The VI does not produce sugar cane or molasses, a residue of sugar cane processing that is the basis for rum distilling. The VI imports molasses from other sugar cane producing places and distills it into rum and transfers it to the US mainland to be marketed. Because the USVI is inside the US custom zone, VI product is not subject to tariffs and duties. Other independent Central American and Caribbean countries that produce rum are subject to tariffs( import taxes) that increase the cost or their rums to US consumers vis a vis Virgin Islands rum. The VI rum is subject to a federal excise tax on liquor but 98% of that excise tax collected on VI rum sales is repatriated to the local government( Excise tax is $13.50 per gallon proof and $13.25 is returned to the VI for amounts shipped to US mainland). The local government then gives approximately 42% of the rebated rum excise tax (called rum cover over) to two distillers Cruzan and Diageo, who use those proceeds to help cover the cost of importing molasses, marketing their brands, and complying with production incentives. Also note that Puerto Rico and the US Virgin Islands are the only two jurisdictions that can make bulk shipments of rum in vats to be bottled on the mainland. All other rum producers have to ship the final product in bottles.

1. If you were a citizen or policymaker of one of the Central American or independent Caribbean states that produce rum, how would you feel about the treatment of US VI rum? Is it protectionism? Is it an export subsidy to the two local rum producers? Is this a fair competition?

2. If you were a representative of the US Government of the Virgin Islands how would you defend this program?

3. What is personal position or stance do you take?