Chicago Mayor Rahm Emanuel may not have been the first to say “never let a serious crisis go to waste,” but he may be the first to explain “it’s an opportunity to do things you think you could not do before.”
Now, while America is looking, is a good time to push back and publicize the way U.S. Customs and Border Patrol is confiscating V.I. customs duties and bullying the territory into keeping them on V.I. books.
The customs duties, which generate no income for the territory, are the very definition of bad policy.
“Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasure of the state,” Adam Smith, the founder of the field of economics, wrote in 1776, in An Inquiry into the Nature and Causes of the Wealth of Nations.
“A tax may either take out or keep out of the pockets of the people a great deal more than it brings into the public treasury” in four ways, Smith said. First, “it may require a great number of officers, whose salaries may eat up the greater part of the produce of the tax, and whose perquisites may impose another additional tax upon the people.”
He may as well have been looking at the history of V.I. customs duties when he wrote that.
The customs duties generate about $12 million per year, but for more than a decade U.S. Customs and Border Protection has confiscated nearly all of it to pay for the cost of collecting them, so they do not go to the V.I. government’s available funds. It uses the funds for services that, in other jurisdictions, the federal government pays for.
Arguably, the USVI’s biggest structural economic hurdle is its isolation and the difficulty and cost that adds to all economic activity. The V.I. customs duties worsen that and generate nothing for the territory.
Are there good reasons for this? CBP has not provided any. It is completely opaque about its finances.
A little history:
For years, U.S. Customs and Border Protection collected the duties, taking a portion for its costs, but after the creation of the Department of Homeland Security in 2003, it began keeping nearly all the funds.
The V.I. Port Authority was similarly losing millions of dollars a year in wharfage duties, until it changed the way it charges fees to bypass CBP in 2010.
“The federal government is providing the same services at no expense in many foreign countries,” Tourism Commissioner Beverly Nicholson-Dot said of the VIPA fees that year.
Former Gov. John deJongh Jr.’s administration tried to work with CBP at least as early as 2012.
DeJongh signed a memorandum of agreement in 2014 hoping to resolve the problem. CBP 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. CBP also agreed to a reporting system to 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.
It has done none of this. It continues to keep nearly all the money and won’t provide detailed accounts of how it uses the funds.
In 2015, the Source spent several weeks attempting to get information from CBP on its budget, what it spends the V.I. tax revenue on, what pre-clearance costs to do now and what it would cost the federal government if it performed the same tasks stateside and so on.
CBP spokesman Jeffery Quinones said he had to research the questions and get approved answers. He returned with a statement approved by his superiors.
“CBP continues to work in partnership with the USVI Government to enhance border security and facilitate travel and trade however, CBP cannot comment on ongoing litigation,” Quinones said.
There was no litigation.
Asked why CBP was citing a lawsuit that did not exist to excuse not giving information it agreed in writing to provide to the USVI, Quinones said he would look into it and get an answer. Two weeks later, he provided the following statement also approved by his superiors:
“CBP signed a new memorandum of agreement, including an annex, with the Government of the United States Virgin Islands in December 2014 and has abided by the terms of that agreement. Federal statutes require CBP to collect customs duties on behalf of the USVI, and this is not subject to any other agreements, as well as the authority and broad discretion to administer the customs laws of the USVI. The USVI Legislature has the power to establish customs duties applicable to merchandise imported. CBP has conveyed the Government of the Virgin Islands its commitment to address concerns and to work in partnership to enhance border security and facilitate travel and trade.”
Their “response” contains no answers to any of the questions posed to them.
The Legislature passed a bill to eliminate those duties in 2016.
In January of 2017, Gov. Kenneth Mapp vetoed the bill, saying he agreed with the policy but was concerned about retaliation.
“The Department of Homeland Security and the Division of Customs and Border Protection advises me that should the lost funds … made available through the collection of Customs Duties, are not immediately replaced by an appropriation from the U.S.Congress to cover the cost now being serviced by the (funds), CDP will be forced to reduce its services in the territory,” he said, adding that “(a)t immediate risk would be the loss of pre-departure clearance of passengers destined to the U.S. mainland at our airports and inspection and clearance of international passengers such as those arriving on cruise ships.”
The threat appears to be simple blackmail. It is not clear that CBP will save a dime. If CBP ends preclearance, passengers will have to jump through more hoops before coming to the territory. It could dampen the numbers of visitors. But CBP will still be clearing those passengers at some point. In fact, that is part of the threat: Air and cruise visitors to the USVI will have to show their passports and have their luggage cleared as if it were an international trip. CBP officials will be doing those tasks somewhere.
Protecting the border is fundamentally a federal issue. And CBP has utterly failed to do that. The territory is awash in contraband guns, cocaine and undocumented immigrants.
This situation is appalling The record of CBP’s threats and lack of cooperation is appalling. It will not stand sunlight. Which is why now, while Congress is paying attention and while national media have the USVI on their radar, is as good a time as we will get to try to publicly shame CBP out of blackmailing the territory over these fees.
If the V.I. Legislature is unwilling or the risks are perceived to be too great, now may be a good time to raise the question with Congress. When the Legislature considered the bill in 2016, Collens said “a “federal legislative solution that returns Virgin Islands customs duty revenue to the Virgin Islands would avoid the necessity of rescinding the customs duties.”
One way or another, let’s not let this crisis go to waste.