DOING BUSINESS IN THE MARIANAS NETWORKING COSTS AND

DOING BUSINESS IN THE MARIANAS: NETWORKING, COSTS AND REGULATORY ISSUES www. Sherman. Pacific. com 2

WHEN IN ROME…. DO AS THEROMANS DO si fueris Rōmae, Rōmānō vīvitō mōre; si fueris alibī, vīvitō sicut ibi “if you were in Rome, live in the Roman way; if you are elsewhere, live as they do there” “Ha’dahi na ti’un respeta I kuturan I lugat” “Be careful that you don’t disrespect the culture of the place” Four Issues of Paramount Importance: Respect our LAND, Respect our CULTURE, Respect our PEOPLE & Respect our ENVIRONMENT www. Sherman. Pacific. com

AVOID COSTLY MISTAKES BY NETWORKING LOCALLY • Immerse yourself in the community – • Seek out and sponsor local sporting and community events – • Join organizations such as the local Chamber of Commerce, the Contractor’s Association, the Rotary Club, the Lions Club, a local Church or other community organizations (see handout in conference bag) Sponsor events hosted by the University of Guam, the Guam Community College, the Northern Marianas College, the Small Business Development Centers, Procurement Technical Assistance Centers (PTAC), Little League Baseball Teams, Soccer Teams, etc. Benefits: – Connected to the community means you are connected to community sentiment • – Networking with established organizations provides access to localized critical information • – – – This is critical as the military buildup will put considerable pressure on the community – smart companies will plan around those pressure points and seek ways to lessen local burdens. Many organizations host monthly meetings with keynote speakers involved in the regional buildup Utilize the networking within the groups to vet potential partners or service providers (Trust but Verify) Community involvement often puts your firm in the same organizations or events in which community leaders participate in Community involvement helps firms identify potential employment candidates www. Sherman. Pacific. com

COSTS-PROFESSIONAL FEES • Guam – PEALS (Professional Engineers Architects Land Surveyors) – Application fee $120, Certificate of Authorization $150, Registration $225 – www. guam-peals. org/fee_sched. html#1 • CNMI – BPL (Board of Professional Licensing) – Application fee $100, Certificate of Authorization $100, Registration $200 – Commonwealth Register Volume 29 Number 07 page 26626 (email: bpl@pticom. com ) • Guam – Guam Contractors License Board – Application fee $50, License fee $400, Responsible Management Employee $400 – www. clb. guam. gov/licensefees. aspx • CNMI – Department of Finance Business License (no contractor’s board) – Business License fee $50 – http: //www. cnmidof. net/rev/forms/buslic. pdf www. Sherman. Pacific. com

COSTS-BUSINESS LICENSES • Guam – Foreign Corporation Certificate of Authority – – – • CNMI – Foreign Corporation Certificate of Authority – – – • Business License Fee $25 http: //www. govguamdocs. com/revtax/docs/Application_Business. License 1009. pdf CNMI – Department of Finance Business License – – • Application fee is $100 for all forms of company structures http: //www. commerce. gov. mp/Applications/Application_Center. html registrar. corp@commerce. gov. mp Guam – Department of Revenue and Taxation – – • Application fee is $100 for a corporation or $1, 000 for a LLC http: //www. govguamdocs. com/revtax/docs/BLBDOC 8. pdf http: //www. govguamdocs. com/revtax/docs/Certificateof. Registration_Application_Foreign. LLC_0609. pdf Business License fee $50 http: //www. cnmidof. net/rev/forms/buslic. pdf Important Link for Contractors Doing Business with the Federal Government on Guam: – http: //www. investguam. com/pdf/revtax. contractorsdoingbus. wfedgov 043007. pdf www. Sherman. Pacific. com

COSTS-CNMI TAXES The income tax laws of the United States are enforced in the CNMI as a local territorial income tax (NMTIT). Taxes imposed under the NMTIT are administered and enforced pursuant to the mirrored-income tax provisions of the U. S. internal revenue code. – In interpreting the NMTIT, the following are generally treated as authoritative interpretations of the NMTIT: U. S. federal cases including tax court cases, IRS revenue ruling revenue procedures, and treasury regulations. • In addition to the mirrored-income tax, the covenant authorizes the CNMI to impose other taxes, a wage and salary tax, earnings tax (0 -9%), business gross revenue tax (0 -5%), and a general excise tax (+/- 5. 42%). • Pursuant to the covenant and CNMI law, every person subject to the NMTIT is entitled to a rebate with respect to their NMTIT tax liability in amounts ranging from 50 -90% of the tax paid. • US Firms can qualify for Domestic International Sales Corporations (DISC) exemptions from local CNMI taxes – A DISC contracts with a producer or reseller of U. S. made goods or provider of certain qualifying construction-related services to provide "services" to such related supplier for a fee. The fee is determined under formulas and rules defined in the law and regulations. Under these regulations, the fee is deductible by the related supplier and results in a specified net profit to the DISC. This net profit is not subject to Federal income tax. The DISC then distributes the profit to its shareholders, who are taxable on the income as a dividend. If the shareholders are U. S. resident individuals or others eligible for the reduced rate of tax (now 15%) on dividends, then the tax rate on the income allocated to the DISC is reduced. More information on CNMI taxes can be found here: http: //www. cda. gov. mp/pdf/Investment. Guide_Nov 2006. pdf www. Sherman. Pacific. com

Costs-GUAM Taxes • • • Guam residents pay a “mirrored” U. S. income tax in which the U. S. Internal Revenue Service’s code of laws is applicable. The income tax laws in force in the United States are the income tax laws of Guam. The U. S. Internal Revenue Code constitutes the Guam Territorial Income Tax Law thus all taxes are paid only to the territorial government, Guam residents and domestic business entities are not subject to U. S. Federal tax. There is the usual range of other types of local taxes, such as, liquor, tobacco, gasoline, real property, gross receipts, use, admissions, amusement, recreational facilities, and hotel occupancy. However, There are no separate municipal, county, school district or improvement district taxes and there is no sales tax imposed in Guam. Gross Receipts Tax (aka Business Privilege Tax) – Businesses - 4% on monthly gross income due by 20 th day of following month income received or accrued Use Tax – 4% assessed on personal property imported into Guam. – not applicable to items imported for resale, to used goods, to property with value of $1, 000 or less and to aircraft parts & materials Real Property Tax – Upon the sale of land and/or buildings - 35% of the full cash value – On the assessed value -. 005% for land and. 01% for building US Firms can qualify for Domestic International Sales Corporations (DISC) exemptions from local GUAM taxes – A DISC contracts with a producer or reseller of U. S. made goods or provider of certain qualifying construction-related services to provide "services" to such related supplier for a fee. The fee is determined under formulas and rules defined in the law and regulations. Under these regulations, the fee is deductible by the related supplier and results in a specified net profit to the DISC. This net profit is not subject to Federal income tax. The DISC then distributes the profit to its shareholders, who are taxable on the income as a dividend. If the shareholders are U. S. resident individuals or others eligible for the reduced rate of tax (now 15%) on dividends, then the tax rate on the income allocated to the DISC is reduced. More information on GUAM taxes can be found here: http: //www. investguam. com/? pg=tax_system&cpath=/sub_busres_1/sub_busenv_2/mi 16 www. Sherman. Pacific. com

Costs-GUAM Labor • Guam – Prevailing Wages 2009 – – – – – Bricklayer: $16. 72 Carpenter: $16. 14 Cement mason: $15. 32; Construction equipment mechanic: $15. 33 Camp cook: $11. 85 Electrician: $18. 39 Air conditioning and refrigeration mechanic: $15. 73 Heavy equipment operator: $16. 39 Painter: $16. 89 Pipefitter: $17. 80 Plasterer: $13. 07 Plumber: $17. 80 Reinforcing metal worker: $14. 95 Sheet metal worker: $18. 05 Structural steel worker: $15. 73 Surveyor helper: $15. 98 Welder: $19. 15 • Davis-Bacon Act soon to be Implemented for Guam • Study to be completed by late summer 2010 www. Sherman. Pacific. com

Costs-CNMI Labor • CNMI – No Prevailing wage system – Exempt from Davis-Bacon Act • Minimum Wage – $4. 55 basic construction skills – Per Federal Law, CNMI Minimum wage is to increase by. 50 cents every year until it meets the US minimum wage. • Next wage increase scheduled for September 2010 to $5. 05 per hour www. Sherman. Pacific. com

Costs-Getting there • Airfare – West coast to Guam/CNMI • Economy $1350 -$1890 • Business $3340 -$5650 – Houston to Guam/CNMI • Economy $1550 -$2100 • Business $3580 -$6200 – Orlando to Guam/CNMI • Economy $1554 -$1890 • Business $4711 -$6980 Plan ahead… 30 day advance tickets are cheapest www. Sherman. Pacific. com

Regulatory Issues-Foreign Labor • GUAM - Must comply with 2 federal agencies, 1 local agency & the Governor’s Office – Guam Department of Labor • http: //guamdol. net/content/view/64/135/ – Guam Governor’s Office – USCIS – Office of Federal Contract Compliance Programs (OFCCP) • CNMI - Must comply with 3 federal agencies & 1 local agency – CNMI Department of Labor – USCIS – US Department of Labor – Office of Federal Contract Compliance Programs (OFCCP) **US Federal Regulations for the CNMI are due in July and September 2010 Utilize local firms to assist processing efforts to avoid costly mistakes and delays www. Sherman. Pacific. com

Regulatory Issues-Foreign Labor 1. The employer must advertise the job opportunity prior to filing for a Temporary Labor Certification with the Governor of Guam. 6. After testing is completed, GES will forward a report to ALPCD on the results of the labor market testing. 3. The employer places Job Order with the Guam Employment Service (GES) to test the local labor market for a period of 30 days. 2. The employer must file the Application for Temporary Labor Certification with the Guam DOL, Alien Labor Processing & Certification Division (ALPCD). 12. The application is then released to the employer for use as a supporting document with their I-129 petition to the U. S. CIS. 13. The employer submits form I-129 to petition for admittance of H-2 B workers into the United States. 11. The application is then Approved or Denied and signed by the Governor of Guam. www. Sherman. Pacific. com 10. The Governor’s Legal Counsel conducts a review of the application. 5. If applicants are identified by GES, monitored interviews are conducted at the GES office. The employer would then decide on applicants and report the results to GES. 9. The Application is reviewed by Director of Labor and her recommendation and signature affixed on the application form. 14. The employer pays fees and submits all necessary documentation to the USCIS. 21. After the application for ID is processed, the alien worker is photographed and issued an ID card, which must be in his possession at all times and conspicuously displayed during working hours. 22. The worker is now clear to begin work for the employer. 4. The employer places an ALPCD approved 3 day advertisement in the Pacific Daily News announcing the job opportunity and directing applicants to apply directly through GES. 15. The application is adjudicated at the California Service Center. Delays may occur due to the H-2 B worker cap. 17. Visas are issued by the Department of State after various checks are done to ensure there are no fraud or security issues with the workers who will be issued visas. 16. If the petition is approved, it is sent to the US Embassy of whatever country the worker originates from. 20. Registration is accomplished by filing an Application for Temporary Non-Immigrant ID card (H-2 ID Card) at the ALPCD office. Copies of the passport, employment contract, approval from DHS and the application are received. There is currently a yearly fee of $1, 000. 23. Should the duration of work last more than a year, the employer would need to apply for an extension of stay with USCIS. In order to accomplish this, the employer would need to apply for a new labor certification with ALPCD. 8. The synopsis and application is reviewed and concurred by the ALPCD Administrator. 19. Within 24 hours from their arrival on Guam, the employer must report the presence of the worker by registering him with ALPCD. 24. Once the extension of stay is approved, by the U. S. CIS, the employer must renew the H-2 ID Card. 7. ALPCD caseworkers will then adjudicate the application and prepare a synopsis on the application for review by the ALPCD Administrator, Director of Labor and Governor of Guam. 18. Once the visa is issued the worker may enter the United States. 25. When the worker is ready to depart the U. S. , the employer must submit an Application for Exit Clearance with ALPCD and subsequently a Notification of Departure form after the actual departure.

Regulatory Issues-WHLS • Workforce Housing Logistics Support – Factor 2 in many solicitations valued as much as 25% of proposal • Workforce housing Logistics Support must comply with several Federal and Local Agencies – Guam Department of Labor / CNMI Department of Labor – Office of Federal Contract Compliance Programs (OFCCP) – Guam Land Use Commission / Saipan Zoning Board • http: //guambuildup. com/GLUC%20 Resolution%202009 -01. pdf – Guam Department of Public Health and Social Services / CNMI Department of Public Health • http: //www. justice. gov. gu/Compilerof. Laws/GCA/10 gca/10 gc 026 A. pdf – Department of Defense – NAVFAC Contracting Office – OSHA – Guam EPA / CNMI DEQ & CRM – Department of Public Works for Guam or CNMI www. Sherman. Pacific. com

Regulatory Issues-WHLS • HOUSING: Basic Tenets – Provide safe, sanitary and adequate living conditions for all workers – No tent cities/No substandard living condition – Workforce housing requirements expected to exceed existing available inventory • Contractors proposed housing solution must address: – – – – Structure type and location Room standards Sanitation facilities, potable and waste water management Refuse disposal Laundry facilities Rodent Control Other features that reflect safe, sanitary and otherwise suitable living conditions www. Sherman. Pacific. com

Regulatory Issues-WHLS • MEDICAL: Basic Tenets – Provide adequate health care for all workers – Existing medical capacity on Guam limited, cannot accommodate expected workforce – Levels of Medical Care should include: First Aid, Primary, Trauma, Medical Evacuation and Rehabilitation • Contractors proposed medical solution must address: – Provision of healthcare to minimize impacts on Guam medical system – Pre-employment physical exams to all employees equal to Guam requirements – Contingency Plan for emergency services at construction and housing sites – Provision on on-site first aid facilities at housing and reporting of communicable diseases www. Sherman. Pacific. com

Regulatory Issues-WHLS • FOOD: Basic Tenets – Provide safe, sanitary and healthy food supply/dining conditions for all workers – Minimize impacts to existing food supply chain and dining facilities • Contractors proposed food/dining solution must address: – Means and methods to meet dining requirements – Construction and operation of kitchen and dining facilities, if proposed – Food supply and dining service contingencies for emergency events www. Sherman. Pacific. com

Regulatory Issues-WHLS • TRANSPORTATION: Basic Tenets – Minimize adverse workforce transportation issues – Develop transportation management plan to minimize traffic congestion, noise and air pollution – Define acceptable truck routes in contract – Contractor transportation plans will require Guam and Do. D Approval • Contractors proposed transportation solution must address: – Types of vehicles/services – Anticipated routes of travel to and from the construction sites, housing locations & off hours – Parking or drop-off locations – Hours and duration of operation (normal, multi-shift and non-standard shift scenarios) – Contingency plans in event of disruption of workforce transportation services www. Sherman. Pacific. com

Regulatory Issues-WHLS • SAFETY & SECURITY: Basic Tenets – Maintain protection of all personnel and property – Develop uniform security access procedures to all Federal worksites • Minimize impacts due to access control processing • Need to address off-normal hours access issues – Contractor oversight of workforce – offsite as well as onsite • Contractors proposed safety/security solution must address: – Procedures to expedite workforce and vehicular access to work sites – Procedures to identify and prohibit contraband at work and housing sites – Provision of pre-employment screening of all personnel for criminal records – Establish guidelines for off duty activities www. Sherman. Pacific. com – Provisions for physical security

Take Aways…. • The Marianas Offers a once in a lifetime opportunity to be involved in the largest military infrastructure program in history. – Competition is limited due to remoteness – Capacity is limited due to market size • The people of the Marianas are very hospitable and eager to help – Join local community organizations – Partner with local firms – Hire local personnel • Costs can be considerable, therefore utilize local firms to help lower costs • Federal and local regulations are daunting - hire experts so you can focus on your core business • Don’t limit your opportunities to only Guam, there are many opportunities in the Northern Mariana Islands, Palau, the Federated States of Micronesia and the Marshall Islands – US Federal Capital Improvement Project Funding – ARRA funding www. Sherman. Pacific. com

“Ha’dahi na ti’un respeta I kuturan I lugat” “Be careful that you don’t disrespect the culture of the place” www. Sherman. Pacific. com