Lt. Gov. Gerard Luz James said he will work to preserve the territory's Foreign Sales Corporations in the wake of a ruling against the lucrative program by the World Trade Organization.
The ruling, which stemmed from a complaint lodged against FSCs by the European Union, has not been made public and is still under review by the federal government. Many speculate, however, the FSC program will have be altered.
"We are optimistic that this will not result in the end of the FSCs program," James said Friday in a released statement. "The process is a lengthy and detailed one, and I'm hopeful as it develops, some compromise can be reached that will preserve the essence of the program for offshore jurisdictions like the U.S. Virgin Islands."
FSCs are subsidiaries of U.S. export companies that are set up in the Virgin Islands and five or six other jurisdictions outside the U.S. Customs Zone in order to gain substantial federal income tax exemptions. The approximately 3,500 FSCs registered in the Virgin Islands pump between $8-$10 million into the territory's treasury.
The majority of FSCs are based in the Virgin Islands, Barbados and Guam. The WTO's final report on FSCs is due in September.
Graham Dunn, vice president of the V.I. FSC Association, said the adjustment may even mean more FSC activity in the territory.
"Up until now the EU has claimed the FSCs don't have a sufficient nexus in the off-shore jurisdictions. My understanding is that the corporations will have to create offshore entities that have more substance," he said.
"I have contacted our Delegate to the U.S. Congress Donna Christian-Christensen to express our concerns and solicit her assistance in working with Congress and the U.S. Trade Office to preserve this vital program that we're benefitting from," James said.
