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.
My wife and I worked with Andrew Hodgdon to sell our 2021 FP Elba 45. In addition to skillfully carrying out the traditional yacht broker responsibilities, Andrew went above-and-beyond to ensure that we were well-positioned to sell in a competitive market. For example, Andrew helped out with much-appreciated repairs and hurricane prep, among other things. Trustworthy, intelligent, and conscientious, Andrew’s communications with us and the buyer were always thoughtful and forward-thinking, and fairly represented our interests.
We really lucked out in connecting with The Multihull Company. We made a cold call to Cynthia Wummer, a Multihull Company broker and told her we wanted to buy a catamaran to cruise The Great Loop and experience the Bahamas. We particularly wanted a PDQ power catamaran. From our first contact she was so helpful and responsive. She immediately contacted a selling broker who represented a prospective seller. Because we are new to a bigger boat and boating on the ICW, Cynthia assisted us through the entire process. She is a captain which was an added bonus to the process; she knew all the right questions to ask the selling broker as well as the surveyor. She drove 3 hours to be present during the survey, she developed a good relationship with the selling broker, she called and checked in with us regularly, was very enthusiastic about our purchase, and answered all our questions. We could not have done it without her. The Multlihull Company support team, Andrew Holland and Courtney Greider, were so helpful in the closing process: the paperwork was easy to complete and communication was smooth and timely. We wouldn’t hesitate to recommend The Multihull Company and Cynthia to anyone who is the market for a boat large or small. Thank you!!!!
Multihull Company has succeeded again. This is my second time using their services and they are extremely professional and honest. Working with their brokers and their administrative team was easy. Communication occurred at every level and constructive advise was always given. They know this business inside and out and acted as my fiduciary in every way. I will use them again for their service and knowledge.
Great to deal with and very patient in our questions. They were able to find us the perfect vessel for our needs.
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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