Article I, Section 8, Clause 4, of the United States Constitution requires that the naturalization laws of the United States be "uniform," that is, not varying from place to place within the United States. Only one class of aliens residing in the Northern Mariana Islands--those who are immediate relatives of United States citizens--can seek United States citizenship through naturalization. Various classes of aliens residing in the United States, not only immediate relatives of United States citizens, may seek naturalization. An argument can be made that the constitutional requirement of uniformity is thus violated. when each State of the United States, under the Articles of Confederation, had its own immigration and naturalization laws, a single State could force all other States to recognize as a citizen any person who met that State's standards for citizenship, even if the person could not meet standards set by other States. The uniform rule of naturalization required by the Constitution ensured that only the Federal Goverment would have the power to naturalize persons as citizens of the United States. See 3 J. Story, Commentaries on the Constitution of the United States �� 1098-99 (1833). The framework set forth in the Covenant does not alter the Federal Goverment's control over naturalization. The goverment of the Northern Mariana Islands is not permitted to establish its own requirements for naturalization of persons as United States citizens. Consequently, the constitutional requirement of uniformity is not violated. Further, uniformity requirements in the Constitution apply only to States of the Union and not to areas subject to the territorial powers of Congress under Article IV, Section 3, Clause 2, of the Constitution. Downes v. Bidwell, 182 U.S. 244 (1901). See 250 - Senate Report 94-433, The Covenant to Establish a Ccumonwealth of the Northern Mariana Islands 79 (1975).* Naturalization as a citizen of the United States--nationals of the United States. Section 302 of the Covenant allows citizens of the Northern Mariana Islands to elect to become nationals rather than citizens of the United States within six months after termination of the trusteeship. Some of those who decide then to become nationals may subsequently have second thoughts. A national may be naturalized as a citizen of the United States, but to do so the national must first becane a resident of one of the fifty States, the District of Columbia, Puerto Rico, Guam, the Virgin Islands, or American Samoa. 8 U.S.C. S� 1101(29), (38); 1436. 1he national may not remain a resident of the Northern Mariana Islands if he or she decides to seek naturalization. Legislation is proposed in this report to allow persons electing United States nationality rather than United States citizenship pursuant to section 302 of the Covenant subsequently to seek naturalization without the necessity of leaving the Northern Mariana Islands. See the recam-endation, Residency reMirement for naturalization of citizens of the Northern Mariana Islands who 'became nationals of the United States, in the Reccmmendations section of this report. *Subsection (b) of section 501 of the Covenant provides that "the applicability of certain provisions of the Constitution of the United States to the Northern Mariana Islands will be without prejudice to the validity of and the power of the Congress of the United States to consent to [section 506 of the Covenant] . . . .11 The report of the Ccmmittee on Interior and Insular Affairs of the United States Senate on the Covenant concluded that section 506(b) did not violate the constitutional requirement of uniformity and noted that subsection (b) was inserted "only out of a super-abundance of cau t ion. " Id. a t 7 4. Section 506 of the Covenant was regarded by its negotiators as an integral part "of the mutual compromises and concessions without which the accession of the Northern Mariana Islands to the United States would not have been possible." Report of the Joint Drafting Ccmmittee on the Negotiating History of the Covenant, at C-3 (1975), reprinted at Hearings before the Subccmmittee on Territorial and Insular Affairs of the House Cammittee on Interior and Insular Affairs on H.J. Res. 549 et al. to Approve the "Covenant to Establish a Ccmmonwealth of the Northern Mariana Islands," 94th Cong., Ist Sess. 374, 376 (1975). 251 Acquisition of United States citizenshij2 Py 122rsons born in the Northern Mariana Islands of alien parents. In the United States proper, United States citizenship is most often acquired by the fact of birth in the United States, usually regardless of whether a person's parents are United States citizens or aliens. See U.S. Const., Amend. XIV, � 1; 8 U.S.C. S 1401(a)(1). Section 303 of the Covenant provides that all persons born in the Northern Mariana Islands after termination of the trusteeship (and who are subject to the jurisdiction of the United States) will be citizens of the United States at birth. Thus, persons born to alien parents in the Northern Mariana Islands may be citizens of the United States at birth, just as may persons born to alien parents in the United States. As United States citizens, those persons are, of course, free to travel, reside, or work anywhere in the United States. In controlling the admission of aliens across its own borders, the Northern Mariana Islands thus has an indirect and long-term effect on admissions into the United States. That effect, however, is likely to be of little practical consequence. Present United States law makes no attempt to prevent alien mothers frcm entering the United States legally and giving birth on United States soil. Further, the constitutional and statutory provisions conferring citizenship on persons born on United States soil make no exception for persons born to alien mothers who are in the United States in violation of the immigration laws. The number of persons born to alien mothers in the Northern Mariana Islands will be negligible by ccmparison to the number born to alien mothers in the United States. Moreover, alien parents of a person born in the Northern Mariana Islands acquire no immediate rights to enter the United States by reason of their child's United States citizenship. only twenty-one years late@r may the child petition for his or her alien parents to be granted the right to permanently reside in the United States as the immediate relatives of a United States citizen. Covenant S 506(c); 8 U.S.C. SS 1151(b), 1154(a). Chapter 13. ImmiZationand Naturalization Service. The statutes. This chapter, sections 1551 et t2.cL., of title 8, establishes the Immigration and Naturalization gervice within the United States Department of Justice and collects a few miscellaneous statutes pertaining to the operation and administration of the Service. Present 2Mlicability Since this chapter is concerned solely with the internal operation of the Immigration and Naturalization Service, the chapter is applicable to the Northern Mariana islands only to the extent that the actions of the Service affect the Northern Mariana Islands. - 252 - TITLE 9. ARBITRATION. Cha2ter 1. General Provisions- and Chapter 2. Convention on the Recognition and Enforcement of Forei2n Arbitral Awards. The statutes. Arbitration is the settlement of a dispute between two parties by a person or persons chosen by those parties (or chosen by a method specified by the parties). Arbitration thus serves as a substitute for litigation. Society benefits because the costs of arbitration are borne by the parties to the dispute and *congested court dockets are relieved. The parties to arbitration benefit by avoiding the costs and delays of courtroan proceedings and by having an influence on how their disputes are to be settled. The federal arbitration laws make binding a written agreement to submit disputes to arbitration if that agreement is part of a maritime transaction or a transaction involving commerce (except for certain specified types of employment contracts). 9 U. S. C. � � 1, 2. Federal courts are required to defer to arbitration proceedings, id. � 3; to compel arbitration if a party fails to submit to arbitration as agreed, id. � 4; to enforce certain arbitral awards, id. �� 9, 13; and to set aside or modify arbitral awards not prcper7l-y made, id. 10, 11. Title 9 also provides for the recognition and enforcement of foreign arbitral awards in federal courts in accordance with the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Id. �� 201-208. Present a22licability Title 9 applies to arbitration clauses "in any maritime transact ion or a contract evidencing a transaction involving commrce. " 9 U. S. C. � 2. "Corm-nerce" is broadly def ined to include camverce "in any Territory of the United States" or between any Territory and any State or foreign nation, the District of ColLu-nbia, or any other Territory. "Territory," as used in title 9, has been held to include Guam, so that covered transactions, in Guam are subject to the federal arbitration laws. Kanazawa Ltd. v. Sound, Unlimited 440 F.2d 1239 (9th Cir. 1971). See also Econo-Car International, Inc. v. Antilles Car Rentals, Inc., 499 F.2d 1391 (3d Cir. 1974), holding title 9 applicable in the Virgin Islands. By operation of section 502(a)(2) of the Covenant, title 9 is now applicable in the Northern Mariana Islands. - 253 - In adherinq to the Convention on the Re-cognition and Enforcement of Foreignn Arbital Awards, the United States declared that the Convention would apply " to all of the territories for the international relations of which the United States . is responsible." 21 U.S.T. 2517; T.I.A.S, 6997 (1958). The United States is responsible for the international relations of the Nbrthern Mariana Islandss. Trusteeship Agreement, Arts. 3, 8(4), 10, 11(2), 14; Covenant � 104, 1003(c). Thus, awards made pursuant to aqreements to arbitrate in the Northhern Mariana Islands are enforceahle in the courts of nations adhering to the Convention and arbitral awards made in those foreign nations are enforceable in the Northern Mariana Islands. Discussion. The federal arbitration laws strongly favor enforcement of arbitration agreements. No policy considerations favor exempting the Northern Mariana Islands from these laws. Since the laws are now applicable, the Commission recommends no change in their applicability. TITLE 10. ARMED FORCES. Note. See also the recommendation, Nominations to the United States Military Academy, the United States Naval Academv, and the United States Air Force Academy, in the Recommendations section of this report. The statutes. Title 10 collects federal law governing the military forces of the United States.* The title is divided into four subtitles: Subtitle A, General Military Law; Subtitle B, Army; Subtitle C, Navy and Marine Corps; and Subtitle D, Air Force. Each of the subtitles contains parts on orgnanization, personnel, training, and procurement. The Uniform Code of Military Justice is found in chapter 47 of title 1-0. Present applicabilitv. In qeneral, title 10 is not applicable to particular geographic jurisdictions. Rather, it is applicable to the armed forces of the United States, wherever those forces may he based or deployed. Some *See also title 14, Coast Guard; title 32, National Guard; title 37, Pay and Allowances of the Uniformed Services; title 38, Veterans' Benefits; and title 50, War and National Defense. 0 - 254 - provisions in title 10, however, are applicable only to particular Persons or particular jurisdictions. The applicability of those provisions to citizens of the Northern Mariana Islands and to the Northern Mariana Islands is discussed below. Service in the armed forces by citizens of the Northern Mariana Islands. Since 198O citizens of the Northern Mariana Island have been able to enlist in the armed forces of the United States. Public Law 96-351, 94 Stat. 1161, 10 U.S.C. S 3253 note.* In its January 1982 interim report to Congress the Commission recommended enactment of legislation to treat citizens of the Northern Mariana Islands as citizens of the United States for purposes of nineteen different United States citizenship requirements in title 10.** In 1983 Conqress enacted Public Law 98-94, 97 Stat. 628. Section 1006 of Public Law 98-94 eliminated, for citizens of the Northern Mariana Islands, three of those citizenship requirements, allowing citizens of the Northern Mariana Islands to participate in the Senior Reserve Officers Training Corps (ROTC) and the armed forces health scholarship program and to become of officers if) the armed forces. Later in 1983, Congress enacted Public Law 98-213, 97 Stat. 1459. Sections 19 to 23 of that statute allow the President by proclamation to declare that citizenship requirements in particular federal laws are not applicable to citizens of the Northern Mariana Islands. In 1984 the President removed for citizens of the Northern Mariana Islands all but one of the remaining citizenship restrictions in title 10 identified in the Commission's interim report. Presidential Proclamation 5207, �S 1(a), 3(a), 6(a), 49 Fed. Reg. 24365. The proclamation did not, however, allow citizens of the Northern Mariana Islands to be treated as citizens of the United States for purposes of section 35J, authorizing the use of armed vessels to protect the interests of United States citizens and their property or commercial interests from the application of force by a foreign government.*** *Prior to 1978 a citizen of the Northern Mariana Islands could. enlist in the armed forces by declaring an intent to become, a. citizen of the United States and becoming a lawful permanent resident of the United States. 10 U.S.C. �� 3253, 8253; Senate Report 96-851, at 1-2 (1980). **10 U.S.C. �� 311, 351, 510, 532(a)(1), 591, 1486, 2004, 2031(b)(1), 2104, 2107(b)(1), 2122, 2545(a), 4348, 6019, 6911(a), 6958, 6959, 8257, 9348. ***Article. 5(3) of the Trusteeship Agreement recognizes that the United States may take measures for "the local defense" of the Trust Territory. Whether that "local defense" extends to protecting citizens of the Northern Mariana Islands and their property and commercial interests when they are overseas is uncertain. - 255 - Title 10 contains a number of other United States citizenship requirements. The Cam-mission made no reccnT@eendat ions with resppct to these reauirements in its January 1982 inteirim report to Congress, because none are expected to cause difficulties for citizens of the Northern Mariana Islands before the end of the trusteeship, when they become citizens of the United States and meet those requirements. The other provisions of title 10 with citizenship requirements are: Militia duty of mariners. Section 312(a)(8) exempts frcm militia duty mariners in the "sea service" of a citizen of the United States. POTC at military junior colleges. Section 2107a(b)(1) -7- - requires cadets pTZ71nted to the Reserve officers' Training Corps at certain military junior colleges to be citizens of the United States. Contracts for aircraft parts. Section 2272 allows only citizens of the United States to ontracts to furnish certain aircraft parts that have won design competitions for the encouragement of aviation. Section 2279 prohibits aliens employed by those contractor-, from contact with the plans or specifications of the aircraf t 'Dart being furnished, or with the part itself, except with the written consent of the Secretary of the military department (for example, the T)epartment of the Air Force) to which the part is beim I furnished. Fasements across military lands. Sections 2668 and 2669 allow the Secretary of a military department to grant easements across military lands to citizens of any State, Territory, caTmnwealth, or possession (and, thus, by implication, only to citizens of the United States), amonq others. Marksmanship instruction. Section 4308(a)(2) limits to United States citizens eligibiliTy- for instruction in marksmanship under the auspices of the Secretary of the Army. Lease of naval fuel reserves. Section 7435 prohibits foreign citizens from having any interest in a lease of naval fuel reserves if the country of their citizenship denies citizens of the United States the right to lease public lands in that country. Recaptured vessels. Section 7672 allows naval prize courts to restore recaptured vessels to their foreign owners if the owner's government in similar circumstances would restore a vessel to the ownership of a citizen of the United States. Gifts of land for air fields. Section 9771 allows the Secretary of the Air Force to accept gifts of land fran citizens of the United States for use as aviation fields. - 256 - Insurrection. Chapter 15 of title 10, sections 331 et seq., authorizes the President to use the armed forces to suppress an insurrection or other violence within a State in prescribed circumstances. "State" is defined, for, purposes of chapter 15, to include Guam. 10 U.S.C. � 335. Accordingly, by operation of section 502(a)(2) of the Covenant, the President may use the armed forces to suppress an insurrection or other violence in the Northern Mariana Islands in the circumstances authorized by chapter 15. Military cooperation with civilian law enforcement authorities. Chapter 18, sections 371 et seq., of title 10 authorizes the Department of Defense to c(;O@erate with federal, State, and local civilian law enforcement authorities by providing them with information, making available military equipment and facilities, and assigning personnel to operate and maintain equipment -made available. (The Posse Comitatus Act, 18 U.S.C. 9 1385, prohibits the use of the Army or the Air Force to execute the laws of the United States, except where specifically authorized by law. See generally 32 C.F.R. 213.10 (1984).) Whether the Department of Defense may cooperate with civilian enforcement authorities in the territories and possessions of the United States is not specifically stated in chapter 18. References to territories and possessions in the chapter make clear, however, that such cooperation is permitted. Although "possession" is defined to include Guam for purposes of title 10, 10 U.S.C. � 101(3), chapter 18 was enacted after January 9, 1978, the effective date of section 502 of the Covenant. See Covenant � 1003(b). Consequently, chapter 18 is not made applicable to the Northern Mariana Islands by operation of the Covenant, and the Department of Defense is not authorized by this chapter to cooperate with civilian law enforcement authorities in the Northern Mariana islands.* Further, since the definition of "possession," 10 U.S.C. S 101(3), excludes any "Canmonwealth," the chapter will not beccme applicable to the Northern Mariana Islands on termination of the trusteeship when the Northern Mariana Islands becomes a camnonwealth. overseas assi2nment of recruits. Section 671 of title 10 provides that "fnlo member of an armed force may be assigned to active duty on land outside the United States and its Territories *Scme assistance may be provided, however, under section 1681(b) of title 48 of the United States Code, authorizing "ftlhe head of any department . . . of the executive branch of the GoverrTnent upon the request of the Secretary of the Interior, [to] extend to the Trust Territory of the Pacific Islands . . . scientific, technical, and other assistance under any program administered by such agency . notwithstanding any provision of law under which the Trust @er'ritory may otherwise be ineligible for the assistance - 257 - and possessions, until he has had twelve weeks of basic training or its equivalent. Guam is a possession of the United States for purposes of title 10'. 10 U.S.C. _P. 101(3). Accordingly, by operation of section 502(a)(2) of the Covenant, rienbers of the armed forces may be assigned to active duty on land in the. I\brthern Mariana Islands before completing twelve weeks of basic training.* Uniform Code of Military_ Justice. The Uniform Code of Military Justice appli s to all regular T@e-mbers of the armed forces and to a variety of other persons connected in one way or another with the armed forces. 10 U.S.C. � 802. Anong those other persons are 11persons serving with, employed by, or accompanying the armed forces outside the United States and outside the Canal Zone, the C(rmnwealth of Puerto Pico, Guam, and the Virqin Islands." Id. q 802(11). Similarly included are "persons within an area leased by or otherwise reserved or acquired for the use of the United States which is under the control of [the armed forces] and which is outside the United States and outside the Canal Zone, the Commonwealth of Puerto Rico, Guam, and the Virqin Islands." Id. S 802(12). Section 502(a)(2) of the Covenant makes applicable to the Northern Mariana Islands those laws of the United States that are applicable to Guam and the several States. At first glance, these laws subjectinq persons who are outqide Guam and. the several States to the Uniform Code of Military Justice appear inapplicable to Guam arr] the several States. The same laws may, however, be read as exemptim persons in Guc-n and the. several States frcm these provisions of the Uniform Code of Military Justice, without chang, ing the meaning of the statute. Under that reading, these provisions are applicable to Guam and the several States. Accordingly, by operation of section 502(a)(2) of the Covenant, persons "serving with, emploved by, or acccmpanying the armed forces" in the Northern Mariana Islands and persons "within an area leased by or otherwise reserved or acquired for the use of the United States which is under the control of [the armed forces]" in the Northern Mariana Islands are not subject to the Uniform Code of Miltary Justice. (Those persons, of course, may be subject to the Uniform Code of Military Justice for another reason, for example, membership in the armed forces.) Rotation of overseas civilian Ml(@y@es of theDepartment of Defense. Section 1586 of title 10 establishes reemployment rights for civilian employees of the Department of Defense returning from *The applicability of section 671 to the several States and Guarn is more easily seen if the section is phrased permissively: "A member of an armed force may he assigned to active duty on land in the United States arO its Territories and possessions prior to ccmpletion of twelve weeks of basic trainim or its equivalent." - 258 posts of duty outside the United States. "United States" is defined, for purposes of title 10, to include only the several States and the District of Columbia. 10 U.S.C. � 101(l). Accordingly, civilian employees of the department assigned to the Northern Mariana Islands are entitled to reemployment rights on returning to the United States. Special provision is made for overseas civilian employees of the departmnt who, at the tim of ernploy-nent, were residents of Guam, the Vi rc .jin Islands, or Puer-to Rico. The Secretary of Defense -may, by regulation, allow these employees, on returning from. assignm-nts outside the jurisdiction in which they previously resided, to assert reemployment rights within that jurisdiction. Id. � 1586(h). This special provision was enacted after January 9, 1978, the effective date of section 502 of the Covenant. See Covenant � 1003(b). The provision is therefore not made applicable to the Northern Mariana Islands by operation of section 502.* Accordingly, a civilian employee of the Department of Defense residinq in the Northern Mariana Islands at the time of em 'ployment is not, on returning to the Northern Mariana Islands from duty outside the Northern Mariana Islands, eligible for reemployment rights pursuant to section 1586. Procurement. The anned forces must generally obtain property and services by formally advertising their needs, inviting competitive bids, and awarding a contract to the lowest responsible bidder. 10 U.S.C. � 2304(a). In a variety of situations, Purchases may be made without regard for these requirements. id. 2304(a)(l)-(17). One such exception is for the purchase of 11property or services to be procured or used outside the United States and the Territories, com:wnwealths, and possessions." Id. 9 2304(a)(6). Guam is a possession of the United States for purposes of title 10. Id. � 101(3). nus, the advertising and biddirp reguiremnts are applicable to the purchase of property or services to be procured or used on Guam. By operation of section 502(a)(2) of the Covenant, those reauirerents are also applicable to the purchase of property or services to be procured or used in the Northern Mariana Islands. Post exchanges, commissaries, _ships' stores. The Secretary of each of the armed forces is authorized to establish stores at military installations to sell goods to meml--)--rs of the military, and to "such civilian officers and employees of the United States, and *Further, given the distinct treatments afforded the residents of Guam and those of the several States, whether the entire statute (10 U.S.C. 9 1586) is a law applicable to Guam and of general application to the several States, within the meaning of section 502(a)(2) of the Covenant, is uncertain. - 259 - such other persons, as he considers proper." 10 U.S.C. q� 4621, 7601, 9621. The conditions under which such stores may be established and the persons to whom goods may be sold vary according to whether the store is inside or outside the United States. Inside the United States such stores may be established only if it is impracticable for goods to be obtained frcin private sources "without impairing the efficient operation of military activities." id. Further, inside the United States, sales to civilian officers and employees of the United States may only be made to those officers and employees residing within Tnilitarv installations. Id. Neither of these restrictions applies to stores outside the United-States. Id. "United States" is defined for purposes of title 10 to include only the States and the District of Columbia. Id. S 101(l). See also the explanatory notes in the Historical @n-d Pevision Nbtes following 10 U.S.C. @q 4621, 7610, 9621. 7hus, the Northern Mariana Islands is not within the United States for purposes of the restrictions on sale of goods by the armed forces, either directly or by operation of the Covenant. Accordingly, military stores established in the Northern Plariana Islands by the armed forces may be established without regard for whether private enterprise might provide the same qoods efficiently. Further, such stores established in the Northern Mariana Islands may be authorized to sell goods to civilian officers and employees of the United States, even though they do not reside within a military installation. Shipments on Tnilitary vessels. Section 4747 allows transportation of passengers and certain merchandise to be transported to Guam on military vessels if space is available, at rates prescribed by the Secretary of the ArTny. Section 4747 provides a federal service to Guam. Accordingly, by operation of section 502(a)(1) of the Covenant, military vessels may carry passengers and certain merchandise to the Northern Mariana Islands if space is available. (Because few military vessels now visit the Northern Mariana Islands, section 4747 is of little immediate importance.) Transfer of obsolete, condemned, or captured vessels. Section 7308 of title 10 allows the Secretary of the Navy to transfer obsolete, condemned, or captured vessels to, among other jurisdictions, any State, Territory, or possession of the United States. Guam is a possession of the United States for purposes of this title. 10 U.S.C. � 101(3). Accordingly, by operation of section 502(a)(2) of the Covenant, the Secretary of the Navy may also transfer obsolete, condemned, or captured vessels to the Northern Mariana Islands. Loan or gift of obsolete material and articles of historical interest. Section 7545 of title 10 allows the Secretary of the Navy to lend or give captured, condemned, or obsolete materials and articles of historical interest to, among other entities, any State, 260 - Territory, or possession of the United States. Guam is a possession of the United States for purposes of this title. 10 U.S.C. � 101(3). Accordingly, by operation of section 502(a)(2) of the Covenant, the Secretary of the Navy may lend or give materials to the Northern Mariana Islands pursuant to section 7545. TITLE 11. BANKRJPrCY. The statute. Article I, Sect ion 8, Clause 4, of the Un i ted States Constitution gives Congress the power to establish uniform bankruptcy laws throughout the United States. Laws enacted pursuant to this power are "for, the benefit and relief of creditors and their debtors in cases in which the latter are unable or unwilling to pay their debts." Black's Law Dictionary 134 (5th ed. 1979). Bankruptcy laws cover both voluntary and involuntary bankruptcy, and provide generally for annulment of the bankrupt's debts in exchange for distribution of most of the bankrupt's property to his or her creditors. The bankrupt gains relief frcrn the burden of debt that, no matter how hard he or she labors, cannot be liquidated. The creditors are each assured a fair share of whatever assets the bankrupt can use to pay the debts. Society in general benefits because the bankrupt's incentive to participate in productive activity is restored and because disputes among creditors seeking first satisfaction from the bankrupt's inadequate assets are minimized. Title 11 was substantially revised by Public Law 95-598, 92 Stat. 2549, enacted November 6, 1978. Present applicability. For the bankruptcy laws to be effectively applicable in the Northern Mariana Islands, two conditions must be satisfied: First, a person residing in the Northern Mariana Islands must be able under the laws to qualify as a debtor eligible for discharge of his or her debts in bankruptcy. Second, a court in the Northern Mariana Islands must be able to administer and enforce the bankruptcy laws. Ability of persons in the Northern Mariana Islands to qualify as debtors under the federal bankru2tcy laws Section 109 of title 11 provides: Notwithstanding any other provision of this section, only a person that resides in the United States, or has a domicile, a place of business, or property in the United States, or a municipality, may be a debtor under this title. - 261 - In 1984 Congress enacted the Bankruptcy Amendments and Federal Judgeship Act, Public Law 98-353, 98 Stat. 333. Section 421(j) (7) of Public Law 98-453 amends section 101 of title 11 by adding the following T)araoraph: (49) 'United States', when used in a geographic sense, includes all jurisdictions where the judicial jurisdiction of the United States extends, including territories and possessions of the United States. The "judicial jurisdiction" of the United States extends to the Northern Mariana Islands. Trusteeship Agreement, Art. 3; Covenant, Art. IV; 48 U.S.C. �� 1694 et sea. Since "United States" is def ined to include the Northern Mariana Tslands, nersons in the Northern Mariana Islands may be debtors under the federal bankruptcy laws. Bankruptcy court jurisdiction in the Northern Mariana Islands. S I (the Bankruptcy AmnchTents and ection 101(a) of Public Law 98-353 Federal Judgeship Act, discussed under the precedinq heading) amends section 1334(a) of title ?8 of the United States Code to give the district courts of the United States "original and exclusive jurisdiction of all cases under title ll," with certain exceptions. Section 1694a(a) of title 48 of the United States Code, as xnended by section 902 of "--lic Law 98-454, provides the "The District Court of the Northern Mariana Islands shall have the jurisdiction of a District Court of the United States, including, but not limited to . . that of a bankruptcy court of the United States." Accordingly, the District Court of the Northern Mariana Islands is able to administer and enforce the bankruptcy laws of the United States. Discussion. The federal bankruptcy laws should continue to apply in the Northern Mariana Tslands.** *Section 104(a) of Public Law 98-353 also adds a new section 152 to title 28, United States Code, providing in pertinent Dart: "The judges of the district courts for the territories shall serve as the hankru,ptcv judges for such courts." "This Commission on July 29, 1982, prior to enactment of Public Laws 98-353 and 98-454, sent letters to the chairmen of the Committees on the Judiciary of the United States Senate and House of Representatives ' recommending that Congress enact legislation to ensure the continued applicability of the 'federal bankruptcy laws in the @,Jorthern Mariana Islands and the' continued existence of bankruptcy court jurisdiction in the Northern Mariana Islands. - 262 - The purposes of the federal bankruptcy laws could be served instead by enactment of a local bankruptcy statute in the Northern Mariana Islands. While the United States Constitution requires a uniform federal law of bankruptcy, Congress has the power under the territorial clause, Article IV, Sect ion 3, Clause 2, of the Constitution, to permit deviation frcm the rule of uniformity for the Northern Mariana Islands.* But the policy considerations that supported adoption of the constitutional rule of uniformity support application in the Northern Mariana Islands of the same bankruptcy law that is applicable elsewhere in the United States. "The purpose behind the [constitutional] grant of the bankruptcy [power] . . . was to enable the new central goverrmnt to eradicate the opiy:)rtunities for fraud and forum-shopping engendered by varying state insolvency . . . laws . . . ." In re Penn Central TransL:)ortation, Co., 384 F. Supp. 895, 915 (Spec Ct., RRRA 1974). See generally 3 J. Story, Ccmmentaries on the @onstitution of the United States �,q 1102-1104 (1833); Perez v. Campbell 402 U.S. 637, 656 (1971). Over the years substantial thought and effort has brought the federal bankruptcy laws into their present form. Development of a local bankruptcy law for the Northern Mariana Islands would require a large allocation of the limited resources of the island, another reason for instead applying the federal law in the Northern Mariana Islands. TITLE 12. BANKS AND BANKI%. The statutes. The federal banking laws interact with State banking laws to constitute a cornplex regulatory framework: Federal and state governn-tents have the power to regulate banking, including requiring incorporation of bank entities, in order to protect camnearce and public welfare, which are deeply affected by the banking industry. A bank can choose to be chartered and regulated by a state or by the federal goverrment under the dual banking systems. State banks electing insurance under the Federal Deposit Insurance Corporation (FDIC) or membership in the Federal Reserve System are also subject to federal regulation. All banks are subject to state rules on branch banking and trust operations. *See Downes v. Bidwell, 182 U.S. 244 (1901). See also Senate Report 94-433, The Covenant to Establish a Ccmonwealth of the Northern Mariana Islands 79 (1975). - 263 - The Federal Reserve banks and the Federal Reserve System were created in 1913 to act as a central control on currency. The FDIC was created in 1933 to promote depositor confidence and ensure sound banking practices through deposit insurance, interest rate regulation, bank merger regulation, etc. National banks are regulated by the Comptroller of the Currency. State banks that are members of the Federal Reserve System are regulated by the Federal Reserve. State nonmember banks that elect to be insured are regulated by the FDIC. State law still applies to state banks unless federal law clearly preempts an area of regulation. W. Schlicti ng, et al., Banking Law 2-2 (1982) (citations anitted). Included among the banking laws are many statutes intended to improve housing and to encourage homeownership in the United States, often through the mechanism of federal insurance of mortgage loans. Title 12 also includes laws governing savings and loan institutions, credit unions, farm credit banks, and other financial institutions. The federal banking laws are described in greater detail in the chapter-by-chapter analysis of title 12, below. Present applicability Section 502(a)(1) of the Covenant provides that federal banking laws in effect on January 9, 1978, shall apply to the Northern Mariana Islands as they do to Guam. Not entirely clear is the range of laws intended to be encompassed by the phrase "federal banking laws." For example, a question could arise as to whether subchapter VIII of chapter 13 of title 12, authorizing the Secretary of Housing and Urban Development to provide mortgage insurance for construction of housing for military personnel and their dependents near military installations, is a banking law. It is even possible negotiators of the Covenant intended section 502(a)(1) of the Covenant to errbrace only a few of the federal banking laws: The United States Senate Report on the Covenant identifies sections 143, 466, and 601 to 632 of title 12 as the laws to which section 502(a) (1) of the Covenant is - 264 - addressed.* The language of the Covenant is not so restricted, however, and can be reasonably read to man that all of title 12 applies to the Northern Mariana Islands as it does to Guam. See Marianas Political Status Ccmmission, Section @y Section Analysis of the Covenant (1975).** Fortunately, most federal banking laws apply to Guam as they do to the States of the United States. Federal laws applicable to Guarn and the several States that are not banking laws (or in the other categories enumerated in section 502(a)(1) of the Covenant) generally apply to the Northern Mariana Islands as they do to the several States. Covenant q 502(a)(2). Only when a law applies differently to Guam than to the several States does it beccme important to determine whether the law is a banking law.*** The present applicability of the statutes in title 12 of the United States Code to the Northern Mariana Islands is discussed in greater detail in the chapter-by-chapter analysis, below. A number of provisions in title 12 impose United States citizenship requirments. Directors of a national bank or a federal *Senate Report No. 94-433, The Covenant to Establish a CcPmnwealth of the Northern Mariana Islands 65, 76 (1975). See also ReL:)ort of the Joint Drafting Committee on the Negotiatirig History of the Covenant, at C-3 (1975), reprinted at Hearings before the Subcommittee on Territorial and Insular Affairs of the House Committee on Interior ana Insular Affairs on H.J. Res. 549 et al. to Approve the "Covenant to Establish a Ccmonwealth of the Northern Mariana Islands," 94th Cong., lst Sess. 374, 376 (1975). "The Analysis is reprinted in Hearings on the Covenant to Establish the Commonwealth of the Northern Mariana Islands before the Subccmmittee on Territorial and Insular Affairs of the House Committee on Interior and Insular Affairs, 94th Cong., lst Sess. 626 (1975) and in Hearings on the Northern Mariana Islands before the Senate Committee on Interior and Insular Affairs, 94th Cong., lst Sess. 356 (1975). ***For this reason, in the chapter-by-chapter analysis that follows, if there is any doubt that a law is a banking law, no ef fort is made to determine whether its applicability to the Northern Mariana Islands is governed by paragraph (1) or paragraph (2) of section 502(a) of the Covenant whe n the law applies unifomly to Guam and the several States. - 265 home loan bank must, in general, be United States citizens. 12 U.S.C. �1.5 72, 1427(a). The majority of the stock in corporations organized to k-ngaqe in international or foreign banking or financial operations, or in banking or financial operations in a dependency or possession of the United States, must be held by United States citizens. Td. S 619. Members of boards of directors of farm credit district bc;Yr-ds must have been United States citizens for at least ten years - Td. S 2222(b). In addition, deposits by United States citizens or residents in United States branches of foreign banks are insured while other deposits are not. Id. � 1813(m)(2). In its January 1982 interim report to the United States Congress the Commission reccmmended enactment of legislation to treat citizens of the @brthern Mariana Islands as citizens of the United States for purposes of these requir(:Nnents. In 1983 Congress enacted Public Law 98-213, 97 Stat. 1459. Sections 19 to 23 of that statute allow the President by proclamation to declare that citizenship requirements in particular federal laws are not applicable to citizens of the Northern Mariana Islands. In 1984 the President reioved for citizens of the Nbrthern Mariana Islands the citizenship restriction in these sections. Presidential Proclamation 5207, �� 4(b)-(e), 6(b), 49 Fed. Reg. 24365.* Discussion. The Marianas Political Status Commission, at page 51 of its Section by Section Analysis of the Covenant, noted the importance of federal bankina laws to the Northern Mariana Islands and its expectation that this Commission would review those laws: The federal banking laws will apply as they apply in Guam. These federal laws are generally designed to protect depositors and facilitate the efficient operation of a national banking system in the United States. For the mos t part the federal banking laws apply in the. states in the same way as they apply in the territories and the Conmnwealth of Puerto Rico, but there are certain differences which are intended to assure that all the financial resources needed to promote economic development *United States citizenship is also required for certain seats on the Board of Directors of the Federal Deposit Insurance Corporation, id. � 1-812, and for membership on the Federal Farm Credit Board, id. 7- 2242. No reca-nmendations were made with regard to tl-@e-se citizenshi 'r) requirements in the Ccomission's January 1982 interim report to the United States Congress. 266 - are available. Such resources are not usually available from local sources alone. It is expected that the Commission on Federal Laws established by Section 504 will review the application of the federal bankina laws to assure that there is adequate local control over important financial institutions. It is also important to note the Govermnent. of the Northern Mariana Islands will have the authority to charter local banks and other financial institutions similar to that possessed by the-States. The importance of sound banking institutions to a developing economy like that of the Northern Mariana Islands should not be underestimated. A functioning banking system encourages savings and investment by the private sector, helps to develop an orqanized capital market, and allows entry of foreiqn capital to supplement local savings.* For the synall, less-developed economy of the Northern Mariana Islands where local capital is scarce, access to the national banking institutions of the United States may be critically important to economic growth. Developing and administering a local alternative to the national bankim structure would be expensive, and is neither feasible nor wise. Accordingly, the federal banking laws now applicable to the Northern Mariana Islands should remain applicable, with only a few minor adjustments, while most of the federal banking laws not now applicable to the Northern Mariana Islands should be made applicable there. The necessary changes are included in the Recommendations section of this report. The individual recommendations are listed in the note below. Note. In the chap ter-by-chap ter analysis that follows, chapters 9 and 15 are not discussed as they have been repealed or omitted. Chapters 7, 7A, and 7B, dealing with the Farm Credit Administration, agricultural marketinq, and regional agricultural credit corporations, respectively, have been transferred for the most part to chapter 23 or repealed. Provisions still in force in those chapters are discussed with chapter 23 in the recommendation, Farm Credit System, in the -Recamne-ndat ions section of this report. Also not discussed is chapter 20, authorizing the Federal Reserve B.3oard to impose certain credit controls, since that legislation expired by its own terms on June 30, 1982. *See generally the studies of the United Nations Industrial Development Orqanization: Summaries of the Industrial Development Plans of 30 Countries (1970); Summaries of Industrial Development Plans (1971); Summaries of IndustriEl -Development Plans (1973). 267 - See also the following recanmendations in the Reccmmendations section of this report: Conversion of national banks into banks organized under laws of the Northern Mariana Islands; merger of banks organized under laws of the Northern Mariana Islands into national banks. Maximum amounts for federally-insured mortgages in the Northern Mariana Islands. Insurance of "public unit" accounts in federal ly- insured savings and loan associations. Escheat of abandoned money orders and traveler's checks. Northern Mariana Islands banks' participation in domestic markets. Mational Consumer Cooperative Bank. Depository Management Interlocks Act. Riqht to financial privacy. Chapter 1. The Comptroller of the Currency. and Chapter 2. National Banks. The statutes. Chapters 1 and 2 of title 12 establish, respectively, the Office of the Comptroller of the Currency and the nati onal banking system.. The Comptroller and the national banking system originated with the passaqe of the National Bank Act in 1864. Act of June 3, 1864, c.106, 13 Stat. 99. [The Comptroller] as the administrator of national banks, is responsible for the execution of laws relatina to national banks and promulgates rules and regulations governing the operation of approximately 4,450 national and District of Columbia banks. Approval of the Comptroller is required for the organization of new national banks, conversion of State-chartered banks into national banks, consolidations or 268 - mergers of banks where the surviving institution is a national bank, and the establishment of branches by national banks. U. S. Gove rnment manual 429 (1982). See also White, Banking Law 45, 66 (1976). National banks are chartered by the Federal Government.* Chapter 2 of title 12 governs the organization, operation, regulation, and dissolution of national banks. Present applicability. Chapters I and 2 of title 12 apply to the Northern Mariana Islands. Section 41 of title 12 provides that "the National Bank Act and all other Acts of Congress relating to national banks shall, insofar as not locally inapplicable on and after August 1, 1956, apply to Guam." See also 12 U.S.C. �� 42, 95(b)(2), 95a(3), 202. Chapters I and 2 are among those laws made applicable to Guam by section 41 and thus made applicable to the Northern Mariana Islands by operation of section 502(a)(1) of the Covenant. National banks in "dependencies" or "insular possessions" of the United States are treated differently fran national banks in the States for purposes of reserve requirements. 12 U.S.C. �� 143-144. See also id. � 466. Ccmpare id. 142 462. Guam is a "dependency or insular possession" of the United States, so national banks on Guam are subject to these different reserve requicEMents. Since federal banking laws apply to the Northern Mariana Islands as they do to Guam by operation of section 502(a)(1) of the Covenant, national banks in the Northern Mariana Islands are also subject to the reserve requirements applicable to national banks in "dependencies" or "insular possessions" of the United States. Guam and the Northern Mariana Islands are treated differently frcm other parts of the United States in one other important respect. National banks in Guam and the Northern Mariana Islands may not be converted into State banks as may national banks in "any State, any Territory of the United States, Puerto Rico, or the Virgin Islands," *State goverrments may also grant charters to banks. - 269 - or in the District of ColuTibia. 12 U.S.C. �� 214, 214a.* Nor may State banks be consolidated or merged into national banks in Guam and the Northern Mariana Islands as they may in those other jurisdictions. Id. @@ 215, 215b.** Discussion. Legislation is proposed to allow national banks in the Northern Mariana Islands to convert into or consolidate or merge with banks organized under the laws of the Northern Mariana Islands and to allow banks organized under the laws of the Northern Mariana Islands to be merged into national banks. See the reccmuT@endation, Conversion of national banks into banks orqanized under laws of the Northern Ra-Firana Islands; merqer of hanks orqanized_under laws of the Northern Mariana Islands into national banks, in the Rec(nmendations section of this report. Chapter 3. Federal Reserve System. The statutes. The Federal Reserve System, established in 1913, serves as the nation's central bank. Its principal responsibility is the execution of monetarv policy, although it also tranfers funds between banks, supervises banks, handles government accounts, and acts as a lender of last resort: It is the responsibility of the Federal Reserve System to contribute to the strength and, vitality of the U.S. econcmy. 9y influencinq the lending , and investina activities of ccmmercial banks and the cost and availability of money and credit, the Federal Reserve System can help promote the f ull use of human and ' capital resources, the qrowth of productivity, relatively stable prices, and *The term "Territory" here apparently refers to Alaska and Hawaii, which were not yet States when this legislation became law in 1950. Guam and the Virqin Islands then, as now, were unincorporated but organized territories of the United States. The ment ion of the Virgin Islands in the leqislation without mention of Guam strongly implies that national banks in Guam (and, consequently, in the Northern Mariana Islands) cannot convert into State banks under the legislation. "Section 215b, like section 214, above, defines "State," to include the "Territories" and the "Virgin Islands" but to omit Guam. Again the implication is that State banks in Guam (and, conse uently, q in the Northern Mariana Islands) may not be consolidated or meraed into national banks under these provisions. - 270 - equilibrium in the Nation's international balance of payments. Through its supervisory and regulatory banking functions, the Federal Reserve System helps maintain a ccmmercial banking system that is responsive to the Nation's financial needs and objectives. The System consists of six parts: the Board of Governors in Washington; the 12 Federal Reserve Banks, their 25 branches and other facilities situated, throughout the country; the Federal Open Market Committee; the Federal Advisory Council; the Consumer Advisory Council; and the member cam-kercial banks, which include all national banks and State-chartered banks that have voluntarily joined the System. U.S. Government Manual 504 (1982). Present applicability. Banks located in dependencies and insular possessions of the United States are given specific rights and responsibilities vis-a-vis the Federal Reserve System by chapter 3 of title 12. Because Guam is a dependency or insular possession of the United States, the special rules applicable to dependencies and insular possessions apply to banks in the Northern Mariana Islands by operation of section 502(a)(1) of the Covenant. Banks organized under the lawns of the Northern Mariana Islands and national banks in the Northern Mariana Islands may becane members of the Federal Reserve System, but are not required to become members. 12 U.S.C. � 466. (National banks located in the United States but not located in a dependency or insular possession must becane members of the System. Id. S 282.) If such banks becane members of the System, they must ccrnply with all requirenvents generally applicable to members of the System. Id. � 466.* If they do not beccme members, they remain subject Eo- other applicable federal and Morthern Mariana Islands laws. Id. Thus, banks in the Northern Mariana Islands that become members are subject to the *Member banks in the Northern Mariana Islands are specifically subject to the bank examination provisions applicable to all member banks. Those provisions, sections 481 et seq. of title 12, were enacted as part of (or are amerklments To) the National Bank Act, which is specifically applicable to Guam. 12 U.S.C. S 41. The bank examination provisions are thus specifically applicable to member banks in the Northern Mariana Islands by operation of section 502(a)(1) of the Covenant. - 271 - reserve requirements applicable to member banks. Id. See also id. S 462. National banks that do not become memberTof the FedJ'al Reserve System are subject to the reserve requirements imposed on national banks in dependencies and insular possessions. See the discussion of chapter 2 of title 12, above. Banks organized under the laws of the Northern Mariana Islands that do not becom members of the System are subject only to reserve requirements imposed by the laws of the Northern Mariana Islands, just as State banks that do not beccme members of the System are subject only to State-imposed reserve requirements. The Board of Governors of the Federal Reserve System is authorized to impose additional reserve requirements to implement monetary policy. Id. � 461. These additional requirement s--- -which apply to a wide variety of depository institutions-do not apply to deposits payable only outside the States of the United States and the District of Columbia. Id. q, 4 61 (b) (6). Requirements imposed pursuant to this authority thus would not apply to deposits payable only in Guam or the Northern Mariana Islands. Section 371a of title 12 prohibits banks that are members of the Federal Reserve system from paying interest on demand deposits, except in certain accounts where withdrawals are made through negotiated orders of withdrawal (Now accounts). W- its own terms this prohibition does not apply to deposits in member banks outside the States of United States and the District of Columbia. it consequently does not apply to deposits in banks in the Northern Mariana Islands, even though they may be members of the Federal Reserve System. Until 1986, the Board of Governors of the Federal Reserve System has the power to prescribe rules governing the payment and advertisement of interest by member banks on time and savings deposits. Id. � 371b. See also id. S 3506(b). This authority also does not eit-end to interest payal7le only outside the States of the United States and the District of Columbia by member 'banks. Id. � 371b. It consequently is inapplicable to interest payable only in the Northern Mariana Islands by member banks. Chapter 4. Taxation. The statutes. Chapter 4 sets forth provisions on taxation of different types of banks. Federal Reserve banks (but not other banks that are members of the Federal Reserve System) are exempted frcm all federal, State, and local taxation other than taxes on real estate. 12 U.S.C. S 531. A national bank must pay every six months a tax equal to one-half of one percent of its average amount of notes in circulation. Id. S 541. It is otherwise treated as a bank organized - 272 - under the laws of the State or other jurisdiction in which its principal office is located for purposes of federal or State taxation. Id. � 548. Present applicability. Sections 541 and 548 of title 12 are derived from the National iank Act, which is specifically applicable to Guam. 12 U.S.C. � 41. See Bank of America v. Chaco, 539 F.2d 1.226 (9th Cir. 1976). Those sections are consequently applicable to the Northern Mariana Islands by operation of section 502(a)(1) of the Covenant. . Section 531 is applicable to Federal Reserve banks, wherever located, and would apply to any Federal Reserve bank located in the Northern Mariana Islands, in the unlikely event one were ever located there. Chapter 5. Crimes and Offenses. The statute. This chapter contains a single section, 12 U.S.C. � 582, which makes criminal the offer or receipt of United States notes or national bank notes by a national bank as collateral for a loan. Present applicability. Section 582 is a law relating to national banks and is thus specifically applicable to national banks on Guam. 12 U.S.C. � 41. By operation of section 502(a)(1) of the Covenant, section 582 is also applicable to national banks in the Northern Mariana Islands. Ch22ter 6. Foreign Banking. The statutes. Chapter 6 of title 12 collects federal laws pertaining to foreign operations by national banks and by so-called "Edge Act" corporations. National banks are authorized to establish branches in foreign countries and in "dependencies or insular possessions of the United States." 12 U.S.C. 9 601. National banks may also invest in so-called "Agreement" corporations, which enqage in banking in foreign countries or in dependencies or insular possessions of the United States. Id. National banks are further authorized to hold ownership intere@-ts in foreign banks or banks organized under the laws of a dependency or an insular possession of the United States. id. State banks that are members of the Federal Reserve System may also establish branches in foreign countries or in dependencies or insular possessions of the United States. Id. � 321. - 273 - Edge Act corporations were originally authorized to allow entities other than the established Arerican banks to engage in foreign banking. Travis v. National City Bank, 23 F. Supp. 363, 367 (E.D.N.Y. 1938). Edge Act corporations are quite similar to the Aqreement corporations in which national banks may invest. See 12 C.F.R. � 211.4 (1984). Edge Act corporations engage only in international or foreign banking, and banking in dependencies or insular rx)ssessions of the United States. Id. 5 616. They are used pri-mrily to finance international trade, Tl-thouqh they may provide many other banking services. Id. � 615. Present applicability. In making federal banking laws apply to the Northern Mariana Islands as they apply to Guam, the negotiators of the Covenant were particularly concerned with chapter 6 of title 12. See Report of the Joint Drafting Committee on the Negotiating History of the Covenant, at C-3 (1975) ;* Senate Report No. 94-433, The Covenant to Establish a Comonwealth of the Northern Mariana Islands 65, 76 (1975). Guam is a dependency or insular possession of the United States, as that term is used in this chapter. By operation of section 502(a)(1) of the Covenant, the Northern Mariana Islands is also *This report is reprinted at Hearings before the Subcorm-ittee on Territorial and Insular Affairs of the House Ccmittee on Interior and Insular Affairs on H.J. Res. 549 et al. to ADprove the "Covenant to Fstablish a Cornonwealth of the Northern Mariana Islands," 94th Cong., Ist Sess. 374, 376 (1975). - 274 - treated as a dependency or insular possession for purposes of this chapter. Chapter 6 generally treats dependencies or insular possessions of the United States in the same way as foreign countries are treated.* National banks thus may establish branches in the Northern Mariana Islands, may invest in Agreement corporations enaaged in bankinq in the Northern Mariana Islands, and hold ownership interests in banks organized under the laws of the Northern Mariana Islands. (And, as noted in the discussion of chapter 2, above, national banks may be organized in the Northern Mariana. Islands.) By contrast, a national bank is generally prohibited from establishina a branch in a State other than the State in which it is situated. 12 U.S.C. � 36. See Leibowitz, The Applicability of Federal Law to Guam, 16 Virginia Journal of International Law 21, 46 (1975). Banks organized under the laws of any of the fifty States, the District of Columbia, Puerto Rico, or the Virgin Islands, if they are members of the Federal Peserve System, may also establish branches in the Northern Mariana Islands. 12 U.S.C. �� 214(a), 321. (But banks organized under the laws of the Northern Mariana Islands would generally not be permitted by applicable State law to establish a branch in one of the States.)- Edge Act corporations are also permitted to engage in banking in the Northern Mariana Islands. Edge Act corporations -must have their home- office in "the United States." Id . � 613. Since these corporations are not permitted to do busii7e-ss in the United States, id. q 616, but are permitted to do business in the dependencies and insular possessions of the United States (including the Northern *An exception is found in section 604 of. title 12, which requires national banks to keep separate accounts for each of their foreign branches. National banks are not required to maintain separate accounts for branches in dependencies or insular possessions. In re Rivera, 79 F. Supp. 510, 512 (S.D.N.Y. 1948). - 275 - Mariana Islands), id. S 611, the "United States," for purposes of these provisions, does not include the dependencies and insular possessions of the United States and, thus, does not include the Nbrthern Mariana Islands. Accordinqly, an Edge Act corporation may not have its home office in the Northern Mariana Islands (or any other dependency or insular possession). Section 632 of title 12 is of particularly broad scope. it provides, in part, that any civil suit to which any corporation organized under the laws of the United States is a party, arising out of transactions involving banking in a dependency or insular possession of the United States, shall be within the original jurisdiction of the district courts of the United States. The District Court of the Northern Mariana Islands has all the jurisdiction of a district court of the United States. 48 U.S.C. q 1694a. The District Court for the Northern Mariana Islands thus has original jurisdiction over any lawsuit involvinq banking arising in the Northern Mariana Islands if one of the parties is a corporation orqanized under the laws of the United States (for example, a national bank or an Edge Act corporation). See generally First Federal Savings & Loan Association of Puerto Rico v. Ruiz de Jesus, 644 F.2d 910 (Ist Cir. 1981). Chapter 6A. Export-Import Bank of the United States. The statutes. This chapter creates the Export-Import Bank of the United States, popularly known as the Eximbank. The purpose of the Export-Import Bank is to aid in financing and to facilitate exports and imports and the exchange of commodities between the United States or any of its Territories or insular possessions and any foreign country or the agencies or nationals thereof. The Export-Import Bank Act of 1945, as amended, expresses the policy of the Congress that the Bank should supplement and encourage and not compete with private capital; that loans should generally be for specific purposes at rates based upon the average cost of -money to the Bank as well as the Bank's mandate to provide competitive financinq, and offer reasonable assurance of repayment; that financing should be provided for U.S. exports at rates and on terms which are competitive with the financing provided by the U.S.'s principal foreign competitors; and that in authorizing loans or guarantees, account should be taken of any serious adverse effects upon the competitive position of U.S. industry, the availability of materials which are in short supply in the United States, and employment in the United States. U.S. Government Manual 475 (1982). - 276 The Export-Import Bank operates four main programs: (1) direct long-term loans; (2) guarantees (principally to canmercial banks); (3) short-term and medium-term insurance; and (4) discount loans to commercial banks. The greatest dollar volume of bank assistance has consisted of direct financing to buyers abroad of U.S. goods and services. This assistance has taken the form of long-term credits to public or private entities for the purchase and export of capital equipment and related services; credits to fore ign lending institutions for relending to local enterprises; credits to countries suffering temporary dollar shortages to maintain the flow of U.S. trade; and agricultural ccmmodity credits. Through these programs the bank has becorm? involved in the prcmotion of development projects in less developed countries. 4 Encyclopedia Britannica Macropaedia 9 (15th ed. 1975). Present applicability. Chapter 6A gives exporters -in the Northern Mariana Islands access to the Export-Import Bank by directing the Bank to aid in financing and to facilitate exports and imports and the exchange of ccmmodities between the United States or any of its Territories or insular possessions and any foreign country or the agencies or nationals thereof. 12 U.S.C. � 635. Guam is a Ter-ritory or insular possession of the United States. By operation of section 502(a) of the Covenant, the Northern Mariana Islands is also treated as part of the United States for purposes of this chapter. It should be noted that the Export-Import Bank cannot aid in financing exports from the United States to the Northern Mariana Islands, since the Northern Mariana Islands is part of the United States and is not a foreign country for purposes of this chapter. Discussion. The Export-Import Bank's purpose is to aid American exporters who cannot obtain private financing. The Eximbank has made concerted efforts to help smal 1 firms obtain export assistance. This assistance is potentially useful to the Northern Mariana Islands, which lacks private capital to finance exports. 277 - Ch22ter 7. Farm Credit Administration. and Chapter 7A. Agricultural Marketing. and Chapter 7B. Regional Agricultural Credit Corporations. Chapters 7, 7A, and 7B are discussed together with chapter 23 in the recommendation, Farm Credit System, in the Recctmnendat ions section of this report. Cha]2ter 8o Adjustment and Cancellation of Farm Loanso The statuteso Chapter 8 provides for the compromise, adjustment, and cancellation of farm loans made by the Federal Government when a debtor, acting in good faith, cannot pay off a debt under $1,000 or if a debtor is deceased (and his estate cannot pay) or has been missing for over two ars or has declared bankruptcy. 12 U.SoCo Ye 9 1150. Present applicability. Chapter 8 does not define its geographic reach. only where the farm credit system operates, however, are the adjustmnt and cancellation provisions of chapter 8 of any irnpor-tanceo The f a n-n credit system is ooverned by the provisions of chapter 23 of title 12. Under accepted principles of statutory construction, if chapter 23 is applicable to the Nbrthern Mariana Islands, so too is chapter 8. 2A Sutherland, Statutes and Statutory Construction � 51.03 (C. Sands ed. 1973)o The applicability of chapter 23 is discussed in the reccmmendation, Farm Credit System, in the RecaTmndations section of this report. Chapter 10 . Local Agricultural-Credit CoM2rations, Livestock-Loan Companies and Like Organizations; Loans to Individuals to Aid Information or to Increase Capital Stocko The statutes. This chapter establishes a revolving fund and authorizes loans from that fund by the Farm Credit Administration to individuals to form and capitalize local aqricultural-credit corporations, livestock-loan companies, or similar organizations. - 278 - Present apj2licability. The geographic extent of chapter 10 is not defined. Chapter 10 is administered by the Farm Credit Administration, which is established by provisions in chapter 23 of title 12. Under accepted principles of statutory construction, if chapter 23 is applicable to the Northern Mariana Islands, so too is chapter 10. 2A Sutherland, Statutes and Statutory Construction � 51.03 (C. Sands ed. 1973). The applicability of chapter 23 is discussed in the reccmmendation, Farm Credit System, in the Reccnmkendat ions section of this report. Chapter 11. Federal Hcme Loan Banks. and Chapter 11A. Federal Home Loan MorLgage Corporation The statutes. Chapter 11 creates the Federal Home Loan Bank Board and authorizes establishment of regional Federal Home Loan Banks. The Federal Hcme Loan Bank Board regulates savings and loan associations much as the Board of Governors of the Federal Reserve System regulates banks. All State-chartered savings and loan associations insured by the Federal Savings and Loan Insurance Corporation (described in the discussion of chapter 12, below) and all federal ly-chartered savings and loan associations are required to be members of the system. Also eligible to becane members are building and loan associations, homestead associations, savings banks, cooperative banks, and insurance firms. The Federal Home Loan Bank Board charters and supervises federal savings and loan associations and loans money to member institutions engaged in residential mortgage financing. See Federal Banking Law Report (CCH) 1561-62. Chapter 11A creates the Federal Home Loan Mortgage Corporation. [This corporation] is authorized to purchase, and make catutitments to purchase, residential mortgages frcm any. federal hcm loan bank, the Federal Savings and Loan Corporation, any member of a federal home loan bank, or any other financial institution whose deposits or accounts are insured by an agency of the united States or under the laws of any state if the total amount of deposits held in such institutions in the state is more than 20% of the total amount of such deposits in all banks, building and loan, savings and loan, and hcmestead associations. The Corporation is also authorized to purchase and make cammitments to purchase residential mortgages frcrn any mortgagee approved by the Housing and Urban Development - 279 - Secretary for participation in any mortgage insurance program under the National Housing Act. It is authorized to deal with, and sell or otherwise dispose of, any such mortgage or interest therein. Id. at 1564. Present a22licability. Guam is defined as a "State" for purposes of chapter 11. 12 U.S.C. � 1422(3). Chapter 11A is expressly applicable to the territories and possessions of the United States. Id. � 1458. See also id. � 1451(k). Since Guam is a territory or possession of the United-States, chapter 11A is applicable on Guam. By operation of section 502(a) of the Covenant, chapters 11 and TIA are also applicable to the Northern Mariana Islands. Chapter 12. Federal Savings and Loan Associations. The statutes. Federal savings and loan associations are chartered by the Federal Home Loan Bank Board.* A principal purpose of the associations is provision of financing for the purchase of homes. 12 U.S.C. S 1464(a). Chapter 12 of title 12 governs the organization, operation, regulation, and dissolution of federal savings and loan associations. (The powers of federal savings and loan associations were substantially expanded, and restrictions on the associations eased, with the 1982 passage of the Garn-St. Germain Depository Institutions Act, Public Law 97-320, 96 Stat. 1469.) Present applicability. Chapter 12 of title 12 is specifically applicable to Guam. 12 U.S.C. � 1466. See also id. �� 1464(c)(5)(C); 1464(c)(8)(A); 1464(d)(13)(A)(3); 1464(i)(3)(.K-); 1470(b)(4). By operation of section 502(a) of the Covenant, the chapter is also applicable to the Northern Mariana Islands. Chapter 13. National Housing. This chapter was enacted originally in 1934 as the National Housing Act. That Act, with its varied and numerous amendments, *Savings and loan associations may also be chartered by State governments. 280 - includes--beyond its basic provisions--thirteen titles setting forth particular programs. The titles (designated as subchapters in the organization of the United States Code) are described below. Section 1715d of title 12 allows the Secretary of Housing and Urban Development to alter particular requirements of this chapter with respect to Alaska, Guam, and Hawaii. The chapter is thus applicable to Guam, and by operation of section 502(a) of the Covenant, to the Northern Mariana Islands.* many programs authorized by this chapter carry their own applicability provisions. None of these provisions specifically excludes Gum or the Northern Mariana Islands from a particular pr ogr am. The various provisions related to applicability are noted in the survey of the National Housing Act that follows. Even though those separate applicability provisions are noted, section 1715d compels the conclusion that the entire chapter applies to Guam and, pursuant to the Covenant, to the Northern Mariana Islands. Provisions preceding subchapter I. In addition to the provisions contained in the thirteen active subchapters, of chapter 13, a number of provisions not classified to any subchapter precede subchapter I. Those provisions are discussed first. The statutes. . The provisions of chapter 13 preceding subchap ter I are in large part concerned with granting powers to and establishing housekeeping rules for the Secretary of Housing and Urban Development and other federal agencies. See, for example, 12 U.S.C. �� 1701c, 170ld-4, 1701g-5, 1701h. other provisions set forth rules governing mortgages *The location of this chapter in title 12 of the United States Code, Banks and Banking, leads to the conclusion that the provisions of the chapter are federal banking laws. Further, the subject of the chapter is mortgage insurance, and mDrtgages are a traditional concern of banking. If the provisions of chapter 13 are considered federal banking laws, they apply to the Northern Mariana Islands--pursuant to section 502(a)(1) of the Covenant--as they apply to Guan. They could also be considered as laws providing federal services and financial assistance programs, in which case they would also apply to the Northern Mariana Islands, under section 502(a) (1), as they apply to Guam. otherwise, they are laws applicable to Gum and the several States, and apply to the Northern Mariana Islands as they do to the several States (and not as they do to Guam). Covenant 502(a)(2). - 281 insured pursuant to the various subchapters of chapter 13. See, for example, id. S 1701j-1, 17011, 17011-1. Still other provisions establish particular assistance prograns. See id. S 170lq (loans for housing and related facilities for elderly or handicapped families); � 1701s (rent supplements for qualified lower incane fanilies); � 1701x(b) (planning loans to nonprofit organizations or public housing agencies engaged in construction or rehabilitation of housing for low- and moderate-inccue families). Present applicability Whether the provisions of chapter 13 preceding subchapter I are applicable to the Northern Mariana Islands is significant only for those provisions establishing particular assistance prograns. The provisions granting powers to and establishing housekeeping rules for federal agencies apply wherever those agencies operate. The provisions setting forth rules governing mortgages insured pursuant to the various subchapters of chapter 13 are applicable to the Northern Mariana Islands in accordance with the provisions of those subchapters (all of which are applicable to the Northern Mariana Islands). "State" is defined to include "the possessions of the United States" for purposes of the provisions authorizing loans for housing and related facilities for elderly or handicapped fanilies. 12 U.S.C. 9 1701q(d)(5). when this definition was enacted in 1959, federal law provided that "no law of the United States hereafter enacted shall have any force or effect within Guam unless specifically made applicable by an Act of Congress either by reference to Guam by name or by reference to 'possessions."' Act of August 1, 1950, c.512, � 25(b), 64 Stat. 390, 48 U.S.C.A. � 1421c(b) (1952), repealed by Public Law 90-497, � 7, 82 Stat. 842 (September 11, 1968). The definition of "State" for purposes of this section thus includes Guarn and, by operation of section 502(a) of the Covenant, the Northern Mariana Islands. Although the statute does not otherwise define the areas in which this insurance progran is available, the definition of "State" to include particular jurisdictions is strong evidence of congressional intent that the program be available in those jurisdictions. Rubenstein v. United States, 153 F.2d 127, 129 (D.C. Cir. 1946). Accordingly, the loan assistance authorized by this statute is available in the Northern Mariana Islands. Rent supplements are paid to "housing owners" on behalf of "qualified tenants." 12 U.S.C. � 1701s(a). "Housing owners" are mortgagors under section 17151 of title 12, id. � 1701(b), a section which-as further discussed Below-applies Eo- the Northern Mariana Islands. "Qualified tenants" are defined by reference to section 1437f of title 42 of the United States Code. 12 U.S.C. 9 1701s(c)(1). Section 1437f is applicable to the territories and - 282 - possessions of the United States. 42 U.S.C. � 1437a(b)(7). Guam i s a territory or possession of the United States, so section 1437f is applicable to the Northern Mariana Islands by operation of section 502(a) of the Covenant. Since both "housing owners" and "qualified tenants" may be found in the Northern Mariana Islands, the rent supplement program is available in the Northern Mariana Islands. The planning loans authorized by section 1701x(b) are available for projects authorized under section 1715z of title 12 or "any other federally assisted program." Section 1715z projects, as further discussed below, may be constructed in the Northern Mariana Islands, so planning loans for those projects are also available in the Northern Mariana Islands. Planning loans for other federally assisted programs are available in the Northern Mariana Islands to the same extent as the programs themselves are available in the Northern Mariana Islands. Subchapter I. Housing Renovation and Modernization. The statutes. This subchapter, title I of the National Housing Act, offers Federal Housing Administration (FHA) insurance to private lending institutions against losses on loans made to finance repairs and improvements to existing structures and the building of small, new, norr-residential structures. See generally 12 U.S.C. SS 1702-1706. See also Federal Banking Law Reporter (CCH) 1571-72. Present applicability. The principal programs authorized by this subchapter are specifically available in Guam and the Trust Territory of the Pacific Islands. 12 U.S.C. S 1706(d). By operation of section 502(a) of the Covenant, these programs are also available in the Northern Mariana Islands. Section 1706e of title 12 authorizes the Secretary of Housing and Urban Development to transfer certain federally-owned residential structures to State and local goverments for use in urban hcmestead programs. Section 1706e does not specify whether Guam or the Northern Mariana Islands are entitled to participate in the program. Regulations issued under authority of this section, however, define Guam and the Trust Territory of the Pacific Islands as local governments -qualified to participate. 24 C.F.R. S 590.5(q) (1984). By operation of section 502(a) of the Covenant, the Northern Mariana Islands is also eligible to participate in the urban hcmestead program. - 283 - Subchapter II. Mortgage Insurance. The statutes. This subchapter, title II of the National Housing Act, is: designed to improve housing standards and conditions by utilizing the best available mans for achieving a sustained long-term residential construction program with a minimum expenditure of federal funds and a maximum reliance upon private business enterprise. To this end the (Federal Housing Administration (FHA)l insures mortgages on both new and existing one- to four-family hcmes, on properties destroyed or damaged by major disasters, on single-family homes in suburban and outlying areas and small ccmmunities, and on farm hanes located on plots of f ive acres or more adjacent to a public highway. The FHA insures mortgages on large scale rental housing projects which are intended to a id the production of reasonably pr iced rental acccmmodations for families and mortgages on cooperative housing. To aid in the elimination of slums and blighted areas, the FHA insures mortgages to assist the financing required for the rehabilitation of existing dwelling accrinmodations and to assist the financing of housing required to relocate families which might be displaced as a result of slum clearance. Under Title II, the FHA also insures mortgages to aid in the provision of housing acccmmodations for servicemen in the Armed Forces of the United States. Federal Banking Law Epyorter (CCH) 1572. Present applicability "State" is defined to include Guam and the Trust Territory of the Pacific Islands for purposes of many programs authorized by this subchapter. See 12 U.S.C. SS 1707(d), 1709 (mortgage insurance); id. S 1713(a)(7) (rental housing mortgage insurance); id. 1715kTc-) (mortgage insurance for housing in urban renewal areas); id. S 17151(c) (mortgage insurance for housing for low and moderTte inccme families and displaced families); and id. S 1715y(b) (mortgage insurance for condominiums). The Secretary of Housing and Urban Develcpment has broad authority to make rules and regulations to carry out this subchapter. Id. � 1715b. Sane of those rules and regulations define "State" to include Guam and the Trust Territory of the Pacific Islands for the purpose of particular programs. See 24 C.F.R. �9 204.251(p), 250.101(h) (1984) (coinsurance under section 244 of the National Housing Act, 12 U.S.C. S 1715z-9); 24 C.F.R. � 232.1(h)(1984) (mortgage insurance for nursing homes and intermediate care - 284 facilities, 12 U.S.C. � 1715w); and 24 C.F.R. � 242.1(g)(1984) (mortgage insurance for hospitals, 12 U.S.C. � 1715z-7). Other regulations, h@y their mention of Guam, make clear particular programs are available in Guam. See 24 C.F.R. 213.7(d)(2), 213.21 (1984) (mortgage insurance for cooperative housing, 12 U.S.C. � 1715e); 24 C.F.R. � 231.6(b) (1984) (mortgage insurance for housing for the elderly, 12 U.S.C. � 1715v); 24 C.F.R. 235.31 (1984) (mortgage insurance for home ownership and housing project rehabilitation, 12 U.S.C. 1715z); and 24 C.F.R. � 236.12(c)(2) (1984) (mortclaqe insurance and interest reduction payments for rental projects, 12 U.S.C. @ 1715z-1). Regulations for other programs authorized by subchapter II do not mention Guam. Yet those regulations often incorDorate by reference regulations that do mention Guam, strongly implying that these programs are available in Guam. See 24 C.F.R. 4@ 237.5 (1984), incorporating by reference subparts A of 24 C.F.R. parts 203, 220, 221, and 231, all of which are applicable to Guam (sine-cial Mortgage insurance for low and moderate income families, 12 U.S.C. S 1715z-2); and 24 C.F.R. �� 222.1 240.1 (1984), also incorporatin q_ by reference subpart A of 24 C.F.R. part 203 (mortgage insurance for servicemen and on loans to homeowners for purchase of land on which home is situated, 12 U.S.C. �� 1715m, 1715z-5). A-11 of the programs available in Guam by the terms of the authorizing statute or by regulations implementinq the authorizing statute are available in the Northern Mariana Islands by or,\--ration of section 502(a) of the Covenant. Neither the statutes nor implementinq regulations define the geographical applicability of some other programs authorized by this subchapter. 12 U.S.C. � 1715z and 24 C.F.R. �q 235.301-.499 (1984) (periodic assistance payments to aid lower-income families in acquiring homes);* 12 U.S.C. � 1715z-la (operating assistance for troubled multifarnily housing projects); id. q 1715z-6 and 24 C.F.R. part 241 (1984) (supplementary financing for insured project mortgages); and 12 U.S.C. � 1715z-8 (mortgage assistance payments for middle-incane families). EVen though these statutes and their implementing regulations do not specify geographical applicability, they are applicable to the Northern Mariana Islands, as is all of chapter 13 of title 12. See the analysis at the beginning of this discussion of chapter 13, above. *Authority for new contracts for assistance payments under this program expired November 30, 1983. 12 U.S.C. q 1715z(h)(1). - 285 - One statute in subchapter II may not be applicable to the Northern Mariana Islands. Section 1715d of title 12 allows the Secretary of Housing and Urban DevelcpTent to increase the maximum amounts for federally-insured mortages in Alaska, Guam, and Hawaii to allow for high construction costs in those areas. Legislation is proposed in this report to confirm the Secretary's authority to increase the maximum amounts for federal ly-insured mortgages in the Northern Mariana Islands. See the recaTtmendation, Maximum amounts for federal ly- insured mortgages in the Northern Mariana Islands, in the Recommendations section of this report. Subchapter III. National mortgage Associations. The statutes. This subchapter, title III of the National Housing Act, establishes the Federal National Mortgage Association (FNKA or Fannie Mae) and the Goverrment National Mortgage Association (GNMA or Ginnie Mae). The FNMA is a government-sponsored corporation owned by private investors who are authorized to buy and sell FHA-insured mortgages (as well as mortgages backed by the Veterans Administration) to "provide a degree of liquidity for mortgage investments, thereby improving the distribution of investment capital available for home mortgage financing." Federal Banking Law Emorter (CCH) 1574. The GWA, which is administered by the secretary of Housing and Urban Development, carries out the following programs: [Tjhe GNKA mortgage-backed securities program which provides secondary market financing for most FHA and VA home loans; the provision of special assistance in the financing of eligible types of federally underwritten mortgages; the provision of mortgage credit through the Emergency Hcme Purchase Assistance Act of 1974 (88 Stat. 1364; 12 U.S.C. 1723d), as amended; the managemnt and liquidation of the portfolio of mortgages held by GNMA; and the management of three Federal asset trusts. U.S. Government Manual 290-91 (1982). Present applicability. Both the FNMA and the GNMA are explicitly authorized to conduct business in any "Territory or possession" of the United States. 12 U.S.C. � 1723a(a). Guam is a "Territory or possession" of the United States. Accordingly, the FNMA and the GNKA may conduct business in Guam and, by operation of section 502(a) of the Covenant, in the Northern Mariana Islands. 286 Subchapter TV. Insurance of Savings and Loan Accounts. The statutes. This subchapter, title IV of the National Housing Act, creates the Federal Savings and Loan Insurance Corporation (FSLIC). The FSLIC, which is supervised by the Federal Home Loan Bank Board, insures savings deposited in savings and loan associations and similar thrift institutions, much as the Federal Deposit Insurance Corporation insures deposits in banks. The FSLIC insures the safety of savings up to $100,000 for each qualified account in an insured institution. Public unit accounts and individual retireTrkent and Keogh accounts are also insured up to $100,000. All Federal savings and loan associations, and those State-chartered building and loan, savings and loan, homestead associations, and cooperative banks which apply and are approved, are insured. U.S. Government Manual 495 (1982). Present applicability. The FSLIC is required to insure the accounts of all federally-chartered savings and loan associations and savings banks. 12 U.S.C. S 1726(a). Federally-chartered savings and loan associations may be organized in the Northern Mariana Islands. See the discussion of chapter 12, above. Accordingly, the FSLIC is also required to extend its services to the Northern Mariana Islands. The FSLIC is also permitted to insure the accounts of savings and loan associations, building and loan associations, homestead associations, and cooperative banks organized and operated according to the laws of a territory or possession in which they are chartered or organized. 12 U.S.C. � 1726(a). Since Guam is a territory or possession, the accouints of eligible institutions in Guam may be insured by the FSLIC. By operation of section 502(a) of the Covenant, so too may the accounts of eligible institutions in the Northern Mariana Islands.* *See also id. �� 1728(d)(1)(iv), 1729(c)(2), 1730(r)(1)(c); Public Law 46-2217, � 527, 94 Stat. 132, 167 (defining "State," for purposes of section 1730g of title 12, to include the Northern Mariana Islands). - 287 - For purposes of provisions in this chapter regulating the activities of savings and loan holding companies, "State" is defined to include the District of Columbia and Puerto Rico, but not Guam, the Northern Mariana Islands, territories, or possessions. 12 U.S.C. � 1730a(a)(1)(i). The savings and loan holding companies subject to regulation, however, are defined to include "any company which directly or indirectly controls an insured institution. . . ." Id. S 1730a(a)(1)(D). Another provision recognizes that a regulaFe-d savings and loan holding company may have its principal office in a territory. Id. � 1730a(h)(3)(B). See also id. 9 1730a(h)(2), (h)(3)(A),(h)(4). "States" have particular functions under the provisions regulating savings and loan holding companies. See id. � 1730a(b)(4) (FSLIC may use reports filed with and examinatioris- made by State supervisory authorities); � 1730a(e)(3) (holding company cannot control insured institutions in more than one StateW �1730a(g)(4) (State authority may request law enforcement by FSLIC). That a territory is not a State--and therefore unable to perform those particular functions--does not, however, preclude regulation of savings and loan holding companies in the territories. The other provisions, noted above, make clear that savings and loan holding companies in the territories are subject to regulation under this chapter. The applicability of these provisions, all part of section 1730a of title 12, to the territories reans that savings and loan holding companies on Guam are subject to regulation under these provisions. By operation of section 502(a) of the Covenant, savings and loan holding companies in the Northern Mariana Islands are also subject to regulation under section 1730a. Because section 1730a applies. differently to Guam than it does to the several States, whether section 1730a is a federal banking law becomes important. Federal banking laws apply to the Northern Mariana Islands as they do to Guam. Covenant � 502(a)(1). Other laws applicable to Guam and the several States apply to the Northern Mariana Islands as they do to the several States. Id. � 502(a)(2). Savings and loan associations are sufficiently akin to banks to require federal laws regulating them to be considered federal banking laws. Accordingly, section 1730a applies to the Northern Mariana Islands as it does to Gum, and the Northern Mariana Islands is not a "State" for purposes of that section. *But a regulated holding company could control insured savings and loan institutions in a State and in one or more territories. - 288 - Accounts established by various goverrmental officers, employees, and agents lawfully investing public funds in insured institutions, for purposes of determining whether the amount of the account exceeds the maximum insurable amount, are treated as separate from other accounts established by other officers, employees, or agents of the same government. 12 U.S.C. � 1724(b). The enumerated governments, however, do not include the Northern Mariana Islands, either directly or by operation of the Covenant.* Legislation is proposed in this report to add the Northern Mariana Islands to the list of governments entitled to establish separately insured accounts. See the recommendation, Insurance of "public unit" accounts in federally-insured savings and loan associations, in th Recomme-ndations section of this report. Subchapter V. Miscellaneous. The statutes. This subchapter, title V of the National Housing Act, as its title indicates, contains a variety of generally unrelated provisions: Multifamily housing built with the aid of federally insured mortgages may not be used for transient or hotel purposes. 12 U.S.C. � 1731b. A General Insurance Fund is established to carry out the mortgage insurance provisions of chapter 13. Id. � 17 3 5c. State usury laws are made inapplicable to federally insured mortgages. Id. S 1735f-7. Mortgage relief is authorized for homeowners m7employed as a result of a closing of a federal installation. Id. � 1735g. *Section 1728(d)(1)(iv) of title 12 specifies a $100,000 per account maximum insurable -amount for public-funds accounts maintained by officers, employees, or agents of any territory or possession in an insured institution in that territory or possession. Since Guam is a territory or possession, by operation of section 502(a) of the Covenant, the $100,000 maximum applies to public-funds accounts maintained by officers, employees, or agents of the Northern Mariana Islands at insured institutions within the Northern Mariana Islands. Section 1728(d)(1)(iv) does not explicitly allow such accounts to be treated separately from other accounts established by other officers, employees, or agents of the Northern Mariana Islands for purposes of determining whether funds on deposit exceed the maximum insurable amount. Further, section 1728(d)(1)(iv) applies only to Northern Mariana Islands public accounts maintained at insured institutions within the Northern Mariana Islands. Section 1724(b), i f made applicable to Northern Mariana Islands public accounts, would permit those accounts to be maintained at an insured institution within the Northern Mariana Islands or anywhere else in the United States. - 289 Present applicability Despite their diversity, the provisions in this subchapter fall in one of two categories. Either they are applicable only if a federally insured mortgage has already been secured or they pertain to the Federal Goverruent's administration of mortgage insurance programs. In the former case, applicability in the Northern Mariana Islands is determined by the availability of particular federal mortgage insurance programs in the Northern Mariana Islands, a question here treated in the discussions of those programs. In the latter case, whether the provisions are applicable to the Northern Mariana Islands is without significance, since they pertain to the internal operations of the Federal Government. Subchapter VI. War Housing Insurance. This subchapter, title VI of the National Housing Act, authorized the FHA to insure mortgages for war workers for various periods between 1941 and 1954. Although the subchapter defines "State" to include Guam and thus--by operation of section 502(a) of the Covenant--the Northern Mariana Islands, 12 U.S.C. � 1736(d), the authority to insure new mortgages expired August 2, 1954. Id. � 1746a. The subdhapter remains in the Code presumably because sTne mortgages insured thereunder have not yet matured. Subchapter VII. Insurance for Investments in Rental Housing for Families of moderate Income. The statutes. This subchapter, title VII of the National Housing Act, was enacted to supplement existing systems of mortgage insurance and to encourage equity investment in rental housing at rents within the capacity of families of moderate income. The Federal Housing Administrator is authorized to insure and make ccinmitnents to insure the minimum annual organization charge and an annual return on the outstanding investment made in eligible projects under this title. Any natural person, company, corporation, and any group containing not more than ten natural persons is eligible for insurance under title VII. These contracts of insurance can be terminated at any time by the Administrator and, after written notice, by the investor at the close of any operating year. - 290 - Federal Banking Law Reporter (CCH) 1573. See also 12 U.S.C. � 1747. Present Applicability. "State" is defined, for purposes of this subchapter, to include Guam. 12 U.S.C. � 17471(q). By operation of section 502(a) of the Covenant, the Northern Ma'riana Islands is also a State for purposes of the subchapter. Although the subchapter does not otherwise define the areas in which this insurance program is available, the definition of "State" to include particular jurisdictions is strong evidence of congressional intent that the program be available in those jurisdictions. Rubenstein v. United States 153 F.2d 127, 129 (D.C. Cir. 1946). Accordingly, the insurance program authorized by this subchapter is available in the Northern Mariana Islands. Subchapter VIII. Armed Services Housing Mortgage Insurance. The statutes. This subchapter, title VIII of the National Housing Act, authorizes federal mortgage insLirance for construction of housing for military personnel and their dependents near military installations. The Secretary of Housing and Urban Developiment may provide insurance without regard to normal considerations of econanic risk if -it is shown that the housing is necessary, that the military installation is permanent, and no substantial curtailment of operations at the installation is presently intended. See Federal Banking Law Reporter (CCH) 1573. Present applicability "State" is defined, for purposes of this subchapter, to include Guam. 12 U.S.C. S 1748(g). By operation of section 502(a) of the Covenant, the Northern Mariana Islands is also a State for purposes of the subchapter. As with the previous subchapter, the definition of "State" to include particular jurisdictions is strong evidence of congressional intent that the program be available in those jurisdictions. Accordingly, the insurance program authorized by this subchapter is available in the Northern Mariana Islands. Subchapter IX. Housing for Bducational Institutions. The statutes. This subchapter, originally enacted as title IV of the Housing Act of 1950, authorizes federal loans and grants to institutions of higher education for construction or purchase of housing and other facilities for students and faculties. - 291 - Present applicability. "State" is defined, for purposes of this subchapter, to include the Territories and possessions of the united States. 12 U.S.C. S 1749c(e). Guam. is a Territory or possession of the United States. By operation of section 502(a) of the Covenant, the Northern Mariana Islands is also a State for purposes of the subchapter. As with the two preceding subchapter, the definition of "State" to include particular jurisdictions is strong evidence of congressional intent that the proqram be available in those jurisdictions. Accordingly, the loan and grant program authorized by this subchapter is available in the Northern Mariana Islands. Subchapter IX-A. Mortgage Insurance For Land Development and New Ccmnunities. The statutes. This subchapter, title X of the National Housing Act, authorizes federal mortgage insurance on property purchased for residential developments and new communities. Although the subchapter defines "State" to include Guan and thus--by operation of section 502(a) of the Covenant--the Northern Mariana Islands, 12 U.S.C. 5 1749aa(c), the authority to insure new mortgacles expires September 30, 1985. Id. S 1749bb(a). Present applicability. "State" is defined, for purposes of this subchapter, to include Guam. 12 U.S.C. S 1749aa(c). Accordingly, by operation of section 502(a) of the Covenant, the Northern Mariana Islands is also a State for purposes of the subchapter. As with the Preceding subchapters, the definition of "State" to include a particular jurisdiction is strong evidence of congressional intent that the program be available in that jurisdiction. Accordingly, the mortgage insurance program authorized by the this subchapter is available in the Northern Mariana Islands. Subchapter IX-B. Mortgage Insurance For Group Practice Facilities and Medical Practice Facilities. The statutes. This subchapter, title XI of the National Housing Act, authorizes federal insurance on mortgages for the construction and - 292 equipping of group medical, optometric, or dental practice facilities. Presentapplicability. "State is defined, for purposes of this subchapter, to include Guam. 12 U.S.C. � 1749aaa-5(6). Accordingly, by operation of section 502(a) of the Covenant, the Northern Mariana Islands is also a State for purposes of the subchapter. As with the preceding subchapters, the definition of "State" to include a particular jurisdiction is strong evidence of congressional intent that the program be available in that jurisdiction. Accordingly, the mortgage insurance program authorized by this subchapter is available in the Northern Mariana Islands. Subchapter IX-C. National Insurance Development Program. This subchapter, title XII of the National Housing Act, authorizes federal insurance and reinsurance against risks associated with riots and civil disorders. The subchapter defines "State" to include "the territories and possessions" and, thus, Guam. 12 U.S.C. S 1749bbb-2(a)(14). Accordingly, by operation of section 502(a) of the Covenant, "State" also includes the Northern Mariana Islands. Authority to issue new contracts of insurance or reinsurance expires September 30, 1985, although existing insurance and reinsurance may be continued until September 30, 1986. 12 U.S.C. q 1749bbb(b)(1). Subchapter X. National Defense Housing Insurance. The statutes. This subchapter, title IX of the National Housing Act, supplewents other federal mortgage insurance programs in areas determined by the President to be critical defense housing areas. Present applicability. "State" is defined, for purposes of this subchapter, to include Guam. 12 U.S.C. � 1750. By operation of section 502(a) of the Covenant, the Northern Mariana Islands is also a State for purposes of the subchapter. Although the subchapter does not otherwise define - 293 the areas in which this insurance progran is available, the definition of "State" to include particular jurisdictions is strong evidence of congressional intent that the program be available in those jurisdictions. Rubenstein v. United Statest 153 F.2d 127, 129 (D. C. Cir. 1946). Accordingly, the mortgage insurance program authorized by this subchapter is available in the Northern Mariana Islands. Subchapter XI. Voluntary Hame Mortgage Credit. The provisions of this subchapter are obsolete and are omitted from the current United States Code. Chapter 14. Federal Credit Unions. The statutes. A credit union is a financial cooperative which aids its nxnbers by encouraging thrift and by providing members with a source of credit for provident purposes at reasonable rates of interest. Federal credit unions serve occupational, associational, and residential groups, thus benefiting a broad range of citizens throughout the country. U.S. Government Manual 554 (1982). The principal difference between a credit union, on the one hand, and banks or savings and loan associations, on the other, is that voting control of a credit union is based on the Irinciple of one person, one vote and not on the number of shares owned. Federal credit unions are chartered by the National Credit Union Administration (NCUA).* The NCUA regulates and insures deposits in all federally chartered credit unions and in State chartered credit unions which are insured under the provisions of this chapter. Present applicability Chapter 14 is specifically applicable to "the several Territories, including the trust territories, and possessions of the United States." 12 U.S.C. S 1772. See also id. �� 1752(6), (9); 1768; 1771; 1781(a); 1785(f)(2), (g)(1). Guam is a Territory or possession of the United States. Accordingly, by operation of *Credit unions may also be chartered by State governments. - 294 - section 502(a) of the Covenant, chapter 14 is applicable to the Nor-thern Mariana Islands.* Chapter 16. Federal Deposit Insurance Corporation. The statutes. The Federal Deposit Insurance Corporation (FDIC) was established in 1933 to insure deposits in banks within and without the Federal Reserve System. The FDIC is to insure the deposits of all banks which are entitled to the benefits of insurance under the law. The major functions of the Corporation are to pay off the depositors of insured banks closed without adequate provision having been made to pay claims of their depo sitors, to act as receiver for all national banks placed in receivership and for state banks placed in receivership when appointed receiver by state authorities, and to prevent the continuance or development of unsafe and unsound banking practices. The Corporation may also make loans to, or purchase assets frcm, the insured banks when such loans or purchases will facilitate a merger or consolidation and will reduce the probable loss to the Corporation. Federal Banking Law Reporter (CCH) 1551. See also U.S. Government Manual 486-87 (1982). Present applicability. Accounts in banks on Guam are entitled to deposit insurance under this chapter. 12 U.S.C. � 1813(a), (d), (e). By operation of section 502(a)(1) of the Covenant, accounts in the Northern Mariana Islands are also entitled to deposit insurance. State banks (including banks in Guam and the Northern Mariana Islands), insured by the FDIC but not members of the Federal Reserve System, are permitted, with the consent of the FDIC, to acquire ownership interests in banks located in foreign countries or in "dependencies or insular possessions of the United States." id. *The NCUA is given authority to exchange information on State chartered credit unions with State regulatory authorities. 12 U. S. C. � 1784(d). The NCUA has defined "State" to include "Territories and possessions." 12 C.F.R. � 700.1(g) (1985). Under section 502(a)(2) of the Covenant, the NCUA's authority extends to exchanges of information with Northern Mariana Islands requlatory auth orities regarding credit unions chartered by the Northern Mariana Islands. - 295 1828(l).* (Insured State banks are otherwise severely restricted in their ability to acquire ownership interests in banks in other States. Id. � 1842(d).) Discussion. Deposits in banks in the Northern Mariana Islands have been insured by the FDIC since well before the negotiation of the Covenant. The Northern Mariana Islands, like other less economically developed areas, lacks capital. FDIC insurance of deposits in local banks encourages savings and, thus, capital formation. ,Chapter 17. Bank Holding Companies. The statutes. A bank holding company is anv firm which controls a bank or another bank holding cam 'pany. 12 U.S.C. S 1841(a)(1). This chapter encourages competition in the bankinq industry by limiting the ability of firms to become bank holding companies, by restricting the acquisition of other banks by bank holding companies, by controlling mrgers or consolidations of bank holding companies, a nd by circumscribing the nonbankinq activities of bank holding companies.** Id. @� 1842, 1843. A bank holding company is generally prohibited Tr-am acquiring a bank in a State other than the State in which the holding company's banking subsidiary is operating. Id. q 1842(d)(1). Present applicability. "Bank" is defined, for purpose of chapter 17, to include banks organized under the laws of Gum. 12 U.S.C. � 1841(c). By operation of section 502(a) of the Covenant, banks in the Northern Mariana Islands are also subject to this chapter. Chapter 18. Bank Service Corporations. The statute. This chapter authorizes two or more, insured banks or other *Banks orqanized in the Northern Mariana Islands, however, are treated as foreign banks covered by rules governing the operation of foreign banks within the fifty States and the District of Columbia. 12 C.F.R. parts 346, 347 (19R4). See also the Camission's recommendation, Northern Mariana Islands banks' participation in domestic markets, in the PecamTiendaitons section of this report. "Recently enacted legislation allows bank holding companies to invest in export trading companies. Public Law 97-290, q, 102(b), 96 Stat. 1233 (1982). - 296 depository institutions to form bank service corporations to Tperform clerical, statistical, bookkeeping, accountinq, and other services without violating Federal limitations on collaborative activity by two or more banks or depository institutions. (Federal limitations barring such collaboration include those imposed by sections 24, 84, 335, and 1845 of title 12. Senate Report 2105, 87th Conq., 2d Sess., reprinted at 1962 U.S. Code Cong. & Ad. News 3878, 3882.) Present applicability The banks and other depository institutions eligible to form bank service corporations are those banks insured by the Federal Deposit Insurance Corporation and those institutions subject to examination by the Federal Home Loan Bank Board or the National Credit Union Administration Board. 12 U.S.C. � 1861(b)(4), (5), as amended by Public Law 97-320, � 709, 96 Stat. 1469, 1541 (October 15, 1982). Nalified banks and depository institutions in the Northern @iariana Islands accordingly may form bank service corporations. Chapter 19. Security Measures for Banks and Savings and Loan Associations. The statutes. This chapter requires federal supervisory agencies to establish minimum standards for security against robberies, burqlaries, and larcenies for national banks, District of Columbia ba nks, Federal Reserve banks, State banks that are members of the Federal Reserve System, nornerrber State banks insured by the Federal Deposit Insurance Corporation, federal savinqs and loan associations, and other institutions insured by the Federal Savings and Loan Insurance Corporation. Present applicability. The minimum security standards established pursuant to this chapter are applicable to any bank or savinqs and loan institution in the cateqories naped in the chapter, reqardless of its location. Accordincily, each bank or savings and loan institution in the Northern Mariana Islands that is within those categories must comply with the minimum security standards applicable to its category. See 12 C.F.R. �� 216.0, 216.1, 326.1 (1984); id. � 563a.1 (1985). Chapter 21. Financial Recordkeepina. The statutes. This chapter allows the Secretary of the Treasury to impose recordkeepinq and reporting requirements on uninsured banks and other uninsured financial institutions. - 297 - Present @Mlicability. The Secretary has defined "United States," for purposes of the requiremnts imposed under authority of this chapter to include the territories and possessions of the United States. 31 C.F.R. q 103.11 (1984).* Gum is a territory or possession of the United States. By operation of section 502(a) of the Covenant, banks and financial institutions within the Northern Mariana Islands are subject to the Secretary's recordkeeping and reporting requirEments.** Chapter 22. lying Arrangements. The statutes. IlTying arrangements" are anticanpetitive practices requiring a custcmer, in order to obtain a desired product or service, also to accept fran (or provide to) the vendor another product or service or to refrain fran dealing with other vendors. This chapter prohibits a bank frcm conditioning banking services, particularly the extension of credit, on the custcrmrls promise to accept (or provide) scme other product or service or to refrain fran dealing with the bank's ccmpeetitors. Present applicability. "Bank" is defined, for purposes of chapter 22, to include banks organized under the laws of Gum. 12 U.S.C. SS 1841, 1971. Accordingly, by operation of section 502(a) of the Covenant, banks in the Northern Mariana Islands are also subject to this chapter's prohibitions against tying arrangements. The definition of "bank" also includes banks organized under the laws of the United States, so that federal ly-chartered banks in the Northern Mariana Islands, too, are subject to this chapter's prohibitions. *See also section 1954 of title 12, authorizing the Secretary to enforce this chapter "in the proper United States court of any territory or other place subject to the jurisdiction of the United States." "The Secretary's authority under this chapter is particularly noteworthy in light of statements made to the effect that "off-shore" banks in the Northern Mariana Islands are beyond the reach of federal regulatory authorities. See Fialka, Tax-Haven Pramoter, Selling Banks in the Pacific, Draws Official Interest, Wall Street Journal, February 8, 1983, at 1. - 298 - Chapter 23. Fann Credit System. Chapter 28 is discussed, together with chapters 7, 7A, and 7B, in the reccmmendation, Farm Credit System, in the Recommendations section of this rePort.* Chapter 24. Federal Financing Bank. The statutes. This chapter establishes the Federal Financing Bank to coordinate borrowing activities by the Federal Government and federally assisted proqrams with national fiscal and debt management policies. Present applicability. The activities of the Federal Financinq Bank are part of the internal management of the Federal Government. Whether the law creating the Federal Financing Bank is applicable to the, Northern Mariana Islands is thus of no significance. The Bank's obligations, it may be noted, are acceptable security for the deposit or investment of public funds by any territory or possession of the United States. 12 U.S.C. � 2288(d).** Chapter 25. National Commission on Electronic Fund Transfers. This chapter established a National Commission on Electronic Fund Transfers to study and to recommend administrative or legislative action with respect to the development of electronic fund transfer systems.*** The Ccrnmission made its final report in 1977 and is no longer in existence. 12 U.S.C. � 2403(b); Senate Report 95-515, at 3 (1978). *Chapters 8 and 10 of title 12, separately discussed earlier, also govern aspects of the. farm credit system. **In addition, the Bank has been given a specific role in connection with guaranteeing the purchase of certain bonds of the Guam Power Authority. 48 U.S.C. S 142.3a. ***This chapter is not to be confused with sections 1693 et seq. of title 15, United States Code, which regulate some asp6-ct@- Of electronic fund transfers. - 299 - Chapter 26. Disposition of Abandoned Money Orders and Traveler's Checks. Chapter 26 is discussed in the Ccimmission's reccmmendation, Escheat of abandoned money orders and traveler's checks, in the Recamwendations section of this report. Chapter 27. Real Estate Settlement Procedures. The statutes. This chapter prescribes certain settlement procedures applicable to all real estate transactions involving federally related mortgage loan-, and prohibits kickbacks and other specified fees and charqes. Present applicability. This chapter does not specifically define its geographic reach, although it is intended to apply to "all transactions in the United States which involve federally related Tmrtaaqe loans. " See 12 U.S.C. � 2603. The Secretary of Housing and Urban Development is given authority, in preparing informational booklets, to consider differences in real estate settlement procedures "a-monq the several State and territories of the United States." Id. � 2604(b). Further, the Secretary has broad authority to Take rules and regulations implementing this chapter. Id. S 2617(a). The Secretary has defined "federally related mortgage loans" to include those made to finance the acguisition of property in any territory or possession of the United States. 24 C.F.R. �� 3500-2(h), 3500.5(b)(3) (1984). Since Guam is a territory or possession, by operation of section 502(a) of the Covenant, real estate settlement transactions involving federally-related mrtaaqe loans in the Northern Mariana Islands are subject to this chapter. Chapter 28. Emergency Mortgage Relief_ This chapter established a nechanism for emerqency relief to homeowners to prevent mortqaqe foreclosures and distress sales durinq the 1975 recession. Authority for credit insurance and ere-rqency mortgage relief payments pursuant to the chapter expired in 1977. 12 U.S.C. S 2708(b). The chapter remains on the books presumably because some obligations incurred under the chapter have not yet been repaid. ChaDter 29. Home Mortgage Disclosure. The statutes. This chapter requires depository institutions in standard retropolitan statistical areas to disclose to the public in-formation - 300 - on mortgage loans made so that citizens and public officials can determine whether those institutions are serving the housing needs of the ccmmunities; and neighborhoods in which they are located. The requirements of this chapter expire in 1985, unless extended. 12 U.S.C. � 2811. Present applicability. The chapter does not define its geographic reach. The Board of Governors of the Federal Reserve System, however, is given broad authority to prescribe regulations implementing the chapter. 12 U.S.C. S 2804(a). The Board has defined "State" in its regulations to include only the fifty States, the District of Columbia, and Puerto Rico. 12 C.F.R. � 203.2(g) (1984). The Board's definition implies that the regulations do not apply elsewhere. The chapter applies only to depository institutions within standard metropolitan statistical areas. The Northern Mariana Islands is not now nor soon likely to be within such an area. The chapter accordingly may be regarded as inapplicable to depository institutions in the Northern Mariana Islands. Chapter 30. Community Reinvestment. The statutes. This chapter requires the Ccimptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Federal Hcme Loan Bank Board to evaluate the record of each financial institution under their supervision in meeting the credit needs of the institution's entire catutunity, including low- and moderate-inccme neighborhoods. Each of the supervisory agencies is also required to take that record into account in determining whether an institution is qualified to receive certain privileges or approvals frcm the agency. Present applicability. This chapter applies to all financial institutions regulated by the various federal supervisory agencies, without regard to their location. As discussed earlier, the jurisdiction of each of these agencies extends to the Northern Mariana Islands. 12 U.S.C. � 2902(2). Accordingly, federally@regulated financial institutions in the Northern Mariana Islands are subject to the provisions of this chapter. - 301 - Chapter 31. National Consumer Cooperative Bank. Chapter 31 is discussed in the Ccmmission's recommendation, National Consumer Cooperative Bank, in the Reccrmnenda t ions section of this report. Chapter 32. Foreign Bank Partici2ation in Domestic Markets, Chapter 32 is discussed in the Commission's recommendation, Northern Mariana Islands banks' participation in domestic markets, in the Recomn-kendations section of this report. Cha2ter 33. Depository Institution Mamement Interlocks. Chapter 33 is discussed in the Commission's reccmmendation, Depository Management Interlocks Act, in the Pecomn-teendat ions section of this report. Chapter 34. Federal Financial Institutions Examination Council. The statutes. This chapter establishes a Financial Institutions Examination Council [to] prescribe uniform principles and standards for the Federal examination of financial institutions by the office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, the Federal Home Loan Bank Board, and the National Credit Union Administration 12 U.S.C. � 3301. Present Mlicability. This chapter establishes one federal entity, the Federal Financial Institutions Examination Council, to prescribe standards for other federal entities, the various financial institutions regulatory agencies. The standards prescribed will affect financial institutions in the Northern Mariana Islands to the extent those institutions are supervised by the regulatory agencies. The jurisdiction of each of the financial institutions regulatory agencies extends to the Northern Mariana Islands. See the earlier discussions of chapter 1 (Comptroller of the Currericy); chapter 3 (Board of Governors of the Federal Reserve System); chapter 11 (Federal Home Loan Bank Board); chapter 14 (National Credit Union Administration); and chapter 16 (Federal Deposit Insurance Corporation). - 302 Chapter 35. Ri!lht_to Financial Privacy. Chapter 35 is discussed in the Commission's reccmmendation, Right to f inancial privacy in the Recommenda t ions section of this report. Chapter 36. Depository institutions Der!@zlation and Financial Etgulation Simpli"Flication. The statutes. This chapter contains the Depository Institutions Deregulation Act and the Financial Regulations Simplification Act. The former provides for the orderly phase-out and the ultimate elimination of the limitations on the maximun rates of interest and dividends which may be paid on deposits and accounts by depository institutions by extending the authority to impose such limitations for 6 years, subject to specific standards designed to ensure a phase-out of such limitations to market rates of interest. 12 U.S.C. S 3501(b). A Depository Institutions Deregulation Committee was created to do this. The Financial Regulation SLaplification Act requires federal financial regulatory agencies per iod ical ly to review their regulations, with the purpose of simplifying and updating them. This chapter "deregulates" banks and other depository institutions, allowing thEm greater freedom in the services they can provide and, most importantly, in the rates of interest they can charge. Regulatory actions in December 1982 and January 1983 freed depository institutions of restrictions on the kinds of accounts they may offer and promised consumers increased access to high yield savings and checking services through federally insured accounts. Present a22licability The Depository Institutions Deregulation Committee established by this chapter is given authority to regulate interest rates and classes of deposits or accounts. The Board of Governors of the Federal Reserve System, the Federal Home Loan Bank Board, and the Federal Deposit Insurance Corporation formerly held this authority. 12 u.S.C. S '3502(a). The supervisory authority of each of those regulatory agencies extends to depos i tory institutions in the Northern Mariana Islands. See the discussions of chapter 3, 11, and 16, above. As noted in the discussion of chapter 3, however, the Board of Governors of the Federal Reserve System, while having - 303 - general supervisory authority aver member banks in the Northern Mariana Islands, does not have authority to regulate interest paid by those banks on time and savings deposits. 12 U.S.C. � 371b. The portion of this chapter containing the Financial Regulation Simplification Act governs the internal conduct of the federal financial regulatory agencies. Simplification and updating of regulations affects the Northern Mariana Islands to the extent the regulations undergoing revision apply to financial institutions in the Northern Mariana Islands. Discussion. Because the Board of Governors of the Federal Reserve System did not have authority to regulate interest paid by member banks in the Northern Mariana Islands, neither does the Depository Institutions Deregulation Canmittee now have that authority. There is no good reason to enact legislation allowing the Depository Institutions Deregulation Camittee to regulate interest paid on tim and savings deposits by banks in the Northern Mariana Islands that are members of the Federal Reserve System. The thrust of the Depository Institutions Deregulation Act is toward removal of governmental restrictions on interest rates that financial institutions may pay. Granting the Ccmmittee authority to regulate where no authority previously existed would be contrary to the purposes of that Act. Chapter 37. Solar Energy and Conservation Bank. The statutes. This chapter creates the Solar Energy and Energy Conservation Bank to provide loans and other financial assistance to encourage the use of solar energy systems and energy conserving improvements. Present applicability The Solar Energy and Energy Conservation Bank is given the same powers as are given to the Government National Mortgage Association (GNMA) by section 1723a(a) of title 12. 12 U.S.C. S 3603(a). Section 1723a(a) gives the GNMA authority to conduct business in any "Territory or possession" of the United States and, thus, by operation of section 502(a) of the Covenant, in the Northern Mariana Islands. See the earlier discussion of subchapter III of chapter 13. Accordingly, the Solar Energy and Energy Conservation Bank is authorized to,conduct business in the Northern Mariana Islands. Discussion. The bylaws of the Solar Energy and Energy Conservation Bank allow the Bank to conduct business only in the fifty States, the - 304 - Di str ict of Columbia, %-erto Rico, and the Territories and possess ions. 24 C.F.R. � 1895.1 (1984) (Bylaws S 2.01). The bylaws by their own terms thus, contrary to the statute, do not allow the Bank to conduct business in the Northern Mariana Islands. Because the bylaws were adopted after January 9, 1978, section 502(a) of the Covenant does not operate to allow the Bank to conduct business in the Northern Mariana islands.* Because of a small population, allowing few econcmies of scale, and an isolated location, making transportation costs high, energy is expensive in the Northern Mariana Islands. Energy conservation improvements in the Northern Mariana Islands are thus likely to be especially cost-effective. The tropical location of the Northern Mariana Islands makes solar energy systems particularly attractive in principle. No legislation is required to allow the Solar Energy and Energy Conservation Bank to conduct business in the Northern Mariana Islands, since it presently has statutory authority to do so. The Bank should be encouraged, however, to awend section 2.01 of its bylaws to allow it to conduct business in the Northern Mariana Islands. Chapter 38. Multifamily Mortgage Foreclosure. The statutes. This chapter establishes a uniform federal procedure to replace disparate State laws governing foreclosure by the Secretary of Housing and Urban Development of certain federally-insured multifamily mortgages. Present applicability. This chapter applies to the specified types of mortgages "located in any State." 12 U.S.C. S 3703. "State" is defined to include "the territories and possessions of the United States" and "the Trust Territories of the Pacific Islands." Id. 9 3702(8). *This result is almost certainly inadvertent. The language in the Bank's bylaws is identical to the statutory language listing the jurisdictions in which the GNMA can conduct business and, thus, appears to comport with the Bank's statutory authority to conduct business wherever the GNMA conducts business. Not taken into account, however, is the expansion of GWA's authority, by operation of section 502(a) of the Covenant, to allow it to conduct business in the Northern Mariana Islands. - 305 - Until termination of the trusteeship, the Northern Mariana Islands is part of the Trust Territory of the Pacific islands and, thus, a "State" within this definition. After termination of the trusteeship, the Northern Mariana Islands will be a territory or possession of the United States and still a "State" within the definition. Accordingly, foreclosure on the specified types of mortgages within the Northern Mariana Islands is governed by the provisions of this chapter. Adjustable-rate mortqaqe loans are used to finance housing pursuant to an agmement allowing the lender to adjust the rate of interest frcm time to time. Federallv chartered financial institutions, by regulations issued prior to enactment of this chapter, are permitted to make adjustable-rate mortgage loans. This chapter allows nonfederally chartered financial institutions also to make adjustable-rate mortgage loans in conformity with federal regulations and nullifies any State law that would prohibit them from making such loans. Present applicability. Chapter 39 does not specifically define its geographic applicability. The chapter is applicable to "housiM creditors," however, and "housing creditor" is defined to include any mortqage lender that is a financial institution, as defined in the Depository Institutions Deregulation and Monetary Control Act (chapter 36, above), or any lender approved by the Secretary of Housing and Urban Development (HUD) for participation in any mortgage insurance program.. under the National Housing act (chapter 13, above). 12 U.S.C. SS 3802(2), 3803(a). Both the Depository institutions Deregulation and Monetary Control Act and the National Housing Act ap _ ply in the Northern Mariana Islands. Accordingly, any qualified financial institution or HUD-approved mortgage lender in the Northern Mariana Islands may make adjustable-rate mortqaqe loans, whether or not it is federally chartered. Further, no law of the Northern Mariana Islands may restrict or forbid the making of adjustable-rate mortgaqe loans.* *But see-12 C.F.R. � 29.2 (1985). - 306 - TITLE 13. CENSUS. The Commission did not examine chapters 1, 3, 5, or 7* of this title of the United States Code in detail. No problems in the application of these chapters to the @brthern Mariana Islands were brought to the Commission's attention. Chapter 9. Collection and Publication of Foreign Commerce and Trade Statistics. The statutes. This chapter, sections 301 et seq. of title 13, authorizes the Secretary of Commerce to collect_1CFWP71le, and publish foreign trade statistics, in order to pranote the domestic and foreiqn commrce of the United States. The foreign trade statistics program, conducted by the Bureau of the Census, involves the compilation and dissemination of a larqe body of data relatinq to the imports and exports of the United States. These statistics are designed to serve the needs of both qoverment and *There are no even-numbered chapters in title 13. - 307 - noncloverment users who have a wide rame of interests. The program, therefore, includes a variety of data presented in many different arrangements and released in the form of reports which are available by subscription and in reports and machine tabulations which are distributed to Department of Ccrnmerce field offices and U.S. Customs Service offices for public reference use. U.S. Department of Ccmmerce, Bureau of the Census, Guide to Foreign Trade Statistics 1 (1979). An important means for collection of these statistics is the Shipper's Fxport Declaration. See 15 C.F.R. part 30 (1985). The Secretary has broad authority to issue regulations to carry out the provisions of this chapter. 13 U.S.C. �� 4, 302, 307. Present applicability. Section 301 of title 13 autly)rizes the Secretary of Commerce to collect infon-ration "from all persons exportinq frcm, or importing into, the United States and the noncontiquous areas over which the United States exercises sovereiqnty, jurisdiction, or control. Collection of such information fran persons engaged in trade between the United States and the noncontiguous areas, or between the noncontiguous areas is also authorized. C@uam. is a noncontiguous area - 308 - over which the United States exercises sovereignty, jurisdiction, and control.* Collection of information is thus authorized with respect to goods moving (1) between foreiqn countries and the United States, including Guam and other noncontiguous areas; (2) between the United States, on the one hand, and Guam and the other noncontiguous areas, on the other; and (3) between Gum and the other noncontiguous areas. Section 502(a)(2) of the Covenant makes applicable to the Northern Mariana Islands federal laws "which are applicable to Gum and which are of general application to the several states." The Secretary of Cawrerce's authority under chapter 9 applies to importers and exporters in both Guam and the several States, as well as to persons tradi nq between Gum and the several States. Accordinqly, chapter 9 is also applicable to the Northern Mariana Islands. The several States and Guam, however, are not subject to the same treatment under chapter 9. The Secretarv may collect information on trade between Guam and foreign countries, between the several States and foreign countries, between Guam and the several States, and between Guain or the several States and the other contiguous areas. The Secretary is not authorized, however, to collect information on trade between two States of the United States. Federal laws applicable to Guam and the several States are to be applied to the Northern Mariana Islands as they are applied to the several States. Covenant � 502(a)(2). In what is surely an unintended result of application of the Covenant formula, the Secretary is thus authorized to collect information on trade -between the Northern Mariana Islands and foreign countries and on trade between the Nbrthern Mariana Islands and Guam, but not on trade between the Nbrthern Mariana Islands and the several States." *The United States now exercises jurisdiction and control over the Northern Mariana Islands. Trusteeship Agreement, Art. 3. The United States will not exercise sovereignty over the Northern Mariana Islands until termination of the trusteeship. Covenant �� 101, 1003(c). "The authority of the Secretary under this chapter extends to the movement of goods in and out of noncontiguous areas that are under the jurisdiction and control, but not the sovereignty, of the United States. `Ihe Trust Territory of the Pacific Islands is such an area. Until approval of the Covenant by the United States Congress, the Northern Mariana Islands was subject to this authority as part of the Trust Territory of the Pacific Islands, and thus a noncontiquous area rather than a State for purposes of the chapter. The Covenant, however, makes clear that if a statute is applica ble to Guam and the several States, it is to be applied to the Northern Mariana Islands as it is applied to the several States without regard for its prior applicability to the Trust Territory of the Pacific Islands. CcMpare Covenant � 502(a)(2) with id. � 502(a)(3). - 309 The regulations now in ef fect under chapter 9 treat the Trust Territory of the Pacific Islands (which, of course, still includes the Northern Mariana Islands) as a foreign country. 15 C.F.R. S 30.1 (a)(1) (1985). Those regulations have been in effect since prior to approval of the Covenant by the United States Congress. To the extent those regulations purport to collect information on trade between the Northern Mariana Islands and the several States, they now exceed the authority granted the secretary by this chapter. The regulations themselves have the status of law under section 502(a)(2) of the Covenant. In applying those regulations, the Northern Mariana Islands must be treated as a State. (Note, however, the broad authority of the Secretary to issue regulations implementing chapter 9 allows the Secretary to change the treatnent of the Northern Mariana islands in those regulations, so long as changes do not purport to require information on the flow of goods between the Northern Mariana Islands and the several States.) Since the Northern Mariana Islands is treated as a State under the regulations: (1) exporters in the other States (or the District of Columbia) are not required to f ile Shipper's Export Declarations when sending goods to the Northern Mariana Islands and exporters in the Northern Mariana Islands are not required to file Declarations when sending goods to those other states (15 C.F.R. �9 30.1, 30.2 (1985)); (2) exporters in Guam and the Virgin Islands are not required to f ile Shipper's Export Declarations when sending goods to the Northern Mariana Islands (id. q 30.1(a)(2) n.1);* (3) exporters in the Northern Mariana Islands are required to f ile Shippers Export Declarations when sending goods to foreign countries, including other parts of the Trust Territory of the Pacific Islands (id. � 30.1(a)(1)(i)); (4) importers in the United States are not required by these regulations to provide information on goods received from the Northern Mariana Islands, although most of the same information is required by Customs regulations (id. 30.70 & n. 9); *But exporters in Puerto Rico must file the Declaration when sending goods to the Northern Mariana Islands. 15 C.F.R. 30.1(a)(2)(ii) (1985). - 310 - (5) importers in the Northern Mariana Islands must provide information on goods entering the Northern Mariana Islands from foreign countries (including the Trust Tbrritory of the Pacific Islands) and from Guam and other noncontiquous areas on specified United States Customs forms (id. � 30.70); and (6) importers in the Northern Mariana Islands are not reauired by these regulations to provide information on goods enterinq the Northern Mariana Islands from the fifty States, the District of Columbia, or Puerto Rico (id.). Discussion. The Northern Mariana Islands should be treated for nurposes of chapter 9 like Guam and the other noncontiguous areas of the United States, not like a State. Like Guam, the Northern Mariana Islands is outside the United States customs territory. General Headnote 2 to the Revised Tariff Schedules of the United States; Covenant � 603(a). Goods must be identified when they move across customs borders, so those borders are convenient points for the collection of statistics. If the current regulations remain in effect but the Northern Mariana Islands is treated as is Guam, then: (1) exporters in the United States, including Giam and other noncontiquous areas, will not be required to file Shipper's Export Declarations when sending goods to the Northern tiariana Islands (15 C.F.R. 30.1(a)(1), 30.1(a)(2) n.1 (1985)); (2) exporters in the Northern Mariana Islands will be required to file Shipper's Export Declarations when sending goods to foreign countries, including other parts of the Trust Territory of the Pacific Islands (id. 30.2(a)); (3) exporters in the Northern Mariana Islands will not be required to file a Shipper's Export Declaration when sending goods to the United States (including Puerto Rico, Guam, and other noncontiquous, areas) (id. S 30.1(a)(2) n.1); (4) importers in the United States will be required to provide information on goods from the Northern Mariana Islands on s pecified United States Customs forms (id. S 30.70(a)); (5) importers in the Northern Mariana Islands will generally be required. to furnish the qovernmnt of the Northern Mariana Islands with a cammrcial. invoice and bill - 311 of lading or air waybill describing imported goods before they may take possession of those goods (id. @ 30.81(b)); and (6) carriers of merchandise to the Northern Mariana Islands will not he permitted to unload before providing the gove rnme nt of the Northern Mariana islands a manifest describing that mrchandise in detail (id. � 30-81(a)).* Thus, four requirements are unchanged, reqardless of whether the Northern Mariana Islands is treated as a State or like Guam: (1) exporters in the United States (and Guam) are not required to file Shipper's Export Declarations when sending goods to the Northern Mariana Islands; (2) exporters in the Northern Mariana Islands must file Shipper's Export Declarations when sending goods to any foreign country (including other parts of the Trust Territory of the Pacific Islands); (3) exporters in the Northern Mariana Islands are not required to file Shipper's Export Declarations when sending goods to the fifty States or the District of Columbia; and (4) importers in the United States must provide information on goods from the Northern Mariana Islands on United States Customs forms (although the authority for requirina such information differs depending on whether the @brthern Mariana Islands is treated as a State or like C ,uam) . If the Northern Mariana Islands is treated like Guam rather than as a State, then: (1) importers in the Northern Mariana Islands will not be required to provide information on goods entering *Thus, federal regulations (which are well within the Secretary's broad rulemaking authority) require that carriers of merchandise to -Guam and importers on Guam provide information to the government of Guam. According to information provided Commission staff by a Bureau of the Census official, the goverrment of Guam requested that federal regulations be issued on the premise that federal regulations would be easier to enforce than local regulations. - 312 - the Northern Mariana Islands fran foreign countries on United States Customs forms, but will be required to provide the goverment of the Northern Mariana Islands with a camaercial invoice and bill of lading or air waybill before taking possession of those goods; and (2) carriers of merchandise into the Northern Mariana Islands will be required to provide the goverment of the Northern Mariana Islands a detailed manifest describing that merchandise before loading it. TITLE 14. COAST GUkRD. The Commission did not examine this title of the United States Code in detail. In its recanmendation, Surveillance of oceanareas in the Recommendations section of this report, the Ccmmission recamrends increased Coast Guard efforts to patrol ocean areas adjacent to the Northern Mariana Islands. No other problems in the application of this title to the Northern Mariana Islands were brought to the Camnission's attention. TITLE 15. COMMERCE AND TRADE. Title 15 collects a wide variety of federal statutes dealing with canmerce and trade. Not all federal statutes affecting camnerce and trade are found in title 15. Many provisions of, for example, title 21, Food and Drugs; title 26, the Internal Revenue Code; title 46, Shipping; and title 49, Transportation, are very important to particular segments of the business world. If title 15 has any central theme, it is that of providing an honest, orderly, safe, and--usually--canpetitive marketplace. The title includes the federal antitrust laws and the laws against unfair and deceptive ccrnpetitive practices. The Truth in Lending Act is part of title 15, as are the laws creating the Consumer Product Safety Ccmmission and the Small Business Administration. Title 15 also contains a number of statutes intended to promote research and development in the United States, particularly in the area of energy conservation. Because of the wide variety of federal statutes collected in title 15, the title is here discussed on a chapter-by@chapter basis. Note. In the chapter-by@chapter analysis that follows, chapters 2D, 27, 40, and 55 are not discussed. Those chapters are discussed in the recanmendat ions, Investment camp@nies, Automobile Dealers 2aX in Court Act, Fishery trade officers; Department of Commerce and Petroleum Marketing Practices Act, respectively, in the - 313 Reccimneendations section of this report. Similarly, subchapters II, III, and VI of chapter 41 are discussed in the recommendations, Restrictions on garnishment, Fair Credit Reporting Act F and Electronic Funds Transfer Act, in the 'ReccauTendat ions section and are not treated in the analysis below. Also not discussed are chapters 3, 10, 11, 14, 16, 17, 18, 33, and 35. Tbese chapters have been repealed, omitted as obsolete, or transferred to other parts of the United States Code. There is no chapter 67 in title 15. Chapter 1. Monopolies and Combinations in Restraint of Trade. The statutes. Chapter 1 contains two of the most important antitrust statutes, the Sherman Antitrust Act of 1890, 15 U.S.C. �� 1 et seq., and the Clayton Act of 1914, id. �� 12 et seq. Both are desiqned to limit the concentration of economic power in the United States by promoting competition. Competition is promoted by imposing leqal restraints on m.nopolies and on the use of unfair trade practices. The Shennan Antitrust Act makes illeqal aqreements between two or mre persons to restrain trade, for example, by fixing prices to eliminate price competition. Id. S 1. The Sherman Act also makes it illegal for a single person or firm, even in the absence of an aqreEment with another firm, to monopolize (or attEmpt to monopolize) trade in particular goods. Id. q 2. The Clayton Act forbids a firm from acquiring the stock or assets of competing corporations if the acquisition would lessen competition or tend to create a mnopoly. Id. q 18. The Clayton Act and its subsecfuent amendments (principal li--the Robinson-Patran Act) also prohibit a seller frcrn offering different prices, services, or facilities to different purchasers unless the seller has leqitimate economic reasons for doing so. Id. q 13. Finns may not require their customers or suppliers to ie-Train from also dealing with the firm's competitors, if such a requirement would substantially lessen canpetition in a particular line of commerce. Id. S 14. Persons injured by violations of the antitrust laws may sue and recover three times their actual damages. Id. 43 15. The attorney general of any State may also bring a legal action to recover triple damages from antitrust violators on behalf of the citizens of the State. id. 15c. The Clayton Act differs fran the Sherman Act in that -it may be used by the Federal Trade Commission (discussed in chapter 2, below) and the courts when a practice does not yet substantially restrain trade but might do so in the future. See J. Van Cise, Understanding the Antitrust Laws 65 (1976). 314 - Present applicability. The Sherman Antitrust Act and the Clayton Act apply to the Territories and insular possessions as well as the States. See 15 U.S.C. �� It 3, 12. The Supreme Court has held that Congress, in enacting the antitrust laws, intended those laws to apply wherever the power of Congress reaches. United States v. Standard Oil Co., 404 U.S. 558 (1972) (American Samoa); Puerto Rico- v. Shell Oil Co., 302 U.S. 253 (1937) (Puerto Rico). ' See also Norman's on Te Waterfront, Inc. v. Wheatley, 317 F. Supp. 241 (D.V.I. 1970), affirmed, 444 F.2d 1011 (3d Cir. 1971) (Virgin Islands). Guam is an insular possession of the United States and well within the &TLbit of conqressional power. The antitrust laws are consequently applicable to Guam. By operation of section 502(a)(2) of the Covenant, those laws also apply to the Northern Mariana Islands. The attorney neneral of the Northern Mariana Islands may bring antitrust actions on behalf of the citizens of the Northern Mariana Islands under the Clayton Act. "State" is defined, for purposes of the provision authorizing suits by State attorneys general, to include the territories and possessions of the. United States. 15 U.S.C. � 15g(2). Since Guam, is a territory or Possession of the United States, the Northern Mariana Islands by operation of section 502(a)(2) of the Covenant is also a "State" for purposes of this provision. Discussion. The residents of the Northern Mariana Islands, few in number and distant from alternative suppliers, are particularly vulnerable to anticompetitive practices. The federal antitrust laws should continue to apply to the Northern Mariana Islands for the protection of those residents. If the antitrust laws were made inapplicable to the Northern Mariana Islands, the Northern Mariana Islands could become a haven for arrangements that would have adverse effects not only on competition and consumers in the Northern Mariana Islands but also on competition and consumers in the United States. Indeed, the current trend is to extend the reach of the antitrust laws to encompass anticompetitive practices and transactions that take place in foreiqn countries, if those practices or transactions adversely affect competition or consumers within the United States. See Shenef ield, The Perspective of the U.S. Department of Justice, in J. Griffin, ed., Perspectives on the Extraterritorial Application of U.S. Antitrust and Other Laws 12, 13 (1979). - 315 - Chapter 2. Federal Trade Commission; Promotion of Export Trade and Prevention of Unfair Methods of Competition. The statutes. The Sherman Antitrust Act and the Clayton Act, discussed in the treatment of chapter 1, above, are ccmplemented by the Federal Trade Ccmmission Act, 15 U.S.C. �� 41 et seq. Together, these three laws- constitute the principal federal protection for the public against abuses caused by restraint of trade and the exercise of monopoly power. The Federal Trade Ccnunission Act, contained in chapter 2 of title 15, establishes the Federal Trade Ccmmission (M) and charges it with preventing "unfair methods of ccxnpetition" and "unfair or deceptive acts or practices." Id. �� 41, 45(a)(1). See generally U.S. Government Manual 510-15 (r9-82). The principal means used by the FTC to prevent unfair or deceptive cam-tercial practices is the cease-and-desist order. 15 U.S.C. � 45(b). Each violation of such an order is cause for assessment of a civil penalty of up to $10,000. Id. S 45(m). The M may investigate particular businesses to ensLwe compliance with the antitrust laws, court decrees, and the statutes forbidding unfair trading practices. Id. � 4 6. The FTC may also issue rules, after providing intere!@t@ parties opportunity to camment, defining particular trade practices as unfair or deceptive. Id. � 57a. The FTC has the power to institute legal action to prevent the false advertisement of products. Id. �� 52-53. The F`M also enforces federal laws requiring wool, Tur, and textile products to be properly labelled. Id. q15 68-70k. Also included in chapter 2 of title 15 is the Webb-Pamerene Act, 15 U.S.C. q,� 61-66. This Act offers United states firms a limited exemption fran federal antitrust laws in carrying on export trade activities. Chapter 2 also contains the Unfair Ccrnpetition Act of 1916, 15 U.S.C. �� 71-77, which regulates the importation of goods into the United States. Section 72, an antidumping statute, prohibits the sale of foreign qoods in the United States at less than cost if the sale is made with the intent of injuring Ainerican production of the same qoods or otherwise restraining trade in those goods in the United States. Section 73 triples the duty on articles imported into the United States under an agreement (other than an exclusive sales agency agreEment) that prevents the importer or any other person frcrn using or dealing in the articles of any other person. Section 75 allows the President to prohibit particular imports into the United - 316 - States from nations prohibiting particular imports from the United States. Section 76 allows the President, during a war in which the United States is not involved, to prohibit particular imports into the United States from nations prohibiting particular imports from the United States and imposes criminal penalties for violation of any such prohibitions. Section 77 authorizes the President to take certain steps against vessels discriminatinq against United States commerce or citizens during a war in which the United States is not engaged. The FTC is also charqed with administering and enforcing a number of laws not included in chapters 1 or 2 of title 15. See 16 C.F.R. � 0.4 (1984). Among these laws are the Packers and Stockyards -Act, 7 U.S.C. 99 181 et seq.; the Trade Mark Act, 15 U.S.C. �� 1051 et secr; the Hart-ScotE--R6d--ino Antitrust Improvements Act of 1976, id. 1311; the Federal Cigarette Labelinc Td-. .j and Advertising Act, 1331 et seq.; the Fair Packagim and Labeling Act, id. F� 1451 et seq.; tlie--Ti:@-th in Lending Act, id. �� 1601 et seq.; the Fair Credit Billing Act, id. � 1666; the Fair Credit Pe@7rCirr- Act, id. 1681 et seg.; the Equal Credit Opportunity Act, id. 1691; the Fair Debt '@o-llection Pra ctices Act, id. �@ 1692 et @e-cr. the Electronic Fund Transfer Act, id. �,� 1695-et seq.; the Hobby Protection Act, id. � 2101; the Magnuson-Moss WarrantV--Federal Trade commission Imi3rovement Act, id. 4-@� 2301 et seq.; the Petroleum Marketing Practices Act, id. �9 2821 et seq.; and the Enerqy Policy and Conservation Act, 42 U.S.C. � OR. Present applicability. The Federal Trade Commission Act, like the other antitrust statutes, forbids certain practices affecting "commerce." And, as with the other statutes, "commerce" is defi ned broadly to include commerce within any "Territory," or between any "Territory" and any State, another Territory, or a foreign nation. 15 U.S.C. � 44. Only commerce that is totally intrastate is exempted from. the reach of the Act, and that exemption exists only because of constitutional limitations on the powers of Congress. See U.S. Const., Art. 1, q 8, cl. 3; Fry v United States, 421 U.S. 542, 547-48 (1975); Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241, 253-257 (1964). Again, as with the other antitrust statutes, Congress intended the Federal Trade Commission Act to apply wherever the power of Congress extends. See the discussion, Present applicability, under chapter 1, above. Since the power of Congress extends to Guam, the Act is - 317 - applicable to Guam and the several States.* Accordingly, by operation of section 502(a)(2) of the Covenant, the Act is also applicable to the Northern Mariana Islands. As a conseauence, the Federal Trade Ccmmission may gather evidence frcm the Northern Mariana Islands, 15 U.S.C. S 49; and the Act may be enforced by the District Court for the Northern Mariana Islands, id. 9 50. See also id. S 53(a); 48 U.S.C. � 1694a(a). The Webb-Pomerene Act, 15 U.S.C. 439 61-66, provides a limited exemption frcm, the antitrust laws for certain export trade activities. "Exports" include exports frcm a "Territory" of the United States. Id. � 61. Since the antitrust laws apply to the Northern Mariana -islands, the Northern Mariana Islands is also part of the United States for purposes of the Webb-Pcmerene exemption fran those laws. 2A Sutherland, Statutes and Statutory Construction � 51.02 (C. Sands ed. 1973). Accordingly, asso and agreements intended to promote export trade from the Northern Mariana Islands are eligible to qualify for the Webb-Pcmerene exemption from the antitrust laws. The provisions of chapter 2 governing the proper labelling of wool, fur, and textiles are specifically applicable to the 11possessions" or "insular possessions" of the United States. 15 U.S.C. 5� 68(h), 69(k), 70(l). See also id. � 68d(a), 69f(c)(2). Guam is an insular possession of the United States. Accordingly, by operation of section 502(a)(2) of the Covenant, the wool, fur, and textile labelling laws are applicable to the Northern Mariana Islands. The Unfair Competition Act of 1916, 15 U.S.C. 71-77, regulating imports into the United States is largely applicable to the Northern Mariana Islands but partly inapplicable. The Act is an antitrust statute and should be given the same construction as the other antitrust statutes. See Zenith Radio Corp. v. Matsushita Electric Industrial Co., 494 F. Supp. 1190, 1211-23 (E.D. Pa. 1980); 2A Sutherland, Statutes and Statutory Construction S 51.02 (C. Sands ed. 1973). As such, under the holdings in TFiFted States v. Standard oil Co., 404 U.S. 558 (1972), and Puerto Rico v. Shell Co., 302 U.S. *See also 'Norman's on the Waterfront, Inc. v. Wheatley, 317 F. Supp. 247, 251 n.3 (D.V.1. 1970), affirmed, 444 F.2d 1011 (3d Cir. 1971). In that case, the federal district court held that the term "intrastate transactions," in now-repealed provisions of the Federal Trade Ccrnmission Act authorizing States and Territories to enact resale price maintenance laws, included transactions within the Virqin Islands. If the Virgin Islands are within the meaning of "State" for purposes of the Act, so too is Guam, which enjoys a juridical status very similar to that of the Virgin Islands. - 318 - 253 (1937), the Act is applicable wherever the power of Congress extends. The power of Congress clearly extends to Guam. * Accordingly, by operation of section 502(a) (2) of the Covenant, the Unfair Competition Act is applicable to the Northern Mariana Islands." Section 73 of title 15, however, is not applicable to the Northern Mariana Islands. That section triples the duty on articles imported into the United States under an agreement (other than an exclusive sales agency agreement) that restricts the use or sale of other goods by the importer or any other person. The Northern Mariana Islands is not within the customs territory of the United States. Covenant � 603(a). Duties on goods imported into the Northern Mariana Islands are set solely by the government of the Northern Mariana Islands. Id. � 603(b). Accordingly, goods imported into the Northern Mariana fs-lands, are not subject to triple duty for violation of section 73. Many of the other laws not found in chapter 2 that are administered and enforced by the FTC are applicable to the Northern Mariana Islands, either directly or by operation of section 502(a)(2) of the Covenant. See 7 U.S.C. 182(6) (Packers and Stockyards Act); 15 U.S.C. � 1127, 48 U.S.C. 1421a (Trade Mark Act); 15 U.S.C. S 1332(3) (Federal Cigarette Labeling and Advertising Act); id. � 1602(r) (Truth in Lending Act and Fair Credit Billing Act); Td-. � 1692a(8) (Fair Debt Collection Practices Act); id. � 2301(T-5) (Magnuson-Moss Waranty--Federal Trade Canmission ImprcTv-ement Act); 42 U.S.C. �� 6202(4), 6291(17), 6302 (Energy Policy and Conservation *In its 1951 report to the United States Congress, the Commission on the Application of Federal Laws to Guam concluded that sections 71 to 77 of title 15, in the substantially similar language in effect on August 1, 1950, were then applicable to Guam. Report of the Commission on the !Nmlication of Federal Laws to Guam, House Document 212, 82d Cong., lst Sess. 16 (1951). The staff of that commission concurred that the sections were "probably" applicable to Guam, but did not give a rationale for its conclusion. See House Committee on Interior and Insular Affairs, Resource Materials Used in the Preparation of the Report of the Comission on Application of Federal Laws to Guam 103-04 (Committee print 1952). **An earlier study by the staff of this Commission concluded that the Northern Mariana Islands is not part of the United States for purposes of sections 72 and 75. Northern Mariana Islands Commission on Federal Laws, Borders: The Applicability of Federal Law to Imports to and E2ports from the Northern Mariana Islands--A Survey 52-53 (staff study 1983). That study did not treat these sections as antitrust statutes given the broad application requifed by the Supreme Court decisions cited in the text, above. - 319 - Act). See also the discussions below of chapter 34, containing the Hart-Scott-Fbdino Antitrust Improvements Act of 1976; and chapter 41, containing the Equal Credit Opportunity Act. Discussion. To protect consumers and competition in the Northern Mariana Islands and to avoid creating a loophole in the implementation and enforcement of the federal antitrust laws and laws against unfair competition, chapter 2 of title 15 should continue to ap ply in the Northern Mariana Islands.* Chapter 2A. Securities and Trust Identures. and Chapter 2B. Securities Exchanges. The statutes. The Securities Act of 1933. The Securities Act of 1933, as amended (Securities Act), is found at sections 77a et seq. (chapter 2A) of title 15. Regulations issued pursuant to the Securities Act are found at sections 230.100 et seq. of title 17, C.F.R. (1984). The Securities Act protects the investim by imposing ._ public disclosure reguirEments on issuers of securities. The purpose of the full disclosure system, according to the Securities and Exchange Commission (SEC), is to assure that the securities markets operate in an environment in which full and accurate material information about publicly traded companies is available to investors, securities analysts and other interested persons. BY fostering investor confidence and implementing the Congressional mndate of investor protection, the full disclosure system contributes to the maintenance of fair and orderly markets and facilitates the capital formation process. Securities & Exchange Commission, 47th Annual E21LOrt 17 (1981). *No recommendation is here made to apply the only now-inappl ic able provision of chapter 2 to the Northern Mariana Islands. That orovision, section 72 of title 15, it will be recalled, triples the duty on the import of goods into the United States under certain anticompetitive conditions. Applyinq section 72 to imports into the Northern Mariana Islands would be inconsistent with the exclusive power to set duties conferred on the qovernment of the Northern Mariana Islands by section 603(b) of the Covenant. - 320 - The term "security" is broadly def ined by the statute to include stocks, bonds, investment contracts, and "the many [other] types of instruments that in our commercial world fall within the ordinary concept of a security . . . ... House Report 85, 73d Cong., lst Sess. 11 (1933). See 15 U.S.C. � 77b(l).* Sections 77c and 77d of title 15 exempt from the registration provisions of the Act certain classes of securities (for example, securities issued by governments or banks) and certain transactions for which the benefits of regulation are too remote. See House Report 85, 73d Cong., lst Sess. 5 (1933). If all securities issued by a firm are valued at less than $100,000, the firm is exempt from mst registration requirements. 17 C.F.R. � 230.257 (1984). The Act generally recruires that, prior to issuance of a security in interstate co-nmerce or through the mails, the issuer must file with the SEC a registration statement containing specified information about the security, the issuer, and the underwriters (that is, those involved. in the distribution of the security). 15 U.S.C. �� 77e-77q, 77aa. This information is made available to the public. Id. 77f(d). The Act further requires that buyers be provided with a prospectus containing the essential information included in the registration statement. Td. S 77j. The SEC is responsible for ensuring that the required disclosure is made prior to distribution of the security and has authority under the Ac t to prevent a security from being distributed if the requirements are not met. Id. �� 77e, 77h(d) and (e). Material misstatements or omissions subject the issuer to criminal or civil penalties. Id. 77k, 771, 77x. The Act also contains anti-fraud provisions. Id. 77q. Sections 77bb et sea. of title 15 establish a Corporation of Foreign Security Holders "for the purpose of protecting rving, conse and advancing the interests of the holders of foreign securities in default." Id. S 77bb. The Trust Indenture Act of 1939, 53 Stat. 1149, amended the Securities Act to add protection for investors in certain types of bonds issued pursuant to trust indentures." The Act requires the *The courts have upheld a broad definition of the term 11security" as used in both the Securities Act and the Securities Exchame Act. See, for example, Tcherephin v. Knight, 389 U.S. 322 (1967); SFC v. Joiner Corp., 320 U.S. 344 (1943); SEPC v. Glenn W. Turner Enterprises, Inc., 474 F.2d 476 (9th Cir. 1973), certiorari denied, 414 U.S. 821 (1973). **A "trust indenture" is a "document which contains the terms and conditions which govern the conduct of the trustee and the rights of the beneficiaries." Black's Law Dictionary 1358 (5th ed. 1979). - 321 - trust indenture to include certain protective clauses and also requires trustees for the bondholder to be, independent of the issuing company. 15 U.S.C. �� 77aaa et @@. The Securities Exchange Act of 1934. The Securities Exchange Act of 1934, as mended (Exchange Act), is found at sections 78a et tM. of title 15. Regulations promulgated thereunder are found Tt sections 240.0-1 et seq. of title 17, C.F.R. (1984). Pursuant to the Exchange Act, the SEC regulates the securities markets, the self-policing organizations within the securities industry, and persons conducting a business in securities. 15 U.S.C. �� 78a et seq. The Act "was intended principally to protect investors against manipulation of stock prices through regulation of transactions upon securities exchanges and in over-the-counter markets, and to impose regular reporting requiremnts on companies whose stock is listed on national securities exchanges." Ernst & Ernst v. Hochfelder,, 425 U.S. 185, 195 (1976). The Exchange Act created the SEC, provided for its organization, and gave it certain rule-making and enforcement powers. 15 U. S.C. S� 78d, 78w. The Act addresses five min areas. First, the Act controls credit in the securities markets, by empowering the Board of Governors of the Federal Reserve System to prescribe rules relating to the extension of credit by brokers and dealers. 15 U.S.C. S 78g. These rules establish, mong other things, initial minimum margin requirements.* See 12 C.F.R. part 220 (1984). The Act itself makes it unlawful for any member of a national securities exchange, or any broker or dealer, to borrow on any security registered on a national securities exchange, except (1) from or through a member bank of the Federal Reserve System, (2) from a nonmember bank for which an agreement filed 'with the Board of Governors of the Federal Reserve System relating to the use of credit is in ef fect, or (3) in accordance with rules and regulations of the Board of Governors of the Federal Reserve System permitting loans among members, brokers, and dealers. 15 U.S.C. S 78h; 12 C.F.R. � 220.5 (1984). Second, the Act regulates exchanges and exchange trading. 15 U.S.C. �� 78f, 78k. No exchange may be registered as a national securities exchange until the SEC has determined that the exchange has the capacity to enforce its own rules as well as the rules and regulations of the SEC. Id. S 78f(b)(1). "Margin" is the cash or collateral provided by a purchaser to a broker or dealer' when buying securities with the aid of credit obtained from the broker or dealer. While the Board regulates initial margin requireTwnts, margin maintenance requirements are set by the various self-regulatory organizations, including the securities exchanges and national securities associations. See 12 C.F.R. � 220.7(b), (e) (1984). - 322 - Third, the Act prohibits the manipulation of securities prices. Id. S 78i. These safeguards are designed to ensure "a free and honest market" that will not be "defeated by manipulative practices." Senate Report 1455, 73d Cong., 2d Sess. 54 (1934). Specifically, the Act makes it unlawful to engage in a transaction or a series of transactions for the purpose of creating a false or misleading appearance of active trading in a security or for the purpose of inducing the purchase or sale of a security by others. 15 U. S.C. 78i(a). Fourth, the Act permits a security to be registered on a national securities exchange only after the issuer has filed an application with the SEC together with additional information appropriate to the public interest and for the protection of investors.* Id. 9 781. This information must be kept current by the filing of regular reports. Id. � 7 8m. In addition, the Act is intended to prevent abuses in the area of proxy solicitation and insider trading. Id. � � 7 8n, 7 8p. This latter provision requires any beneficial owner of more than ten percent of a security, or any director or officer of the issuer of any security, to report to the SEC whenever any change occurs in his or her ownership of stock in the corporation." Last, the Act regulates trading in over-the-counter securities markets, and provides that no association of brokers and dealers may be registered as a national securities association until certain SEC requirements are net, including provision of satisfactory evidence of the association's capacity to enforce its own rules as well as the rules and regulations of the SEC.*** Id. � 78o-3. "It is anticipated that the information filed by a corporation as a condition precedent to registration will be so ccmplete as to present to the stockholder, or the prospective stockholder, a picture of the corporation's financial condition which will enable him intelligently to evaluate its securities." Senate Report 1455, 73d Gong., 2d Sess. 74 (1934). "Profits realized by an insider fran the purchase and sale of a stock within a period of less than six months are profits of the corporation and must be paid over by the insider to the corporation. 15 U.S.C. � 78p(b). ***A national securities association is a self-policing association of brokers and dealers engaged in over-the-counter securities transactions. 15 U.S.C. � 78o-3. Brokers and dealers must be members of a national securities association in order to engage in over-the-counter transactions. Id. � 78o(b)(8). See generally 69 Am. Jur. 2d, Securities Reg7latiorr---Federal � 401 (1973). The National Association of Securities Dealers is the only national securities association registered under the Act. Id. � 364. - 323 - Present @Mlicability. The Securities Act of 1933. The Securities Act generally applies to any non-exempted security sold through the channels of interstate ccmmerce or the mails. 15 U.S.C. � 77e. "Interstate camnerce" is defined to include camierce between any Territory and any State of the United States, the District of Columbia, any other Territory, or any foreign country. Ide � 77b(7). The term, "Territory," in turn, is defined to include the insular possessions of the United States. Id. � 77b(6). Because Guam is an insular possession of the UniteT- States, the Act applies to securities offered or sold through ccmmerce or the mails between Guam and any Statel other territory, the District of Columbia, or any foreign country. Therefore, by operation of section 502(a)(2) of the Covenant, the Securities Act applies to securities offered or sold through commerce or the mails between the Northern Mariana Islands and any State or territory of the United States, the District of Columbia, or any foreign country. The Securities Exchange Act of 1934. The Exchange Act defines "interstate canmerce" to mean "trade, canmerce, transportation, or canmunication among the several States or between any foreign country and any State, or between any State and any place or ship outside thereof." 15 U.S.C. � 78c(a)(17). The Act defines "State" to mean flany State of the United States, the District of Columbia, Puerto Rico, the Canal Zone, the Virgin Islands, or any other possession of the United States." Id. S 78c(a)(16). Because Guam is a possession of the United States, the Act applies to transactions in securities offered or sold between Guam and anywhere else. By operation of section 502(a)(2) of the Covenant, the Exchange Act applies to transactions in securities offered or sold between the Northern Mariana Islands and anywhere else. Discussion. Prior to World War I transactions in securities were carried on by a relatively small number of people.* The Federal Government's Liberty Loan Drives during and after the war, however, taught a large segment of the population that paper could represent property and that securities could yield a reasonable rate of return. Later, during the 1920s, high-pressure salesmen lured unsophisticated *Until the enactment of federal securities legislation, securities were regulated by the States. Because most businesses were involved in interstate ccmmerce, State statutes afforded little protection. 1 L. Loss, Securities Regulation 105-06 (2d ed. 1961). - 324 - investors into securities trading with pramises of high interest returns and easy wealth. Fraudulent securities were sold for dubious enterprises, including the develcpment of "imaginary mines in Peru, mythical railroads in Canada, . . . extracting gold frcm seawater, [and] light frcm pcmegranates." James, The Securities Act of 1933, 32 Mich. L. Rev. 624, 627 (1934). Speculation was rampant. It was estimated that during this period [skine 50 billions of new securities were floated in the United States. Fully half or $25,000,000,000 worth of securities floated during this period have been proved to be worthless. These cold figures spell tragedy in the lives of thousands of individuals who invested their life savings, accumulated after years of effort, in these worthless securities. House Report 85, 73d Cong., lst Sess. 2 (1933). In 1932 the Senate Camittee on Banking and Currency was directed to investigate practices "with respect to the buying and selling and the borrowing and lending of listed securities upon the various stock exchanges, the values of such securities, and the effect of such practices upon interstate and foreign cam-merce Senate Resolution 84F 72d Cong., lst Sess., 75 Cong. Rec. 5241 (1932). See also Senate Resolutions 56 and 97, 73d Cong., Ist Sess., 77 Cong. Rec. 1171, 5232 (1933). The investigation laid the foundation for enactment of the Securities Act of 1933 and the Securities Exchange Act of 1934. 1 L. Loss, Securities Regulation 121 (2d ed. 1961); Senate Report 792, 73d Cong., 2d Sess. 3 (1934). Thus, the Acts were enacted in an effort to eliminate abuses in the financial markets believed to have contributed to the stock market crash of 1929 and the depression which followed. Among these abuses were excessive use of credit, manipulation of stock prices, trading by officers and directors on the basis of inside information, and failure of corporations to di sclose information which would have allowed investors to make informed investment decisions. See Senate Report 1455, 73d Cong., 2d Sess. (1934); Loamis, The Securities Exchange Act of 1934, 28 Geo. Wash. L. Rev. 214, 217 (1959). The arguments for continued application of the federal securities laws to the Northern Mariana Islands are at least as strong as arguments for enactment of the legislation in the first place. Investors in the Northern Mariana Islands should be protected fran unscrupulous securities practices just as investors are protected in other areas subject to the jurisdiction of the United States. 325 Nonapplicability of the federal securities laws to the Northern Ma-ciana Islands would man that unregulated securities could be issued. There would be no disclosure requirements for the issuer. There would be no requireneent for a prospectus to be provided the buyer. High-pressure sales practices could go unchecked. An unregulated exchange could establish itself in the Northern Mariana Islands dealing in unregulated securities. While a securities haven in the Northern Mariana Islands might attract scne investnent capital, it would also make the Northern Mariana islands a magnet for unscrupulous promoters and could tarnish the reputation of legitimate firms operating in the Northern Mariana Islands. Establishing the Northern Mariana Islands as the only area under the jurisdiction of the United States not subject to the federal securities laws, furthermore, could conceivably create "loopholes," making more difficult the enforcement of those laws nationally.* The federal securities laws should consequently continue to apply to the Northern Mariana Islands. The people of the Northern Mariana Islands are as deserving of the protections afforded by these laws as are others under United States jurisdiction. No legislation is necessary for their continued application. Ch22ter 2B-1. Secu--ities Investor Protection. The statutes. Chapter 2B-1 establishes the nonprofit Securities Investor Protection Corporation (SIPC) to protect stock market investors when a stockbroker holding cash or securities for those investors fails and is unable to satisfy its obligations to those investors. The SIPC protects investors in much the sane way the Federal Deposit Insurance Corporation protects bank depositors. The SIPC obtains the funds to provide protection from its member stockbrokers and dealers. Present applicability All registered stockbrokers and dealers" in the United States and its territories and possessions must be members of the SIPC. 15 U.S.C. S 78ccc(a)(2)(A)(i). Further, chapter 2B-1 is declared to apply as does the Securities Exchange Act of 1934. Id. S 78bbb. That Act is applicable to the possessions of the United-States. id. *No such loopholes, however, have thus far been identified. "Only registered brokers or dealers may engage in securities transactions if the mails or any means of interstate ccmmrce are used. 15 U.S.C. 5 78o(a)(1). 326 - 78c(a)(16),(17). Guam is a possession of the United States. Accordingly, by operation of section 502(a) (2) of the Covenant, all registered stockbrokers and dealers in the Northern Mariana Islands must be members of the SIPC, and all investors who are customers of those brokers or dealers are protected by this chapter. Chapter 2C. Public Utility Holding Companies. The statutes. Chapter 2C protects investors in gas and electric utility holding companies by requiring those companies to register with the Securities and Exchange Commission (SBC), by limiting transactions between such companies, and by requiring the companies to disclose a wide range of information to the SEC, State regulatory agencies, and the investing public. A holding company is any f irm that owns or controls 10 percent or more of an electric or gas utility or of another public utility holding company. 15 U.S.C. � 79b(a)(7). Present applicability "United States" is defined, for purposes of chapter 2C, to include only the several States and the District of Columbia. 15 U.S.C. � 79b(a)(24), (25). "Interstate cammrce" is defined to include commerce among the States (including the District of Columbia) or between a State and any place outside the State. id. S 79b(a)(28). Thus, the Northern Mariana Islands is not part of Fh-e United States for purposes of chapter 2C, but commerce between the Northern Mariana Islands and, say, Hawaii is interstate commerce for purposes of the chapter. The operative provisions of chapter 2C generally forbid specified activities and transactions of public utility holding companies if those activities or transactions affect interstate commerce or use the mails. See id. �� 79d, 79e, 79f. The SEC is given broad authority to exempt public utility holding companies from the r-rovisions of the chapter if the business of those companies is primarily outside the several States and the District of Columbia. Id. � 79c(a)(5), (b). The SEC has exercised that authority to exemFT from the provisions of the chapter any company not organized under the laws of any State or the District of Columbia and not owning assets in any of those jurisdictions (or having a subsidiary owning such assets). 17 C.F.R. � 250.5 (1984). Accordingly, any public utility holding company in the Northern Mariana Islands is exempt from the provisions of this chapter. Discussion. Electric power in the Northern Mariana Islands is generated and distributed by the government of the Northern Mariana Islands. There - 327 - is no gas distribution utility in the Northern Mariana Islands. There consequently is no need to apply this chapter to the Northern Mariana Islands. Fran time to time, proposals have been made to turn over power generation and distribution in the Northern Mariana Islands to a privately held public utility. See Governor: Private Sector Takeover is Good and Badf Pacific Daily News (Guam), Focus supplement, September 14, 1984, at 2; Panels Seek to Trim Goverment, Lder February 17, 1984, at 2; PriZtization of Services Sought, Marianas Variety, August 10, 1984, at 5. Even if power generation and distribution in the Northern Mariana Islands were handled by the private sector, there would be little reason to apply chapter 2C to the Northern Mariana Islands. Any private utility in the Northern Mariana Islands would be likely to be small, serving only the geographically isolated Northern Mariana Islands, and thus unlikely to be able to engage in the abuses that prompted enactment of chapter 2C. Chapter 2D. Investment CM2anies and Advisers. Chapter 2D is discussed in the recamnendation, Investment ccmpanLies, in the Recamiendations section of this report. Chapter 2E. Omnibus Small Business Capital Formation. The statutes. Chapter 2E authorizes the Securities and Exchange Ccmmission .(SEC) to collect and disseminate information on the needs of "new, small, medium-sized, and independent business" with respect to raising equity capital and to look for ways to reduce the costs of raising capital for small businesses (defined as firms the total .outstanding securities and indebtedness of which are valued at $25 million or less). Present applicability. The information required to be collected pursuant to chapter 2E is available to the general public. 15 U.S.C. SS 80c(a), 80c-l(d), 80c-3(b). Accordingly, persons in the Northern Mariana Islands may benefit from the information collected pursuant to this chapter. Ch22ter 4. China Trade. The statutes. This chapter, enacted in 1922, authorizes the creation of "China Trade Act corporations" for the purpose of engaging in business in 328 - China, which is def ined to include Tibet, Mongolia, Hong Kong, and Macao. 15 U.S.C. �� 142(b), 144. Such corporations may be chartered only if it is found that the "corporation will aid in developing markets in China for goods produced in the United States." id. � 145. "No corporation for the purpose of engaging in business within China shall be created under any law of the United States other than this chapter." Id. � 162. Present applicability. A corporation created under this chapter is, of course, intended to operate primarily in China. A majority of the directors of the corporation and its president and treasurer are required to reside in China. 15 U.S.C. � 149(b). A majority of the incorporators, a majority of the directors, and the president and treasurer of a China Trade Act corporation are required to be citizens of the United States. Id. �� 144(a), 149. Citizens of the Northern Mariana Islands will not-become citizens of the United States until termination of the trusteeship under which the Northern Mariana Islands is currently administered. Covenant �� 301, 1003(c). Accordingly, until that time citizens of the Northern Mariana Islands cannot be regarded as citizens of the United States for purposes of these requirements.* Discussion. By 1976, when favorable tax treabnent for China Trade Act corporations was repealed, this chapter was regarded as a dead letter. At that time only three such corporations were active, trading only with Hong Kong and Formosa, and reportedly accounting for "a rather negligible amount of trade." House Report 94-658, at 261-62 (1975). And despite the apparent prohibition of this chapter against creation of corporations other than China Trade Act corporations to engage in business in China, there were by 1976 "innumerable U.S. companies currently trading in Hong Kong and Foxmosa" not organized as China Trade Act corporations. Id. at 262. Because of the largely obsolete character of this chapter, amendment to allow citizens of the Northern Mariana Islands to form China Trade Act corporations would serve no purpose. *No recommendations were made with regard to these citizenship requirements in the Commission's January 1982 interim report to the United States Congress. - 329 - Chapter 5. Statistical and Commercial Information. The statutes. Chapter 5 requires the United States Department of Commerce to collect, organize, and publish statistics on manufacturing, commerce, transportation, and trade in the united States and, to some extent, in foreign countries. Present applicability. The current geographic applicability of chapter 5 is not specified with particularity. Two provisions state that information collected is to show "the condition of the manufactures, domestic trade, currency, and banks of the several States and Territories." 15 U.S.C. SS 176, 183. Both provisions were originally enacted well before the united States acquired Puerto Rico, the Virgin Islands, or Gum, so whether "Territory" was intended to include such after-acquired jurisdictions is not clear. Fortunately, whether chapter 5 is applicable to the Northern Mariana Islands is not of great moment. Sections 131, 182, and 193 of title 13, United States Code, authorize the Department of Commerce to collect virtually all the same information. The Northern Mariana Islands is specifically required to be included among the areas from which information is to be collected for purposes of those sections. Chapter 6. Wei@Lhts and Measures and Standard Time. The statutes. Chapter 6 establishes standard legal units and eguivalencies for measures of length (for example, inches, miles, centimeters), capacity (for example, gallons, bushels, liters), surface area (for example, square feet, acres, hectares), and weight (for example, ounces, pounds, and grans). The chapter also establishes standard gauges (thicknesses) for iron and steel and standard units of electrical measure (for example, ohms, amperes, watts). Standard barrels are established for apples, other fruits and vegetables, dry commodities, and lime. A standard set of weights and measures is to be provided to each State land grant college by the Secretary of Commerce. In addition, chapter 6 makes the metric system lawful in the United States and establishes the United States Metric Board, to promote use of the metric system in the United States. - 330 - The chapter also contains the Uniform Time Act, establishing uniform time zones spanning the United States and provides for the use of "daylight savings time" from the end of April to the end of October (so that the pcpulation will be encouraged to start its daily activities closer to sunrise and end them closer to sunset, and thereby reduce costs of artificial lighting). Presentapplicability With the exception of the provisions on the measurement of time, chapter 6 provides little guidance on the geographic applicability of its provisions. The metric system is made lawful "throughout the United States of America." 15 U.S.C. � 204. Standard units of measurement are made legal for use "in the United States." id. �� 205, 206, 223. Substandard barrels may not be used or shipped fram "any State [or] Territory" to any other State or Territory or a foreign country. Id. Sq 235, 238, 241. The general intention of Congress in adopting standardized units of weights and measures may be presumed to include making the use of those adopted units as widespread as possible. "united States" and "Territory," for purposes of these provisions, should be construed to include Guam* and, by operation of section 502(a)(2) of the Covenant, the Northern Mariana Islands. "State" is defined, for purposes of the Uniform Time Act, to include any possession of the United States. Id. � 267. Guam i s a possession of the United States. Accordingly-, by operation of section 502(a)(2) of the Covenant, the Northern Mariana Islands is also a State for purposes of the Uniform Time Act. The operative provisions of the Uniform Time Act are sections 260, 260a, and 262 of title 15. Each of these provisions, however, applies only "within the standard time zones prescribed by sections 261-264." The wsternmost of the eight standard time zones, the Bering Zone, "includes that part of the United States that is between 162* W. longitude and 1721301 W. longitude and that part of the Aleutian Islands that is west of 172*30' W. longitude, but does not include any part of the State of Hawaii." 49 C.F.R. � 71.13 (1983). The Northern Mariana Islands is three times zones further west. Since the Northern Mariana Islands is not within any of those *The Cammission on the Application of Federal Laws to Guam in 1951 reached a similar conclusion and noted the concurrence in that conclusion by the Bureau of Standards of the United States Department of Ccimmerce. Report of the Commission on-the &plication of Federal Laws to Guam House Document 212, 82d Cong., Ist Sess. 16 (1951); House Cammittee on Interior and Insular Affairs, Resource Materials Used in the Preparation. of the Report of the Commission on Application of Federal Laws to Guam 104 (Catutittee print 1952). - 331 - standard time zones, the operative provisions of the law do not apply in the Northern Mariana Islands. Further, the Northern Mariana Islands by its own legislation has defined its own "Marianas Standard Time" and, as authorized by section 260a of title 15, has decided not to observe daylight savings time. 1 Code of the Northern Mariana Islands SS 501-502 (1983). Discussion-the Uniform Time Act. There is no purpose to be served by instituting daylight savings time at a location near the Equator, where the times of sunrise and sunset vary little throughout the year. There also seems to be little benefit and, for that matter, little burden for the Northern Mariana Islands in establishing in federal law a standard time zone to embrace the area. Chapter 7. Bureau of Standards. The statutes. Chapter 7 establishes the National Bureau of Standards within the United States Department of Camerce. The Bureau, among other functions, provides the national systEm. of physical, chemical, and materials measurement; coordinates the system with measurement systems of other nations and furnishes essential services leading to accurate and uniform physical and chemical measurEment throughout the Nation's scientific cata, tin ity, industry, and canmerce; conducts materials research leading to improved methods of measurement, standards, and data on the properties of materials needed by industry, camerce, educational institutions, and Government; provides advisory and research services to other Government agencies; develops, produces, and distributes standard reference materials; and provides calibration services. U.S. Government Manual 139 (1982). Chapter 7 also authorizes the Bureau to operate a fire research center and a hydraulic research center. Present applicability. Chapter 7 does not specify with precision the geographic applicability of its provisions. The provisions establishing the National Bureau of Standards are part of the internal organization of the Federal Government and, as such, have no geographic applicability. The Bureau is authorized to "exercise its functions" 332 - for, awng others, "any State or municipal goverrment within the United States . . . or any scientific society, educational institution, firm, corporation or individual within the United States or friendly countries engaged in manufacturing or other pursuits requiring the use of standards or standardized instrunents." 15 U.S.C. S 273. The work of the Fire Research Center is to be "disseminated broadly. " Id. 9 278f(a). Bureau regulations make the Bureau's research and services generally available to the public at large. 15 C.F.R. part 200 (1985). Under these statutory and regulatory provisions, the Bureau should be regarded as authorized to make its research and services available to persons on Guam.* By operation of section 502(a) of the Covenant, Bureau research and services are also available to persons in the Northern Mariana Islands. Chapter 7A. Standard Reference Data Program. The statutes. Chapter 7A authorizes the United States Department of Ccmmerce to ccmpile and disseminate standard reference data on the physical and chemical properties of materials. Present applicability. The purpose of this chapter is to make standard reference data readily available to scientists, engineers, and the general public. 15 U.S.C. � 290. Persons in the Northern Mariana Islands thus may obtain the information made public pursuant to this chapter. Chapter 8. Falsely StqM22@ Gold or Silver or Goods Manufactured Therefran. The statutes. Chapter 8 makes criminal the false marking of gold, silver, or gold or silver articles and the import, export, or movement in interstate ccmmerce of falsely marked gold, silver, or gold or silver articles. *The Camission on the Application of Federal Laws to Guam reached the same conclusion in 1951, noting that "The Bureau of Standards believes it may carry on its functions in relation to and on Guam." Reportof the Ccmmission on the @pplication of Federal Laws to Guam, House Document 212, 82d Cong., Ist Sess. 17 (1951); House Camnittee on Interior and Insular Affairs, Resource Materials Used in the Preparation of the Report of tf7e -Camission on Application of Federal Laws to Guam 104-05 (Cammittee print 1952). - 333 - Present a22licability. Movement of falsely marked gold, silver, or gold or silver articles between the States and the Territories and possessions is specifically prohibited. The intent of the prohibition, as shown by the language of the statute, is to include the territories and possessions within the United States for purposes of the statute. Guam would thus be included and, by operation of section 502(a)(2) of the Covenant, so would the Northern Mariana Islands. Chapter 8 consequently prohibits the importation and exportation of falsely marked gold and silver to and fran the Northern Mariana Islands and prohibits its movement between the Northern Mariana Islands and other parts of the United States. Chapter 9. National Weather Service. The statutes. Chapter 9 establishes the National Weather Service within the National Oceanic and Atmospheric Administration (NOAA) of the United States Department of Commerce and charges it with forecasting the weather and recording climactic conditions. Present applicability Chapter 9 does not specify with precision the geographic areas for which the National Weather Service is required to forecast weather conditions and record climactic data. Regulations issued by NOAA likewise do not specify those areas. See 15 C.F.R. parts 907, 945 (1985). In the U.S. Government manual (1982), however, at page 141, N(AA is described as reporting "the weather of the United States and its possessions and [providing] weather forecasts to the general public. . . ." Guam is a possession so, by operation of section 502(a) of the Covenant, NCAA's construction of its authority would extend to reporting the weather of the Northern Mariana Islands and providing weather forecasts to the general public there. The National %bather Service has for a number of years maintained stations and Emplcyed personnel in the Trust Territory of the Pacific Islands for the collection of meteorological data. In June 1983, it was announced that a NCAA weather radio station would be established in the Northern Mariana Islands in the near future to give the population of the Northern Mariana Islands timely warning of weather disturbances and stoxms. NOAA Weather Station Slated for Ccmmonwealth, Marianas Variety, June 17, 1983, at 9.* *The station is scheduled to begin broadcasting in mid-1985. Telephone conversation, February 22, 1985, between Ccmmission staff and John Brookbank, office of the General Counsel, National Oceanic and Atmospheric Administration. - 334 - Discussion. weather forecasts are of importance to the residents of the Northern Mariana Islands, just as they are to people elsewhere in the United States. Timely warning of the tropical storms and typhoons that are not infrequent in the Northern Mar iana Islands is essential to the protection of life and property. In the past, tropical storm and typhoon warnings and other weather forecasts have been provided to the goverrment of the Northern Mariana Islands and media serving the Northern Mariana Islands from United States Navy weather forecasting facilities on Guam. In addition, the government of the Northern Mariana Islands is now able to receive daily weather forecasts from the Federal Aviation Administration. Direct Weather Reports Due, Pacific Daily News (Guam), Focus supplement, October 12, 1984, at 1. Chapter 9A. Weather Modification Activities or Attempts: E@--porting Requirement. The statutes. Chapter 9A requires any person attempting to modify weather in the United States (for example, by seeding rain clouds) to report that activity to the Secretary of Commerce. 1"he Secretary is required to keep a record of such attempts and make information about weather modification activities available to the public. Present applicability. "United States" is defined, for purposes of chapter 9A, to include "any territory or insular possession of the United States." 15 U.S.C. S 330(4). Guam is a territory or insular possession of the United States. Accordingly, by operation of section 502(a)(2) of the Covenant, chapter 9A is applicable to the Northern Mariana Islands and persons attempting to modify the weather of the Northern Mariana Islands must report their activities to the Secretary of Commerce. Chapter_10A. Collection of State Cigarette Taxes. The statutes. Chapter 10A assists States in collecting cigarette taxes. Any person who brings cigarettes into a State having a cigarette tax to sell to anyone other than a State-licensed distributor must report the shipmnt to the State tobacco tax administrator. Present @a .Mlicability. "State" is defined, for purposes of chapter 10A, to include only - 335 - the several States, Puerto Rico, and the District of Columbia. 15 U.S.C. � 375(6). Accordingly, persons bringing cigarettes into the Northern Mariana Islands for sale are not required by this chapter to report their shipments to Northern Mariana Islands tax authorities. Discussion. The Northern Mariana Islands, under section 603 of the Covenant, is a custans territory in and of itself and has the authority to examine all shipments of any products into the Northern Mariana Islands. The Northern Mariana Islands, unlike the States of the United States, consequently does not need the assistance provided by this chapter to collect locally-imposed cigarette taxes. Chapter 10B. State Taxation of Income from Interstate Commerce. The statutes. Chapter 10B prohibits a State frcm collecting inccme tax from a person or firm whose only activity within the State is the solicitation of orders. Residents of the State and corporations orcianized under State law may, however, be taxed. A State is also prohibited from imposing any tax on the generation or transmission of electricity that discriminates against out-of-State users of that electricity. Presentapplicability "State" is not defined for purposes of chapter 10B. See al so Senate Report 658, 86th Cong., Ist Sess. (1959) and House Conference Report 1103, 86th Cong., lst Sess. (1959), both reprinted at 1959 U.S. Code Cong. & Ad. News 2548, 2560. In the absence of a definition expanding the meaning of "State" beyond its normal usage to include the territories or possessions, the term does not include those jurisdictions.* Accordingly, chapter 10B does not directly limit the taxing powers of the Northern Mariana Islands. Applicable constitutional provisions, however, may impose similar limitations. See the discussion immediately below. Discussion. The principal incane tax in the Northern Mariana Islands is the federal inccme tax imposed as a local mirror-image tax. Covenant *But see Goldberg v. State Tax Ccmmission, 618 S.W.2d 635, 641-42 (Mo. 1981), assuming without discussion that chapter 10B limits the taxing power of Puerto Rico. - 336 - 601; Northern Mariana Islands Public Law 4-24 (1984). The extent to which the inccme of a person or firm not residing in the Northern Mariana Islands may be taxed by the Northern Mariana Islands is determined by the same rules that determine the extent to which the incane of a person or firm not residing in the United States is subject to the federal income tax. Covenant � 601; 48 U.S.C. � 142li(e). See generally 26 U.S.C. �� 2(d), 11(d), 871, 877, 882; 26 C.F.R. �� 1.864-3 to 1.864-7 (1984). The Northern Mariana Islands may also impose its own local income tax, in addition to the federal income tax imposed as a local territorial incane tax. Covenant � 602. The ability of the Northern Mariana Islands to impose a local tax on the income of a foreign business is limited only by applicable provisions of the Constitution of the United States and the Constitution of the Northern Mariana Islands. The Cammerce Clause, Article I, Section 8, Clause 3, of the Constitution of the United States, imposes scme limits on the power of the States to levy taxes affecting interstate cammerce. Chapter 10B is intended to establish a minimun threshhold of activity within a State before the incane of a foreign (that is, out-of-State) business may be taxed by that State. See Heublein, Inc. v. South Carolina Tax Ccwmission, 409 U.S. 275, 279-80 (1972). Whether the Ccmmerce Clause itself imposes limits on the power of the Northern Mariana Islands to tax the incane of foreign business is unclear. The Commerce Clause is not applicable to the Northern Mariana Islands unless it applies "of its own force." Covenant � 501. The application of the Ccmmerce Clause to territories and possessions of the Un i ted States has not been definitively determined. See Pan American World Airways v. Virgin Islaads, 459 F. 2d 387, 395 (3d Cir. 1972). 'The Due Process Clause of the United States Constitution is clearly applicable to the Northern Mariana Islands. Covenant q 501. See also Constitution of the Northern Mariana Islands, Art. I, � 5. That clause imposes approximately the same limitations on the imposition of taxes as does the CamVerce Clause. Pan American World Airways v. Vir2in Islands, above, 459 F. 2d at 395. A court might well decide that inccme frcm a person or firm whose only activity within the Northern Mariana Islands is the solicitation of orders cannot be taxed by the Northern Mariana Islands consistently with due process requirEments. Chapter 12. Discrimination AQainst Farmrs Cooperative Associations by_Boards of Trade. The statutes. Boards of trade are exchanges where agricultural ccmmodities are purchased and sold. Chapter 12 prohibits boards of trade frcm 337 - discriminating in their membership policy against agricultural cooperatives. Present applicability The geographic reach of chapter 12 is defined by whether the agricultural canmodities bought or sold by a board of trade move in interstate camerce. 15 U.S.C. � 432. If the ccmmodities move in interstate ccmmerce, the board of trade may not discriminate against agricultural cooperatives. "Interstate commerce" is defined, for purposes of chapter 12, to include (among other types of camnerce) commerce between "any State, Territory, or possession . . . and any place outside thereof." Id. S 431(c). See also id. q 431(d). Guaffn is a Territory or possession. Accordingly, by o@Wration of section 502(a)(2) of the Covenant, a board of trade dealing in agricultural cam@odities moving into or out of the Northern Mariana Islands may not discriminate against agricultural cooperatives. Chapter 13. Textile Foundation. The statutes. Chapter 13 establishes a corporation, the Textile Foundation, to prcmote scientific and economic research for the benefit of the textile industry. The principal offices of the Foundation are to be in Washington, D.C. Present EiMlicability Chapter 13 places no geographic limitations on the operations of the Textile Foundation. The Foundation is authorized to establish agencies or branch offices at such places as it deems advisable. The Foundation accordingly could, but is not required to, engage in research benefitting the textile industry in the Northern Mariana islands and establish offices there. Discussion. The Washington, D.C., telephone directory gives no listing for the Textile Foundation. Librarians at the Textile Museum in Washington and the Institute for Textile Technology in Charlottesville, Virginia, believe the Foundation is no longer active.* Accordingly, whether the applicability of chapter 13 to the Northern Mariana Islands should be changed is academic. *Telephone conversations with Ccmmission staff, November 16, 1984. - 338 - Chapter 13A. FishiM Industry. The statutes. Chapter 13A allows persons engaged in the fishing industry to act together in catching and selling fish and other marine and freshwater products without their collective action being considered unlawful restraint of trade under the antitrust laws. I f , however, that collective action results in excessive prices, the Secretary of Commerce is given the power to prevent monopolization or restraint of trade by those persons. Present applicability. Persons catching fish or other aquatic products entering the ccmmerce of the United States and its Territories and possessions (among other places) are entitled to the antitrust exemption granted by chapter 13A. 15 U.S.C. � 521. Guam is a Territory or possession. Accordingly, by operation of section 502(a)(2) of the Covenant, persons catching fish and other aquatic products and bringing them into canme-rce in the Northern Mariana Islands may engage in collective action to the extent permitted by this chapter. Chapter 14A. Aid to Small Business. The statutes. Chapter 14A provides aid for small business and establishes the Small Business Administration: The fundamental purposes of the Small Business Administration (SBA) are to aid, counsel, assist, and protect the interests of --mall business; ensure that mall business concerns receive a fair portion of Goverment purchases, contracts and subcontracts, as well as of the sales of Government property; make loans to small business concerns, State and local development companies, and the victims of floods or other catastrophes, or of certain types of economic injury; and license, regulate, and make loans to small business investment companies. U.S. Government Manual 599 (1982). A "small business" is one that is independently owned and operated and not dominant in its field of operation. 15 U.S.C. � 632. Limitations on the size of a small business eligible for assistance vary according to the industry in which the business operates. Id.; 13 C.F.R. part 121 (1984). Loans are made to small business by the SBA only if commercial loans are not available on reasonable terms. 15 U.S.C. � 636. - 339 Present @!Mlicability The SBA is authorized to establish offices throughout the United States. 15 U.S.C. � 633(a). "United States" is defined, for purposes of chapter 14A, to include "the several States, the Territories and possessions of the United States, the Commonwealth of Puerto Rico, the Trust Territory of the Pacific Islands, and the District of Columbia." Id. While chapter 14A does not specify precisely the jurisdictiong-in. which it is to apply, the definition of "United States" to include a particular jurisdiction is strong evidence of congressional intent that the chapter apply in that jurisdiction. Rubenstein v. United States, 153 F.2d 127, 129 (D.C. Cir. 1946). Guam. is a Territory or possession of the United States, so the assistance authorized by this chapter is available on Guam. Accordingly, by operation of section 502(a)(1) of the Covenant, small businesses in the Northern Mariana Islands are eligible to receive SBA assistance. See also 13 C.F.R. �� 101.3-1(i)(7); 101.3-2 (1984). Chapter 14A targets "Asian Pacific Americans" as a "socially and econcmically disadvantaged group" to receive special attention from the S13A. 15 U.S.C. � 631(e). "Asian Pacific Americans" are defined to include persons with "origins from . . . the Northern Mariana Islands." 13 C.F.R. � 124.1-1(c)(3)(ii) (1984). SBA regulations add a requirement, not found in the authorizing statute, that individuals eligible for this special attention be citizens of the United States. Compare id. � 124.1-1(c)(2)(i) with 15 U.S.C. -q 637(a)(4) to (a)(6). Citizens of the Northern Mariana Islands will not become citizens of the United States until termination of the trusteeship. Covenant SS 301, 1003(c). Until that still uncertain date, citizens of the Northern Mariana Islands are not eligible for special attention as members of a socially or economically disadvantaged group (although citizens of the United States who trace their origins to the Northern Mariana Islands are eligible).* Discussion. Most businesses in the Northern Mariana Islands are "small businesses" under the most restrictive definition of the term. The development of small business is widely perceived as the most promising way to encourage the expansion and diversification of the private sector in the Northern Mariana Islands and, thus, to promote the economic developmnt of those islands. As a consequence, a great deal of discussion has taken place on how best to extend SBA assistance to the Northern Mariana Islands. The only obstacles to *No recommendation was made with regard to this citizenship requirement in the Commission's January 1982 interim report to the United States Congress. - 340 - the extension of assistance appear to be limits on the total funds available to the SBA. See generally Fundingfor CNMI Plans Identified, Marianas Variety, August 10, 1984, at 3; Business Center Sought, Pacific Daily News (Guam), Focus supplement, June 22, 1984, at 7; U.S. Officials _Support__SBA Assistance to the Commonwealth,, Commonwealth Examiner, May 18, 1984, at 21; NMI Group Asks Montoya to Help Small Business, Pacific Daily News, March 16, 1984, at 7; Small Businesses Organize id., Focus supplement, March 9, 1984, at 6; Northern Marianas SeeF_SBA Assistance, Marianas Variety, March 2, 1984, at 2; official Ff-fers Aid to Small -Bus ine ssea, Pacific Daily News, February 28, 1984, at 4. The United States citizenship requirement imposed by SBA regulations for treatment as a member of a socially or economically disadvantaged group should be changed. The exclusion of citizens of the Northern Mariana Islands, which almost certainly was unintentional, can be remedied by amendment of the regulation; no action by Congress is required. Residents of Saipan have already benefitted from SBA disaster assistance. See, for example, Sai22n Eligible for fpLphoonj Hazen Disaster LoanE, Pacific Daily News, January 29, 1982, at 9. Chapter 14B. Small Business Investment Program. The statutes. Chapter 14B authorizes the Small Business Administration (SBA) to license and support small business investment companies (SBICs). SBICs are created by private investors as a source of equity capital for small businesses. A licensed SBIC with its own private paid-in capital of $500,000 is eligible for long-term loans or loan guarantees from the SBA. Chapter 14B also authorizes the SBA to guarantee payment of rent for camiercial or industrial property by small business concerns; to guarantee the surety on a bond issued in favor of small business against any loss from a failure to perform by the small business; and to guarantee payments by small businesses on contracts for the planning, design, or installation of pollution control facilities. In addition, chapter 14B authorizes the SBA to lend money to State and local development companies for plant acquisition, construction, conversion, or expansion. The SBA is also authorized to guarantee repaynent of bonds issued by such development companies. Present applicability. Small business investnent companies "organized and chartered under State law" and "State and local development companies" are - 341 eligible for assistance under chapter 14B. "State" is defined, for purposes of the chapter, to include "the Territories and possessions of the United States." 15 U.S.C. �� 662(4). Guam is a Territory or possession. Accordingly, by operation of section 502(a) of the Covenant, small business investment companies organized and chartered under the laws of the Northern Mariana Islands, small businesses in the Northern Mariana Islands, and any Northern Mariana Islands developmnt company are eligible for the loans, loan quarantees, and other assistance available under chapter 14B. In addition, the definition of "State" to include Territories and possessions for purposes of chapter 14B is strong evidence of congressional intent that all programs authorized by the chapter be available in the. Territories and possessions. Rubenstein v. United States, 153 F.2d 127, 129 (D.C. Cir. 1946). Accordingly, again by operation of section 502(a)(2) of the Covenant, all programs authorized by the chapter are available in the Northern Mariana Islands. Chapter 15. Economic Recovery. The statutes. Chapter 15 establishes the Commodity Credit Corporation within the United States Department of Aqriculture. The Corporation's purposes are "stabilizing, supportinq, and protecting farm income and prices," maintaining "balanced and adequate supplies of agricultural commodities," and "facilitating the orderly distribution" of those commodities. 15 U.S.C. � 714. The Corporation supports prices of agricultural commodities by purchasing those commodities with federal funds. Chapter 15 also creates a fisheries research and development grant proaram administered by the United States Departmnt of Ccmmrce. Present applicability. Chapter 15 does not define with specificity the jurisdictions in which the Ccmmodity Credit Corporation may operate. The incidental mention of "Territories and possessions" in several r )rovisions in the chapter makes clear that the Corporation's powers and responsibilities extend to those jurisdictions. See 15 U.S.C. �� 713a-5 (exemption from taxation); 714b(c) (court jurisdiction); 714i (cooperation with other governmental agencies). Guam is a Territory or possession. Accordingly, by operation of section 502(a) of the Covenant, the Corporation's powers and responsibilities extend to the Northern Mariana Islands. The fisheries research and development grant program is specifically applicable to the Northern Mariana Islands and citizens 342 - of the Northern Mariana Islands are specifically eligible to receive such grants. Id. � 713c-3(a). Chapter 15A. Interstate Transportation of Petroleum Products. The statutes. Chapter 15A assists States in conserving deposits of crude oil found wfthin their borders. State limitations on the extraction of oil are enforced by making criminal. the transportation in interstate conraerce of oil extracted in violation of those limitations. Present applicability. "State" is not defined by chapter 15A and, consequently, cannot be assumed to include the territories and possessions of the United States. Accordinqly, the Northern Mariana Islands is not a "State" for purposes of chapter 15A and any limitations on the production of oil under the law of the Northern Mariana Islands would not be reinforced by the federal penalties imposed by this chapter. Discussion. No oil has been produced in the Northern Mariana Islands. Unless and until oil is produced in the Northern Plariana Islands, consideration of whether chapter 15A ought to be made applicable to the Northern Mariana Islands is unnecessary. Chapter 15P. Natural Gas. The statutes. Tinder chapter 15B, the Natural Gas Act of 1938, the Federal Eneroy Requlatory Commission controls the price of natural gas moving in interstate crmmerce and approves all natural gas exports from and imports to the United States. Present applicability. "United States" is not defined for purposes of chapter 15B. Section 717a(4) of title 15 defines "State" to include "any oroanized Territory of the United States." Sections 717s and 717u give jurisdiction to enforce chapter 15B to "the United States courts of any Territory or other place subject to the jurisdiction of the United States." These provisions provide som evidence of a congressional intent that at least the "organized Territories" and, perhaps, all "places subject to the jurisdiction of the United States" be considered part of the United States for purposes of the prohibitions on the import and export of natural gas. If all places subject to the jurisdiction of the United States 343 - are within the United States for ourposes of section 717b, imports to and exports from Guam are clearly within the section's prohibitions. By operation of section 502(a)(2) of the Covenant, imports to and exports from the Northern Mariana Islands would also be included. If only "organized Territories" are within the United States for purposes of section 717b, the applicability of the section to the Northern Mariana Islarxis, by operation of section 502(a)(2) of the Covenant, depends upon whether Guam is an "organized Territory," as the term is used in this chapter. Guam did not yet have an organic act in 1938 when the chapter was enacted, and thus was not then "organized." See United States v. Standard Oil Co., 404 U.S. 558, 559 n.2 (1972).* Discussion. The trooical climate of the Northern Mariana Islands makes unlikely the importation of natural gas for heating purposes. There are at this time no large-scale industrial users of natural qas in the Northern Mariana Islands. on the export s ide, no sources of ccmmercial quantities of natural gas are now known to exist in the Northern Mariana Islands. Consequently, resolution of the uncertain applicability of chapter 15B to the Northern Mariana Islands is not necessary at this time. Chapter 15C. Alaska Natural Gas Transportation. The statutes. Chapter 15C authorizes the construction of a natural gas pipeline (or other transportation system) frcm Alaska to the forty-eiqht contiguous States. Present applicability. Any natural gas transportation system constructed pursuant to chapter 15C would not serve the Northern Mariana Islands in any way. According jly, the chapter is inapplicable to the Northern Mariana islands. Chapter 16A. Emergency Petroleum Allocation. The statutes. Chapter 16A, the Emerqency Petroleum Allocation Act of 1973, *Further, "Territory" (as opposed to "territory") is sometimes, but not always, used to mean only a territory that has been "incorporated" into the United States. Guam is an unincorporated territory. 48 U.S.C. � 1421a. - 344 - authorizes the President to allocate gasoline and certain other petroleum products in the event of temporary shortages in the United States.* Present applicability. "United States" is defined, for purposes of chapter 16A, to include "the territories and possessions of the United States." 15 U.S.C. � 752(7). Guam is a territory or possession of the United States. Accordingly, by operation of section 502(a)(2) of the Covenant, the President's authority in the event of an oil shortage includes the authority to allocate oil to and within the Northern Mariana Islands. See 15 U.S.C. � 753(a). Chapter 16B. Federal Energy Administration. The statutes. Chapter 16B established the Federal Energy Administration, to plan, direct, and control a variety of federal programs (authorized by other federal laws) "related to the production, conservation, use, control, distribution, rationing, and allocation of all forms of energy 15 U.S.C. � 764(a). The Federal Energy Administration was subseguently merged into the United States Department of Energy, when that cabinet agency was created. 42 U.S.C. � 7151(a). Present applicability. No provisions in chapter 16B define the extent of the geographic area in which the Federal Energy Administration was to have operated (before its incorporation into the Department of Energy). The chapter established an aqenqy within the executive branch of the Federal Goverment and assigned that agency the administration of certain federal laws. The agency's qeographic jurisdiction was coextensive with the geographic applicability of those laws. Among those laws is the Emergency Petroleum Allocation Act, which is applicable to the Northern Mariana Islands. See the discussion of chapter 16A, above. Chapter 16C. Energy Supply and Environmental Coordination. The statutes. Chapter 16C authorizes the United States Department of Energy, *Virtually all allocation controls thus far imposed pursuant to this chapter have since been revoked. Executive Order 12287, 46 Fed. Reg. 9909 (1981); Executive order 12153, as mended, 44 Fed. Reg. 48949, 76477 (1979), 45 Fed. Reg. 3559 (1980). - 345 - as successor to the Federal Energy Administration,* to prevent power plants and other major fuel burning installations fran burning natural gas or petroleum products if coal is a reasonable alternative fuel; to require that new installations be able to burn coal; and to take other steps to coordinate conservation of fossil fuels with protection of the environment. Present applicability. The current applicability of chapter 16C to the Northern Mariana Islands must be determined on a section-by-section basis. The authority to issue orders or rules under section 792, relatinq to the conversion of power plants to coal, expired on December 31, 1978. 15 U.S.C. 792(f). All such orders and rules issited before that date expired on January 1, 1985. Id. Neither the statute nor its legislative history indicate whether power plants in the Northern Mariana Islands are subject- to section 792. No orders or rules applicable to power plants in the Northern Mariana Islands appear to have been issued pursuant to the section, so the cruestion of the section's applicability to the Northern Mariana Islands is now academic. Subsection (a) of section 793 requires distribution of low sulfur fuel (which causes less air pollution) to areas with the worst air pollution problems when fuel is allocated pursuant to section 792 or pursuant to the Emergency Petroleum Allocation Act of 1973. The latter Act, discussed under chapter 16A, above, is applicable to the Northern Mariana Islands, so fuel allocations made pursuant to that Act may result in the allocation of high-sulfur fuel to the Northern Mariana Islands, which has few air pollution problems. Whether the Northern Mariana Islands micht also receive hiqh-sulfur fuel under an allocation made pursuant to section 792 is, as discussed above, now academic. Subsection (b) authorizes a federal study of health effects frcm coal burning power plants. Because there are no coal burni ng power plants in the @brthern Mariana Islands, whether this subsection is applicable to the Northern Mariana Islands is also academic. Subsection (c) provides that actions taken under the Clean Air Act or under section 792 are not to be considered "Major Federal actions significantly affecting the quality of the human environment" for purposes of the National Environmental Policy Act (NEPA). NEPA is applicable to the Northern Mariana Islands. Covenant 5 502(a)(2); People of Saipan v. United States Department of Interior, 356 F. Supp. 645 (D. Hawaii (1973), affirmed as modified, 502 F.2a 90 (9th *42 U.S.C. 9 7151(a). - 346 - Cir. 1974), certiorari denied, 420 U.S. .1003 (1975). So also is the Clean Air Act. 42 U.S.C. � 7602(d).* Subsection (c) should be construed to extend wherever the laws it modifies extend. 2A Sutherland, Statutes and Statutory Construction q 51.02 (C. Sands ed. 1973). Accordingly, actions taken under the Clean Air Act affectinq the Northern Mariana islands are not major federal actions signif icantly af fectim the quality of the human environment triggering NEPA. Whether actions taken under section 792 in the Northern Mariana Islands are also exempt from NEPA is academic since, as discussed above, no such actions have been taken. Subsection (d) of section 793 is relevant only to particular electric power transmission facilities in the State of New York and is thus inapplicable to the Northern Mariana Islands. Sect ions 794 and 795 in subchapter 16C recruired certain information to be given to Congress before January 31, 1975, and are now obsolete, so whether those sections are applicable is academic. For purposes of one provision in chapter 16C, authorizing the collection of a wide range of energy statistics, "United States" is defined to include "the territories and rx)ssessions of the United States." 15 U.S.C. � 796(e)(3). Guam is a territory or possession of the United States. Accordingly, by operation of section 502(a)(2) of the Covenant, energy statistics fran the Northern Mariana Islands may be collected pursuant to that provision. Chapter 19. Miscellaneous. The statutes. Chapter 19 allows any State, Territory, or possession to *In its January 1982 interim report to Conqress, the Ccm.,mission recommended enactment of legislation to exclude the Northern Mariana Islands frcm provisions of the Clean Air Act governing motor vehicle emission and fuel standards and to require the. administrator of the Environmental Protection Agency to exempt the Northern Mariana Islands from any other requirement of the Clean Air Act on a finding by the governor of the Northern Mariana Islands that the benefits of campliance with that requireyTent in the Northern Mariana Islands are significantly outweighed by the costs of ccinpliance. In Der-ember 1983, Public Law 98-213, 97 Stat. 1459, became law. Section 11 of that legislation amends the Clean Air Act by, among other things, allowing the administrator of the Environmental Protection Agency to exempt persons or air pollution sources in the Northern Mariana Islands frcm. the application of particular recruirements of the Clean Air Act. See 42 U.S.C. S 7625-1. - 347 - reciulate prize fiqht films within their jurisdiction, regardless of whether those films are moving in interstate or foreian cowme-rce. Chapter 19 also regulates the collection of tolls fran Federal Government traffic over certain bridges in the San Francisco, California, area. Present applicability. Since Guam is a territory or possession, it may regulate prize fight films pursuant to chapter 19. Accordingly, by operation of section 502(a)(2) of the Covenant, the Northern Mariana Islands may also rec .julate such films, regardless of whether the films are moving in interstate or foreiqn camTkerce. The provisions of chapter 19 governing toll bridges in California are obviously of no relevance to the Northern Mariana Islands. Chapter 20. Regulation of Insurance. The statutes. Chapter 20 declares a federal policy of allowing the States, rather than the Federal Government, to requlate the insurance industry. The federal antitrust laws are made generally inapplicable to that industry in any State that by its own laws regulates 'the industr 'v. (The National Labor Relations Act, the Fair Labor Standards Act, and the Merchant Marine Act of 1920 continue to apply to the industry, regardless of State regulation. 15 U.S.C. � 1014.) Present applicability. "State" is defined, for purposes of chapter 20, to include among other jurisdictions, the several States and Guam.* 15 u.s.c. *Neither the Virgin Islands nor American Samoa is included within this definition of "State." Guam was included in the definition on the recon-mendation of the Ccmmission on the Application of Federal Laws to Guam. See Act of August 1, 1956, c. 852, � 4, 70 Stat. 908-; Report of the Commission on the Application of Federal Laws to Guam, House Document 212, 82d Cong., lst Sess. 4, 5 (1951); House Ccmmittee on Interior and Insular Affairs, Resource Materials Used in the Preparation of the Report of the Commission on Application of-Federal Laws to Guam 97-98 (Ccnunittee print 1952). - 348 - s 1015. Accordingly, by operation of section 502(a)(2) of the Covenant, the Northern Mariana Islands is a "State" for purposes of chapter 20. The Northern Mariana Islands regulates its insurance industry. Northern Mariana Islands Public Law 3-107 (1984). Consequently, that industry in the Northern Mariana Islands is generally exempt fran the antitrust laws and other federal regulation. Chapter 21. National Policy on Employment and Productivity. The statutes. Chapter 21 establishes the Council of Economic Advisors to advise the President on economic matters and the Joint Economic Committee to coordinate economic policymaking by the United States Congress. Chapter. 21 also establishes national economic goals such as promotion of free enterprise, full Employment, and reduction of inflation and trade deficits. Present applicability The Council of Econanic Advisors and the Joint Economic Committee are oart of the internal structure of the Federal Goverrment. The activities of both entities and the 'econanic goals established by chapter 21 relate to the United States as a whole. The effects of these activities and goals on the Northern Mariana Islands depend on the strength of the relationship between the economy of the Northern Mariana Islands and that of the nation. Nothing in chapter 21 either requires or forbids special consideration of the needs of the Northern Mariana islands, or of any territory or possession, in formulating or implementing national econanic policy. Chapter 22. Trademarks. The statutes. A trademark is "any word, name, symbol, or device or any combination thereof adopted and used by a manufacturer or merchant to identify his ooods and distinguish them frcm those manufactured or sold by others." 15 U.S.C. 9 1127. (A trade name, by contrast, identifies the dealer or manufacturer rather than the goods and is not protectable under federal law unless the name is also a trademark.) The original function of a trademark was to indicate ownership or origin. In modern trade usage - 349 - the purchaser frequently does not know, or care about, the personal identity or name of the trademark owner and the user, Nevertheless, the purchaser of a trademarked article may think that all goods which bear the mark ccme frcm a canmon, even though anonymous, source. A mark may also serve to symbolize or guarantee the high quality of all goods which bear the particular mark and permit the purchaser to secure those goods which have given him satisfaction in the past and to reject those which have been felt to be unsatisfactory. In addition, in the dramatic expansion of advertising in this century, brand names have provided sellers with an effective short-hand device to use in creating a demand for their products. S. Oppenheim & G. Weston, Unfair Trade Practices and Consumer Protection 32 (1974). See also Trade-Mark Cases 100 U.S. 82 (1879). Congressional authority to protect trademarks is within the powers granted by the Ccmmerce Clause of the United States Constitution, Article I, Section 8, Clause 3. See Dawn Donut Co. v. Hart's Food Stores, Inc., 267 F.2d 358, 365 (2d Cir. 1958). The trademark laws of the United States, ccmn-only known as the Lanha-n Act, allow the owner of a trademark to register that trademark with the United States Patent and Trademark Office, and thereby to prevent other persons fran using the sane trademark. The trademark laws also provide owners of registered trademarks various rights and remedies under treaties and conventions between the United States and foreign nations. Present applicability. The Northern Mariana Islands is now defined as part of the United States for purposes of the trademark laws of the United States, so those laws apply in the Northern Mariana Islands as in other areas of the United States.* *Even were the Northern Mariana Islands not considered part of the United States, residents of the Northern Mariana Islands would be able to obtain protection for their products in the United States under those laws. Foreign nationals may obtain United States trademarks. 15 U.S.C. � 1051; Carl Zeiss Stiftung v. V.E.B. Carl Zeiss, Jena 293 F.Supp. 892, 916 (S.D.N.Y. 1968). But the rights of foreign nationals and of United States citizens to be protected against infringement in the Northern Mariana Islands were the Northern Mariana Islands not considered part of the united States would be questionable. See Wells Fargo & Co. v. Wells Fargo Express 1:0--1 556 F.2d 406, 426-30 (9t17-Cir. 1977). - 350 - "United States" is def ined in the trademark laws to include all territory under the jurisdiction of the United States. 15 U.S.C. � 1127. Both Guam and Northern Mariana Islands are under the jurisdiction of the United States. See 48 U.S.C. � 1421a (Guarn); Trusteeship Aqre(:-Tnent, Art. 3; Covenant �� 101, 1003(c). Section 1126(i) of title 15 provides that citizens or residents of the United States shall receive all benefits afforded by the United States to foreign citizens pursuant to international trademark conventions. In its January 1982 interim report to the United States Congress the Ccmmission recanmended enactment of legislation to treat cit izens of the Northern Mariana Islands as citizens of the United States for purposes of this provision. Section 4(f) of Presidential P .roclaTnation 5207, 49 Fed. Reg. 24365 (1984), issued pursuant to section 19 of Public Law 9P-213, 97 Stat. 1459 (1983), provides that citizens of the %rthern Mariana Islands shall also receive all such benefits. Discussion. The purposes underlying the trademark laws are as important in the Northern Mariana Islands as in other areas of the United States. The manufacturer or merchant has the same interest in identifying his products and distinquishinq them frcm the products of others. Society has the same interest in allowing trademarks a certain degree of protect ion. Wbre the federal trademark laws not applicable in the Northern Mariana Islands, the Northern Mariana Islands could establish its own trademark laws. The cost of enacting and administering those laws would be high, however, and no benefits frcxn local control are apparent. Given the relatively small population of the Northern Mariana Islands, few trademarks are likely to be sought. A separate system of trademark laws would raise questions as to the protection afforded United States and foreign rights in the Northern Mariana Islands, and that afforded Northern t4ariana Islands rights in the United States and in foreign countries. The resulting uncertainties miqht also discourage potential investors from undertaking activities in the Northern Mariana Islands. The federal trademark laws accordinqly should continue to apply in the Northern Mariana Islands. No legislation is necessary for the continued application of these laws in the Northern Mariana Islands. Chapter 23. Dissemination of Technical, Scientific and Engineering Information. The statutes. Chapter 23 establishes, within the United States Department of Carmerce, a clearinghouse for the collection, organization, and - 351 - dissemination of technical, scientific, and engineering information. The purpose of the clearinghouse, known as the National Technical Information Service, is "to make the results of technological research and developiment more readily available to industry and business, and to the general public." 15 U.S.C. � 1151. Present a22licability. The technological information collected pursuant to chapter 23 is available to the general public and is consequently available to persons in the Northern Mariana Islands. 15 U.S.C. �� 1151, 1152(b). Chapter 24. Transportation of Gambling Devices. The statutes. Chapter 24 contains the Gambling Devices Act of 1962, which makes unlawful the transportation of gambling devices, including slot machines, into any State or possession or the District of Columbia unless the devices are legal in the receiving jurisdiction. 15 U.S.C. � 1172. manufacturers of gambling devices are required to register with the Attorney General of the United States and to identify each such device with a permanently affixed serial number, the name of the manufacturer, and the date the device was manufactured. Id. � 1173. Present a22licability. "State" is defined, for purposes of chapter 24, to include Guam. 15 U.S.C. � 1171(b). The chapter thus applies to Guam and the several States. Accordingly, by operation of section 502(a)(2) of the Covenant, chapter 24 is applicable to the Northern Mariana Islands. The prohibition on transportation of gambling devices does not apply to jurisdictions that have enacted legislation exempting themselves from that prohibition. The Northern Mariana Islands has enacted such legislation. See 6 Code of the Northern Mariana Islands S 3153 (1983). Chapter 25. Flammable Fabrics. The statutes. Chapter 25 gives the Consumer Product Safety Ccr(unission (CPSC)* authority to set flammability standards for garments and interior *The ConsLxner Product Safety Commission is established by chapter 47 of title 15, discussed below. - 352 - furnishings made of fabrics (or related -materials) and fabrics (or related materials) used or intended for use in garments or interior furnishings and forbids the importation into the United States or the movement in ccmmerce of articles violating those standards. (The chapter is not applicable to articles exported frcm the United States.) Present Mlicability. "Carimerce" is defined, for purposes of chapter 25, to include, in addition to commerce among the several States, ccrmrerce in any territory or insular possession of the United States. 15 U.S.C. � 1191(b), (c). Further, the CPSC, charqed with enforcing the chapter, has defined "United States" to include "the Territories and Possessions of the United States." 16 C.F.R. � 160P..l(c) (1984).* Guam is a territory or insular possession. Accordingly, by operation of section 502(a)(2) of the Covenant, the Northern Mariana Islands is part of the United States for purposes of chapter 25 and fabrics, garments, or furnishings violating CPSC fleatutability standards may not be brought into the Northern Mariana Islands. Chapter 26. Household Refrigerators. The statutes. Chapter 26 requires each household refrigerator offered for sale in interstate commerce to be equipped so that its door may be opened frcm inside. (The legislation was enacted to prevent children frcm locking themselves in abandoned or discarded refrigerators and suffocating.) Present applicability. "Interstate ccmmerce" is defined, for purposes of chapter 26, to include camyerce between or among the States, Territories, and possessions of the United States (as well as the District of Columbia and Puerto Rico). 15 U.S.C. � 1214. Guam is a Territory or possession. Accordingly, household refrigerators from any State, Territory, possession, the District of Columbia, or Puerto Rico may not be offered for sale in the Northern Mariana Islands unless equipped with the required door-openinq device. Chapter 26 is silent with respect to the sale of household refrigerators not equipped with the required safety device if those *The CPSC has also defined "export" to include exports from any territory or possession of the United States. 16 C.F.R. � 1019.2(b) (1984). - 353 - refrigerators are imported fran a foreign nation and do not move in interstate canmerce.* Discussion. Many refrigerators purchased in the Northern Mariana Islands are in fact imported from Japan and other east Asian nations. The compelling safety purpose of chapter 26 would best be served if household refrigerators imported into the Northern Mariana Islands from foreign nations were also clearly subject to the chapter. Amending the chapter to include imported household refrigerators would not change the applicability of the chapter to the Northern Mariana Islands but would alter the substance of the chapter as it applies to the entire United States. Recamnending such a substantive change is beyond the mandate of this Commission." Chapter 27. Automobile Dealer Suits Against Manufacturers. Chapter 27 is discussed in the recommendation, Automobile Dealers L)ay in Court Act, in the Recommendations section of this report. Chapter 28. Disclosure of Automobile Information. The statutes. Chapter 28 requires each new automobile distributed in canmrce to bear a label, affixed by the manufacturer, specifying certain information about the automobile, including its suggested retail price. Removal of the label before sale of the automobile to its ultimate purchaser is forbidden. *If "interstate commerce" were defined for purposes of chapter 26 to include ccmmerce between "any State, Territory, or possession and any place outside thereof," as it is, for example, for purposes of chapter 12 of title 15, above, then imported refrigerators would also be required to be equipped with the door-opening device. "The Consumer Product Safety Cautission has the authority to ban the distribution in camnerce of any product, whether imported or not, if the product is unreasonably dangerous. 15 U.S.C. SS 2056, 2057, 2064. This authority could be exercised to ban the distribution of refrigerators not equipped with a door-opening device. The Northern Mariana Islands could also enact local legislation to prevent the sale of any household refrigerators in the Northern Mariana Islands not equipped with the door-opening safety mechanism, regardless of where the refrigerator is manufactured. - 354 - Present Mlicability. New automobiles shipped to "Guam. . . . the Trust Territories of the Pacific [sic] . . . . or any other place under the jurisdiction of the United States shall be deEmed to have been distributed in commerce.11 15 U.S.C. � 1231(h). Accordingly, by operation of section 502(a)(2) of the Covenant, new automobiles for sale in the Northern Mariana Islands must bear the required labels. Chapter 29. Manufacture, Transportation, or Distribution of Switchblade Knives. The statutes. Chapter 29 prohibits, with limited exceptions, the manufacture, distribution, and sale of switchblade knives in interstate commerce. 15 U.S.C. � 1242. The chapter also prohibits the possession of switchblade knives within any "Territory or possession of the United States." Id. S 1243. Present applicability "Interstate commerce" is defined, for purposes of chapter 29, to include commerce "betwen any State, Territory, possession of the United States, or the District of Columbia, and any place outside thereof." 15 U.S.C. � 1241(a). Gum is a Territory or possession of the United States. Accordingly, by operation of section 502(a)(2) of the Covenant, the prohibition against the manufacture, distribution, and sale of switchblade knives in interstate commerce applies to commerce between the Northern Mariana Islands and any place outside thereof. The ban on possession of switchblade knives within any Territory or possession of the United States does not, however, now apply to the Northern Mariana Islands. The Northern Mariana Islands is not now a Territory or possession of the United States. Although Guam is one or the other, the ban on possession is not applicable to the several States and is consequently not made applicable to the Northern Mariana Islands by operation of section 502 of. the Covenant.* Cha2ter 30. Hazardous Substances. The statutes. Chapter 30 requires the identif ication and labelling of hazardous substances and prohibits the introduction of misbranded or *Nor will the ban become applicable to the Northern Mariana Islands on termination of the trusteeship. Covenant � 105. - 355 banned hazardous substances into interstate canmerce. Hazardous substances include substances which are toxic, corrosive, irritants, strong sensitizers, flammable, or radioactive; substances which generate pressure through heat, pressure, or other mans; and substances which may cause serious injury or illness in normal handling or use. See 15 U.S.C. S 1261. Substances, including toys and other articles, that present particular hazards to children are also included c-mng "hazardous substances." Id. Present applicability "Interstate ccmmerce" is. defined for purposes of chapter 30, to include "camnerce between any State or territory and any place outside therof." 15 U.S.C. � 1261(b).* The term "territory" in turn is defined to include "any territory or possession of the United States." Id. � 1261(a). Qjam is a territory or possession of the United Sta@es. By operation of section 502(a)(2) of the Covenant, "interstate ccmmerce" includes ccmmerce between the Northern Mariana Islands and any place outside thereof. Accordingly, the requirements and prohibitions of this chapter are applicable to hazardous substances moving in canmerce between the Northern Mariana Islands and any place outside of the Northern Mariana Islands. Chapter 31. Destruction of PrM2rty_Moving in Ccmerce. The statutes. Chapter 31 makes criminal the willful destruction or injury of property moving by railroad, motor vehicle, or aircraft in interstate or foreign ccmmerce in the possession of a ccmmon carrier or a contract carrier. Present @221icability. "Interstate or foreign ccmmerce" is not defined for purposes of chapter 31, but the use of that tenn indicates a congressional intention to reach all ccmmerce that is not purely intrastate. Cam-nerce between a territory or possession of the United States and a place outside thereof should thus be considered as encanpassed by the term "interstate or foreign cam-nerce." This conclusion is buttressed by a provision barring prosecution under this chapter if prosecution under the laws of any State or possession of the United States has already resulted in conviction or acquittal on the merits for the same act or acts. 15 U.S.C. S 1282. Guam is a possession of the United States. Accordingly, by operation of section 502(a)(2) of *In addition, "United States courts of the territories" are given jurisdiction to enforce the chapter. 15 U.S.C. � 1267(a). - 356 - the Covenant, property moving in or out of the Northern Mariana Islands in the possession of a common carrier or a contract carrier is protected by chapter 31. Chapter 32. Telecasting of Professional Sports Contests. The statutes. Chapter 32 exempts from federal. antitrust laws certain telecasting agreements by professional football, baseball, basketball, and hockey leagues.* Also exempted are mergers of football leagues if the resulting league increases rather than decreases the number of competing teans. Present applicability. The federal antitrust laws apply to the Northern, Mariana Islands. See the discussion of chapters I and 2 of title I ,5, above. Chapter 32, an exception to the antitrust laws, is applicable wherever those laws apply. 2A Sutherland, Statutes and statutory Construction S 51.02 (C. Sands ed. 1973). Accordingly, professional sports leagues in the Northern Mariana Islands are exempt from the antitrust laws to the limited extent allowed by chapter 32. (There arer however, currently no professional sports leagues in the Northern Mariana Islands.) CDMter 34. Antitrust Civil Process. The statutes. Chapter 34 authorizes the Attorney General of the United States to investigate possible violations of the federal antitrust laws through the use of "civil investigative demands" without instituting a civil or criminal proceeding. Through the use of the civil investigative demand, the Attorney General may examine documents and witnesses to determine whether a civil or criminal complaint should be filed. Present 2pplicability. Civil investigative demands may be served "at any place within the territorial jurisdiction of any court of the United States" and, to the extent consistent with due process, in foreign countries. 15 *The telecasting exemption is written, however, to prevent professional football telecasts on Saturdays when college football games are played. - 357 - U.S.C. � 1312(d). The Attorney General may enforce the demand through proceedings in the district court for any judicial district in which the person on whcm the demand was served resides, is found, or transacts business. Id. S 1314(a). The broad reach of the civil investigative demand corresponds with the broad reach of the antitrust laws. See 2A Sutherland, Statutes and statutory Construction �@ 51.02 (C. Sands ed. 1973). Those laws extend to the Northern Mariana Islands. See the discussion of chapters 1 and 2 of title 15, above. Accordingly, civil investiaative demands may be., served on persons in the Northern Mariana Islands and may be enforced by the District Court for the Northern Mariana Islands.* Chapter 36. Cigarette Labelingand Advertising. The statutes. Chapter 36 requires all cigarettes sold or distributed in the United States to bear labels warning of the adverse health effects of smoking and forbids cigarette advertising on radio and television stations regulated by the Federal Camunications Ccmmission. Present applicability. "United States" is defined, for purposes of chapter 36, to include Guam. 15 U.S.C. � 1332(3). Accordingly, by operation of section 502(a)(2) of the Covenant, cigarettes sold or distributed in the Northern Mariana Islands must bear the required label. Radio and television stations in the Northern Mariana Islands are subject to regulation by the Federal Ccmmunications Ccomission. 47 U.S.C. �� 153(e), (g), (v); 301. Accordingly, those radio and television stations may not broadcast cigarette cam-nercials. Chapter 37. State Technical Services. The statutes. Chapter 37 authorizes federal financial assistance to support State and multi-state technical service programs designed to increase the effective use of scientific and engineering information by business and industry. Technical services are to be provided pursuant to a five-year plan, prepared by an institution or agency *The District Court for the Northern Mariana Islands has all the jurisdiction of a district court of the United States. 48 u.s.c. � 1694a(a). 358 - des iqnated by the governor of the State, and approved bv the Secretary of Camerce. The federal assistance -must be matched 1:@Y State or other nonfederal funds. Present @Mlicability. "State" is defined, for purposes of chapter 37, to include Guam. 15 U.S.C. � 1352(f). Accordimily, by operation of section 502(a) of the Covenant, the Northern Mariana Islands is eligible to receive federal assistance to support a technical service program.* Chapter 38. Traffic and Motor Vehicle Safety. The statute. Chapter 38, the National Traffic and Motor Vehicle Safety Act of 1966, in an effort to reduce deaths and injuries frcm traffic accidents, authorizes the United States Secretary of Transportation to establish motor vehicle safety standards. New vehicles not meeting those standards may not be manufactured, sold, or delivered in interstate ccmrrerce and neither new nor used vehicles not meeting those standards maY be imported into the United States. Chapter 38 also requires motor vehicle tires to be c1raded accordinq to a uniform quality grading systcm and to be permanently labelled with certain safety information. Each new motor vehicle must he ecruipped with tires which can carry the maximum permissible load for that vehicle. The sale or delivery of reqrooved tires in interstate ccmmerce is prohibited. In addition, chapter 38 authorizes the Secretary of Transportation to establish facilities for research and testing in traf f ic safety. Present applicability. "State" is defined, for purposes of the motor vehicle safety standards of chapter 38, to include the several States and Guam, among other jurisdictions. 15 U.S.C. � 1391(8). Accordingly, by operation of section 502(a)(2) of the Covenant, the Northern Mariana Islands is also a "State" for purposes of the motor vehicle safety standards, and motor vehicles not meting those standards rn.W not be *The matching funds requirement of chapter 37 is subject to section 1469a(d) of title 48, United States Code, which provides in pertinent part that "in the case of . . . the Northern Mariana Islands any department or agency shall waive any requirerrent for local matching funds under $200,000 (including in-kind contributions) required by law to be provided by . . . the Northern Mariana Islands." - 359 - manufactured in the Northern Mariana Islands for sale elsewhere in the United States or brought into the Northern Mariana Islands from other parts of the United States or any foreign country for sale or delivery. Discussion. The applicability of chapter 38 to the Northern Mariana Islands has been the subject of some controversy. Most automobiles sold in the Northern Mariana Islands are manufactured in Japan. At least some Japanese manufacturers are said to produce automobiles which meet United States safetv standards and Clean Air Act emission standards and others that met neither set of standards. Those Japanese manufacturers are said to be unwilling to produce automobiles which met United States safety standards but which are not equipped with emission control devices necessarV to meet Clean ,*Air Act standards. The small sales volume in the Northern Mariana Islands alone is apparent1v insufficient to justify production of @-automobiles which met one set of standards but not the other. Under the Clean Air Act, automobiles imported into the Northern -Mariana Islands must met emission control standards established by the United States Environmental Protection Agency. The Act also requires gasoline retailers in the Northern Ma riana Islands to sell unleaded gasoline. Air Quality in the Northern Mariana islands is substantially better than that in most parts of the United States. Compliance with automobile emission control standards confers few benefits in the Northern Mariana islands while costing consumers and service station operators in the Northern Mariana Islands substantial sumse For these reasons, this CaTnission in its 1982 interim report to the United States Congress reccmmended that motor vehicles in the Northern Mariana Islands be exempt frcm the emission control requirements of the Clean Air Act. in 1983 Congress authorized the administrator of the Environmental Protection Agency to exempt motor vehicles in the Northern Mariana Islands frcm these requirements. 42 U.S.C. � 7625-1(a). Because Japanese imports into the Nbrthern Mariana Islands are required to continue to meet federal safety standards, however, and because they will not, it is said, produce vehicles which meet safety standards but not emission control recruirernents, consuners in the Northern Mariana Islands must continue to pay for unwanted, costly, and unnecessary emission control equipment.* Pursuant to authority granted by chapter 38, the Secretary of *The additional costs per vehicle of ccmplyinq with federal safety and emission control requirements range from $300 to $4000, de,pendin;T on make and model, according to information gathered fran autombile dealers in the Northern Mariana Islands in 1982. - 360 - Transportation has established fifty -motor vehicle safety standards. Amonq the items covered by the standards are location of controls, seat belt assemblies, rearview mirrors, occu 'pant crash protection, acceleration control systems, roof-crash resistance, hydraulic brake systems, and child restraint systems. Some standards apply to only motorcycles or only school buses. See generally 49 C.F.R.. part 571 (1984). None of the standards appears to be obviously unnecessary for vehicles operated in the Northern Mariana Islands. In 1983 eight hundred twenty-eight traffic accidents were reported in the Northern Mariana Islands. [19831 Traffic Accidents Reported Hich, Marianas Variety, February 10, 1984, at 1. Three persons were 1:illed in traffic accidents durinq that year. Id. That fatality rate, for the Northern Mariana Islands . popu.17a-tion of approximately 17,000 is roughly .18 traffic deaths per 1000 persons. By comparison, in 1982 there were 46,000 traffic deaths in the United States, with its population of. approximately 227,000,000. World Alamanac 1984, at 197, 909 (1983). The rate in the United States is thus approximately .0002 traffic deaths per 1000 persons. The traffic death rate in the Northern Mariana Islands was about 900 times as great as in the United States.* In the absence of other data, nothing suggests that the need for automobile safety standards is less in the Northern Mariana Islands than elsewhere in the United States. At least since October 1981 all new motor vehicles sold in the Northern Mariana Islands have met the safety standards issued pursuant to chapter 38. While some savings to automobile purchasers would result if those standards were not applicable in the Northern Mariana Islands, those savings could. well be offset by the increased costs to individuals and to society from more frequent and more serious traffic accidents. Personal injuries, deaths, damage to property, and larger insurance premiums are all part of those costs to individuals and families. Society, largely through the goverrynent, of the Northern Mariana Islands, must devote a greater proportion of its resources to emergency, hospital, and rehabilitation services. *Traffic fatalities are commonly assessed on the basis of vehicle miles travelled. I%brld Almanac 1984, at 909 (1983). 'The short distances and limited number of miles of roads in the Northern Mariana Islands may well mean that the Northern Mariana Islands has an even more disproportionate traffic fatality rate measured by fatalities per vehicle miles travelled than is indicated by fatalities per 1000 population. In 1984 five persons wre killed in traffic accidents in the Northern Mariana Islands. Focus on Holiday_ Traffic Successful, Pacific Daily News (Guam), Flocus supplement, December 28, 1984, at 1. The three fatalities in 1983 thus do not seem atypically high. - 361 Based on the foregoing considerations, no recommendation is here made to make chapter 3P inapplicable to the Northern Mariana Islands. Chapter 39. Fair Packaging and Labeling Program. The statutes. Chapter 39 requires every consurer commodity distributed in ccmmrce to bear a label identifying the commodity and its manufacturer or distributor and specifying the quantity of the commodity in any package. Consumer commodities include foods (other than meat and poultry), drugs, cosmetics, and most other products intended for household use. The United States Secretary of Health and Human Services or, depending on the type of product involved, the Federal Trade Commission is authorized to issue additional regulations to prevent the deception of consumers or to facilitate value comparisons. See 16 C.F.R. part 500 (1984); 21 C.F.R. parts 1, 101, 501r 701 (1984). Present applicability. "Commerce" is def ined, for purposes of chapter 39, to include commerce between any State or any territory or possession of the United States and any place outside thereof (as well as other types of camverce). 15 U.S.C. S 1459(e). Guam is a territory or possession of the United States. Accordingly, by operation of section 502(a)(2) of the Covenant, consumer commodities brought into the Northern Mariana Islands (and consumer commodities exported from the Northern Mariana Islands) must bear the required labels and otherwise comply with the requirermnts of chapter 39 and regulations issued pursuant to the chapter. The Secretary of the Treasury is given authority to enforce the prohibitions of chapter 39 as those prohibitions ap to imports @ply into the United States. Imports into the United States are generally controlled by the United States Custcms Service, part of the United States Department of the Treasury. The Northern Mariana Islands, however, is outside the customs territory of the United States. Covenant � 603(a). The United States Customs Service as a consequence does not control imports into the Northern Mariana Islands.* *The Commission has adopted a recommendation for federal legislation that would confirm the authority of the government of the Northern Mariana Islands to enforce federal laws when the federal agency with principal enforcement responsibility is unable or unwilling--for whatever reason--to perform that function. See the recommendation, Enforcement of federal laws in the Northern Mariana Islands, in the Recommendations section of this report. - 362 - Discussion. Neither chapter 39 nor regulations issued thereunder explicitly require that consumer products be labelled in the English language. many popular consumer ccmmodities sold in the Northern Mariana Islands are imported from Japan, Taiwan, and other nations and are not labelled in English. while the basic information as to identity of product and manufacturer and quantity is usually discernible fran the label, in sme instances it is not. Consumers in the Northern Mariana Islands are entitled to the sane protection against unfair and deceptive labelling as are consumers elsewhere in the United States. At the same time, those consumers should not be denied access to a wide variety of canmodities fran foreign nations, ccmmodities with which they are familiar and which they like, because those products are not labelled as required by this chapter. Ideally, all foreign manufacturers exporting to the Northern Mariana Islands would label their products as required, so that the choice of products available in the Northern Mariana Islands would not be narrowed. In practice, scme manufacturers may prefer to give up selling in the relatively small Northern Mariana Islands market if required to go to the expense of designing and printing new labels. Because no claim has yet been made that the requiraments of chapter 39 cause undue hardship in the Northern Mariana Islands, no recamTendation is here made to alter the applicability of the chapter to the Northern Mariana Islands. Chapter 39A. Special Packaging of Household Substances for Protection of Children. The statutes. Chapter 39A, the Poison Prevention Packaging Act of 1970, requires household substances that present particular dangers to children to be packaged so that children under five, but not adults, will have difficulty in opening the package. Manufacturers are authorized also to sell the sane substances in packages that are easy to open, for the use of elderly or handicapped persons, if the package is conspicuously labelled "This package for households without young children." The Consumer Product Safety Canmission is authorized to establish special packaging standards for any household substance. Present applicability. The provisions of chapter 39A do not specify the jurisdictions in which the chapter is applicable. The Consumer Product Safety Ccrnmission, which administers the chapter, regards it as applicable - 363 - to the several States and Guam. * Administrative interpretations are accorded deference in construing statutes. See Sawczyk v. United States Coast Guard, 499 F. Supp. 1034 (W.D.N.Y. 1980); 2A Sutherland, Statutes and Statutory Construction � 49.06 (C. Sands ed. 1973). Accordingly, by operation of section 502(a)(2) of the Covenant, chapter 39A applies in the Northern Mariana Islands. Chapter 40. Department of Cammerce. Chapter 40 is discussed in the reccmmendation, Fishery trade officers; Department of Ccmerce, in the Recam-nendat ions section of this report. Chapter 41. Consumer Credit Protection. Chapter 41 contains six subchapters, dealing respectively with consumer credit cost disclosure, restrictions on garnishment, credit reporting agencies, equal credit opportunity, debt collection practices, and electronic fund transfers. Three of those subchapters are treated in the recommendations, Restrictions ongarnishment ' Fair Credit ReL:)orting Act and Electronic Fund Transfer Act, in the Recamnendations section of th17-report. The other three subchapters are examined below. SUBCHAPrER I. 00NSUMER CREDIT COST DISCLOSURE. The statutes. Subchapter I of chapter 41 contains, among other provisions, the Truth in Lending Act of 1968 and its subsequent amendments. That Act requires lenders to disclose fairly and fully all terms in consumer credit transactions, such as installment sales and personal loans. Transactions in excess of $25,000 (except for hcme sales) and cam-nercial and agricultural loans, c-mng others, are exempted fran the Act's provisions. lone Act does not regulate the amount of interest a lender may charge, but requires only that the interest rate and other charges, fees, and terms be canpletely disclosed. The *Section 1476 of title 15 allows a State to petition the Consuffer Product Safety Camnission to apply its own, more protective packaging standard instead of the Ccinmission's standard. The Ccmmission has defined "State" for purposes of this section to include, among other jurisdictions, the several States, Guam and the Trust Territory of the Pacific Islands. 16 C.F.R. � 1704.2(d) (1984). only in jurisdictions in which chapter 39A is applicable would it be necessary to petition to apply a different standard. Consequently, the Ccmmission regards the chapter as applicable in all the jurisdictions it includes within the definition of "State." - 364 - Act is intended in large part to protect consumers from unscrupulous creditors and unfair billing and credit card practices and to allow consumers to make informed canparisons camong different sources of credit. The Act also protects credit card holders against large losses resulting fran unauthorized use of a credit card and establishes procedures for correction of billing errors. Present applicability "State" is defined, for purposes of subchapteri I, to include the several States and, among other jurisdictions, "any territory or possession of the United States." 15 U.S.C. 9 1602(r). Guam is a territory or possession of the United States. Accordingly, by operation of section 502(a) (2) of the Covenant, the Northern Mariana Islands is a "State" for purposes of the subchapter. Subchapter I does not specify its geographic reach through its definition of "State." Indeed "State" and "United States" seldcm appear in the subchapter and even less in the operative provisions of the subchapter. A procedure is provided, however, whereby it may be determined whether the requirements of a State law (including--because the Northern Mariana Islands is a "State"--a law of the Northern Mariana Islands) are inconsistent with the subchapter. 15 U.S.C. 5 1610(a). if the subchapter were not applicable to the Northern Mariana Islands, there would be no need to determine if its laws were inconsistent with the subchapter. Further, while the subchapter does not specify precisely the jurisdictions in which it is to apply, a definition of "State" to include a particular jurisdiction for purposes of the subchapter is strong evidence of congressional intent that the subchapter be applicable in that jurisdiction. Rubenstein ' v. United States, 153 F.2d 127, 129 (D.C. Cir. 1946). Accordir-n-gly, const r credit transactions in the Northern Mariana Islands are subject to the truth in lending and other requirements of subchapter I. SUBCHAPTER II. RESTRICTIONS ON GhRNISWENT. Subchapter II is discussed in the recomrie-ndation, Restrictions on Garnishment, in the Reccmmendations section of this report. SUBCHAPIER III. CREDIT REPORTING AGENCIES. Subchapter III is discussed in the recamiendation, Fair Credit Reporting Act, in the Recanmendations section of this report. SUBCHAPTER IV, EQUAL CREDIT OPPORTUNITY. The statutes. Subchapter IV makes unlawful discrimination against credit applicants on the basis of race, color, religion, national origin, sex, marital status, or age. - 365 - Present applicability. Subchapter IV contains no provisions defining its geographic applicability. The Board of Governors of the Federal Reserve System, however, is given broad authority to issue regulations implementing the subchapter. 15 U.S.C. � 169lb(a). The Board has defined "State" to include "any territory or possession of the United States." 12 C.F.R. � 202.2(bb) (1984). Guan is a territory or possession of the United States. Accordingly, by operation of section 502(a) of the Covenant, the Northern Mariana Islands is a "State" for purposes of subchapter IV. The operative provisions of subchapter IV refer not to States, however, but to creditors and credit applicants. See 15 U.S.C. � 1691. Even so, a definition of "State" for purposes of a particular statute to include a specified jurisdiction is strong evidence that the statute is to apply in that jurisdiction. See Rubenstein v. United States, 153 F.2d 127, 129 (D.C. Cir. 1946). Consequently, the prohibitions against discrimination contained in subchapter IV apply to creditors and protect credit applicants in the Northern Mariana Islands. SUB01APrER V. DEBT COLLECTION PRACHCES. The statutes. Subchapter V prohibits debt collection businesses fran using abusive, deceptive, and unfair practices to collect money owed. For example, a debt collector is prohibited from ccming to the debtor's home at three in the morning to try to collect the debt, 15 U.S.C. S 1692c(a)(1); fran using violence or the threat of violence to collect the debt, Ld. 1692d(l); and frcm harassing the debtor by frequent telephone calls, id. � 1692d(5). Present applicability. "Debt collectors" subject to subchapter V are those who use "any instrumentality of interstate ccmmerce or the mails" in collecting debts. 15 U.S.C. � 1692a(6). "State" is defined, for purposes of this subchapter, to include among other jurisdictions "any State, territory, or possession of the United States." Id. � 1692a(8). Guam is a territory or possession of the United States-. Accordingly, by operation of section 502(a) of the Covenant, the Northern Mariana Islands is a "State" for purposes of the subchapter and "interstate camnerce" includes camerce between the Northern Mariana Islands and other parts of the United States. Consequently, debt collectors in the Northern Mariana Islands who use any instrumentality of interstate camnerce or the mails are subject to the prohibitions of subchapter V. - 366 - SUBC[1APT`ER VI. ELECrRONIC FUND TRANSFERS. Subchapter VI is discussed in the reccmmendation, Electronic Fund Transfer,@,ct, in the Recommendations section of this report. Chapter 42. Interstate Land Sales. The statutes. Chapter 42 is intended to prohibit fraudulent land development schemes. A developer is required to provide a prospective purchaser with a printed report giving a fair and accurate description of the property. Subdivisions containing less than twenty-five lots and certain other real estate are exempt from the requirements of the chapter. Present applicability Chapter 42 generally applies to developers who "make use of any means or instruments of transportation or ccmunication in interstate commerce, or of the mails." 15 U.S.C. S 1703(a). "Interstate canmerce" is defined as "trade or commerce among the several States or between any foreign country and any State." Id. S 1701(8). "State" is defined to include, among other i ur i!;d-ict ions, "the several States . . . and the territories and possessions of the United States." Id. 9 1701(9). Qjam is a territory or possession of the United States. Accordingly, by operation of section 502(a)(2) of the Covenant, chapter 42 applies to developers who "make use of any means or instruments of transportation or communication" in commerce between the Northern Mariana Islands and any place outside of the Northern Mariana Islands, or of the mails. The location of the land of fered for lease or sale does not affect the applicability of the chapter; it may be located in the United States or in a foreign country. 15 U.S.C. S 1701(3). Chapter 43. Newspaper Preservation. The statutes. Chapter 43 allows competing newspapers, with the prior approval of the Attorney General of the United States, to enter into joint operating arrangements without violating the antitrust laws. Such arrangements may encompass printing, circulation, delivery, solicitation of advertising, and other functions but not consolidation of editorial or reportorial staffs. Permission for joint operations is predicated on the likelihood that only one of the - 367 - newspapers would be able to stay in business without joint operations. Present applicability As noted in the discussions of chapters 1 and 2, above, the antitrust laws are applicable to the Northern Mariana Islands. Exemptions frcm the antitrust laws, such as that contained in this chapter, must be construed to h ave identical geographic applicability. 2A Sutherland, Statutes and Statutory__ Construction S 51.02 (C. Sands ed. 1973). Chapter 43 is more specific. "Persons" eligible for exemption frcm the antitrust laws conferred by this chapter include, among others, 11any individual, and any partnership, corporation, association, or other legal entity existing under or authorized by the law of the United States, any State or possession of the United States, . . . or any foreign country." 15 U.S.C. S 1802(6). "Any individual" is not limited in any way, and so includes citizens and residents of the Northern Mariana Islands. Further, Guam is a possession of the United States. Accordingly, by operation of section 502(a)(2) of the Covenant, newspaper firms existing under or authorized by the law of the Northern Mariana Islands are eligible for the antitrust exemption conferred by chapter 43. Ch22ter 44. Protection of Horses. The statutes. Chapter 44 outlaws the practice of "soring" horses, injuring or sensitizing their legs to induce artificially a particular gait for show purposes. Present a22licability. Chapter 44 is phrased in expansive and general terms, but does not specifically define its geographic applicability. "State," however, is def ined for purposes of the chapter to include, miong other jurisdictions, "the several States, . . . Guam. . . . and the Trust Territory of the Pacific Islands." 15 U.S.C. 9 1821(4). The definition of "State" to include a particular jurisdiction for purposes of a statute is strong evidence of congressional intent that the statute apply in that juri9diction. Ribenstein v. United States, 153 F.2d 127, 129 (D.C. Cir. 1946). Accordingly, chapter 44 is applicable in Guam and the several States and, by operation of section 502(a)(2) of the Covenant, in the Northern Mariana Islands. 368 - Cha2ter 45. Emergency Loan Guarantees to Business Enter2rises. The statutes. Chapter 45 establishes the Emergency Loan Guarantee Board to make loans to businesses when camiercial credit is not reasonably available and when failure of the business would have a substantial adverse effect on the econany. Authority to make new loans pursuant to this chapter expired in 1973. Present applicability. Because authority to make new loans pursuant to this chapter expired before adoption of the Covenant, the chapter is de facto inapplicable to the Northern Mariana Islands. Chapter 45A. Chrysler Corporation Loan Guarantee. The statutes. Chapter 4-9A authorized loan guarantees by the Federal Government of up to $1,500,000,000 to rescue the Chrysler Corporation, which was on the verge of bankruptcy in 1980. Present applicability. The provisions of chapter 45A apply only to the Chrysler Corporation and its employees, and affect the Northern Mariana Islands only incidentally, to the extent that firm does business there. Chapter 46. Motor Vehicle Information and Cost Savings. Chapter 46 contains five subchapters, dealing respectively with bumper standards for motor vehicles, an automobile consumer information study, demonstration projects for inspecting motor vehicles for safety and Emission control defects, tampering with motor vehicle oftmeters, and improvements in automotive fuel econany. The five subchapters are treated in order below. SUBCHAPrER I. BUMPER STANEARDS. The statutes. Subchapter I authorizes the United States Secretary of Transportation to issue bumper standards applicable to all motor vehicles manufactured in or imported into the United States. Vehicles not meeting the applicable standard may not be imported into - 369 - the United States. Bumper standards are intended to reduce front and rear end damage and consequent repair costs resulting from low-speed collisions or towing. Present applicability "State" is defined for purposes of subchapter I to include, among other jurisdictions, the several States and Gum. 15 U.S. C. S 1901(16). "United States," although not specifically defined, must be considered to include each such "State." Accordingly, by operation of section 502(a)(2) of the Covenant, automobiles manufactured in or imported into the Northern Mariana Islands must meet federal bumper standards. Discussion. Subchapter I should continue to apply to the Northern Mariana Islands for the same reasons the National Traffic and motor Vehicle Safety Act should continue to apply to the Northern Mariana Islands. See the discussion of chapter 38, above. SUBCHAPrER II. AUT`CM0BILE CONSUMER INFORMMION STUDY. The statutes. Subchapter II requires the Secretary of 'Iransportation to compile and disseminate information on the damage susceptibility, crashworthiness, and ease of repair of different makes and models of passenger motor vehicles. Automobile dealers are required to distribute to prospective purchasers information developed by the Secretary comparing differences in insurance costs for different makes and models based on crashworthiness and damage susceptibility. Present applicabilitV The geographic applicability of subehapter II is not specif ically defined. "State," however, is defined for purposes of the subchapter to include, mong other jurisdictions, the several States and Gum. 15 U.S.C. S 1901(16). A definition of "State" to include a particular jurisdiction for purposes of a statute is strong evidence of congressional intent that the statute be applicable in that jurisdiction. Rubenstein v. United States, 153 F.2d 127, 129 (D.C. Cir. 1946). Accordingly, by operation of section 502(a)(2) of the Covenant, the information compiled by the Secretary of Ttansportation pursuant to this chapter must be available to the general public in the Northern Mariana Islands and automobile dealers in the Northern Mariana Islands must furnish to prospective purchasers the information on comparative insurance costs provided by the Secretary. - 370 SUBCHAPrER III. DIAGNOSTIC INSPECTION DEMONSTRATION PRQJECTS. The statutes. Subchapter III requires the Secretary of Transportation to provide funds and technical assistance to States for frcm five to ten demonstration projects for inspection of motor vehicles for safety and emission control defects. Present applicability. "State" is defined for purposes of subchapter III to include, among other jurisdictions, the several States and Gum. 15 U. S. C. 9 1901(16). Accordingly, by operation of section 502(a) (2) of the Covenant, the Northern Mariana Islands is eligible for demonstration projects assisted under subchapter III. Discussion. The legislation authorizing State inspection demonstration projects authorized financial assistance to States for demonstration projects only through September 30, 1977. 15 U.S.C. � 1963(b), (c). Accordingly, whether the Northern Mariana Islands should be treated as a "State" for purposes of subchapter III is now academic. SUCHAFTER IV. ODOMETER REOUIREMENTS. The statutes. An cdcmeter is an instrument in a motor vehicle recording how many miles the vehicle has travelled. Purchasers of motor vehicles, particularly used vehicles, rely heavily on odameter readings to determine the safety, reliability, and value of a vehicle. Subchapter IV prohibits persons frcm tanpering with or disconnecting odcmeters. Individuals and States are authorized to enforce the requirements of the subchapter. Present applicability "State" is defined for purposes of subchapter IV to include, among other jurisdictions, the several States and Guam. 15 U. S. C. � 1901(16). Accordingly, by operation of section 502(a) (2) of the Covenant, the Northern Mariana Islands is authorized to enforce the requirements of the subchapter. By necessary implication, individuals in the Northern Mariana Islands may also enforce those requirements. 371 SUBC[iAPrER V. IMPROVING ALTrCMOTIVE EFFICIENCY. The statutes. Subchapter V requires automobiles manufactured in or imported into the customs territory of the United States to m@eet federal fuel economy standards and to bear labels specifying their fuel economy. Present applicability. Subchapter V applies only within the customs territory of the United States. 15 U.S.C. q 2001(9), (10). The Northern Mariana Islands is not within the customs territory of the United States. Covenant � 603(a). Accordingly, automobiles manufactured in or imported into the Northern Mariana Islands need not meet federal fuel economy standards or bear the labels required by sLbchapter V. Cha2ter 47. Consumer Product Safety. The statutes. Chapter 47, the Consumer 'Product Safety Act, establishes the Consumer Product Safety Commission. The Commission, among other functions, collects information on hazardous consumer products, bans such products or requires corrective action where appropriate, conducts research on consumer product hazards, and establishes mandatory safety standards and encourages the development of voluntary standards for consumer products. Present applicability Consumer products subject to chapter 47 are those wtiich are "distributed in cam-L-rce." 15 U.S.C. �� 2057(l); 2063(a)(1); 2064(b), (c), (d), (g)(1); 2065(a); 2068; 2071. "Ccinmercell is defined to include commerce "betwen a place in a State and any place outside therof." Id. S 2052(a)(12). "State" is defined to include, among other jurisdictions, the several States and Guam. Id. S 2052(a) (10). Accordingly, consumer products brought into the Northern Mariana Islands from any place outside of the Northern Mariana Islands are subject to regulation by the Consumer Product Safety Commission. (Also subject to regulation are consumer products sent from the Northern Mariana Islands to other parts of the United States.) Section 2066 of title 15 requires consumer products violating federal safety standards to be refused admission into the customs territory of the United States. The Northern Mariana Islands is not within the customs territory of the United States. Covenant S 603(a). -Accordingly, section 2066 does not apply to unsafe goods imported into the Northern Mariana Islands (although it does apply to 372 - such goods imported into the United States frcm the Northern Mariana Islands). The inapplicability of section 2066 to imports into the Northern Mariana Islands does not, however, affect the applicability of other provisions in chapter 47 making unlawful the distribution in ccmmerce in the Northern Mariana Islands of unsafe consumer products brought into the Northern Mariana Islands frcm any other place. Ch22ter 48. Hobby Protection. The statutes. Chapter 48 prohibits the manufacture in, or importation into, the United States of improperly marked imitation political and numismatic items. The chapter is intended to protect collectors of coins and political memorabilia (such as political campaign buttons). Present applicability. "United States" is defined for purposes of chapter 48 to include neither Guan nor the Northern Mariana Islands. 15 U.S.C. � 2106M. Accordingly, chapter 47 does not prohibit the manufacture in, or importation into, the Northern Mariana Islands of improperly marked imitation political and numismatic items. Chapter 49. Fire Prevention and Control. The statutes. Chapter 49 authorizes federal assistance to States for fire prevention and control. The chapter also establishes the United States Fire Administration, now part of the Federal Emergency Management Agency (FEMA),* to undertake research and development and public education and to collect and disseminate information on fire hazards and fire prevention; and the National Academy for Fire Prevention and Control, also within FEMA, to provide professional training to firefighters. Present applicability "State" is defined for purposes of chapter 49 to include, C-Twng other jurisdictions, the several States, Guan, and the Trust Territory of. the Pacific Islands. Sane provisions of the chapter make specific reference to "States." See 15 U.S.C. �� 2206(e), (f); 2208(b)(2); 2209(a); 2211; 2220(a)(2), (6). Even though other provisions in the chapter are not specifically directed to "States," the definition of "State" to include a particular jurisdiction is *See Executive Order 12127, � 1-103, 3 C.F.R., Camp. 1979, at 376 (1980). - 373 strong evidence of congressional intent that the statute be applicable to that jurisdiction. Rubenstein v. United States, 153 F.2d 127, 129 (D.C. Cir. 1946). By operation of section 502(a) of the Covenant, the Northern Mariana Islands is a "State" for purposes of chapter 49. Accordingly, the chapter is applicable to the Northern Mariana Islands. Chapter 50. Consumer Product Warranties. The statutes. Chapter 50 contains the Magnuson-Moss Warranty Act, which establishes minimum standards that must be met by warranties* on consumer products. Written warranties must "fully and conspicuously disclose in simple and readily understood language the terms and conditions" of the warranty. 15 U.S.C. � 2302(a). Warranties must be made available to prospective purchasers prior to sale. Warranties must meet various other statutory requirements intended to protect consumers, as well as rules established by the Federal Trade Ccmmission to implement those requirEments. Present applicability. "Consumer products" subject to the Magnusorr-Moss Warranty Act are those "distributed in ccmmerce. " 15 U. S. C. S 2301(l). "Ccmmerce" is def ined to include canmerce "between a place in a State and any place outside thereof." Id. � 2301(14). "State" in turn is defined to include, among other jurisdictions, the several States and Guam. Id. S 2301(15). Accordingly, by operation of section 502(a)(2T-of the Covenant, warranties on consumer products moving in ccmmerce into or out of the Northern Mariana Islands must meet the requirements of chapter 50. Chapter 51. National Productivity and Quality of Working Life. The statutes. Chapter 51 established the National Center for Productivity and Quality of @%brking Life, and charged it with formulating a national policy for increased productivity in the private and public sectors. Funding for the Center expired in 1978, and its functions were assumed by the National Productivity Council. 15 U.S.C. S 2471; *Warranties, in general, are guarantees by the manufacturer or seller of a product that the product is free of defects or will perform in a specified manner over a specified period of time. A warranty may also prcmise specific corrective action if the product does not perform as promised. See 15 U.S.C. S 2301(5). 374 Executive Order 12089, 3 C.F.R., Omp. 1978, at 246 (1979), as amended by Executive order 12107, � 2-101(b), 3 C.F.R., Camp. 1978, at 264, 266, 268 (1979). The National Productivity Council was itself subsequently disbanded. Executive Order 12379, S 16, 3 C.F.R., Camp. 1982, at 204, 205 (1983). A National Productivity Advisory Ccmmittee later performed many of the same functions. Executive Order 12332, 3 C.F.R., Ccmp. 1981, at 198 (1982), as amended by Executive Order 12399, � 1, 3 C.F.R., Camp. 1982, at 236, 237 (1983). Authority for the Advisory Camittee expired on September 30, 1984. Id. Present applicability Because the entity created to carry out the purposes of chapter 51 no longer exists, whether the chapter applies to the Northern Mariana Islands is largely academic. The congressional findings and declaration of policy for the chapter do not specifically mention productivity in the territories and possessions of the United States as an area of concern, but neither is productivity in those jurisdictions excluded fran the scope of the chapter. See 15 U.S.C. �� 2401, 2402(l), 2403.* Discussion. Because the operative provisions of chapter 51 are largely obsolete, no purpose would be served by enacting legislation to clarify whether productivity in the Northern Mariana Islands is among the concerns addressed by the chapter. Chapter 52. Electric and Hybrid Vehicle Research, Devel9pnent, and Demonstration. The statutes. Chapter 52 encourages the develcpment of motor vehicles powered, at least in part, by electrical storage batteries or fuel cells. The United States Department of Energy is given authority to conduct research, development, and demonstration projects and to guarantee loans that will further the use of electricity-powered motor vehicles. Funding to carry out the purposes of this chapter was not authorized beyond 1983. "State" was defined specifically to include the Northern Mariana Islands in legislation establishing a Mite House Conference on Productivity. Public Law 97-367, � 103(4), 96 Stat. 1761 (1982). That conference addressed many of the same concerns addressed by this chapter. - 375 - Presentapplicability. The geographic applicability of chapter 52 is not def ined by any provision in the chapter. In regulations implementing the chapter, the Department of Energy includes, among firms eligible for certain small business planning grants, concerns located in, among other jurisdictions, the several States and the territories and possessions of the United States. 10 C.F.R. S 476.2 (1984). Administrative definitions are accorded deference in construing statutes. See Sawczyk v. United States Coast Guard, 499 F. Supp. 1034 (W.D.N.Y. 1980); 2A Sutherland, Statutes and StatutM Construction S 49.06 (C. Sands ed. 1973). Guam is a territory or possession of the United States. Accordingly, by operation of section 502(a)(2) of the Covenant, small businesses in the Northern Mariana Islands are eligible for those planning grants. Further, if the chapter is applicable to the Northern Mariana Islands for one purpose, it is applicable for all purposes (in the absence of specific provisions to the contrary). Consequently, chapter 50 is applicable in its entirety to the Northern Mariana Islands. Recipients of certain federally guaranteed loans for the development of electric powered motor vehicles must be citizens of the United States. 15 U.S.C. S 2509(i). until termination of the trusteeship, citizens of the Northern Mariana Islands will not be citizens of the United States. Covenant �� 301, 1003(c). No recamnendation was made with regard to this citizenship requirement in the Commission's January 1982 interim report to the United States Congress. Chapter 53. Toxic Substances Control. The statutes. Chapter 53 contains the Toxic Substances Control Act, a comprehensive regime for the regulation and control of chemical substances intended to reduce the risks of serious injury to health and the environment. The Act acccmplishes its purposes by requiring testing of chemical substances and placing restrictions on the use of those substances where necessary. Present a22licability. "Chemical substances" subject to chapter 53 are generally those which are distributed in camrerce. See, for example, 15 U.S.C. SS 2603(a); 2604(e), (f); 2605; 2606; 2614(2); 2616(a)(1)(D). "Commerce" includes commerce "between a place in a State and any place outside of such State." Id. S 2602(3). "State" in turn is defined specifically to include 'Fhe Northern Mariana Islands. Id. � 2602(13). See also id. � 2602(14). Accordingly, chemi@a-l substances moving into or out of commerce in the Northern Mariana Islands are subject to the requirements of chapter 53. - 376 - Not only the distribution in ccmmerce, but also the manufacture and processing of chemical substances, are reached by chapter 53. See again, for example, 15 U.S.C. SS 2603(a); 2603(b)(3)(A); 2604(a), (e), (f); 2605; 2606; 2614(2); 2616(b). The geographic areas in which manufacturing and processing are subject to chapter 53, even if the chemical substance is not distributed in interstate ccMmerce, are not precisely defined. The inclusion of the Northern Mariana Islands in the definitions of "State" and "United States," however, is strong evidence that Congress intended all of chapter 53 to apply in the Northern Mariana Islands. Rubenstein v. United Statts, 153 F.2d 127, 129 (D.C. Cir. 1946). Accordingly, the manufacture and processing of chemical substances in the Northern Mariana Islands is subject to the requirements of chapter 53. Chapter 53 also bars admission of certain toxic substances into the custcms territory of the United States. 15 U.S.C. q 2612. See also id. S 2602M. The Northern Mariana Islands is not within the custcrg- territory of the United States. Covenant � 603(a). Consequently, importation of these toxic substances into the Northern Mariana Islands is not prohibited. Nonetheless, as discussed above, the manufacture, processing, or distribution of such chemicals within the Northern Mariana Islands is subject to chapter 53. The only consequence of the exclusion of the Northern Mariana Islands from the custans territory of the United States, for purposes of this chapter, is that no federal law requires those particular toxic substances to be refused admission into the Northern Mariana Islands, even though those substances cannot legally be processed or distributed in camnerce in the Northern Mariana Islands. (The Northern Mariana Islands could enact its own legislation refusing such substances admission into the Northern Mariana Islands.) Exports of chemical substances fran the United States are also controlled under chapter 53. 15 U.S.C. � 2611. Since the Northern Mariana Islands is defined to be within the United States for purposes of chapter 53, id. S 2602(13), (14), exports from the Northern Mariana Islands are7-subject to those controls. Chapter 54. Autcmotive Propulsion Research and Development. The statute. Chapter 54 establishes a program, under the auspices of the United States Department of Energy, to develop advanced automotive propulsion systems. The advanced systems are intended to improve the environmental impact and fuel econany of the internal ccmbustion engine now used in most autcmobiles. The Department is authorized to make contracts with or grants to a wide variety of entities for - 377 - research and development leadinq to improvements in autamotive propulsion systems. Present applicability. The geographic applicability of chapter 54 is not specifically defined by any provision in the chapter. "State," however, is defined and, since none of the chapter's operative provisions refer to "States," that definition may be. taken as strong evidence of the jurisdictions to which Congress intended the chapter to apply. See Rubenstein v. United States, 153 F.2d 127, 129 (D.C. Cir. 1946). "State" is defined for purposes of chapter 53 to include, amonq other jurisdictions, the several States and Guam. 15 U. S. C. S 2702(8). Chapter 53 was enacted after January 9, 1978, the effective date of section 502 of the Covenant, so the Northern Mariana Islands is not made a "State" for purposes of the chapter by operation of the Covenant. Discussion. As a practical matter, the qeographic applicability of chanter 53 is only important in deten-nining the jurisdictions in which entities entering into contractual or grant arrangements with the Department of Energy may be located. Even there, the contractinq and grantmaking authority of the Department is so broad that it can easily be interpreted to include not only persons and institutions in the Northern Mariana Islands, but also entities in foreign nations. See 15 U.S.C. S 2703(b); 10 C.F.R. 9 473.2 (1984). in any event, no funds for the research and development authorized by this chapter have been available since 1978. 15 U.S.C. S 2710. ChMter 55. Petroleum Marketing Practices.. Chapter 55 is discussed in the recammendations, Petroleum Marketin2 Practices Act, in the Reccmmendations section -ZTf -this report. Chapter 56. National Climate Program. The statutes. Chapter 56 establishes a national climate program within the 1,1bited States Department of Ccmmerce to "assist the Nation and the world to understand and respond to natural and man-induced climate processes and their implications." 15 U.S.C. S 2902. "Climate" is the physical description of abnosphere and ocean at a location characterized over tirm scales of two weeks and lonqer. Summer - 378 - droughts, sea level rises, and ice ages are all climate phencmenao predictions of weather events, the passage of a weather front, for example, are theoretically impossible beyond approximately two weeks. Climate forecasts begin in time at that far limit of weather predictability. See 15 U.S.C. � 2904(d)(8). Federal grants to States for climate studies are authorized by the chapter. Present applicability. The geographic applicability of chapter 56 is not defined in its provisions. The principal purpose of the national climate program, however, is to accumulate knowledge about the climate of the Nation and the world and its effects. Such knowledge benefits people everywhere and has no geographic limitations. "State" is not defined in chapter 56, for purposes of determining eligibility to receive federal grants under the chapter. Accordingly, "State" mans only the fifty States of the Union and the Northern Mariana Islands is not eligible to receive such grants. Chapter 57. Interstate HorseraciM. The statutes. Chapter 57 regulates wagers made in one State on horseraces taking place in another State. ne purpose of the chapter is protect horse race tracks frcrn loss of attendance and wagering revenues. Senate Report 95-554, at 3 (1977). Out-of-state betting offices may only accept wagers with the permission of regulatory authorities in the State in which the betting office is located and in the State in which the horse race is run. The out-of-state betting office must also obtain the approval of horse racing tracks near that office. Present applicability. "State" is defined for purposes of chapter 57 to include, among other jurisdictions, the several States and "any territory or possession of the United States." 15 U.S.C. 1,q 3002(2). Although Guam is a territory or possession, chapter 57 was enacted after the effective date of section 502 of the Covenant and, accordingly, is not made applicable to the Northern Mariana Islands by operation of that section. On termination of the trusteeship, the Northern Mariana Islands will beccme a territory or possession of the United States. At that time it will become a "State" for purposes of chapter 57. - 379 Discussion. There are few horses and no horse race tracks in the Northern Mariana Islands (or in Guam). There is consequently no need to protect horse racing and on-track betting in the Northern Mariana Islands frcm canpetition fron or revenue diversion by betting offices in other States. while establishment of an off-track office in the Northern Mariana Islands to accept wagers on horse races in other jurisdictions is within the realm of possibility, it is highly unlikely that interest in distant @Y)rse races sufficient to make such a venture wortWhile would exist in the Northern Mariana Islands. Further, even were such an office established, betting at the track would be a realistic alternative for very few custcmers of the off-track betting office, since the Northern Mariana Islands is thousands of miles fran the nearest horse racing track in the United States. Consequently, allowing such off-track betting would not harm the econcmic interests of any race track in the United States. Accordingly, there is no need to make chapter 57 applicable to the Northern Mariana Islands prior to termination of the trusteeship. Chapter 58. Full Lb2l2yment and Balanced Growth. The statutes. Chapter 58 encourages action by the United States Government to utilize existing programs and to propose new programs to alleviate unemployment, particularly "structural unemployment" in particular regions and industries, and youth unemployment. Present applicabilitX The geographic applicability of chapter 58 is not specified in any of its provisions, but the chapter is concerned with the economy of the Nation in its entirety. Particular actions taken pursuant to the chapter will affect the Northern Mariana Islands to the extent the programs altered by those actions are applicable to the Northern Mariana Islands.* *For example, one such program used to pramote full employment was the now@repealed Canprehensive Employment and Training Act of 1973 (CETA), Public 92-203, 87 Stat. 839, repealed by Public Law 97-300, S 184(a)(1), 96 Stat. 1322 (1982). See 15 U.S.C. � 3116(b), (c). CETA was applicable to the Northern Mariana Islands. Public Law 92-203, 9 601(a)(9), 87 Stat. 839; Covenant S 502(a). Thus, actions taken under CETA pursuant to chapter 58 of title 15 could have affected the Northern Mariana Islands. 380 - Chapter 59. Retail Policies for Natural Gas Utilities. The statutes. Chapter 59 encourages State regulatory authorities that establish prices for natural gas sold by utilities to consumers to adopt procedures governing termination of service by those utilities. The procedures, which do not have to be adopted by the State, require prior notice of the shutoff to a consumer and a reasonable opportunity for the consumer to dispute the reasons for termination of service. Special rules are also encouraged to prevent terminations when termination would be especially dangerous to health, for example, during severe winter weather if gas is used for heating. State regulatory authorities are also encouraged to adopt procedures forbidding utilities from covering expenditures for promotional or political advertising in their charges to consuners. Unregulated natural gas utilities are encouraged to adopt the procedures for termination of service and the advertising restriction on their own initiative. Present applicability Chapter 59 applies to State natural gas regulatory agencies and to unregulated natural gas utilities. 15 U.S.C. S 3203(a),(c). "State" is not defined by any provision in the chapter and, consequently, must be taken to man only the fifty States of the Union. Consequently, chapter 59 does not apply in the Northern Mariana Islands. Discussion. There is no natural gas utility in the Northern Mariana islands. With current technology, natural gas is unlikely to become an important fuel in the Northern Mariana Islands unless sources of natural gas are discovered within the Northern Mariana Islands. Further, chapter 59 does not apply to natural gas utilities until annual sales of 10 billion cubic feet are achieved. 15 u.s.c. 3201(b). Chapter 60. Natural Gas Policy. The statutes. Chapter 60 establishes maximum prices for the sale of natural gas and establishes procedures for the allocation of natural gas in emergencies or shortages. 381 - Present applicability The geographic applicability of chapter 60 is not specifically defined by any provision in the chapter. "State," however, is defined for purposes of the chapter to include only the several States and the District of Columbia. 15 U.S.C. S 330104). "United States" is defined to include the States and the Outer Continental Shelf. That the territories and possessions of the United States in general and the Northern Mariana Islands in particular are not included within the definitions of "State" or "united States" is ample evidence that Congress did not intend the chapter to apply in the Northern Mariana Islands. Rubenstein v. United States, 153 F.2d 127, 129 (D.C. Cir. 1946). Discussion. Natural gas is neither produced nor consumed in significant quantities in the Northern Mariana Islands. Accordingly, there is no need to consider whether chapter 60 ought to apply in the Northern Mariana Islands. Chapter 61. Soft Drink Interbrand_Campetition_ The statutes. Chapter 61 exempts from the antitrust laws agreements which allow soft drink trademark license holders to give licensees exclusive rights to manufacture, distribute, or sell the trademarked soft drink within a specified geographic area. Present applicability The geographic applicability of chapter 61 is not specifically defined by any provision in the chapter. As noted in the discussions of chapters 1 and 2, above, the antitrust laws are applicable to the Northern Mariana Islands. Exemptions fran the antitrust laws, such as that contained in this chapter, must be construed to have identical geographic applicability. 2A Sutherland, Statutes and Statutory Construction � 51.02 (C. Sands ed. 1973). Accordingly,, chapter 61 is applicable to the Northern Mariana Islands. Chapter 62. Condcminium and Cooperative Conversion Protection and Abuse Relief. The statutes. Chapter 62 provides persons renting apartments same rights when those apartments are converted to condominiums or cooperatives, forcing the tenant to either buy the apartment or move out. Although most responsibility for assisting such tenants remains with State and - 382 - local goverrments, chapter 62 does authorize the United States Department of Housing and Urban Development to provide quick assistance to tenants who want to buy their apartments. The chapter also protects buyers of condominium or cooperative units against purchase agreements that are unconscionable. Present 222licability No provision in chapter 62 delineates the geographic applicability of the chapter. "State," however, is defined for purposes of the chapter to include, among other jurisdictions, the several States and the territories and possessions of the United States. 15 U.S.C. � 3603(23). A definition of "State" to include a particular jurisdiction for purposes of a statute is strong evidence that Congress intended the statute to apply in that jurisdiction. Rubenstein v. United States 153 F.2d 127, 129 (D.C. Cir. 1946). Since Guam is a territory or possession, chapter 62 applies to condominium and apartment conversions on Gum. Although chapter 62 is applicable to the several States and Guams, it was enacted after the effective date of section 502 of the Covenant. Consequently, chapter 62 is not made applicable to the Northern Mariana Islands by operation of section 502. On termination of the trusteeship, the Northern Mariana Islands will become a territory or possession of the United States. At that time, chapter 62 will become applicable to condominium and cooperative conversions in the Northern Mariana Islands. Discussion. Chapter 62 applies only to rental housing containing five or more residential units, for example, a building containing five apartments. 15 U.S.C. � 3603(5), (10). Very few rental properties in the Northern Mariana Islands include five or more units. No conversion of any such property to a condominium or cooperative project is known to have taken place there. Accordingly, no compelling need requires chapter 62 to be made applicable to the Northern Mariana Islands prior to termination of the trusteeship. Chapter 63. Technology Innovation. The statutes. Chapter 63 encourages technological innovation and dissemination of technological developments through the establistumnt of centers for industrial technology, supported by grants from the United States Department of Commerce, and by the transfer of federally owned or - 383 - originated technology to State and local governments and to the private sector. Present a22licability. The geographic applicability of chapter, 63 is not defined specifically by any of its provisions or in its legislative history. See 1980 U.S. Code Cong. & Ad. News 4892 et tfta. The goals of chapter 63 are quite broad and the chapter can be read to allow establis@ment of a center for industrial technology in the Northern Mariana Islands and the transfer of federally owned or originated technology to the goverrTnent of the Northern Mariana Islands or to the private sector in the Northern Mariana Islands. Chapter 64. Methane TransportationResearch, Development and Demonstration. The statutes. Chapter 64 directs the United States Secretary of Energy to establish a program to develop methane-powered motor vehicles. Present LaMlicability. The only question of geographic applicability that arises with respect to chapter 64 is whether individuals and entities in the Northern Mariana Islands are eligible to participate in the research, development, and demonstration program as grantees, contractors, or loan recipients. That question is not specifically answered by any provision in the chapter. Regulations issued pursuant to chapter 64 list a wide variety of individuals and entities eligible to participate, but does not specify whether those individuals or entities must reside or be located within particular jurisdictions in order to be eligible. 10 C.F.R. � 478.2 (1984). Cha2ter 65. Product Liability Risk Retention._ The statutes. A manufacturer and others distributing or selling a product may be found liable for damages for certain injuries caused by that product. C-ormnonly, insurance is purchased to protect against such liability. If the potentially liable firm has sufficient assets, it may "self-insure," that is, assune the risk of liability itself and pay any damages awarded against it fxan its own assets. Risk retention groups allow member fiLms to combine assets for insuring each of the member firms against liability. Chapter 65 allows the fornation of such cooperatives to insure against product - 384 - liability, and exempts such groups fran most (but not all) state insurance laws, other than in the State in which the group is chartered. A group, to obtain this exemption, must be chartered in one of the States, Bermuda, or the Cayman Islands,* and must met the capitalization requirEments of at least one. State. I - Present applicability. "State" is defined for purposes of chapter 65 to include only the several States and the District of Columbia. 15 U.S.C. S 3901(a)(6). Consequently, a risk retention group chartered in the Northern Mariana Islands is not exempt fran State laws in the United States, if it carries on activities in those States. Conversely, a risk retention group chartered in one of the States, Bermuda, or the Cayman Islands, and operating in the Northern Mariana Islands is not exempt frcm applicable laws of the Northern Mariana Islands. Cha2ter 66. Promotion of Export Trade. The statutes. Chapter 66 prcmotes exports from the United States, principally by small- and medium-sized firms and by export trade associations. The United States Department of Cammerce is assigned the role of encouraging the formation of export trade associations and export trading canpanies. The Department of Canmerce is also permitted by this chapter to confer immunity fran the federal antitrust laws on particular export trade activities not having significant anticompetitive effects within the United States. Present applicability For purposes of the provisions of chapter 66 generally encouraging export trade, "State" and "United States" are defined specifically to include the Northern Mariana Islands. 15 U.S.C. � 4002(5)f (6). Accordingly, persons and firms in the Northern Mariana Islands are eligible for assistance fran the Department of Comm,rce in establishing export businesses. Further, exports from the Northern Mariana Islands (other than exports to other parts of the United States) are exports fran the United States for purposes of the chapter. *Prior to enactment of chapter 65, risk retention groups were ccmrmnly organized under the laws of Bermuda or the Cayman Islands. - 385 - Any "person" may apply for a certificate of exemption frcm the antitrust laws for export trading activities. 15 U.S.C. �� 4011-4013. "Person" is defined to include, among others, any individual who is a resident of the United States. Id. S 4021(5). "United States," however, is not defined for purpc7ses of these provisions.* "Export trade" is defined to include "exports fran the United States, or any territory thereof to any foreign nation." 15 U.S.C. S 4021(l). While Guam is a territory of the United States, chapter 66 was enacted after the effective date of section 502 of the Covenant. Consequently, exports fran the Northern Mariana Islands are not included in "export trade" by operation of section 502. Nonetheless, as noted in the discussion of chapter 1 and 2, above, the antitrust laws apply to the Northern Mariana Islands. Exemptions fran the antitrust laws, such as that contained in this chapter, must be construed to have identical geographic applicability. 2A Sutherland, Statutes and Statutory Construction � 51.02 (C. Sands ed. 1973). Further, Department of Ccmmerce regulations establishing procedures for issuance of certificates of exemption define "United States" specifically to include the Northern Mariana Islands. 15 C.F.R. S 325.2(p) (1984). Administrative interpretations are accorded deference in construing statutes. See Sawczyk v. United States Coast Guard, 499 F. Supp. 1034. (W.D.N.Y. 1980); 2A Sutherland, Statutes and Statut= Construction S 49.06 (C. Sands ed. 1973). Accordingly, firms in the Northern Mariana Islands are eligible for the antitrust exemption authorized by chapter 66. Chmter 68.** Land Remte-Sensirig_Carmercialization. The statutes. The Landsat satellites orbiting the Earth in space gather a wide variety of data about the natural resources and other features of the Earth and its regions. Chapter 68 establishes policies and procedures for the collection and use of that data and contains requirements for the private marketing of the data. The chapter also provides for continued federal ownership of the Landsat system and of unenhanced data collected by the system. The operation of private remote-sensing space systems is prohibited unless a license has first been obtained fran the Secretary of Caumerce. The Federal GoverrTnent *The definition of "United States" for purposes of the provisions of this chapter encouraging export trade does not apply to the provisions of the chapter related to antitrust inmmity. House Conference Report 97-924, at 18 (1984). "There is no chapter 67 in title 15. 386 is prohibited frcrn transferring its weather satellite systems to the private sector. Present applicability. Contracts for the marketing of unenhanced Landsat data may be made only with "a United States private sector party (as defined by the Secretary [of Commerce])." 15 U.S.C. S 4212(a). See also id. S 4212(d). The Secretary has not yet issued regulations defining Th is "a United States private sector party," so it is not now known if firms in the Northern Mariana islands may qualify for Landsat data marketing contracts. Landsat data must be sold to "all potential buyers on a nondiscriminatory basis." Id. � 4224(a)(3). See also id. � 4271. "United States private sector parties" are also eligible for licenses to operate private rEmote-sensinq satellite systEMs. Id. 4241(a)(1). Again, whether firms in the Northern Mariana Isle@_n_ds are eligible depends upon the definition of "United States private sector parties" to be issued by the Secretary of CaTtme-rce. The prohibition against operatinc j such a system without a license extends to any person "who is subject to the jurisdiction or control of the United States." Persons in the Northern Mariana Islands are subject to the jurisdiction of the United States. Trusteeship Agreement, Art. 3; Covenant �� 101, 1003(c). Consequently, persons in the Northern Mariana Islands may not or)erate a private remote-sensing satellite systEm without a license issued by the Secretary of Ccmmerce. TITLE 16. CONSERVATION. The Commission's reccmmendation, 'ale Magnuson Fishe Conservation and Management Act, in the Reconmendations section of this report, discusses chapter 38 of title 16. See also the recanmendation, Tuna fisheries, in the Recanmendations section. Chapter 12 of title 16, regarding the federal regulation and development of power, and chapter 33, on coastal zone management, are discussed below. The Ccmmission's staff examined the other chapters in title 16, but did not conpile and edit its research for inclusion in this report. I No significant problems in the application of these chapters to the Northern Mariana Islands wiare uncovered by the staff's research or otherwise brought to the Ccm-.ission's attention.@J - 387 - Chapter 12. Federal Requlation and Development of Power. The statute. This chapter, sections 791a et seq. of title 16, contains the Federal Power Act. The Act authorizes the Federal Energy Regulatory Ccrmission (successor to the Federal Power Canmission) to issue licenses for the construction, operation, and maintenance of hydroelectric power projects. IV-1here navigable waterways are affected, the Corps of Engineers gives its opinion on the Droject as part of the Federal Energy Regulatory Ccmmission (FERC) permit p r rocess under the Federal Power Act (rather than through the Army Corps of Bnq i neers or EnvirorTnental Protection Agency permit processes). See 16 U.S.C. � 797(e); 33 C.F.R. �@,F 209.140, 320.3(f) (1984). The FERC requires that envirormental concerns be considered in its application process for projects over 1.5 megawatts (1,500 kilowatts). 18 C.F.R. � 4.50 (1984). For hydroelectric projects of 1.5 meaawatts or less, the FERC has the authority to expedite the permit process. 16 U.S.C. � 2705. For these projects, only a Clean Water Act permit is required. 18 C.F.R. S 4.61 (1984). Small hydrooower plants not designed primarily for generation of electricity and certain other small hydropower projects can obtain an exemption frcm licenses with only minor environmental reporting. See id. �� 4.90 et seq., 4.101 et sea.. Present applicability. The Federal Power Act defines "State" to include any organized Territory of the United States. 16 U.S.C. � 796(6). Congress has enacted an oruanic act establishing a civil qoverrinent for Guam. 48 U.S.C. �� 1421 et seq. See United States v. Standard Oil Co., 404 U.S. 558, 559 n.2 (1972). Guam. is thus an "organized" terpl-t-ory of the United States. Guam is not, however, incorporated. 48 u.s.C. � 1421a. Incorporated territories are destined for Statehood. A distinction is sometimes made between "Territory" and "territory," with the capitalized form deemed to apply only to incorporated territories and the lower-case form deemed to mean only unincorporated territories. See, for example, House Report 93-507, reprinted at 1973 U.S. Code Cong. & Ad. News 2730, 2732; House Report 1521, 90th Cong., 2d Sess., Appendix (1968); House Ccmmittee on Interior and Insular Affairs, Resource Materials Used in the Preparation of the Report of the Commission on Application of Federal Laws to Guam 182 (Committee print 1952). The capitalized form, however, has been used so often to embrace unincorporated areas that whether the word is capitalized is not a reliable indication of congressional intent. See, for example, Public Law 90-201, � 2, 81 Stat. 584 (1967), 21 U.S.C. S 601(g); United States v. Standard Oil Co., above; United States v. Villarin Gerena, 553 F.2d 723, 724-26 388 (1st Cir. 1977); Moreno Rios vo' United States, 262 F.2d 68, 71-72 (Ist Cir. 1958). See also Garcia v. Friesecke, 597 F.2d 284 (Ist Cir. 1979), certiorari denied, 444 U.S. 940 (1979). Some authority supports the conclusion that the Federal Power Act is applicable to G uam. The Cammission on the Application of Federal Laws to Guam in 1951 concluded the Act applied to Guam. Report of the Commission on the Application of Federal Laws to Guam, House Document 212, 82d Conq., Ist Sess. 13, 18 (1951). See also House Ccmmittee on Interior and Insular Affairst Resource Materials Used in the Pre2aration of the Report of the Commission on Application of Federal Laws to Guam 115-16 (Committee print 1952). The Ccmmission's staff supported this conclusion by relying on a 1925 opinion of the Solicitor of the Department of the Interior. Id. 116. That opinion held the Act applicable within Puerto Rico, eve7-though Puerto Rico was not then considered a "Territory," but only an "Insular Possession." 51 Decisions of the U.S. Dep't of Interior 53. In addition, the Federal Power Act was originally derived frcm the Rivers and Harbors Act of 1899, which does apply to Guam and the Northern Mariana Islands. See the reccmmendation, Rivers and Harbors Act, in the Reccimmendations section of this report. For the foregoing reasons, the Federal Power Act should be regarded as applicable to the Northern Mariana Islands.* Discussion. Little, if any, potential for hydroelectric power generation is apparent in the Northern Mariana Islands." Accordingly, even though same doubt may exist as to the present applicability of the *In its January 1982 interim report to Comress, the Ccmmission reccmrmnded enactmnt of legislation to allow citizens of the Northern Mariana Islands to be treated as citizens of the United States for purposes of meting citizenship requirements for Federal. Energy Regulatory Ccmmission licenses prior to termination of the trusteeship. In 1983 Congress enacted Public Law 98-213, 97 Stat. 1459. Sections 19 to 23 of that statute allow the President by proclamation to declare that citizenship requirmnts in particular federal laws are not applicable to citizens of the Northern Mariana 'Islands. In 1984 the President removed for citizens of the Northern Mariana Islands this particular citizenship restriction. Presidential-Proclamation 5207, � 4(h), 49 Fed. Reg. 24365. "Should a project subject to the Act ever be contemplated for the Northern Mariana Islands, it would almost certainly be a small-scale project entitled to expedited treatment under the Act. 389 - Federal Power Act to the Northern .'Mariana Islands, no legislation is here recommended to confirm the Act's applicability to the Northern Mariana Islands. The United States Army Corps of Engineers has recently been given the authority to conduct studies in the Northern Mariana Islands on hydroelectric power generation. Public Law 98-213, 1,5 13, 97 Stat. 1459 (1983). Chapter 33. Coastal Zone Management. The statute. The Coastal Zone Manaqement Act of 1972, 16 U.S.C. q� 1451 et seq., was passed to encourage development of national land use policies for coastal lands and . adjacent waters by providing substantial federal financing as an incentive. Once a State plan is approved, even federal programs must be consistent, to the maximum extent practicable, with the State program and applicants for a federal permit or license must show the planned activity will comply with State plan requirements. Conc .1ress itemized many ecological, cultural, historic, esthetic, and economic factors States should consider in their plans: (1) the protection, within the coastal zone, of natural resources, including wetlands, floodplains, estuaries, beaches, dunes, barrier islands, coral reefs, and fish and wildlife and their habitat; (2) the management of coastal development to minimize loss of life and property caused by improper development in flood-prone, storm surge, geological hazard, and erosion-prone areas and in areas of subsidence and saltwater intrusion and by destruction of natural protective features such as beaches, dunes, wetlands, and barrier islands; (3) priority consideration for coastal-dependent uses and orderly processes for siting major facilities related to national defense, enerqy, fisheries development, recreation, ports and transportation, and the locatio n, to the maximum extent practicable, of new commercial and industrial developments in or adjacent to areas where such development already exists; (4) public access to the coasts for recreation purposes; - 390 (5) assistance in the redevelopment of deteriorating urban waterfronts and ports, and sensitive preservation and restoration of historic,, cultural, and esthetic coastal features; and (6) assistance to support canprehensive planning conservation, and management for living marine resources, including planning for the siting of pollution control and aquaculture facilities within the coastal zone, and improved coordination between State and Federal coastal zone management agencies and State and wildlife agencies. See 16 U.S.C. 9 1452(2). The Ccmmerce Department's National oceanic and Atmospheric Administration administers federal funding under the Act. The Administration also approves State coastal zone management programs and insures that federal activities are consistent with State plans. See 15 C.F.R. parts 923, 930 (1985). Present applicability. The Coastal Zone Management Act is specifically applicable to the Northern Mariana Islands. 16 U.S.C. q 1453(4). Discussion. Many areas of the United States have more rivers and lakes, more coastline, and more wetlands than does the Northern Mariana Islands. In few jurisdictions, however, are the areas affected by federal coastal zone management laws such a large proportion of the total area of the jurisidiction. Thus, for example, the zone regulated under the Coastal Zone MAnagenent Act in California may extend only a few miles inland frcm the shore, so that only a small portion of the State is affected. In the Northern Mariana Islands, by contrast, a few miles frcm any shore of an island will embrace the entire island. Land uses anywhere on any of the small islands may affect coastal waters, so that all land areas in the Northern Mariana Islands are designated as within the coastal zone. 2 CamTonwealth Reqister 848, 878-79 (1980). The ocean and lagoons of the Northern Mariana Islands are important in the daily lives of virtually every family in the Northern Mariana Islands, so that their protection and wise use is of great importance to all. Island environments are notoriously fraaile. Tsland resources are limited and particularly susceptible to over-exploitation. See generally J. McFachern & E. Thwle, Ecolopical Guidelines for Island Devel2222nt 7-16 (1974). The Northern Mariana Islar@ds is now - 391 undergoing relatively rapid econanic development, fueled by the natural desire of the people of the Northern Mariana Islands for an improved standard of living and by the attractiveness of the islands to tourists, particularly tourists from JaT)an. Care is essential to ensure that unplanned or badly planned development does not have long-term adverse effects on the environment of the Northern Mariana Islands. The Coastal Zone Management Act is already enforced locally (as provided in the Act) by the Coastal Resources Management Office established by a Northern Mariana Islands executive orde r in 1980. 2 Ccmmonwealth Register 848. The Coastal Resources Management Program operated by that office coordinates review of all permit activities, including those under federal law, in the Northern Mariana Islands. The program in effect in the Northern Mariana Islands insures that permitted activities met the standards developed for orderly use and development of coastal resources. Activities in the Northern Mariana Islands reguirinc .j permits are (1) major projects anywhere in the islands with the potential to affect directly and significantly coastal waters, and 2) projects in areas of particular concern, includinq certain lagoons and reefs, wetlands and mangrove areas, shorelines (from the mean high water mark inland 150 feet) on Saipan, Tinian and Rota, and caTffercial ports and industrial areas on those three islands. An office such as that established under the Coastal Zone Manaqement Act and the Ccmmonwealth's executive order is necessary to integrate local and federal permit processes. Although discussion continues in the Northern Mariana Islands on the best approach to acccmplish this--a legislatively-created agency has been suggested--,* support exists for the basic concept of a permit clearinghouse to expedite environmental decision-raking and resolve conflicts between competing interests for the balanced and intelligent utilization of coastal zones. Accordirnly, no changes are recamended in the present applicability of the coastal zone manaaement laws to the Northern Mariana Islands. *Coastal Resources Red Tape Knocked, Pacific Daily News (Guam), Camm.nwealth Focus supplement, April 23, 1982, at 7A. - 392 - TITLE 17. COPYRIGHTS The statutes. The federal protection afforded conyrights derives from Article I, Section 8, Clause 8, of the United States Constitution, granting Congress the power: To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries. A copyright is protection extended to published literary property. Federal copyright protection covers original works of authorship fixed in any tanqible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. 17 U.S.C. S 102(a). Works that may be copyrighted include literary works; musical works, including any accompanying words; dr&rotic works, including any accompanying music; pantomimes and choreographic works; pictorial, graphic, and sculptural works; motion pictures and other audiovisual works; and sound recordings. Id. Ihe purpose of the copyright laws is to ensure the maximum pubfil-c dissemination of knowledge by recognizing the author's continuing prcperty rights after disclosure of his or her ideas to the public in some tanqible form. See generally M. Nimmer, On 22Might 9 2.01[Al (1981). The copyright laws were completely revised in 1976. Those laws specify the works that may be copyrighted, the duration of copyrights, the rules governing copyright ownership and transfer, and the protections afforded to copyright owners. Present applicability. For purposes of the copyright laws, "United States" is defined to include "the organized territories under the jurisdiction of the United States Government." 17 U.S.C. S 101. Guam is an organized territory of the United States.* Further, section 1421n of title 48 *An organized territory is a territory that has received an Slorganic act" from Congress. United States v. Standard Oil Co., 404 U.S. 558, 559 n.2 (1972). Congress enacted an organic act for Guam on August 1, 1950. See 64 Stat. 384, codified as amended at 48 U.S.C. �� 1421 et seq. - 393 - of the United States Code specifically provides that the "laws of the United States relating to copyrights, and to the enforcement of riqhts arising thereunder, shall have the same force and effect in Gum. as in the continental United States." By operation of section 502(a)(2) of the Covenant, the copyright laws of the United States also apply in the Northern Mariana Islands.* Discussion. The purposes underlyinq the cop important in . yright laws are as the Northern Mariana Islands as in other areas of the United States. The author has the same interests in obtaining prof its fran his or her creative works. Society has the same interests in allowing intellectual property a certain degree of protection. Were the federal copyright laws not applicable in the Northern Mariana Islands, the Northern Mariana Islands could establish its own copyright laws. The cost of enacting and administering those laws would be high, however, and no benefits from local control over copyrights are apparent. Given the relatively small population of the Northern Mariana islands, few copyrights are likely to be sought. A separate system of copyright laws would raise questions as to the protection afforded United States and foreign rights in the Northern Mariana Islands, and that afforded Northern Mariana Islands rights in the United States and in foreign countries. The federal copyright laws accordingly should continue to apply in the Northern Mariana Islands. No legislation is necessary for the continued application of these laws in the Northern Mariana Islands. TITLE 18. CRIMES AND CRIMINkL PROCEDURE. Part I. Crimes. Note. See also, in the Recommendations section of this report,, the recaxwndations 1m2rtation of fruit bats, Custorps crimes,, Exportation of arms, liquors and narcotics to Pacific -Ys-lands, *Even were the Northern Mariana islands not considered part of the United States, residents of the Northern Mariana Islands would be able to obtain protection for their works in the United States under those laws. Fbreiqn nationals may obtain United States copyrights. 17 U.S.C. � 104. But the rights of foreign nationals and of United States citizens to be protected against infringement in the Northern Mariana Islands were the Northern Mariana Islands not considered part of the United States would be questionable. See Robert Stigwood Group Ltd. v. O'Reilly, 530 F.2d 1096, 1101 (2d Cir. 1976). - 394 - Lottery prohibitions, and Technical amendments to title 18 of the United States Code, Crimes and Criminal Procedure. The statutes. Criminal penalties, generally fines and/or imprisorynent, are prescribed for particular conduct for the most part by State and local laws, not by federal law. Thus, for example, murder is proscribed in all parts of the United States by the criminal laws of the various States, territories, and possessions of the United States. No federal law, however, forbids murder in general terms.* Although the control of individual conduct through application of criminal sanctions is largely the responsibility of the States, territories, or possessions of the United States, a variety of federal criminal statutes does prohibit conduct inimical to the interests of the United States. Title 18 of the United States Code, Crimes and - Criminal Procedure, has been described as so chaotic and lacking in logical organization that it impedes any effort to make consistent legislative policy. Schwarz, Studx Draft of a Proposed Federal Criminal Code: @!M- ress and Issues in National Commission on Reform of Federal Criminal Laws ' Study f t of a New Federal Criminal Code xxv, xxvi (1970). Since the National Ccmmission on Reform of Federal Criminal Laws issued its final report in 1971, Congress has worked on a ccrnprehensive overhaul of the entire criminal code. Its ef forts, however, have thus far not resulted in enacted legislation. See 41 Congressional Quarterly Weekly Report 1559 (1983); 40 Congressional Quarterly INbekly Report 1018 (1982). Most federal crimes are defined in part I (sections 1 to 2520) of title 18.. Only those crimes included in part I are here addressed. Other federal statutes, scattered throughout the United States Code, make criminal conduct related to particular subjects. See, for example, among the immigration and naturalization laws of the United States, sections 1321 to 1328 of title 8, establishing criminal penalties for offenses aqainst those laws; and, among the social security laws, sections 408, 1307, 1383a, 1395nn, and 1396h of title 42, establishinq criminal penalties for offenses against those laws. *But federal laws do forbid the murder of specified federal officials and other particular classes of persons. See 18 U.S.C. ,q� 351 (Members of Conaress); 1114 (officers and employees of the United States); 1116 (foreign officials and others); and 1.751 (the President and Vice President). - 395 - These statutes are addressed in connection with the other laws of which they are a part. Below is a chap ter-by-chap ter summary of the federal criminal statutes in part I of title 18:* Chapter 1. General provisions (S� 1-15). This chapter defines terms such as "United SFa_t_e_s_,r'_"felony," "misdemeanor," and "accessory after the fact" as used in the federal criminal laws. Chapter 2. Aircraft and motor vehicles (q,� 31-35). This chapter makes criminal the destruction of aircraft, aircraft facilities (for example, an airport control tower), motor vehicles, or motor vehicle facilities (for example, a trucking terminal) employed in interstate or foreign ccminerce. Chapter 3. Animals, birds, fish'. and plants 41-47).. This chapter makes criminal hunting, fis ing, and trapping in federal wildlife refuges, importing certain animals regarded as injurious, and specified other activities related to animals and plants. See the recrmmendation, DTportation of fruit bats, in the Pecamiendations section of this report. Chapter 5. Arson 81). This chapter makes criminal willfully and maliciously setting fire to property on federal lands, on the high seas, and in certain other areas. Chapter 7. Assault M 111-114). This chapter makes criminal the assault of certain federal officers and employees a r-d specified foreign officials and the commission of assaults on federal lands, on the high seas, and in certain other areas. Chapter 9. Bankruptcy BS 151-155). This chapter makes criminal specified offenses against the federal bankruptcy laws. Chapter 11. Bribery, graft, and conflict of interest 201-224). This chapter makes criminal bribery of federal officers or employees or the, solicitation of *The only even-numbered chapters in part I of title 18 are 2, 12, 18, 40, 42, 44, 50, 84, 96, 102, 110, and 114. Even-numbered chapters were omitted in the original organization of part I to allow later insertion of additional chapters in proper alphabetical position. - 396 - compensation by a federal officer or employee for services in any matter in which the United States is a party or has � direct interest. Also made criminal is participation as � federal officer or employee in any matter in which the officer or employee has a personal financial interest. In addition, the chapter makes unlawful, bribery by any person intended to influence sporting contests. Chal2ter 12. Civil disorders M 231-233). This chapter makes criminal conduct facilitating the use of fireams, explosives, or incendiary devices in civil disorders or conduct interfering with a fireman or law enforcement officer during a civil disorder. ChaZer 13. Civil rights (�� 241-246). This chapter makes criminal conduct intended to deprive a person of his or her civil rights. Nmnq the many rights protected are the right to vote; the right to enjoy public facilities free from discrimination on account of race, color, religion, or national origin; the right to participate in the benefits of federal proqrams; and the right to serve on juries. Chapter 15. Claims and services in matters af fectinq government M 285-292). This chapter makes c-r'17minrl f iling false or fraudulent claims against the Federal Goverrment. Chapter 17. Coins and currency. (,q� 331-337). This chapter makes criminal the mutilation of United States coins and notes, and certain other offenses affecting the coins and currency of the United States. Chapter 18. g2n2ressional assassinationt kidn@pj?ing and assault (5 351). This chapter makes criminal killing, kidnapping, or assaulting members (or members-elect) of Congress. Chp4er 19. Conspiracy (�� 371-372). This chapter makes criminal conspiracies to commit an offense against the United States, to defraud the United States, or, by force, intimidation, or threat, to interfere with the official duties of an officer of the United States. Chapter 21. Contempt (M 401-402). This chapter grants courts of the United States power to punish sumiarily by fine or imprisoment misbehavior in their presence or vicinity; misbehavior by their officers in their official transactions; and disobedience of their - 397 - lawf ul orders. Disobedience of a court order may also be prosecuted as criminal contenpt if the disobedience independently is an offense against the laws of the United States or the laws of the State in which the disobedience occurred. Chapter 23. Contracts M 431-443). Ihis chapter makes criminal the entering into contracts of various specified types by federal officials and the execution of contracts for particular purposes between the United States and particular classes of individuals. For example, members of Congress may not enter into contracts with the United States. Also made criminal is destruction of certain records related to war contracts. Chapter 25. Counterfeiting and fo!@Rery (�� 471-509). This chapter makes criminal the forging, altering, or counterfeiting of notes, obligations, securities, and coins of the United States or of foreic ,in countries; ship's papers; public records and seals of agencies of the United States; and various other docuuents. Also made criminal is the manufacture or possession of plates, dies, and other paraphernalia useful for such forgery, alteration, and counterfeiting. Chapter 27. Custcms M 541-552). This chapter makes criminal smuggling and other conduct intended to evade payment of customs duties or other restrictions on the importation of articles into the United States. See the recanvendation, Custcms crimes, in the Reccrumndations section of this report. Chapter 29. Elections and political activities 592-607). This chapter makes criminal various act ivities-7opeding the conduct of fair and free elections or otherwise corrupting the political process. Chapter 31. an-bezzlernent and theft (,q� 641-665). This chapter makes criminal embezzlerrent or theft of n-Oney or property belonging to (or in the custody of) the United States. Chapter 33. Emblems, insiania, and names M 700-715). This chapter makes criminal the misuse or misapproprUition of a variety of federally-protected emblems, insignia, and n&nes, ranging frcm military insionia to the 4-4 Club emblem, and frcm the Great Seal of the United States to Rnokey Bear and Woodsy Owl. 398 - Chapter 35. Escape and rescue (�� 751-757). 11iis chapter makes it criminal to escape frcm the custody of the United States or to help scmeone else escape from federal custody. Chapter 37. Es@ionaqe and censorship 792-799). This chapter makes criminal. the unauthorized disclosure national defense or classified information and the violation of certain National Aeronautics and Space Administration regulations. Chapter 39. EMlosives and -other dangerous articles (S 836). This chapter makes crli-minal the unauthorized transportation of fireworks into a State, Territory, or ,possession where their use or sale is forbidden. Chapter 40. Importation, manufacturef distribution, and stor"q of explosive materials M 841-848). ibis chapter makes it criminal for anyone to engage in the business of importing, manufacturing, or dealing in explosives without a federal license. Also made criminal are various other activities related to the distribution, use, or possession of explosives. Chapter 41. Extortion and threats (F� 871-878). This chapter makes criminal threats against the 'President; extortion by a federal officer or employee; demand or rece ipt of blackmail for not revealing violations of fede ral law; receipt of kickbacks fram persons employed in constructing public works; and transmission of extortion threats in interstate or foreign caumrce or through the Postal Service. Chapter 42. Extortionate credit transactions 891-896)o This chapter makes criminal the extens ion of credit on the understandinq that failure to make timely repayment could result in the use of violence or other unlawful acts against the person, reputation, or property of the debtor or another person* Chapter 43. -False personation (�� 911-917). This chapter makes criminal false representation of oneself as a citizen of the United States, an officer or employee of the United States, a creditor of the United States, a foreign diplanat or of f icial, or a nxnber or agent of a 4-H Club or the Red Cross. Sta 4o Firearms (99 921-928). This chapter .@ter 4 makes criminal the importation, manufacture, or sale of firearms without a federal license. - 399 - Chapter 45. Foreign relations (95 951-970). This chapter makes criminal acting as an agent of a foreign government (unless one is a diplomat) without first notifying the Secretary of State; publication by a federal employee of diplomatic codes and correspondence; correspondence by a United States citizen to a foreiqn qovernment intended to influence the conduct of that government in a dispute with the United States, unless the citizen is seeking redress of injuries sustained by that citizen from the foreign government; lying under oath to influence the conduct of a foreiqn governme nt or the 17nited States, to cause injury to the United States; enqaginc j in certain financial transactions with foreign qovernments; conspiriml to injure the property of a friendly foreign ooverrtnent; serving in a foreign armed force at war with or taking part in a militar y expedition against a nation with which the United States is at peace; providing armed vessels for use in a war in which the United States is neutral; and exporting arms, licruors, and narcotics to certain Pacific Islands. See the recommendation, Exportation of arms? liquors and narcotics to Pacific Islands, in the Recommendations section of thi's report. Chapter 47. Fraud and false statements 1001-1027). This chanter makes criminal the making of false or fraudulent statermnts to the injury of the United States and its departments and agencies and the making of false or fraudulent statements by federal officials in the course of their work. Chapter 49. Fugitives from justice (99 1071-1074). This chapter makes criminal hidinc g a person fleeing arrest by or escaning the custody of the United States. It also makes criminal travelling in interstate or foreign camrerce to avoid prosecution, giving testimony, or confinement under the laws of any jurisdiction. M2@ter 500 Gambling (�9 1081-1084). This chapter makes criminal offshore pambling operations by persons subject to the jurisdiction of the United States or on United States vessels. Chapter 51. Homicide (q� 1111-1117). This chapter makes unlawful the killing or attempted killing of federal judges and law enforcement officials, foreign officials, official guests of the United States, or internationally protected persons. Also made criminal is misconduct or neqliqence by shio officers or owners that results in loss of life. - 400 Chapter 53. Indians M 1151-1165). This chapter makes criminal various offenses committed on Indian reservations or in certain other Indian areas. CL2@ter 55. Kidn@MiE2 M 1201-1202). This chapter makes criminal kidnapping affecting intersiate or foreign commerce and kidnapping of foreign officials, official guests of the United States, or internationally protected persons. Chapter 57. Labor (� 1231). This chapter makes criminal the transportation in interstate or foreign commerce of any person employed to interfere by force or violence with collective bargaining or a lawful strike. Chapter 59. Lig!40r traffic M 1261-1265). This chapter makes criminal the shipmant of liquor into- States, Territories, or Possessions where prohibition is in effect. Also made criminal is shipmnt of liquor without proper labelling, delivery of liquor by a common carrier to a person other than the designated cosignee, and C.O.D. shipment of liquor by a common carrier. Chapter 61. Lotteries M 1301-1307). This chapter makes criminal importing lottery tickets or related matter into the United States, or carrying them in interstate or foreign comnierce or via common carrier or the Postal Service. Also made criminal is the furnishing of assistance to lotteries by postal employees, the radio broadcast of lottery information, and lottery participation by certain financial institutions. The criminal penalties do not apply to certain fishing contests and State-run lotteries. See the recommendation, Lottery prohibitions, in the Recommendations section of this report. Chapter 63. Mail fraud M 1341-1343). This chapter makes criminal the use of the postal service or of a telephone, telegraph, radio, or television to obtain money or property by fraudulent mans. Chapter 65. Malicious mischief (�� 1361-1364). This chapter makes criminal injury to or destruction of any property of the United States; communication lines, stations, or systems; or buildings, structures, or vessels within the maritime or other special jurisdiction of the United States. Interference with the exportation of articles from the United States to foreign countries is also made criminal. 401 - Chapter 67. Military and navy BS 1381-1385). This chapter makes criminal enticing or procuring a member of the Armed Forces to desert, or concealing a deserter; unlawful entry into a military or naval installation; and the unauthorized use of any part of the Army or Air Force as a posse (that is, as a force to assist law enforcement authorities in keeping the Peace or capturing a felon). Chapter 69. Nationality and citizenship �5 1421-1429). TFis chapter makes criminal the negligent failure of a clerk of court to pay over naturalization or alien registration fees to the United States; the collection of fees beyond those authorized; the misuse, counterfeiting, falsifying, or sale of citizenship or naturalization papers; the impersonation of another person in naturalization proceedings; and . various other offenses against the naturalization laws. Chapter 7 1. ObscenitX B� 1461-1465). This chapter makes criminal mailing, importing, or transporting in interstate or foreign commerce obscene materials or articles, or drugs or other articles used for inducing abortion. Chanter 73. Obstruction of justice (�� 1501-1511). This chapter makes criminal obstruction of or assault on any officer of the United States authorized to serve process and on United States extradition officers. Also made criminal are threatening or corrupting United States court officers, jurors, or witnesses; attempting to influence a grand or petit jury decision by means of a written caTnun icat ion to a juror; obstructing administrative proceedings; stealing or altering court records; acknowledging bail in the name of another person without that person's consent; picketing or paradiril in or near a courthouse or the residence of a judge, juror, witness, or court officer; violating the secrecy of a grand or petit jury; obstructing exercise of an individual's rights or performance of an individual's duties under a court order; or obstructing federal criminal investigations of or State law enforcement activities against illegal gambling. Chapter 75. Pasuats and visas M 1541-1546). This chapter makes criminal the unlawful, use, forgery, alteration, or counterfeiting of United States passports or visas. - 402 - Chapter 77. Peonage and slavery M 1581-1588). This chapter makes criminal the holding of a person in peonage or slavery or otherwise participatinq in the slave trade. Chapter 79. Perjury (�� 1621-1623). This chapter makes criminal lying under oath in any case in which a law of the United States allows an oath to' be administered or before a grand jury or court of the United States. Chapter 81. Pira@y and privateerin2 (�� 1651-1661). This chapter makes criminal the ccmmission of piracy on the hiqh.seas and various related offenses. Chapter 83. Postal Service (�9 1691-1734). ibis chapter makes criminal a wide variety of activities interfering with the integrity or movement of the mails or with the federal postal monopoly. Chapter 84. Presidential assassination, kidnp@2ingf and assault (�� 1751-1752). This chapter makes criminal killing, kidnapping, assaulting, or attempting or conspiring to kill or kidnap the President of the United States, the Vice President, or the next in line of succession to the office of President, the President-elect, or the Vice President-elect. Also made criminal is unauthorized entrance into any temporary residence of the Pres ident. Chapter 85. Prison-made goods 1761-1762). This chapter makes criminal the transportation of prison-made goods in interstate or foreign ccmmerce or in improperly labelled packages. Cha2ter 87. Prisons M 1791-1792). This chapter makes criminal the introduction of contraband, firearms, explosives, or other dangerous instrumentalities into a federal prison and the instigation of a mutiny or riot at a fede ral pr i so n. Chapter 89. Professions and occupations Oq 1821). This chapter makes criminal the transportation of dentures without the authorization of a licensed dentist into a State or territory where local law prohibits the supplying of dentures by persons other than licensed dentists. Chapter 91. Public Lands M 1851-1863). This chapter makes criminal a wide variety of activities adversely affecting lands owned by the Federal Government. - 403 - Chapter 93. Public officers and employees 1901-1923). This chapter makes criminal various activitleg- -by federal officers and employees harmful to the public interest. Among the activities proscribed are unauthorized disclosure of confidential information; trading in the funds, debts, or public property of the United States or a State; usinq federal funds to lobby members of the United States Congress; interfering with civil service examinations; participating in a strike against the Federal Goverment; and making a false statement to obtain certain federal compensation. Chapter 95. Racketeering (�� 1951-1955). This chapter makes criminal interference with camrierce by robbery, extortion, or threat of physical violence. it also makes criminal travel in in terstate or foreign camnerce, or use of any interstate or foreign ccnmmrce facility or of the mails, to distribute the proceeds of or to promote or establish illegal gambling, prostitution, or trade in licuor or narcotics. Also made criminal are certain gambling businesses violating State or territorial law and kickbacks related to certain employee benefit plans. Chapter 96. Racketeer influenced and corrupt organizat! s (�� 1961-1968). This chapter makes criminal investing profits from a wide variety of illegal activities in any enterprise engaged in interstate or foreign cartnerce. Chapter 97. Railroads (�� 1991-1992). This chapter makes criminal murder or robbery on a railroad train, or entering a train with the intent of canmitting murder or robbery if the train is in a Territory of the United states or the District of Columbia. Also made criminal is damaging or destroying trains, depots, and other railroad facilities employed in interstate or foreign camerce. Chapter 99. E@4 (�� 2031-2032). This chapter makes rape a federal crime if cammitted on federal lands, on the high seas, and in certain other areas. Chapter 101. Records and reports (�� 2071-2076). This chapter makes criminal FTIFirng, mutilating, destroying, or removing federal public records or making false entries in those records. - 404 - Chapter 102. Riots M 2101-2102). This cha 'nter makes criminal travel in interstate or foreign ccnmerce or use of facilities of interstate or foreign ccimmerce, including the mails.. to prcmte,, organize, or carry out a violent public disturbance. Chapter 103. Robbery and burglary (�� 2111-2117). This chapter makes criminal robbery committed on federal lands, the high seas, and in certain other areas. Also made criminal are robbery of property belonging to the United States; robbery or burglary of a Federal Reserve bank, a national bank, or a bank whose deposits are insured by the Federal Deposit Insurance Corporation,- assaulting or woundinc q a person having custody of the mail or property or money belonging to the United States; and burqlary of Postal Service property or of transportation facilities containing interstate or foreign freight shipments. Chapter 105. Sabotage (�� 2151-2157). This chapter makes criminal a variety of activities interfering with national defense. Pmng the activities proscribed are trespass on or causing damage to military installations or prcperty; destrcying war materials, military installations, or defense plants, utilities, or transportation or ccmmunication facilities; and producing defective materials with the intention of harming the national defense. Chapter 107. Seamen and stowaways 2191-2199). This chapter makes criminal cruelty to seamen; revolt or mutiny by seamen; inciting semen to revolt or mutiny; shanghaiing sailors; abandoning seamn in foreign ports; dangerous and willful or drunken neglect of duty by seamen; misuse of federal certificates, licenses, and docurents issued to vessels, officers, or semen; seduction of female passengers by officer or crew; and stowing away on a vessel or aircraft. Chapter 109. Searches and seizures (�� 2231-2236). Ihis chapter makes criminal interference 7th lawful searches and seizures; destruction or reimoval of articles to prevent their seizure; and rescue of seized property. Also made criminal are unlawful searches without warrants; malicious procurement of search warrants without probable cause; and exceeding authority in execution of a search warrant. Chapter 110. Sexual ex2lOitation of children 2151-2153). Ihis chapter makes criminal using a child in sexually explicit conduct for production of a film, - 405 book, magazine, or other visual or print media depicting that conduct, with the knowledge that the media will be circulated in interstate or foreiqn caTtmerce or in the mails. Shipiwnt or receipt of such media in interstate or foreign ccmTnerce or in the mails is also made criminal. Chapter 111. Shipping (S� 2271-2279). This chapter makes criminal a variety of offenses related to shippinq. Among the activities made criminal are destruction of a vesSE!l by its owner to collect the proceeds of insurance on the vessel; destruction or casting away of a vessel of the UnitE.@d States by a merber of its crew; use of a vessel by its master to violate the laws of the United States or to defraud the United States; breaking or entering a vessel with intent to canmit a felony; unauthorized possession of explosives or weapons aboard a vessel of the United States; and the unauthorized boarding of a vessel just prior to its arrival at its destination. Chapter 113. Stolen property (�S 2311-2318). This chapter makes criminal the movement in interstate or foreign canmrce of various specified types of stolen proparty, including motor vehicles, aircraft, cattle, and goods or money of value in excess of $5000. Al so made criminal is the similar movement in interstate or foreign ccmmerce of counterfeited securities or tax stamps, counterfeiting tools, and phonograph records or films bearing forqed or counterfeit labels. Chapter 114. Trafficking in contraband cigarettes 2341-2346). This chapter makes unlawful transporting, receiving, selling, purchasing, or possessing cigarettes in quantities of 300 or more cartons (60,000 cigarettes) that do not bear evidence of payment of applicable State taxes. Also made criminal is making false statements or otherwise failing to keep proper records regardincj the shipnent of cigarettes in quantities of 300 or more cartons. Chapter 115. Treason, sedition, and subversive activities 2381-2391). This chapter makes criminal giving aid or comfort to enemies of the United States by persons owinc j allegiance to the United States;* engaging *Citizens of the Northern Mariana Islands will owe alleqiance to the United States on termination of the trusteeship when they become citizens or nationals of the United States. 406 - in insurrection or rebellion against the authority of the United States; failure of subversive organizations to register with the Attorney General; and encouraging insubordination, mutiny, or disloyalty by members of the Armed Forces. Chapter 117. White slave traffic (�� 2421-2424). This chapter makes criminal the transportation of woren in interstate or foreign commerce for prostitution or other immoral purposes. Chapter 119. Wire interception and interception of oral communications M 2510-2520). This chapter makes criminal unauthorized wiretapping or interception of oral commmications. Also made criminal are the manufacture and the shipment or advertisement in interstate or foreign commerce or in the mails of devices for the surreptitious interception of wire or oral communications. Present ap plicability. As noted above, the protection of persons and property and the preservation of the peace within a State or territory are, generally speaking, functions of the State or territorial goverment. Federal criminal laws enacted by Congress for these purposes operate only in the so-called "special maritime and territorial jurisdiction of the United States," where State or territorial governments lack jurisdiction. See Caha v. United States, 152 U.S. 211, 215 (1894). Section 7 of title 18, defininq the "special maritime and territorial jurisdiction of the United States" has been interpreted to include within that jurisdiction only areas within which the United States exercises exclusive jurisdiction, for example,, a military installation, and areas outside of the United States where no recognized systEm of law and order obtains. Ex parte Mulvaney, 82 F. Supp. 743, 744 (D. Hawaii 1949). Thus, the then Territory of Hawaii was held not to be within the special maritime and territorial jurisdiction of the United States. Id. See also Watts v. United States, 1 Wash. T. 288, 296-301 (1870T,_holdina the then Territory oF Washington the equivalent of a State so that crimes committed there were not committed in an area within the sole and exclusive jurisdiction of the United States. By the same reasoning, the Northern Mariana Islands is not within the special maritime and - 407 - territorial jurisdiction of the United States.* Consequently, crimes such as homicide, arson, rape, and robbery, if they involve no federal interest, are punishable under the laws of the Northern Mariana Islands, not under federal laws. Almost all other federal criminal statutes protect specific federal interests and are of universal application throughout the territorial limits of the United States. Id. The territorial limits of the United States are defined to includeTall places subject to the jurisdiction of the United States. 18 U. S. C. @ 5. Guam is subject to the jurisdiction of the United States, and thus to federal criminal laws. See United States v. Santos, 623 F.2d 75, 77 (9th Cir. 1980); United States v. Taitano, 442 F.2d 467, 469 (9th Cir. 1971), certiorari denied, 404 U.S. 852 (1971). The federal criminal laws are therefore applicable to rmam and the several States and, by operation of section 502(a)(2) of the Covenant, are consEx:iuently now applicable to the Northern Mariana Islands." Some federal criminal statutes, by their own terms, are not applicable to all areas subject to the jurisdiction of the United States. Specific applicability provisions in a particular statute supercede the general rule that federal criminal statutes apply wherever the United States has jurisdiction. Thus, for example, section 372 of title 18 makes criminal a conspiracy to impede or injure a federal officer by two or more persons "in any State, Territory, Possess ion, or District." Guam is a "Territory" or "Possession." The section is thus applicable to Guam and the several States and, by operation of section 502(a)(2) of the Covenant, to the Northern Mariana Islands. Also applicable to the Northern Mariana Islands by way of their application to Guam (by name or as a *The cases determining the extent of the special maritime and territorial jurisdiction of the United States did not address whether the Northern Mariana Islands is excluded from that jurisdiction. Accordingly, legislative lanquaqe is proposed in this report to make clear that the Northern Mariana Islands is not within that jurisdiction. See the reccmmendation, Technical amendments to title 18 of the United States Code, Crimes and Criminal Prodecur@_, in-the Recawxe nda t ions section of this report. See also !Kynne v._ United States, 217 U.S. 234 (1910), holdinq, under a predecessor statute, that a murder committed on a ship in Honolulu harbor, within the jurisdiction of the Territory of Hawaii, was not within the jurisdiction of a "State" and, thus, could be prosecuted by the United States. "Even if the Covenant had never been adopted, however, the Northern Mariana Islands--by virtue of Article 3 of the Trusteeship Aqreement--would be under the jurisdiction and, therefore, within the territorial limits of the United States for purposes of the federal criminal laws. 408 - territor 'v or possession) and section 502(a)(2) of the Covenant are chapter 41, making criminal extortionate credit transactions (18 U.S.C. � 891(8)) - chapter 44, making criminal the unlicensed importation, manufacture, or sale of firearms (id. � 921(a)(2)); and chapter 59, making criminal transportation of intoxicating liquors i nto "any State, Territory, District, or Possession" wh e re prohibition is in effect (id. � 1262). Even though federal criminal laws are generally applicable to the Northern Mariana Islands, the specific language of particular criminal statutes may make their actual application in the Northern Mariana Islands very unlikely or impossible. For example, chapter 53 of title 18, making criminal various offenses committed on Indian reservations or in certain other Indian areas is applicable to any Indian reservations in the Northern Mariana Islands but, of course, there are none. Likewise, chapter 87, making criminal certain offenses at federal prisons, and chapter 97, making criminal certain conduct affecting trains and railroad facilities, have no practical application in the Northern Mariana Islands which has neither federal prisons nor railroads. Many federal criminal statutes become applicable only if a particular activity affects interstate or foreign commerce. "Interstate commerce" is defined to include "commerce between one State, Territory, Possession, or the District of Columbia and another State, Territory, Possession, or the District of Columbia." 18 U.S.C. � 10. Guam is a "Territory" or "Possession" of the United States so interstate commerce includes camme-rce among the several States and Guam. By operation of section 502(a)(2) of the Covenant, interstate commerce also includes commerce among the several States, Guam, and the Northern Mariana Islands. Thus, statutes making a particular activity criminal if it affects interstate or foreign camerce are applicable to activities affecting commerce crossing the borders of the Northern Mariana Islands.* Certain sections of chapter 27 of title 18, making criminal smuggling and other customs law violations, are inapplicable, by their own terms, to Guam and other named areas outside the customs territory of the United States. See 18 U.S.C. �� 542 (entry of goods by means of false statements), 544 (relanding of goods), and 546 (srnuq The Northern Mariana Islands is al so outside the ._gling). customs territory of the United States. Covenant S 603(a). But, "Interstate or foreign commerce" is occasionally defined in slightly varying terms for the purpose of particular chapters in title 18 of the United States Code. See, for example, 18 U.S.C. S 841(b). In all such cases, commerce across the borders of the Northern Mariana Islands is included within that definition. 409 - because the Northern Mariana Islands is not specifically named, these sections and the reminder of chapter 27 are applicable to the Northern Mariana Islands under the general proposition that federal criminal statutes are applicable in all areas subject to the jurisdiction of the United States.* Chapter 114, making criminal trafficking in contraband cigarettes, is not applicable in the Northern Mariana Islands. "Contraband cigarettes" are defined, in part, as those which bear no evidence of payment of applicable State cigarette taxes in the State where the cigarettes are found. 18 U.S.C. 5 2341(2). "State" is def ined to include neither Guam nor the Northern Mariana Islands. Id. S 2341(4). Chapter 114 is the only chapter in part I of title 18 7hat, by its own terms, is not applicable in the Northern Mariana Islands. Discussion. Most federal criminal laws should continue to apply in the Northern Mariana Islands. Federal criminal laws generally protect particular interests, personnel, facilities, or functions of the Federal Government. Those interests, personnel, facilities, and functions are no less deserving of protection in the Northern Mariana Islands than elsewhere. The application of several federal criminal laws to the Northern Mariana Islands should be changed. See, in the Recamnendations T section of this report, the reemmendations, Inrpo ation of fruit bats, Customs crimes, EM2rtation of arms, liqu6rs, Wn-d narcotics to Tacific Islands, Lottery prohibitions, and Technical amendments to title 18 Ff -the United States Code, Crimes andT FMminal Procedure. Part II. Criminal Procedure. and Part III. Prisons and Prisoners. and *A statute is applicable to the Northern Mariana Islands if it is applicable to the several States and Guam. Covenant S 502(a)(2). The converse, however, is not true. A statute applicable to all areas subject to the jurisdiction of the United States is not inapplicable to the Northern Mariana Islands simply because it is inapplicable to Guam. - 410 - Part IV. Correction of Youthful Offenders. and Part V. Immunity of Witnesses. The Commission did not examine these parts of title 18 in detail. No problems in the application of these parts to the Northern Mariana Islands were brought to the Comr,ission's attention. TITLE 19. CUSTOMS DUTIES. The Commission's staff prepared. two draft reccmmendations related to title 19 for the Commission's consideration. The time and resources available to the Commission were. not adequate to allow a sufficient opportunity for public camxent on these proposals. Accordingly, the Commission took no action with respect to either proposal. The two recommendations, Title 19 of the United States Code, Customs Duties and Import quotas, are reproduced in tFFe Documentary Supplement to this report. TITLE 20. EDUCATION. The Commission's recommendation, The Higher Education Act, in the RecomzTL-ndat ions section of this report,, discusses chapter 28 of title 20. The Commission's staff examined the other chapters in title 20, but did not compile and edit its research for inclusion in this report. No significant problems in the application of these chapters to the Northern Mariana Islands were uncovered by the staff's research or otherwise brought to the Commission's attention. TITLE 21. FOOD AND DRUGS. The Commission's staff examined title 21 in its entirety, but did not compile and edit its research for inclusion in this report. No significant problems in the application of title 21 to the Northern Mariana Islands were uncovered by the staff's research or otherwise brought to the Commission's attention. TITLE 22. FOREIGN RELATIONS AND INTERCOURSE. The Commission's recommendation, Creation of a special United States pass@2rt for citizens of the Northern Mariana Islands, in the Recammendat ions section of this report, discusses chapter 4 of title 22. The Commission's staff examined the other chapters of title 22, - 411 but did not compile and edit its research for inclusion in this report. No significant problems in the application of these chapters to the Northern Mariana Islands were uncovered by the staff's research or otherwise brought to the Ccrnission's attention. TITLE 23. HIGHWAYS. and TITLE 24. HOSPITALq AND ASYLUMS. 1he Commission did not exarnine these titles of the United States Code in detail. No problems in the application of these titles to the Northern Mariana Islands were brought to the Commission's attention. TITLE 25. INDIANS. The statutes. Title 25 of the United States Code contains federal laws of a general. and permanent nature relating to American Indians. Present applicability. Title 25 in general applies to orqanized Indian tribes and their meml-)ers and to Indian reservations and other Indian lands. Neither orqanized Indian tribes nor Indian lands are found in the Northern Mariana Islands. Consequently, title 25 may be regarded as inapplicable to the Northern Mariana Islands by reason of its subject matter. Discussion. The Commission makes no recommendations with respect to title 25. The Commission notes, however, that section 399 of title 25 authorizes the Secretary of the Interior to lease certain mineral lands on Indian reservations to citizens of the TTnited States. Citizens of the Northern Mariana Islands will not beccm .e citizens of the United States until full implementation of the Covenant on temination of the trusteeship. Covenant �5 301, 1003(c). Until that time they are unable to lease mineral lands on Indian reservations pursuant to section 399. No reccrm-nendat ions were made with regard to this citizenship requirerrent in the Commission's January 1982 interim report to the United States Conqress. - 412 - TITLE 26. INTEMAL REVENUE ODDE Subsidiary Table of Contents Page Summry. 414 Income taxes. 414 Estate and gift taxes. 415 Eknployrrent taxes. 415 Excise taxes. 416 Introduction. 416 An Overview of the Federal Tax System. 417 The goals of taxation. 417 The rreans of taxation. 419 Subtitle A. The Income Tax. 422 The statutes. 422 The personal income tax. 422 The corporate inoane tax. 426 Present applicability. 427 The federal inccm tax as a local territorial tax. 427 Effective date. 428 The individual taxpayer. 429 The corporate taxpayer. 430 --the "possessions corporations tax credit." 432 --foreign sales corporations. 434 Administration and enforcement of the local territorial incaw tax. 435 Allocating tax collections between the Northern Mariana Islands and the United States. 437 Issues of interpretation. 438 --I'inccm tax laws in force." 438 --the "abate vs. rebate" debate. 439 --a 100-percent rebate? 441 --rebate without prior payment? 442 Discussion. 445 Factors in evaluating taxation alternatives. 445 Local autonomy. 446 413 - Page Local autonomy vs. mirror taxation. 447 --revenue-raising capability. 447 --complexity in administration. 448 --complexity for the taxpayer. 450 --loopholes. 452 --adaptability. 454 --equity 455 --compatibility with the Covenant. 456 other options. 457 --federal taxation, proceeds to the federal treasury. 457 --federal taxation, proceeds to the Northern Mariana Islands. 458 Subtitle B. Estate and Gift Taxes. 459 The statutes. 459 Present applicability. 460 Discussion. 462 Who is entitled to treatment as a "nonresident not a citizen of the United States" for gift and estate tax purposes--aoquisition of United States citizenship sole@y by status as citizen of the Northern Mariana Islands or by birth or residence in the Northern Mariana Islands. 462 Who is entitled to treatment as a "nonresident not a citizen of the United States" for gift and estate tax purposes--acquisition of United States citizenship by reason of birth or residence in another possession. 464 Subtitle C. Employment Taxes. 465 The Federal Insurance Contributions Act. 465 The statute. 465 Present applicability. 466 The Railroad Retirement Tax Act. 466 The statute. 466 Present applicability. 467 The Federal Unemployment Tax Act. 467 The statute. 467 Present applicability. 468 Collection of Income Tax at Sources on Wages. 469 - 414 Subtitle D. Miscellaneous Excise Taxes. and Subtitle E. Alcohol, Ibbacco, and Ciertil-nOther Excise Taxes. 469 The statutes. 469 Present applicability. 471 In general. 471 Environmental excise taxes. 472 Insurance policies issued by foreign insurance f irms. 474 Charities, private foundations, and trusts. 474 Windfall oil profits. 474 Federal excise taxes on goods shipped from the United States to the Northern Plariana Islands. 475 Federal excise taxes on qoods shipped from the Northern Mariana Islands to the United States. 475 Subtitle F. Procedure and Administration. 477 Subtitle G. The Joint Committee on Taxation. 477 Subtitle H. Financing of Presidential Campaic gns. 478 Subtitle 1. Trust Fund Code. 478 Sumary Income taxes. The federal income tax laws became applicable to the Northern Mariana Islands on January 1, 1979, as a local territorial, or "mirror," tax, with proceeds of the tax going. into the treasury of the Northern Mariana Islands. The mirror tax is administered and enforced by the qovernment of the Northern Mariana Islands, but that government may request the Federal Government to administer and enforce the tax at no cost to the Northern Mariana Islands. Residents Of the Northern Mariana Islands, including corporations organized under the laws of the Northern Mariana Islands,, were temporarily exempted, until January 1, 1985, from payment of the local territorial tax on income derived from sources within the Northern Mariana Islands. The application of federal income tax laws as mirror taxes in the' territories has been criticized as creating a system too complex - 415 - for both the taxpayer and tax collection authorities and too conducive to tax evasion and avoidance. Prevailing sentiment in the Northern Mariana Islands opposes imposition of the mirror tax and favors development and implemntation of a locally-developed tax system. The Covenant must be amended to allow the Northern Mariana Islands to replace the mirror tax with its own tax system. (The authority given the Northern Mariana Islands under the Covenant to rebate mirror taxes collected, however, has been argued to be sufficiently broad to allow the Northern Mariana Islands to replace the mirror tax with its own tax system without amending the Covenant.) Allowing the Northern Mariana Islands to replace the mirror tax with its own tax system may give the Northern Mariana Islands an unfair advantage over Guam, unless Guam is given similar authority. Federal qrants to the Northern Mariana Islands may be fewer and smaller if federal income tax laws are not imposed as a mirror tax in the Northern Mariana Islands substantially as those laws are imposed in the united States. This likelihood is based on the sentiment that taxes collected in the United States proper should not be expended for the benefit of the Northern Mariana Islands if the people of the Northern Mariana Islands are unwilling to contribute to their own welfare by taxing themselves at comparable levels. The government of the Northern Mariana Islands informed conqressional leaders in December 1983 of its intention to develop and submit to the United States Conqress legislation to allow the Northern Mariana Islands to repeal the mirror tax and otherwise revise the tax relationship between the Northern Mariana Islands and the United States. Estate and aift taxes. Because of exclusions and deductions allowed in computing estate and qift taxes, those taxes affect only relatively wealthy persons. Persons residing in the Northern Mariana Islands who become United States citizens solely by operation of article III of the Covenant will be subject to neither estate nor gift taxes. All other United States citizens residing in the Northern Mariana Islands are subject to those taxes. Employment taxes. Employers and employees in the Northern Mariana Islands are made subject to taxes imposed by the Federal Insurance Contributions Act to support the federal social security system at the time the social security systems of the Northern Mariana Islands and the United States are merged (either at the end of the trusteeship or an earlier date set by agreement between the Northern Mariana Islands and the United States). The self --employment tax, imposed on self-employed individuals for the same purpose, also becomes effective in the Northern Mariana Islands at that time. 416 The Federal Unemployment Tax Act, which imposes an employment tax to support the federal-State unemployment insurance program, . is not applicable in the Northern Mariana Islands. Excise taxes. Most federal excise taxes are not applicable within the Northern Mariana Islands. The only excise taxes that do apply in the Northern Mariana Islands are the environmental taxes on crude oil and petroleum products, on certain chemicals, and on hazardous wastes. Introduction Taxes command attention, particularly frm those called upon to pay them. Fran the negotiation of the Covenant to the present, the extent to which the Internal Revenue Code should apply to the Northern Mariana Islands has commanded a great deal of attention. While the wisdom of applying other federal laws to the Northern Mariana Islands has frequently been the subject of debate, with no federal law has the debate been so heated as with the Internal Revenue Code. The most appropriate system of taxation for the Northern Mariana Islands is the subject of ongoing negotiations, involving the goverment of the Northern Mariana Islands, the Department of the Interior and Department of the Treasury in the United States Goverment, and concerned committees of the United States Conciress. Section 3(c) of Public law 98-213, 97 Stat. 1459, which was signed into law in December 1983, provides: The Secretary of the Interior and the Governor of the Commonwealth of the Northern Mariana islands shall each submit a report to the Committee on Interior and Insular Affairs of the House of Representatives and the Committee on Energy and Natural Resources of the Senate on any efforts to develop any needed modification of the income tax rates required by sections 601 and 602 of the Covenant 0 0 * to enforce such sections. The initial report shall be transmitted not later than January 1, 1984, with subsequent reports to be transmitted every three months thereafter until January 1, 1985. The reports shall set forth the precise objectives of both the Camnonwealth government and the administration, any areas of difference, the modifications under consideration, and what progress has been made to resolve any differences and implement the provisions of sections 601 and 602. The first rep'Orts submitted pursuant to this requirement contemplate modification of Covenant provisions relating to the federal income tax. See letter from Richard T. Montoya, Deputy Assistant Secretary of the Interior for Territorial and International Affairs, to Senator James A. McClure, Chairman, Committee on Energy and Natural Resources - 417 - (December 27, 1983);* letter fran Northern Mariana Islands Governor Pedro P. Tenorio to Senator McClure (December 30, 1983). The following treatment begins with an overview of the federal tax system, and then proceeds to discuss each of the major federal taxes imposed by the Internal Revenue Code.** Each type of tax is described, its present applicability to the Northern Mariana Islands is discussed, and issues pertaining to its application are summarized. The treatments of particular taxes are presented according to their arrangement in the various subtitles of the Internal Revenue Code, title 26 of the United States Code. An Overview of the Federal Tax System The goals of taxation. Nations, and their local subdivisions, tax their citizens and residents to raise money for cammn purposes. Taxes, however, are not only used to raise revenue to support the functions of government. They are also used to manipulate the national econany, to encourage spending for particular purposes (for example, housing or pollution control devices) and to discourage it for others (for example, tobacco products). More generally, a system of taxation may be used to encourage full employment or international trade, to speed economic growth, or to stabilize the national currency. In addition to the revenue-raising and economic goals of taxation, tax systems can be used to lessen the gap between the richest and the poorest members of a society, if that gap is thought too large. Wealthier individuals in the society can be taxed at a higher rate, and government program can benefit primarily those with less wealth at their disposal. In democratic societies, the common purposes for which citizens may be taxed, the method of taxation, and the tax contribution expected fran each citizen and resident are decided by elected legislative bodies. In the federal system of the United States, the functions of government are divided between the national government and State and local governments. The legislatures of each of those governments decide for what purposes within their constitutional authority public funds shall be raised and how those funds shall be raised. *The Deputy Assistant Secretary took no position on whether modification of the Covenant provisions would be supported by the executive branch of the Federal Government. *,*Customs duties, imposed by title 19 of the United States Code, are not discussed here. 418 The Congress of the United States has decided to raise funds frcm the American public for a wide variety of purposes. In fiscal year 1983, the most important. purposes for which taxes were collected, judged by the expenditures for each, were as follows: Expenditures Percent in billions of of total dollars eM2nditures* National defense, and veterans benefits and services 235.3 28.9 Social security 170.7 21.0 other inccme security programs, including unemployment canpensation, federal employee retire- ment, and food stamps 106.2 13.0 Interest on the national debt 89.8 11.0 Health, including Medicare 81.3 10.0 Education, training, employment, and social services 26.6 3.3 Agriculture 22.2 2.7 Transportation 21.4 2.6 Natural resources and environment 12.7 1.6 International affairs 9.0 1.1 All other federal functions 39.4 4.8 U. S. Office of Management & Budget, 13udget of the U.S. Government: Fiscal Year 1985, at 9-6 to 9-7 (1984). *No allowance is made here for undistributed offsetting federal receipts, which reduce total federal expenditures by $18.6 billion. Consequently, the percentages given here in total exceed 100 percent. - 419 - The means of taxation. Taxes are judged by a variety of interrelated criteria. The first test is the ability of the tax to raise revenue for the goverment. More revenue is raised if the costs to the goverment of administering and enforcing the tax are low. Administration and enforcement costs will be lower if taxpayers voluntarily pay the tax. Voluntary payrent in turn is more likely if taxpayers view the tax as fair. A tax that is certain in its application and not subject to variation at the discretion of administrative officials is more likely to be perceived as fair. Taxpayers are also more likely to pay the tax if it can be done with little pain to themselves. Unfortunately, a tax that scores highly against one criteria is likely to score poorly against others. Most obviously, taxes that cause little pain to the taxpayer are not likely to raise larqe amounts of revenue. Taxes that are finely discriminating in order to ensure that differently@situated groups of taxpayers are treated equitably are apt to be more ccmplex for the government to administer aryl more difficult for the taxpayer to understand. Among the better known mans of taxation are inccme taxes, prcperty taxes, sales and excise taxes, death and gift taxes, and custcms duties. Inccm taxation is widely accepted as the fairest kind of tax "based on the prem-ise that an individual's income is the best single index of his ability to contribute to the support of goverment." 9 Encyclopaedia Britannica Macropaedia, Income Tax, Personal 272 (15th ed. 1980). The most important federal taxes are the personal incCMe tax, social insurance taxes and contributions, the corporation inccme tax, excise taxes, customs duties, and estate and gift taxes. In f iscal year 1983 the contribution of each to total federal budget receipts was as follows: - 420 Receipts Percent in billions of of total dollars receipts* Personal inccme taxes 288.9 48.1 Social insurance taxes and contributions 209.0 34.8 Corporation income taxes 37.0 6.1 Excise taxes 35.3 5.9 Custcms duties 8.7 1.4 Estate and gift taxes 6.1 1.0 U.S. Office of Management & Budget,, @udget of the U. S. Government: Fiscal Year 1985, at 9-19 to 9-21 (1984). Taxation in the United States stands up well when compared to tax systems in other countries. "[Ilt is clear that the total [federal, State, and local) tax burden is wre moderate in the 101-ted States than in most other developed countries."" G. Break & J. Pechman, Federal Tax Reform: The Impossible Dream? 3 (1975). And, "[clompared to those of most other countries, the federal part of the U.S. tax system is probably one of the best. It relies heavily on progressive taxes and is administered with campetence and evenhandedness." Id. at 10. *Miscellaneous receipts of $15.6 billion, not itemized here, are included in total receipts of $600.6 billion. **Less-develcped countries tend to tax at lower rates. 110ne might suppose that a country with high per capita incomes would have less need for high government expenditures, especially in the form of social welfare,, but the fact is that the demand for government services tends to increase with the level of national incane." 17 Encyclopaedia Britannica Macropaedia, Taxation 1076, 1081 (15th ed. 1980). - 421 - If the federal tax system is ccmpared not to the systems of other countries but to one or another proposed systems, compliments quickly turn to condemnation: Despite recent progress in lowering rates, the [federal] tax system remains a disgrace. It is in dire need of simplification and reform. The tax system is inordinately bia, filling volumes of codes, complicated by hundreds of credits, exemptions and special provisions. Many taxpayers need expensive professional help to fill out their returns. Each act of the Conqress complicates the system further. Widespread evasion is apparent on interest, dividend and other forms of household or professional income. Tax shelters are commonplace. Estimates of the size of the underground economy range from tens of billions of dollars to several hundred billion. In short, we have a system that fosters contempt for the law, and simultaneously discourages productive econcmic activity. Hall & Rabushka, A Er Msal to Simplify Our Tax System, Wall Street Journal, December 10, 1981, at 30. And: Taxes are now so complicated and income-sheltering so widespread that its incidental, almst casual, promotion seems routine and respectable. There is a subtle corruption in public morals; tax avoidance easily blurs into tax evasion . . . 0 . * The system has created so many vested interests that almost any effort to remold it would encounter inmense political opposition. Everyone favors simple taxes with low rates until the implications of such a system become clear. Samuelson, The Tax Trap, 14 National Journal 641 (April 10, 1982). Political and philosophical perspectives also influence evaluations of the American system of taxation. Some persons prefer more . governmental functions to be carried out at State and local levels wiiile others prefer more federal participation in these functions. Some prefer that government assume fewer responsibilities overall, while others favor an expansion of govermental activity. Likewise, differences of opinion exist as to the extent to which the Federal Government, through the tax system, should attempt to steer the economy or reallocate resources among the various sectors of the American economy. - 422 The federal tax system is administered by the Internal 'Revenue Service, part of the Department of the Treasury. Subtitle A. The Income Tax. The statutes. Subtitle A of the Internal Revenue Code imposes taxes on the incanes of individuals and corporations.* * * * The significance of the federal income tax in foreign and domestic affairs can hardly be overstressed. This tax provided the monetary means by which the United States -merged as a dominant world power early in the twentieth century; it promises to provide the means by which the nation will continue to exert international leadership while meeting its overseas commitments. At the d(xnestic level the federal income tax permits the Federal Government to exercise substantial control over the direction taken by the nation's economic and social institutions. J. Chommie, Federal Income Taxation I (2d ed. 1973). Income, for purposes of the federal income tax, is defined to include most gains received by a taxpayer, including wages, salaries, camnissions, interest, rent, business income, dividends, prizes, and awards., Certain gains to a taxpayer, however, are specifically excluded from the Code's definition of income. Among the gains not included in inccme are life and health insurance benefits; property acquired by gift or inheritance; interest from tax-exempt bonds; income of governmental bodies; scholarships; social security benefits; and some fringe benefits. The personal income tax. After an individual taxpayer's total income, or "gross income," is calculated, the taxpayer determines the adjustments for which he or she is eligible. Adjustments reduce "gross income" to "adjusted gross income" by subtracting trade and business expenses, sixty percent of net gains realized from the sale of property owned for more than six months ("lonq-ten-P capital gains"), moving expenses, and certain other receipts or expenses. *A separate tax, included in subtitle A, on income from. self-emplqyment helps fund the federal social security s 26 ystem. U.S.C. 1401 et secr. This tax is discussed together with the Federal Insurance Ct3n-tributions Act under Subtitle C. Employment Taxes, below. 423 - The resulting "adjusted gross income" is then further reduced to "taxable income" by deductions. Each individual taxpayer is allowed to deduct from adjusted qross income a personal exemption of $1000.* Additional exemptions of $1000 are allowed for persons dependent for support on the taxpayer who are part of the taxpayer's family or household. Further exemptions are allowed if the taxpayer or the taxpayer's spouse is over 65 years of age or blind. In addition to personal exemptions, individual taxpayers are permitted a wide variety of other deductions from adjusted gross income. Until 1977, an individual could deduct from adjusted gross incane either the total of all itemized deductions or a "standard deduction," whichever was greater. The standard deduction has now been incorporated into the tax tables as the "zero bracket allowance." Adjusted gross income may still be reduced, however, by subtractinq the a-Pount by which total itemized deductions exceed the zero bracket allowance. The rnost important deductions for the individual are for taxes paid to local governments, for interest payments, for medical expenses in excess of five percent of adjusted gross income, for contributions to charity, and for casualty losses, such as losses from fire or theft. 0. Eckstein, Public Finance 57 (4th ed. 1979). After the taxpayer has calculated his or her taxable income, the amunt of tax owed to the Federal Government is determined by applying the tax rate for that level of taxable income. Against the amount of tax determined to be owed to the government, the taxpayer may apply certain "credits" to reduce the total tax owed. Tax credits are allowed for a variety of expenditures by a taxpayer. Amnq the expenditures that may give rise to a tax credit are taxes paid to foreign countries, political campaign contributions, investments in productive property, employment-related child care expenses, and residential energy conservation expenditures. In addition, the "earned incom. credit" of up to $500 may be claimed by certain low income workers who have dependent children in their household. Unlike other tax credits, if the earned inccnie credit exceeds the taxpayer's total tax liability, the Federal Government will pay the difference to the taxpayer. United States citizens and aliens residing in the United States are subject to taxes on their world-wide income (but, as noted above, receive a credit against those taxes for taxes paid to foreign countries). In addition, the United States imposes taxes on the *For 1984 and succeedinq years, the personal exemption will be adjusted to reflect changes in the cost of living. - 424 - income of foreign persons if that income is generated in the United States. in general, each individual with a qross annual income of $3300 or more and each married couple choosing to be taxed as a single unit ("fi.ling a joint return") and having a gross annual income of $5500 is required to file an incom tax return. 7he return identifies the taxpayer, lists exemptions, deductions, credits, and the amount of tax due. Persons expecting to earn more than $500 in a year from wages and taxpayers with gross income in excess of specified amounts ($20,000 in the case of a single taxpayer) are required to estimate their income tax liability and make quarterly tax payments to the goverment based on that estimate. This procedure is not required, however, if the taxpayer will owe less than a specified amount ($400 in 1984) beyond what is withheld from the taxpayer's wages. For most wage earners in the United States, federal income taxes are withheld from the wage earner's paycheck by his or her Employer and paid by the employer directly to the Federal Government. In general, then, the wage-earning taxpayer will have income tax withheld from wages, while the self-employed taxpayer will pay estimated tax to the goverment in quarterly installments. Below are tables giving an idea of the level of federal income taxes at various income levels. The taxes are calculated at 1983 rates. In each instance, the taxpayers are assumed to have no itemized deductions in excess of the zero bracket allowance and no adjustments, credits (other than the earned income credit, if applicable), or exemptions other than personal exemptions for themselves and their dependents. Married couples are assumed to be filing a joint return. Wage-earner, single, no dependents (one personal exemption): Gross income Income tax Annual Biweekly Annual Biweekly -6,000 T 230.7@ $ 3U7 13.27 9,000 346.15 795 30.58 12,000 461.54 1,300 50.00 15,000 576.92 1,892 72.77 18,000 692.31 2,583 99.35 21,000 807-69 3,376 129.85 24,000 923.08 4,216 162.15 30,000 1,153-85 6,126 235.62 36,000 1,384-62 8,323 320.12 - 425 - Wage earner and g2pendent spouse, no other dependents (two personal exemptions): Gross income Income tax Annual Biweekly Annual Biweekly $ 6,000 230.77 T-69 2.65 9,000 346.15 429 16.50 12,000 461.54 868 33.38 15,000 576.92 1,340 51.54 18,000 692.31 1,851 71.19 21,000 807.69 2,421 93.12 24,000 923.08 3,064 117.85 30,000 1,153.85 4,547 174.88 36,000 1,384.62 6,272 241.23 Wage earner, demdent spouse, and two dependent children (four personal exeMtions): Gross income Income tax Annual Biweekly Annual Biweekly $ 6,000 $ 230.77 -0-* -0- 9,000 346.15 $ 179** 9 6.88 12,000 461.54 568 21.85 15,000 576.92 1,018 39.15 18,000 692.31 1,510 58.08 21,000 807.69 2,041 78.50 24,000 923.08 2,611 100.42 30,000 1,153.85 4,027 154.88 36,000 1,384.62 5,672 218.15 *This family is entitled to an earned income credit of $497, to be paid by the government to the family. "This family is entitled to an earned income credit of $122, so that its annual incorm tax obligation is $57 ($179 minus $122), or a biweekly obligation of $2.19. - 426 - Wage earner, dependent spouse, and four dependent children (six personal exerqptions): Gross inccme Income tax Annual Biweekly Annual Biweekly $ 6,000 $ 230.77 -0-* -0- 9,000 346.15 -0-** -0- 12,000 461.54 $ 299 $ 11.50 15,000 576.92 718 27.61 18,000 692.31 1,170 45.00 21,000 807.69 1,680 64.62 24,000 923.08 2,231 85.81 30,000 1,153.85 3,524 135.54 36,000 1,384.62 5,072 195.08 *This family is entitled to an earned income credit of $497, to be paid by the government to the family. "This family is entitled to an earned income credit of $122, to be paid by the governrent to the family. The corporate income tax. A corporation's inccme tax liability in general is calculated in much the same way as the personal incom. tax. Despite the similarity in outline and many provisions in comrron, the two taxes vary widely in detail. Corporations have no deductions for personal exemptions or for medical expenses, for example. They are, however, entitled to deduct virtually all costs of doing business. Taxable corporate income in excess of $100,000 is taxed at the rate of 46 percent. (Taxable income of less than $100,000 is taxed in increments: 16 percent of the first $25,000; 19 percent of the second $25,000; 30 percent of the third $25,000; and 40 percent of the fourth $25,000.) Non-profit charitable, educational, benevolent, and religious corporations, labor unions, and trade associations are exempted from the corporate income tax, except to the extent they engage in commerce not connected with their primary function. Insurance companies and certain financial institutions are treated differently frcrn other corporations. Corporations are subject to U.S. tax on foreiqn as well as domestic income. Income earned by foreian - 427 - branches (and certain corporations located in tax havens) is included in the corporation's tax return in the year it is earned. If the corporation operates through a foreign subsidiary, foreign earnings are subject to tax when they are distributed to the U.S. parent corporation as dividends. However, credit against the domestic tax is allowed for foreign income and withholding taxes paid on earnings and dividends received from abroad. J. Pechman, Federal Tax Policy 127 (3d ed. 1977). Foreign corporations conducting business within the United States pay the corporate income tax on that part of their income derived from their United States business operations. F,ven though a corporation is taxed on its income, dividends *r)a id by the corporation to its shareholders are income to those shareholders, on which they must pay personal income tax. Present applicability. The federal income tax as a local territorial tax. The present applicability of the Internal Revenue Code to the Northern Mariana Islands is addressed by the Covenant, and has been the subject of subsequent acts of Congress. Section 601 of the Covenant provides: (a) The incorre tax laws in force in the United States will cane into force in the Northern Mariana Islands as a local territorial income tax on the first day of January following the effective date of this Section, in the same manner as those laws are in force in Guam. (b) An individual who is a citizen or a resident of the United States, of Guam or of the Northern Mariana Islands (including a national of the United States who is not a citizen), will file only one income tax return with respect to his income, in a manner similar to the provisions of Section 935 of Title 26, United States Code. (c) References in the.Internal Revenue Code to Guam will be deemed also to refer to the Northern Mariana Islands, where not otherwise distinctly expressed or manifestly incompatible with the intent thereof or of this Covenant. Section 602 provides further: - 428 The Goverment of the Northern Mariana Islands may by local law impose such taxes, in addition to those imposed under Section 601, as it deems appropriate and provide for the rebate of any taxes received by it, except that the power of the Government of the Northern Mariana Islands to rebate collections of the local territorial inccme tax received by it will be limited to taxes on incame derived frcm sources within the Northern Mariana Islands. Section 601(c) of the Covenant provides that, for virtually all purposes of the federal incame tax laws, the Northern Mariana Islands will be treated as is Gum. It was considered desirable by the framers of the Covenant "that Guam and the Northern Marianas have coordinated tax laws since they operate in the same econamic and geographic sphere." Marianas Political Status Camission, Section by Section Analysis of the Covenant 67-68 (1975).* Section 601, standing alone, imposes a "mirror" of the federal tax as a local territorial tax of the Northern Mariana Islands. The taxpayer's obligation is to the Northern Mariana Islands, not to the United States. The words "the Northern Mariana Islands" are to be substituted for the words "the United States" wherever thev appear in the federal incame tax laws, just as the word "cuam" is substituted in applying the federal inccne tax laws as the territorial inccre tax of Guam. See 48 U.S.C. 9 142li(e); Revenue Rulinq 80-167, 1980-1 C.B. 176, 177. The local territorial taxes collected in the Northern Mariana Islands are payable to the government of the Northern Mariana Tslands. See 48 U.S.C. 5 1421i(b). Effective date. The effective date of section 601 was January 9, 1978. Covenant 5 1003(b); Presidential Proclamation 4534, 42 Fed. Reg. 56593 (1977). Consequently, under subsection (a) of section 601, the federal incone tax laws became applicable to the Northern Mariana Islands as a local territorial incane tax on January 1, 1979. *The Analysis is reprinted in Hearings on the Covenant to Establish the Ccamnwealth of the Northern Mariana Islands before the Subccmmittee on Territorial and Insular Affairs of the House Catatittee on Interior and Insular Affairs, 94th Cong., lst Sess. 626 (1975) and in Hearings on the Northern Mariana Islands before the Senate Committee on Interior and Insular Affairs, 94th Cong., lst Sess. 356 (1975). - 429 - Residents of the Northern Mariana Islands, including corporations and other firrm organized under the laws of the Northern Mariana Islands, were temporarily exempted fran payment of the local territorial tax on income derived from sources within the Northern Mariana Islands. The exemption, granted by successive acts of Congress, expired on January 1, 1985. Public Law 96-205,, S 205(a), 94 Stat. 84 (exemption until January 1, 1981, and, conditionally, until January 1, 1982); Public Law 96-597, S 303(a), 94 Stat. 3477 (1980) (exemption until January 1, 1983); Public law 98-213, 5 3(a), 97 Stat. 1459 (1983) (exemption until January 1, 1985).* Residents of the the Northern Mariana islands have been subject to the federal income tax as a local territorial tax since January 1, 1979, on inccme derived fram sources outside the Northern Mariana Islands. The individual taxpayer. Individuals who are citizens or residents of the Northern Mariana Islands, Guam, or the United States (excluding the Northern Mariana Islands and Guam) are required to file only one tax return. Covenant S 601(b). The jurisdiction with wh ich the return is filed is determined by citizenship or residence at the close of the tax year. 26 U.S.C. � 935(b)(2). If the taxpayer is a resident of the Northern Mariana Islands at that time,, the return is filed with the Northern Mariana Islands; if a resident of Guam, with Guam; and if a resident of the United States, with the United States. Id. S 935(b)(1). If the taxpayer resides in none of the three j urisdi'-ct ions, and is a citizen of the United States, the return is filed with the United States. Id. If the nonresident taxpayer is a citizen of the Northern Mari ar@a-- Islands but not of the United States, the return is filed with the Northern Mariana Islands. Id. *Specifically, the exemption is available "for taxable years beginning after December 31, 1978, until, but not after January 1, 1985." Whether the exemption is available for a taxable year coinciding with the calendar year beginning January 1, 1985, is thus unclear. The ambiguity is increase d by a 1980 amendment of the language. Prior to enactment of section 303(a) of Public Law 96-597, the exemption applied to "taxable years beginning . . . before January 1 . . . " rather than to "taxable years beginning . . . until, but not after January l." Public Law 96-205, S 205(a). The legislative history of Public Law 96-597 does not explain why the language was changed in this manner. - 430 - The corporate taxpayer* Since section 601 of the Cbvenant operates to substitute "the Northern Mariana Islands" for "the UnJLted States" in applying the federal inccme tax laws as the local territorial incane tax of the Northern Mariana Islands, the tax relationship between the Northern Mariana Islands and Northern Mariana Islands corporations is the same as that between the United States and United States corporations. The United States corporate income tax is applied to "every corporation." 26 U.S.C. 9 11(a). Excepted, however, are foreign c orporations, which are taxed only on income "effectively connected with the conduct of a trade or business within the United States." Id. q� 11(d), 882(a)(1). In addition, foreign corporations are taxEU-a flat 30 percent of certain income received from sources within the United States that is not connected with the conduct of a trade or business in the United States. Id. 9 881.* A "foreiqn corporation" is defined as a corporation 7ot ornanized "under the law of the United States or of any State." Id. S 7701(4), (5). For purposes of the local territorial tax of the Northern Mariana Islands, then, corporations organized under the laws of the Northern Mariana Islands are subject to the local territorial income tax in the sarm way that donestic corporations in the United States are subject to the federal corporation income tax. Foreiqn corporations in the Northern Mariana Islands (including corporations organized under the laws of the United States, of any State, or of Guam) are subject to the territorial corporate tax only on income effectively connected with the conduct of a trade or business within the Northern Mariana Islands and to the flat 30 percent tax on all other income received from sources in the Northern Mariana Islands. A Northern Mariana Islands corporation is a foreign corporation for purposes of the federal corporate incante tax. See Revenue Ruling 56-616, 1956-2 C.B. 589 (Guam corporation is foreign for purposes of federal inccme tax laws). Accordingly, a Northern Mariana Islands corporation receivinq inccm effecti vely connected with the conduct of a trade or business in the United States is subject to the federal corporate income tax on that income. Oualified Guam corporations are exempted, however, frcm the flat 30 percent tax on other inccme *Section 881 was amended by section 127(b)(1) of the Deficit Reduction Act of 1984, Public Law 98-369, 98 Stat. 494, to exclude most interest inccrne fran the 30 percent tax. - 431 - received fran sources in the United States. 26 U.S.C. S 881(b).* See also id. � 1442(c). AccordinglY, qualified Northern Mariana Islands corporations are also exempted frcm the federal 30 percent tax on other inccme received from sources within the United States." The inccme of a Northern Mariana Islands corporation from. sources in the United States, regardless of whether it is trade or business income, is subject to the local territorial corporate income tax of the Northern Mariana Islands. And, since that tax is on income derived frcm. sources outside of the Northern Mariana Islands, it may not be rebated under the authority of section 602 of the Covenant. (The Northern Mariana Islands corporation owing taxes to both the Northern Mariana Islands and the United States on incane derived frcm the United States may claim. a credit against its *Before anendments made by section 130 of the Deficit Reduction Act of 1984, Public Law 98-369, 98 Stat. 494, any corporation "created or organized in Guam or under the law of Guam" qualified for the exemption. Section 130 requires an exempt corporation to be less than 25 percent owned by foreign persons and to derive at least 20 percent of its gross incone frcm sources within Guam. "But this exemption may not be used to channel "passive" inccFne (that is, incorw not connected with the conduct of a trade or business) from the United States to foreign countries. See 26 C.F.R. � 4a.861-1 (1984). Guam, which sought to becove a conduit (like the Netherlarris Antilles) for foreign investment in the United States, f iled a lawsuit challenginq the legality of this requlation. See Treasury Suit Opens, Pacific Daily News (Guam), June 13, 1984, at 8; Guam v. U.S.: The Pacific-Island Territory sues for Tax-Haven Rights, Wall Street Journal, November 30, 1983, at 1. The changes made in the 30 percent tax by the Deficit Reduction Act of 1984, exempting most interest incom frcm. that tax, has greatly reduced the incentive for establishin- See the preceding footnote. .1 such conduits. See also U.S. Tax Measure Unsettles a Caribbean Haven, Wall Street Journal, July 6, 1984, at 19; Congress Nixes Guam Tax Haven ()uest, Pacific Daily News, June 17, 1984, at 3. Citizens or residents of the Northern Mariana Islands are not "foreign persons" for purposes of determining whether a Northern Mariana Islands corporation is qualified for the exemption. The Deficit Reduction Act of 1984 specifies that citizens or residents of United States possessions are not "foreign persons." See also 26 U.S.C. � 7701(9), (30). Guam is a possession. Accordirijly, by operation of section 601(c) of the Covenant, citizens or residents of the Northern Mariana Islands are not "foreign persons" in this context. - 432 Northern Mariana Islands tax obligation for taxes paid on that inccme to the Federal Government, which in most instances will eliminate anY liability for taxes to the Northern Mariana Islands on that incame. Id. SS 901, 906 (as made applicable to the Northern Mariana Islands by section 601 of the Covenant). The corporation may also claim a credit against its Northern Mariana Islands tax obligation for taxes paid to Guam on incone derived fran sources on Gumn. Id.) Corporations, unlike individuals, may have to file incom tax returns with more than one jurisdiction, depending upon where they are organized and from which jurisdictions they derive income. Every corporation, foreign or dcmestic, subject to the federal corporate income tax is required to file a return with the United States. 26 U.S.C. S 6012(a)(2). By operation of section 1421i of title 48 of the United States Code, every corporation subject to the Guam income tax is required to f ile a return with Guam. And, by operation of section 601 of the Covenant, every corporation subject to the local territorial incane tax of the Northern Mariana Islands must file a return with the Northern Mariana Islands. A corporation organized under the laws of any of these jurisdictions--the United States, Guam, or the Northern Mariana Islands--and receiving incom from sources in the other two will have to file a return with each of the three jurisdictions. There is no rule, similar to that of section 601(b) of the Covenant for individual taxpayers, allowing the filing of a single return in one jurisdiction to satisfy the return-filing requirements of the other two. -the "possessions corporations tax credit." As an incentive to attract employment-generating business corporations to certain possessions of the United States, section 936 allows those corporations a "possessions corporations tax credit" against their federal inccme tax. The effect of the credit is to allow qualified corporations to operate virtually free of federal tax on their income frcrn those possessions. The corporations are, however, subject to any taxes imposed by the possessions and, if electing this credit, cannot claim a foreign tax credit for taxes paid to the possession. 26 U.S.C. 9 901(g). In general, so long as the possession's tax on the corporation's inccme is less than the federal income tax, it is advantageous for the corporation to elect the possessions corporation tax credit over the foreign tax credit. To qualify for the credit, the corporation must be organized under the the laws of the United States or of one of the States; 80 percent or more of its gross income for the tax year and the two preceding years must be derived fran sources-within a possession; and at least a fixed percentage (55 percent in 1983, 60 percent in 1984, and 65 percent thereafter) of its gross incane for the tax year and the two preceding years must be derived fran the active conduct of a trade or business within a possession. Id. S 936(a)(2). - 433 - For purposes of section 936, "possession" is def ined to include Puerto Rico but not to include the Virgin Islands. Id. S 936(d)(1). Guam is a possession of the United States, so qualiffi;d corporations on Guam are eligible for the possessions corporation tax credit against their federal inccme tax. In determining the availability of the "possessions corporations tax credit" to corporations in the Northern Mariana Islands, it is important to note that the credit is not against the local territorial inccue tax, but aqainst the federal inccme tax.* Section 601(c) of the Covenant provides that references to Guam in the Internal Revenue Code "will be deemed also to refer to the Northern Mariana Islands." The reference to "possessions" in section 936 includes Guam,, so the Northern Mariana Islands is also a possession for purposes of the possessions corporation tax credit.** (Even while the effective date for application of the federal inccoe tax laws to the Northern Mariana Islands as a local territorial inccme tax on inccre derived frcm sources within the Northern Mariana Islands was postponed, section 601 of the Covenant otherwise became *Not addressed here is whether a Gum corporation doing business in the Northern Meriana Islands could claim a possessions corporation tax credit against the local territorial inccme tax of Guam or whether a Northern Mariana Islands corporation doing business in Guam could claim the credit against the local territorial incane tax of the Northern Mariana Islands. Strict application of the substitution of "Guam" or "the Northern Mariana Islands" for the nUnited States" formula suggests the credit would be available in these situations, although Gum has no particular interest in or responsibility for attracting business to the Northern Mariana Islands nor does the Northern Mariana Islands have any interest in giving tax advantages to Northern Mariana Islands corporations for operating on Gum. **Two knowledgeable authorities state that whether "possession" as used in section 936 includes the Northern Mariana Islands is unclear. Liebman, Income Tax Incentives for Investment in the Northern Mariana Islands 1 2 University of Hawaii Law Review 389, 422 (1981); U.S. DeT)1t of the Treasury, TV--rritorial Income Tax Systems: Inccme Taxation in the Virgin islands, Guam, the Northern Mariana Islands, and American Samoa, 34 Bulletin for International Fiscal Documentation 260, 268, n. 18 (1980). Neither authority, however, gives any reason for excluding the Northern Mariana Islands frcm the definition of "possession." A more recent authoritative study concludes, again without discussion, that the Northern Mariana Islands is a "possession" for purposes of section 936. U.S. Dep't of the Treasury, The Operation and Effect of the Possessions Corporation System for Taxation 135 (4th annual report 1983). - 434 - effective on January 9, 1978. Covenant 9 1003(b); Presidential Proclamation 4534, 42 Fed. Reg. 56593 (1977).) -foreign sales corporations. Sections 801 to 805 of the Deficit Reduction Act of 1984, Public Law 98-369, 98 Stat. 494, amended the Internal Revenue Code to authorize favorable tax treatment for certain foreign sales corporations (FSCs). A portion of FSC income from foreign trade activities is treated as foreign source income not effectively connected with a trade or business within the United States. 26 U.S.C. 9 92.1(a).* As such, it is not subject to federal income tax. Id. �� 11(d), 882. Further, in general, a United States corporafl3n may deduct from its taxable income all dividends received from an FSC in which it owns stock to the extent those dividends are attributable to foreign trade income. Id. � 245(c). Consequently, United States corporations may obtain r significant tax advantages by organizing FSCs to carry on their export trading activities. An FSC must be organized under the laws of a foreign country or a possession of the United States. Id. � 922(a) (1) (A) (ii). It must also maintain an office in a foreiq@-country or in a possession of the united States." Id. q 922(a)(1)(D)(i). The Northern Mariana Islands is specifically--Included as a "possession" in which an FSC may be organized and maintain an office. Id. q 927(d)(5). FSCs receive a further tax advantage in that the possessions, including the Northern Mariana Islands, are not permitted to impose any tax of their own on the foreign trade income of a FSC prior to January 1, 1987. Id. S 927(e)(5). FSCs are required to carry on their principal management activities outside of the United States, that is, in one or more foreign countries or possessions of the United States. id. S 927(b)(1)(A). Similarly, for foreign trade income of a FSC to be eligible for exemption from federal income tax, siqnificant "economic processes" in generating that income must have taken place outside the United States. Id. q 927(b)(1)(B). "Economic processes" include the solicitation, nE@3_tiation, and making of trading contracts, the processing and delivery of orders, payment for qoods, and so forth. Id. � 927(d), (e). *Citations are to the Internal Revenue coder as amended by the Deficit Reduction Act. **It does not appear to be required, however, that the office be maintained in the same foreign country or possession in which the FSC is organized. - 435 - FSCs thus make sane contribution to the economies of the jurisdictions in which they elect to carry on their activities. As a consequence, since the enactment of the Deficit Reduction Act, eligible jurisdictions have devoted substantial effort to attracting FSCs. See, for example, DuPont Executives Get FSC Pitch, Pacific Daily News (Gum), October 27, 1984, at 3; Glenn: People Paying Attention, id., Focus supplement, October 26, 1984, at 12; DOW Eyes Saipan for FSC Site, id., October 23, 1984, at 1; FSC Support Office to Open Here, id., October 20, 1984, at 1; Reps to Promote FSC in CNMI, id., fbcu-ssuppleTnent, October 19, 1984, at 2; Guam Woos U.S. Export Companies, U.S. News & World Report, October 8, 1984, at 64; The U.S. Virgin Tslands--More than Tax Incentives for Foreign Sales Corporations, Wall Street Journal, October 8, 1984, at 29 (full page advertisement); Pacific Paradises id., September 19, 1984, at 1; Foreign Sales Cor You're Tax Exempt in Guam, id., rporations: September 7, 1984, (advertisement). Administration and enforcement of the local territorial inccme tax. The application of federal inccme tax laws as a local tax of the Northern Mariana Islands in the same manner as those laws are in force in Guen means that the tax is administered and enforced by the government of the Northern Mariana Islands. Section 31(c) of the Organic Act of Guam, as amended, 48 U.S.C. � 142li(c), provides: The administration and enforcement of the Gum Tbrritorial inccme tax shall be performed by or under the supervision of the Governor (of Guam) - Any f unction needful to the administration and enforcement of the inccme-tax laws in force in Guam . . . shall be performed by any officer or employee of the government of Guam duly authorized by the Governor (either directly, or indirectly by one or more redeleqations of authority) to perform such function. Paraqraph (d)(2) of the same section provides: The Governor or his delegate shall have the same administrative and enforcement powers and rEmedies with regard to the Guam 71--rritorial income tax as the Secretary of the Treasury, and other United States officials of the executive branch, have with respect to the United States incane tax. Needful rules and regulations not inconsistent with the regulations prescribed under section 7654(e) of the Internal Revenue Code for enforcement of the Gum Territorial inccme tax shall be prescribed by the Governor. - 436 (Section 7654(e) of the Internal Revenue Code authorizes the Secretary of the Treasury to issue regulations to coordinate the United States and Gum taxes on personal incane and to require information fram certain taxpayers subject to--or claimi to be subject to---Gum personal incane taxes.) Regulations issued by the government of the Northern Mariana Islands may not conflict with the federal incane tax laws. See Government of Guam v. Koster, 362 F.2d 248 (9th Cir. 1966). Criminal offenses under the local territorial income tax of the Northern Mariana Islands are offenses against the goverment of the Northern Mariana Islands, and are not offenses against the government of the United States. See 48 U.S.C. S 142li(f). The District Court for the Northern Mariana islands has civil and criminal jurisdiction over disputes involving the local territorial incane taxes of the Northern Mariana Islands. See id. 9 142li(g), (h). See also Dudley v. Commissioner, 258 F.2d 182 (7 Cir. 1958) (Tax Court of the 57rTed States does not have jurisdiction over challenge to federal income tax laws applied as local territorial incane tax of the Virgin Islands). Section 3(d) of Public Law 95-348, 92 Stat. 487 (1978), authorizes and directs the Secretary of the Treasury, on the request of the governor of the Northern Mariana Islands, to administer and enforce the territorial incame tax and/or certain other taxes of the Northern Mariana Islands. The governor's request must be pursuant to legislation enacted by the Northern Mariana Islands. Administration and enforcement by the Secretary is to be without cost to the Northern Mariana Islands. By additional actions of the legislature and governor of the Northern Mariana Islands, administration and enforcement can be returned fran the Secretary to the government of the Northern Mariana Islands. Section 204 of Public law 96-205, 94 Stat. 84 (1980), simplified the procedure for requesting federal assumption of administration and enforcement of the local tax. Section 204 also, if federal administration and enforcement is requested, encourages the employment of citizens of the Northern Mariana Islands by the Secretary of the Treasury, requires the Secretary to establish a taxpayer information service, and ensures that taxes collected are paid "directly upon collection" into the treasury of the Northern Mariana Islands. The United States Department of the Treasury has taken the position that, if it is to administer and enforce taxes in the Northern Mariana Islands, "it will assume full authority over the issuance of regulations, collection of tax, employment of staff - 437 - and other functions." Letter from Roscoe L. Egger, Jr., Commissioner of Internal Revenue, to Northern Mariana Islands Governor Pedro P. Tenorio (June 11, 1982). The Northern Mariana Islands has informed the Department of the Treasury that it "is unwilling to surrender full administration and enforcement authority over its income tax system" to the Internal Revenue Service. Letter from Pedro P. Tenorio, Governor of the Northern Mariana Islands; Olympio T. Borja, President of the Northern Mariana Islands Senate; and Benic jno R. Fitial, Speaker of the Northern Mariana Islands House of Representatives, to Donald T. Regan, Secretary of the Treasury (September 24, 1982). See also IRS Takeover on Hold for Now, Pacific Daily News, December 11, 1980, at 3. The government of the Northern Mariana Islands subsequently announced its intention not to seek administration and enforcement of the Internal Revenue Code by the Department of the Treasury when the temporarv partial exemption from the federal income tax imposed as a local territorial tax expired on January 1, 1985. QuarterlX Report Reflects IRC Implementation Progress, Executive Branch Diqest (Office of the Governor of the Northern Mariana Islands), September 30, 1984, at 11. See also NMI to Administer Guam-style Tax Code, Pacific Daily News (Guam), September 7, 1984, at 9; CNMI to Enforce IRC Sans IRS, Marianas Variety, August 24, 1984, at 3; Tax Task Force Defers Invitation to IRS, id., Auqust 17, 1984, at 1; Governor's AuthoMity on Tax Code Sought, Pacific Daily News, August 11, 1984, at 3. Allocating tax collections between the Northern Mariana Islands and the United States. Individual income tax payments received by the Northern Mariana slands and by the United States are divided between the two jurisdictions by the same method used to distribute individual income tax receipts between Guam and the United States. Tax payments attributable to income derived from sources within the Northern Mariana Islands belong to the treasury of the Northern Mariana Islands, regardless of which jurisdiction actually receives the payments. 26 U.S.C. � 7654(a)(2). Likewise, taxes on income derived from sources within the United States belong to the United States. Id. S 7654(a)(1). All other tax payments go to the jurisdicti@;n- with which the taxpayer files his or her return. Id. 9 7654(a)(3). At least once a year, f unds are to be trans fer79d between the treasuries of the Northern Mariana Islands and the United States as necessary to distribute payments received by each jurisdiction in accordance with these rules. Id. S 7654(c). The source of particular items of income is determiri@ according to the same rules used to identify income as foreign or domestic under the federal tax laws. Id. S 7654(b)(3). - 438 - No mechanism for distributing receipts between the Northern Mariana Islands and Gum is apparent. An individual taxpa, r . Ye residing in the Northern Mariana Islands, for example, pays taxes to the government of the %-rthern Mariana Islands on income derived fran sources in Guam and from sources in the United States.* Taxes derived from sources within the United States belong to the United States. Taxes derived from sources on Gum, however, remain the property of the Northern Mariana Islands. Likewise, taxes paid by an individual taxpayer residing on Guam on income from sources in the Northern Mariana Islands remain in the treasury of Gum and are riot transferred to the treasury of the Northern Mariana Islands. Taxes on the income of military personnel stationed in the Northern Mariana Islands are subject to special treatment. The Soldiers and Sailors Civil Relief'Act, 50 U.S.C. App. 5� 501 et seq., is specif ically ap I plicable to the Northern Mariana Islands in the same way it applies to Guam. Covenant � 605. By that Act, military personnel stationed on Gum or in the Northern Mariana Islands do not become residents of Guarq or the Northern Mariana Islands for purposes of local taxes. 50 U.S.C. App. � 574. Despite that statute, however, the government of the United States pays to Guam or the Northern Mariana Islands, as the case may be, taxes collected by the United States on compensation paid to those persons. 26 U.S.C. 7654(d); Covenant � 601(c). Issues of interpretation-"income tax laws in force." Section 601(a) of the Covenant provides that: The income tax laws in force in the United States will come into force in the Northern Mariana Islands as a local territorial income tax on the first day of January following the effective date of this Section, in the same manner as those laws are in force in Gum. (Ehiphasis added.) The suggestion has been made that changes in the incane tax laws of the United States made after the effective date of section 601 do not apply in the %.rthern Mariana Islands. The language of section 601(a) is contrasted with section 31 of the Organic Act of Guam, 48 U.S.C. 9 142li(a), which provides: *Note that none of these taxes can rebated to the taxpayer under section 602 of the Covenant, since only taxes on income from sources within the Northern Mariana Islands can be rebated under that section. - 439 - The income-tax laws in force in the United States of America and those which may hereafter be enacted shall be held to 1;; likewise in force in Guam . . . . (Emphasis added.) The omission of any reference to later amendments to the federal tax laws in section 602(a) is argued to mean that only the federal law in force on the effective date of that section applies as a local territorial tax of the Northern Mariana Islands, regardless of subsequent amendments to that law as it applies elsewhere. This reading of section 601 is supported by its proponents with an arqument based on the principle of "no taxation without representation." The people of the Northern Mariana Islands my be deemed to have approved the imposition of the federal income tax as a local territorial tax because they approved the Covenant, the arqument goes. Amndments to the federal tax laws after approval of the Covenant, however, if applied to the Northern Mariana Islands would constitute imposition of taxation without participation by representatives of the Northern Mariana Islands. Mile it is initially plausible, this readinq of section 601 must be rejected. Men one provision of law--in this case, section 601--incorporates by reference a body of laws--here, the federal income tax laws--that body of laws is taken with whatever chanq_es may be subsequently made from t:1me to time. Sanermeier v. District Director of Customs, 448 F.2d 1243, 1244 (9th Cir. 1971); 2A Sutherland, Statu@M Construction S 51.08 (4th ed. Sands 1973). Further, section 601 itself states that the federal income tax laws are to apply to the Northern Mariana Islands "in the same manner as those laws are in force in Guam." Since changes in the federal income tax laws alter the local territorial income tax of Guam, so too do they alter the local territorial income tax of the Northern Mariana Islands. -the "abate vs. rebate" debate. Section 602 of the Covenant gives the Northern Mariana Islands the power to enact local legislation to "provide for the rebate of any taxes received by it . on income derived from sources within the Northern Mariana isiands." in 1979, the first year the federal incane tax laws were to be in effect as the local territorial tax, the Northern Mariana Islands enacted legislation givinq every person subject to the tax "a rebate of one hundred percent (10 0%) of s uch tax . . . except that no amounts of such tax imposed on income derived from sources without - 440 - the Northern Mariana islands shall be rebated." Northern Mariana Islands Public Law 1-30, S 1. Actual payment of the tax prior to its rebate to the taxpayer was generally not required. Id. � 3 (a). The United States Congress reacted by enacting .section 70-5(c) of Public Law 96-205, 94 Stat. 84 (1980), which stated that "[ilt is the sense of Congress that the term 'rebate' as used in section 602 [of the Covenant] does not permit the abatement of taxes." That same law temporarily exempted residents of the Northern Mariana Islands frcrn payment of the tax on incane derived fram sources within the Northern Mariana Islands until January 1, 1981, and, conditional on the repeal of the rebate provisions of Northern Mariana Islands Public Law 1-30, until January 1,, 1982. Public Eaw 96-205, 9 205(b), 94 Stat. 84 (1980). The rebate provisions of Northern Mariana Islands Public Eaw 1-30 were not immediately repealed but, in section 303 of Public Law 96-597, 94 Stat. 3477 (1980), Congress furthered postponed the effective date of the tax to January 1, 1983r and "suspended" until that date the provision expressing the sense of Congress that the power to rebate the tax does not encompass the power to do away with the tax entirely. In May 1982 the Northern Mariana Islands enacted its canprehensive Revenue and Taxation Act of 1982, Northern Mariana Islands Public Law 3-11, which, among other things, repealed Northern Mariana Islands Public Law 1-30 with its 100-percent rebate provisions. Chapter VII of the new law, however, reenacted the rebate provisions of the earlier law with virtually no change.* The new law, morever, added a definition of "rebate" at odds with the sense-of-Conqress definition. The new definition reads: *Through an apparent error in drafting, the rebate would have only applied to tax years before the federal tax laws became applicable as a local territorial incane tax to incame derived fran sources within the Northern Mariana Islands, which would have rendered the rebate meaningless. On December 30, 1982, immediately before the local territorial inccre tax was to beccoe applicable to incane derived from sources within the Northern Mariana Islands by residents of the Northern Mariana Islands, pursuant to United States Public Law 96-597, Northern Mariana Islands Public Law 3-37 was enacted. Section 19 of that law corrected the earlier tax law to make the rebate provisions effective for all tax years beginning prior to termination of the trusteeship, when most citizens of the Northern Mariana Islands will beccme citizens of the United States. 441 "Rebate" means an adjustment, reduction, return, credit, nontaxable refund, or other nontaxable payment of all or part of any tax, as provided by the Camnonwealth of such amount of the taxes paid by a person. The term "rebate" shall apply only to any tax imposed on income fran sources within the Ccmronwealth In December 1983, section 3 of Public Law 98-213, 97 Stat. 1459, was enacted, extending the temporary exemption for residents of the Northern Mariana Islands on inccme derived fran sources within the Northern Mariana Islands until January 1, 1985, and amending its earlier sense-of-Congress provision to give a specific definition of "rebate": As provided in section 602 of [the Covenant) the term frebate of any taxes' shall, effective January 1, 1985, apply only to the extent taxes have actually -been paid pursuant to section 601 of said Act, shall not exceed the amount of tax actually paid for any tax year, and my only be paid following the close of the tax year involved. Notwithstanding any other provision of law, effective January 1, 1985, the Commonwealth of the Northern Mariana Islands shall maintain, as a matter of public record, the name and address of each person receiving such a rebate, together with the amount of the rebate, and the year for which such rebate was made. See also House Report 98-174, at 4-5 (1983). But for the specific definition of "rebate" qiven by Congress in Public Law 98-213, two questions would exist as to the meaning of the term as used in section 602 of the Covenant. The first question is whether the power to rebate taxes includes the power to rebate 100 percent of all taxes paid by a taxpayer. The second question is whether the tax to be rebated must actually be paid to the government before it can be rebated. --the "abate vs. rebate" debate--a 100-percent rebate? Section 602 of the Covenant allows the rebate "of any taxes received" (errphasis added) by the government of the Northern Mariana Islands. That language alone strongly implies that the goverment of the Northern Mariana Islands may return 100 percent of the taxes it receives (other than taxes on income not derived frcm sources within the Northern Mariana Islands). Indeed, if "any" is construed to permit the rebate of only some percentaqe of taxes less than 100 percent, the percentage of taxes that can be rebated becomes problematical. - 442 - In its Section !?X Section Analysis of the Covenant, the Marianas Political Status CQnmission stated, with regard to th rebate power, that: The power to rebate taxes will mean that the Northern Mariana Islands Government can adjust the impact of the local territorial inccme tax in any way which it deErns appropriate to the local conditions in the Northern Marianas. In ef feet, i t means the Northern Marianas Government will have ccmplete authority to write its own tax code.* Accordingly, the Northern Mariana Islands may, under section 602 of the Covenant, enact legislation providing for the rebate of 100 percent of taxes collected on incame derived frcm sources within the Northern Mariana Islands. (Section 3 of Public Law 98-213 does not suggest that only some lesser percentage of taxes collected may be rebated.) -the "abate vs. rebate" debate--rebate without prior payment? Dictionary definitions of "rebate" are generally broad enough to support an implication that the sun rebated must have been paid beforehand as well as the contrary implication that the sum rebated may be deducted before initial payme nt. See hbbster's Third New International Dictionary 1892 (1966); 8 Oxford Fnglish DiFtironary 219 (1933). A prcminent legal dictionary, referring specifically to tax rebates, defines a "tax rebate" as "an amount returned (ie. refunded) to the taxpayer after he has made full payment of the Ea." Black's Law Dictionary 1139 (5th ed. 1979). Webster's New Dictionary of Synonyms 218 (1978) distinguishes between "rebate" and "abatement." "Rebateff is defined as "an amount deducted and returned after payment" (with the example "a rebate on an inccme tax"). "Abatement" is defined as "a deduction fran a levied tax or impost." *The Analysis is reprinted in Hearings on the Covenant to Establish the Commonwealth of the Northern Mariana Islands before the Subcommittee on Territorial and Insular Affairs of the House Comittee on Interior and Insular Affairs, 94th Conci., lst Sess. 626 (1975) and in Hearings on the Northern Mariana Islands before the Senate Committee on Interior and Insular Affairs, 94th Conq., Ist Sess. 356 (1975). - 443 The Internal Revenue Code, however, in other contexts def ines "rebate" to include "abatement." See 26 U.S.C. 6211(b)(2), 6653(c). Section 602 of the Covenant allows the government of the Northern Mariana Islands by local law to "provide for *the rebate of any taxes received by it" (emphasis added). Section 602 also refers to the power "to rebate collections of the local territorial income tax received by [the qovernment of the Northern Mariana Islands]" (empfia-sir's- added) .The neqotiating history of the Covenant also is uniform in its references to rebates of taxes "received" or 01collected. " See Senate Report 94-433, The Covenant to Establish a Commonwealth of the Northern Mariana Islands 65, 80 (1975); House Report 94-364, Approving the "Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the Tinited States of America" 10 (1975); Marianas Political Status Commission, Section by Section Analysis of the Covenant 71-72 (1975).* The leqislative and neqotiating history of section 60 2 of the Covenant show that the power to rebate was intended to be "similar to the power which Guam has with respect to its local territorial income tax." Senate Report 94-433, The Covenant to Establish a Commonwealth of the Northern Mariana Islands 80 (1975). See also Marianas Political Status Commission, Section by Section Analysis of the Covenant 72 (1975); and the sect ion-by-sect ion analysis of the Covenant prepared by the executive branch of the United States Cove rnm. e nt, reprinted at Hearings before the Subcommittee on Territorial and Insular Affairs of the House Cammittee on Interior and Insular Affairs on H.J. Res. 549 et al. to Approve the "Covenant to Establish a Commonwealth of the Northern Mariana Islands," 94th *See also the sect ion-by-sect ion analysis of the Covenant prepared by the executive branch of the United States Government, reprinted at 'Hearings before the Subcommittee on Territorial and Insular Affairs of the House Committee on Interior and Insular Affairs on H.J. Res. 549 et al. to @p@rove the "Covenant to Establish a Ccrmnwealth of the Northern Mariana Islands," 94th Cong., lst Sess. 391 (1975); and Office of the Plebiscite Ccmmissioner, The Covenant to Establish a ComTonwealth of the Northern Mariana Islands in Political Union with the United States of America Explained 7 (1975), reprinted at Hearings before the Subcommittee on Territorial and Insular Affairs of the House Committee on Interior and Insular Affairs on H.J. Res. 549 'et al. to @p@rove the "Covenant to Establish a CciTtmonwealth of the Northern Mariana Islands," 94th Cong., lst Sess. 544, 551(1975). - 444 - Cong. , lst Sess. 384 (1975). The only power to rebate the local territorial income tax of Guam at the time the Covenant was negotiated and approved was vested in the Gum Economic Development Authority. The Authority was (and still is) authorized under Guam law to grant tax advantages to certain corporations in order to further the economic developuent of Guam. In general, the Authority for specified periods may grant "abatements" of certain local taxes and grant "rebates" of up to 75 percent of the. corporate inccrm tax and of up to 75 percent of all income tax on dividends paid by a qualified corporation. Guam Goverment Code SS 53577-53579 (1970).* Significantly, the special privileges the Authority may grant are termed abatements with respect to taxes locally imposed and rebates with respect to the federal income tax imposed as a local territorial tax. Moreover, for abatements "the actual payment of the tax in question to the Government shall not be required." Guam Government Code 5 53581 (1970). Fbr rebates, however, "the amount of tax due prior to rebate shall be deposited with the qovermient, at the time of filing the incam tax return. The Tax Commissioner . . . shall immediately thereafter cause the return to be reviewed and audited, and if the rebate is found in order, shall cause the amount deposited to be returned to the taxpayer within one hundred eighty (180) days from the date of deposit." Id. In summary, even though "rebate" as a matter of general usage can mean a deduction made before payment, the language of the Covenant and its legislative and negotiating history compel the conclusion that section 602 authorizes the rebate only of taxes previously paid to the government of the Northern Mariana Islands. Section 3 of Public law 98-213 thus does not alter the meaning of section 602 of the Covenant in this respect. "Prior to amendment in 1968. . . . the Organic Act [of Guam] . . . provided that all laws enacted by the Guam legislature ultimately would be reported to Congress, and unless Congress acted to annul the law within one year, it was deemed to have congressional approval. Guam Organic Act 5 19, ch. 512, 9 19, 64 Stat. 389 (1950). 1he original law granting tax rebates was passed by the Gum iegoislature and submitted to Congress while this pre-1968 version was still in effect, and Congress failed to annul the law within the one-year period." Ramsey v. Chaco, 549 F.2d 1335, 1338 (9th Cir. 1977) (holding Guam's tax rebate laws do not violate section 31 of the Organic Act of Guam, which applies the United States Internal Revenue Code to Gumn as a local territorial incom tax). - 445 - Discussion. The "abate vs. rebate" debate is a dispute over the extent to which the federal incoma tax laws, applied as the local territorial inccme tax laws of the Northern Mariana Islands, may be modified by the governmient of the Northern Mariana Islands. As such, it is an argument over the meaning of words used in the Covenant. The debate, however, is symptcmatic of a larger issue: Regardless of the provisions of the Covenant, how closely should the tax system of the Northern Mariana Islands be tied to the federal tax system? Closely related is an even broader issue: Mat is the best system of taxation for the Northern Mariana Islands? That question is beyond the purview of this treatment, since lines must be drawn somewhere and the function of the Ccmmissi on is to examine the applicability of federal laws to the Northern Mariana Islands, not to propose an entire legal regime for the @brthern Mariana Islands. Fortunately, the question of the best tax system for the Northern Mariana Islands has been the subject of able treabyent elsewhere. See Report of the Advisory Commission on Revenues and Taxation, Ccomnwealth of Me Northern Mariana Islands (1982); 0. Oldman, Tax and Revenue Reform for the Commonwealth of the Northern Mariana Islands (1982) (consultant's revised report to the Advisory Canmission on Revenues and Taxation). Arguments in favor of local tax autonomy for the Northern Mariana Islands are generally the same as arguments against applying the federal incane tax laws to the Northern Mariana Islands in one form or another. (And, likewise, arguments against local tax autonany generally are arguments in favor of applying the federal inccffe tax laws to the Northern Mariana Islands.) Factors in evaluating _ taxation alternatives. Among the scmtimes overlapping factors to be considerW_ in evaluating alternative relationships between the federal incane tax laws and the tax laws of the Northern Mariana Islands are the following: (1) Revenue-raising capability. To what extent does the tax rWovide revenues needed to finance government functions in the Northern Mariana Islands? (2) Complexity in administration. How ccmplex is the system to administer? (3) Complexity to the taxpayer. Row difficult is calculation and payment of taxes for the taxpayer? - 446 - (4) Loopholes. Tb what extent does the system of fer ambiguities a-nd-711-n-consistencies that enable taxpayers to avoid taxes in the Northern Mariana Islands, the United States, or other jurisdictions? (5) Adaptability. 1b what extent is the system adaptable t(:T- -changing circumstances in the Northern Mariana Islands? (6) Equity. Is the treatment accorded taxpayers in the Northern Mariana Islands fair in comparison to the treatment accorded to taxpayers in Guam, other United States territories, and the States of the United States? (7) Compatibility with the Covenant. Is the svstem of taxation campatible with the Covenant, or must the Covenant be amended to allow implementation of the system? Local autoncmy. The institution of a local ly-autonamous system of taxation, with no links to the federal inccm tax laws, is favored by many persons and businesses in the Northern Mariana Islands. Northern Mariana Islands Governor Pedro P. Tenorio, in his January 1983 State of the Ccmmonwealth address, stated that "permanent deferral" of the application of the federal inccme tax laws to the Northern Mariana Islands is his administration's top priority and called for the Northern Mariana Islands to develop and administer its own tax system. Karla Hoff, an econanist then in the United States Department of the Treasury, has described the relationship that could exist between the tax laws of the Northern Mariana Islands and the federal inccme tax laws if the Northern Plariana Islands were granted ccmplete authority to write its own tax laws. See Hoff, U.S. Federal Tax Policy Towards the Territories: Past, Present, and Future, 37 Tax Law Review 51, 96-97 (1981). 1he following discussion 'is drawn in large part frcm her description. If the Northern Mariana Islands administered its own tax system, imposed under its own law, the Northern Mariana Islands would be treated for most purposes of the federal inccme tax laws in the same way a foreign country is treated. United States citizens residing in the Northern Mariana Islands would continue to be subject to federal inccm tax on their worldwide inccme except for inccme derived fran sources within the Northern Mariana Islands, which would be exempt frcrn federal inccme, taxes. Tbey would also receive a. federal tax credit for taxes paid to the Northern Mariana Islands on inccme - 447 - derived from foreign sources, so that income would not be taxed by both the Northern Mariana Islands and the United States. United States citizens residing in the Northern Mariana Islands would be subject to provisions in the federal income tax laws designed to prevent "tax avoidance and evasion by U.S. taxpayers who reside in or derive income from a foreign country." Id. at 96. Local autonomy vs. mirror taxation--revenue-raising capability. The revenue a local tax system can generate is dependent on the provisions of that local tax systEm. Proponents of local tax autonomy for the Northern Mariana Islands have argued that the earned income credit provisions of the federal income tax laws greatly reduce the revenue-raising capability of those laws wtien they are applied to the Northern Mariana Islands as a local territorial income tax. The earned income credit, it will be recalled, to the extent it exceeds the taxpayer's total tax liability, is paid by the government to the taxpayer. Because the economy of the Northern Mariana Islands is not highly developed, a disproportionately large number of low-income wage earners will be eligible to receive earned income credit payments from the government of the Northern Mariana Islands. Since these payments must be made fran the tax receipts of the government of the Northern Mariana Islands, the net revenues of that government are correspondingly reduced. Persons opposing tax autonomy for the Northern Mariana Islands generally recognize the detrimental impact of the earned income credit on the tax revenues of the Northern Mariana Islands. The late Congressman Phillip Burton (who opposed tax autonomy for the Northern Mariana Islands) suggested that the UrUted States Congress, if requested to do so, would probably enact legislation allowing the Northern Mariana Islands by local law to reduce or eliminate the credit as a part of its local territorial income tax. The governor of the Northern Mariana Islands has argued that the prominence of the Japan-based tourism industry in the economy of the Northern Mariana Islands adversely affects revenues from any tax based on income. Tourists are generally sold in Japan package tours to the Northern Mariana Islands that include round-trip airfare, Treals, and ground transportation in the Northern Mariana Islands, and other services both in Japan and the Northern Mariana Islands. Determining the income taxable by the Northern Mariana Islands and collecting the tax thereon is thought to be more difficult than collecting a locally-imposed tax on gross business revenues. See letter from Northern Mariana Islands Governor Pedro P. Tenorio to Senator James A. McClure (Decen-ber 30, 1983), submitted in compliance with section 3(c) of Public T-aw, 98-213, 97 Stat. 1459 (1983). 448 - Local autonany can also be justified on the ground that, since the federal government receives no revenues fran the tax system in ef fect in the Northern Mariana Islands, it should not control the structure of that system. See R. Bastin & A. T-af fer, Government .Policies and Economic Growth in Guam 193 (report ccmmissioned by 16th Guam Legislature; 1981). Local tax autonany also may yield more revenues than application of the federal inccm tax laws as a local territorial tax laws if the local tax system has lower costs of administration and enforcement. The costs to the government of the Northern Mariana Islands of enforcing federal tax laws as a local tax are apt to be high, due in large part to the ccrnplexity of the federal laws. Present federal law, however, requires the United States Department of the Treasury to administer and enforce those laws in the Dbrthern Mariana Islands at no cost to the Northern Mariana Islands, but only if the Northern Mariana Islands requests that assistance. Public Law 95-348, � 3(d), 92 Stat. 487 (1978), as amended by Public Law 96-205, � 204, 94 Stat. 84 (1980). (The Northern Mariana Islands has not requested federal administration and enforcement pursuant to the terms of that legislation.) The revenue-raising capability of a locally-imposed tax cannot be fully gauged without assessing the possible adverse affect of instituting such a systEm on federal grants to the Northern Mariana Islands. The first mirror tax was imposed in the Virgin Islands because Congress reasoned that it was unfair that wealthy planters in the Virgin Islands should escape U.S. income taxes, while mainland taxpayers provided funds to support the Virgin Islands goverrment. Hoff, U.S. Federal Tax Policytowards the Territories, 37 Tax Law Review 51, 63 (19-81). --complexity in administration. The administrative canplexity of a locally autonomous tax system depends on the provisions of that tax systEm. It is unlikely, however, that any local tax system would rival the federal incane tax laws in canplexity. The law of federal inccim taxation is a canplex and difficult subject. Based as it has been on statutory laws which have been subject to constant aimndment and supplemented by Pegulations and rulings of the administrative authorities, and interpreted by decisions of the various courts, the Tax Court, the Federal district courts, the Federal courts of appeals, the Court of Claims, 449 and the United States Supreme Court, it is far from easy to find and apply the correct principles to a given question arising in connection with tax liability for a particular year. 1 Mertens, Law of Federal Incane Taxation S i.ni (rev. ed. 1981). The frequency of changes in federal tax laws and the need to revise or clarify existing regulations have caused a considerable backlog in the drafting of regulations, so that "current" regulations frequently do not reflect existing law. See U.S. General Accounting Office, Further Improvements Needed in Processing Tax Regulations (Report GAO/GGD-84-12; 1983). In themselves, then, the federal income tax laws, although simple in basic structure, are extremely complicated in detail. When the federal laws are applied as a territorial income tax, putting the territory in the place of the United States, the complexities of administration are multiplied, particularly when taxpayers residing in either the territory or the United States have incone from both places. In the case of the Northern Mariana Islands, the application of the federal income tax laws as a local "mirror" tax are further complicated by the existence of another mirror tax system on nearby Guam, a territory with many economic ties to the Northern Mariana Islands.* Tb administer the mirror taxp, the Northern Mariana Islands must draw the necessary expertise from the small local population or bring in costly outside assistance. in either case, the allocation of local resources to tax administration and enforcenent may be disproportionate to the revenues collected and to the economy as a whole. See generally U.S. Dep't of the Treasury,, Territorial Income Tax Systems: Income Taxation in the Virgin Islandsr Guam, the Northern Mariana Islands and American Samoa, 34 Bulletin for International Fiscal Documentation 260, 273 (1980); Liebman, Income Tax Incentives for Investnent in the Northern Mariana Islands, 2 University of Hawaii Law Review 389, 422-23 (1981). Guam, where the federal income tax laws have applied as a local territorial tax since *A person's tax liability is affected by three principal variables: citizenship, residence, and source of income. Men four taxing jurisdictions--the Northern Mariana Islands, the United States, Guam, and "foreign" (or other)--are involved, there are sixty-four different possible combinations of citizenship, residence, and source of income. The possibilities multiply when some individuals receive income from more than one jurisdiction. 450 - 1951, continues to have difficulties in administration of the tax and collection of taxes due. These difficulties in large part are attributable to Gum's lack of the financial resources necessary to improve administration and collection. U.S. General Accounting Office, Fbll@mm of Guam's Administration of its Income Tax Program (Report GAD/GGD-84-11; 1983)1 U.S. General Accounting office, '1he Government of Guam's Administration of its Inccme Tax Program (Report GGD-80-3; 1979). Ttie complexity of administering the mirror inccme tax in the Northern Mariana Islands makes a strong argument for preferring implementation, instead, of a local systEm. of taxation. Weakening that argurwnt for the Northern Mariana Islands is the open offer, under Public Law 95-348 as mended by Public Law 96-205, for the Federal Government to assune at no cost to the Northern Mariana Islands administration and enforcement of the mirror tax in the Northern Mariana Islands. Nonetheless, federal assumption of the costs of administration does not eliminate those costs (although some econctnies may be possible). The mirror tax systEm not only ccmplicates the life of territorial tax administrators. The United States Internal Revenue Service also is confronted by extra work. Applying the clear, if not always simple, provisions of the system is difficult enough; not all provisions, however, are clear. For example, in the tax relationship between Guam and the United States (which, under section 601 of the Covenant, is the sane as that between the Northern Mariana Islands and the United States), inconsistencies have existed in the withholding of taxes on ccmpensation paid to federal Employees and retirees living on Guam and on ccmpensation paid residents of Guam serving in the United States armed forces. Hoff, U.S. Federal Tax Policy Towards the Territories: Past, Present, and Future, 37 Tax Law Review 51, 82 (1981); Feds Give $1.6 Million More in Tax Reimbursement for Guam, Pacific Daily News (Guam), DecEmber 7, 1983, at 1. --ccrnplexity for the taxpayer. Voluntary ccmpliance with tax obligations is enhanced if the taxpayer can calculate, report, and pay his or her taxes without great difficulty. Yet, "every country has tax laws that are far fram being generally understood by the public." 17 Encyclopaedia Britannica, Taxation 1076, 1080 (15th ed. 1980). For an individual wage earner, with no sources of incame other than wages and with not enough deductions to justify itemization, preparation of a federal income tax return is not exceedingly difficult. Taxes are withheld from wages as the wages are paid, so the taxpayer is presented with a minor paperwork chore once a year 451 - when tax returns are due. For some persons in the Northern Mariana Islands, language difficulties or lack of education might make this paperwork more than a minor chore. This situation is little different than -that encountered by some persons in the United States, in ethnic enclaves and economically depressed areas, for example. In the United States, friends, relatives, and taxpayer assistance organizations--both nonprofit and commrcial--can provide assistance to taxpayers unable to complete their own tax returns. It is likely, although not inevitable, that similar arrangements would soon develop in the Northern Mariana Islands. For large businesses and high-incane individuals, assistance, in complying with mirror tax obligations can probably be obtained--at a price, of course--fram existing accounting and legal firms in the Northern Mariana Islands and on Guam. The greatest difficulties in complying with mirror taxation are likely to be experienced by the many very small local business operations in the Northern Mariana Islands. These operations, which include, among other ventures, "mom and pop" grocery stores, neighborhood bars, subsistence farms which sell their surpluses, schoolyard snack vendors, and small laundrcimats, in most cases will need assistance in complying with mirror tax obligations. For some, the cost'of obtaining that assistance may be the difference between continued operation and liquidation. Taxpayers, such as United States corporations, accustomed to paying federal income taxes also have difficulties in determining their tax obligations under mirror tax systems. "In general, U.S. corporations operating in the territories have not been made aware that they are subject to territorial taxation under the rules applicable to foreign corporations." U.S. Dep't of the Treasury, Territorial Income Tax Systems: Income Taxation in the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa, 34 Bulletin -for International Fiscal Documentation 260, 274 (1980). Taxpayer uncertainty caused by the complexities of mirror taxation may inhibit investTwnt in the Northern Mariana Islands, since investors are reluctant to invest when the tax consequences of investrent cannot be calculated with reasonable certainty. In addition to the complexities that cane with the federal income tax laws and those that arise from the application of those laws as a mirror tax, further complications arise from particular characteristics of the Northern Mariana Islands. For example, extended family relationships in the Northern Mariana Islands mean many individuals may reside in several different households during the course of the year. Determining which head of household is entitled to claim an individual as a dependent could be difficult. Or, as another example, family farm surpluses, as is natural in a - 452 - climate favoring rapid spoilage of food, are shared with others both as a moral obligation and in the expectation of later reciprocity. Gifts of food (or anything else) are not taxable as incane. 26 U.S.C. � 102(a). The United States Supreme Court has held, however, in scme situations that something of value transferred out of moral obligation or in anticipation of future econcrnic benefits is not a gift but is taxable inccme. Commissioner v. Duberstein, 363 U.S. 278, 285 (1960). Wiether reciprocal transfers of farm products constitute taxable inccme to the recipients could pose a knotty question if the federal income tax laws are ap I .plied to the Northern Mariana Islands. If they are inccme, keeping track of income becanes excessively tedious and much of the socially-important spontaneity of the transfers is lost. If the transfers are not treated as incane, inccm tax revenues could be diminished by an increase in such exchanges of property. The question of whether a transfer of property is income or a gift arises frequently, of course, in administering the federal inoome tax laws in the United States. The different cultural context in the Northern Mariana Islands may require different answers to similar questions. Scme of the canplexity encountered by the taxpayer if the federal inccme tax laws are applied to the Northern Mariana Islands as a local territorial income tax may be avoided if the Northern Mariana Islands elects to have the United States Department of Treasury administer that tax. As a part of any such administration, the Department is required to establish at no cost to the Northern Mariana Islands "a taxpayers information service to provide such information and assistance to citizens of the Northern Mariana Islands . . . as may be necessary for the f iling of returns and the payment of such taxes." Public Law 96-205, S 204(a)(3), 94 Stat. 84 (1980). -loopholes. IDcal tax autoncrny for the Northern Mariana Islands is also favored as a means of eliminating loopholes resulting frcm the interaction of the federal and local mirror tax systems. Cne of the foremost arguments against applying federal income tax laws as local territorial inccme tax laws is that the mirror system creates too many cpportunities for tax avoidance and tax evasion. Thus, United States Department of the Treasury econcmist Karla Koff wrote, with reference to application of the mirror system to Guarn and the Virgin Islands: * * * [Tlhe Federal inccme tax relationships with the Virgin Islands and Guam . . . create numerous opportunities for federal tax avoidance and evasion. Such opportunities arise from the fragmentation of tax jurisdiction over U.S. taxpayers and from the failure of particular U.S. tax provisions to take account of the special status of the Virgin Islands and Guam. - 453 Under the Guam mirror system, an individual who * la ims res idence [on Gum] . . . has no obligation to file * U. S. tax return. Although residents of a territory are required to pay tax on their worldwide income under the U. S. income tax laws administered by the territory, individuals have an incentive to make claims to territorial residence because the Virgin Islands and Guam do not have the resources nor, apparently, the political will to enforce the Code An individual who does change residence from the United States to the Virgin Islands or Guam, or vice-versa, may attempt to change accounting methods in order to minimize tax. The tax savings cold be substantial . . . . 0 . . The ability of a U.S. parent-U.S. subsidiary together to escape tax on the income of the subsidiary in the territory creates a strong incentive for artificial profit-sharing by U.S. corporations to the territories. Hoff, U.S. Federal Tax Policy Towards the Territories: Past, Present, and Future, 37 Tax Law Review 51, 82-84 (1981). While the above-quoted passage is concerned with the loss of federal tax revenues, it is possible in particular instances that taxpayer maneuvers could also result in lost territorial tax revenues* Documenting the existence of loopholes is difficult. Enforcement authorities are, of course, not anxious to publicize loopholes. Likewise, persons taking advantage of loopholes do not want to draw attention to the goose that lays golden eggs. Nonetheless, that major loo 'pholes are found with some frequency is shown by federal regulations issued in 1982 and 1983 to prevent the escape of federal tax revenues. See 47 Fed. Reg. 57919 (December 29, 1982); Guam Throttles Golden Goose, Forbes, January 16, 1984, at 34; U.S. Moves to Bar Issuance by Territories of Billions of Dollars in Arbitrage Bonds, Wall Street Journal, December 21, 1983 at 34; A Treaty that May Sink Havens, Business Week, February 14, 1983, a7t- 140; 'Guam Balks - at Treasury Is Bid_ to Slam Doors on Foreign Investors, Wall Street Journal, January 19, 1983, at 1; Foreign Investors Can Get Federal Tax Break Here, Pacific Daily News (Guam), October 6, 1982, at 4; Guam Could Become Financial Center, id. at 1. Allowing the Northern Mariana Islands exclusive control over its own system of taxation does not guarantee that individuals with tax obligations to both the Northern Mariana Islands and the United States will not find methods of exploiting the relationship between - 454 the two tax systems. Puerto Rico, for example, has its own tax system and PLerto Rican taxpayers receive favorable treatment under the federal tax laws. United States parent corporations, until recent amendments to section 936 of the Internal Revenue Code, could shift to their possess ions-corporat ion* subsidiaries in Puerto Rico title to patents and other intangible assets. Royalties and other incane derived from those assets thus became inccme derived fr-cin sources within the possession eligible for the possessions corporation tax credit. See House Conference Report 97-760, at 504-13 (1982); The Puerto Rico Revisions, New York Times, September 15, 1982, at Dl; Puerto Rico Fears Tax Bill Will Devastate Economy, Washington Post, August 2, 1982, at Al. -adaptability. A locally autonanous tax system for the Northern Mariana Islands would, almost by definition, be more adaptable to the changing needs and circumstances of the Northern Mariana Islands than a system applying the federal income tax laws as a local territorial tax of the Northern Mariana Islands. Whenever the federal inccm tax laws are amended, territorial mirror tax laws are amended without any action by the territory. The Northern Mariana Islands, through the use of the surtaxes and rebates authorized by 602 of the Covenant, can adjust the impact of the mirror tax in the Northern Mariana Islands and can offset changes in the federal incane tax laws. With a locally autonomous tax system, however, the %-rthern Mariana Islands has complete control over its own taxes. Tax systems not only raise revenue, but also attempt to regulate the econany and to prcmote, social goals.** Changes in federal income taxes because of changing revenue needs of the Federal Gioverrrnent, the changing state of the national econcrny, and shifting social goals may be inappropriate for the Northern Mariana Islands. For example, if federal taxes are lowered to stimulate the national econcmy, the Northern Mariana Islands--lacking siqnificant borrowing capabilities--must enact local surtaxes to keep its revenues constant. The local legislature may thus be confronted with the politically difficult task of raising taxes during a recession. See, for example, Budget Changes Could Mean $27.3 Million Loss, Pacific Daily News, March 2, 1982, at 7 (discussing effects of President Reagan's tax cuts on Guc-vn revenues). *See the discussion, The corporate taxpayer-the "2 ssessions 2 corporations tax credit," under.Present applicability, above. **See the discussion, The goals of taxation, in An overview of the Federal Tax System, above. 455 - Adaptability to local circumstances may not always be an advantage. Politically powerful local interests may be able to persuade the local goverment to reduce their share of the community's tax burden much more easily than they could obtain favorable treatment under the federal income tax laws. See Sumitomo Pushes for Tax Break, Pacific Daily News (Guam), Focus Supplement, October 28, 1983, at 1; Copmnwealth oil Threatens to Close Puerto Rican Refinerv, Wall Street Journal, September 28, 1981, at 16; GORCO Threatens Pullout, Pacific Daily News, May 29, 1981, at 1; Fate of Virgin Islands Oil Refinery Entangled in Economics and F;motion, New York Times, April 15, 1981, at A17. This argument, of course, cuts in two directions. Territorial governments may want to reduce tax obligations for particular firms in order to convince them to establish operations in the territory. (The rebate authority granted by section 602 of the Covenant allows the Northern Mariana Islands to grant tax breaks for this purpose if the federal income tax laws are applied as a territorial tax of the Northern Mariana Islands. These tax breaks would be sought and defended with the same vigor as would favorable treatment under a tax system not linked to the federal i ncame tax laws.) Both the Northern Mariana Islands and nearby Guam seek additional economic development. The greater autonomy each jurisdiction has over its own taxation, the greater the likelihood the two jurisdictions will compete in offering tax advantages to prospective irvestors. The ultimate effect may be that each jurisdiction must choose between imposing relatively high tax rates on other taxpayers or reducing expenditures for police protection, education, and other public services.* But again, the rebate authority that both the Northern Mariana Islands and Guam now have is such that mutual ly-inj urious competition may take place under the federal income tax laws applied as local mirror taxes. Further, controllinc .1 the two jurisdictions by federal law to prevent such canpetition may be unduly paternalistic. -equity. A major objection to allowing the Northern Mariana Islands to operate its own tax system, not linked to federal income tax laws, is that the Northern Mariana Islands would be given an *But the new investors, even though paying few taxes themselves, may stimulate the local economy sufficiently by their activity so that other taxpayers--throuqh greater sales or income-pay more and overall tax collections are increased. Such was the experience with Operation Bootstrap in Puerto Rico. See U.S. Dep't of the Treasury, The Operation and Effect of the Possessions Corporation System of Taxation 1 (4th annual report 1983). At some point, however, reducing tax rates for only some taxpayers becomes unfair to other taxpayers similarly situated. 456 - unfair econcmic advantage over neighboring Guam. Guam, of course, is subject to federal inccm tax laws appl ied as a territorial income tax. This objection presupposes that the local system of the Northern Mariana Islands would impose lower taxes than Guam's mirror system. If taxes in the Northern Mariana Islands are less than in Guam, the Northern Mariana Islands will have an advantage over Guam in luring prospective investors and may even cause wealthy Guamanians and existing Guam ccmmercial enterprises to move to the Northern Mariana Islands. See Murphy, Pipe Dreams, Pacific Daily News (Guam), October 6, 1983, at 23 ("at least two Gum businessmen have now established residency in Saipan, because of the tax breaks they get there"). One possible mans of treating the Northern Mariana Islands and Guam equitably is to allow each to develop and administer its own system of taxation. That proposal has at least some support on Guam. See Gov Guam to Lobby for Local Tax System, id., February 15, 1983, at 3. Puerto Rico and American Sawa now enjoy local tax autoncxny. 26 U.S.C. �� 931-933; Hoff, U.S. Federal Tax Policy Towards the Territories, 37 Tax Law P@eview 51, 60 (1981); U.S. Dep't of the Treasury, Territorial Income Tax Systems: Income Taxation in the Vir_qin Islands, Guam, the Northern Mariana Islands and American Samoa, 34 Bulletin for International Fiscal Documentation 260, 269 (1980). (American Sawa, however, by its own legislation has made the federal inccme tax laws applicable as its own mirror tax. American Samoa Code Annotated S 11.0403 (1981).) Consequently, ample precedent exists for allowing the Northern Mariana Islands and Guam to develop their own tax systems. -compatibility with the Covenant. If the argument is accepted that EWc-tiron 602 of the Covenant allows the government of the Northern Mariana Islands to rebate 100 percent of taxes due, with no prior payment of those taxes, and allows elimination of the requirements for f iling returns, local tax autonomy can be established consistently with the Covenant. If that argument is not accepted, amendmnt of the Covenant is necessary to eliminate the application of the federal inccme tax laws to the Northern Mariana Islands as a local territorial tax of the Northern Mariana islands. In the face of the congressional definition of "rebate" in section 3(b) of Public T-aw 98-213, 97 Stat. 1459 (1983), arguments for a more expansive definition of the term are likely to fail. Accordingly, if the Northern Mariana Islands is to have local tax autonany, the Covenant must be amended or, at the very least, section 3(b) of Public law 98-213 must be repealed or amended. - 457 - Other options. Local autonany and mirror taxation (with either federal or local administration) are not the only possible relationships between the federal incane tax laws and the tax laws of the Northern Mariana Islands. -federal taxation, proceeds to the federal treasury. The Northern Mariana Islands could be considered as part of the United States for purposes of the federal incane tax laws, so that persons and corporations in the %rthern Mariana Islands would be treated just as are persons and corporations in, say, Missouri. All taxes would be paid into the federal treasury. Ilie objections to this possible relationship are several, and none of the terribories or possessions of the United States is now treated in the sane way as a State of the United States for purposes of the federal inccme tax laws. The principal objection derives f-ram the United States Declaration of Independence. Any federal law imposing taxes on a territory or possession of the United States smacks of taxation without representation. The objection is attenuated if proceeds of the tax are turned over to the territory or possession, where they way be appropriated by the elected representatives of the local citizenry. If, however, proceeds go into the federal treasury, they are sLbject to appropriation by the United States Congress, in wbich citizens of territories and possessions have no vote. Applying federal incane tax laws to the Northern Mariana Islands as they are applied in the United States would not, of course, directly raise any revenue for the Northern Mariana Islands. The Northern Mariana Islands is (and most other territories are) already dependent to some extent on annual appropriations by the United States Congress. If federal inccue taxes collected in the Northern Mariana Islands could only be expended in the Northern Mariana Islands after appropriation by the Congress, the Northern Mariana Islands would be even less able to chart its course for more than one year at a time. Amendment of the Covenant would be necessary to put this alternative in ef fect. The alternative would be less ccmplex for both taxpayers and administrators than the mirror tax system, although taxpayers in the Northern Mariana Islands would still be subject to the canplexity of the federal incane tax laws. LoWholes caused by the juxtaposition of two separate tax systems would be eliminated. This alternative, however, would rule out any local adjustment of the tax laws to meet special needs or changing circumstances in the Northern Mariana Islands. The alternative would also be unfair to the Northern Mariana Islands as long as other territories were allowed either to operate their own local systems of taxation or to receive mirror tax collections. 458 - -federal taxation, @roceeds to the Northern Mariana Islands. Treating the Nbrthern Mariana Islands as part of the United States for purposes of the federal inccme tax laws, but turninq over to the governm,nt of the Northern Mariana Islands all taxes collected on inccme derived frcm. sources within the Northern Mariana Islands is also a possible alternative. President Carter, in his 1980 statement of "a ccnprehensive Federal territorial policy" proposed that this alternative be enacted into law for Guam, the Virgin Islands, American Samoa, and the Northern Mariana Islands. I Public Papers of the Presidents: Jimmy Carter 1980-81, at 317, 322 (1981). No such legislation, however, was enacted. one such "unified" system of taxation is described by Karla Hoff in her U.S. Federal Tax Policy towards the Territories: Past, Present, and Future, 37 Tax 'Law Review 51, 94 (1981). She outlines a system under which the T.\brthern Mariana Islands would receive (1) all federal income taxes paid by persons residing in the Northern Mariana Islands at the end of the year; (2) a prorated share of federal income taxes paid by persons not residing in the Northern Mariana Islands but with inccme frcm. sources in the Northern Mariana Islands, based on the ratio of their inccme derived frcm sources in the Northern Mariana Islands to their total onrld-wide incame; and (3) a prorated share of federal corporate inccme taxes, based on the ratio of inccme derived frcm sources in the Northern Mariana Islands to total income derived frcrn sources in the Northern Mariana Islands or the United States. Certain high-income individuals not residinc g i n the Northern Mariana Islands and all corporations would be required to provide the Internal Pevenue Service with information categorizing their inccme by source, if they derived incame frcm sources in the Northern Mariana Islands. Implementation of this alternative would also require anendm-ent of the Covenant. The ccmplexities of the mirror tax system, although not of the federal inccme tax itself, would be avoided and loopholes caused by the juxtaposition of separate systems of taxation would be avoided. Ms. Hoff also suggests that, by ccmparison with the mirror tax, tax collections should increase and ccmpliance problems decrease because the federal Internal Revenue Service is more efficient than territorial tax administrations. Id. at 95. A principal disadvantage of the unified system is, again, that the Northern Mariana Islands would have no power to adjust the tax laws to meet special needs or changing circumstances in the Northern Mariana Islands. Because the Internal Revenue Service is interested in maximizing federal revenues, there is also the possibility that regulations promulgated by the Service to allocate a taxpayer's inccme between sources in the Northern Mariana Islands and sources in the United States could favor the Federal Goverment. - 459 - Subtitle B. Estate and Gift Taxes. The statutes. The estate tax is levied on the amount of property transferred frcm one person to another by bequest. The gift tax is levied on the total amount of gifts made by any individual since 1932. The ma*or purpose of taxing gifts and bequests is to reduce the inequality of the distribution of wealth . . . . Despite their advantages on social and econcmic grounds, estate and gift taxes amount to a small proportion of federal revenues. [Because of large exemptions allowed, it] is estimted that less than a quarter of the total wealth owned by those who die in any one year is subject to the estate and gift taxes. G. Break & J. Pechman, Federal Tax Reform: The Impossible Drewn? 110-11 (1975). The estate tax and the gift tax were originally separate taxes. Since a person can reduce estate taxes by giving away property before death, the two taxes were integrated and made subject to the same rate schedule beginninq in 1977. Public Law 94-455, SS 2001(a)(1), 2001(b)(1), 90 Stat. 1520 (1976). See House Report 94-1380, at 10-15 (1976). The gross estate of a person thus includes not only all property owned at the time of death, but also all property given away before death (but after 1932). Consequently, the uore that is paid out in taxes on gifts during the donor's lifetime, the less will be the tax on what is left at the donor's death. 26 U.S.C. �9 2001(b), 2012. Like the incare tax, the estate and gift tax allows a variety of exclusions and deductions. Not counted as taxable gifts, for example, are gifts of $10,000 or less to any one person in one calendar year. Id. � 2503(b). In conputing taxable gifts, a taxpayer is also 71lowed to deduct gif ts to his or her spouse and gifts to certain charitable or benevolent organizations. Id. S� 2522, 2523. In addition, the taxpayer is allowed, in his or her lifetime, a credit against tax due of $192,800. Id. �� 2010(a), 2504(a).* The credit of ,",192,800 in effect exempts from gift and *The $192,800 credit will becane effective for gifts made in 1987 and thereafter. Legislation enacted in 1981 increased the credit from its earlier level of $47,000 in incrEmental annual steps, so that the credit for gifts made in 1984, for example, is $96,300. - 460 - estate taxes cumulative transfers of $600,,000. House Conference Report 97-215, at 247 (1981). In other words, if a person through taxable lifetime gifts and the passing of his or her taxable estate at death transferred $600,000 worth of property, the total tax but for the credit would be $192,800. The marginal rate of tax paid on taxable gifts and estates is graduated, ranging fram 18 percent on the first -$10,000 of the total of the estate and all taxable gifts to 50 percent on any part of the total of the estate and all taxable gifts in excess of $2,500,000.* Present applicability. Article VI of the Covenant, dealing with revenue and taxation, makes no specific reference to the applicability of federal estate and gift taxes. Estate and gift taxes are not inccme taxes and, so, are neither imposed by section 601(a) of the Covenant nor subject to the rebate provisions of section 602 of that document. But subsection (c) of section 601 of the Covenant provides that "References in the Internal Revenue Code to Guam will be deemed also to refer to the Northern Mariana Islands, where not otherwise distinctly expressed or manifestly incompatible with the intent thereof or of this Covenant." The estate tax is imposed on "the transfer of the taxable estate of every decedent who is a citizen or resident of the United States." 26 U.S.C. S 2001(a). "United States" is defined, in section 7701(a)(9) of title 26 to exclude Guam. See also 26 C.F.R. 9 20.0-1(b)(1) (1984). Section 2208 of title 26, however, provides: A decedent who was a citizen of the United States and a resident of a possession thereof at the time of his death shall, for purposes of the tax imposed by this chapter, be considered a "citizen" of the United States within the meaning of that term wherever used in this title unless he acguired his United States citizenship solely by reason of (1) his being a citizen of such possession of the United States, or (2) his birth or residence within such possession of the United States. Section 2209 provides: A decedent who was a citizen of the United States and a resident of a possession thereof at the time of his death *The maximum marginal rate of 50 percent becam-es effective for decedents dying and gifts made in 1988. From 1984 through 1987 the maximum marginal rate is 55 percent, that rate being applicable to any part of a total of the estate and all taxable gifts in excess of $3,000,000. 26 U.S.C. 5 2001(c)(2)(D). - 461 - shall, for purposes of the tax imposed by this chapter, be considered a "nonresident not a citizen of the United States" within the meaning of that term wherever used in this title, but only if such person acquired his United States citizenship solely by reason of (1) his being a citizen of such possession of the United States, or (2) his birth or residence within such possession of the United States. Thus, "a United States citizen who roves fran the United States to one of the possessions will continue to be treated for estate tax purposes in the same manner in which he would have been @re*atoed if he had remained in the United States." Conference Report 2632 (1958), reprinted at 1958 U.S. Code Cong. & Ad. News 4791, 5053, 5077. Gum is a possession of the United States. Consequently, under section 601(c) of the Covenant, residents of the Northern Mariana Islands are residents of a possession within the meaning of sections 2208 and 2209 of title 26. United States citizens currently residing in the Northern Mariana islands are subject to the estate tax now. Other persons currently residing in the Northern Mariana Islands are not subject to the estate tax now. Those residents of the Northern Mariana Islands who became United States citizens solely through operation of Article III of the Covenant will be classified as "nonresidents not citizens of the United States" for estate tax purposes.* As such, only that part of their estate within the United States (defined not to include the Northern Mariana Islands) will be subject to the estate tax. See 26 U.S.C. S 2103. For United States citizens, in general, "gross estate" is defined, for purposes of camputing the tax, as including "all property . . . . wherever situated." 26 U.S.C. S 2031(a) (emphasis added). Section 2501(a)(1) of title 26 imposes a tax on transfers of property by gift by any individual, resident or nonresident. Generally excepted fran this tax, however, are transfers of intangible property "by a nonresident not a citizen of the United States." 26 U.S.C. � 2501(a)(2). Also excepted are transfers by a nonresident not a citizen of the United States of pro. rty outside pe the United States. 26 U.S.C. � 2511. Provisions similar to those of the estate tax, above, classify residents of the Northern Mariana *Distinguishing, for purposes of determinin tax liability, residents of the Northern Mariana Islands who became United States citizens by operation of article III of the Covenant and those who are United States citizens by reason of birth or individual naturalization may be constitutionally invalid. See Flores v. Government of Guam, 444 F. 2d 284, 288 n.8 (9th Cir. 1971). - 462 - Islands who becane citizens of the United States solely through operation of the Covenant as "nonresidents not citizens of the United States" for purposes of the gift tax. Id. S 2501(c). Residents of the Northern Mariana Islands who are (:Tr- who beccme United States citizens by another means are United States citizens for purposes of the gift tax. Estate and gift taxes levied on inhabitants of the Northern Mariana Islands are among the taxes to be paid by the United States into the treasury of the Northern Mariana Islands. Covenant S 703(b). Discussion. Who is entitled to treatment as a "nonresident not a citizen of the ffn-irt-edStates" for 2ift and estate tax puFp?ses--acqui sit ion of United States citizenship solely by status as citizen of the Northern Mariana Islands or by birth or residencF-I-nthe PTorthern Marian-a Islands. The favorable treatment, for purposes of federal taxation of gifts and estates, afforded to a "nonresident not a citizen of the United States" is clearly available to each citizen of the Northern Mariana Islands who becoms a citizen of the United States by operation of section 301 of the Covenant. Favorable treatment for purposes of federal taxation of gifts and estates will probably also be available for the descendants of persons who beccme citizens of the United States under section 301. Although that treatment is not so clearly mandated, support for it may be found in a regulation of the United States Internal Revenue Service. An apparently key word in sections 2208, 2209, and 2501(c) of title 26 is "solely." Residents of the Northern Mariana Islands entitled to the favorable treatment given "nonresidents not citizens of the United States" are only those citizens of the United States who acquire citizenship solely by reason of being a citizen of the Northern Mariana Islands (that is, by operation of section 301 of the Covenant) or by birth in the Northern Mariana Islands (by operation of section 303 of the Covenant).* *Residence in the Northern Mariana Islands, under the Covenant, provides no independent basis for acquisition of United States citizenship, since such residence is not residence in the United States for purposes of United States naturalization laws. Covenant � 503(a). - 463 The children of many, if not most, citizens of the Northern Mariana Islands who become citizens of the United States by operation of section 301 of the Covenant will themselves be citizens of the United States by reason of their birth in the Northern Mariana Islands under section 303 of the Covenant. Their birth in the Northern Mariana Islands will not, however, be the sole reason for their acquisition of United States citizenship. ThZy-will also be United States citizens because their parents are United States citizens. In most instances, a child of a United States citizen, wherever the child is born, is a citizen of the United States. 8 U.S.C. � 1401(c),(d),(g). Consequently, that child, if born in the Northern Mariana Islands, is not a United States citizen solely by reason of birth in the Northern Mariana Islands; the child also derives United States citizenship frcFn the parent's (or parents') United States citizenship. Since birth in the Northern Mariana Islands is not the sole reason for the child's United States citizenship, the child would appear not to be entitled to favorable treatment as a "nonresident not a citizen of the United States" for purposes of federal gift and estate taxation.* Collectively, the net effect of this interpretation is to allow favorable treatrent under federal gift and estate tax laws for only that generation in the Northern Mariana Islands that beccrnes citizens of the United States by operation of section 301 of the Covenant, and not for the descendants of that generation. (Favorable treatment would also be available to persons born in the Northern Mariana Islands of alien parents.) The Internal Revenue Service, in an example accampanying regulations implementing the statute providing favorable gift and estate tax treatment for certain residents of possessions of the United States, takes the position that an individual born in a possession of United States citizen parents is a United States citizen solely by reason of birth in that possession. 26 C.F.R. 20.2209-1, example (2) (1984). *A child born outside the Northern Mariana Islands to parents who had become United States citizens by operation of section 501 of the Covenant could not, of course, claim birth in the Northern Mariana Islands as a basis for United States citizenship. Such a child would appear unable to claim entitlement to favorable treatment as a "nonresident not a citizen of the United States" for purposes of federal gift and estate taxation. In fact, however, even this child may be able to receive that treatment. See the discussion in the text, below. - 464 - Some support for the Internal Revenue Service's reading of the statutes and the meaning given "solely" may be found in the legislative history of section 2208. Prior to enactment of section 2208, United States citizens residing in the possessions were not subject to the federal estate or gift taxes. Fairchild v. Ccianissioner, 24 T.C. 408 (1955). Section 2208 was enacted so that "United SFa-t s citizens who are residents of the possessions and who acquired their United States citizenship completely independently of their'r -connections with the possessions rwould] have their estates taxed in the same manner as citTz-ensof the United States are taxed." Conference Report 2632, 85th Cong., 2d Sess. (1958), reprinted in 1958 U.S. Code Cong. & Ad. News 4791, 5053, 5077-78 (Emphasis added). The cITI-1-dof parents who bec United States citizens by operation of section 301 of the Covenant cannot be said to have acquired United States citizenship "completely independently" of his or her connections with the Northern Mariana Islands, since one basis for the child's United States citizenship is the acquisition of United States citizenship by the parents under section 301. Who is entitled to treatment as a "nonresident not a citizen of the United States" for gift and estate tax purposes-acquisition of United States citizenship by reason of bi th or residence in another possession* By a literal reading of the pertinent Ttatutes, res idents of the Northern Mariana Islands who become United States citizens by virtue of their birth or residence on Guam would be classified as "United States citizens" for purposes of both the estate and gift taxes. Th achieve the favored status of a "nonresident not a citizen of the United States," residence in the sane possession as that in which citizenship was acquired would appear to be required. 26 U.S.C. �� 2209, 2501(c). Similarly, Northern Mariana Islands citizens who become United States citizens by operation of the Covenant but who reside in Guam. (or another possession, for example, the Virgin Islands), would also not appear to qualify as "nonresidents not citizens of the United States." Such a result seems unintended. If a citizen of the Northern Mariana Islands residing in the Northern Mariana Islands is exempted from estate and gif t taxes and a citizen of Guam residing on Guam is similarly exempted, no rationale justifies imposing the taxes on the citizen of the Northern Mariana Islands residing on Guam or the citizen of Guam residing in the Northern Mariana Islands. That conclusion has been reached by the Internal Revenue Service, which found that "[t]here is no indication of a Congressional intent to distinguish between possession citizens who were residents of the same possession at the time of their death as that through which they acquired citizenship, and those who were not." Revenue Ruling 74-25, 1974-1 C.B. 284, 285. - 465 - Subtitle C. Errployment Taxes. Subtitle C of the Internal Revenue Code imposes taxes on employment to support the social security system (the Federal Insurance Contributions Act) and the railroad employees retirement system (the Railroad Retirement Tax Act), and to provide federal support for State unemployn-ent canpensation programs (the Federal Unemployment Tax Act). Subtitle C also contains provisions requiring employers to withhold inccre taxes fran the wages of employees and to pay the withheld taxes to the federal treasury. These employnent taxes and their present applicability to the Northern Mariana Islands are discussed below. The Federal Insurance Contributions Act The statute. The Federal Insurance Contribution 's Act, 26 U.S.C. 95 3101 et seq., imposes wage-based taxes on Employers and Employees to suPP6r--t the federal old age, survivors, disability, and health insurance program, more cammnly known as social security (which includes the medicare program). The employer and employee are each required to pay 5.7 percent* of the employee's wages not in excess of the "contribution and benefit base" for old-age, survivors, and disability insurance. Id. Sq 3101(a), 3111(a), 3121(a). That base, which is adjusted annJally as necessary to reflect cost-of-living increases in benefits paid, is $37,800 for 1984. 48 Fed. Reg. 50414 (1983). Thus, in 1984, the employer and employee are each required to pay taxes equal to 5.7 percent of the Employee's wages up to $37,800. In addition, the employer and employee are each required to pay an amount equal to 1.3 percent" of the employee's wages not in excess of the contribution and benefit base for hospital insurance (medicare). 26 U.S.C. �5 3101(b), 3111(b). The employer is required to withhold the social security tax on the employee frcm the employee's ueges. 26 U.S.C. S 3102(a). *In 1988 the percentage increases to 6.06 and in 1990 to 6.2. 26 U.S.C. �9 3101(a), 3111(a). **In 1985, this will increase to 1.35 percent and, in 1986, to 1.45 percent. 26 U.S.C. �� 3101(b), 3111(b). - 466 - Self-employed persons are also obliged to contribute to the social security system through a tax on self-employment incame. 215 U.S.C. �� 1401 et seq. The self-employment tax is greater than the tax on employee!F,-but not as large as the total of the taxes imposed on employer and employee. Id. S 1401. Present applicability. Section 606(b) of the Covenant provides: Those laws of the United States which impose excise and self-employment taxes to support or which provide benefits frcm the United States Social Security System will upon termination of the Trusteeship Agreement or such earlier date as may be agreed to by the Government of the Northern Mariana Islands and the Goverment of the United States beccre applicable to the Northern Mariana Islands as they apply to Guam. Section 703(b) of the Covenant in general provides for the return of federal taxes derived fran the Northern Mariana Islands to the goverment of the Northern Mariana Islands. Excepted, however, are taxes collected under "Chapters 2 or 21 of Title 26, United States Code." Chapter 2 is the tax on self-employment income while chapter 21 is the Federal Insurance Contributions Act. Residents of Guam also pay the tax on self-employment inccyne, 26 U.S.C. � 1402(b), and the taxes imposed by the Federal Insurance Contributions Act, id. � 3121(e). At the time these taxes become effective, the social security system of the Northern Mariana Islands is merged into the federal system, and persons in the Northern Mariana Islands become eligible for federal social security benefits based on their contributions into either the Northern Mariana Islands or the federal system.* Covenant � 606(c). The Railroad Retirement Tax Act The statute. The Railroad Retirement Tax Act, 26 U.S.C. �� 3201 et seq., imposes taxes based on wages on railroads and their empi7o-y-ees to support programs similar to social security to protect railroad workers and their families frcm loss of income resulting frcm *Contributions into the Trust Territory Social Security Retirement Fund are also considered in determining eligibility. Covenant S 606(c). - 467 - retirement, death, disability, unemployment, or sickness. Railroads and their employees pay these taxes instead of the taxes imposed by the Federal Insurance Contributions Act, above. 26 U.S.C. � 3121(b)(9). Present applicability. The Railroad Retirement Tax Act applies to railroads subject to the jurisdiction of the Interstate Cam.-erce Camission and their employees. 26 U.S.C. � 3231(g). The Commission's jurisdiction now extends to transportation between various points and Gucan, but only to the extent the transportation is within the United States. 49 U.S.C. � 10501(b). "Unit ed States" is defined to exclude both Guam and the Northern Mariana Islands. Id. � 10102(26). Accordingly, railroads in the Northern Mariana I91-ands are not subject to the jurisdiction of the Interstate Commerce Commission and they and their employees are not subject to the Railroad RetireTwnt Tax Act. At present, the question of the applicability of the Railroad Retirement Tax Act to the Northern Mariana Islands is entirely academic, since there are no operating railroads in the Northern Mariana Islands. (Durinq the Japanese administration of the Northern Mariana Islands, however, narrow-gauge railroads were extensively used to transport harvested sugar cane.) The Federal Unemployment Tax Act The statute. The Federal Unemployment Tax Act, 26 U.S.C. �� 3301 et seq., imposes a tax on employers equal to 3.2 percent* of the fir:it $7,000 in wages of each of his or her Employees. 26 U.S.C. H 3301, 3306(b)(1). The employer is granted a credit against this tax for required payments into a State unemployment ccrnpensation fund, but the credit may not exceed 90 percent of the employer's federal unemployment tax obligation. Id. � 3302. The proceeds of the federal unemployment tax support the federal-State unemployment compensation program. Under that program, unemployment insurance benefits are paid to unemployed workers *The pe rcentage is 3.5 in years in which congressional appropriations to the federal extended unemployment compensation fund have been exhausted. 26 U.S.C. S 3301(l); 42 U.S.C. 9 1105. (After December 31, 1984, the percentages will rise to 6.0 and 6.2 respectively. 26 U.S.C. � 3301 note.) 468 - pursuant to State compensation laws approved by the United States Department of Labor. The unemployment insurance program is a cooperative venture between the states and the federal government, and as such, neither exercises total control over its financial health. States set and collect unemployment taxes fram employers and deposit the funds into a state account in the federal unemployment trust fund. The states then draw on these funds to pay benefits. Generally, it is up to the state to determine the extent of the unemployment tax it imposes and the benefits it pays. As a result, both differ greatly around the country. State taxes range from an average of about 2.7 percent in most states up to a maximum of 9 percent in Michigan. Average weekly benefits range from $55 in Puerto Rico to $130 in Illinois. Duration of state benefits also differs, but benefits generally last around 26 weeks. Budget Crisis Dims Outlook for Greater Jobless Benefits; 3 Million Workers Face Cuts, 40 Congressional Ouarterly Weekly Report 1031, 1034 (1981). Federal unemployment taxes are used to pay administrative costs for the entire [unemployment insurance] program, to fund job placement services, to share 50-50 with states the cost of the 13 weeks in extended benefits and to provide loans to states whose accounts fall short. id. Present applicability. The Federal Unemployment Tax Act does not apply to Guam. 26 U.S.C. 5 3306(c), (j). Accordingly, it is not applicable to the Northern Mariana Islands by operation of sections 502(a)(2) or 601 of the Covenant. The negotiating history of section 601 confirms this conclusion: The revenue provisions of the Covenant are not designed to render the Federal Unemployment Tax and the benefits derived therefrom applicable to the Northern Mariana Islands. - 469 - Report of the Joint Drafting Committee on the Negotiating Histor _V of the Covenant, at C-3 (1975), reprinted at Hearings before the Subcommittee on Territorial and Insular Affairs of the House Committee on Interior and Insular Affairs on H.J. Res. 549 et al. to Appr the "Covenant to Establish a Ccmmonwealth of the Northern Mariana Islands," 94th Cong., Ist Sess. 374, 376 (1975). And: Section 601 of the Covenant does not make the federal unemployment tax or benefits derived therefrom applicable to the Northern Marianas. These laws are not applicable to Guam either. It appears preferable for the Northern Marianas to provide its own unemployment benefits and an appropriate level of taxation to support those benefits, rather than to participate in the federal unemployment tax system and be subject to its high tax rates. Marianas Political Status Comitission, Section by Section Analysis of the Covenant 70 (1975).* Collection of Income Tax at Source on Wages The provisions for withholding of income taxes on wages by employers are an integral part of federal income tax collection, discussed under the heading, Subtitle A. The Income Tax, above. These provisions are not further 7"s-c-ussed here. Subtitle D. Miscellaneous Excise Taxes. and Subtitle E. Alcohol, Tobacco, and Certain Other Excise Taxes. The statutes. An excise tax is a tax levied on the manufacture, sale, or consumption of particular goods. The Federal Goverment derives most Of its *The Analysis is reprinted in Hearings on the Covenant to Establish the Commonwealth of the Northern Mariana Islands befo-r-e-Me- Subcommittee on Territorial and Insular Affairs of the House Committee on Interior and Insular Affairs, 94th Cong., Ist Sess. 626 (1975) and in Hearings on the Northern Mariana Islands before the Senate Committee on Interior and Insular Affairs,---914TH-Cong., lst Sess. 356 (1975). - 470 consumption tax revenue fran excise taxes on camwdities or services that are considered socially and morally undesirable--for example, excises on the consumption of liquor and tobacco. The rationale for the sumptuary taxes is that use by consumers of the products on which the taxes are levied creates additional cos ts to society that are not borne by the producers and are not reflected in the prices they charge. . . . The excise tax raises the price of the camTodi ty, thus discouraging consumption and at the same time imposing a charge on the people who are likely to create social problems. Another type of excise tax is one whose proceeds are used to pay for particular services provided by government to consumers. The best example of such a tax is the gasoline tax, whose revenues have paid for the federal highway trust fund since its enactment in 1956. . . . Selective excise taxes are used heavily during wartime to discourage the consumption of items that are manufactured with strategic materials or are scarce for other reasons. G. Break & J. Pechman, Federal Tax Reform: The Impossible Dream? 116-17 (1975). The Internal Revenue Code imposes excise taxes on gasoline and other petroleum ftels, 26 U.S.C. 5q 4041 et sea., 4081 et seg.; motor vehicles and other automotive products, Rd-. q� 4061 J_ seg.; coal, id. S 4121; recreational fishing and ardieiy equipmenE-, d. � 4161; 71rearms, id. �� 4181 et seg.; telephone and teletype ccrmunicatioris, id. 4f5_1 et seq.; air transportation, id. 4261 et seg.; insurance policies issued by foreign insurance firms, id. 4371; bookmaking, lotteries, and other gambling transactions, 73. FS 4401 et seg.; the use of 'trucks, id. �-q 4481 et seg.; and th@_remval of Fa-rd'minerai resources frcm th@-deep seabed-7d. �q 4495 et seg. "Environmental taxes" are imposed on crude oil and imported petroleum products, id. @� 4611 et seg.; various chemicals, id. 5� 4661 et seg.; and hazardous waste, id. �� 4681 et seg. other excise taxes are imposed to regulate the activities of public charities, id. 9 4911; private foundations and black lung benefit trusts, id. SS 4940 et seg.; pension plans, id. �9 4971 et seq.; and real esEa-te investmeriE-ti@i_sts, id. � 4981. Windfall profits of crude oil producers due to the dereaulation of oil prices are subject to a windfall profits tax. Id. �9 4986 et seq- - 471 - Excise taxes are also imposed on distilled spirits, wine, and beer, id. q,� 5001 et seq.; on cigarettes and other tobacco products, id. gq@-5701 et seq-.; and on machine guns, destructive devi ces, and Z-ertain other-F-71rearms, id. �� 5801 et seq. In fiscal year 1983, the excise taxes that produced the largest federal revenues were the windfall profits tax on oil producers ($12,999 million); alcohol taxes ($5,557 rillion); the gasoline tax ($6,140 million); and tobacco taxes ($4,136 million). U.S. Office of Manaqement & Budget, Budget of the U.S. Government: Fiscal Year 1985, at 9-19 to 9-20 (1984). Present applicability. In general. Section 604(a) of the Covenant allows the United States to "levy excise taxes on q goods manufactured, sold or used or services rendered in the Northern Mariana Islands in the same manner and to the same extent as such taxes are applicable within Guam." The Marianas Political Status Commission noted that this section assures that there will be no discrimination between Gum and the Northern Mariana Islands. The proceeds of such taxes will be turned over by the federal government to the Northern Marianas Government in any event under Section 703(b) and, under Section 602(a), can be rebated if the local government wishes. Thus, there are siqnificant protections against the imposition of excise taxes which might otherwise interfere with economic development. Marianas Political Status Commission, Section by Section Analysis of the Covenant 76-77 (1975).* The "United States" is defined, for purposes of the entire Internal Revenue Code, to include only the several States and the District of Columbia. 26 U.S.C. S 7701(9). The excise taxes imposed by the Code are applicable in Guam and the Northern Mariana Islands, then, only if made specifically applicable by the terms of the particular tax. With a few exceptions, noted below, none of the *The Analysis is reprinted in Hearings on the Covenant to Establish the Commonwealth of the Northern Mariana Islands befoi; -the Subcommittee on Territorial Tn"d insular 'Affairs of tFe- House Committee on Interior and InsulaF--A-f-f-aJr`Ts, 94th Cong., Ist Sess. 626 (1975) and in Hearings on the Northern Mariana Islands before the Senate Committee on Interior and Insular Affairs, 94th Conq., lst Sess. 356 (1975). - 472 - excise taxes are applicable to Gum. or the Northern Mariana Islands. Environmental excise taxes. "United States" is defined b:) include the Northern Mariana Islands for purposes of the environmental tax on crude oil received at a United States ref inery or petroleum products entered into the United States for consumption, use, or warehousing. 26 U.S.C. � 4612(a) (4) (A). The tax, which is $.0079 per barrel,* would thus apply to crude oil or petroleum products brought into the Northern Mariana Islands fram any place other than the United States. The "United States" is also defined to include the Northern Mariana Islands for purposes of the envir-ormental tax on certain chemicals manufactured or produced in, or entered into, the United States. Id. � 4662(a)(2). The environmental tax on hazardous waste is imposed "on the receipt of hazardous waste at a qualified hazardous waste disposal facility." Id. � 4681(a). "Hazardous waste" and "qualified hazardous was-t-e disposal facility" are defined by reference to the Solid Waste Disposal Act. Id. � 4682(a). That Act defines "State" to include the Northern @gr-iana Islands. 42 U.S.C. S 6903(31). Accordingly, owners or operators of qualified hazardous waste disposal facilities in the Northern Mariana Islands are subject to the tax on hazardous waste. The enviromental taxes on crude oil and petroleum products and on chemicals are imposed to help finance the Hazardous Substance Response Trust Fund, camTonly known as "the Superfund." 42 U.S.C. � 9631(b) (1) (A.). The Trust Fund in turn finances environmental cleanup. Section 703(b) of the Covenant provides, in part, that: There will be paid into the Treasury of the Goverment of the Northern Mariana Islands, to be expended to the benefit of the people thereof as that Governmnt may by law prescribe, the proceeds of all taxes collected under the internal revenue laws of the United States on articles produced in the Northern Mariana Islands and transported to the United States, its territories or possessions, or consumed in the Northern Mariana Islands, [and] the proceeds of any other taxes which may be levied by the Congress on the inhabitants of the Northern Mariana Islands *One barrel equals 42 United States gallons. 26 U. S. C. 9 4612(a)(8). - 473 - There is consequently roan for doubt as to whether federal taxes collected on crude oil and petroleum products brought into the Northern Mariana Islands and on chemicals sold in the Northern Mariana Islands should be turned over to the Northern Mariana Islands or paid into the Hazardous Substance Response Trust Fund. The question is complicated by the presence of specific provisions removing any possible doubt as to the disposition of taxes collected in Puerto Rico and the Virgin Islands, and the absence of similar provisions addressing the disposition of taxes collected in the Northern Mariana Islands or Guam. Section 7652(a)(3) of title 26 requires federal taxes "on articles produced in Puerto Rico and transported to the United States - - ., or consumed in the island" to be turned over to the government of Puerto Rico. Section 7652(b)(3) of title 26 requires turnover to the goverment of the Virgin Islands of federal taxes on "articles produced in the Virgin Islands and transported to the United Stater." The enviromental taxes on crude oil and petroleum products and on chemicals are specifically exempted from these turnover provisions. 26 U.S.C. SS 4612(c), 4662(e). No similar exemption is made for the turnover provisions of section 703(b) of the Covenant or section 30 of Guam's Organic Act, 48 U.S.C. S 1421h. Under normal rules of statutory construction, the omission must be considered as deliberate, particularly since the United States is defined specifically in the same sections to include "the CQmmnvjealth of the Northern Mariana Islands." 26 U.S.C. H 4612(a)(4)(A), 4662(a)(2).* The Post-closure Liability Trust Fund is used to cover monitoring, maintenance, and other liabilities of hazardous waste dumps after those dumps have been closed. 42 U.S.C. SS 9607(k), *The environmental taxes were enacted as part of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, Public Law 96-510, 94 Stat. 2767. Nothing in the legislative history of that act explains why Puerto Rico and the Virgin Islands were treated one way and Guam and the Northern Mariana Islands another. The lack of explanation is due in part to the fact that specific mention of the Puerto Rico and Virgin Islands tax turnover provisions first appeared in a compromise bill offered as a substitute for bills reported out of the House and Senate committees. See 126 Congressional Record 30926-27 (the substitute bill), 30930 (remarks of Senator Randolph). See generally Congress Clears 'Superfund' Legislation, 36 Congressional Quarterly Almanac 584, 592-93 (1980). - 474 - 9611(j) , 9641(b). The environnental tax on hazardous waste is. less closely linked to this trust fund than are the other environmental taxes to the Hazardous Substance Response Trust Fund. See 26 U.S.C. S 4682(d); 42 U.S.C. �� 9641, 9651(2). No specific provision-s address the disposition of hazardous waste taxes collected in any of the jurisdictions in which federal taxes are ccmnonly turned over to the government of that jurisdiction. Accordingly, whether federal hazardous waste taxes collected in the Northern Mariana Islands should go to the Post-closure Liability Trust Fund or, under section 703(b) of the Covenant, to the government of the Northern Mariana Islands is debatable. Insurance policies issued -@X foreign insurance firms. The excise tax on insurance policies issued by foreign insurers applies only to policies issued against risks in the United States. 26 U.S.C. S 4372(d). Since the Northern Mariana Islands is not within the United States, pursuant to the definition of "United States" applicable to the entire Internal Revenue Code, policies issued against risks in the Northern Mariana Islands are not subject to the tax. Policies issued by insurance firms in the Northern Mariana Islands aaainst risks in any of the fifty States or the District of Columbia are subject to the tax. Charities, private foundations, and trusts. The excise taxes used to regulate the activities of public charities, private foundations, black lung benefit trusts, pension plans, and real estate investment trusts are qenerally not applicable to such organizations in the Northern Mariana Islands. These excise taxes are used to prevent such organizations fran abusing their preferred status under the federal inccme tax laws. In the Northern Mariana Islands, these organizations will enjoy a preferred status under the federal incane tax laws applied as a local territorial income tax. They will not, however, be subject to the excise taxes used to prevent abuse of their preferred status unless the Northern Mariana Islands enacts local legislation imposing such taxes. Private foundations in the Northern Mariana Islands, since the Northern Mariana Islands is not part of the United States for purposes of the Internal Revenue Code, are subject to a special federal tax imposed on inccme derived from. sources within the United States by foreign private foundations. 26 U.S.C. q 4948. Windfall oil profits. The windfall profits tax is imposed on domestic crude oil. 26 U.S.C. �� 4986(a), 4991(a). Domestic crude 475 - oil includes oil produced fran oil wells in possessions of the United States. Id. S 4996(b)(3). r--,uam is a possession, so by operation of section 9'0-1(c) of the Covenant, oil produced fran wel ls in the Northern Mariana Islands is subject to the tax. Under section 703(b) of the Covenant, any windfall profits taxes collected by the United States on oil oroduced in the Northern Mariana Islands are paid to the treasury of the Northern Mariana Islands. (There are no oil wells in the Northern Mariana Islands at this time.) Federal excise taxes_ on goods shipped fran the United States to the Northern Mariana Islands. (bods shipped frcm the United States to Guam are "exempted fran the payment of any tax imposed by the internal revenue laws of the United States." 26 U.S.C. S 7653(b). By operation of section 601(c) of the Covenant, goods shipped frcm the United States to the Northern Mariana Islands are also exempted from taxation. See Senate Report 94-433, The Covenant to Establish a Copmnwealth of the Northern Mariana Islands 65, 80 (1975). Goods entering Puerto Rico and the Virgin Islands frcm the United States are subject to a federal tax equal to any local tax on similar goods of local nanufacture. 26 U.S.C. � 7653(a). This federal tax is paid into the treasuries of those jurisdictions. Id. S 7652(a)(3); 48 U.S.C. � 1642; Puerto Rico v. Blumenthal, 642 [email protected] 622, 631-32 (D.C. Cir. 1980), certiorari denlr-@,451 U.S. 983 (1981). No similar tax is imposed on goods frcrn the United States entering the Northern Mariana Islands, Guam, or American Samoa. The Northern Mariana Islarkis, however, has the authority to impose its own excise taxes on goods ranufactured, sold, or used in or imported into the Northern Mariana Islands. Covenant � 604(b). When federal excise taxes are paid at the time a product is manufactured, statutes may allow a "drawback" or refund of the taxes paid if the product is subsequently exported. See, for example, 26 U.S.C. � 5706; 27 C.F.R. SS 290.221 (1984) (drawback of excise tax on tobacco products). When goods are shipped fran the United States to Qlam, drawbacks of federal excise taxes paid on those qoods are allowed in the same manner as if Guam were a foreign country. 26 U.S.C. � 7653(c). By operation of section 601(c) of the Covenant, when goods are shipped frcm the United States to the Northern Mariana Islands, drawbacks of federal excise taxes paid are allowed in the same manner as if the Northern Mariana Islands were a foreian country. Federal excise taxes on goods shi fram the Northern Mariana Islands to the United States. Excise taxes imposed on the production or manufacture of partil-c-ular goods in the United States are also imposed on the importeition of those goods into the United States. 476 - See, for example,,. 26 U.S.C. �� 5001 (distilled spirits), 5701 (tobacco products). The Northern Mariana Islands is not only outside the United States for purposes of the Internal Revenue Code, but is also outside the customs territory of the United States. Covenant 5 603(a); Revised Tariff Schedules 'of the United States, General Headnote 2. Consequently, when goods from the Northern Mariana Islands cross the border into the United States, they become subject to federal excise taxes collected on the importation of those goods. Section 703(b) of the Covenant requires the Federal Government to turn over to the governmant of the Northern Mariana Islands "the proceeds of all taxes collected on articles produced in the Northern Mariana Islands and transported to the United States, its territories or possessions." Under section 602 of the Covenant, the government of the Northern Mariana Islands may in turn rebate these taxes to the taxpayer. Language virtually identical to that in section 703(b) of the Covenant in the organic legislation for Puerto Rico and the Virqin Islands was construed in Puerto Rico v. Blumenthal, 642 F.2d 622 (D.C. Cir. 1980), certiorari denied, 451 U.S. 983 (1981). The court, relying on the legislative history and administrative construction of the Puerto Rico and Virgin Islands provisions, held that not all excise taxes but only "equalization" taxes collected by the United States on articles produced in those islands and transported to the United States are to be paid over to the qovernments of Puerto Rico and the Virgin Islands. Id. at 626. The equalization taxes, levied by section 7652(a)(1) (PCW-rto Rico) and (b)(1) (Virgin Islands) of title 26, are taxes imposed on articles manufactured in those islands and shipped into the United States. Equal in amount to taxes imposed on similar articles manufactured in the United States, ectualization taxes are intended to prevent island manufacturers from having an unfair competitive advantage in selling their goods within the United States. That advantage would arise, in the absence of an equalization tax, because products of the islands are qenerally exempt from federal taxes, including federal excise taxes on manufactures. Despite the close similarity of the language at issue in the Puerto Rico and Virgin Islands cases, those cases should not be read as limiting federal excise taxes payable to the Northern Mariana Islands under section 703(b) of the Covenant only to equalization taxes. At no time from negotiation of the Covenant to the present has any federal equalization tax been imposed on articles manufactured -in the Northern Mariana Islands and transported to the United States. Because the Northern Mariana Islands is outside the customs territory of the United States and goods exported from the - 477 - Northern Mariana Islands are subject to excise taxes on their importation into the United States, no equalization tax would ever be necessary to prevent manufacturers in the Northern Mariana Islands from obtaining an excise-tax advantage over their competitors in the United States. Accordingly, section 703(b), requiring payment to the Northern Mariana Islands of "the proceeds of all taxes collected under the internal revenue laws of the United States on articles produced in the Northern Mariana Islands and transported to the United States, its territories or possessions," would be meaningless if read as limited only to equalization taxes. The same result may be reached by defining equalization taxes to include not just taxes levied by statutes such as section 7652(a)(1) and (b) (1), but any tax imposed on goods as a condition of entry into the United States in order to protect mainland manufacturers of competing goods required to pay a similar tax on, say, the manufacture of those qoods. Any excise tax imposed on importation of such goods would be an equalization tax under this definition and, as such, would be payable after collection to the government of the Northern Mariana Islands. The Puerto Rico and Virgin Islands cases do foreclose payment to the Northern Mariana Islands of federal taxes collected after goods from the Northern Mariana Islands have entered the customs territory of the United States, for example, a tax collected at the point of sale. See Puerto Rico v. Blumenthal, 642 F.2d at 639-4n. Excise -gn"@try into the United States from the taxes collected on c goods upon Northern Mariana Islands, however, should be paid to the Northern Mariana islands. Subtitle F. Procedure and Administration. Subtitle F of the Internal Revenue Code contains a wide variety of provisions governing the collection, enforcement, and administration of federal taxes. To the extent a particular tax is applicable in the Northern Mariana Islands,, these provisions govern the collection, enforcement, and administration of that tax. The federal income tax, applied as a local territorial tax of the Northern Mariana Islands, is collected, enforced, and administered as provided in this subtitle, except that the government of the Northern Mariana Islands acts in the place of the Federal Goverrment. See the discussion, Subtitle A. The Income Tax, above. Subtitle G. The Joint Committee on Taxation. Subtitle G of the Internal Revenue Code establishes in the United States Congress the Joint Committee on Taxation, charged with oversight over the operation, effects, and administration of the Internal Revenue Code. - 478 - Subtitle H. Financing of Presidential Campaigns. Section 6096 of the Internal Revenue Code allows a taxpayer to earmark one dollar of inccme taxes owed to be paid into the Presidential Election Cmpaign Fund. Subtitle H of the Code provides the mechanism for distributing funds collected in this manner among candidates for the presidency of the United States. Subtitle I. Trust Fund Code. Subtitle I of the Internal Revenue Code establishes internal housekeeping rules for the Black Lung Disability Trust fund, the Airport and Airway Trust Fund, and the Highway Trust Fund. Each of these funds receives all proceeds fran specific federal taxes and other desiqnated federal receipts. Each of the f unds is used to finance specified federal programs, authorized under other titles of the United States Code. TITLE 27. INMXICATIW., LIOUORS. The Camission did not examine this title of the United States Code in detail. No problems in the application of this title to the Northern Mariana Islands were brought to the CcFmission's attention. TIME 28. JUDICIARY AND JUDICIAL PROCEDURE. The Ccmmission's staff examined title 28 in its entirety, but d id not can-pile and edit its research for inclusion in this report. The application of title 28 to the United States District Court for the Northern Mariana Islands is governed by sections 1694-1694e of title 48 of the United States Code. See also Covenant H 401-403. No significant problems in the application of title 28 to the Northern Mariana Islands were uncovered by the staff's research or otherwise brought to the Cammission's attention. TITLE 29. 1ABDR. Chapter 4B of title 29,, containing the Wagner-Peyser Act, is discussed below. 'Ihe Ccmmission's staff examined the other chapters in title 29, but did not compile and edit its research for inclusion in this report. The Camission was asked to recanmend to Congress that the National Labor Relations Act, chapter 7 of title 29, not apply to the Northern Mariana Islands, but declined to make such a recommendation. - 4.79 - Section 503(c) of the Covenant provides that the federal minimum waqe law, contained in chapter 8 of title 29, shall be inapplicable to the Northern Mariana Islands "except in the manner and to the extent made applicable . . . by the Congress by law after termination of the Trusteeship Agreement." The activities in the Northern Mariana Islands of the United States and its contractors are, however, subject to federal laws governing "the conditions of employment, including the wages and hours of employees." Covenant S 502(b). Chapter 4B. Federalamloyment Service. The statute. The Waqner-Peyser Act, codified in this chapter, establishes the United States Employment Service. The Act was succinctly described in a recent Supreme Court opinion: The Wagner-Peyser Act was passed in 1933 in order to deal with the massive problem of unemployment resulting from the Depression. The Act establishes the United States Employment Service within the Department of Labor "filn order to promote the establishment and maintenance of a national system of public employment offices." 29 U.S.C. 9 49. State agencies, which have been approved by the Secretary of Labor, are authorized to participate in the nationwide employment service. Id., at S 49g. The Secretary is authorized to make usiM rules and regulations as may be necessary" to acccmplish the ends of the Act. Id. , at � 49k. Federal regulations issued pursuant to that Tulthority have established an interstate clearance system to provide employers a means of recruiting nonlocal workers, when the supply of local workers is inadequate. 20 C.F.R. @ 602.2(c) (1981). If local workers are not available, a "clearance order" is sent through the Employment and Training Administration of the Department of Labor to other state agencies in order to give them. an opportunity to meet the recFuest. Alfred L. Snapp & Son,, Inc. v. Puerto Rico, 458 U.S. 592, 594-95 (1982) (footnote omitted). The Immigration and Nationality Act of 1952 allows the admission of temporary foreign workers into the United States only if "unemployed persons capable of performing such service or labor cannot be found in this country." 8 U.S.C. � 1101(a)(15)(H)(ii). The nationwide employment service established by the Wagner-Peyser Act determines whether qualified unemployed persons can be found within the United States. Again as described by the Supreme Court in the Sn2M case: 480 - The Attorney General is charged with deterfnininq whether entry of foreiqn workers would meet this standard, "upon the petition of the importing employer." 8 U. S. C. S 1184(c). He is to make this determination "after consultation with appropriate agencies of the Government." Ibid. The Attorney General has delegated this responsibility to the ammissioner of Immigration and Naturalization, 8 C.F.R. S 2.1 (1981), who, in turn, relies on the Secretary of Labor for the initial determinations. 8 C.F.R. � 214.2(h)(3) (1981). TO met this responsibility, the Secretary of Labor relies upon the employment referral system established under the Wagner-Peyser Act. 0 - # The Employer who anticipates a need for foreign laborers must file an application with the local public employment office, including a copy of the job offer. 20 C.F.R. �� 655.201(a)(I)t (b)(1) (1981). The application must be filed in sufficient time to allow the agency to recruit through the interstate clearance system for 60 days prior to the estimated date of the start of employment, Id., at (c). The regulations further provide that the (;FPloyer must include assurances that the job opportunity is $$open to all qualified U.S. workers without regard to race, color, national origin, sex, or religion, and is open to U.S. workers with handicaps who are qualified to perform the work," and that the employer will continue to seek U.S. workers until the foreign workers have departed for the employer's place of employment. 29 C.F.R. �� 655.203(c), (d). Finally, the regulations require that "each employer's job offer to U.S. workers must offer U.S. workers at least the same benefits which the employer is offering, intends to offer, or will afford, to temporary foreign workers." 20 C.F.R. � 655.202(a). Similarly, the employer may not impose obligations or restrictions on damestic workers that are not, or will not be, imposed on foreign workers. Ibid. 458 U.S. at 595-96 (footnotes cmitted). "U.S. workers" are defined to include aliens legally permitted to work permanently within the United States. 8 U.S.C. � 1101(a)(15)(H)(ii); 20 C.F.R. �� 655.200, 656.50 (1981). The Act also provides for federal subsidy of State Employment offices meetinq standards set by the Act. 29 U.S.C. S 49d(b). Funds available under the Wagner-Peyser Act may not be paid to a jurisdiction unless the jurisdiction has an unemployment compensation 481 - law approved by the Secretary of Labor under the Federal Unemployment Tax Act. Id.* No State is required to participate in the federal employment clearinghouse system. Id. @ 49c. Present applicability. The Wac .jner-Peyser Act defines "State" to include Puerto Rico, Guam, the District of Columbia, and the Virgin Islands. 29 U. S.C. 9 49b(b). By operation of section 502(a)(2) of the Covenant, the Northern Mariana Islands is a "State" for purposes of the Waqner-Peyser Act. The Immigration and Nationality Act, with exceptions not pertinent here, is inapplicable to the Northern Mariana Islands. Covenant S 503(a).** The Northern Mariana Islands is thus outside the United States for purposes of that Act. As noted above, alien workers may be brought into the United States after a determination that no qualified "U.S. workers" are available in the United States. But, because the Northern Mariana Islands is not part of the United States for purposes of the Act, the search for qualified unemployed workers need not extend to the Northern Mariana Islands. (And, of course, alien workers may be brought into the Northern Mariana Islands without regard f or requirements in the Immigration and Nationality Act.) Participation of the Northern Mariana Islands in the nationwide employment service system established by the Wagner-Peyser Act is not inconsistent with exemption of the Northern Mariana Islands fran the Immigration and Nationality Act. Any public employment service in the Northern Mariana Islands receiving funds under the Wagner-Peyser Act simply need not perform those functions related to administration of the federal immigration laws. Under the Waqner-Peyser Act, Guam is excepted frcm the requirement that a jurisdiction have an unemplo. nt c pe ation law yme an. ns approved by the Secretary of Labor under the Federal Unemployment Tax Act. 29 U.S.C. � 49d(b). The Federal Unemployment Tax Act does not *The Federal Unemployment Tax Act is codified at sections 3301 to 3308 of title 26 of the United States Code. "The Commission has concluded that the Immigration and Nationality Act, with the same exceptions, should remain inapplicable to the Northern Mariana Islands. See the discussion of chapter 12 of title 8 of the United States Code, above. 482 - apply in Guam. 26 U.S.C. � 3306(j). Because that Act does not apply in Guam, it also is inapplicable in the Northern Mariana Islands. See Covenant SS 502(a), 601(c). Because the Waqner-Peyser Act is legislation providing federal services and financ ial assistance, it applies to the Northern Mariana Islands as it does to Gum. id. � 502(a)(1). Accordingly, the Northern Mariana Islands is J_so exempt from the requirement that it have an approved unemployment compensation law in order to receive funds under the Wagner-Peyser Act. Discussion. The advantage to the Northern Mariana Islands in applying the Wagner-Peyser Act in the Northern Mariana Islands is that federal money is available to subsidize the operation of a local employment clearinqhouse in the Northern Mariana Islands. The r ')rincipal function of such a clearinghouse, to match workers who are seeking employment with employers who are seeking job applicants, is well-suited to the needs of the developing economy of the Northern Mariana Islands. Applying the Wagner-Peyser Act in the Northern Mariana Islands is thus consistent with the obligation of the United States to promote the economic development of the Northern Mariana Islands. See Covenant 5 701. The Northern Mariana Islands already has a local Employment clearinghouse established under local law. By meetinq the requirements of the Wapner-Peyser Act, that office is eligible to receive federal fundinq. Provision of that fundinq is consistent with the promise of the United States to "make available to the Northern Mariana islands the full range of federal programs and services available to the territories of the United States." Covenant 9 703(a). No effort should be made at this time to require employers in the United States to consider available crualified workers residing in the Northern Mariana Islands or to require employers in the Northern Mariana Islands to consider available qualified workers residing in the United States before fillincl vacancies with nonresident alien workers. Transportation and ccomunication between the Northern Mariana Islands and other parts of the United States are too time-consuming and costly to nake such requirements practicable. The federal minimum wage is not applicable in the Northern Mariana Islands. Covenant S 503(c). Wages in the economically less developed Northern Mariana Islands are considerably lower than in the United States. Consequently, few workers in the United States are likely to be attracted by vacancies in the Northern Mariana Islands. While scrm small advantaqe might accrue to a few residents of the Northern Mariana Islands were the preference over y q1ven . nonresident aliens for vacancies in other parts of the United 483 States,* that advantage is likely to be offset by the costs to the employment office in the Northern Mariana Islands in administering participation of the Northern Mariana Islands in the national system. The Wagner-Peyser Act, establishinq the United States Employment Service and the national employment clearinghouse system, should continue to apply in the Northern Mariana Islands. No legislation is necessary for its continued application. TITLE 30. MINERAL LANDS AND MINING. The Commission's staff examined title 30 in its entirety, but did not compile and edit its research for inclusion in this report. No significant problems in the application of title 30 to the Northern Mariana Islands were uncovered by the staff's research or otherwise brought to the Cammission's attention. TITLE 31. MONEY AND FINANCE. INTRODUCTION. Note. No major changes are recommended in the current appliTa-bil-lity to the Northern Mariana Islands of title 31. A number of relatively minor and technical changes are recanmended. Each recamiended change, if implemented, would cause a particular federal law to apply to the Northern Mariana Islands as it now applies to Guam and the other territories and possessions of the United States. See, in the Reccmmendations section of this report, the following recamnendations: Northern Mariana Islands financial institutions as federal depositaries; issuance of substitute federal checks; Federal employee a ,llotments to credit unions; and Public part ir-cllp'afir-o'@nin block grant proposals. The statutes. Title 31 collects statutes regulating the internal financial management of the Federal Government. Included in title 31 are the statutory charters of the Department of the Treasury and other federal financial management agencies; laws governing the collection, *Citizens of the Northern Mariana Islands residing in other parts of the United States are already entitled to preference over nonresident aliens. 8 U.S.C. S 1101(a)(15)(H)(ii); 20 C.F.R. �� 655.200, 656.50 (1984). 484 budgeting, appropriation, and expenditure of federal monies; statutes relating to the manufacture and circulation of coins and paper currency; and procedures qoverning grants from the Federal Govermient to States and other entities. Title 31, which was revised and enacted into positive law in 1982,* is divided into six subtitles. Each of the subtitles is examined separately below. Present applicability, Most provisions in title 31 relate to the internal management of the financial resources of the Federal Government, and apply wherever the Federal Government functions. The Northern Mariana Islands is within the American political family, receives monies from the Federal Government for various purposes, and uses United States currency. The Northern Mariana Islands is thus affected by title 31 to roughly the same extent as are all other American political jurisdictions. A few provisions in title 31 are of particular concern to the Northern Ma riana Islands. The present applicability of those provisions to the Northern Mariana Islands is discussed in the subtitle-by-subtitle analysis of title 31, below. "United States" is defined, for purposes of title 31, to mean "when used in a geographic sense . . . the States of the United States and the District of Columbia." 31 U.S.C. S 103. Even though the Northern Mariana Islands is not included within that definition, the definition (as will be seen below) does not operate to make the title inapplicable to the Northern Mariana Islands. Prior to the recodification of title 31 in 1982, the title included a provision requiring federal employees in the continental United States paid from appropriated funds to be United States citizens. The provision, formerly section 699b of title 31, was anitted from the codification not because it has been repealed but because it is a "recurrent provision" frequently reenacted in annual appropriations legislation. In its 1982 interim, report to the United States Congress, the Commission recommended enactment of legislation to treat citizens of the Northern Mariana Islands as citizens of the *No substantive changes were intended in the revision and recodification of title 31. The revision "substitutes simple language for awkward and obsolete terms and eliminates superseded, executed, and obsolete laws." Publisher's Explanation, 31 U.S.C. 'at Ve See Public T-aw 97-258, 5 4, 96 Stat. 877 (1982); House Report 97-651, at 1-5 (1982). - 485 - United States for purposes of all such requirements. Sect ion 17 of Public Law 98-213, 97 Stat. 1459, enacted in 1983, provides that "No provision of law prohibitinq the payment of canpensation to, or employment of, any person not a citizen of the United States of America by the United States of America shall bar the United States of America from paying campensation to or employing any citizen of the 1@brthern Mariana Islands." SUBTITLE-BY-SUBTITLE ANALYSIS OF TITLE 31. SUBTITLE I. GENERAL. The statutes. Subtitle I of title 31 contains the statutory charters of the Department of the Treasury (chapter 3), the office of Management and Budget (chapter 5), and the General Accounting Office (chapter 7).* The principal functions of the Department of the Treasury are formulating and recamnending domestic and international fiscal, economic, financial, and tax policies; serving as financial agent for the Federal Government; managing the public debt; enforcing federal laws; and manufacturing coins and currency. Principal subdivisions within the Department are the Bureau of Alcohol, Tbbacco and Firearms; the Ccrnptroller of the Currency; the United States Customs Service; the Internal Revenue Service; the Bureau of the mint; the Bureau of Engraving and Printing; the Bureau of the Public Debt; the Bureau of Government Financial Operations; and the Secret Service. The Office of Management and Budget (01B) is part of the Executive Office of the President of the United States. CMB, assists the President in preparing and administerinq the budget of the United States. CMB acts as a clearinghouse and coordinator for federal executive agencies in a number of different ways: CMB collects departmental canments on proposed legislation in order to determine the position of the. executive branch. The office also advises the President with respect to action to be taken on bills passed by Congress. In addition, CMB generally advises the President on improving the managerial efficiency of the Federal Goverment. The General Accounting office (GAO) is an independent agency within the legislative branch of the Federal Goverment. The GAO is generally charged with assisting "the Congress, its cammittees, and its members in carrying out their legislative and oversight responsibilities . . . ." U.S. Government Manual 41 (1982). The GAO also has audit authority over the receipt, jir"s-bursement, and use of *Title 31 was enacted without even-numbered chapters. - 486 public monies, and is frequently asked to recam@end measures to make the Federal Government more efficient and effective. The GAO is headed by the Ccmptroller General of the United States (not to be confused with the Ccnptroller of the Currency, who is part of the Department of the Treasury). Present applicability. As with most of title 31, the provisions of subtitle I govern the internal operations of the Federal Government. Those orovisions affect the Northern Mariana Islands to the sane extent as they affect all other Arerican jurisdictions. SUBTITLE II. THE BUDGET PROCESS. The statutes. Subtitle II of title 31 contains provisions governing the preparation of the federal budget (chapter 11), the appropriation of money by Congress (chapter 13), and the expenditure of, and accounting for, appropriated funds by the executive branch (chapter 15). Present applicability. The provisions of subtitle II in general apply to the Northern Mariana Islands as they do to all other Anerican jurisdictions, since they are directed to internal processes of the Federal Goverment. Section 1305(l) of title 31, part of subtitle II, appropriates 11necessary amounts" to pay the proceeds of the personal estate of a United States citizen dying abroad to the legal representative of the deceased. See generally 22 U.S.C. �� 1175 et seq.; 22 C.F.R. �9 72.15 et seq. (1984). In its January 198@-interim report to Congress, th4 Catatission recommended enactment of legislation to treat citizens of the Northern Mariana Islands as citizens of the United States for purposes of a predecessor to section 1305(l), fomer section 711(l) of title 31. In 1983 Congress enacted Public Law 98-213, 97 Stat. 1459. Sections 19 to 23 of that statute allow the President by proclamation to declare that citizenship requirements in particular federal laws are not applicable to citizens of the Northern Mariana Islands. In 1984 the President removed for citizens of the Northern Mariana Islands the citizenship restriction of section 1305(l). Presidential Proclamation 5207, S 3(d), 49 Fed. Reg. 24365. SUBTITLE III. FINANCIAL MANAGEMENT. The statutes. Subtitle III of title 31 sets forth the borrowing authority of - 487 - the United States Government and prescribes how the public debt is to be administered (chapter 31). The subtitle also governs the deposit, custody, and disbursement of federal funds (chapter 33), the Federal Government's internal accounting and auditing procedures (chapter 35), the handling of claims by and aqainst the Federal Government (chapter 37), and the prompt payment of invoices from businesses for goods and services received by th e Federal Government (chapter 39). Present applicability. In general subtitle III is directed at the internal operations of the Federal Government and, like most of title 31, affects the Northern Mariana Islands as it affects all other Aznerican jurisdictions. For a few provisions in subtitle III, the qeographic applicability of the provision may be of some importance. Section 3105(d) (1) allows the Secretary of the Treasury to authorize certain financial institutions to redeem savings bonds and savings notes if those institutions are incorporated "under the laws of the United States, a State, the District of Columbia, or a territory or possession of the United States." Guam is a territory or possession of the United States. Accordimly, by operation of section 502(a) of the Covenant, a financial institution incorporated under the laws of the Northern Mariana Islands may be authorized to redeem savings bonds and savings notes if it meets the other requirements for such authorization.* Section 3106 allows the Secretary of the Treasury to authorize financial institutions meetinq the eligibility requirements of section 3105, above, to redeem retirement and savings bonds. Financial institutions in the Northern Mariana Islands, eligible under section 3105, are also eligible under section 3106 to be authorized to redeem retirement and savings bonds. A "reqistered" security is a note, bond, or other certificate of indebtedness the ownership of which is recorded by the Departmnt of the Treasury. 31 C.F.R. S 306.2(n) (1984). Section 3121(g) of title 31 of the United States Code requires certain federal obligations to be reg i s te red .Same obligations are excepted from the registration requirement if the "interest on the obliqation is payable only outside the United States and its territories and possessions." Guam *Although section 3105 was enacted after the effective date of seci ton 50 2 of the Covenant, it restates law in effect prior to the effective date of section 502. Consequently, section 3105 is applicable to the Northern Mariana Islands by operation of section 502. - 488 - is a territory or possession of the United States. Accordingly, by operation of section 502(a)(2) of the Covenant, an obligation of the United States is not excepted from the reqistration requirement if the interest on the obligation is payable in the Northern Mariana Islands. Section 3124(a) of title 31 exempts obligations of the United States Government frcm most taxation "bv a State or political subdivision of a State." Thus, for example, interest on a United States Savings Bond is not part of the recipient's income for purposes of computing the recipient's State incane tax obligation. Section 3124 prohibits taxation only by a State or a political subdivision of a State. Territories and possessions are riot explicitly included within the prohibition and, since territories and possessions are specifically mentioned in subsection (b) of the same section, the amission ar)pears intentional. Despite that appearance, however, section 3124(a) should be regarded as prohibitinq taxation of federal obligations by territories or possessions, or their political subdivisions. Section 3124(a) implements Article I, Section 8, Clause 2, of the United States Constitution, which empowers Congress "to borrow (mloney on the credit of the United States." To allow. States to tax notes, bonds, and other obligations of the United States would reduce the yield on those obligations to creditors and thus increase the cost to the Federal Government of borrowing money. The courts have consistently held that to allow the States to tax federal obligations without federal permission is inconsistent with the constitutional supremacy of the national goverment over the States. See American Bank & Trust Co. v. Dallas County, --U.S.--, 103 S-Ct. 3369 (1983); The Banks v. The Mayor, 74 U.S. 16, 23-25 (1868); Weston v. City Council, 27 U.S. (2 Pet.) 449, 464-69 (1829). The same principle is applicable to territories and possessions: To allow a territory to tax federal obligations without federal consent would raise the federal cost of borrowing money and is thus inconsistent with the suprEmacy of the national goverment See generally Dcmenech v. National City_ Bank, 294 U.S. 199, 20; (1935); Talbott v. Board of County Ccumissioners, 139 U.S. 438 (1891); Northern Pacific Railroad Co. v. Rockne, 115 U.S. 600 (1885). Accordinqly, section 3124(a) should be construed as prohibiting the goverTmnt of a territory or possession fran taxing obligations of the United States. Since Gum is a territory or possession, by operation of section 502(a)(2) of the Covenant, the goverment of the Northern Mariana Islands is similarly constrained frcxn taxing obligations of the Federal Goverment. Se ction 3124(b) provides that inccue from federal notes, bonds, and other obligations is taxable incane for purposes of the federal income tax. The section makes clear, however, that this rule does not apply to notes, bonds, and other obligations issued by, among other issuers, the territories and possessions of the United States. The Northern Mariana Islands is now neither a territory nor a - 489 - possession of the United States. Although section 3124(b) exempts income from obliqations issued by the qovernment of Guam from. federal income tax, that section's exemption does not apply to income from obligations issued by the several States. Consequently, section 502(a)(2) of the Covenant does not brinq income from obligations issued by the governmnt of the Northern Mariana Islands within the federal income tax exemption of section 3124(b). The nonapplicAbility of the section 3124(b) exemption to the Northern Mariana Islands is, however, of little importance because section 607(a) of the Covenant provides that "ra]ll bonds or other obligations issued by the Government of the Northern Mariana Islands or by its authority will be exempt, as to principal and interest, from taxation by the United States . . . . " Section 3303(b) of title 31 allows the Secretary of the Treasury to designate financial institutions in territories and possessions of the United States to receive deposits of federal funds. See the recommnidation, Northern Mariana Islands financial institutions as federal depositaries, in he Recommendations section of this report. Section 3329 requires the Secretary of the Treasury to prohibit sendinq a check drawn on federal funds "from the United States or from a territory or possession of the United States" to a foreign country if conditions in that foreign country make it unlikely the payee will receive the check or be able to negotiate it for full value. Since Guam is a territory or possession, section 502(a)(2) of the Covenant requires the Secretary to prohibit the sending of such checks from the Northern Mariana Islands to a foreign nation where receipt of the check or the ability to cash the check for full value is unlikely. Section 3330 imposes similar restrictions on Veterans Administration checks "to be sent to a person in the United States or a territory or possession of the United States" when that person is legally responsible for care of a person in a foreign country. Again, section 502(a)(2) of the Covenant makes the restrictions applicable to Veterans Administration checks sent to persons in the Northern Mariana Islands. Section 3331(c) authorizes the issuance of substitute checks to replace lost, stolen, or destroyed checks when the original check was drawn on federal funds on deposit in a territory or possession or in a foreign country. See the recammendation, Issuance of substitute federal checks, in the Recommendations section of this report. Section 3332 authorizes federal employees to have part of their pay sent to certain financial organizations. See the reccuuneandation, Federal employee allotments to Northern Mariana Islands credit unions., in the Recommendations section of -t-Fil-Treport. - 490 - Section 3342(a)(3) allows a disbursing official of the United States Government, in a foreign country where satisfactory banking facilities are not available, to cash checks drawn on the United States Treasury for the acccmmdation of any person who is a United States citizen. In its January 1982 interim report to the United States Congress, the Ccmmission recanmnded enactmnt of legislation to treat citizens of the Northern Mariana Islands as citizens of the United States for purposes of this provision.* In 1983, Conaress enacted Public Law 98-213, 97 Stat. 1459. Sections 19 to 23 of that statute allow the President by proclamation to declare that citizenship requiranents in particular federal statutes are not applicable to citizens of the Northern Mariana Islands. In 1984 the President removed for citizens of the Northern Mariana Islands -the citizenship restriction on check cashing under section 3342(a)(3). Presidential Proclamation 5207, � 3(d), 49 Fed. Reg. 24365. Section 3702(b)(1) requires that certain claims aqainst the United States Government be made within six years after the claim accrues. An exception, however, is made for claims "of a State, the District of Columbia, or a territory or possession of the United States." Guam is a territory or possession. Accordingly, by operation of section 502(a)(2) of the C ovenant, the six-year statute of limitations does not apply to claims of the government of the Northern Mariana Islands against the Federal Goverment. Section 3714 allows the Secretary of the Treasury to deduct from money owed a State by the United States any losses of principal or interest on defaulted State stocks or bonds held in trust by the Federal Goverment. "State" is not defined to include territories or possess ions. Consequently, the Covenant does not put the Northern Mariana Islands in the position of a State for purposes of section 3714 and the Secretary is not authorized to withhold money owed the Northern Mariana Islands by the United States to offset losses on Northern Mariana Islands stocks or bonds held in trust by the Federal Goverment. Section 3725(a) authorizes the Secretary of State to settle, "for not more than $1,500 in any one case, a claim for personal injury or death of an individual not a national of the United States in a foreign country in which the United States exercises privileges of extraterritoriality when the injury or death is caused by an officer, employee or agent of the United States Government (except of a military department . . . or the Coast Guard)." Citizens of the Northern Mariana Islands, prior to termination of the trusteeship, are not nationals of the united States. Covenant 301, 1003(c). *At the time of the interim report, prior to the revision of title 31, this provision was section 492a of title 31. - 491 - Consequently, the Secretary is authorized under section 3725(a) of this title to settle a claim for personal injury or death of a citizen of the Northern Mariana Islands in a foreign country in which the United States exercises privileges of extraterritoriality when that injury or death is caused by an officer, employee, or agent of the Federal Government. 'Ihe United States, however, now exercises privileges of extraterritoriality in no foreign country and has not done so for a number of years. 6 M. Whiteman, Digest o International Law 279 (1968). Consequently, whether citizens of the Northern Mariana Islands should be treated as nationals of the United States for purposes of section 3725(a) is entirely academic. SUHrITLE IV. MONEY. The statutes. Subtitle IV of title 31 contains two chapters. Chapter 51 establishes the. monetary system of the United States and orovides for the manufacture of currency by the Bureau of Engraving and Printing and the minting of coins by the Bureau of the Mint. (Both the Bureau of Engravinq arxi Printing and the Bureau of the Mint are parts of the Department of the Treasury.) Chapter 53 authorizes the Secretary of the Treasury to take action, in coordination with the federal reserve banks and the Board of Governors of the Federal Reserve System, to alter the value of United States currency as measured against foreign currencies and to further a stable system of exchar-qe rates. Chapter 53 also requires certain recordkeeping and reporting of transactions whenever more than $10,000 in money or negotiable instruments is moved into or out of the United States. The purpose of these requirements is to aid criminal, tax, and regulatory investioations and T)roceedinqs. 31 U.S.C. S 5311. The chapter also requires citizens or residents of the United States and persons in the United States doing business therein to report certain transactions with foreiqn financial agencies. The Secretary of the Treasury is also authorized to require by regulation that financial institutions in the United States report the existence of all monetary transactions meetinq criteria established by the Secretary. The Secretary is further directed to require reports on foreign currency transactions involvinq United States nersonse Chapter 53 also specifies a variety of civil and criminal penalties to encourage compliance with its requirements. .Present applicability. ChaDter 51, establishinq the monetary system of the United States and providing for the issuance of currency and coin, in a narrow sense is a set of instructions to the executive branch of the Federal Goverrment, implementing the power of Congress to issue money - 492 and regulate its value.* In a broader sense, however, cha 'oter 51 is applicable wherever the currency and coin of the United States circulate, since the attributes of denamination and value are inseparable fran the paper and metal used for money. Throuqhout the trusteeship period, the, coins and currency of the United States have been, as a rotter of local law, the official media of exchange in the Northern Mariana Islands." Under section 502(a)(1) of the Covenant, federal banking laws apply to the Northern Mariana Islands as they do to Guam. One federal bankinq law specifically applicable to Guam is the National Bank Act. 12 U.S.C. @ 41. Section 5103 of title 31, making federal coin and currenc 'V legal tender, was originally enacted as part of the National Bank Act. See historical note following 12 U.S.C. S 38. Accordingly, by operation of section 502(a)(1) of the Covenant, the coi ns and currency of the United States are legal tender in the Northern Mariana Islands as a matter of federal law. "United States" is defined, for purposes of the recordkeeping *That power is given Congress by Article I, Section 8, Clause 5, of the United States Constitution. See also Legal Tender Cases, 79 U.S. (12 Wall.) 457, 545 (1871). "When the armed forces of the United States occupied the Northern Mariana Islands, "United States dollar notes regardless of denomination bearing the overstamp 'Hawaii' and all United States coin" were made the only legal tender in the Northern Mariana Islands. Military Governor of the Mariana Islands, Proclamation 4, art. 1 (1944), reprinted at 1 D. Richard, United States Naval Administration of the Trust Territory of the Pacific Islands 677 (1957). The overprint;d- currency was referred to as "Mrit-edStates Currency, Hawaiian Series." Id. In 1947 ordinary United States currency and coins were madj'-legal tender throughout the Trust Territory. U.S. Joint Chiefs of Staff, Interim Directive for Military Government for the Former Japanese Mandated Marshall, Caroli ne, and Mariana Islands and for the Bonin and Volcano Islands, including Marcus Island, part II, If 1, reprinted at 2 D. Richard, United States Naval Administration of the Trust Territory of the Pacific Islands 506, 507 (1957). They have remained legal tender as a matter of the law of the Northern Mariana Islands ever since. See Northern Mariana Islands Executive Order 1-47, If 6 (1947); Trust Territory of the Pacific Islands Interim Regulation 4-48, chap. 9, 1 1 (1948), both reprinted at 3 D. Richard, United States Naval Administration of the Trust Territory of the Pacific Islands 113 1137, 1159 (1957); 1 Trust Territory Code S 106 (1980); Covenant S 505; Constitution of the Northern Mariana Islands, Schedule on Transitional Matters S 2. - 493 - and reporting requirements of chapter 53, to include, in addition to the several States, any territory or possession of the United States whenever the Secretary of the Treasury by regulation includes that territory or possession. 31 U.S.C. S 5312(a)(5). The Secretary by regulation has included all territories and possessions as part of the United States. 31 C.F.R. S 103.11 (1984). Since Guam is a territory or possession, Guam and the several States are part of the United States for purposes of the recordkeeping and reporting recuirements of chapter 53. Accordingly, by operation of section 502(a)(2) of the Covenant, the Northern Mariana Islands is also part of the United States for purposes of these requirements. Consequently, persons transporting money or negotiable instruments into or out of the Northern Mariana Islands (other than fran or to other parts of the United States) are subject to the reporting reauirements of chapter 53. Persons residing in the Northern Mariana Islands and persons in the Northern Mariana Islands doinq business there must report foreign transactions as required by chapter 53. SUBTITLE V. GENERAL ASSISTANCE ADMINISTRATION. Because of the variety of provisions collected in subtitle V, each of the seven chapters in the subtitle is separately treated below. Chapter 61. LlrMram Information. The statutes. Chapter 61 requires the Office of Management and Budget to collect and disseminate information on federal domestic assistance proqrc-rns. The Catalog of Federal Domestic Assistance, which lists and describes each such program, is published pursuant to this chapter by the General Services Administration. Present applicability. The domestic assistance programs for which information is collected and disseminated pursuant to this chapter include those which provide assistance to the territories or Possessions of the United States. Guam is a territory or Accordingly, by possession. operation of section 502(a) of the Covenant, programs providing assistance to the Northern Mariana Islands are included. As a practical matter, danestic assistance programs may provide assistance to a wide variety of recipients. Examination of the information collected pursuant to this chapter, particularly the Catalog of Federal Domestic Assistance, will usually reveal whether a @ @rticular federal program is available in the Northern Mariana Islands, either directly or by operation of section 502(a)(1) of the Covenant. (Section 502(a)(1) makes applicable to the Northern - 494 - Mariana Islands "those laws which provide federal services and financial assistance programs" that were ap to Gu&n on plicable January 9, 1978. In addition, in section 703(a) of the Covenant, the United States agrees to make available to the @brthern Mariana Islands "the full range of federal prograns and services available to the territories of the United States.") Chapter 63. Using Procuremnt Contracts and Grant and Cooperative Agreements. The statutes. Chapter 63 guides federal agencies in selecting appropriate legal instrurwnts to use in acquiring property and services and in providing federal assistance. Such instruments may be executed between the agency, as one party, and a State, a local govermTent, or other recipient, as the other party. Present applicability. "State" is defined, for purposes of chapter 63, to include "a territory or possession of the United States." Since chapter 63 was enacted after January 9, 1978, however, the Northern Mariana Islands is not included in this definition of "State" by operation of section 502(a) of the Covenant. That anission is of little consecRience, since the operative provisions of the chapter apply equally to "a State, a local goverment, or other recipient." See 31 U.S.C. SS 6303, 6304, 6305, 6308. If the Northern Mariana Islands is not "a local government," it certainly falls within the catch-all category, "other recipient." Further, chapter 63 does not prohibit federal agencies from using the prescribed legal instruments to document agreements with other parties, should the Northern Mariana Islands not be considered as even an "other recipient." C!1a pter 65. Intergovernmental Cooperation. The statutes. Chapter 65 allows States to recruest from federal agencies information on grants received by the State; requires federal agencies to minimize the time between the transfer of grant funds to a State and the disbursenent of those funds by the State; establishes rules for the accountability for and administration of grant funds; allows States to receive federal technical assistance on a reimbursable basis; encourages federal agencies to foster local developrmnt in planning agency programs and projects; and establishes mechanisms to ensure effective congressional oversight of grant programs. - 495 Present applicability. "State" is defined, for purposes of chapter 65, to include "a territory or possession of the United States." 31 U.S.C. S 6501(8). Guam is a territory or possession. Accordingly, by operation of section 502(a) of the Covenant, the Northern Mariana Islands is a State for purposes of chapter 65, and grants and assistance from federal agencies to the Northern Mariana Islands are subject to this chapter's vrovisions. Chapter 67. Revenue Sharing. The statutes. Pursuant to this chapter, specified amounts Of federally-collected revenues are paid to eligible State and local governments for uses determined by those State and local qoverments. Present applicability. Only States of the Union (and their nolitical subdivisions) and the District of Columbia are eligible to receive revenue-sharing funds from the Federal Goverment. 31 U.S.C. SS 6701(e), 6705, 6707. Most federal revenues derived from the Northern Mariana Islands, however, are independently payable to the vernment of the Northern g_o Mariana Islands pursuant to section 703(b) of the Covenant. See also 48 U.S.C. SS 1397 (Virgin Islands), 1421i (Guam). Cha2ter 69. Payment for Entitlement Land. The statutes. Since States and their political subdivisions may not tax real property owned by the Federal Government, State and local revenues are diminished in areas where the Federal Goverment owns land. Chapter 69 authorizes federal paymnts to State and local governuents to compensate them for property taxes they would have received from land were it not owned by the Federal Government. Present ap ,,plicability. "The Ommmealth of the Northern Mariana Islands" is specifically included as a "unit of general local government" eligible to receive payments in lieu of property taxes pursuant to this chapter. 31 U.S.C. � 6901(2)(D). No land in the Northern Mariana islands, however, is currently owned by the Federal Government. 496 - Chapter 71. Joint Funding Simplification. The statutes. Chapter 71 enables State and local governments and private nonprofit organizations to use federal assistance rrore effectively by requiring federal assistance programs to use the sane technical and administrative requirewents and by otherwise simplifying their financial and management requirEments, so that projects funded by -two or more federal agencies involve less paperwork. Present applicability. "State" is defined, for purposes of chapter 71, to include "a territory or possession of the United States." 31 U.S.C. � 7102(5). Guam is a territory or possession of the United States. Accordinqlv, by operation of section 502(a) of the Covenant, the Northern Mariana Islands is a "State" for purposes of chapter 71 and federal agencies, in providing assistance to the Northern Mariana Islands, must ccmplv with the chapter's requirements. Chapter 73. Administering Block Grants. Chapter 73 is discussed in the reccimrendation, Public participation in block _ grant proposals, in the Recammendations section of this report. SUBTITLE VI. MISCELIANEOUS. The statutes. Subtitle VI contains, four chapters. Chapter 91 establishes budget procedures and audit rules for specified corporations owned in whole or in part by the Federal Goverment. Among the mny corporations subject to. the chapter are the Federal Deposit Insurance Corporation, the Federal Crop Insurance Corporation, the Rural Telephone Bank, and the Pension Benefit Guarantee Corporation. Chapter 93 contains laws formerly found in now-repealed title 6 of the United States Code, Sureties and Surety Bonds. A surety bond provides that, in the event an individual or firm does not perform an obligation or contract, the issuer of the bond will pay a specified sum to the person, firm or agency adversely affected by the failure to perfom. If an individual or f irm is required by a law of the United States to give a surety bond, that bond must meet the criteria established by chapter 93. Chapter 95 requires the federal Civil Service Retirement SysteM and other federal employee pension plans to publish annual reports fully disclosing their financial condition. The requirements are based on similar requirements applicable to private pension plans under the Employee Retirement Incame Security Act, 29 U.S.C. � 1023. - 497 Chapter 97, entitled "Miscellaneous" in a subtitle identically entitled contains two provisions. Section 9701 establishes the principle that federal agencies to the extent possible should collect fees for services and things of value provided to persons. Section 9702 requires that trust funds held by the Federal Goverment be invested in obligations of the United States earning at least five percent annual interest. Present applicability. Chapter 91 applies to federally-owned corporations regardless of where they may operate. The chapter is thus applicable to the Northern Mariana Islands to the extent that the affected corporations operate in the Northern Mariana Islands. Chapter 93 treats the territories and possessions of the United States as part of the United States for purposes of the rules governing the issuance of surety bonds required by federal law. 31 U.S.C. �9 9304(a)(1)(B), 9306(a). Guam is a territory or possession of the United States. Accordingly, by operation of section 502(a)(2) of the Covenant, the Northern Mariana Islands is also part of the United States for purposes of chapter 93. Chapter 95 is applicable to federal employee pension plans regardless of where the Employees enrolled in those plans may work. Federal employees in the Northern Mariana Islands enrolled in a federal pension plan, like all other federal-employee enrollees, benefit fram the requirements of chapter 97. The miscellaneous provisions of chapter 97, on user fees and investment of federal trust funds, apply to the Federal Government without qeographic limitation. See 59 Decisions of the Ccmptroller General 389 (1980). Accordingly, the Federal Government may collect user fees in the Northern Mariana Islands to the same extent it does elsewhere and federal trust funds particularly related to the Northern Mariana Islands must be invested as are other federal trust funds. TITLE 32. NATIOM%L GUARD. The Ccnunission did not examine this title of the United States Code in detail. No problems in the application of this title to the Northern Mariana Islands were brouqht to the Ccmmission's attention. TITLE 33. NAVIGATION AND NAVIGABLE WATERS. The Camission's reccmmendation, The Rivers and Harbors Act, in the Recommndations section of this report, discusses chapter 9 of title 33. - 498 - Chapter 26 of title 33, the Federal Water Pollution Control Act (also known as the Clean Water Act); chapter 27, the Ocean Dumping Act; and chapter 29, the Deepwater Port Act, are each discussed below. The Commission's staff examined the remaining chapters in title 33, but did not compile and edit its research for inclusion in this report. No significant problems in the application of these chapter-s- to the Northern Mariana Islands were uncovered by the staff's research or otherwise brought to the Cammission's attention. Chapter 26. Water Pollution Prevention and Control. The statute. The Federal Water Pollution Control Act, as extensively amended by the Clean Water Act of 1977 (and therefore usually referred to as the Clean Water Act), 33 U.S.C. SS 1251 et seq., restricts discharqes of substances into the waters of thi-LE-ited States.* The Act establishes a close Federal-State partnership to administer the national pollutant discharge elimination system (NPDES), under the supervision of the Administrator of the Environmental Protection Agency (EPA). Industrial, municipal, and other "point source" dischargers--such as pipes, wells, containers, and vessels--must obtain permits before discharging pollutants into United States waters. Permits are issued either by the EPA or by a State agency if the State has set up its own permit program pursuant to EPA guidelines. 40 C.F.R. part 123 (1984). The EPA is also responsible for designating dumping sites and establishing criteria for Ocean dumpinq within the three-mile territorial limit of the United States and for regulating the disposal of sewage sludge. The Corps of Engineers oversees the discharge of dredged or fill material, unless an EPA-approved State plan is employed instead. EPA regulations consolidate the NPDES system and the dredge or fill requirements (both frcm the Clean Water Act) with provisions of the Clean Air Act, the Solid Waste Disposal Act (as it pertains to hazardous waste management), aryJ the Safe Drinkinq Water Act (regulating injections of substances underground, whic h may affect water tables). See 40 C.F.R. part 122 (1984). The Corps of Engineers is authorized under the Clean Water Act to issue permits for discharge of dredged or fill material into United States waters at specified disposal sites developed jointly by the EPA and the Corps. The Corps considers the economic impact on *The Act applies to "navigable waters" but defines this term to man essentially all "waters of the United States." 33 U.S.C. S 1362(7). See also 40 C.F.R. � 401.11(l) (1984). - 499 - navigation which would result from failure to utilize a proposed disposal site.* The EPA Administrator, however, may still prohibit dumping that has an unacceptably adverse effect on municipal water supplies, shellfish beds, fisheries, wildlife, or recreation areas. Present applicability. The Clean Water Act (the Federal Water Pollution Control Act) defines "State" to include Guam and the Trust Territory of the Pacific Islands. 33 U.S.C. 5 1362(3). 1-3y operation of section 502(a)(2) of the Covenant, the Northern Mariana Islands is also a "State" covered by the Act. Discussion. The ocean and lagoons of the Northern Mariana Islands are important in the daily lives of virtually every family in the Northern Mariana Islands, so that their protection and wise use is of great importance to all. Island enviroments are notoriously fragile. Island resources are limited and particularly susceptible to over-exploitation. See generally J. McEachern & E. Towle, Ecological Guidelines for Island Development 7-16 (1974). The Northern Mariana Islands is now undergoing relatively rapid economic development, fueled by the natural desire of the people of the Northern Mariana Islands for an improved standard of living and by the attractiveness of the islands to tourists, particularly tourists from Japan. Care is essential to ensure that unplanned or badly planned development does not have lonq-teym adverse effects on the environment of the Northern Mariana Islands. One may grant that care is necessary to prevent detrimental effects on the enviromrent, but still argue that this care may be required by local legislation of the Northern Mariana Islands rather than by applying federal laws to the Northern Mariana Islands. The inhabitants of the Northern Mariana Islands may have a better understanding of the enviromneental. relationships in the islands than do scientist s or federal officials far away. Further, the process of applying for permits under federal enviroruental and navigational laws has been criticized, both in the Northern Mariana Islands and elsewhere, as unduly burdens(xre and time-consuming. Delays are maqnif ied for the Northern Mariana Islands by the distance of the islands from decision-rakinq officials. *33 U.S.C. 9 1344. As this is section 404 of the Act, these permits are also called "404 permits." See also 33 C.F.R. �� 209.145(b); 320.2(f) (1984). - 500 Despite these considerations, the Camission supports the continued application of the Clean Mter Act to the Northern Mariana islands. While islanders may have a good understanding of traditional environmental relationships in their islands, -the application to island areas of development technology perfected on continental land masses calls for different types of knowledge. Intensive, sophisticated research may be necessary to determine whether plans for a proposed development are reasonably consistent with protection of the environment. While the local government in the Northern Mariana Islands may be able to obtain' such research from time to time on a contractual basis, it cannot duplicate on an ongoing basis the routine in-house expertise of the Environrrental Protection Aqency and the Army Corps of Engineers. With the grant monies provided under the Clean Water Act,* the Northern Mariana Islands can be assured that the quality of its water supplies does not deteriorate due to the increase in population and econanic growth. Because of the enclosed nature of the islands' water supplies this is a matter of long-term importance. Additionally, ongoing efforts to simplify the regulatory burden of applying for and ccmplyinq with such grants should ease the problems that have occurred in the past. The Cammission does not suggest means for expediting the review of permit applications frcm- the Northern 'Mariana Islands. Streamlining the permit process may well be necessary, but the protection of the Clean Water Act should not be eliminated by making it inapplicable to the Northern Mariana Islands. Rather, officials administering the Act should be encouraqed toward greater efficiency. For example, in a praiseworthy development, the Army Corps of Engineers has recently issued a general permit authorizing the maintenance clearing of rivers, streams, storm. drains, and beach areas in the Northern Mariana Islands without the necessity of obtaining specific permits for each activity. Army Corp of Engineers General Permit PODCO-0 GP 82-1 (1982).** The most widely mentioned industries with potential for improving the standard of living in the Northern Mariana Islands are tourism and fisheries. 7burism is highly dependent on maintenance of *EPA grants to the Northern Mariana Islands for fiscal 1983 were over $1 million for sewer construction and another $50,000 for water quality projects. 40 Congressional Ouarterly Weekly Report 2916 (1982). **Under the Clean Water Act, the Northern Mariana Islands may expedite the NPDES permit process by establishing its own permit program, under federal guidelines, to replace the federal permit program. 33 U.S.C. S 1342(b), (c). 501 an environment attractive to vacationers. Fisheries are dependent on the existence of unpolluted waters. These industries and the quality of life in the Northern Mariana Islands should be protected by continued application of the Clean Water Act to the Northern Mariana Islands. Furthermore, nonapplicability of the Act would create a loophole for polluting businesses seekim .1 locations under the Auerican flag where they would not be subject to environmental constraints elsewhere applicable. Attraction of such business to the Northern Mariana Islands is not in the best interests of the Northern Mariana Islands. The Clean Water Act makes the District Court of Guam or the United States District Court for the District of Hawaii the proper forum for lawsuits arising in the Northern Mariana Islands (or in which the defendants are in the Northern Mariana Islands). Because the Northern Mariana islands now has its own federal court, the Cammission proposes legislative language to make that court the appropriate forum for these lawsuits. See the reccmmendation, Judicial venue under the Clean Water Act, the ocean Timping Act, and the Ocean Thermal Energy Conversion Act, in the Recammendations section of th7 report. Chapter 27. ocean pumping. The statute. The Ocean Dumping Act, part of the Marine Protection, Research, and Sanctuaries Act of 1972, 33 U.S.C. �� 1401 et seq., regulates the ocean dumping of all types of materials, including dredged mterial, solid waste, chemicals, sludge, rock, sand, debris, industrial and agriculture waste, municipal waste, and discarded equipment. Permits issued under this Act apply to ocean waters beyond the three-mile limit* and also affect United States vessels or aircraft transporting material frcm any location to dump into the ocean. The Environmental Protection Agency (EPA) issues general or special permits for ocean dumping and designates dumpinq sites. The Army Corps of Engineers has responsibilities under the Act if a permit request involves ocean dumping of dredged material. EPA approval of permits issued by the Corps is required, however, unless the Corps determines no other econcmically feasible method or site is available. The EPA is required to grant a waiver unless dumping would have an unacceptably adverse effect on municipal water *The three-mile limit is the demarcation line between ocean areas covered by this Act and those covered by the Clean Water Act. Pacific Legal Foundation v. Quarles, 440 F. Supp. 316 (D.C. Cal. (1977). See the discussion of the Clean @Qater Act under chapter 26 of this title, above. - 502 - supplies, shellfish beds, fisheries, wildlife or recreational areas.* `Ihe Act also reguires that the Secretary of Cam-rerce and the Coast Guard "initiate a comprehensive and continuing ram. of proq mnitoring and research regarding the effects the dumping of material into ocean waters or other coastal waters. - . ." 33 U S.C. � 1441. Long-range effects of pollution, overfishinq, and man-induced changes in ocean ecology are also to be the subject of research. Id. S 1442. Present applicability. The Ocean Dumping Act (the ocean dumping provisions of the Marine Protection, Research, and Sanctuaries Act of 1972) defines "United States" to include the several States, the Territories and possessions of the United States, and the Trust lbrritory of the Pacific Islands. 33 U.S.C. � 1402(d). Guam is a Territory or possession of the United States. Accordingly, by operation of section 502(a)(2) 'of the Covenant, the Northern Mariana Islands is part of the United States for purposes of the Act. Discussion. The considerations for and against applying the ocean Dumping Act to the Northern Mariana Islands are largely the same as those for and against application of the Clean Water Act. See the discussion under chapter 26 of this title, above. As with that Act, the Commission recann-ends that the Ocean Dumt)ing Act continue to apply to ocean areas adjacent to the Northern Mariana Islands. No legislation is necessary to achieve that result. The Ocean Dumping Act contains language making the District Court of Guam or the United States District Court for the District of Hawaii the proper forum for lawsuits arising in the Northern Mariana Islands (or in which the defendants are in the Northern Mariana Islands). Because the Northern Mariana Islands now has its own federal court, the Commission proposes legislative language to make that court the appropriate forum for these lawsuits. See the recammendation, Judicial venue under the Clean Water Act, the Ocean Dumping Act, and the Ocean Thernal Energy Conversion Act-,77-the Recanmendations section of this report. *See generally 40 C.F.R. parts 220-229 (1984) (EPA),- 33 C.P.R. parts 320, 324 (1984) (Corps of Engineers). See also V. Yannacone & B. Cohen, Environmental Rights and Remedies � 5.27 (Supp. 1981). 503 Chapter 29. Deepwater Ports. The statute. The Deepwater 'Port Act of 1974, 33 U.S.C. � 1501 et seq., prohibits ownership, construction, or operation of a deepwi-ter port beyond the territorial seas of the United States without a license issued by the Secretary of Transportation. Deepwater ports are offshore ports for transferring oil frcm larqe tankers to pipelines or to smaller tankers able to enter harbors too shallow to acccmmdate deep-draft ships. The Act requires the Secretary of Transportation to consult the Environmental Protection Agency and the Army Corps of Engineers on the impact of a deepwater port on the environme nt and navigation. Licenses are issued only after compliance with the Clean Water Act and the Ocean Dumpinq Act is assured. Additionally, the governor of the adjacent coastal State must approve the port. 33 u.s.c. S 1503(c). The Act also prohibits the discharge of oil fran ships and provides extensive remedies for violations , includim citizens' civil suits and class actions. Additionally, a Deepwater Port Liabilitv Fund is created. 33 U.S.C. S 1517(f). The Act also provides that the port is to be treated as an area of exclusive federal jurisdiction located within a State,* though the ports "do not possess the status of islands and have no territorial seas of their own." 33 U.S.C. 9 1518(a). Present applicability. The Deepwater Port Act of 1974 defines "State" to include the territories and possessions of the United States. 33 U.S.C. 9 1502(18). Guam is a territory or Possession of the United States. *The federal law, however, is that of the nearest coastal State. 33 U.S.C. � 1518(b). The United States enforces State law as federal law for the deepwater port. Id. 504 - The Act thus applies to Guam and, 1:@y operation of section 502(a)(2) of the Covenant, to the Northern Mariana Islands.* niscussion. No deepwater ports for the offshore delivery,of oil now exist or are known to be planned for the Northern Mariana Islands area, although proposals have been made to locate oil transfer depots at Saipan, Tinian, and Maug. See, for example, Joe Murphy, Pipe Dreams, Pacific Daily News (Guam), November 7, 1981, at 23; Saipan, Tinian Port Sought, Marianas Varietyr SeptEmber 19, 1980, at 3; Tinian Superport Now Sought, Pacific Daily News, SeptEmber 17, 1980, at 1. These depots would not be deepwater ports within the m-eaninq of the Act, however, since the Act defines such ports to include only those beyond the territorial sea. 33 U.S.C. � 1502(10). The proposals, however, indicate that the Northern Mariana Islands may be well located for a deepwater oil transfer port. Should a deepwater port be proposed for an ocean area adjacent to territorial waters surrounding the Northern Mariana Islands, the Northern Mariana Islands would be unlikely to have the resources or trained personnel necessary to monitor construction and operation of the port. Further, the jurisdiction of the Northern Mariana Islands to enforce laws of its own beyond territorial waters is auestionable. The interests of the Northern Mariana Islands are best protected by continued application of the federal Deepwater Port Act to ocean areas adjacent to the Northern Mariana Islands. No legislation is necessary to secure that continued application. *The Act requires United States citizenship of persons seeking licenses for the ownership, construction, or operation of a deepwater port. In its January 1982 interim report to Congress, the Camnission recammended enactment of legislation to suspend this requirement for citizens of the Northern Mariana Islands pending termination of the trusteeship. In 1983 Conaress enacted Public Law 98-213, 97 Stat. 1459. Sections 19 to 23 of that statute allow the President bv proclamation to declare that citizenship requirements in particular federal laws are not applicable to citizens of the Northern Mariana Islands. In 1984 the President removed for citizens of the Northern Mariana Islands the citizenship restriction on deepwater port licenses. Presidential Proclamation 5207, S 4(n), 49 Fed. Reg. 24365. - 505 [TITLE 34. NAVY.] This title was repealed in its entirety in 1956. Act of August 10, 1956, c. 1041, S 53, 70A Stat. 1. Federal laws on the Navy and Marine Corps are now found in subtitle C (�� 5001 et sea.) of title 10 of the United States Code. TITLE 35. PATENTS. The statutes. The federal protection afforded patents derives from Article I, Section 8, Clause 8, of the United States Constitution, granting Congress the power: To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries. A patent is a qrant of property made by the goverment to an inventor conveyinq to that individual the exclusive right to make, use, and sell the invention for a tenn of years. The purpose of patents is encouragement of scientific discoveries through public disclosure of technological infomation. The policy of the United States laws is that one who has invested time and labor in developing a new product shall have the benefit of his invention, by being given the right to exclude others completely from the enjoyment of his invention. The consideration or quid pro quo which is given the public is the pranpt disclosure of a heretofore unknown invention. The purpose of disclosure to the public is to catalyze other inventors into activity and make possible additional advances in the art. The inventor makes a truly Faustian barqain with the sovereign, exchanging secrecy, of indefinite and of possibly rpetual pe duration, for ephemeral patent rights. By' way of contrast, the inception of a copyright (or right in a trademark) does not depend upon any administrative act of the goverment. A copyright (or rights in a trademark) arises spontaneously upon the fulfillment of certain statutory reauirements. Copyrights and trademarks may be reqistered with the appropriate administrative agency of the goverment, but such registrations merely involve official recognition of preexisting rights. 506 - P. Rosenberq, Patent Law Fundamentals � 1.02 (1982) (footnotes omitted). The patent laws of the United States establish the Patent and Trademark Office in the United States Department of Ccmmerce; set forth the requirements and procedures for obtaining a patent; and provide rules governing the ownership, transfer, and protection of patents. Present applicability. The patent laws def ine "United States" to include the territories and possessions of the United States. 35 U.S.C. 100(c). Guam is a territory or possession of the United States. Consequently, the patent laws also apply in the Northern Mariana Islands by operation of section 502(a)(2) of the Covenant.* Discussion. The purposes underlying the patent laws are as important in the Northern Mariana Islands as in other areas of the United States. The inventor has the same interest in obtaining profit frCm his or her creative works. Society has the same interest in allowing invention a certain degree of protection. were the federal patent laws not applicable in the Northern Mariana Islands, the Northern Mariana Islands could establish its own patent laws. The cost of enacting and administering those laws would be high, however, and no benefits frcm local control over patents are apparent. Given the relatively small population of the Northern Mariana Islands, few patents are likely to be sought. A separate system of patent laws would raise questions as to the protection afforded United States and foreign rights in the Northern Mariana *Even were the Northern Mariana Islands not considered part of the United States, residents of the Northern Mariana Islands would be able to obtain protection for their products in the United States under those laws. Fbreiqn nationals may obtain United States patents. 35 U.S.C. �� 101, 102, 104, 119. But the rights of foreign nationals and of United States citizens to be protected against infringement in the Northern Mariana Islands were the Northern Mariana Islands not considered part of the United States would be questionable. 35 U.S.C. @ 271(a); Dr. Beck & Co. v. Ceneral Flectric Co., 210 F. Supp. 86, 92 (S.D.N.Y. 1962), affirmed, 317 F.2d 538 (2d Cir. 1963). - 507 - Islands, and that afforded Northern Mariana Islands rights in the United States and in foreign countries. The resulting uncertainties might also discourage potential investors frcm undertaking activities in the Northern Mariana Islands. The federal patent laws accordincily should continue to apply in the Northern Mariana islands. No legislation is necessary for the continued application of these laws in the Northern Mariana Islands. TITLE 36. PATRIOTIC SOCIETIES AND OBSERVAW-ES. and TITLE 37. PAY MID ALLOWAWES OF THE ITNIROPMED SERVICES. and TITLE 38. VETERM1SI BENEFITS. The Ccmmission did not examine these titles of the United States Code in detail. No problems in the application of these titles to the Northern Mariana Islands were brought to the ammission's attention. TITLE 39. THE POSTAL SERVICE. The statutes. Title 39 is the basic charter for the United States Postal Service. The title sets forth the purposes, organization, and personnel rules for the Postal Service, defines what is mailable matter, and collects laws governing transportation of the mails. Present applicability. Section 403(a) of title 39 requires the Postal Service to 11receive, transmit, and deliver" the rails "throuqhout the United States, its territories and possessions" and to "serve as nearly as practicable the entire population of the United States." Guam is a territory or possession of the United States. Accordingly, by operation of section 502(a)(2) of the Covenant, the Northern Mariana Islands is also amonq the jurisdictions served by the Postal Service. And, in fact, the Northern Mariana Islands has been served by the United States Postal Service through the many years it has been part of the Trust Territory of the Pacific Islands.* *See section 225.1(e) of title 39, C.F.R. (1984), including the Trust Territory within the Western Region of the Postal Service. 508 The postal abbreviation for the Northern Mariana Islands is "04". Zip codes are 96951 for Rota,, 96952 for Tinian, and 96950 for Saipan and other islands. Discussion. The Congress of the United States is given the power "[tlo establish Post Offices and Post Roads" by Article I, Section 8, Clause 7, of the United States Constitution. Congress has provided that "ftlhe Postal Service shall have as its basic function the obligation to provide postal services to bind the Nation together through the personal, educational, literary, and business correspondence of the people." 39 U.S.C. � 101(a). The Northern Mariana Islands is distant from other parts of the United States and, with its wall population, generates and receives a relatively small volume of mail. Such communities, however, are the object of special congressional attention: [The Postal Service] shall provide prompt, reliable, and efficient services to patrons in all areas and shall render postal services to all caru unities. The costs of establishing and maintaining the Postal Service shall not be apportioned to impair the overall value of such service to the people. The Postal Service shall provide a maximum degree of effective and regular postal services to rural areas, communities, and small towns where post offices are not self-sustaining. No small post office shall be closed solely for operating a deficit, it being the specific intent of the Congress that effective postal services be insured to residents of both urban and rural communities. Id. q 101. Further, rates for each class of mail are required to be uniform throughout the United States and its territories and possessions. Id. 9 3623. Chapter 30 of title 39 (sections 3001 et seq.) makes certain lottery materials nonmailable. The Commissic7n-recamriends a . limited exemption from these provisions for any mail to an address within the Northern Mariana Islands for a lottery conducted in the Northern Mariana Islands by a nonprofit organization for religious, charitable,. educational, or benevolent purposes. See the recommendation, Lottery prohibitions, in the Recommendations section of this report. - 509 - TITLE 40. PUBLIC BUILDINGS, PROPERTY, AND WORKS. The Commission's staff examined title 40 in its entirety, but did not compile and edit its research for inclusion in this report. No significant problems in the ap lication of title 40 to the p Northern Mariana Islands were uncovered by the staff's research or otherwise brought to the Commission's attention. TITLE 41. PUBLIC CONTRACTS. Title 41 prescribes procedures federal agencies must follow in procuring goods and services from firms and individuals outside the Federal Government. Sane provisions of title 41 apply to federal contracts to be performed in the Northern Mariana Islands while others do not.* Chapters 3 and 8 of title 41 have been repealed. Chanter 1. General Provisions. The statutes. Chapter 1 contains a variety of provisions governing federal contracts. For example, in general, federal contracts may be awarded only after a publicly advertised solicitation of proposals, 41 U.S.C. 59 5 et seq. (now largely superceded by id. q 260 ); contracts may not be [email protected]@ before appropriations coveriFF the contracted performance have, been made by Conpress, id. �� 11-12; land may not be purchased without the express authorii-ation of Congress, id. � 14; federal *Even though the government of the Northern Mariana Islands and the governwents of other territories and possessions may receive substantial federal funds for particular projects, those funds are regarded as having lost their federal character upon transfer to the territorial government. Consequently, territorial governments in expending those funds are generally not reguired to procure goods and services in accordance with the procedures set forth in title 41. See generally Porter v. United States, 496 F.2d 583, 586-91 (Ct. Cl. 1974), certiorar"173den-ir-e-d, 420 U.S. 1004 (1975); 34 Op. Attly Gen. 217 (1924); Comptroller General Opinion B-131569 (June 11, 1957); 74 Decisions of the U.S. Dep't of the Interior 365, 370 (1967). See also Pegple of Saipan v. United States Eje@rtment of Interior, 502 F.2d 90, 94-96 (9th Cir. 1974), certiorari denied, 420 U.S. 1003 (1975); Harris v. Boreham, 233 F.2d 110 (3d Cir. 1956). But see Mideast Systems & China 71vil Construction Saipan Joint Venture, Inc. v. Clark, --F. Supp.-- (D.D.C. June 26, 1984) (Civil Action 84-1382). - 510 contracts may not be assigned, id. S 15; government contracts are to be deposited with the General7Accounting Office, id. S 20; and preference in government purchases is to be given to-FamTodities and services produced by blind or other severely handicapped individuals, id. �� 46 et seg. Three important laws included in chapter 1 are the Buy American Act, the Walsh-Flealey Act, and the Anti-Kickback Act. These three laws are separately discussed below. Present applicability. "State" is defined, for purposes of sections 46 to 48c, governing the purchase of ccmmodities and services produced by blind or other severely handicapped individuals, to include Guam. 41 U.S.C. S 48b(8). By operation of section 502(a)(2) of the Covenant, the Northern Mariana Islands is a State for purposes of these sections. Consequently, qualified nonprofit agencies organized under the laws of the Northern Mariana Islands to operate in the interest of blind or severely handicapped individuals are entitled to the preference afforded such organizations by these sections. The other miscellaneous provisions in this chapter do not specify their geouraphic applicability. Each, however, is directed at the Federal GovernTw-.nt itself, and none contains exceptions based on the location where a federal contract is to be performed. The present applicability of the Buy American Art, the Walsh-Healey Act, and the Anti-Kickback Act is discussed, together with the provisions of each of those laws, inunediately below. The Buy American Act The statutes. The Buy Averican Act, 41 U.S.C. �� lOa-10d, requires that, to the greatest extent possible, the Federal Governmen t purchase for public use within the United States only those articles, materials, and supplies that have been mined, produced, or manufactured within the United States. Exceptions are allowed if such purchases would be "inconsistent with the public interest," if costs would be unreasonably high, or if the desired items cannot be found in the United States in "sufficient and reasonably available cam@ercial .quantities and of satisfactory quality." Present applicability. The Buy knerican Act is inapplicable to the Northern Mariana Islands, in that goods purchased for public uses, Dublic buildings, or public works in the Northern Mariana Islands need not be mined, produced, or manufactured in the United States. In another sense, 511 - however, the Act is applicable, in that goods mined, produced, or manufactured in the Northern Mariana islands are mined, produced, or manufactured within the United States as defined by the Act. 7he "Public uses," "public buildings," and "public works," for which qoods purchased must comply with the Act, are only those within the several States, the District of Columbia, Puerto Rico, American Samoa, and the Virqin Islands. 41 U.S.C. � 10c(b).* See also Comptroller General Opinion B-165293 (March 24, 1969); 74 Decisions of the U.S. Dep't of the Interior 365, 367 (1967). Regulations issued pursuant to the Buy American Act, however, purport to extend the coverage of the Act to any place subject to the jurisdiction of the United States. See 32 C.F.R. parts 6-001.5(e), 6-102.1 (1984); 41 C.F.R. �� 1-6.101(c), 1-6.103-1, 1-18.601(f), 1-18.602.1 (1984). Since Guam is a place subject to the jurisdiction of the United States, by operation of section 502(a)(2) of the Covenant, the requlations--if valid--extend the Act's coverage to public uses, public buildings, and public works in the Northern Mariana Islands. But, because the Act clearly excludes Guam from the jurisdictions covered by the Act, regulations issued pursuant to the Act cannot exte nd the Act to Guam. Accordingly, goods for public uses, public buildirps, and public works in the Northern Mariana Islands may he procured without regard for the Buy Airnerican Act. Goods mined, produced, or manufactured within the United States and, thus, qualifying for qoverruent purchase under the Buy American Act may be mined, produced, or manufactured at "any place subject to the jurisdiction of the United States." See 41 U.S.C. 10c(a); 32 C.F.R. parts 6-001.1(c), 6-001.5(e), 6-102.1 (1984); 41 C.F.R. S 1-6.101(c) (1984). Since Guan is a place subject to the jurisdiction of the United States, by operation of section 502(a)(2) of the Covenant, goods mined, produced, or manufactured in the Northern Mariana Islands may be purchased for public uses, public .buildinqs, or public works in the United States without violating the Buy American Act. See 74 Decisions of the U.S. Dep't of the Interior 365, 369 (1967). F)iscussion. The treatment of the Nbrthern Mariana Islands for purposes of the Buy American Act is of obvious benefit to the Northern Mariana Islands. Whether the Buy Aznerican Act should continue to apply to the Northern Mariana Islands in this manner is a policy decision for the United States Congress. The Commission makes no recommendation on that question. *The now-defunct Canal Zone is also listed amom the jurisdictions within which compliance is necessary. Id. 512 The Walsh-Healey Act The statutes. The Walsh-Healey Act, 41 U.S.C. �� 35-45, requires federal contracts for materials, su@pplies, or equipmnt valued at more than $10,000 to incorporate guarantees that (1) all persons employed by the contractor will be paid not less than the wages determined by the Secretary of Labor to be the prevailing minimum. wages for persons employed in similar work in the saTm locality; (2) no person employed by the contractor may work in excess of eight hours in any one day or in excess of forty hours in any one week except under a collective barqaining agreement limiting the employee's total hours or canpensating the employee at one and one-half tirnes regular wages for overtime hours worked; (3) the contractor will Employ neither child labor nor, except in limited specified circumstances, convict labor; and (4) the contractor will provide a safe, sanitary workplace for each employee. Present applicability. The Walsh-Healey Act does not specifically define the geographic extent of its applicability. Provision is made, however, for enforcement of the Act in the federal courts "of any Territory or possession." 41 U.S.C. � 39. That provision strongly implies a congressional intent to apply the Act to federal contracts performed in the Territories and possessions of the United States. Since Guan. is a Territory or possession of the United States, by operation of section 502(a)(2) of the Covenant, the Act also applies to federal contracts performed in the Northern Mariana Islands. Further, section 502(b) of the Covenant provides that "[t]he laws of the United States regarding . . . the conditions of employmnt, including the wages and hours of employees, will apply to the activities of the United States goverment and its contractors in the Northern Mariana Islands." The principal purpose of section 502(b) is to ensure that the United States Goverment and its contractors will pay the federal minimum wage to their employees in the Northern Mariana Islands. See the discussion of sections 502(b) and 503(c) of the Covenant in the sect ion-by-sect ion analysis of that document by the Senate and House Camittees on Interior and Insular Affairs, the Marianas Political Status Camission, and the United - 513 States Department of Justice.* Although section 502(b) is directed principally toward the federal minimum wage law, its language encompasses all federal laws regarding the conditions of employment. The Walsh-Healey Act is sucha law, and is therefore specifically applicable to federal contracts to be performed in the Northern Mariana Islands. Be that as it may, the Secretary of Labor has broad discretion to allow exemptions from the requirements of the Act. 41 U.S.C. S 40; 41 C.F.R. 5 50-206.2 (1984). The Secretary has exercised that discretion to make the Act applicable only to contracts performed within the fifty States, the District of Columbia, Puerto Rico, and the Virgin Islands. 41 C.F.R. S 50-201-603 (1984). See also 32 C.F.R. S 12-602.1 (1984); 41 C.F.R. � 1-12.602-1 (1984). Accordingly, the Walsh-Healey Act is not now applicable to federal contracts performed in the Northern Mariana Islands. The Anti-Kickback Act The statutes. The Anti-Kickback Act, 41 U.S.C. �� 51-54, makes criminal any payment or gift by a subcontrac 'tor to any officer, partnerr agent, or employee of a higher tier subcontractor or of the prime contractor when the prime contract is a negotiated contract with the Federal Government (or any of its departments, agencies, or establishments). The Act also allows the United States to withhold the amount of any such payment or the value of any such gif t fran amounts due under the contract. Present applicability. Congress, in enactinq the Anti-Kickback Act, intended to reach all kickbacks in negotiated contracts with the Federal Government. *The House cammAttee's analysis in included in House Report 94-364, at 5, 8-9 (1975). The Senate cQwnittee's analysis is found in Senate Report 94-433, at 65, 77-78 (1975). The sect ion-by@sect ion analysis by the Marianas Political Status Ccmmission is reprinted in Hearings on the Covenant to Establish the Ccnrionwealth of the Northern Mariana Islands before the Subcommittee on Territorial and Insular Affairs of the House Committee on Interior and Insular Affairs, 94th Cong., lst Sess. 626 (1975) and in Hearings on the Northern Mariana Islands before the Senate Ccomittee on Interior and Insular Affairs, 94th Cong., lst Sess. 356 (1975). The Department of Justice's memorandum is reprinted in the forement ioned House ccmmittee hearings at 384, 389. - 514 - See United States v. Acme Process EquiLment Co., 385 U.S. 138, 146 (1966). Accordingly, such contracts made or to be performed in the Northern Mariana Islands are subject to the Act. Chapter 2. Terrination of War Contracts. The statutes. Chapter 2, sections 101 et seg. of title 41, was originallv enacted as the Oontract Set@t-lement Act of 1944, to establish procedures for expeditious settlement of war contracts abruptly terminated at the conclusion of World War 11. 41 U.S.C. @ 101; United States v. Erie Basin Metal Products, Inc., 244 F.2d 809, 815 (7th Cir. 1957). The Act contained no expiration date, but post-TAbrld War II contracts are governed by the Armed Services Procurement Act of 1947 (codified in part IV of subtitle A of title 10 of the United States Code). See 3 Government Contracts Reporter (CCH) If 22,010 (1982). Present applicability. This chapter is applicable to war contracts without regard for the locations where the contracts are -made or to be performed and, thus, is applicable to war contracts made or performed in the Northern Mariana Islands. The extensive territorial reach of the chapter is demonstrated by one provision in the chapter allowing contractinc j agencies in certain instances to exempt frcm the chapter's requirements war contracts made or to be performed outside the continental United States and Alaska. 41 U.S.C. � 125. Because the chapter, for all practical purr)oses, has been superseded by the Armed Forces Procurement Act, cited above, its present applicability to the Northern Mariana Islands is of little consequence. Chapter 4. Procurement Procedures. The statutes. Chapter 4, sections 251 et sea. of title 41, collects various requirements governing contrac7ts- with the Federal Government. Among these requirements,. for example, are provisions for advertising for bids on federal procurement contracts, 41 U.S.C. � 253, and other provisions governing contracts that may be made without advertisinq, id. 9 252(c). A "fair proportion" of federal procurement requirements are to be obtained frcm small business concerns. Id. � 252(b). Advance payments to contractors are permitted urO r certain circumstances. Id. S 255. (Some provisions in chapter 4 supercede similar provisions in chapter 1 of title 41 for all contracts made by "executive agencies," but not for contracts made by other parts of the Federal Goverrment. See id. � 260.) 515 Chapter 4 does not apDly to procurEment by the Department of Defense,, the Coast Guard, or the National Aeronautics and Space Administration (NASA). 41 U.S.C. @ 252(a)(1). ProcurEment for the Departwent of Defense, the Coast Guard, and NASA is governed by chapter 137 of title 10 of the United States Code (�� 2301 et seq.). 10 U.S.C. q- 2303(a). Despite this division in statutory procurement authority, uniform Federal Acquisition Regulations have been developed to govern procurement by all federal executive apencies. See title 48, C.F.R. (1984). Present Applicability. Chapter 4 contains no explicit specification of its geographic reach. Section 252(c)(6), however, allows an exception fran the chapter's requirements for advertising of federal contracts if "the property or services are to be procured and used outside the limits of the United States and its possessions." The exception would not be necessary unless the advertisinc .j reguirements of the chapter were otherwise applicable to the possessions of the United States. There is no reason to assume that the rest of the chapter, almost all of which was originally enacted at the same time as the advertising requirements, is not similarly applicable to possessions of the United States. Since Guam is a possession of the United States, by operation of section 502(a)(2) of the Covenant, the requirements of chapter 4 apply to contracts for property or services procured or to be used in the Northern Mariana islands. This conclusion is consistent with that of the Federal Procurement Regulations, which by their own terms are applicable "to procurements made within and outside the United States, unless otherwise specified." 41 C.F.R. S 1-1.004 (1983). Chapter 5. Judicial Review of Administrative Decisions. The statutes. Chapter 5, sections 321 and 322 of title 41 (also known as the Wunderlich Act), provides that (1) provisions in federal contracts making administrative decisions final do not bar challenges in court of decisions alleged to be fraudulent, capricious, arbitrary, so qrossly erroneous as necessarily to imply bad faith, or not supported by substantial evidence; and (2) federal contracts may not contain provisions purporting to make administrative decisions. on questions of law final, unreviewable by the courts. Present applicability. Chapter 5 does not specify the extent of its geographic applicability. on its face, the chapter applies to all federal contracts without exception. Accordingly, the chapter should be assumed applicable to federal contracts made or to be performed in the Northern Mariana Islands. - 516 - Chapter 6. Service Contract Labor Standards. The statutes. Chapter 6, sections 351 et seq. of title 41, . requires all federal contracts for personaf-services furnished in the United States and valued in excess of $2,500 to contain provisions specifying that ernpjoyees providing services under the contract will receive minimum prevailing local wages and fringe benefits or, if applicable, union wages and fringe benefits. The chapter does not cover contracts subject to the Walsh-Healey Act, discussed under chapter 1 of this title, above. 41 U.S.C. � 356(2). Present applicability. "United States" is defined for purposes of chapter 6 to include, in addition to the several States and other jurisdictions, Guam and a number of other named islands including Eniwetok and Kwajalein Atolls in the Trust lbrritory, but not including the N@rthern Mariana Islands. 41 U.S.C. 5 357(d). See also 29 C.F.R. S 4.112 (1984); 41 C.F.R. S 1-12.902-1(b) (1984). Areas not specifically named are not included within the definition. Id. Even though the Northern Mariana Islands is not specifically-named, by operation of section 502(a)(2) of the Covenant, the Northern Mariana Islands is part of the United States for purposes of chapter 6. Further, since chapter 6 is a federal law "regarding . . . the conditions of employment, including the wages and hours of employees," it is applicable to federal contractors in the Northern Mariana Islands. Covenant S 502(b). See the discussion of the present applicability of the Walsh-Healey Act under chapter I of this title, above. Accordingly, chapter 6 is applicable to federal contracts for personal services furnished in the Northern Mariana Islands. Chapter 7. Office of Federal Procurement Policy. The stautes. Chapter 7, sections 401 et secr. of title 41, establishes the Office of Federal Procurement Rlicy "to provide overall direction of procurement policies, regulations, procedures, and forms for [federal] executive agencies." 41 IT.S.C. 9 402(b). Present applicability. The activities of the office of Federal Procurement Policy are part of the' internal management of the Federal Government. Changes in federal procurement policies, regulations, procedures, and forms as a result of the office's activities will affect the Northern Mariana Islands to the extent those policies, regulations, - 517 - procedures, and forms are applicable to procurement activities in the Northern Mariana Islands.* Chapter 9. Contract Disputes. The statutes. Chapter 9, sections 601 et seq. of title 41p establishes standard procedures for resolutio-n of-Tisputes arising out of federal contracts. Present RMlicability. Chapter 9 applies to contracts to which a federal agency is a party. 41 U.S.C. �� 601(2), 602(a). The unlimited qeo. aphic reach qr . of the chapter is shown by a provision allowing an agency head to declare the chapter inapplicable to certain contracts between the agency and a foreign goverment. Id. � 602(c). Accordingly, the chapter is applicable to federal cong-acts made or to be performed in the Northern Mariana Islands. TITLE 42. THE PUBLIC HEALTH AND WELFARE. The Ccmmission's recornmendation, Medicaid, in the Recomrendations section of this report, discusses subchapter XIX of chapter 7 of title 42. Chapter 85 of title 42, containing the Clean Air Act, and chapter 99, containing the Ocean Thermal Enerq .y Conversion Act, are discussed below. The Commission's staff examined the other chapters in title 42, but did not compile and edit its research for inclusion in this report. No significant problems in the application of these chapters to the Northern Mariana Islands were uncovered by the staff's research or otherwise brouqht to the Ccmmission's attention. *Circular A-102, promulgated by the office of Federal Procurement Policy, establishes uniform reguirements for federal assistance to State and local goverments, and thus imposes requirements those State and local governments must satisfy in order to receive federal assistance. Circular A-102 has been held applicable to grants by the United States Depart:ment of the Interior to the Northern Mariana Islands. Mideast Systems & China Civil Construction Saipan Joint Venture, Inc. v. Clark, --F. Supp.-- (D.D.C. June 26, 1984) (Civil Action 84-1382). - 518 - Chapter 85. Air Pollution Prevention and Control. The statute. Chapter 85 contains the Clean Air Act, which seeks to protect public health by preventing or controlling air pollution. ne Act "affects virtually all industrial and transportation activity, the production and use of enerq y, and real estate development." 1977 Congressional Quarterly Almanac 627. A prominent federal role under the Act is performed by the United States Environmental Protection Agency (EPA). The EPA sets standards for maximum concentrations of various airborne pollutants believed harnful to health or the envirornent. The States, under EPA oversight, are responsible for formulating and enforcinq rules to prevent airborne pollutants form exceeding concentrations allowed by the EPA. The automobile is an important source of air pollution nationally, and provisions directed at controlling auto-mobile exhaust emissions are an important part of the Clean Air Act. No funds have been authorized to he appropriated fo r implementation of the Clean Air Act beyond September 30, 1981. See section 327 of the Act, 42 U.S.C. S 7626. The National ComAssion on Air Ouality issued a report, "Th Breath Clean Air," in March 1981, which recamrends a number of changes in the Act. President Reagan has sent Congress a set of proposed principles intended to guide drafting of reauthorizing legislation. "Changes Proposed for Clean Air Act," New York Tires, August 6, 1981, at A-11. (Neither the report of the National Cmwission nor President Reagan's principles touch directly on the special situation of the Northern Mariana Islands.) Significant revisions in the Act were not made before September 30, 1981, when the existing authorization ex *pired, but funding has been extended under continuing ngress. q resolutions of Co, Present applicability. The Clean Air Act was amended in 1977 to apply expressly to the Northern Mariana Islands. Section 218 (c) of Public Law 95-95, 91 Stat. 761, amended the definition of "State," as that term is used in the Clean Air Act, to include the Northern Mariana Islands. The clear intent of this amendment was to include the Northern Mariana Islands within the coveraqe of the Act. House Report 95-294, at 341 (1977). Why the 1977 amendments extended the Act to the Northern Mariana Islands is not indicated by the various congressional reports on the legislation. See id. 341, 436; Senate Report 95-127, at 94 (1977); House Conference Re@pot 95-564, at 83, 195 (1977). - 519 - The term "State," as used in the Act, is def ined to include as well the Ccmmonwealth of Puerto Rico, the Virgin Islands,, Gum, and American Samoa. Section 302(d), 42 U.S.C. S 7602(d). "States" have particular responsibilities under some provisions of the Act. See, for example, section 107(a), 42 U.S.C. 7407(a) (State responsibility for assuring air quality). Although not all other provisions of the statute use the tem. "State," a definition of "State or "United States" to include a particular jurisdiction for purposes of a statute is strong evidence of congressional intent that the statute be applicable in that jurisdiction in all respects. Rubenstein v. United States, 153 F.2d 127, 129 (D.C. Cir. 1946). There is no doubt that the Clean Air Act is applicable in its entirety to Puerto Rico, the Virqin Islands, Guam, and American Samoa, as well as to the Northern Mariana Islands. Discussion. In its January 1982 interin report to the Congress, the Ccmmission recamTended enactnent of legislation to exclude the Northern Mariana Islands from provisions of the Clean Air Act governinq motor vehicle emission and fuel standards and to require the Administrator of the Environmental Protection Agency to exempt the Northern Mariana Islands from any other requirement of the Clean Air Act on a finding by the governor of the Northern Mariana Islands that the benefits of compliance with that requirement in the Northern Mariana Islands are significantly outweighed by the costs of the compliance. Detailed support for that recamiendation may be found in the Comission's interim report. In December 1983, Public T-aw 98-213, 97 Stat. 1459, became law. Section 11 of that legislation amends. the Clean Air Act by, among other things, providing that: (1) Upon petition by the governor of Guam, American Samoa, or the Commonwealth of the Northern Mariana Islands, the Administrator [of the Environmental Protection Agency] is authorized to exempt any person or source or class of persons or sources in such territory fran any requirement under this Act other than section 112 or any requirement under section 110 or part D necessary to attain or maintain a national primary ambient air quality standard. Such exemption my be granted if the Administrator finds that campliance with such requirement is not feasible or is unreasonable due to unique geographical, meteorological, or economic factors of such territory, or such other local factors as the Administrator deems significant. Any such petition shall be considered in accordance with section 307(d) and any exemption under this subsection shall be considered final action by the Administrator for the purposes of section 307(b). 520 (2) The Administrator shall T)rcmptly notifV the Ccmittees on Energ r y and Commerce and on Interio " and Insular Affairs of the House of Representatives and the Cammittees on Envirorment and Public TVbrks and on Enerqy and Natural Resources of the Senate upon receipt of arkV petition under this subsection and of the approval or rejection of such petition and the basis for such action. 42 U.S.C. � 7625-1.* Chapter 99. Ocean Thermal Energy Conversion. The statute. The Ocean Thermal Energy Conversion Act of 1980, 42 U.S.C. SS 9101 et seg., regulates ocean thermal energy conversion (OTEC) facilitii;s-. ' Th se facilities exploit differences in temperature between the surface of the ocean and its lower depths to generate electricity. The Act requires a license for the ownership, construction, or operation of an OTEC facility located in the territorial sea of the United States, or connected to the United States by pipeline or cabler or documented under the laws of the United States. Id. � 911(a), (f). The Administrator of the National Oceanic and Atmospheric Administration must treat issuance of an OTEC license as a "major Federal action" requiring preparation of an environmental impact statenent. Id. � 9117(e). The Coast Guard oversees navigation aspects of 07EF activities. Id. S 9118. Present applicability The Ocean Thermal Energy Conversion Act defines "State" to include the Northern Mariana Islands. 42 U.S.C. 9102(15). Accordingly, the Act is applicable to the Northern Mariana Islands. Section 9111(a) reauires United States citizens to obtain a license to own, construct, or operate an OTEC facility. Subsection (c) of section 9111 authorizes the issuance of such licenses to United States citizens. Subsection (f) requires the issuance of such licenses to qualified United States citizens. Moreover, sect ion 9118(e)(2)(c) requires that OTEC facilities be manned by United States citizens or aliens lawfully admitted for permanent residence, *Section 112 of the Clean Air Act, 42 U.S.C. 9 7412, 0overns particularly hazardous air pollutants, such as asbestos and vinyl chloride. Section 307 of the Act, 42 U.S.C. q 7607, governs administrative proceedings and judicial review of administrative action under the Act. - 521 - except in specified circumstances. And, finally, section 9151 makes criminal certain acts and omissions by United States citizens or nationals or other persons subject to United States jurisdiction if those acts or omissions violate provisions of the Ocean lbermal Energy Conversion Act. In its January 1982 interim report to the United States Congress, the Ccmmission recommended enactment of legislation to treat citizens of the Northern Mariana Islands as citizens of the United States for purposes of these requirements. In 1983 Congress enacted Public Law 98-213, 97 Stat. 1459. Sect ions 19 to 23 of that statute allow the President by proclamation to declare that citizenship requirements in particular federal laws are not applicable to citizens of the Northern Mariana Islands. In 1984 the President removed for citizens of the Northern Mariana Islands the citizenship restrictions of this chapter. Presidential Proclamation 5207, 5 4(t) , 49 Fed. Reg. 24365. Consequently, assistance for the construction of OTEC facilities pursuant to chapter 99 is now available to citizens of the Northern Mariana Islands. Discussion. The Northern Mariana Islands is actively considering the desirability of constructing ocean thermal energy conversion facilities.* Because of the great temperature difference between surface waters and ocean depths in Darts of the Marianas, an OTEC system there may be able to generate electricity economically. The issues involved in regulating the development of OTEC facilities are many and complex. See generally 42 U.S.C. S 9101. Wbile the Northern Mariana Islands could develop its own approach to these issues and enact its own regulatory legislation, that ef fort would be time-consuming and expensive and likely would result in legislation not dissimilar to the federal law. Once enacted, the legislation would require employment of regulatory officials, at additional cost. The more economical course is to rely on federal law for regulation of OTEC facilities in the Northern Mariana Islands. The ocean Thermal Energy Conversion Act contains language making the District Court of Gum or the United States District Court for the District of Hawaii the proper form for lawsuits arising in the Northern Mariana Islands (or in which the defendants are in the Northern Mariana Islands). Because the Northern Mariana Islands now has its own federal court, the Commission proposes legislative *See unsolicited L`ro@-Sal on OTEC Feasibility and Demonstration "t, Projec r79FF11'nted in Hearings on Pacif" Basin Energ Ic y Before the Senate Committee on Enerqy & Natural Resources, 96th Conq., 2d Sess. 57 (1980); Fina ial Study of OTEC Plant Offered to the Ccmwnwealth of the NorCh-ern Mariana islands, Marianas variety, July 23, 1982, 7t- 1. - 522 - language to make that court the apprcpriate forum for these lawsui ts. See the reccmmendation, Judicial venue under the Clean Water -Act, -the Ocean Dumping Act, and the Ocean Thermal Energy Conversation Act, in the Recommendations section of @h'isreport. TITLE 43. PUBLIC LMDS. The Ccmmission did not examine this title of the United States Code in detail. By operation of sections 801 and 1003(a) of the Covenant, all real property in the Northern Mariana Islands previously belonging to the goverment of the Trust Territory of the Pacif ic Islands is transferred to the government of the Northern Mariana Islands. See also Covenant _qq 802-804, 806. The Fede ral Government now holds no interest in property in the Northern Mariana Islands other than leaseholds. Accordingly, most of this title, which deals with federal public lands, is by reason of its subject matter inapplicable to the Northern Mariana Islands. Chapter 29 of this chapter, on submerged lands, is of importance to the Northern Mariana Islands. See the recaw@endation, Submerged lands, in the Recanmendations section of this report. TITLE 44. PUBLIC PRINTING AND DOCUMENTS. The Ccmmission did not examine chapters 1 to 17 and 21 to 37 of this title of the United States Code in detail. Nb problems in the application of these chapters to the Northern Mariana Islands were brought to the Canmission's attention. Chapter 19 of title 44 is discussed in the Ccmmission's reccmmeandation, Government de22sitory libraries, in the Reccmmendations section of this report. TITLE 45. RAILROADS. The statutes. Title 45 of the United States Code contains federal laws of a general and permanent nature relating to railroads. Present applicability. At the present time, there are no railroads in the Northern Mariana Islands.* Although parts of title 45 may be theoretically *During the Japanese administration of the Northern Mariana Islands, however, narrow-gauqe railroads were extensively used to transport harvested sugar cane. - 523 - applicable to the Northern Mariana Islands, the title has no practical application in the @brthern Mariana Islands now. There are three United States citizenship requirements in title 45. Section 231(d)(3) states, for purposes of determining coverage under the railroad retirement laws, that an individual not a citizen or resident of the United States is not deemed in the service of an employer when renderinq service outside the United States to an employer who is required under the laws of that place to employ, in whole or in part, citizens or residents thereof. Subsection (h) (6) of section 231 excludes from the definition of compensation certain remuneration received by non-resident aliens temporarily present in the United States. Section 351 incorporates definitions similar to those in section 231, above, for purposes of determining coverage under the railroad unemployment insurance laws. Section 543(a)(1) requires that directors of the National Railroad Passenger Corporation be United States citizens. Subsection (d) of section 543 requires officers of the corporation to be United States citizens* Citizens of the Northern Mariana islands will not become citizens of the United States until termination of the trusteeship. Covenant SS 301, 1003(c). Until that time, they will he considered as aliens for purposes of sections 231 and 351 of title 45 and will be ineligible to serve as directors or officers of the National Railroad Passenger Corporation. No recommndations were made with reqard to these citizenship requirements in the Commission's January 1982 interim. report to the United States Conqress. TITLE 46. SHIPPINGG. Although the Commission staff devoted substantial effort to the study of title 46, the staf f was unable to complete that stud 'V or to present recommendations for Commission consideration prior to publication of this report. A draft staff recommendation on the vessel documentation and vessel crewinq laws, prepared for consideration by the Commission at its ninth meeting, was rendered obsolete by sections 301-303 of Public Law 98-454, 98 Stat. 1732, 1734-35 (1984). That draft is reproduced in the Documentary Supplement to this report. Its oceanic location makes the Northern Mariana Islands highly dependent on the shippinci industr _V. The Commission believes that the applicability of title 46 to the Northern Mariana Islands mrits f urther study. - 524 - TITLE 47. TELEGRAPHS, TELEPHONES, AND RADIOTELEGRAPHS. The Cammission's staff examined title 47 in its entirety, but did not ccrnpile and edit its research for inclusion in this report. No significant problems in the application of title 47 to the Northern Mariana Islands were uncovered by the staff's research or otherwise brought to the Ccmission's attention. See generally office of Technology Assessment, U.S. Congress, Telecommunications in the U.S. Pacific Islands (staff paper 1985). Title 47 contains several recruirements of United States citizenship. Citizens of the Northern Mariana Islands will not become citizens of the United States until termination of the trusteeship. Covenant SS 301, 1003(c). Section 303(l)(1) of title 47 limits the issuance of radio station operators' licenses to United States citizens or nationals or to citizens of the Trust Territory of the Pacific Islands "presenting valid identity certificates issued by the High Commissioner of such Territory." Section 310(b) requires that grantees or holders of broadcast, cammon-carrier, or aeronautical radio station licenses be United States citizens. Section 734(d) limits the number of shares of stock in the Communications Satellite Corporation that may be owned by aliens ineligible to hold broadcast licenses under section 310, above. In its Jaruary 1982 interim report to the United States Congress, the Cammission reccmmended enactment of legislation to treat citizens of the Northern Mariana Islands as citizens of the United States for purposes of sections 303, 310, and 734. In May 1982 the President, pursuant to section 1004(a) of the Covenant, issued Proclamation 4938, 47 Fed. Reg. 19307. That proclamation suspended for citizens of the Northern Mariana Islands the citizenship requirements of sections 303 and 310 until termination of the trusteeship. The suspension of the citizenship requirement in section 310 also removes citizens of the Northern Mariana Islands fram the category of aliens for purposes of the stock ownership limitations of section 734. In addition, section 17 of title 47 prohibits ownership, operation, or control of telegraph or cable lines in Alaska by persons who are not citizens of the United States. Section 154(b) requires mdrbers of the Federal Ccomunications CcMmission to be United States citizens. Section 222(d) prohibits the Federal Ccmmunications Commission fran approving the merger of telegraph carriers if more than one-fifth of the stock of the resulting carrier will be awned by aliens. Section 3Z7 allows United States citizens publishing newspapers in foreign countries to use Navy radio stations for transmission of press messages at ccmmercial rates if no camrercial service is available. Paragraphs (c)(2) and (e)(1) of section 396 require that members of the board of directors and officers of the Corporation for Public Broadcasting be United States citizens. Subsections (a) and (b) of section 733 impose the same requirement on members of the board of directors and officers of the - 525 - Communications Satellite Corporation. No reccmnendations were made with regard to these citizenship requirements in the CcnmLission's January 1982 interim report to the United States Congress. TITLE 48. TERRITORIES AND POSSESSIONS. Title 48 collects laws of a general and permanent nature specifically directed toward the territories and insular possessions of the United States. Most of the chapters in title 48 gather provisions pertinent to a par-ticular territory or insular possession. Provisions directly affecting the Northern Mariana Islands are found in chapter 14, entitled Trust Territory of the Pacific Islands. (The Covenant and several presidenti proclamations on the applicability of particular federal laws to the Northern Mariana Islands are reprinted immediately following section 1681 of title 48). The applicability of federal laws to Guam often determines the applicability of those laws to the Northern Mariana Islands. See Covenant SS 502, 601, 603(c), 604(a), 605, 606(b). Consequently, provisions in title 48 regarding the application of federal laws to Guam are of particular interest to the Northern Mariana Islands. See 48 U.S.C. �� 142le, 1421h, 1421i, 1421n. (See also section 1421q, applying to Guam certain laws made applicable to the Northern Mariana Islands by section 502(a)(1) of the Covenant.) Through legislation contained in chapter 15 of title 48, the United States conveyed certain submerged lands adjacent to Guam, the Virgin Islands, and American Samoa to the goverments of those territories. In its recomrrendation, Submerged _ lands, in the RecamTendations section of this report; the Ccomission proposes enactment of similar legislation for the Northern Mariana Islands. Chapter 16 establishes the offices of nonvoting delegate to the United States House of Representatives fran Gum, the Virgin Islands,, and Anerican Samoa. In its reccmmendation, A nonvoting delegate to the United States Congress, in the Reccnmendations section of this report, the Commission proposes enact:ment of leqislation establishing the office of nonvoting delegate to the United States House of Representatives fran the Northern Mariana Islands. Provisions in the organic legislation for Guam and the Virgin Islands charge the governors of those territories with enforcement of federal laws within their jurisdictions. 48 U.S.C. SS 1422, 1591. Problems in executing federal laws in the Northern Mariana Islands are discussed in the recommendation, Enforcement of federal laws in the Northern Mariana Islands, in the RecamTendations section of thl-s report. 526 - TITLE 49. TRANSPORTATION. Title 49 collects federal statutes regulating interstate transportation by rail, air, highways, and inland waterways. The Commission's staff examined title 49 in its entirety, but did not. compile and edit its research for inclusion in this report. Except with respect to chapter 20 of title 49 (which contains the Federal Aviation Act), no significant problems in the ap _plication of title 49 to the Northern Mariana Islands were uncovered by the staff's research or otherwise brought to the Commission's attention. Chapter 20 is discussed below. Chapter 20. Federal Aviation Program., The statute. Chapter 20 contains the Federal Aviation Act, the basic statute regulating interstate air transportation within the United States as well as air transportation between the United States and places in foreign countries. Present applicability. "Interstate and foreign air transportation" is defined, for purposes of chapter 20, to include air transportation between any point in a Territory or possession of the United States and any other point, whether within or outside of that Territory or possession. 49 U.S.C. 9 1301(24). See also id. � 1301(23), (41). Guam is a Territory or possession. Consequently, air transportation between Gum and any other place (or between two points on Guam) is subject to chapter 20. "Interstate and foreign air transportation" also includes, for purposes of chapter 20, a ir transportation between any point in a State and any point outside of that State, but does not generally include air transportation between two points within the same State. Chapter 20 is thus applicable to the several States and Guam and, by operation of section 502(a)(2) of the Covenantr to the Northern Mariana Islands. Section 502(a)(2) applies statutes to the Northern Mariana Islands as those statutes apply to the several States, not as they apply to Guam. Consecruently, air transportation between points within the Northern Mariana Islands is subject to chapter 20 only to the same extent that air transportation between points within the same State is subject to the chapter. Various rights, privileges, and immunities under chapter 20 are limited to citizens of the United States. All citizens of the United States are entitled to a public right to freedom of transit through the navigable airspace of the United States. 49 U.S.C. � 1304. 527 - United States citizens operating intrastate air ccmnon carriers My establish joint services and fares with other domestic and foreign air carriers. Id. q 1371(d)(4). Certain citizens of the United States may be granted cer-tificates of public convenience and necessity for all-cargo air services. Id. � 1388. Aircraft eligible for registration as aircraft of the dFir-ted States must be owned by citizens of the United States, by aliens lawfully admitted for pennanent residence, or by certain foreign corporations orqanized and doinq business in the United States. Id. 9 1401. The Secretary of 717 the issuance of airman Transportation may prohibit or restrict certificates to aliens. Id. � 1422(b)(1). The Secretary may also provide aviation insurance, if such insurance is not comTrercially available on reasonable terms and conditions, on certain cargo owned by (or the risk of loss of which is on) citizens of the United States. Id. � 1533. "Citizen of the United States" is defined, for purposes of the chapter, to include individuals who are citizens of the United States or one of its possessions (or partnerships composed of or corporations controlled by such persons). 49 U.S.C. � 1301(16). Citizens of the Northern Mariana Islands will not be citizens of the United States or of one of its possessions until termination of the trusteeship. Covenant �� 301, 1003(c). An argument can be made that section 502(a)(2) of the Covenant requires that citizens of the Northern Mariana Islands be treated as citizens of the United States for purposes of chapter 20. Nonetheless, to ensure clarity, the Commission in its @January 1982 interim report to Congress recamnended enactment of legislation to treat citizens of the Northern Mariana Islands as citizens of the United States for purposes of these restrictions. In 1983 Conaress enacted Public Iaw 98-213, 97 Stat. 1459. Sections 19 to 23 of that statute allow the President by proclamation to declare that citizenship requirerents in particular federal laws are not applicable to citizens of the Northern Mariana Islands. In 1984 the President removed for citizens of the Northern Mariana Islands the citizenship restrictions in these statutes. Presidential. Proclamation 5207, � 4(dd)-(ff), 49 Fed. Reg. 24365. Discussion. The Northern Mariana Islands is far removed from. other parts of the United States, except Guam. (Honolulu is more than 3000 miles away.) The Northern Mariana Islands and Guam are closer to many foreign nations than to other parts of the United States. The Northern Mariana Islands has a relatively small population, limitina its attraction to air carriers which are not serving on the same flights one or more other destinations. The Northern Mariana Islands is also relatively isolated from the rest of the world. Frequent and reliable air service is as essential to the Northern Mariana Islands as are roads and public - 528 - transportation to a mainland city. Further, tourism, the leading industry in the Northern Mariana Islands, is dependent on freguent and reliable air service. Air cabotage restrictions. Section 1508(b) of title 49 prohi7bi-tsforeim airlines frcm-taking on "at any point within the United States persons, property, or mail for compensation or hire and destined for another point within the United States." Thus, for example, a foreign airline's flight frcm Chicago to- New York to Paris may carry passengers frcm Chicago to Paris or from New York to Paris, but it may not carry passengers from Chicago to New York. The purpose of section 1508(b) is protection of dcmestic airlines frcm foreign canpetition.* The Northern Mariana Islands and Guam, however, are substantially different fran any two other points within the United States. Restrictions on air service between the Northern Mariana Islands and Guam by foreign air carriers are much more likely to limit the total service available than do the same restrictions imposed upon two points with similar populations at the sane distance form each other in the United States, say, for example, Eugene and Grants Pass, Oregon. Eighty percent of all visitors to the Northern Mariana Islands ccme from Japan.** The Northern Mariana Islands and Guam are an ideal joint tourist destination, with a greater number of visitors attracted to each if tourists may travel easily between the two. See Working Together for Area Thurism, Pacific Daily News (Guam), February 4, 1982, at 18. The airline distance between Saipan, the principal destination in the Northern Mariana Islands, and Guam, is approximately 155 miles, less than eight percent of the Tokyo-Saipan-Guam journey of approximately 2015 miles. The Ccmmission considered recanmending that the air cabotage restrictions be made inapplicable to the transportation of passengers by foreign airlines between Guam and the Northern Mariana Islands or between points within the Northern Mariana Islands. The purpose of the exception would have been to encourage. tourists from Japan--the point of origin for most tourists visiting the Northern Mariana Islands and Guam--to visit both Guam and the Northern Mariana Islands, even if they were traveling on a foreign airline. The *See American merchant Marine Carriers v. Fowler, 429 F.2d 702, 708 (2d Cir. 1970), certiorari denied, 400 U.S. 1029 (1971), camenting on a similar statute affecting shipping. "News release from office of the Governor of the Northern Mariana Islands, June 1, 1981. Most of the remaininq tourists cane frcm the United States. - 529 - Commission discovered, however, that the air cabotage restrictions have been interpreted to permit carriage between domestic points if the passenger has a through ticket to or from a foreign point. See Quantas Empire Airways, 29 C.A.B. 33, 41-42 (1959). This interpretation allows passengers originating from, or ultimately destined for, Japan to travel between the Northern Mariana Islands and Guam on foreign airlines. Accordingly, the Ccmmission decided that no legislation with respect to the air cabotage restrictions is necessary at this time. Essential air service. Small caTounities in the United States that met certain crite'ria are entitled to retain "essential air service." If necessary to maintain that air service, federal subsidies may be paid to the air carrier providing that service. 49 U.S.C. 9 1389. The subsidy proqram will end in 1988. Id. S 1389(g). It may be eliminated even earlier. See Air Servije- Cuts Eyed, Washington Post, January 29, 1985, at A8. The Northern Mariana Islands is part of the United States for purposes of the statute authorizing rmintenance of essential air service to small cammunities in the United States. "United States" is defined, for purposes of all of chapter 20, to include the several States and the Territories and possessions of the United States. Id. s 1301(41). Guam is a Territory or possession of the United Stat7e-s. Accordingly, by operation of section 502(a)(2) of the Covenant, the Northern Mariana Islands is part of the United States for purposes of chapter 20. See Civil Aeronautics Board Order 82-6-113, Essential Air Transportation for Rota, Northern Mariana Islands [and] Tinian, Northern Mariana Islands (1982). The ending of the essential air service subsidy program in 1988 (or sooner) may have a significant adverse effect on the Northern Mariana Islands. The Commission, however, has not examined that possibility in detail and has formulated no recammndations with respect to essential air service. The Camission notes that the Pacific Basin Developmnt Council has devoted considerable effort to studying the provision of essential air service to Pacific islands under the jurisdiction of the United States.* Local control over air routes serving__ the Northern Mariana Islands. Fram time to time, greater local control over the award of e- air routes serving the Northern Mariana Islands or Guam has been urged. For example, a task force of Guam's Commission on *The Pacific Basin Development Council is canposed of the governors of the Northern Mariana Islands, Guam, Hawaii, and Anerican Samoa. Its mailing address is 567 South King Street, Suite 620, Honolulu, Hawaii 96813. 530 Self-Determination reccmmended that Guam "be exempt frcm all bilateral and multilateral agreements of the United States relative to air service." Air Service Proposals 'Innovative,' Pacific naily News (Guam), August 9, 1984, at 5. The task force proposed that the governor of Guam be given "the authority to sponsor any qualified air. service carrier to come to Guam subject to presidential consultation concerning articulated foreign policy and national defense interests." Id. The argument is made that the Northern Mariana Islands, interested in promoting tourism, is benefitted when foreign air carriers are not restricted in providing regular air service and charter flights to the Northern Mariana Islands. See Northern Mariana Islands Ccmmonwealth Legislature, Senate Joint Resolution 1-16 (1978); Rosario, Periscope, Marianas Variety, Plarch 22, 1985, at: 2; Flying in the Pacilff"c- has Ups and Downs (editorial), Pacific Daily News, December 15, 1984, at 38. Even if this argument is valid, however, other foreign policy interests of the United States and the desire to ensure fair treatment of domestic air carriers may impede. the removal of restrictions on foreiqn air carriers. The Ccmission has not examined these issues in detail, and makes no recaumendations with respect to them. The Commission believes the issues marit further study. Airline passenger head taxes. Section 1513 of title 49 prohibits States or territories from levying taxes on airline passengers. This prohibition is applicable to the several States and Guam. 49 U.S.C. S 1513(a). Accordincily, by operation of section 502(a)(2) of the Covenant, the prohibition applies to the NbIrthern Mariana Islands. See also Island Aviation, Inc. v. Mariana Islands Airport Authority (District Court for the Northern Mariana Islands, Civil 81-0048, Fe niary 24, 1983). It has been suggested that legislation should be enacted to make the prohibition of section 1513 inapplicable to the Northern Mariana Islands, in order to allow the Northern Mariana Islands to increase government revenues. The principal source of any such taxes would be tourists visiting the Northern Mariana Islands. The Camnission has not examined this issue in detail and makes no reccrm-nendat ions with respect to it. The issue may merit further study. TITLE 50. WAR AND NATIONAL DEFENSE. The Canmission's staff examined title 50 and its appendix in their entirety, but did not ccmpile and edit its research for inclusion in this report. 531 - Title 50 contains a number of United States citizenship rectuireTrents. Citizens of the Northern Mariana Islands will not becane- citizens of the United States until termination of the trusteeship. Covenant �15 301, 1003(c). Section 1801(i) of title 50 defines "United States person" for purposes of certain protections offered by the Foreign Intelligence Surveillance Act as including United States citizens and aliens lawfully admitted for permanent residence. ("United States" is defined by subsection (j) of section 1801 to include, when used in a geographical sense, the Trust Territory of the Pacific islands.) Section 460(b)(3) of the Appendix to title 50 forbids denial to any United States citizen of membership on a selective service local board or appeal board on account of sex. The same section also requires members of local and appeal boards to be citizens of the United States. Section 514 of the Appendix extends to citizens of the United States servinq in the armed forces of a wartime ally of the United States the benefits of the Soldiers' and Sailors' Relief Act, suspending civil legal proceedings against certain persons in the armed forces of the United States. Section 572 of the Appendix extends to United States citizens serving in the armed forces of a wartime ally of the United States certain rights and exemptions related to their tax liabilities. In its January 1982 interim report to the United States Congress, the Commission recanmended enactment of legislation to treat citizens of the Northern Mariana Islands as citizens of the United States for purposes of section 1801(i) of title 50 and sections 460(b)(3), 514, and 572 of the Appendix to title 50. In 1983 Congress enacted Public Law 98-213, 97 Stat. 1459. Sect ions 19 to 23 of that statute allow the President by proclamation to declare that citizenship requirements in particular federal laws are not applicable to citizens of the Northern Mariana Islands. In 1984 the President removed for citizens of the Northern Mariana Islands the citizenship restrictions in these sections. Presidential Proclamation 5207, �F4 5(r), 5(s), 5(t), 5(u). Other United States citizenship requirements are found in the Trading with the Enemy Act, sections I et sea. of the A -prendix to title 50. Section 2 of the Appendix dj'f-in:;-s "enemy" and "ally of enemy" for purposes of the law forbidding trade with either to exclude United States citizens not residing in the territory of a nation with which the United States is at war. The same section defines "United States," apparently only in a geographical sense, to include "all land and water, continental or insular, in any wav within the jurisdiction of the United States" including areas occupied by United States military or naval forces. This definition does not expand similarly the definition of "United States" for purposes of determining who is a United States citizen, since Congress did not intend the populace of enemy territory occupied by the United States armed forces to be treated as United States citizens. Section 8(b) gives any United States citizen the right to abrcqate any contract entered into with an enemy or ally of an enEmy - 532 prior to the beginning of a war or within thirty days af ter the beginning of the war. Section 10 allows United States citizens, on approval of the President,, to pay taxes or fees required by, or f ile applications with, an enemy, or an ally of an enemy, in connection with patents, copyrights, and trademarks; and allows the President to grant to any United States citizen a license to use patents, copyrights, or trademarks owned by an enemy or an -ally of an enemy., Section 12 restricts the sale of alien property to purchasers who are United States citizens, unless the President determines otherwise; and prohibits resale to a person not a United States citizen. In its January 1982 interim report to Congress, the Commission also recommended enactment of legislation to treat citizens of the Northern Mariana Islands as citizens of the United States for purposes of these provisions in the Trading with the Enemy Act. The presidential proclamation issued pursuant to sections 19 to 23 of Public Law 98-213 did not, however, address these provisions. No other significant problems in the application of title 50 and its appendix to the Northern Mariana Islands were uncovered by the Commission staff's research or otherwise brought to the Commission's attention. PROPOSED NORTHERN MARIANA ISLANDS FEDERAL RELATIONS ACT The Northern Mariana Islands Federal Relations Act, as set forth below, if enacted by Congress, would implement all of the Commission's recommendations. An Act to specify the applicability or inapplicability of certain federal laws to the Northern Mariana Islands, and for other purposes. Be it enacted the Senate and House of Representatives of the United States of America in Congress assembled, that TABLE OF 0ONrENTS Sec. 1. Short title. Sec. 2. Nonvoting Delegate to Congress. Sec. 3. land-grant colleges. Sec. 4. Immigration and naturalization. Sec. 5. Ncminations to the United States Military Academy, the United States Naval Academy, and the United States Air Force Academy. - 533 - Sec. 6. Banking laws. Sec. 7. Surveillance of ocean areas. Sec. 8. Investment companies. Sec. 9. Automobile Dealers Day in Court Act. Sec. 10. Fishery trade officers; Department of Commerce. Sec. 11. Restrictions on garnishment. Sec. 12. Fair Credit Reporting Act. Sec. 13. Electronic Fund Transfer Act. Sec. 14. Petroleum Marketing Practices Act. Sec. 15. Fishery conservation and manaqement. Sec. 16. Tuna fisheries. Sec. 17. Federal crimes. Sec. 18. Consolidated grant for higher education. Sec. 19. Special temporary passports. Sec. 20. Northern Mariana Islands financial institutions as federal depositaries. Sec. 21. Issuance of substitute checks. Sec. 22. Federal employee allotments to Northern Mariana Islands credit unions. Sec. 23. Public participation in block grant proposals. Sec. 24. Rivers and harbors. Sec. 25. Judicial venue under the Clean Water Act. Sec. 26. Judicial venue under the Ocean Dumping Act. Sec. 27. Judicial venue under the Ocean Thermal Energy Conversion Act. Sec. 28. Nonprofit lottery mailings. Sec. 29. Medicaid. - 534 - Sec. 30. Submerged lands. Sec. 31. Government depository libraries. Sec. 32. Enforcement of federal laws in the Northern Mariana Islands. Sec. 1. Short title. This Act may be cited as "The Northern Mariana Islands Federal Relations Act." Sec. 2. Nonvoting Delegate to Congress. (a) The Northern Mariana Islands shall be represented in the United States Congress by the Resident Representative to the United States authorized by section 901 of the Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States of America (approved by Public Law 94-241, 90 Stat. 263). The Resident Representative shall be a nonvoting Delegate to the House of Representatives, elected as hereinafter provided. (b)(1) The Resident Representative shall be elected by the 'people qualified to vote for the popularly elected officials of the Northern Mariana Islands at the reqular general election, on the day and month set by section 1 of Article VIII of the Constitution of the Northern Mariana Islands, in the first odd-numbered year subsequent to enactment of this Act and thereafter at such general election every second year thereafter. The Resident Representative shall be elected at larqe, by separate ballot, and by a majority of the votes cast for the office of Resident Representative. If no candidate receives such majority, on the fourteenth day following such election a runoff election shall be held between the candidates receiving the highest and the second highest number of votes cast for the office of Resident Representative. In case of a permanent vacancy in the office of Resident Representative by reason of death, resignation, or permanent disability, the office of Resident Representative shall remain vacant until a successor shall have been elected and qualified. (2) The tenn of the Resident Representative shall ccmrrence on the second Monday of January following the date of the election. (c) To be eligible for the office of Resident Representative, a candidate shall: - 535 - (1) he at least twenty-f ive years of acie on the date of the, election; (2) be a citizen of the United States, provided, however, that prior to termination of the Trusteeship AqreEment for the former Japanese Mandated Islands, 61 Stat. 3301, the candidate shall be a person def ined as a United States citizen or United States national in section 8 of the Schedule on Transitional Matters of the Constitution of the Northern Mariana Islands, as approved by Presidential Proclamation 4534 of October 24, 1977; (3) have been a resident and domiciliary of the Northern Mariana Islands for at least seven years prior to the date of taking office; (4) not be, on the date of the election, a candidate for any other office. (d) Acting pursuant to legislation enacted in accordance with the Constitution of the Northern Mariana Islands, the Government of the Northern Mariana Islands will detemine the order of names on the ballot for election of Resident Representative, the method by which a special election to f ill a vacancy in the office of Resident Representative shall be conducted, the method by which ties between candidates for the office of Resident Representative shall be resolved, and all other matters of local application pertaining to the election and the office of Resident Representative not otherwise expressly provided for herein. (e) Until the Rules of the House of Representatives are amended to provide otherwise, the Resident Representative for the Northern Mariana Islands shall receive the same compensation, allowance, and benefits as a Member of the House of Representatives, and shall be entitled to wtiatever privileges and immunities that are, or hereinafter may be, aranted to the nonvoting Delegate fram the Territory of Guam* Sec. 3. Land-grant colleges. (a) Section 506 of Public Law 92-318, 86 Stat. 235, as amended, is further amended to read as follows: (1) The College of the Virgin Islands, the Ccmmunity College of Ainerican Samoa, the - 536 - College of Micronesia, the University of Guam, and an institution in the Northern Mariana Islands designated by the legislature of the Northern Mariana Islands shall be considered land-grant colleges established for the benefit of agriculture and mechanic arts in accordance with the provisions of the Act of July 2, 1862, as amended (7 U.S.C. �� 301-305, 307-308). (2) In lieu of extending to the Virqin Islands, Guam, Amrican Samoa, the Northern Mariana Islands, and the Trust Territory of the Pacific Islands (other than the Northern Mariana Islands) those provisions of the Act of July 2, 1862,, as amended, relating to donations of public land or land scrip for the endowment and maintenance of colleges for the benefit of agriculture and the mechanic arts, there is authorized to be appropriated $3,000,000 to the Virgin Islands, $3,000,000 to Guam, and $3,000,000 to the Northern Mariana Islands and an equal amount to American Samoa and to the Trust Territory of the Pacific Islands (other than the Northern Mariana Islands). Amounts appropriated pursuant to this section shall be held and considered to have been granted to the Virgin Islands, Guam, American Samoa, the Northern Mariana Islands, and the Trust lbrritory of the Pacific Islands (other than the Northern Mariana Islands) subject to the provisions of that Act applicable to the proceeds fran the sale of land or land scrip. (b) Subsection (c) of section 1361 of Public Law 96-374, 94 Stat. 1367, is amended to read as follows: Any provision of any Act of Congress relating to the operation of or provision of assistance to a land-qrant college in the Virgin Islands or Gum shall apply to land grant colleges in American Samoa, the Northern Mariana Islands, and the Trust Territory of the Pacific Islands (other than the Northern Mariana Islands) in the same manner and to the same extent. (c) Section 5 of the Act of August 30, 1980, c.841, 26 Stat. 417 (the Second Morrill Act), as added by section 506(c) of the Public Law 92-318, 86 Stat. 235, and as amended (7 U.S.C. � 326a), is further amended to read as follows: 537 - There is authorized to be appropriated annually for payment to the Virgin Islands, American Samoa, Guam, the Northern Mariana Islands, and the Trust Territory of the Pacific Islands (other than the Northern Mariana Islands) the amount they would receive under this Act if they were States. Sums appropriated under this section shall be treated in the same manner and be subject to the same provisions of law, as would be the case if they had been appropriated by the first sentence of this Act. (d) Section 22 of the Act of June 29, 1935, c.338, 49 Stat. 439, as amended (7 U.S.C. S 329), is further amended- (1) by striking out "and Guam" wherever it appears and inserting in lieu thereof "Gum, and the Northern Mariana Islands"; (2) by striking out "$8,100,000" and insertinq in lieu thereof "$8,250,000"; and (3) by striking out "$4,360,000" and inserting in lieu thereof "$4,380,000". (e) The first sentence of section 3(b)(2) of the Act of May 8, 1914, c.79, 38 Stat. 372, as amended (7 U.S.C. 5 343), is further amended by striking out "and Guam" and inserting in lieu thereof "Guam, and the Northern Mariana Islands". M Section 10 of the Act of May 8, 1914, c.79, 38 Stat. 372, as added by section l(i) of Public Law 87-749, 76 Stat. 745, and as amended (7 U.S.C. 9 349), is further amended to read as follows: The term "State" means the States of the Union, Puerto Rico, the Virgin islands, Guam, and the Northern Mariana Islands. (g) Notwithstanding subsection (4) of section 1404 of the National Agricultural Research, Extension, and Teaching Pol icy Act of 1977, as amended (7 U.S.C. S 3103(4)), an institution in the Northern Mariana Islands desiqnated by the legislature of the Northern Mariana Islands as a land-grant college, pursuant to section 506(a) of Public Law 92-318 (86 Stat. 235) as anended by section 1 of this Act, shall not be required, in order to qualify as - 538 a "college" or "university" for purposes of the National Agricultural Research, Extension, and Tleaching Policy Act of 1977, as amended, to (1) provide an educational program for which a bachelor's degree or any other higher degree is awarded, or (2) be accredited by a nationally recognized accrediting agency or association. (h) The first sentence of section 3(b)(2) of the Act of Auqust 11, 1955, c.790, 69 Stat. 671, as amended (7 U.S.C. � 361c(b)(2)), is further amended by striking out "and Guam" and inserting in lieu thereof "Guam, and the Northern Mariana Islands". Sec. 4. Immigration and naturalization. (a)(1) Persons who, on fhe date of introduction of Act, are immediate relatives of citizens of the Northern Mariana Islands shall be treated as though they were immediate relatives of citizens of the United States for purposes of the immigration laws of the United States. Any citizen of the Northern Mariana Islands claiming that an alien is entitled to an immediate relative status under section 201(b) of the Immigration and Nationality Act may file a petition with the Attorney General of the United States for such classification. (2) For purposes of this subsection, "citizens of the Northern Mariana Islands" are those persons defined as United States citizens or United States nationals in section 8 of the Schedule on Transitional Matters of the Constitution of the Northern Mariana Islands, as approved by Presidential Proclamation 4534 of October 24, 1977. (3) This subsection shall expire upon the establishment of the Canmonwealth of the Northern Mariana Islands. (b)(1) A person who elects to beccme a national rather than a citizen of the United States pursuant to section 302 of the Covenant to Establish a Ccmmonwealth of the Northern Mariana Islands in Political Union with the United States of America (approved by Public T-aw 94-241, 90 Stat. 263) may be naturalized subsequently as a citizen of the United States upon compliance with applicable requirements of the Immigration and Nationality Act, except that in petitions for naturalization filed under the provisions of this subsection residence and physical presence within the United States within the meaning of the Immigration and Nationality Act shall include residence and physical presence within the Northern Mariana Islands. - 539 - (2) For purposes of the requirements of judicial naturalization of persons eligible for naturalization under this subsection, the Northern Mariana Islands will be deemed to constitute a State as defined in subsection 101(a), paragraph (36) of the Immigration and Nationality Act (8 U.S.C. � 1101(a)(36)). (3) The courts of record of the Northern Mariana Islands and the District Court for the Northern Mariana Islands shall have jurisdiction to naturalize persons who become eligible under this subsection and who reside within their respective jurisdictions. Sec. 5. Nominations to the United States Military @, a Academy, the United States Naval Aca@ nd the United States Air Force Academy. (a) Subsection (a) of section 4342 of title 10, United States Code, is amended by strikinq the language following clause (10) and substit uting therefor the following: (11) one cadet from the Northern Mariana Islands, nominated bv the Resident Representat ive to the United States for the Northern Mariana Islands. Each Senator, Representative, and Delegate in Conciress, including the Resident Commissioner from Puerto Rico, and the Resident Representative to the United States for the Northern Mariana Islands are entitled to nominate a principal candidate and nine alternates for each vacancy that is available to him under this section. (b) Subsection (f) of section 4342 of title 10, United States Code, is amended to read as follows: Each candidate for admission nominated under clauses (3)-(7), (9), (10) and (11) of subsection (a) must be domiciled in the State, or in the congressional district, from which he is nominated, or in the District of Columbia, Puerto Rico, American Samoa, Guam, the Virgin Islands, or the Northern Mariana Islands, if nominated from one of those places. (c) Section 4343 of title 10, United States Code, is amended by substituting "clauses (2)-(9) and (11) of section 4342(a)" for "clauses (2)-(9) of section 4342(a)". - 540 - (d) Subsection (a) of section 6954 of title 10, United States Code, is amended by strikinq the language following clause (10) and substituting therefor the following: (11) One from the Northern Mariana Islands, nominated by the Resident Representative to the United States for the Northern Mariana Islands. Each Senator, Representative, and Delegate in Congress, including the Resident Commissioner fran Puerto Rico, and the Resident Representative to the United States for the Northern Mariana Islands are entitled to nominate a principal candidate and nine alternates for each vacancy that is available to him under this section. (e) Subsection (a) of section 6966 of title 10, United States Code, is amended to read as follows: ' The Secretary of the Navy shall, as soon as possible after the first of June of each year, notify in writing each Senator, Representative, and delegate in Congress, and the Resident Representative to the United States for the Northern Mariana Islands of any vacancy that will exist at the Naval Academy because of graduation in the following year, or that may occur for other reasons, for which the member or delegate or resident representative is entitled to nominate a candidate and nine alternates. (f) Subsection (e) of section 6956 of title 10, United States Code, is amended by substituting "clause (2)-(9) and (11) of section 6954(a)" for "clauses (2)-(9) of section 6954(a)". (q) Subsection (b) of section 69@8 of title 10, United States Code, is amended to read as follows: Each candidate for admission nominated under clauses (3)-(7), (9), (10) and (11) of section 6954(a) must be domiciled in the State, or 'in the congressional district, from which he is nominated, or in the District of Columbia, Puerto Rico, American Samoa, Guam, the Virgin Islands, or the Northern Mariana Islands, if nominated from one of those places. 541 - (h) Subsection (a) of section 9342 of title 10, United States Code, is amended by striking the language following clause (10) and substituting therefor the following: (11) One cadet from the Northern Mariana Islands, nominated by the Resident Representative to the United States 'for the Northern Mariana Islands. Each Senator, Representative, and Delegate in Congress, including the Resident Commissioner from Puerto Rico, and the Resident Representative to the United States for the Northern Mariana Islands are entitled to nominate a principal candidate and nine alternates for each vacancy that is available to him under this section. (i) Subsection (f) of section 9342 of title 10, United States Code, is amended to read as follows: Each candidate for admission nominated under clauses (3)-(7), (9), (10) and (11) of subsection (a) rust be domiciled in the. State, or in the congressional district, from which he is nominated, or in the District of Columbia, Puerto Rico, Anerican Samoa, Guam, the Virgin Islands, or the Northern Mariana Islands, if nominated from one of those places. (j) Section 9343 of title 10, United States Code is amended by substituting "clauses (2)-(9) and (11) of section 9342(a)" for "clauses (2)-(9) of section 9342(a)". Sec. 6. Bankipg laws. (a) Conversion of national bank into bank organized under laws of the Northern Mariana Islands. Subsection (a) of section 1 of the Act of August 17, 1950, c.729, 64 Stat. 455, as amended (12 U.S.C. S 214(a)), is further amended by deleting "or the Virgin Islands," and inserting in lieu thereof "the Virgin Islands, or the Northern Mariana Islands,". (b) Merger of bank organized under laws of the Northern Mariana Islands into nation9l bank. Subsection (2) of section 3 of the Act of Novenber 7, 1918, c.209, 40 Stat. 1036, as added by section 20 of Public Law 86-230, 73 Stat. 457 (12 U.S.C. S 215b(2)), is amended by inserting immediately after the phrase "the Virgin Islands," the phrase "the Northern Mariana islands,". - 542 - (c) Maxiinum. amounts for federal lyo- insured mortgages in the Northern Mariana islands. Section 214 of the Act of June 27, 1934, c.847, 48 Stat. 1246, as added by section 2(a) of the Act of April 23, 1949, c.89, 63 Stat. 57, and as amended (12 U.S.C. � 1715d), is further amended by deleting "or Hawaii" each time it appears and inserting in lieu thereof, "the Northern Mariana Islands, or Hawaii". (d) Insurance of public unit accounts. Subsection (b) of section 401 of the Act of June 27, 1934, c.847, 48 Stat. 1246, as amended (12 U.S.C. 9 1724(b)), is further amended by insertinq fimnediately after the hrase "of the P Virgin Islands," the phrase "of the Northern Mariana Islands,". (e) Farm Credit System. Section 5.0 of Public Law 92-181, 85 Stat. 583, as amended by section 502 of Public Law 96-592, 94 Stat. 3437 (12 U.S.C. � 2221), is further amended by inserting the phrase "and the !\brthern Mariana Islands" after the phrase "the Virqin Islands of the United States" each time it appears. (f) Abandoned money orders and traveler's checks. The Northern Mariana Islands shall be considered a "State" for purposes of sections 601, 602, and 603 of Public Taw 93-495, 88 Stat. 1500 (12 U.S.C. �� 2501, 2502, and 2503). (g) National Consumer Cooperative Bank. The fifth sentence of section 101 of Public Law 95-351, 92 Stat. 499, as amended (12 U.S.C. � 3011), is further amended by deleting "and in the Ccmmonwealth of Puerto Rico." and inserting in lieu thereof "in the Ccmmonwealth of Puerto Rico, and in the Northern Mariana Islands.". (h) Northern Mariana Islands banks' participation in dcmestic markets. Paragraph (7) of subsection (b) of section I of Public Law 95-369, 92 Stat. 67 (12 U.S.C. 9 3101(7)), is amended by deletinq "or the Virgin Islands," and inserting in lieu thereof "the Virgin Islands, or the Northern Mariana Islands,". (i) Management interlocks. Subsection (4) of -section 205 of Public Law 95-630, 92 Stat. 3641 (12 U.S.C. � 3204(4)), is amended by deletinq "or the Virgin Islands" and insertinq in lieu thereof "the Virgin Islands, or the Northern Mariana Islands". (j) Right of financial privacy. Subsection 1 of section 1101 of Public Law 95-630, 92 Stat. 3641 (12 U.S.C. 543 - S 3401(l)), is amended by deleting "or the Virgin Islands;" and inserting in lieu thereof "the Virgin Isl ands, or the Northern Mariana Islands;% Sec. 7. Surveillance of ocean areas. (a) The Congress finds anj declares that: (1) The Northern Mariana Islands, on termination of the Trusteeship Agreement between the United States and the United Nations, will becane a self-governing ccrnmonwealth in political union with and under the sovereignty of the United States, pursuant to section 101 of the Covenant to Establish a CaiTtmonwealth of the Northern Mariana Islands in Political Union with the United States of America (as approved by Public Law 94-241, 90 Stat. 263 (1976)). (2) The United States is obligated to protect the resources of the Northern Mariana Islands, including those resources found within two hundred miles of the coastlines of the Northern Mariana Islands, against unlawful exploitation by nationals or residents of other nations. (3) The United States, to fulfill its obligation to the people of the Northern Mariana Islands, should increase its surveil-lance of all ocean areas within two hundred miles of the coastlines of the Northern Mariana Islands. In particular, the United States should ensure that all applicable federal laws, including those governinq the exploitation of marine resources, are enforced within those areas. (b) The Secretary of the Department in which the Coast Guard is operating may, by agreement, on a reimbursable basis or otherwise, utilize the personnel, services, equipment (including aircraft and vessels) and facilities of any other Federal agency, including all elements of the Department of Defense, and of the Government of the Northern Mariana Islands in patrolling waters within two hundred miles of the coastlines of the Northern Mariana Islands. Sec. 8. Investment ccupanies. Section 6(a)(1) of the Investffent Company Act of Auc 22, 1940, c. 686, 54 gust Stat. 789 (15 U.S.C. S 80a-6(a)(1)), is amended by inserting "the Northern Mariana Islands," immediately before "the Virgin Islands,". - 544 - Sec. 9. Autcmbile Dealers Day in Court Act. Section 1 of the Act of August 8, 1956, 70 Stat. 1125) (15 U. S. C. 1221), is amended by adding thereto a new subsection to read as follows: (f) The term "TLc-rritory" shall include the Northern Mariana Islands. Sec. 10. Fishery trade officers; Department of Camerce. The Nojhern Mariana Islands shall be consi7e-red as part of the United States for purposes of section 211 of Public Law 96-561, 94 Stat. 3275 (15 U.S.C. 9 1511b), and section 3 of the Act of February 14, 1903, c. 552r 32 Stat. 825, as mended (15 U.S.C. S 1512). Sec. 11. Restrictions on 2arnishment. Section 302 90-321, 82 Stat. 1 --- TIM of Public Law 46 968) (15 U.S.C. S 1672), is amended by adding a new subsection, to read: (d) The term "State" includes the Northern Mariana Islands; plemployers," "employees," and "earnings" within the T\brthern Mariana Islands are subject to the provisions of this title. Sec. 12. Fair Credit Reporting Act. Subsect ion (b) of section 603 of Public 90-321, 82 Stat. 146 (1968), as added by section 601 of Public Law 91-508, 84 Stat. 1114 (1970) (15 U.S.C. � 168la(b)), is amended by deleting the final period and adding the following: ", and includes persons in the Northern Mariana Islands.". Sec. 13. Electronic Fund Transfer Act. Section 903(10) of Public 'Law 90-321, 82 Stat. 146 (1968), as added by section 2001 of Public Law 95-630, 92 Stat. 3641 (1978) (15 U.S.C. S 1693a(10)), is amended by inserting "the Northern Mariana Islands," immediately after "the Cam-onwealth of Puerto Rico,". Sec. 14. Petroleum Marketing Practices Act. Subsection 19 of section 101 and subsection 14 of section 201 of Public Law 95-297, 92 Stat. 322 (1978) (15 U.S.C. 2801(19), 2821(14)), are amended by inserting in each "the Northern Mariana Islands," immediately after "Guam,". Sec. 15. Fishery conservation and management. (a) Subsection 21 of section 3 of the Magnuson Fishery Conservation and Management Act, as mended (16 U.S.C. � 1802(21)), is further amended to read as follows: - 545 - The term "State" rreans each of the several States, the District of Columbia, the Commonwealth of Puerto Rico, American Samoa, the Virgin islands, Guam, and any other territory or possession of the United States, except the Northern Mariana Islands. (b) Paragraph (8) of subsection (a) of section 302 of the Magnuson Fishery Conservation and Management Act, as amended (16 U.S.C. S 1852(a)(8)), is further amended to read as follows: (8) Western Pacific Council.--The Western Pacific Manaqemnt Council shall consist of the State of Hawaii, Anerican Samoa, and Guam and shall have authority over the fisheries in the Pacif ic ocean seaward of such States. The Western Pacific Council shall have 11 voting members, including 7 appointed by the Secretary pursuant to subsection (b)(2) of this section (at least one of whom shall be appointed fran each of the following States: Hawaii, American Samoa, and Guam). 'Ihe Western Pacific Council shall also have a nonvoting observer who shall be appointed by and serve at the pleasure of the Governor of the Northern Mariana Islands. Sec. 16. Tuna fisheries. (a) The Congress finds and declares the fo'llowing: (1) In the Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States of America (approved by Public Law 94-241, 90 Stat. 263 (1976)), the United States agreed to assist in developing the economic resources of the Northern Mari ana Islands for the benef it of the inhabitants of those islands. (2) Tuna in waters adjacent to the Northern Mariana Islands are a valuable and renewable resource, which can contribute to the food supplv, economy, and health of the Northern Mariana Islands and of the Nation as a whole. (3) Foreign fishing vessels catch substantial quantities of tuna in waters adjacent to the Northern Mariana Islands, but neither the Northern Mariana Islands nor the United States derive revenues fran tuna caught by those vessels. - 546 (4) Negotiation of an international agreement or agreements to conserve and mnage tuna in the 'Kbstern Pacific Ocean, including those waters adjacent to the Northern Mariana Islands, is in the best interests of the United States and the Northern Mariana Islands. (b) (1) The Secretary of State shall, upon the reaue-st of and in cooperation with the Governor of the Northern Mariana Islands, initiate and conduct negotiations for the purpose of entering into one or more international fisheries agreements for the conservation and management of any highly migratory species of fish within the fishery conservation zone of the Northern Mariana Islands or anv appropriate region that includes that fishery conservation zone. The Governor of the Northern Mariana Islands shall be entitled to designate an observer, who shall serve at the pleasure of the Governor, to attend those negotiations. (2) All payments or other consideration received pursuant to any agreement concluded under the authority granted by paragraph (1) of this subsection and attributable to the taking of fish, or to the right to take f ish, by the vessels of foreign nations within the f ishery conservation zone of the Northern Mariana Islands shall be paid to the Government of the Northern Mariana Islands. (3) For purposes of this subsection, the fishery conservation zone of the Northern Mariana Islands shall be defined in relation to the Northern Mariana Islands in the same manner as the fishery conservation zone of the United States is defined in relation to the United States by the Magnuson Fishery Conservation and Management Act. (4) Flor purposes of this subsection, the term "highly migratory species" mans species of tuna which, in the course of their life cycle, spawn and migrate over great distances in waters of the ocean. Sec. 17. Federal crimes. (a) Chapter 27 of title 18, United States Code, is mended by: (1) adding to the table of contents thereof the following: Sec. 553. Imports to and exports from the, Northern Mariana Islands. and - 547 - (2) addinq thereto a new section, to read as follows: � 553. LTports to and exports from the Northern Mariana Islands. This chapter and sections 496, 1364, and 1915 of this title shall not apply to the entry of goods or articles into the Northern Mariana Islands nor to the export of goods or articles therefrcm. (b) Subsection (a) of section 42 of title 18, United States Code, is amended by redesiqnatinq present paragraph (5) as paragraph (6) and by inserting a new paragraph (5), to read as follows: Nothinq in this subsection shall restrict the importation of species of so-called "flying foxes" or fruit bats of the genus Pteropus into the Northern Mariana Islands. (c) Chapter 45 of title 18, United States Code, is amended by: (1) striking frcm the table of contents thereof the followi nq: Sec. 969. EM2rtation of arms, lig@orsf and n9r-cotics to Pacific Islands. and (2) by repealing section 969. (d) Section 1114 of title 18, United States Code, is amended by insertinq after "Guam," the phrase "the Northern Mariana Islands,". (e) Chapter 61 of title 18, United Wates Code, is amended by: (1) addinq to the tab of contents thereof the following: Sec. 1308. Certain lotteries in the Northern Mariana Islands. and 548 - (2) adding a new section thereto, to read as follows: 1308. Certain lotteries in the Northern Mariana Islands. (a) Nothing in this chapter shall prohibit an advertisement, Ca list of prizes, or information concerning a qualified lottery conducted in the Northern Mariana Islands in accordance with the laws of the Northern Mariana Islands: (1) disseminated in a newspaper published in the Northern Mariana Islands, or (2) broadcast by a radio or television station licensed to a location in the @brthern Mariana Islands. (b) Nothing in this chapter shall prohibit the transportation or mailinq to addresses within the Northern Mariana Islands Of equipment, tickets, or materials concerning a crualified lottery conducted in the Northern Mariana Islands in accordance with the laws of the Northern Mariana Islands. (c) For the purposes of this section, "qualified lottery" means a lottery conducted by a nonprofit organization for reliqious, charitable, educational, or benevolent purposes, in which no part of the gross receipts derived therefrcm inures to the benefit of any private shareholderr member, or employee of such organization except as campensation for actual expenses incurred by that person in the conduct of the lottery. (f) Section 2279 of title 18, United States Code, is amended by adding thereto a new paragraph, to read as follows: Nothing in this section shall restrict officers or employees of the Goverment of the Northern 549 - Mariana Islands, in the perfonnance of their official duties, frcm boarding any vessel about to arrive at. any port of the Northern Mariana Islands. (g) The Northern Mariana Islands shall be considered a "State" for purposes of sections 7, 245(c), 402, 659, 1761(b), and 1901 of title 18, United States Code. (h) The Northern Mariana Islands shall be considered a "State" or "Territory" for purposes of sections 1715 and 1716 of title 18, United States Code. Sec. 18. Consolidated grant for higher education. (a) The Secretary of Education shall make available annually to the Northern Mariana Islands a block grant for postsecondary educational needs in the Northern Mariana Islands. The block grant shall be made frcm appropriations authorized under the Higher Education Act and shall consist of: (1) an amount equal to the amounts of any funds that would otherwise be allotted to the Northern Mariana Islands or any institution of higher education in the Northern Mariana Islands on the basis of a f6mula prescribed by the Act, including, but not lirnited to funds allotted under: (A) section 119 of the Act, 'as added by section 101(a) of Public Law 96-374, 94 Stat. 1367 (20 U. S. C. � 1012) (education outreach prograns); (B) section 415A of the Act, as added bV section 131(b) (1) of Public Law 92-318, 86 Stat. 235,, and as amended (20 U.S.C. S 1070c) (State student incentives); and (C) sections 419 and 420 of the Act, as added by section 1001(a) of Public T-aw 92-318, 86 Stat. 235, as amended (20 U.S.C. �� 1070e and 1070e-1) (assistance to institutions of higher education). - 550 - (2) thirty-three hundredths of one percent of any funds appropriated by Congress under the following authorizations: (A) section 119 of the Act, as added by section 101(a) of Public Law 96-374, 94 Stat. 1367 (20 U.S.C. � 1019) (education outreach prcx1rams), to the extent of the ten per centum of such funds apportioned for discretionary grants or contracts pursuant to section 116 of the Act, as added by section 101(a) of Public Law 96-374 (20 U.S.C. 9 1016); (B) sections 201 and 347 of the Act, as added by sections 201 and 301 of Public Law 96-374, 94 Stat. 1367 (20 U.S.C. �� 1021 and 1069c) (college a nd research library assistance and library training research, strengthening institutions, and aid to institutions with special needs); (C) section 417A of the Act, as added by section 131(b)(1) of Public Law 92-318, 86 Stat. 235, and as amended (20 U.S.C. S 1070d) (special programs for students frcm disadvantaged backgrounds); (D) section 531 of the Act, as added by section 153 of Public Law 94-482, 90 Stat. 2081, and as amended (20 U.S.C. S 1119) (teacher training programs); (E) sections 546, 607, and 613 of the Act, as added by sections 505(a) and 601(a) of Public Iaw 96-374, 94 Stat. 1367 (20 U.S.C. SS 1119b-5, 1127, and 1130b) (training for elementary and secondary school teachers to teach handicapped children, and international education prograns); - 551 - (F) section 702 of the Act, as added by section 701 of Public Law 96-374, 94 Stat. 1367 (20 U.S.C. 5 1132a-1), but only to the extent it authorizes appropriation of grant funds (grants for the construction, reconstruction, and renovation of undergraduate and graduate academic facilities); (G) section 801 of the Act, as added by section 129(b) of Public Law 94-482, 90 Stat. 2081, and as amended (20 U.S.C. 1133) (cocperative education); (H) section 901 of the Act, as added by section 181(a) of Public raw 92-318, 86 Stat. 235, and as amended (20 U.S.C. � 1134) (grants to institutions of higher education); a nd (I) sections 942, 953, 1005, and 1102 of the Act, as added by sections 904, 905, 1001(a) and 1101 of Public Law 96-374, 94 Stat. 1367 (20 U.S.C. �� 1134m, 1134p, 1135a-3, and 1136a) (assistance for training in the legal profession, law school clinical experience proqrcams, fund for the improvement of postsecondary education, and urban grant university proqran) . If al 1 jurisdictions entitled to receive funds appropriated pursuant to the authorizations listed in subsection (b) of this section are entitled to receive a minimum amount of funds pursuant to any such authorization and that minimum amount is greater than thirty@three hundredths of one percent of that authorization, then that minimum -munt shall be substituted for thirty-three hundredths of one percent for each such authorization in determining the total amount of the block grant. (b) The block grant authorized under subsection (a) of this section shall be made available directly to a college or cawunity college established or to be established by the Government of the Northern Mariana 552 Islands and designated by the Board of Education of the Northern Mariana Islands as the recipient of the block grant for purposes of meeting postsecondary educational needs in the Northern Mariana Islands. The block grant shall not be restricted in use to only those uses permitted under the Higher Education Act. Nothinq. in this section shall preclude the Secretary of Education frcm providinq adequate procedures for accounting for, auditing evaluating, and reviewing any prograns or activities receiving benefits from the block grant authorized under subsection (a) of this section or fran providing technical assistance otherwise available under the Higher Education Act. (c) The institution designated as recipient of the block grant pursuant to subsection (b) of this section shall receive the block grant without regard to whether it is accredited. No funding otherwise available under the Act shall be denied the institution because it lacks accreditation. The Secretary of Education shall waive any reguirement for matching funds otherwise required by the Act to be provided by the Northern Mariana Islands or by any institution of higher education in the Northern Mariana Islands. (d) Nothinq in this section shall preclude the Northern Mariana Islands, or any institution of hiqher education in the Northern Mariana Islands, frcm. receiving assistance under the Higher Education -Act if that assistance is available under a program or programs not included in determining the amount of the block grant available to the Northern Mariana Islands pursuant to subsection (a) of this section. (e) The Higher Education Act or "the Act", as used herein, means the Higher Education Act of 1965, 79 Stat. 1219, as amended (20 U.S.C. SS 1001 et sea.). (f) Any funds required to be made available under this section shall remain available until expended. Sec. 19. Special terrpora!D@ passports. (a) The Secretary of State or persons designated by the Secretary of State shall issue special United States passports to citizens of the Northern Mariana Islands, notwithstanding section 4076 of the Revised Statutes of 1878, as amended (22 U.S.C. S 212). These passports shall recite the privilege of citizens of the Nort hern Mariana Islands to enter and to reside and be employed in the United States, and to enjoy the diplanatic and consular protection of the United States in foreign countries. - 553 (b) For purposes of this section, "citizens of the Northern Mariana Islands" are those persons defined as United States citizens or United States nationals in section 8 of the Schedule on Ttansitional Matters of the Constitution of the Northern Mariana Islands, as approved by Presidential Proclamation 4534 of October 24, 1977. (c) This section shall expire upon the establishment of the Camonwealth of the Northern Mariana Islands. Sec. 20. Northern Mariana Islands financial institutions as federal de4sitaries. Subsection (b) of section 3303 of title 31, United States Code, is amended by deleting the phrase "and in territories and possessions of the United States" and inserting in lieu thereof ", in territories and possessions of the United States, and in the Northern Mariana Islands". Sec. 21. Issuance of substitute checks. Subsection (c) of section 3331 of title 31, United States Code, is amended by insertinq the phrase "or the Northern Mariana Islands" immediately after the phrase "a territory or possession of the United States". Sec. 22. Federal M,21oyee allotments to Northern V Mariana Islands credit unions. Subsection (a) of section- 3332 of title 31, United S s Code, is anended by adding thereto the following sentence: "State", for purposes of this subsection, includes the Northern Ma. riana Islands. Sec. 23. Public 2@rticipation in block qrant P 0 E..22sals. Subsection (2) of section 7302 of title 31, United States Code, is amended by deleting the phrase "and territories and possessions of the United States." and inserting in lieu thereof the phrase ", territories and possessions of the United States, and the Northern Mariana Islands.". Sec. 24. Rivers and harbors. The applicability of the Act of March 3, 1899, c.425, 30 Stat. 1151, as an-ended (33 U.S.C. �� 401 et seq.), to the Northern Mariana Islands is confirmed. Sec. 25. (a) Judicial venue under the Clean Water Acto (a) Subsection (n) of section 311 of the Act of Yu-ne 30, 1948, c.758, 62 Stat. 1155, as added by section 2 of Public Law 92-500, 86 Stat. 816, and as amended (33 U.S.C. S 1321(n)), is further amended: - 554 - (1) by strikinq "Trust Territory of the Pacific Islands" wherever it appears and inserting in lieu thereof "Trust Territory of the Pacif ic Islands (other than the Northern Mariana Islands)"; and (2) by inserting a new sentence after the second sentence thereof to read as follows: In the case of the Nbrthern Mariana Islands, such actions may be brought in the District Court for the Northern Mariana Islands. (b) Subsection (m) of section 312 of the Act of June 30, 1948, c.758, 62 Stat. 1155, as added by section 2 of Public Law 92-500, 86 Stat. 816, and as &Tended (33 U.S.C. 5 1322(rn)), is further mended: (1) by striking "Trust Territory of the Pacific Islands" wherever it appears and inserting in lieu thereof "Trust Territory of the Pacific Islands (other than the Northern Mariana Islands)"; and (2) by inserting a new sentence after the first sentence thereof, to read as follows: In the case of the Northern Mariana Islands, such actions may be brouqht in the District Court for the Northern Mariana Islands. Sec. 26. Judicial venue under the Ocean Dumping Act. Subsection (g) of section 3 of Public Law 92-532, 86 Stat. 1052, as mended (33 U.S.C. q 1402(p)), is further mended: (1) by insertinq after "Puerto Rico," the follcwing: "the District Court for the Northern Mariana Islands,"; and (2) by inser-tinq after "Trust Territory of the Pacific Islands" the following: "(other than the Northern Mariana Islands)". Sec. 27. Judicial venue under the Ocean Therwal Eney@y Conversion Act. Subsection (c) of section 303 of Public Law 96-320, 94 Stat. 974 (42 U.S.C. q 9153(c)), is mended by deleting the period after "District of Hawaii" 555 - and inserting in lieu thereof ", and in the case of the Northern Mariana Islands, the appropriate court is the District Court for the Northern Mariana Islands.". Sec. 28. Nonprofit lottery mailings. Section 3005 of title 39, United States Code, is amended by adding a new subsection (f) thereto, to re&i as follows: (1) Nothing in subsection (a) of this section shall prohibit the mailing to addresses within the Northern Mariana Islands of equipment, tickets, or materials concerning a qualified lottery conducted in the Northern Mariana Islands in accordance with the laws of the Northern Mariana Islands. (2) For the purposes of this section, "qualified lottery" mans a lottery conducted by a nonprofit organization for religious, charitable, educational, or benevolent purposes, in which no part of the gross receipts derived therefrom inures to the benefit of any private shareholder, member, or employee of such organization except as compensation for actual expenses incurred by that person in the conduct of the lottery. Sec. 29. Medicaid. Section 1902(j) of the Social Security Act, as amended (42 U.S.C. � 1396a(j)) is further amended by inserting before "American Samoa" each place it occurs "the Northern Mariana Islands and". Sec. 30. Submerged lands. (a) Subject to valid existing rights, the United States releases, relinquishes, and conveys to the Commonwealth of the Northern Mariana Islands any and all right, title, and interest it may have in submerged lands within the boundaries of the Ccmmonwealth of the Northern Mariana Islands, to be administered in trust for the benefit of the people thereof. (b) For purposes of this section, (1) "submerged lands" shall include: (A) all lands permanently or periodically covered by tidal waters up to but not above the ordinary high water mark as heretofore or hereafter - 556 - modified by accretion, erosion, and reliction, and seaward to a line three qeoqraphical miles distant fran the coastlines of the Ccmmonwealth of the Northern Mariana Islands. (B) all f illed in, made, or reclaimed lands which were formerly lands described in subparagraph (A) of this paragraph; and (C) all improvements on and all natural resources on or within lands described in subparagraphs (A) and (B) of this paragraph. (2) "Covenant" shall rean the Covenant to Establish a Ccmmorwealth of the Northern Mariana Islands in Political Union with the United States of America, as approved by Public law 94-241, 90 Stat. 263 (1976). (c) There are excepted fran the transfer made by subsection (a) of this section any and all submerged lands leased to the Government of the United States pursuant to sections P02 and 803 of the Covenant for so lonq as such lands are leased. (d) Nothing contained in this section shall affect such rights, if any, the Cannonwealth of the Northern Mariana islands may have in the seabed and its subsoil, and their natural resources, more than three geographical miles distant fram the coastlines of the Cammonwealth of the Northern Mariana Islands. (e) This section shall becane effective on establishmnt of the Ccmmonwealth of the Northern Mariana Islands pursuant to sections 101 and 1003(c) of the Covenant. Sec. 31. Government depository libraries. (a) Section 1905 of title 44, United States Code, is amended: (1) by deleting, in the first sentence, the phrase "and the Virgin Islands," and inserting in lieu thereof "the Virgin Islands, and the Northern Mariana Islands,"; and (2) by amending the last sentence to read as follows: - 557 - The Ccimmissioner of the District of Columbia may designate two depository libraries in the District o f Columbia, the Governor of Guam, the Governor of Nnerican Samoa, and the Governor of the Northern Mariana Islands may each designate one de ,pository library in Guam, American Samoa, and the Northern Mariana Islands, respectively, and the Governor of the Virgin Islands may designate one depository library on the island of Saint Thomas and one on the island of Saint Croix. (b) Section 1909 of title 44, United States Code, is amended by inserting after the phrase "American Samoa," each time it appears the phrase "the Northern Mariana Islands,". Sec. 32. Enforcement of federal laws in the Northern Mariana Islands. (a) The Governor of the Northern Mariana Islands is authorized to enforce or execute in the Northern Mariana Islands any federal law applicable to the Northern Mariana Islands, provided, however, that, in enforcing or executing any such federal law, the authority exercised by the Governor shall be subject to any direction or control exercised by the federal agency principally charqed with the enforcemant or execution of that law or, if no federal agency is so charged, by the United States Department of Justice. (b) The authority granted to the Governor of the Northern Mariana Islands by subsection (a) of this section may be delegated by the Governor to any officer or employee of the Government of the Northern Mariana Islands, either directly, or indirectly by one or more redelegations of authority. (c) Any agency of the Federal Goverment is authorized to provide financial and technical assistance to the Goverment of the Northern Mariana Islands in enforcing or executing within the Northern Mariana Islands federal laws normally enforced or executed by that agency. Any program for financial and technical assistance as authorized by this section shall be developed in cooperation with the Government of the Northern Mariana Islands and shall be covered by a memorandurn of - 558 - understanding agreed to by the Government of the Northern Mariana Islands and the concerned agency. APPENDIX Page The Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States of America. 561 List of draft staff recommendations circulated for comment. 578 Bibliography 581 Commission staff 596 -561- PUBLIC LAW 94-241--MAR. 24,1976 90 STAT. 263 Public Law 94-241 94th Congress Joint Resolution To approve file "Covenant To Establish a Commonwealth of the Northern Mar. 24, 1976 Mariana Islands in Political Union with the United States of America", and (HJ. Res. 549) for other purposes. Whereas the United States is the administering authority of the 48 USC 1681 Trust Territory of the Pacific Islands under the terms of the note. trusteeship agreement for the former Japanese-mandated islands entered into by the United States with the Security Council of the United Nations on April 2, 1947, and approved by the United States on July 18, 1947; and Whereas the United States, in accordance with the trusteeship agree- ment and the Charter of the United Nations, has assumed the obligation to promote the development of the peoples of the trust territory toward self -government or independence as may be appropriate to the particular circumstances of the trust territory and its peoples and the freely expressed wishes of the peoples concerned; and Whereas the United States, in response to the desires of the people of the Northern Mariana Islands clearly expressed over the past twenty years through public petition and referendum, and in response to its own obligations under the trusteeship agreement to promote self-determination, entered into political status nego- tiations with representatives of the people of the Northern Mariana Islands; and Whereas, on February 15, 1975, a "Covenant to Establish A Common- wealth of the Northern Mariana Islands in Political Union with the United States of America" was signed by the Marianas Politi- cal Status Commission for the people of the Northern Mariana Islands and by the President's Personal Representative, Ambas- sador F. Haydn Williams for the United States of America, following which the covenant was approved by the unanimous vote of the Mariana Islands District Legislature on February 20, 1975 and by 78.8 per centum of the people of the Northern Mariana Islands voting in a plebiscite held on June 17, 1975: Now be it Resolved by the Senate and House of Representatives of the United States Of America in Congress assembled, That the Covenant to Estab- Covenant to lish a Commonwealth of the Northern Mariana Islands in Political Establish a Union with the United States of America, the text of which is as Commonwealth follows, is hereby approved. of the Northern Mariana Islands in Political Union "COVENANT TO ESTABLISH A COMMONWEALTH OF THE NORTHERN with the United MARIANA ISLANDS IN POLITICAL UNION WITH THE UNITED STATES States of OF AMERICA America. Congressional "Whereas, the Charter of the United Nations and the Trusteeship approval. Agreement between the Security Council of the United Nations and 48 USC 1681 the United States of America guarantee to the people of the Northern note. Mariana Islands the right freely to express their wishes for self- government or independence; and -562- 90 STAT. 264 PUBLIC LAW 94-241--MAR. 24,1976 "Whereas, the United States supports the desire of the people of the Northern Mariana Islands to exercise their inalienable right of self- determination; and "Whereas, the people of the Northern Mariana Islands and the people of the United States share, the goals and values found in the American system of government based upon the principles of govern- ment by the consent of the governed, individual freedom and democ- racy; and "Whereas, for over twenty years, the people of the Northern Mariana Islands, through public petition and referendum, have clearly expressed their desire for political union with the United States; "Now, therefore, the Marianas Political Status Commission, being the duly appointed representative of the people of the Northern Mariana Islands, and the Personal Representative of the President of the United States have entered into this Covenant in order to estab- lish a self-governing commonwealth for the Northern Mariana Islands within the American political system and to define the future relation- ship between the Northern Mariana Islands and the United State& This Covenant will be mutually binding when it is approved by the United States, by the Mariana Islands District Legislature and by the people of the Northern Mariana Islands in a plebiscite, constituting on their part a sovereign act of self-determination. "ARTICLE I "POLITICAL RELATIONSHIP "SECTION 101. The Northern Mariana, Islands upon termination of the Trusteeship Agreement will become a self-governing common- wealth to be known as the 'Commonwealth of the Northern Mariana Islands', in political union with and under the sovereignty of the United States of America. "SECTION 102. The relations between the Northern Mariana Islands and the United States will be governed by this Covenant which, together with those provisions of the Constitution, treaties and laws of the United States applicable to the Northern Mariana Islands, will be the supreme law of the Northern Mariana Islands. "SECTION 103. The people of the Northern Mariana Islands will have the right of local self-government and will govern themselves with respect to internal affairs in accordance with a Constitution of their own adoption. "SECTION 104. The United States will have complete responsibility for and authority with respect to matters relating to foreign affairs and defense affecting the Northern Mariana Islands. "SECTION 105. The United States may enact legislation in accord- ance with its constitutional processes which will be applicable to the Northern Mariana Islands, but if such legislation cannot also be made applicable to the several States the Northern Mariana Islands must be specifically named therein for it to become effective in the Northern Mariana Islands. In order to respect the right of self-government guaranteed by this Covenant the United States agrees to limit the exercise of that authority so that the fundamental provisions of this Covenant, namely Articles 1, 11 and III and Sections 501 and 805, may be modified only with the consent of the Government of the United States and the Government of the Northern Mariana Islands. -563- PUBLIC LAW 94-241--MAR. 24,1976 90 STAT. 265 "ARTICLE II "CONSTITUTION OF THE NORTHERN MARIANA ISLANDS "SECTION 201. The people of the Northern Mariana Islands will formulate and approve a Constitution and may amend their Consti- tution pursuant to the procedures provided therein. "SECTION 202. The Constitution will be submitted to the Govern- Submittal to U.S. ment of the United States for approval on the basis of its consistency for approval. with this Covenant and those provisions of the Constitution, treaties and laws of the United States to be applicable to the Northern Mariana Islands. The Constitution will be deemed to have been approved six months after its submission to the President on behalf of the Govern- ment of the United States unless earlier approved or disapproved. If disapproved the Constitution will be returned and will be resub- mitted in accordance with this Section. Amendments to the Constitu- tion may 'be made by the people of the Northern Mariana Islands without approval by the Government of the United States, but the courts established by the Constitution or laws of the United States will be competent to determine whether the Constitution and subse- quent amendments thereto are consistent with this Covenant and with those provisions of the Constitution, treaties -and laws of the United States applicable to the Northern Mariana Islands. "SECTION 203. (a) The Constitution will provide for a republican form of government with separate executive, legislative and judicial branches, and will contain a bill of rights. "(b) The executive power of the Northern Mariana Islands will be vested in a popularly elected Governor and such other officials as the Constitution or laws of the Northern Mariana Islands may provide. "(c) The legislative power of the Northern Mariana Islands will be vested in a popularly elected legislature and will extend to all rightful subjects of legislation. The Constitution of the Northern Mariana Islands will provide for equal representation for each of the chartered municipalities of the Northern Mariana Islands in one house of a bicameral legislature, notwithstanding other provisions of this Covenant or those provisions of the Constitution or laws of the United States applicable to the Northern Mariana Islands. "(d) The judicial power of the Northern Mariana Islands will be vested in such courts as the Constitution or laws of the Northern Mariana Islands may provide. The Constitution or laws of the Northern Mariana Islands may vest in such courts jurisdiction over all causes in the Northern Mariana Islands over which any court estab- lished by the Constitution or laws of the United States does not have exclusive jurisdiction. "SECTION 204. All members of the legislature of the Northern Mari- ana Islands and all officers and employees of the Government of the Northern Mariana Islands will take an oath or affirmation to support this Covenant, those provisions of the Constitution, treaties and laws of the United States applicable to the Northern Mariana Islands, and the Constitution and laws of the Northern Mariana Islands. "ARTICLE III "CITIZENSHIP AND NATIONALITY "SECTION 301. The following persons and their children under the age of 18 years on the effective date of this Section, who are not citizens or nationals of the United States under any other provision of law, and who on that date do not owe allegiance to any foreign state, are -564- 90 STAT. 266 PUBLIC LAW 94-241-MAR. 24,1976 declared to be citizens of the United SUtes, except as otherwise pro- vided in Section 802: 41 (a) all persons born in the Northerti Mariana Islands who am citizens of the Trust Territory of the Pacific Islands on the day preceding the effective date of this Section, and who on that date am domiciled in the Northem Mariana Islands or in the United States or any territory or possession thereof ; &A @ b) all persons who am citizens of the Trust Territory of the acific Islands on the day. mced' r the effective date of this Sec- tion, who have been domiciled con'tZnuously in the Northern Mari- ana Islands for at least five years immediately prior to that date, and who, unless iinder age, registeivd to vote in elections for the Marianas Islands District Legislature or for any municipal elec- tion in the Northern Mariana Islands prior to January 1, 1975; and "(c) all persons domiciled in the Northern Mariana Islands on the day preceding the effective date of this Section, who although not citizens of the Trust Tei ritory of the Pacific Islanasj on th"at date have been domiciled continuously in the Northern Mariana Islands beginning prior to January .1, 1974. "SF=iow 302. Any person who becomes a citizen of the United States solely by virtue of the provisions of Section 301 may within six months after the effective date of that Section or within six months after reaching the age of 18 yemrs, whichever date is the later, become a national but not a citizen of the United States by making a declara- tion under oath b?fore anv court established by the Constitution or laws of the United States i;r any court of record in the Commonwealth in the form as follows: 41 q being duly sworn, hereby declare my intention to be a national but not a citizen of the United States.' 11 "SEC"ON 303. All persons born in the Commonwealth on or after the effective date of this Section and subject to the jurisdiction of the United States will be citizens of the United States at birth. "SEcnow 304. Citizens of the Northern Mariana Islands will be entitled to all privileges --tnd immunities of citizens in the several States of the United States. "AmicLF IV JUDICIAL AUTIJORITY District Court for "SECTION 401. The United States will establish for and within the the Northern Northern Mariana Islands a court of record to be known as the Mariana Islands. 'District Court for the Northern Mariana Islands'. The Northern Establishment Mariana Islands will constitute a part of the same judicial circuit of the United States as Guam. "SEC"o-, 402. (a) The District Court for the Noilbern 'Mariana Islands will have the. jurisdiction of a district court of the United States, except that in all causes arising under the Constitution, treaties or laws of the United States it will have jitrisdiction regardless of the sum or value of the matter in controversy. " (b) The District Court will have original jurisdiction in all cause.-, in the Northern Mariana Islands not described in Subsection (a) ilirisdiction over which is not vested by the Constitution or laws of the Northern Mariana Islands in a court or courts of the Northern Mariana Islands. In causes brought in the District Court solely on -565- PUBLIC LAW 94-241-MAR. 24, 1976 90 STAT. 267 the basis of this subsection, the District Court will be considered a court of the Northern Mariana Islands for the purposes of determining the requirements of indictment by grand jury or trial by jury.. "(c) The District Court will have such appellate jurisdiction as the Constitution or laws of the Northern Mariana Islands may pro- vide. When it sits as an appellate court, the District Court will consist of three judges, at least one of whom will be a judge of a court of record of the Northern Mariana Islands. "SECTION 403. (a) The relations between the courts established by the Constitution or laws of the United States and the courts of the Norhtern Mariana Islands with respect to appeals, certiorari, removal of causes, the issuance of writs of habeas corpus and other matters or proceedings will be governed by the laws of the United States pertain- ing to the relations between the courts of the United States and the courts of the several States in such matters and proceedings, except as otherwise provided in this Article; provided that for the first fifteen years following the establishment of an appellate court of the Northern Mariana Islands the United States Court of Appeals for the judicial circuit which includes the Northern Mariana Islands will have jurisdiction of appeals from all final decisions of the highest court of the Northern Mariana Islands from which a decision could be had in all cases involving the Constitution, treaties or laws of the United States, or any authority exercised thereunder, unless those cases are reviewable in the District Court for the Northern Mariana Islands pursuant to Subsection 402 (c). "(b) Those portions of Title 28 of the United States Code which apply to Guam or the District Court of Guam will be applicable to the Northern Mariana Islands or the District Court for the Northern Mariana Islands, respectively, except RS otherwise provided in this Article. "ARTICLE V "APPLICABILITY OF LAWS "SECTION 501. (a) To the extent that they are not applicable of their own force, the following provisions of the Constitution of the United States will be applicable within the Northern Mariana Islands USC prec. title 1. as if the Northern Mariana Islands were one of the several States: Article I, Section 9, Clauses 2, 3, and 8; Article 1, Section 10, Clauses I and 3; Article IV, Section I and Section 2, Clauses 1 and 2; Amend- ments 1 through 9, inclusive; Amendment 13; Amendment 14, Section 1; Amendment 15; Amendment 19; and Amendment 26; provided, however, that neither trial by jury nor indictment by grand jury shall be required in any civil action or criminal prosecution based on local law, except where required by local law. Other provisions of or amend- ments to the Constitution of the United States, which do not apply of their own force within the Nortbern Mariana Islands, will be appli- cable within the Northern Mariana Islands only with approval of the Government of the Northern Mariana Islands and of the Government of the United States. "(b) The applicability of certain provisions of the Constitution of the United States to the Northern Mariana Island will be without prejudice to the validity of and the power of the Congress of the United States to consent to Sections 203, 506 and 805 and the proviso in Subsection (a) of this Section. -566- 90 STAT. 268 PUBLIC LAW 94-241-MAR. 24,1976 "SECTION 502. (a) The following laws of the United States in existence on the effective date of this Section and subsequent amend- ments to such laws will apply to the Northern Mariana Islands, except as otherwise provided in this Covenant: as otherwise provided in t "(1) those laws which provide federal services and financial assistance programs and the federal banking laws as they apply to Guam; Section 228 of Title II and Title XVI of the Social 42 USC 428, Security Act as it applies to the several States; the Public Health 1381. Service Act as it applies to the Virgin Islands; and the Microne- 42 USC 201 note. sian Claims Act as it applies to the Trust Territory of the Pacific 50 USC app. Islands; 2018. "(2) those laws not described in paragraph (1) which are applicable to Guam and which are of general application to the several States as they are applicable to the several States; and "(3) those laws not described in paragraph (1) or (2) which are applicable to the Trust Territority of the Pacific Islands, but not their subsequent amendments unless specifically made appli- cable to the Northern Mariana Islands, as they apply to the Trust Territory of the Pacific Islands until termination of the Trustee- ship Agreement, and will thereafter be inapplicable. "(b) The laws of the United States regarding coastal shipments and the conditions of employment, including the wages and hours of employees, will apply to the activities of the United States Govern- ment and its contractors in the Northern Mariana Islands. "SECTION 503. The following laws of the United States, presently inapplicable to the Trust Territory of the Pacific Islands, will not apply to the Northern Mariana Islands except in the manner and to the extent made applicable to them by the Congress by law after termination of the Trusteeship Agreement: "(a) except as otherwise provided in Section 506, the immigra- tion and naturalization laws of the United States; "(b) except as otherwise provided in Subsection (b) of Sec- tion 502, the coastwise laws of the United States any prohi- bition in the laws of the United States against foreign vessels landing fish or unfinished fish products in the United States; and "(c) the minimum wage provisions of Section 6, Act of June 25, 29 USC 206. 1938, 52 Stat. 1062, as amended. Commission on "SECTION 504. The President will appoint a Commission on Federal Federal Laws. Laws to survey the laws of the United States and to make recom- mendations to the United States Congress as to which laws of the United States not applicable to the Norhtern Mariana Islands should be made applicable and to what extent and in what manner, and which applicable laws should be made inapplicable and to what extent and in Membership. what manner. The Commission will consist of seven persons (at least four of whom will be citizens of the Trust Territory of the Pacific Islands who are and have been for at least five years domiciled con- tinuously in the Northern Mariana Islands at the time of their appoint- ments) who will be representative of the federal, local, private and public interests in the applicability of laws of the United States to the Reports to Northern Mariana Islands. The Commission will make its final report Congress. and recommendations to the Congress within one year after the ter- mination of the Trusteeship Agreement, and before that time will make such interim reports and recommendations to the Congress as it considers appropriate to facilitate the transition of the Northern Mari- ana Islands to its new political status. In formulating its recommenda- tions the Commission will take into consideration tile potential effect of each law on local conditions within the Northern Mariana Islands, -567- PUBLIC LAW 94-241-MAR. 24,1976 90 STAT. 269 the policies embodied in the law and the provisions and purposes of this Covenant. The United States will bear the cost of the work of the Commission. "SEcnow 505. The laws of the Trust Territory of the Pacific Islands, of the Mariana Islands District and its local municipalities, and all other Executive and District order-, of a local nature applicable to the Northern Mariana Islands on the effective date of this Section and not inconsistent with this Covenant or with those provisions of the Constitution, treaties or laws of the United States applicable to the Northern INItiriana Islands will remain in force and effect until and unless altered by the Government of the Northern Mariana Islands. "SEmox 506. (a) Notwithstanding the provisions of Subsection 503 (a), upon the effective date of this Section the Northern Mariana Islands will be deemed to be a part of the United States under the Imm I i@n :n n, A ct as amended for the following pur- 8 USC 1101 note. d Wa 'lit 0 @o igm tio i y I apply to the Northern Mariana s 01 1), a d the sa a Act wi' sl!@ t; t 6 ext t dica a nds h en in te in each of the following Subsections of this Section. " (b) With respect to children born abroad to United States citizen or non-citizen national parents permanently residing in the Northern Mariana Islands the provisions of Sections 301 and 308 of the said Act will apply. 8 USC 1401, ti(c) With respect to aliens who are 'immediate relatives' (as defined 1408. in Subsection 201 (b) of the said Act) of United States citizens who "Immediate am lpeymanently residing in the Northern Mariana Islands all the relatives." provisions of the mid Act will apply, commencing when a claim is 8 USC 1151. made to entitlement to 'immediate relative' status. A person who is certified by the Government of the Northern Mariana Islands both to have been a lawful permanent resident of the Northern Mariana Islands and to have had the 'immediate relative' relationship denoted herein on the effective date of this Section will be presumed to have been admitted to the United States for lawful permanent residence as of that date without the requirement of any of the usual procedures set forth in the said Act. For the purpose of the requirements of judicial naturalization, the Northern Wariana Islands will be deemed to constitutea State as defined in Subsection 101(a) paragraph (36) of the said Art. The Courts of record of the Northern Mariana Islands 8 USC 1101. and the District Court for the Northern Mariana Islands will be included among the courts specified in Subsection 310 (a) of the said Act and will hav . . sdiction to naturalize persons who become 8 USC 1421. Neuerlion and who reside within their respective eligible under this t jurisdictions. 41(d) With respect to persons who will become citizens or nationals of the United States under Article III of this Covenant or under this Section the loss of nationality provisions of the said Act will apply. "AxncLz VI 41 REVENUM AND TAXATION "SzcnoN 601. (a) The income tax laws in force in the United States will come into force in the Northern Mariana Islands as a local terri- torial income tax on the first day of Januar following the effective date of this Section, in the same manner as t ose laws are in force in Guam. St"(b) An individual who is a citizen or a resident of the United ates, of 6uam, or of the Northern Mariana Islands (including a -568- 90 STAT. 270 PUBLIC LAW 94-241--MAR. 24,1976 national of the United States who is not a citizen), will file only one income tax return with respect to his income, in a manner similar to the provisions of Section 935 of Title 26, United States Code. "(c) References in the Internal Revenue Code to Guam will be deemed also to refer to the Northern Mariana Islands, where not other- wise distinctly expressed or manifestly incompatible with the intent thereof or of this Covenant. Additional taxes "SECTION 602. The Government of the Northern Mariana Islands levied by Island may by local law impose such taxes, in addition to those imposed under government. Section 601, as it deems appropriate and provide for the rebate of any taxes received by it. except that the power of the Government of the Northern Mariana Islands to rebate collections of the local terri- torial income tax received by it will be limited to taxes on income derived from sources within the Northern Mariana Islands. "SECTION 603. (a) The Northern Mariana Islands will not be included within the customs territory of the United States. "(b) The Government of the Northern Mariana Islands may, in a manner consistent with the international obligations of the United States, levy duties on goods imported into its territory from any area outside the customs territory of the United States and impose duties on exports from its territory. "(c) Imports from the Northern Mariana Islands into the customs territory of the United States will be subject to the same treatment as imports from Guam into the customs territory of the United States. "(d) The Government of the United States will seek to obtain from foreign countries favorable treatment for exports from the Northern Mariana Islands and will encourage other countries to consider the Northern Mariana Islands a developing territory. "SECTION 604. (a) The Government of the United States may levy excise taxes on goods manufactured, sold or used or services rendered in the Northern Mariana Islands in the same manner and to the same extent as such taxes are applicable within Guam. "(b) The Government of the Northern Mariana Islands will have the authority to impose excise taxes upon goods manufactured, sold or used or services rendered within its territory or upon goods imported into its territory, provided that such excise taxes imposed on goods imported into its territory will be consistent with the international obligations of the United States. U.S. property "SECTION 605. Nothing in this Article will be deemed to authorize exclusion from the Government of the Northern Mariana Islands to impose any cus- customs duties. toms duties on the property of the United States or on the personal property of military or civilian personnel of the United States Govern- ment or their dependents entering or leaving the Northern Mariana Islands pursuant to their contract of employment or orders assign- ing them to or from the Northern Mariana Islands or to impose any taxes on the property, activities or instrumentalities of the United States which one of the several States could not impose; nor will any provision of this Article be deemed to affect the operation of the 50 USC app. 501. Soldiers and Sailors Civil Relief Act of 1940, as amended, which will be applicable to the Northern Mariana Islands as it is applicable to Guam. Northern "SECTION 606. (a) Not later than at the time this Covenant is Mariana Islands approved, that portion of the Trust Territory Social Security Retire- Social Security ment Fund attributable to the Northern Mariana Islands will be trans- Retirement Fund, ferred to the Treasury of the United States, to be held in trust as a transfer to U.S. Treasury. -569- PUBLIC LAW 94-241-MAR. 24,1976 90 STAT. 271 separaW fund to be known as the'NorthernMariana Islands Social Security Retirement Fund. This fund will be administered b the Administration. United States in accordance with the social security laws of the Trust Territory of the Pacific Islands in effect at the time of such transfer, which may be modified by the Government of the Northern Mariana Islands only in a manner which does not create any additional differ- ences between the social security laws of the Trust Territory of the Pacific Islands and the laws described in Subsection (b). The United States Nvill supplement such fund if necessary to assure that persons receive bi-iiefits therefrom comparable to those they would have received from the Trust Territory Social Security Retirement Fund under the laws applicable thereto on the day preceding the establish- ment of the Northern Mariana Islands Social Security Retirement Fund, so long as the rate of contributions thereto also remains comparable. " (b) Those laws of the United States which impose excise and self- employment taxes to support or which provide benefits f rom, the United States Social Security Svstem will upon termination of the Trusteeship Agreement or such ;arlier date as may be agreed to by the Government of the Northern Mariana Islands and the Govem- ment of the United States bocome. applicable to the Northern Mariana Islands as they apply to Guam. "(@) At such time as the laws described in Subsection (b) become applicable to the Northern Mariana Islands: "(1) the Northern Mariana Islands Social Security Retirement Fund will be transferred into the appropriate Federal Social Security Trust Funds; "(2) prior contributions by or on behalf,of persons domiciled in the Northern Mariana Isiands to the Trust Territory Social SecuritT Retirement Fund or the Northern Mariana Islands Social Security Retirement Fund will be considered to have been made to the appropriate Federal Social Security Trust Funds for the purpose of determining eligibility of those persons in the Northern Mariana Islands for benefits under those Iftws; and "(3) persons domiciled in the Northern Mariana Islands who are elirible for or entitled to social security benefits under the laws of the Trust Territory of the Pacific Islands or of the North- ern Mariana Islands will not lose their entitlement and will be eliqible for or entitled to benefits under the laws described in Subsection (b). "SEcno.v 607. (a) All bonds or other obligations issued by the Bonds and other Government of the Northern '.Nfnriana Islands or bV its authority will obligations, be exempt, as to principal nnd interest, from taxation by the United exemption. States, or bv any State, territory or possession of the United States, or any political subdivision of any of them. '1(b) During the initial seven yea, period of financial assistance provided for in Section 702, ftnd'during such subsequent periods of financial arqistance as may be agreed, the Government of the Northern Mariana Islands will Riftbori7e no public indebtedness (other than bonds or other obligations of the Government payable solely from revenues derived f rom any public improvement or undertaking) in excess of ten pereentum 6f the aggregate assessed valuation of the property within the Northern Mariana Islands. -570- 90 STAT. 272 PUBLIC LAW 94-241-MAR. 24,1976 "ARTICLE VII "UNITED STATES FINANCIAL ASSISTANCE "SECTION 701. The Government of the United States will assist the Government of the Northern Mariana Islands in its efforts to achieve a progressively higher. standard of living for its people as part of the American economic community and to develop the economic resources needed to meet the financial responsibilities of local self- government. To this end, the United States will provide direct multi- year financial support to to the Government of the Northern Mariana Islands for local government operations, for capital improvement rit. The initial period of such Seven year grant States will assistance, nd credit qof appropriation atqion for the authorization. els of direct grant assistance to the Government of the Northern Mariana Islands each of the seven fiscal years following the effective date of this Section: (a) $8.25 million for budgetary support for government operations of which $250,000 each year will be reserved for a special education training fund connected with the change in the political Status of the Northern Mariana Islands; (b) $4 million for capital improvement projects,of which $500,000 each year will be reserved for such projects on the Island of Tinian and $500,000 each year will be reserved for such projects on the Island of Rota; and (c) $1.75 million for an economic development loan fund, of which $500.000 each year will be reserved for small loans to farmers and fishermen and to agricultural and marine coopera- tives, and of which $250,000 each year will be reserved for a special program of low interest housing loans for low income families. Federal programs "SECTION 703. (a) The United States will make available to the and services Northern Mariana Islands the full range of federal programs and availability. services available to the territories of the United States. Funds pro- vided under Section 702 will be considered to be local revenues of the Government of the Northern Mariana Islands when used as the local share required to obtain federal_programs and services. "(b) There will be paid into the Treasury of the Government of tile Northern Mariana Islands, to be expended to the benefit of the people thereof as that Government may by law proscribe, the proceeds of all customs duties and federal income taxes derived from the North- ern Mariana Islands, the proceeds of all taxes collected under the internal revenue laws of the United States on articles produced in the Northern Mariana Islands and transported to the United States, its territories or possessions, or consumed in the Northern Mariana Islands, the proceeds of any other taxes which may be levied by the Congress on the inhabitants of the Northern Mariana Islands, and all quarantine, passport, immigration and naturalization fees collected in the Northern Mariana Islands, except that nothing in this Section shall be construed to apply to any tax imposed by Chapters 2 or 21 26 USC 1401. of Title 26, United States Code. 3101. SECTION 704. (a) Funds provided under Section 702 not obligated or expended by the Government of the Northern Mariana Islands -571- PUBLIC LAW 94-241-MAR. 24,1976 90 STAT. 273 during any fiscal year will remain available for obligation or expendi- ture b that Government in subsequent fiscal years for the purposes for Zeb, the funds were appropriated. " (b) Approval of this Covenant by the United States will constitute Pro-rats share, an authorization for the appropriation of a pro-rata share of the appropriation funds provided under Section 702 for the period between the effective a",hoitalim date of this Section and the beginning of the next succeeding fiscal year "(c) The amounts stated in Section 702 will.be adjusted for each fiscal year by a percentage which will be the same as the percentage change in the United States Department of Commerce composite price index using the beginning of Fiscal Year 1975 as the base. "(d) Upon expiration of tbeseven year period of guaranteed annual direct grant assistance provided by Section 702, the annual level of payments in each category listed in Section 702 will continue until Congress appropriates a aifferent amount or otherwise provides by law. "ARTICLr VIII 6&PROPERTY "SEcTiox 801. All right, title and interest of the Government of tile Trust Territory of the Pacific Islands in and to real property in the Northern Mariana Islands on the date of the signing of this C ovenant or thereafter acquired in any manner whatsoever will, no later than upon the termination of the Trusteeship Agreement, be transferred to the Government of the Northern Mariana Islands. All right, title and interest of the Government of the Trust Territory of the Pacific Islands in and to all personal property on the date of the signing of this Covenant or thereafter acquired in any manner whatsoever will, no later than upon the termination of the Trusteeship Agreement, be distributed equitably in a manner to be determined by the Goveimment of the Trust Territory of the Pacific Islands in consultation with those concerned, including the Government of the Northern Mariana Islands. "SEcTiov 802. (a) The following propert will be made avail-able L-sed property, to the. Government of the United States by Lase to enable it to carry U.S. defense out its defense responsibilities: purposes- 4( (1) on Tinian Island, approximately 17,799 acres (7,203 hectares) and the waters immediately adjacent thereto; " (2) on Saipan Island, approximately 177 acres (72 hectares) at Tanapag Harbor; and 14 (3) on Farallon de Medinilla Island, approximately 206 acres (83 hectares) encompassing the entire island, and ihe waters immediately adiacent thereto. (b) The United States affirms that it has no present need for or present intention to acquire any greater interest in property listed above thin that which is granted to it under Subsection 803(a), or to acquire any property in addition to that listed in Subsection (a), above, in order to carry out its defense responsibilities. "SEcnoN 803. (a) The Government of the Northern Mariana Islands will lease the property described in Subsection 802(a) to the Govern- ment of the United States for -a term of fifty years, and the Gov- ernment of the United States will have the option of renewing this ]ease for all or part of such property for an -additional term of fifty years if it so desires at the end of & first term. _572- 90 STAT. 274 PUBLIC LAW 94-241-MAR. 24,1976 11(b) The Government of the United States will pay to the Govern- ment of the Northern Mariana Islands in full settlement of this lease, including the second fifty year term of the lease if extended under the renewal option, the total sum of $19,520,600, determined as follows: " 1) for that property oil Tinian Island, $17.5 million; 46 2 for that property at Tanapag Harbor on Saipan Island, $2 lillion; and "(3) for that property known as Farallon de INfedinilla, $20,600. The sum stated in this Subsection will be adjusted by a percentage which will be the same as the percentage change in the United States Department of Commerce composite price index from the date of sign- ing the Covenant. Technical *'(c) A separate Technical Agreement Regarding Use of Lrand To Agreement Be Leased by the United States in the Northern Mariana Islands will ... nL T Regard' Use of be executed simultaneously with this Covenant. Vie terms of tile lease Land to the United States will be in accordance with this Section and with Leased by the U.S. the terms of the Technical Agreement, The Technical Agreement will also contain terms relating to the leaseback of property, to the joint use arrangements for San Jose Harbor and West Field on Tinian Island, and to the -principles whioh will govem the social structure relations between the United States military and the Northern Mari- ana Islands civil authorities. "(d) From the property to be ]eased to it in accordance with this Covenant the Government of the United States will lease back to tile Government of the Northern Mariana Islands, in accordance with the Technical Agreement, for the sum of one dollar per acre per year, approximately 6,458 acres (2,614 -hectares) on Tinian Island and approximately 44 acres (18 hectares) at Tanaj@ag Harbor on Saipan Island, which will be used for purposes compatible with their intended military use. Ne) From the property to be ]eased to it at Tanapag, Harbor on Saipan Island the Government of the United States wili'make avail- able to the Government of the Northern Mariana Islands 133 acres (54 hectares) at no cost, This property will be set aside for public use as an American memorial park to honor the American and Marianas dead in the World War 11 Marianas Campaign. The $2 million received from the Government of the United States for the kase of this property will be placed into a trust fund, and used for the develop- ment and maintenance of tile park in accordance with the Technical Agreement, "SEcTioiq 804. (a) The Government of the United States will cause all agreements between it and the Government of the Trust. Territory of the Pacific Islands which grant to the Government of the United States use or other rights in real property in the Northern Mariana Islands to be terminated upon or before the effective date of the Sec- tion. All right, title and interest. of tile Government of the Trust Territory of the Pacific Islands in and to any real property with respect to which the Government of the United States enjoys such use or other rights will be transferred to the Government of the Northern Mariana Islands at the time of such termination. From the time such right, title and interest is so transferred the Government of the North- ern Maxiana Islands will assure the Government of the United States the continued use of the real property then actively used by the Gov- ernment of the United States for civilian governmental purposes on terms comparable to those enjoyed by the Government of the United -573- PUBLIC LAW 94-241-MAR. 24,1976 90 STAT. 275 States under its arrangements with the Government of the Trust Territory of the Pacific Islands on the date of the signature of this Covenant. "(b) All facilities at Isely Field developed with federal aid and Isely Field all facilities at that field usable for the landing and take-off of air- facilities, craft will be available to the United States for use by military and availability to naval aircraft, in common with other aircraft, at all times without U.S. charge, except, if the use by military and naval aircraft shall be sub- stantiRl, a reasonable share, proportional to such use, of the cost of operating and maintaining the facilities so used may be charged at a rate estab) ished by agreement between the Government of the Northern Mariana Islands and the Government of the United States. "SECTION 805. Except as otherwise. provided in this Article, and [Andholding notwithstanding the other provisions of this Covenant, or those pro- restrictions. visions of the Constitution, treaties or laws of the United States applicable to the Northern Mariana Islands, the Government of the Northern Mariana Islands, in view of the importance of the owner- ship of land for the culture and traditions of the people of the North- ern Mariana Islands, and in order to protect them a.-ainst exploitation and to promote their economic advancement and self-sufficiency: "(a) will until twenty-five years after the termination of the Trusteeship Agreement, and may thereafter, regulate the aliena- tion of perinanentand long-term*interests in real property so asto restrict the anuisition of such interests to persons of Northern .Nlariana Isla as descent; and "(b) may regulate the extent towbich a person mayown orhold land which is now public land. "SEc-rtoN- 806. (a) The United States will continue to recognize and respect the scarcity and special importance of land in the Northern Mariana Islands. If the United States must acquire any interest in real property not transferred to it under this Covenant, h will follow the policy oi seeking to acquire only the minimum area necessary to a4womplish the public purpose for which the real property is required, of seeking only the minimum interest in real property necessary to support such public purpose, acquiring title only if the public purppse cannot be accomplisbed if a lesser interest is o6tained. and of seeking first to satisfy its requirement by acquiring an interest in public rather than private real property. " (b) The United States may, upon prior written notice to the Gov- @rnmetit of the Northern Mariana Islands, acquire for public purposes in accordance with federal laws and procedures any interest in real property in the Northern Mariana Islands by, purchas@' lease, exchange, gift or otherwise under such terms and conditions as may be nego- tiated by the parties. The United States will in till cases attempt to acquire any interest in real property for public purposes by voluntary means under this Subsection before exercising the power of eminer@t domain. No interest in real roperty will be acquired unless duly authorized by the Congress orthe United Statems, and appropriations are availRble therefor. 11(c) In the event it is not possible for the United States to obtain an interest in real property for public purposes by voluntary nicans. it may exercine within the 06minonwealtli the powe@ of emineni doinain to th@ sanic extent and in the saine manner as it has and can exercise ( lie power of eininent domain in a State of the Union. The power of Power of eminent eminent doinain will be exercised within the Commonwealth only to dornsin- the extent ncemsary and in coinpliance with applicable United States, laws, and with full recognition of the due process mquired by the United States Constitution. USC prec. title 1. -574- 90 STAT. 276 PUBLIC LAW 94-241-MAR. 24,1976 "ARTICLE IX NORTHERN MARIANA ISLANDS REPRESENTATIVE AND CONSULTATION "SECTION 901. The Constitution or laws of the Northern Mariana Islands may provide for the appointment or election of a Resident Representative to the United States, whose term of office will be two years, unless otherwise determined by local law, and who will be entitled to receive official recognition as such Representative by all of the departments and agencies of the Government of the United States upon presentation through the Department of State of a certifi- cate of selection from the Governor. The Represenative must be a citizen and resident of the Northern Mariana Islands, at least twenty- five years of age, and, a fter termination of the Trusteeship Agreement, a citizen of the United States. "SECTION 902. The Government of the United States and the Govern- ment of the Northern Mariana Islands will consult regularly on all Special matters affecting the relationship between them. At the request of representatives, either Government., and not less frequently than every ten years, the report. President of the United States and the Governor of the *Northern Mariana Islands will designiate special representatives to meet and to consider in good faith such issue.-, affecting the relationship between the Northern Mariana Islands and the United States as may be desig- nated by either Government and to make a report and recommenda- tions with respect thereto. Special representatives will be appointed in any event to consider and to make recommendations regarding future multi-year financial assistance to the Northern Mariana islands pursuant to Section 701, to meet at least one year prior to the expiration of every period of such financial assistance. "SECTION, 903. Nothing herein shall prevent the presentation of cases or controversies arising under this Covenant to courts estab- lisled by the Constitution or laws of the United States. It is intended that any such cases or controversies will be justiciable in such courts and that the undertakings by the Government of the United States and by the Government of the Northern Mariana Islands provided for in this Covenant will be enforceable in such courts. "SECTION 904. (a) The Government of the United States will give sympathetic consideration to the views of the Government of the Nothern Mariana Islands on international matters directly affecting the Northern Mariana Islands and will provide opportunities for the effective presentation of such views to no less extent than such oppor- tunities are provided to any other territory or possession under com- parable circumstances. Promotion of "(b) The United States will assist and facilitate the establishment local tourism. by the Northern Mariana Islands of offices in the United States and abroad to promote local tourism and other economic or cultural interests of the Northern Mariana Islands. (c) On its request the Northern Mariana Islands may participate in regional and other international organizations concerned with social.economic, educational. scientific. technical and cultural matters when similar participation is authorized for any other territory or possession of the United States under comparble circumstances. -575- PUBLIC LAW 94-241-MAR. 24,1976 90 STAT. 277 "ARTICLE X APPROVAL, EFFECTIVE DATES, AND DEFINTIONS SECTION 1001. (a) This Covenant will be submitted to the Mariana Islands District Legislature. for its approval. After its approval by the Mariana Islands District Legislature, at this Covenant will be sub- mitted to the people of the Northern Mariana Islands for approval in a plebiscite to be called by the United States. Only persons who are domiciled exclusively in the Northern Mariana Islands and who meet such other qualifications, including timely registration, as are promulgated by the United States as administering authority will be eligible to vote in the plebiscite. Approval must be by a majority of at least 55% of the valid votes cast in the plebiscite. The results of the plebiscite will be certified to the President of the United States. b This Covenant will be approved by the United States in Covenant accordance with its constitutional processes and will thereupon become approval by U.S. law. "SECTION 1002. The President of the United States will issue a Trusteeship proclamation announcing the termination of the Trusteeship Agree- Agreement ment, or the date on which the Trusteeship Agreement will terminate, termination; and the establishment of the Commonwealth in accordance with this establishment of Commonwealth, Covenant. Amy determination by the President that the Trusteeship proclamation. Agreement has been terminated or will be terminated on a day certain will be final and will not be subject to review by any authority, judicial or otherwise, of the Trust Territory of the Pacific Islands, tile Northern Mariana Islands or the United States. "SECTION 1003. The provisions of this Covenant will become effective Effective dates. as follows, unless otherwise specifically provided: ((a) Sections 105, 201-203, 503, 504, 606, 801, 903 and Article X will become effective on approval of this Covenant; " (b) Sections 102, 103, 204, 304, Article IV, Sections 501, 502, 505, 601-605, 607, Article V11, Sections 802-805, 901 and 902 will become effective on a date to be determined and proclaimed by the President of the United States which will be not more than 180 days after this Covenant and the Constitution of the Northern Mariana Islands have both been approved; and " (c) The remainder of this Covenant will become effective upon the termination of the Trusteeship Agreement and the establish- ment of the Commonwealth of the Northern Mariana Island". "SECTION 1004. (a) The application of any provision of the Consti- tution or laws of the United States which would otherwise apply to the Northern Mariana Islands may be suspended until termination of the Trusteeship Agreement if the President finds and declares that tile application of such provision prior to termination would be inconsistent with the Trusteeship Agreement. "(b) The Constitution of the Northen Maxiana Islands will become Constitution of effective in accordance with its term on the same day that the provisions the Northern of this Covenant specified in Subsection 1003(b) become effective. Mariana Islands, provided that if the President finds and declares that the effectiveness effective date. of any provision of the Constitution of the Northern Mariana Islands prior to termination of the Trusteeship Agreement would be incon- sistent with the Trusteeship Agreement such provision will be ineffec- -576- 90 STAT. 278 PUBLIC LAW 94-241-MAR. 24,1976 tive until termination of the Trusteeship Agreement. Upon the establishment of the Commonwealth of the Norhtern Mariana Islands the Constitution will become effective in its entirety in accordance with its terms as the Constitution of the Commonwealth of the Northern Mariana Islands. Definitions. "SECTIO N 1005. As used in this Covenant: "(A)'Trusteeship Agreement' means the Trusteeship Agree ment for the former Japanese Mandated Islands concluded between the Security Council of the United Nations and the United States of America, which entered into force on July 18, 1947; " (b) 'Northern Mariana Islands' means the area now known as the Mariana Islands District of the Trust Territory of the Pacific Islands, which lies within the area north of 14 DEGREES north latitude, south of 21DEGREES north latitude, west of 150degrees east longitude and east of 144degrees east longitude; "(c) 'Government of the Northern Mariana Islands' includes, as appropriate the Government of the Mariana Islands District of the Trust Territory of the Pacific Islands at the time this Covenant is signed, its agencies and instrumentalities, and its successors including the Government of the Commonwealth of the Northern Mariana Islands; " (d) 'Territory or possession' with respect to the United States includes the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam and American Samoa; "(e) 'Domicile' means that place where a person maintains a residence with the intention of continuing such residence for an unlimited or indefinite period, and to which such person has the intention of returning whenever he is absent, even for an extended period. "Signed at Saipan, Mariana Islands on the fifteenth day of Feb- ruary, 1975. "For the people of the Northern Mariana Islands: EDWARD DLG. PANGELINAN, Chairman, Marianas Political Status Commission. VICENTE N. SANTOS. Vice Chairman, Marianas Political Status Commission "For the United States of America: Ambassador F. HAYDN WILLIAMS, Personal Representative of the President of the United States. "Members of the Marianas Political Status Commission: Juan LG. CABRERA. VINCENTE T. CAMACHO. JOSE R. CRUZ. BERNARD V. Hofschneider BENJAMIN T. MANGLONA. DANIEL T. MUNA. Dr. FRANCISCO T. PALACIOS. JOAQUIN I. PANGELINAN. MANUEL A. SABLAN. JOANNEs B. TAIMANAO. PEDRO A. TENORIO." -577- PUBLIC LAW 94-241-MAR. 24,1976 90 STAT. 279 SEc. 2. It is the sense of the Congress that pursuant to section W2 Special of the foregoing Covenant and in any case within ten years from the representatives, date of the enactment of lis resolution, the President of the United appointment by States should request, on behalf of the United States, the designation President, report of special representatives to meet and to consider in good faith such to Congress. 48 USC 1681 issues affecting the relationship between the Northern Mariana Islands note. and the United States as may be designated by either Govemment and to make a report and recommendations with respect thereto. Approved March 24, 1976. LEGISLATIVE HISTORY- HOUSE REPORT No. 94-364 (Comm. on Interior and Insular Affairs). SENATE REPORTS: No. 94-433 (Comm. on Interior and Insular Affairs) and No. 94-596 (Committees on Foreign Relations and Armed Services). CONGRESSIONAL RECORD: Vol. 121 (1975): July 21, considered and passed House. Vol. 122 (1976): Feb. 24, considered and passed Senate, amended. Mar. 11, House concurred in Senate amendments. WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS: Vol. 12, No. 13 (1976): Mar. 24, Presidential statement. LIST OF DRAFT STAFF RECOMMENDATIONS CIRCULATED FOR COMMENT Draf- t-:- staff recommendations considered by Commission for inclusion in Commission's first Interim Report to the Congress of the United States. (January 1982). The Federal Tort Claims Act (see Public Law 97-357, S 204, 96 Stat. 1705 (1982)). Extending Certain Rights of United States Citizenship to Citizens of the Northern Mariana Islands (see Public Law 98-213, SS 17-25, 97 Stat. 1459 (1983); Public Law 98-94, �1006, 97 Stat. 628 (1983); Presidential Proclamation 5207, 49 Fed. Reg. 24365 (1984); Presidential Proclamation 4938, 47 Fed. Reg. 19307 (1982)): Part I. Federal Employment. Part II. The Uniformed Services. Part III. Protection and Services in Foreign Countries. Part V. Political and Civil Rights. Part VI. Federal Programs and Benefits. Part VII. Appointment to High office (not included in Interim Report). Part VIII. Statutory Construction. The Clean Air Act (see Public Law 98-213, � 11, 97 Stat. 1459 (1983)). Draft staff recommendations considered by Commission for inclusion in this report: The Federal Bankruptcy Laws (adopted; see Public Law 98-353, �� 101(a), 421(j)(7), 98 Stat. 333 (1984)). Government Depository Libraries (adopted). Nominations to the United States Military Academy, the United States Naval Academy, and the United States Air Force Academy (adopted). Allowing Foreign Air Carriers to Trans.port Passengers and their Luggage between the Northern Mariana Islands and Guam (original and revised versions) (not adopted) . -579- Creation of a Special United States Passport for Citizens of the Northern Mariana Islands (adopted). The Federal Intellectual Property Laws (adopted). Land Grant Colleges (adopted). Major Aquatic Permit Programs (adopted only with respect to Rivers and Harbors Act). The Fishery Conservation and Management Act and the Vessel Documentation Act (original and separate revised versions with respect to each Act),. (The revised staff recommendation on the Fishery Conservation and Management Act was adopted with changes. A second revised staff recommendation on the vessel documentation and vessel crewing laws is listed below.) The Higher Education Act (adopted with changes). Federal Crimes ( adopted) . The Federal Immigration and Nationality Laws (adopted with changes). The Wagner-Peyser Act, Establishing the United States Employment Service (adopted with changes). The Federal Banking Laws and Related Federal Housing Laws (adopted). A Nonvoting Delegate to the United States House of Representatives (original and revised versions) (revised version adopted with changes). The Securities Act of 1933 and the Securities Exchange Act of 1934 (adopted). Title 5 of the United States Code, Government Organization and Employees (adopted). Federal Contract Laws (adopted with changes). Federal Postal Laws (adopted with changes). Medicaid (original and alternate versions) (original version adopted with changes). Enforcement of Federal Laws in the Northern Mariana I sl a nds ( adop ted wi th ch ange s -580- Submerged Lands (adopted). Title 31 of the United States Code, Money and Finance (adopted). Ocean Surveillance (adopted). Tuna Fisheries (adopted with changes). Title 15 of the United States Code-, Commerce and Trade (adopted). Draft staff recommendations not acted on by Commission: Vessel Documentation and Vessel Crewing Laws (second revised version). Import Ouotas. Title 19 of the United States Coder Customs Duties. BIBLIOGRAPHY The books and articles in this bibliography are orqanized under the following headings: The Northern Mariana Islands. In general. The Covenant. --Neqotiatinq and Leqislative History. The Constitution of the Northern Mariana Tslands. The Econcmy. Education reoqraohv. Geoloqy. Government. Health. History. --before 1898. --1898-1944. --after 1944. Territories and possessions of the United States. In general. Guam. Applicability of the Constitution and laws of the United States. Federal camnissions. Trust Territorv of the Pacific islands: Termination of the trusteeship. Many of the works cited in this bibliography contain their own biblioqraphies. other references may be found in the comprehensive annotated biblioqraphies on Micronesia in aeneral and the Northern Mariana Islarxis in particular listed below: E. Bryan,, Land in Micronesia and its Resources: An Annotated Bibliography (1970). M. Marshall & J. Nason, Micronesia 1944-1974 (197-5). S. Ouinn & D. Villaacmez, The Northern Mariana Islands: An Annotated Bibliography (1978). Trust Territory of the Pacific Islands, A Bibliography of Reports, Survevs and Studies Prepared by, for, or about the Trust Territory of the Pacific Islands (1969). Pathways to Micronesia (rev. ed. 1976). Pathways to Science in Micronesia (1970). The Northern Mariana Islands: In oeneral. U.S. Bureau of the Census, 1980 Census of Population: Number of Inhabitants: Northern Mariana Islands (PCBO-1-A57A; 1982). 1980 Census of Povulation: General Population Characteristics: Northern Mariana Islands (PC80-1-B57A; 1983). 582 1980 Census of Population: Detailed Social and Economic Characteristics: Northern Mariana Islands (PC80-1-C/D57A.; 1984). The Northern Mariana Islands: The Covenant. Ccumnt, United Nations Trusteeship-Law to Approve the Covenant to Establisb a Ccnmnwealth of the Northern Mariana Islands in Political Union with the United States, P.L. @b. 94-241 (March 24, 1976), 18 Rarvard International. Law Journal 204 (1977). Dempsey, Self-determination and Security in the Pacific: A Study of the Covenant between the United States and the Northern Mariana Islands, 9 New York University Journal of International Law and Politics 277 (1976). Leary, The -Northern Marianas Covenant and American Territorial Relations (University of California, Berkeley, Institute of Governmental Studies, Research Fenort 8(@-1; 1980). Leibowitz, The Marianas Covenant Negotiations, 4 Fordham International Law Journal 19 (1981). Note, Inventive Statesmanship vs. the Territorial Clause: The Constitutionality of Agreements Limiting Territorial Pmers, 60 Virginia raw Review 1041 (1974). Note, The Comnonwealth of the Northern Mariana Islands: A Mass Grant of United States Citizenship, 8 Universi of California, Davis Law Review 453 (1975). Note, The Marianas, the United States, and the United Nations: The Uncertain Status of the New American Ccrmnwealth, 6 California West;rn International Law Journal 382 (1976). The Northern Mariana Islands: The Covenant-Neaotiating and Legislative Mi-story. 121 Congressional Record 6993-7002, 1209-90, 20479-80, 23399-402, 23662-73 (House approval), 24297-98, 24305, 39592, 39632-33, 42116-17 (1975). 122 Congressional Record 3588-90, 3775-77, 3795-96, 4019-4232 (Senate approval), 5136-37, 7272-73 (1976). Hearings before the Senate Committee on Foreign Relations on H.J. Res. 549, to Approve the Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States of America, 94th Conq-, lst Sess. (1976). Hearings before the Senate Committee on Interior and. Insular Affairs on the Dbrthern Mariana Islands, 94th Cong., lst Sess. (1975). - 583 Hearings before the Subcommittee on General Tp-qislation of the Senate Ccrmittee on Armed Services on P.J. Pes. 549, to Approve the "Covenant to Establish a Conmonwealth of the Northern Mariana Islands in Political Union with the United States of America," 94th Cona. , lst Sess. (1976). Hearings before the Subcommittee on Territorial and Insular Affairs of the House Ccirmittee on Interior and Insular Affairs on H.J. Pes. 549 et al. to Approve the "Covenant to Establish a Ccmmnwealth 7f -the Nlorthern Mariana islands," 94th Conq., lst Sess. (1975). Hearings be fore the Subcommittee on Territorial and Insular Affairs of the House Cawnittep on Interior and Insular Affairs on Marianas Political Status, 94th Com,. Ist Sess. (1975). Hearinn before the Subccipmittee on Territorial and Insular Affairs of the House Cannittee on Interior and Insular Affairs on Progress Peport on Trust Territory Status Negotiations, 93d Cong., Ist Sess. (1973). Hearing before the Subcommittee on Territorial and Insular Affairs of the House Camittee on Interior and Insular Affairs on Territories orientation Briefing, 92d Cong., Ist Sess. (1971). House Peport 94-364, Approving the "Covenant to Establish a Ccinm.nwealth of the Northern Mariana Island-, in Political Union with the United States of America" (Committee on Interior and Insular Affairs, 1975). H. Marcuse, Cbvenant to Establish a Ccmmonwealth of the Northern Mariana Islands (PL 94-241): Basic rbcumnt and Annotations (ms. U.S. Dep't of Justice 1976). Marianas Political Status Commission, Section-by-Section Analysis of the Covenant to Establish a Canmnwealth of the Northern Mariana Islands, reprinted in Hearings before the SubcaTnittee on Territorial and Insular Affairs of the Rouse Committee on Interior and Insular Affairs on the Covenant to Establish the Ccrrynonwealth of the Northern Mariana Islands, 94th Conq., lst Sess. 626 (1975) and in Hearings before the, Senate Ccmimittee on Interior and Insular Affairs on the Northern Mariana Islands, 94th Com ., Ist Sess. 356 (1975). office of Micronesian Status T\1eqot iat ions, Fxecutive office of the President of the United States, The Future Political Status of the Trust Territory of the Pacific Islands: Official Records of the Fourth Pound of Micronesian Future Political Talks, Koror, Palau, April 2-13, 1972, at 57-66 (1972). Marianas Political Status Negotiations, Ooening Round, Saipan, Dec-ember 13-14, 1972. Second Session, Saipan, May 15-june 4, 1973. Third Session, Saipan, December 6-1.9, 1973. - 584 - Fourth Session, Saipan, May 15-31, 1974. Fifth Session, Saipan, December 5-19, 1974. Fifth and Final Session (Second Part), February 4-15, 1975. 1 Public Papers of the Presidents: Gerald R. Ford 1975, at 898-901 (1977). Office of the Plebiscite Commissioner, The Covenant to Establish a Commonwealth of the Northern Mariana Islands in political Union with the United States of America Explained (1975), reprinted in Hearings before the Subcommittee on Territorial and Insular Affairs of the House Committee on Interior and Insular Affairs on H.J. Res. 549 et al. to Approve the "Covenant to Establish a Commonwealth of the Northern Mariana Islands," 94th Corr., Ist Sess. 543 (1975). The Plebiscite Commissioner Answers Some of Your Ouestions about the Plebiscite, the Covenant, and Commonwealth (n.d. 1975), reprinted in Hearings before the Subcommittee on Territorial and Insular Affairs of the House Committee on Interior and Insular Affairs on H.J. Res. 549 et al. to Approve the "Covenant to Establish a Commonweath of the Northern Mariana Islands," 94th Cong., Ist Sess. 502 (1975). Report of the Joint Drafting Committee on the Negotiating, History of the Covenant (1975), reprinted in Hearings before the Subcommittee on Territorial and Insular Affairs of the House Committee on Interior and Insular Affairs on H.J. Res. 549 et al. to Approve the "Covenant to Establish a Commonwealth of the Northern Mariana Islands, 94th Cong Ist Sess. 374 (1975). Senate Report 94-433, The Covenant to Establish a Commonwealth of the Northern Mariana Islands (Committee on Interior and Insular.Affairs, 1975). Senate Report 94-596, Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States of America (Committee. on Foreign Relations, 1976). United Nations Trusteeship Council, Report of the United Nations Visiting Mission to observe the Plebiscite in the Mariana Islands District, Trust Territory of the Pacific Islands, June 1975 (United Nations Document T/1771, supp. no. 3; 1976). Report of the United Nations Visiting Mission to the Trust Territory of the Pacific Islands, 1976, at 396, 398-99, 403, 406, 420 (United Nations Document T/1774, supp. no. 3; 1976). U.S. Dep't of Interior, Order 2973, "Plebiscite in the Mariana Islands District" (April 10, 1975) with attached proclamation by the Secretary of the Interior, 40 Fed. Reg. 17300 (1975). 585 U.S. Dep't of Justice, Explanation of the Covenant (n.d. 1975?), reprinted in Hearings before the Subcommittee on Territorial and Insular Affairs of the House Ccitrittee on Interior and Insular Affairs on H.J. Res. 549 et al. to Approve the "Covenant to Establish a ComTrionwj'a-1th of the @brthern Mariana Islands, 94th Cong., lst Sess. 384 (1975). (This document, also known as the "Administration Memorandum" or the "Marcuse Memorandum"--after its author--, is further identified at pages 626 and 6,Ql of the forernentioned hearings.) The Northern Mariana Islands: The Constitution of the Northern Mariana Islands. Branch, The Constitution of the Northern Mariana Islands: Does a .Different Cultural Settinq Justify Different Constitutional Standards?, 9 Denver Journal ot International Law 35 (1980). Journal of the Northern Mariana Islands Constitutional Convention of 1976 (1976). Northern Mariana Islands Constitutional Convention, Analysis of the Constitution of the Commonwealth of the Northern Mariana Islands (1976). (The Analysis was formally approved by Resolution No. 16 of the Convention.) Willens & Siemer, The Constitution of the 1\3orthern Mariana Islands: Constftutional 7 @incipHes end Innovation in a Pacific Setting, 65 Georgetown Law Journal 1973 (1977). Wilmer, Cutler & Pickerinq, 13riefinq Papers: Northern Marianas Constitutional Convention, 1976 (2 vols. 1976). The Northern Mariana Islands: The Economv. Case & Schaller, Appropriate Energy Technology in the U.S. Pacific Territories, 2 Solar Law Reporter 1083 (1981). Comronwealth of the Northern Mariana Islands, Dep't of CaTmrce & Labor, Advantages of Doing Business in the Camonwealth of Northern Mariana Islands, America's Newest Jurisdiction (n.d. 1984?) Commonwealth of the Northern Mariana Islands, Fisheries Development Plan (1981). Overall Economic Developmnt Stateqy (1984). Dator, Alternative Futures for the Commonwealth of the Northern Mariana Islands, 34 Political Science (New Zealand) 26 (1982). Emerick, 'Land Tenure in the Marianas, in J. deYounq (ed.), Land Tenure Patterns (1958). 586 - Kent, Development Planning_ for Micronesia, 34 Political Science (New Zealand) 1 (1982). McGrath, Resolving the Land Dilei-ra: An Historical Outline of 1znd Tenure Development in vicronesia, 19 Micronesian Reporter (Ist Ouarter 1971), at 9. M. Nakayama & F. Ramp, Micronesian Navigation, Island Empires, and Traditional. Concepts of ownership of the Sea (1974). Nordquist & Moore, Emerging Law of the Sea: Issues in the t1ariana Islands, 7 Journal of International Law and Econcmics 43 (1972). Pacific Basin Development ronference, Econamic Growth and Development Through Unity (1980). Robert R. Nathan Associates, Inc. , Assessment of Current and Prospective Socio-economic Conditions in the Camonwealth of the @brthern Mariana Islands (1980). Smith, Land Tenure on Rota, Mariana Islands, 1.0 Micronesica (journal of the University of Q5 ) 223 (1974). The Northern Mariana Islands: Education. Pacific Postsecondary Education Council, Recamxe ndat ions for Postsecondary Education in the U.S. Territories (1982). Urban Systems Pesearch and. Engineers, Postsecondary Education in the U.S. Territories (1982). The Northern Mariana Islands: Geography. E. Bryan, Guide to Place Narnes in the Trust, Territory of the Pacific Islands (1971). The Northern Mariana Islands: Geology. Thams J. Davis, Inc., Saipan Island Water Plan (1973). Trust Territory of the Pacific Islands, Micronesian Minerals: An Abstract of Available Information (1971). U.S. Geolopical Survey, 0--oloqy of Saipan, Mariana Islands (Professional Paper 280; 195P). Military Geolony of Pagan, Mariana Islands (1957). Military Geology of Tinian, Mariana Islands (2 vols. 1960). The Northern Mariana Islands: Goverm-ent. Code of the Caqnonwealth of the Northern Mariana Islands (2 vols. 1984) (cited in this report as "Code of the Northern Mariana Islands"). U.S. General Accounting Office, Limited Progress Made in Consolidating Grants to Insular Areas (Report GGD-81-61; 1981). 587 - Problems with New Responsibilities of Self-Cloverment in the Northern Mariana Islands (Report ID-80-20; 1980). The Northern Mariana Islands: Health. Robert Plytinger Associates, Inc., @@w Directions for Health Services for the Cammnwea-l-th of the t\brthern Mariana Islands (1980). U.S. General Accounting Office, WaVs to Reduce the Cost of Medical Peferral Proarams in Micronesia and Arerican Sarroa (Report (M/NSAID-84-139; 1984). The Northern Mariana Islands: History--in general. Alkire, The Carolinians of Saipan and the Cormnwealth of the Nortl@e-rn Mariana Islands, 57 Pacific Affairs 270 (19PA). F. Hezel & M. R-erq (eds.), Micronesia: Winds of Change: A Book of Readings on Micronesian History (n.d. 1980?) S. Russell, Fran Arabwal to Ashes: A Brief History of Garanan Village: 1818 to 1945 (Micronesian Achaeological Survey Report 19; 1984). Northern Mariana Islands: History-before 1898. Bellwood, The Peoplina of the Pacific, 243 Scientic American (NbveTnber 1980), at 174. Craib, Micronesian PrehistoKy: An Archeolooical Overview, 219 Science 922-27 (1983). H. Friis (ed.), The Pacific Basin: A History of Gecx-iraphical Exploration (1967). Hezel, A Second Look: Conmiest of the Marianas, Pacific T)aily News (Guam), Islander supplement, Mav 2, 1982, at 6. Linker, Depc@nulation in Micronesia: Marianas, Pacific, March-April 1982, at 35. Spoehr, Conquest Culture and Colonial Culture in the Marianas during the Spanish Period, in N. Gunson (ed.), The Changing Pacitic 247 (1978). A. Spoehr, Marianas Prehistory: Archaeological Survey and Excavations on Saipan, Tinian, and 'Rota (1957). L. Thompson, Archaeoloo of the Marianas Islands (Pernice P. Bishop Museum Bulletin 100; 1932). The Native Culture of the Marianas (Bernice P. Bishop Museum Bulletin 185; 1945). Underwood, The Native origins of the Neo Char-lorros of the Mariana Islands, 12 Micronesica (journal of the university of Guam.) 203 (1976). The Northern Mariana Islands: History-1898-1944. Ballendorfr Japa se Bastions in the Pacific, Micronesian Reporter (Ist 1972), at 17. Blakeslee, Japan's Mandated Islands, 11 Department of State Bulletin 764 (1944). P. Clyde, Japan's Pacific Mandate (1935). 4 W. Craven & J. Cate (eds.), The Amy Air Forces in World War II: The Pacific: Guadalcanal to Saipan (1944). 5 W. Craven & J. Cate (eds.), The Amy Air Forces in World War II: The Pacific: Matterhorn to Nagasaki June 1944 'to August 1945 (1953), at 507-576, 703-756. P. Crawl, The United States Army in World War II: The War in the Pacific: Campaign in the Marianas (1960). Evans, Would Japanese Withdrawal fran the LeeEe Affect the Sta@us of the Japanese Mandate?, 27 American Journal of International Taw 140 (1933). Gilchrist, The 4a2anese Islands: Annexation or Trusteeship?, 22 Foreign Attairs, 635 (19447-. B. Hart, History of the Second World War (1st American ed. 1971), at 617-20. Heneman, The Administration of Japan's Pacific Mandate, 25 American Political-S-R-e-nce Review 1029 (1931). Japanese Goverment, Report to the Council of the League of Nations on the Administration of the South Sea Islands under Japanese Mandate (annual, 1922 through 1938). 8 S. Morison, History of United States Naval Operations in World War II: New Guinea and the Marianas (1959). Nishi, An Evaluation of ' Japanese Agricultural and Fishery Developsent in Micronesia during the Japanese Mandate, 1914 to 1941, 4 Micronesica (Journal of the University of Guam) 1 (19687 7. E. Pcmercy, Pacific Outpost: American Strategy in Guam and Micronesia (1951). F. Pratt, Vbr for the TAbrld (1950), at 210-22. W. Price, Japan's Islands of Mystery 34-46 (1945). Russell, Ube n Saipan was Deutsch, Pacific, March-April 1982, at 21. U.S. Dep I t of the Navy, Chief of Naval Operations, Administrative Orqanization and Personnel of the Japanese Mandated Islands (1944). Civil Affairs Handbook: Mandated Mariana Islands (1944). Williams, Japan's Mandate in the Pacific, 27 American Journal of InternatTonal 428 (1933). T. Yanaihara, Pacific Islands Under Japanese mandate (1940). The Northern Mariana Islands: History@after 1944. N. Bowers, Problems of Resettlement of Saipan, Tinian, and Rota, Mariana Islands (Coordinated Investigations of Micronesia Report 31; 1950). - 589 Brewer, Trusteeship in- the Pacific, I Editorial Research Reports 377 (1945). Comment, 7urisdiction-Territories--Government of Trust Territory of the Pacif ic Islands is not an Agency of the Un-ited States for PUR22es of Jurisdiction over Breach of Contract and Unconstitutional Taking Clai . 15 Virginia Journal of International Law 1029 (1975). Comment Self-executincj Treaties-Trusteeship Agreements -Citizens of Trust Terri@= of the Pacif ic Islands Have Ri2hts Under the Trusteeship Ag nt which are Judicially Enforceable, 10 Texas International Taw Journal 138 (1975). A* Dean (ed.5-, Issues in Micronesia (U.S. Paper No. 5, 10th Conference of the Institute of Pacific Relations, Stratford-upon-Avon, England, 1947). Embree, Military Government in Saipan and Tinian, 5 Applied Anthropology 1 (1946). Re Emerson, et ale, Anerica's Pacific Dependencies (1949). Galep A New Political Status for Micronesia, 51 Pacific Affairs 4 TI-97- 27 87. Re Gale, The Americanization of Micronesia: A @tudy of the Consolidation of U.S. Rule in the Pacific (1979). E. Gallahue, The Economy of the Mariana Islands (ms. 1946) (volume 5 of the U.S. Commercial Company's mimeographed Economic Survey of Micronesia). Hearing before the Senate Committee on Foreign Relations on the Trusteeship Agreement for the Ile-rritory of the Pacific Islands, 80th Cong., lst Sess. (1947). C. Heine, Micronesia at the Crossroads: A Reappraisal of the Micronesian Political Dilemma (1974). Hezelo, Micronesia: Yesterday's Myths, Today's Realities, 142 r America 434 (1980). Hills, Micronesia-cur Sacred Trust, Center Magazine (Sept r--October 1980), at 21. Jacobson, Our "Colonial" Problem in the Pacific, 39 Foreign Affairs 56 (1960)0 E. Kahn, A Reporter in Micronesia (1966). McPhetres, Elections in the Northern Mariana Islands, 35 Politicaf-911le"noe (New Zealand) 103 (1983). N. Maller, The Congress of Micronesia: Develcpment of the Legislative Process in the Trust Territory of the Pacific Islands (1969). Mink, Micronesia: our Bungled Trust, 6 Texas International Law Forum 181 (1971). D. D.Tevin, The American Touch in Micronesia (1977). Note, Custom, Code and Courts in Micronesia, 5 Stanford Law Review 46 (1952). Nbte, Judicial Review of the Unreviewable: The Ralpho and Melong Cases, 9 Law & Policy in Internaiiona-f-Business f283 (1977). He Fufer, Micronesia under American Rule: An Evaluation of the Strategic Trusteeship (1944-77) (1978). 590 - Olsen, Piercinq Micronesia's Colonial Veil: Enewetak v. Laird and ?;-9'1pan v. Department of interior, 15 Columbia Journal of Transnational Law 473 (1976). President , of the United States, Messaqe transmitting Recorurendation to the Conaress Enablinq this Governnent to AT)prove the Trusteeship AqreEment for the Territory of the Pacific Islands (with related materials), House T)ocument 378, 80th Conq., lst Sess. (1947). Resident Representative to the United States of America for the %rthern Mariana Islands, Annual Report (report to the Governor and -Teaislature of the Northern Mariana Islands; since 1979; title varies). D. Richard, United States Naval Administration of the Trust Territory of the Pacific Islands (3 vols. 1957). A. Spoehr, Saipan: The Ethnoloqy of a War-devastated island (1954). P. Trumbull, Paradise in Trust: A 'P4--port on Americans in Micronesia, 1946-58 (1959). U.S. Dep't of the Navy, Chief of Naval Operations, Handbook on the Trust Territory of the Pacific Islands: A Handbook for Use in Training and Administration (1948). U.S. Dep't of State, Trust Territory of the Pacific Islands (report to the United Nations; annual, since 1954). (The annual report -r-o the United Nations on the Trust Territory of the Pacific Islands was previously prepared by the U.S. Department of the Navy, for 1948 to 1951, and the U.S. repartment. of the Interior for 1952 and 1953. See also the annual reports on the Trust Territory of the Pacific Islands prepared, since 1952, by the High Commissioner of the Trust Territory.) 1 M. Whiteman, Digest of International Law 731-839 (1963). 13 M. Vbliteman, Digest of International Law 685-90 (1968). Williams, Administration of the Natives of Saipan, 23 American Foreiqn Service Journal, April 1946, at 7. Territories and possessions of the United States: In general Connent, Alaska and Hawaii: From Territoriali@y to Statehood, 38 Calirornia Law Review 273 (1950). Federal Territorial Policy, I Public Papers of the Presidents: Jimmy Carter 1980-81, at 317 (1981). Knorr, Pimerican Government of Overseas Dependencies, in Symposiur, on Principles and Methods of Colonial Administration, at 98 (Colston Research Society, University of Bristol, Emland, 1950). R. Littler, The Governance of Hawaii (.1929). A. Leibowitz, Colonial Emancipation in the Pacific and the Caribbean (1976). The Camionwealth of Puerto Rico: Trying to Gain Dignity and Maintain Culture, 11 Georgia Journal of International and Comparative Law 211 (1981). - 591 - United States Federalimr: Tbe States and the Territories, 28 American University Law Review 449 (1979). Maqruder, The Commonwealth Status of Puerto Rico, 15 University of Pittsburgh Law Review 1 (1953). Nader, The Commnwealth Status of Puerto Rico, Harvard Law Record, December 13, 1956, at 2. W. Perkins, Denial of Empire (1962). E. Pomeroy, The Territories and the United States, 1861-1890 (rev. ed. 1969). Potter, The Nature of American Territorial Expansion, 15 American Journal of Inter onal Law 189 (1921). Rodriquez, Colonial Representation in the American aTpire, 15 American Journal of International Law 530 (1921). U.S. General Accountinq Office, Experiences of Past Territories Can Assist Puerto Pico Status Deliberations (Report G,GD-80-26; 1980). Issues Affectirp U.S. Territory and Insular Policy (Report GAO/NSIAD-R5-44; 1985). Puerto Rico's Political Future: A Divisive Issue With Many Dimensions (Report GGD-81-48; 1981). R. Van Cleve, The Office of Territorial Affairs (1974). D. Wainhouse, Remnants of Phpire: The United Nations and the End of Colonialism.115-31 (1964). TAI. Willoughby, Territories and Dependencies of the United States (1905). Territories and possessions of the United States: Guam. C. Beardsley, Guam Past and Present (1964). P. Carano & P. Sanchez, A Complete History of Guam (1964). L. Cox, The Island of Guam (rev. ed. 1926; see also the 1917 revised edition). J. Holmes, 'Ihis is Guam (1953). R. Roqers, Guam's Search for Ccmmonwealth Status (University of Guam, Micronesian Area Research Center, Educational Series No. 4; 1984). R. Stevens, Guam, U.S.A.: Birth of a Territory (1953). L. Thompson, Guam and its -People (1947). Territories and possessions of the United States: Applicability of the Constitution and laws of the United States. Chovanes, Patents, Trademarks, and Copyrights in the Trust Territory of the Pacific Islands, 42 Journal of the Patent URT11-c-e Society 254 (.1960). Camment, International Law-Trusteeship as Foreign Country--Status of Kwajalein under the Federal Tort Claims Act, 4 Villanova Law Review 149 (1958). Coudert, The Evolution of the Doctrine. of Territorial Incorporation, 29 Columbia law Review 824 (1926). 0 - 592 - George, The United States in the Ryukyus: TheInsular Cases Revived, 39 New York University Law Review 785 (1964) Green, Applicability of American Laws to Overseas Areas Controlled by the United States, 68 Harvard Taw Review 781 (1955) Hoff, U.S. Federal Tax Policy Towards the Territories: Past, Present, and Future, 37 Tax Taw Review 51 (1981) Laughlin, The Application of the Constitution in United States Territories: American Samoa, A Case Study, 2 University of Hawaii Law Review 337 (1981). Leibowitz, American Samoa: recline of a Culture, 10 California Western International Law Journal 220 (1980). The Applicability of Federal Law to Guam, 16 Virginia Journal of International Law 21 (1975). The Applicability of Federal Law to the Commonwealth of -Puerto Pico, 56 Georgetown law Journal 219 (1967). Liebman, Income Tax Incentives for Investment in the Northern Mariana Islands, 2 University of Hawaii Law Review 389 (1981). McShane, Is the Jury System Suitable for the Commonwealth of the Northern Mariana. Islands?, 34 Political Science (New Zealand) 66 (1982). Note The Application of the American Constitution to American Samoa, 9 Journal of International Law and Economics 325 (1974). Rodriquez Antongiorgi, Review of Federal Decisions on the Applicability of United States Laws in Puerto Rico Subseauent to the Establishment of the Commonwealth of Puerto Rico, 26 Revista Juridica de la Universidad de Puerto 321 (1957). J. Smurr, Territorial Jurisprudence: What the Judges Said about Frontier Government in the United States of America During the Years 1787-1900 (2 vols., University Microfilms; 1970). U.S. Dep't of the Treasury, Territorial Incame Tax Systems: Income Taxation in the. Virgin Islands, Guam, the Northern Mariana Islands and American Samoa (1979) When the United States acauired Hawaii and--as a result of the Spanish-American War-Guam, Puerto Rico, the Philipine Islands, and Cuba, many law review articles addressed the status of those areas under the Constitution of the United States. Some of these articles were written by leadinq legal scholars of that era. Several of these articles are listed below: Baldwin, The Constitutional Ouestions Incident to the Acquistition and Government by the United States of Island Territory, 12 Harvard Law Review 393 (1899). Cooley, Grave Obstacles to Hawaiian Annexation, 15 Forum. 389 Fuller, Some Constitutional Questions Suggested by Recent Acquisitions, 1 Columbia law Review 108 (1901). 593 ram Idell, The Status of Our New Territories- 12 @ Harvard Law- Review 365 (1899). Littlefield, The Insular Cases,, 15 Harvard Law 'Review 169, 281 (1901). Lowell#, The Status of Our New Possessions, 13 Harvard Taw Review 155 (1899). Palfrey, The Growth of the Idea of Annexation, and its Preaking Upon Constitutional Law, 13 Harvard Law Peview 371 UP99). Randolph, Constitutional Aspects of Annexation, 12 Harvard Taw Review 38 (1898). The Insular Casesi 1 Columbia law Review 436 (1901). Thayer, Our New Possessions, 12 Harvard Law Review 464 (1899). Territories and possessions of the United States: Federal Camissions. American Saman Camission Report, Senate Document 249, '71st Cong., 3d Sess. (1931). J. Gra v, Amerika Samoa (1960), at 220-30. House Committee on Interior and Insular Affairs, Report of the Commission on the Application of Federal Laws to the Virgin Islands (1956). Resource Materials Used. in the Preparation of the ReDort of the Commission on Application of Federal Laws to Guam (committee print 1952). R. Moore & J. Farrington, The American Saroan Commission's Visit to Samoa (1931). h3orthern Mariana Islands Ccmission on Federal Laws, Interim Report to the Congress of the United States (1982). Report of the Commission on the Anplication of Federal Laws to Guam, House Document 212, 82d Corp., lst Sess. (1951). Report of the Hawaiian Ccrnmission, Senate Document 16, 55th Cong., 3d Sess. (1898). Report of the Joint Commission on Conditions in the Virgin Islandsr House Document 734, 66th Cong., 2d 9ess. (1920). Reports of the United States (Taft) Philippine Commission, Senate Document 112, 56th Corp., 2d Sess. (1901). Trust Territory of the Pacific Islands: Termination of the trusteeship. Armstrong, Strategic Underpinni@2s of the @@al Regime of Free AssociaFl'on: The Negotiations for the Future Political Status of Micronesia, 7 Brooklyn Journal of International Law 179 (1981). The Emergence of the Micronesians into the International Camyunity: A Study of the Creation of a New International Entity, 5 Brooklyn Journal of International Law 207 (1979). 594 - The N@gotiations for the Future Political Status of Mi7c-ronesia, 74 Ainerican Journal of International Law 69-9 (1980). Blaz & Lee, The Cross of Micronesia, 23 Naval War College Review 59 (1971). Clark, Self-Determination and Free Association: Should the United Nations Terminate the Pacific Islands Trust?, 21 Farvard International Law Journal 1 (1981.). Ccmment, Constitutional Law--Executive Agreements.- International Law--Executive Authority Concerning the Future Political Status of the Trust Territory of the Pacific Islands, 66 Michigan Law PevTew 12 7 (1968). Ccrw@eent, International Law and Dependent Territories: The Case for Micronesia, 50 Temple Law Quarterlv 58 (1976). S. DeSmith, Microstates and Micronesia: Problems of Am@rfcals Pacific Islands and Other Minute Territories (1970). G. Goodman & F. Moos (eds.), The United States and Japan in the I-Nbstern Pacific: Micronesia and Papua New Guinea (1981). Green, Amrica's Strategic _ Trusteeship Dilema: Its Humanitarian Obligations, 9 Texas International Law Journal 19 (1974). Termination of the U.S. Pacific islands Trusteeship, 9 Texas International Law Journal 175 (1974). Hills, Compact of Free Association for Micronesia: Constitutional and International Law Issues, is International Lawyer 583 (1984). Holdridge, U.S. Interests in the Pacific Island Pegion, 82 Department of State Bulletin 59 (1982). D. Hughes & S. Linqenfelter, Political Development in Micronesia (1974). Leary, American Policy in Micronesia: An Assessment, 5 Journal of the College of the Virqin Islands 125 (1979). Lincoln, The Mariana Islands, in W. Louis (ed.), National Security and InternatTo-nal Trusteeship in the Pacific (1972). Macdonald, Termination of the Strategic _ Trusteeship: Free Association, the United NaF31-o-ns, and International Law, 7 Brooklyn Journal of International Law 235 (1981). P. Manhard, The United States and Micronesia in Free Association: A Chance to Do Better? (National Defense University, National Security Affairs Monograph 79-4; 1979). D. McHenry, Micronesia: Trust Betrayed (1975). metelski, Micronesia and Free Association: Can Federalism Save Them?, 5 California Western International Law Journal 162 (1974). 0 - 595 Mihaly, Tremors in the Western Pacific: Micronesian Freedom. and U.S. Security, 52 Foreign Affairs 839 (1974). Note, A Macrostudy of Micronesia: The Ending of a Trusteeship, 18 New York Law Forum 139 (1972). Quigg, Coming of age in Micronesia, 47 Foreign Affairs 493 (1969). Rosenblatt, Introduction, 7 Brooklyn Journal of International law 173 (1981). Rotov, Micronesia: Trusteeship American Style, International Affairs (Moscow), April 1981, at 103. Sayre, Legal Problems Arising from the United Nations Trusteeship System, 42 American Journal of International Law 263, 288-90 (1948). The Applicability of the Principle___ of Self-Determination to Unintegrated Territories of the United States: The Cases of Puerto Rico and the Trust Territory of the Pacific Island, 67 American Journal of International Law (Proceedings) (1973) (1973). J. Webb, Micronesia and United States Pacific Stategy: A Blueprint for the 1980s (1974). Turmoil in 'Paradise: Micronesia at the Crossroads, 98 U.S. Naval Institute Proceedings 26 (1972). 20 Weekly Compilation of Presidential Documents 454 (1984). 21 Weekly Compilation of Presidential Documents 203 (1985). 1 M. Whiteman, Digest of International Law 897-911 (1963). STAFF OF THE NORTHERN MARIANA ISLANDS COMMISSION ON FEDERAL LAWS Daniel H. MacMeekin Executive Director John A. Cutler Staff Counsel Dianne L. Brickey Secretary to the Executive Director and Word Processing Specialist Michelle Monroe Secretary The following persons also served on the Commission's staff during the periods indicated: Jose S. Dela Cruz, Northern Mariana Islands Liaison Attorney, January 1981-May 1983 Jeffrey V. Nackley, Attorney, May 1982-August 198.3 Trevor A. Haydon, Special Assistant, September- November 1982 Guadelupe Flores, Secretary, Northern Mariana Islands Office, June-August 1981 Antonia Mafnas, Secretary, Northern Mariana Islands office, October-December 1981 Hermana Gridley, Secretary, Northern Mariana Islands Office, February-June 1982 Lillian Villagomez, Secretary, Northern Mariana Islands Office, June 1982-May 1983 Photography: Front cover and all photos on back cover except tank and beach scene (at lower left) courtesy of Carole Mathison, photographer for Commonwealth Council for Arts and Culture, Northern Mariana Islands Department of Community and Cultural Affairs. Photos of tank and beach scene courtesy of Nancy MacMeekin. AV 1V Aw a MIJ 4 111 :1N a) 0 LA Ofi, 17 fill w j6.@7 TI,