Story by Andrew Holland / May 15, 2018
It is a common theme for our clients to ask us how they can legally avoid paying US Duty and Import tax on their boat when they are entering US Waters. So, is there a way for you as a boat owner to legally avoid paying US Duty when entering the US?
The simple answer to the question is yes, you can avoid paying duty on a vessel when sailing into the US. However, this does not necessarily mean that it would be beneficial, or financially prudent to do so. So, how can you legally avoid paying Duty on a vessel?
The only way to legally avoid paying US Duty on a boat when first clearing into the US is by foreign flagging the vessel. Whether through a Virgin Island Corporation, Jamaican corporation, Cayman Corporation, or many others, a boat owner may choose to create a corporation and foreign flag the boat under this corporation. The downside of this approach of course is the cost to set up the corporation and any annual maintenance fees that may be due on the corporation. Depending on the type of corporation being set up the costs can vary, but can exceed several thousand dollars.
Foreign flagging the vessel will enable a boat owner to enter into the US under what’s known as a Cruising Permit which allows foreign flagged boats to cruise in US Waters for a period of up to 12 months, before being required to clear out of US Waters. It is important to note however that a foreign flagged vessel lying in US Waters that is in the US on a cruising permit cannot be sold to a US Resident while in US Waters without paying US Duty. This is often why you will see the “Not For Sale in US Waters to a US Resident” tag on certain vessels. (Read more about this here)
The trade-off of foreign flagging your vessel will be determined by the value of your vessel, and your plans moving forward with the boat. If it’s your plan to cruise up and down the eastern seaboard on a boat with a value of $200,000 with plans to eventually sell her in the US at the end of your cruise, the tradeoff of paying a few thousand dollars to set up a corporation and having to clear out of the US every 12 months is likely not worth it to save the cost of paying US Duty that would amount to approximately $4,500. (Read more about the cost of US Duty here)
However, if you have a larger yacht or mega-yacht, only plan to occasionally cruise in US Waters, and eventually sell her offshore, the benefits of foreign flagging your vessel which enables you to obtain a cruising permit during your time in US Waters may be worthwhile.
I chose Zee (Zvonimir Kalinic) after posting an ad for a broker on Yacht Sales from about 15 other brokers because he showed professionalism and care right away compared to the others. Most of the brokers never intended to show people my boat but yet somehow expected to collect commission. Zee met me in Novigrad and spent 3 hours taking photos and drone footage and throughout the listing period was communicating continuously and advising me about any offers that came through. His service was at a high standard that I was extremely happy with and felt comfortable at all times especially since I’m in Sydney and my boat is in Montenegro. I can’t recommend Zee highly enough to anyone looking to sell their boat with peace of mind.
The brokerage team has been amazing. They helped me find the right catamaran for our family of four, with enough space for extended family and friends to stay with us anytime. The broker really helped me narrow down what I needed. I started with a long list and eventually narrowed it down to something that was the right fit and price for me.
I cannot speak too highly of Andrew Hodgdon and his colleagues at the Multihull Company.
The process of selling my boat was very smooth and well managed and with excellent communication – especially important as I was unable to be nearby during the sale process. Andrew’s deep knowledge of the market and my boat was very reassuring. We spoke regularly and he kept me closely advised all the way through to a happy sale. I found him a good guy, very helpful, willing to share and bounce ideas around, and I enjoyed working with him. Highly recommended!
Successful relationships cannot exist without it. At The Multihull Company we base every relationship on a firm commitment to earning and retaining our client’s trust.
Advice of any kind is valuable only when grounded in hard-won expertise. It too, must be trustworthy. Trust and expertise define the heart and soul of The Multihull Company. We are a team of skilled professionals who thrive on providing expert, trustworthy advice and service to catamaran and trimaran sailors around the globe.
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