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Feds Keeping Millions in USVI Customs Duties

Months after agreeing to turn over more V.I. customs duties to the territory, U.S. Customs and Border Patrol has told local officials it will keep nearly all the expected $11.5 million to cover the cost of collecting the money, according to Finance Commissioner Valdamier Collens.

The Senate Finance Committee was considering a bill to devote $10 million of the expected funds to road repairs, but Collens testified against the bill Tuesday, saying the money was not going to be available.

The issue of the V.I. duties being effectively confiscated by U.S. Customs had festered for years, but was thought by many to be resolved after the territory and Customs signed a memorandum of agreement in December 2014. (See Related Link below)

According to Collens, under a 1994 agreement, Customs claimed broad authority to take reimbursement for virtually any costs of its operations, especially the costs of air passenger pre-departure clearance, which it then estimated at around $5 million per year.

After the creation of the Department of Homeland Security in 2003, Customs began charging more and more costs to the territory, until the charges eclipsed total customs duty collections, leading to "threats that U.S. Customs and Border Protection would reduce or cut air passenger pre-departure clearance and other essential federal activities in the U.S. Virgin islands," Collens said.

In 2014, Customs agreed to fund air passenger pre-departure clearance with federal funds and to otherwise limit reimbursements from local customs duties to only the specific costs of collecting those duties. But since then, Customs has only remitted $1 million and apparently plans to remit less in the future.

"Although U.S. Customs and Border Protection has not completed its financial reporting for the fourth quarter (it) indicated in a report received on September 28, 2015, that it expects ‘U.S. Customs and Border Protection will just cover its expenses for the year.’”

“The implication from this statement is that U.S. Customs and Border Protection intends to keep the vast majority of the U.S. Virgin islands’ customs duty collections from Fiscal Year 2015," Collens said.

Senators reacted with a mix of surprise and outrage.

Sen. Sammuel Sanes said U.S. Customs and Border Patrol’s overall "budget was $8.46 billion to do their jobs, yet here they are, to be blunt, stealing our money."

Sen. Myron Jackson said, "It reeks of colonialism."

Sen. Clifford Graham asked, "The (agreement) is less than a year old, and since the execution, Customs and Border Patrol has not lived up to their side of the agreement?"

Collens said, "That is correct."

Graham asked, "They are charging 92 percent (of the duties) to collect 100 percent?"

"Correct," Collens said.

Graham continued his inquiry. "Should we call their bluff and eliminate customs duties?"

Collens replied that the reason they were able to do this is because they controlled the funds.  "There are many ways to deal with this," he said, saying the territory could repudiate its recent memorandum of agreement, reduce or eliminate the customs duties, "or change the funding formula," possibly restricting how the funds are divided by law.

Asked what efforts he had made to bring Customs to the table, Collens said when the Finance Department tried to meet with them, "All we were told is they are working to prepare their budget and don’t have time to meet."

Budget Director Nellon Bowry said he was not directly involved with the dispute, but that in his experience, administrative costs are "usually in the range of 20 to 25 percent," rather than 92 percent.

Several times, Collens said reducing the customs duties to zero might both force Customs to the table and allow the money to circulate in the local economy, instead of going to federal administrative costs.

Graham seemed to endorse that option, shortly before the committee voted to hold the road bill affected by the funds.

"We have $13 million dollars that we are not getting, every year, gone. And if you eliminate the customs duty then maybe that money would recirculate in the economy. So maybe that is a backdoor way to get the (money)," Graham said.

The committee also voted to hold a bill, proposed by Gov. Kenneth Mapp to let Government House issue an $8 million revolving credit, secured by Gross Receipts Tax funds, to buy vehicles, allowing it to bypass the Legislature and buy up to $8 million in vehicles on a recurring basis.

It approved a bill sponsored by Sens. Neville James and Kurt Vialet appropriating $90,000 from the Community Facilities Trust Fund for renovations to the Horace Clark Ballpark located by Arthur A. Richards Jr. High School near Frederiksted.

The Community Facilities Trust Fund consists of a small percentage of remitted federal alcohol excise taxes. It was created as part of the deal to bring Diageo to the territory.

Bowry testified the fund should receive $3.7 million this year and would have enough left after other projects to fund these renovations.

The measure now goes on to the Rules and Judiciary Committee, and then on for a final vote on the Senate floor.

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