DeJongh: Agreement Resolves Customs Dispute

The Virgin Islands and the U.S. Customs and Border Patrol have reached an agreement that resolves a long-standing dispute over the responsibility for financing the costs of CBP’s activities in the territory, Gov. John deJongh Jr. announced Saturday.

The agreement includes customs pre-clearance services, which are critical to the territory’s tourism industry, deJongh said in the news release from Government House.

“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,” deJongh said. “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 V.I. customs duties it collects on behalf of the territory to help finance a portion of its federal activities in the Virgin Islands. According to de Jongh, CBP had been keeping an increasing proportion of V.I. 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.

DeJongh said that although it is a territory of the United States, the 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 those 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.

DeJongh said although CBP has, until now, withheld a full accounting of its use of Virgin Islands revenue, CBP’s diversion of funds is estimated to have cost the Virgin Islands millions of dollars annually. For example, in fiscal year 2012 CBP retained all Virgin Islands customs duty revenue, collecting approximately $12 million in Virgin Islands customs duties, and charging the Virgin Islands more than $12 million in costs.

Those charges included more than $1.5 million in federal immigration inspection costs, almost $1 million in federal agriculture inspection costs, and as much as another $3 million in federal customs costs, according to the release.

On top of millions in unreimbursed federal costs, deJongh said CBP took another nearly million dollars to pay for overhead for its Washington, D.C. headquarters. The estimates for some years show that more than half of 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 (memorandum of agreement) is the strong relationship we have developed with the CBP in the course of our negotiations," deJongh said. "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," deJongh said.

According to the governor, CBP is authorized by statute to withhold its costs for collecting V.I. 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 the government executed with CBP’s predecessor agency in 1994. But deJongh argued that the 1994 MOA was outmoded and had to be re-negotiated.

The new agreement also provides a mechanism to allow the Virgin Islands to request new or enhanced CBP services on a reimbursable basis and establishes a reporting system that will allow the Virgin Islands government to track CBP’s costs in the territory to ensure it is not overcharged for CBP’s costs of collecting V.I. customs duties.

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