U.S. Virgin Islands Governor Kenneth Mapp recently vetoed legislation that would have eliminated customs duties, while at the same time transferring money that would have been collected through a different provision in the proposed bill.
The bill, sponsored by Sen. Kurt Vialet, would have mandated the Bureau of Internal Revenue to create and present a report to the legislature with suggestions for appropriate changes to excise taxes upon import within 90 days of the bill’s implementation. The idea behind it was that the bill would force an evaluation of alternatives to customs duties as a main revenue source for the territory. The money collected from the new revenue source would then have gone to the U.S. Virgin Islands government to help pay off its structural deficit.
Governor Mapp instead decided he would veto the bill, citing concerns about how the legislation would be an unnecessary risk to the territory’s economy. He said he understood the need for the territory to collect its fair share of customs duties, but the bill as proposed had implications that could have been detrimental to an economy that’s still in recovery mode.
What are customs duties?
Customs duties, also referred to as import duties, are taxes collected on all imports and some exports by a customs authority. The tax is typically contingent on how much the goods being transported are worth and the country of origin, among other factors.
Customs duties are levied when imported goods first come into the territory, crossing the border. The cost of the duty typically gets added to the price consumers pay for the good, which means the same good produced domestically should typically cost less. The idea is to give an advantage to local businesses and manufacturers rather than those located overseas.
Congress sets all duty rates in the United States. All import rates are listed in a registry known as the Harmonized Tariff Schedule, which comes from the International Trade Commission. There is a general rate for countries that have normal trade relations with America and special rates applied to countries that may not be developed or do not have an international trade program.
These duties may also be impacted by international organizations and treaties. There are a few countries that have worked hard to reduce duties to promote free international trade. The World Trade Organization (WTO) also promotes commitments among its member nations to cut tariffs. These agreements occur after numerous rounds of negotiations among WTO members.
Another example of a treaty that helps reduce tariffs is the North American Free Trade Agreement (NAFTA), which includes the Canada, Mexico and the United States. As of 2008, all tariffs among the three nations have been eliminated.
For further insights into how Gov. Mapp’s decision to veto the customs duties bill could affect businesses in the U.S. Virgin Islands, consult a knowledgeable corporate planning attorney.
BoltNagi is a widely respected and established business and corporate law firm serving clients throughout the U.S. Virgin Islands.