The CNMI consists of 14 islands in the western Pacific Ocean, just north of Guam and 5,500 miles from the U.S. mainland. Most of the CNMI population—53,883 in 2010, according to the U.S. Census—reside on the island of Saipan, with additional residents on the islands of Tinian (3,136) and Rota (2,527). The 1976 covenant between the CNMI and the United States established the islands’ status as a self-governing commonwealth in political union with the United States. The covenant granted the CNMI the right of self- governance over internal affairs and grants the United States complete responsibility and authority for matters relating to foreign affairs and defense affecting the CNMI. The covenant also provided U.S. citizenship to certain CNMI residents. Further, the covenant exempted the CNMI from federal immigration laws and certain federal minimum wage provisions. However, under the terms of the covenant, the U.S. government has the right to apply federal law in these exempted areas without the consent of the CNMI government. Acting under this authority, Congress enacted CNRA in 2008 to apply federal immigration laws to the CNMI; in November 2009, the U.S. government began its application of immigration laws to the CNMI. Between 1980 and 2009, the CNMI used its authority over its own immigration policy to bring in foreign workers under temporary renewable work permits and to allow the entry of foreign business owners and their families. Owing primarily to the influx of these workers between 1980 and 2000, the CNMI population increased from about 16,800 in 1980 to 69,200 in 2000, and the CNMI economy became dependent on foreign labor. Most of these foreign workers were employed in the garment and tourism industries, which together accounted for about 80 percent of all employment in the CNMI in 1995. However, beginning in the late 1990s, the tourism industry experienced a sharp decline, as total visitor arrivals to the CNMI dropped by more than half, from a peak of 736,117 in 1996 to 340,957 in 2011. In addition, in 1999, the garment industry was central to the CNMI economy and employed close to a third of all workers; however, by early 2009, the last garment factory had closed. Because of the decline in the tourism industry and the departure of the garment industry, employment in the CNMI has fallen. Between 2002 and 2010, the number of foreign workers in the CNMI dropped by more than 60 percent, according to CNMI Department of Finance tax data. CNMI tax data also show that in 2010 there were 14,958 foreign workers and 11,336 U.S. workers in the CNMI, with foreign workers outnumbering U.S. workers in all industries but government and banking and finance. Figure 1 shows the numbers of foreign and U.S. workers in the CNMI labor force from 2002 through 2010. As the number of foreign workers has declined, the CNMI’s real gross domestic product (GDP) has also fallen sharply, declining by 49 percent between 2002 and 2009. Figure 2 shows the CNMI’s real GDP from 2002 through 2010. The CNMI government’s revenues have also fallen by 45 percent, from $240 million in fiscal year 2005 to an estimated $132 million for fiscal year 2011. In addition, the cost of labor in the CNMI increased after application of the federal minimum wage began there in 2007. Labor costs may increase further because of the potential application of Federal Insurance Contributions Act (FICA) payroll taxes to some previously exempt workers. CNRA’s stated intent in establishing federal immigration law in the CNMI is in part to minimize, to the extent practicable, any potential adverse economic and fiscal effects of phasing out the CNMI’s own foreign worker permit program and to maximize the CNMI’s potential for economic and business growth. To that end, CNRA provides, among other things, opportunities for individuals authorized to work in the United States, including citizens of the Freely Associated States, and provides a mechanism for the continued use of foreign workers as needed to supplement the CNMI’s resident workforce. (See app. II for the complete statement of congressional intent.) CNRA required that DHS, DOL, and DOI take the following actions, among others: DHS. CNRA required that the Secretary of Homeland Security establish a transitional work permit program for foreign workers in the CNMI during the initial 5-year transition period. In administering this program, the Secretary must determine the number, terms and conditions, and fees for the permits. The Secretary must also provide for an annual reduction in the allocation of permits for foreign workers that results in zero permits by the end of the transition period; however, the length of the transition period can be repeatedly extended by the Secretary of Labor (see the following subsection). The system for allocating permits may be based on any reasonable method and criteria determined by the Secretary of Homeland Security. CNRA also requires DHS to collect from CNMI employers $150 per worker per year, which the Secretary must transfer to the Treasury of the CNMI for the purpose of funding ongoing vocational educational curricula and program development in the CNMI by CNMI educational entities. In adopting and enforcing the program, DHS must consider in good faith any comments and advice submitted by the Governor of the CNMI within 30 days of receipt. DOL. CNRA required that the Secretary of Labor, in consultation with the Secretaries of Homeland Security, Defense, the Interior, and the Governor of the CNMI, ascertain the current and anticipated labor needs of the CNMI and determine whether an extension of the transition period by up to 5 years at a time is necessary to ensure that an adequate number of workers will be available for legitimate businesses in the CNMI. DOL must determine the extension no later than 180 days before the end of the transition period. DOL is to base its decision on the labor needs of legitimate businesses in the CNMI and may consider a number of factors, such as CNMI unemployment rates and efforts to train U.S. citizens, lawful permanent residents, and unemployed foreign workers in the CNMI. (See app. III for a list of the factors that CNRA states DOL may consider.) DOI. CNRA required that the Secretary of the Interior, in consultation with the Governor of the Commonwealth, the Secretary of Labor, the Secretary of Commerce, and CNMI private sector representatives, provide technical assistance to the CNMI, including assistance for recruiting, training, and hiring of workers to assist employers in the CNMI to hire U.S. citizens and nationals and legal permanent residents. Technical assistance must also be provided for identifying economic opportunities and for job skills identification and curricula development. In addition, CNRA required that the Secretaries of Homeland Security, Labor, the Interior, and State negotiate and implement interagency agreements to assign their respective duties in order to ensure the timely and proper implementation of CNRA requirements. In our August 2008 report, we found that the interaction of DHS and DOL decisions—on how many CNMI transitional work permits to allocate annually and whether to extend the transition period, and therefore the CNMI transitional work permit program, past 2014—would significantly affect employers’ access to foreign workers. We also found that because of the prominence of foreign workers in the CNMI labor market, any substantial and rapid decline in permits for foreign workers would have a negative effect on the size of the CNMI economy. However, a more modest reduction in the annual permit allocations would result in minimal effects on the CNMI economy. To illustrate a range of possible effects on the CNMI economy given varying rates of reduction in the annual allocation of CNMI transitional work permits for foreign workers, for our 2008 report we generated simulations that estimated the impact on the CNMI’s economy by an index representing total GDP. We generated these simulations for several scenarios, using a range of assumptions regarding the effect of a reduction of labor on production and the ability of the CNMI resident workforce to substitute for the foreign workers in production. In the first scenario, we found that a steep reduction in the transitional work permits for foreign workers—from 20,000 in 2007 to 1,000 by 2021—would lower the CNMI’s GDP to a range of about 21 percent to 73 percent of its 2007 value by 2021. In the second scenario, we found that a less precipitous decline in the transitional work permits—from about 20,000 in 2007 to about 8,000 by 2021—would lower the CNMI’s GDP to a range of about 64 percent to 85 percent of its 2007 value by 2021. In the third scenario, we found that a much smaller decline in the transitional worker permits— from 20,000 in 2007 to 17,000 by 2021—would lower the CNMI’s GDP to a range of no less than about 92 percent to about 98 percent of its current value by 2021. On September 7, 2011, DHS issued a final rule to implement a CNMI transitional work permit program, as required by CNRA, for foreign workers who would not otherwise be admissible under federal law. The final rule creates a classification of CW-1 status for transitional foreign workers and a CW-2 status for dependents of CW-1 workers. DHS delayed issuing a final rule for almost 2 years, following a court injunction on its October 2009 interim rule that prohibited it from issuing a final rule until it followed notice-and-comment rulemaking procedures to consider public comments on its interim rule. DHS received 146 public comments on the interim rule and made some changes in the final rule in response to those comments. (For more information on DHS’s actions to issue the final rule and respond to public comments on its interim rule, see app.