Deferred importation would let U.S. citizens buy foreign-flagged brokerage yachts in U.S. waters.

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.

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Two bills now pending in the U.S. Congress would amend the law to allow all sellers of foreign-flaged 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.

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“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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