House, Senate tell V.I., Customs to resolve issues

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ST. THOMAS - After Gov. John deJongh Jr. submitted testimony to Congress in May, the U.S. House and Senate Appropriations committees have directed U.S. Customs and Border Protection to resolve a dispute over the federal agency's use of fees that belong to the territory.

The language was included in the Fiscal Year 2015 Homeland Security Appropriations bill currently working its way through Congress, but deJongh is pushing to have the language further clarified.

The V.I. government believes that Customs is keeping millions of dollars that should be coming to the territory's coffers but instead is being used to fund federal operations in the territory.

In several letters sent July 25 to the chairmen and senior members of the House and Senate Appropriations committees, deJongh explains that under the law, Customs can keep only a portion of the funds it collects to fund its direct costs of collecting the local duties - not the costs of federal services such as immigration, agricultural inspections and customs pre-clearance of passengers and cargo to the United States.

The Revised Organic Act of 1954 says the proceeds of customs duties and any taxes levied by the federal or local government - minus the costs of collecting the fees, taxes or duties - will go into the V.I. Treasury.

In 1994, Gov. Alexander Farrelly signed a Memorandum of Understanding with Customs for the federal agency to collect customs duties and other fees related to port entry and the importation of foreign products.

Under the agreement, the agency would keep a portion of the fees to cover the cost of collections and turn the rest over to the V.I.

However, things changed after the terrorist attacks on Sept. 11, 2001, when the U.S. government formed the Department of Homeland Security, which absorbed Customs and Immigration. A new agency, Customs and Border Protection, took over collection activities in the territory.

DeJongh said in recent years, Customs has been charging more than $12 million a year from the territory, keeping more than $1.5 million in federal immigration inspection costs, nearly $1 million in federal agricultural inspection costs, and as much as $3 million in federal customs costs.

DeJongh said the federal agency took nearly a million dollars of V.I. customs duty revenue to pay for overhead for its Washington, D.C., headquarters.

Customs has argued it is entitled to withhold the funds based on that MOU from 1994, but deJongh says that the 1994 agreement is outmoded and needs to be renegotiated.

The Port Authority also has been trying to collect about $10 million in tonnage and wharfage fees from Customs. Customs used to collect wharfage and tonnage fees from cargo vessels on behalf of the Port Authority and remit the funds to the V.I. Finance Department, which would then turn the money over to the Port Authority.

In 2008, Customs became delinquent in remitting the funds to the Port Authority, which resulted in a $9.6 million receivable on the agency's books.

In 2011, the Port Authority began to collect the wharfage and tonnage fees directly, but it still has not been able to collect the $9.6 million that is in arrears.

When the governor submitted written testimony to the Congressional committees in May, he asked lawmakers to step in and help resolve the territory's conflict with Customs.

In the preliminary report filed recently, the committees directed the federal agency to work with the territory to resolve the issue.

DeJongh said the result is good, but some of the language still is not right and needs to be made clearer.

In his July letters, the governor included proposed language to be included in the final reports, expected to come out later this year. DeJongh asked the congressional committees to direct Customs to fund its federal activities exclusively with congressional appropriations and federal user fee revenues.

- Contact reporter Aldeth Lewin at 714-9111 or email

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