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USVI wants to keep more of its own customs duties
Published on May 6, 2014 Email To Friend    Print Version

ST THOMAS, USVI -- US Virgin Islands Governor John de Jongh submitted on Friday written testimony to a US Senate Committee urging Congress to intervene in the long-simmering dispute between the government and the US Customs and Border Protection (CBP) over the responsibility for financing the costs of CBP’s activities in the USVI.

US Virgin Islands Governor John de Jongh
In his statement to the Senate Appropriations Subcommittee on Homeland Security, de Jongh noted that although it is a territory of the United States, the US Virgin Islands is outside of the “customs territory” of the United States, and is authorized by the Revised Organic Act to impose its own customs duties and similar fees to generate revenues for the local government. The territory has generated as much as $16 million a year in total duties and fees from local businesses in recent years, but the CBP has been retaining a substantial amount of these duties and fees to cover the cost of its operations and activities on St Croix, St John and St Thomas, leaving the government with little or no net revenue.

De Jongh said that although CBP has withheld a full accounting of its use of US Virgin Islands revenue, CBP’s diversion of funds is estimated to cost the USVI millions of dollars annually. For example, in Fiscal Year 2012 CBP retained all US Virgin Islands customs duty revenue, collecting approximately $12 million in USVI customs duties, and charging the USVI over $12 million in costs. Those charges included over $1.5 million in federal immigration inspection costs, nearly $1 million in federal agriculture inspection costs, and as much as $3 million in federal customs costs. On top of millions in unreimbursed federal costs, de Jongh said that CBP took another nearly million dollars to pay for overhead for its Washington, DC headquarters.

According to the governor, CBP is authorized by statute to withhold its costs for collecting USVI customs duties, but not for the federal activities it undertakes in the territory, such as border surveillance and enforcement of immigration and agricultural laws. CBP has claimed it is entitled to withhold additional amounts pursuant to a memorandum of agreement that the government executed with CBP’s predecessor agency in 1994, but de Jongh has argued that the 1994 agreement is outmoded and needs to be renegotiated.

According to de Jongh, CBP has indicated that it is willing to consider changes to the agreement, but unless Congress makes up the difference and provides CBP with more funding, it might have to cut back on services in the territory, including the pre-clearance services it provides at each of the territory’s airports and cruise ports. Since 2010, de Jongh has pushing to get CBP to seriously address the agreement and exorbitant costs allocated to the US Virgin Islands.

In his written statement to Congress, de Jongh said, “CBP’s practices have deprived the Virgin Islands of the use of its own customs duties, causing an increasingly severe financial strain on the [territorial] government, and cannot be allowed to continue.”

The governor noted that CBP provides important services in the US Virgin Islands that are essential to the tourism industry, including pre-clearance of passengers returning to the United States.

“CBP performs pre-departure clearance of air passengers bound for the continental US from many locations, including in the Caribbean, in the Virgin Islands, Bermuda, The Bahamas, and Aruba. However, while CBP pays for its operations costs in Bermuda, The Bahamas, and Aruba with Customs User Fee funds and/or federal appropriations, in the Virgin Islands, CBP charges the Virgin Islands government,” de Jongh said.

The governor added, “The preferential treatment of foreign Caribbean countries over a US territory has no basis in logic or policy. Rather, it is an unintended consequence of changes in law and circumstances that have been perpetuated over time and through federal bureaucratic inertia. CBP must stop its improper use of Virgin Islands customs duty revenue for other federal purposes, and CBP should properly and fully apply immigration and agriculture user fee statutes and other applicable federal funding for its federal operations in the US Virgin Islands.”

In his testimony, de Jongh wrote, “I respectfully ask for [Congress’] clear commitment to direct CBP to: provide passenger pre-departure clearance in the US Virgin Islands funded with the Customs User Fee funds and/or appropriations, as it does for similar activities in foreign countries; cease its use of Virgin Islands customs duty revenue to finance or fund the costs of other federal operations in the Virgin Islands, including, but not limited to, CBP operations governed by other federal user fee statutes and funds such as immigration and agriculture inspections; and finally, retain from the Virgin Islands customs duty collections only CBP’s documented and direct costs of collecting the Virgin Islands customs duties, and remit the balance of collections promptly to the Virgin Islands treasury.”

The governor also wrote letters to the Democratic and Republican leadership of the Homeland Security and Appropriations committees urging their support for the territory’s position.
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