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Navigate the boat show bond

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There are legal ways to sell a yacht in the United States, but it can be complicated. Boat shows offer foreign-flagged megayachts for sale a navigable option, the “boat show bond.”

 

Typically, when a foreign-flagged yacht comes into U.S. waters, it has 48 hours to check in with U.S. Customs and Border Protection. At that time, it can get a cruising permit to sail in the country for up to one year.

 

But that boat cannot be offered for sale or charter to U.S. citizens. That’s the big rule of the cruising permit; it only allows for personal use.

 

If the boat comes to the U.S. specifically to be sold, however, there are several paths it can cruise down. It must either be imported into the United States first (and pay 1.5 percent tax on the value of the vessel), it must be turned over to the “care, custody and control” of a broker (which prohibits the owner’s personal use) or it can post the boat show bond.

 

More than a hundred yachts opt for the latter each season, said customs broker Trey Reeder. Posting the bond allows the yacht to be shown to any potential buyer, therefore eliminating the need for the “not for sale to U.S. citizens while in U.S. waters” sign. And it lets owners enjoy their vessels before, during and after shows.

 

Despite advantages, downsides are that the bond only allows the boat to be for sale during a show itself, and the yacht must leave the country after the six-month bond expires.

 

But this bond is a good option for non-U.S.-flagged yachts for sale in U.S. boat shows, said Jeff Erdmann, president of Bollman Yachts and director of government affairs with the Florida Yacht Brokers Association.
Yachts can file for the boat show bond and not have to hand over any money.

“It’s works terrific,” Erdmann said. “You temporarily import the boat for a show by filing for a bond for 3 percent of the value of the boat.”

 

On this route, the guarantee of payment allows a yacht longer than 79 feet to be offered for sale during boat shows to residents of the United States. That means a $10 million yacht avoids paying $150,000 in federal tax (duty) by promising to pay $300,000 if rules are broken.

 

And with the boat show bond, yachts don’t have to display the sign “not for sale or charter to U.S. citizens while in U.S. waters” during boat shows.

 

How the bond works
When filing for a bond, the captain must forfeit the megayacht’s original registration and cruising permit to U.S. Customs, said Steele Reeder, president of Howard S. Reeder in Ft. Lauderdale.
Yachts less than 79 feet don’t get the option for a bond, Reeder said.

 

Trey Reeder, a yacht specialist with the firm and son of Steele Reeder, visits the yacht requesting the bond and takes the original cruising license and original registration, which he drives to a nearby customs office.

“We’re the go-between between the client and customs,” Trey Reeder said. “We try to prevent captains from spending hours in customs.”

 

Right before the Ft. Lauderdale International Boat Show is a busy time for Reeder as he puts about 200 miles a day on his Dodge Charger traveling between vessels, bond and customs offices.

 

“Most of the boats start the bond in October because it has a six-month lifespan,” Trey Reeder said. “And six months puts them through April, that way they can do all shows.”

 

The Ft. Lauderdale show is in October, Miami’s Yacht and Brokerage Show is in February and the Palm Beach International Boat Show is in March.

 

Boat show bond rules
If boat show bond rules are broken, the bond will be forfeited. One important consideration is that the bond doesn’t just expire in six months, Trey Reeder said.

 

“You have to cancel it,” he said. “At that time, I go to customs, get the original paperwork and deliver it back to the boat.”

 

When the bond is closed, in order to get another cruising permit, three conditions must be met: the vessel must leave the United States for a foreign port or place, the yacht returns from that foreign port or place, and at least 15 days have elapsed since the previous license expired.

 

Capt. Jeff Ridgway of the 154-foot Burger M/Y Ingot has been through the boat show bond process four or five times.

 

“We have to leave the country after the show to clear the bond,” Ridgway said. “But that can consist of a trip to the Bahamas and back.”

 

Another rule is to plan before traveling and to communicate with Customs.

 

“You have to be aware that you can’t just move around, but have to let them know that you want to move,” Ridgway said of the Reeders, who he uses as customs brokers. “If the owner surprises you with a trip, just let them know.”

 

To move without a cruising permit, a vessel has to communicate with the USCG. Either you have a cruising permit or your documents go on file because you are not eligible, Steele Reeder said. In that case, if you want to move the vessel you get a “permit to proceed” from the USCG. Vessels in this category must obtain a permit before proceeding to each subsequent U.S. port.

 

Boats get exactly six months to use the bond.
“And there is positively no extension on the bond,” he said.

 

Another important rule refers to closing the bond.
“A kicker, that everyone hates, is that they have to close the bond in the same port they received it,” Trey Reeder said. “The bond never leaves the Custom office.”

 

“For example if start in Ft. Lauderdale and go to Rybovich [West Palm Beach], and want to depart for a trip from there, they can’t,” Reeder said.

 

“They have to travel back here, make plans to dock or tie up somewhere and close the bond,” Reeder said from his office in Ft. Lauderdale.

 

Also, a list of visitors during the show must be kept because the boat may not be offered for sale before or after a show, Erdmann said.

 

“That way they can continue to work with the people on that list even after the show,” he said.
“We have never seen a problem with this because brokers usually keep records,” Steele Reeder said. “They keep a list because these are sales lead.”

 

Private use allowed
Owners may continue to use their yachts, during shows and between shows, with a few rules.
“There are no specific restrictions saying you can’t use the boat,” Steele Reeder said. “Yachts can travel within the customs jurisdiction of the office where the paperwork is being held.”

 

For example, yachts in Ft. Lauderdale can use the boat between the border of the West Palm Beach and the Miami custom’s coverage. But they have to physically close the bond to leave from the originating office.
Why can’t yachts go to shows in Newport or Annapolis?

 

“We typically don’t let our bonded boats go to other ports other than West Palm Beach, Ft. Lauderdale and Miami,” Trey Reeder said. “The reason being is control and our assurances to customs and to the bonding company that our boat will follow the rules.”

 

“It would be too hard for us to keep track of our clients and control their movements if we let them go to much farther than the three boat show ports in South Florida,” he said.

 

The boats purchase the bond, but no money changes hands between a boat and customs unless a boat breaks the bonds rules, Reeder said.

 

But if they don’t follow rules, customs will collect from the bonding company and the bonding company will then look to the boat to recoup the lost funds, he said.

 

“Buy purchasing the bond, the owner is essentially agreeing to follow the rules or payback the bonding company,” Trey Reeder said. “There is a risk involved with bonding an asset that can fire up the motors and disappear to a foreign country at any point.”

 

The bond history
The bond has made boat shows big, Steele Reeder said. What would Florida boat shows look like without this option?

 

“We would lose the big boats because they wouldn’t want to pay the import tax for a five-day show,” he said. “We would see a cut in numbers and a decrease value-wise.”

 

Reeder was a member of the Marine Industries Association of South Florida in the late 1990s when the group wanted to expand the Ft. Lauderdale show by creating a free-trade zone, he said.

 

The group said, “Why couldn’t we come up with a temporary solution for the shows and let customs keep control?” Steele said.

 

“We came up with a draft, had the customs guys in on it, but thought it was a pipe dream. Why would people want to give yachts a break?”

 

But U.S. Rep. E. Clay Shaw Jr. saw hundreds of thousands of people in the industry who would benefit and got it attached to legislation.

 

“It passed to all our amazement,” Reeder said.

 

So, for yachts that want to sell at U.S. shows, the boat show bond is chosen by most all of the large foreign-flagged boats in South Florida shows, said Trey Reeder.

 

“Who has the boat show bond?,” Reeder said. “Most every boat on the outside docks at these shows has the bond.”

 

Dorie Cox is associate editor of The Triton. Comments on this story are welcome at dorie@the-triton.com.

Dorie Cox is associate editor of The Triton. Comments on this story are welcome at dorie@the-triton.com.

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