Duty Bound

New leg­is­la­tion could let U.S. cit­i­zens buy for­eign-flagged bro­ker­age yachts in U.S. waters.

Yachts International - - Contents - By Gary Beck­ett

Have you ever walked the docks at a boat show and seen a sign next to a bro­ker­age yacht that states: Not for sale or char­ter to U.S. cit­i­zens while in U.S. waters?

Those signs ex­ist be­cause, ever since the Tar­iff Act of 1930, Amer­i­cans have been barred from buy­ing a for­eign-flagged bro­ker­age yacht in their home waters un­less the seller first pays a duty. To­day, many in the U.S. bro­ker­age in­dus­try con­sider re­vi­sion of the Tar­iff Act—a cam­paign known as “de­ferred im­por­ta­tion”— one of their top leg­isla­tive is­sues.

U.S. res­i­dents can’t even step aboard to view a used, for­eign-flagged ves­sel that is listed for sale in U.S. waters, un­less the boat is first im­ported and the seller pays a duty on its ap­praised value. That duty is as­sessed at 1.5 per­cent of the yacht’s value. (On a $10 mil­lion yacht, the duty would be $150,000.) The law ap­plies to all for­eign-flagged bro­ker­age yachts listed for sale in the United States, even those owned by U.S. cit­i­zens. Duty is not as­sessed on a for­eign-flagged bro­ker­age yacht sold to a non-U.S. res­i­dent in U.S. waters.

Two bills now pend­ing in the U.S. Congress would amend the law to al­low all sell­ers of for­eign­flaged bro­ker­age yachts to de­lay pay­ment of the duty un­til the boat’s sale, or do away with the duty al­to­gether. In May, U.S. Reps. Lois Frankel, a Demo­crat, and Ted Yoho, a Repub­li­can, both from Florida, in­tro­duced leg­is­la­tion that would main­tain

the duty but de­fer its pay­ment un­til the time of the yacht’s sale. Then in Au­gust, U.S. Rep. Brian Mast, a Repub­li­can from Florida, in­tro­duced the “Mar­itime In­dus­tries Re­lief Act of 2017,” which would elim­i­nate the duty.

If the elim­i­na­tion were en­acted, it would save a po­ten­tial seller thou­sands or even hun­dreds of thou­sands of dol­lars, de­pend­ing on the yacht’s ap­praised value. In ad­di­tion, the In­ter­na­tional Yacht Bro­kers As­so­ci­a­tion (IYBA) says, the changes would cre­ate marine in­dus­try jobs by en­cour­ag­ing more own­ers to of­fer their yachts for sale in the United States. Mari­nas, yacht ser­vice and main­te­nance yards, yacht bro­kers, yacht crew and other marine ser­vice providers all would ben­e­fit from either bill be­com­ing law, the pro­po­nents say.

“Our stud­ies have found that marine jobs pay 28 per­cent more than a sim­i­lar job in any other in­dus­try,” said Sta­ley Wei­d­man, chair­man of IYBA’s Pub­lic Af­fairs Com­mit­tee. “That’s great for all of our coastal com­mu­ni­ties, and we’re pre­pared to be fully en­gaged to sup­port this … leg­is­la­tion to im­prove jobs for our marine in­dus­tries around the coast­line of the U.S.”

The IYBA says that bro­ker­age-yacht own­ers typ­i­cally spend an av­er­age 10 per­cent of their yacht’s value an­nu­ally on la­bor, goods, ser­vices and main­te­nance, and that new-yacht buy­ers typ­i­cally spend 13 per­cent of the sell­ing price on up­grades and im­prove­ments dur­ing the first year of own­er­ship. Adding more yacht sales in U.S. waters could thus con­trib­ute $200 mil­lion or more to the U.S. econ­omy, IYBA says.

“A $1 mil­lion boat is go­ing to give you $130,000 in eco­nomic im­pact in the first year and a $100,000 im­pact each year go­ing for­ward,” IYBA Pres­i­dent Paul Flan­nery said. “For a $10 mil­lion boat, it’s 10 times that, for a $1.3 mil­lion im­pact the first year. So, that does equate to a lot of jobs.”

Ad­di­tion­ally, IYBA says, the cur­rent pol­icy dis­cour­ages about $2.46 bil­lion in U.S. eco­nomic ac­tiv­ity; typ­i­cally, 300 to 400 pre-owned boats (val­ued in ex­cess of $2 bil­lion) are on the mar­ket. Right now, the for­eign-flagged ones can­not be of­fered for sale or char­ter to U.S. res­i­dents while in U.S. waters.

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