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Legislation on importation offers to shift the time duty applies

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About five years ago, when the Florida Yacht Brokers Association (FYBA) was bringing home its drive to cap the sales tax on boats sold in Florida at $18,000, Jeff Erdmann was asked by a member of Congress what the government could do on a national level to help the marine industry.
Erdmann, now a broker with Denison Yachts, immediately thought of deferring the importation duty on yachts (1.5 percent of the value) that come into the U.S. for sale. Erdmann and his colleagues at FYBA got to work creating legislation that delays payment of that duty until the vessel sells.
Doing so, Erdmann says, would translate into a lot more boats coming to the United States for sale, a lot more people able to view vessels for sale, a lot more sales, and a lot happier yacht owners.
“Right now, I can show Mrs. Bin Laden a yacht, but I can’t show your mother a yacht,” Erdmann said during a breakfast meeting with The Triton and several issue stakeholders.
To show a foreign-flagged yacht for sale, it must either pay its duty (an expensive proposition that is mostly refundable if the yacht doesn’t sell) or take out a boat show bond, which lets yachts larger than 79 feet be shown for sale during boat shows spanning a six-month period. The bond covers duty of 3 percent of the value of the yacht in case the rules are broken.
Some yachts opt for neither option, coming in instead under a cruising license. As such, the yachts are for recreational use only and cannot be shown “for sale the U.S. residents while in U.S. waters,” which we’ve all seen hanging off the back of yachts in myriad boat shows. Sales may still happen this way, but brokers, brokerages and yacht owners risk a lot taking that route.
Deferring importation until the moment of sale enables yachts to come here and be shown to anyone interested. If they sell, duty is handled as a part of the sales process. If not, the yacht can stay for cruising or service.
“All we want is a shift in the time when the duty is applicable,” he said. “We want it applicable at the moment of sale versus at the moment of importation.”
In November, Rep. Lois Frankel introduced the bill that would scratch that not-for-sale language off the cruising permit. It has been referred to committee but hasn’t come up for a vote yet. The bill has gathered nine co-sponsors and the support of more than 60 associations and agencies. Erdmann and others from FYBA will be in Washington during the American Boating Congress this month to keep the issue front and center with legislators.
By the way, years ago, some groups opposed capping the Florida sales tax at $18,000, arguing that it would translate into lost tax revenue. Instead of losing the predicted $1 million in the first year, the cap encouraged yacht owners to pay so they could keep their yachts in Florida waters — to the tune of more than $13 million the first year.
The same caution is being leveled by a minority of people who disagree with deferred importation, arguing that yachts that sell here will just go offshore to close, avoiding the importation duty. Even if that turns out to be true, it’s not much different than what happens today. At least with deferred importation, the economic impact is clearly on our side if it means having yachts on the ground in the U.S., in marinas during boat shows where they can be shown to everyone, in shipyards before and after a sale, and cruising our unique destinations.
There’s about $2 billion worth of yachts on YachtWorld, the central agency listings of yachts for sale, that carry that “not for sale to U.S. owners” line. No one really knows what will happen to them if this bill gets passed.
Time will tell, of course, but we in yachting know that these tax requirements surrounding yachts and their use are not really about the money. It’s more about excessive expenses and — more particularly — unnecessary expenses.
Kudos to FYBA — and to Erdmann and his team — for bringing another issue to the plate. Here’s hoping they bring it home, too.

Lucy Chabot Reed is publisher of The Triton. Comments are welcome at lucy@the-triton.com.

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