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.
Andrew, and Andrew are both fantastic. Transaction was smooth and professional highly recommend the team over at Multihull.
I just purchased my first large boat (my dreamboat) and Michael Streng and the rest of TMC was amazing! I really felt like I was a VIP customer because they were fast and easy to communicate with and worked ahead of me. It really was a treat and I would use them again any day!
Andrew Hodgdon and The Multihull Company have done an extraordinary job facilitating the sale of our catamaran. There were a couple of challenges (geography and timing) that made this sale a little tricky, but, as usual, Andrew was amazing. I’ve been buying and selling cruising boats for over 12 years and Andrew is, without a doubt, the best broker I’ve worked with.
Andrew Hodgdon at TMC-St. Augustine kept us thoroughly informed during the sale of our boat and took the extra steps necessary to complete the deal. His knowledge of the process made a complex deal very easy. Needless to say, we are extremely happy and satisfied with the job that Andrew did.
A shout out to Andrew Holland at the TMC main office, who handled the closing transaction of the sale of our boat. Very professional and thorough. Thank you!!
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