USVI resolves dispute with US Customs and Border Patrol over costs and revenue
Governor John de Jongh said on Saturday that the government of the US Virgin Islands and the US Customs and Border Patrol (CBP) have executed a new memorandum of agreement (MOA) to resolve a long-standing dispute over the responsibility for financing the costs of CBP’s activities in the USVI, including customs pre-clearance services that are critical to the territory’s tourism industry.
“This agreement not only ensures that the Virgin Islands will receive the vital services it requires from the CBP, including Customs pre-clearance, but stipulates that the territory will no longer subsidize these services through its local customs duties,” de Jongh said, adding, “After years of discussion and negotiations, the federal government has agreed to fund pre-clearance and other federal CBP activities through federal appropriations and user fees, allowing us to retain more of our own customs duties for our General Fund needs, as Congress intended.”
The dispute resolved by the new agreement involved the CBP’s use of USVI customs duties it collects on behalf of the territory to help finance a portion of its federal activities in the US Virgin Islands. According to de Jongh, CBP had been keeping an increasing proportion of USVI customs revenues over the years to pay for its activities in the territory, and since 2011 had kept all of the territory’s duties it collected.
De Jongh said 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 local duties and fees in recent years, but the CBP has been retaining an increasing 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.
He said that, although CBP has, until now, withheld a full accounting of its use of US Virgin Islands revenue, CBP’s diversion of funds is estimated to have 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. The estimates for some years show that more than half of US Virgin Islands customs revenue was improperly used by CBP to fund other federal activities, the governor said.
“Just as important as the additional revenues that will flow to the government’s General Fund under this new MOA is the strong relationship we have developed with the CBP in the course of our negotiations. I am thankful for the cooperation and willingness to find solution to this dispute both by CBP officials in Washington, as well as by the CBP regional office in Puerto Rico led by Marcelino Borges. I am most appreciative of the support and leadership provided by CBP Commissioner Gil Kerlikowske who I got to know well in Washington when he served as the White House Director of National Drug Control Policy and when we met to discuss the security and financial challenges of the territory. In our meetings on the MOA, he reminded me of our work together to find common solutions, and I believe that was the key factor in our reaching this agreement,” de Jongh said.
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 MOA was outmoded and had to be renegotiated.
The new agreement also provides a mechanism to allow the US Virgin Islands to request new or enhanced CBP services on a reimbursable basis and establishes a reporting system that will allow the USVI government to track CBP’s costs in the territory in order to ensure it is not overcharged for CBP’s costs of collecting USVI customs duties.