The Legislature of the Virgin Islands recently approved Bill No. 31-0398, a new bill eliminating customs duties in the Territory. These duties generate approximately $12 million every year, but for more than 10 years, the U.S. Customs and Border Protection has taken almost all of it to cover the costs of collecting it. As a result, the duties reached the point where negligible funds actually received by the U.S. Virgin Islands were not worth the trouble and cost focused on collecting them.
The Revised Organic Act of the Virgin Islands It defines the powers of the Territory and its authority to take up to 6 percent duties on any goods brought from other lands into the Territory. U.S. Customs and Border Protection had taken a portion of the duties to cover its costs, but that portion became significantly larger—almost the entire value of the funds—after the establishment of the federal Department of Homeland Security in 2003.
Previous solutions proved ineffective
In December 2014, the administration of Governor John deJongh, Jr. signed an agreement with the stated goal of resolving this problem. At the time, U.S. Customs and Border Protection agreed it would fund pre-departure clearance for air passengers with federal funds and would work to limit reimbursement from these local customs duties. This agreement also called for greater transparency in reporting the funds that were collected, why they would be retained and how they would be used.
Reports from various U.S. Virgin Islands officials revealed that U.S. Customs and Border Protection had essentially ignored the agreement from the beginning, only remitting $1 million since it was signed. CBP kept more than 90 percent of all the funds earned in customs duties in 2015 and has not returned any 2016 funds, according to US Virgin Islands Finance Commissioner Valdamier Collens.
The original purpose of the customs duties was to provide additional funding to the territory. With how little money was actually coming back to the US Virgin Islands under the arrangement, the Government of the Virgin Islands decided to put an end to the practice altogether.
The decision to remove the customs duties was not met without resistance. The St. Croix Chamber of Commerce, for example, did not agree with the changes. In a written statement, it said “the federal government could easily refuse to fund these services and remove the convenience of local customs clearance.” However, the majority of elected officials who passed the amended bill were of the mindset that money going to CBP should come from federal funding—not local money.
The passage of Bill No. 31-0398 could have an impact on businesses throughout the U.S. Virgin Islands. It will be interesting to see if upon approval of Governor Kenneth E. Mapp, it will open up any new opportunities for commerce in the Territory in the years to come.
BoltNagi is a respected and established business and corporate law firm proudly serving clients throughout the U.S. Virgin Islands.