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Questioning the rules and reasons on chartering in the U.S.

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I just booked my flight for the Newport Charter Show and got to thinking about chartering in the United States. As an active member of the U.S. Superyacht Association, I hear from marinas and shipyards around the country eager for more yachts to visit. One of the best ways to do that is to encourage more cruising, and one the best ways to do that is through charter.

Without knowing too much about it, one would figure yacht charters in the U.S. would be a vast and wonderful opportunity, filled with diverse destinations (think Alaska, the Chesapeake, the Florida Keys), convenient cruising and safe vacations.

Learn a little about it, though, and it’s easy to get confused with which rules apply, and when. There are some who claim only U.S.-flagged yachts can charter in the U.S. (Think Jones Act.) Not completely true. There are ways to charter a foreign-flagged vessel in the U.S., but it’s not all that common.

When we dig deep into this topic of chartering in the U.S., some of the rules are downright absurd. If you aren’t the captain of a large yacht, you might not know that the U.S. government has no entry category for large yachts. If they are commercially registered — which they must be to charter in the Mediterranean – they are considered cargo ships when they come to the U.S. (Absurd, right?)

I spoke with a veteran charter captain who operates the foreign-flagged vessel under his command in the Caribbean in winter, the Med in summer. He lives here in the United States and brings the vessel here for service, but never to cruise.

When I asked why not, he says he can’t, and explained the cargo vessel rule as he understands it. Yet there are some foreign-flagged vessels that charter. The easiest way, of course, is to pay the duty, but that’s an expensive proposition. Another way is to use a demise contract, which requires the yacht owner to give up ownership for the length of the charter and requires the charter client to accept an enormous responsibility for the length of the charter. If nothing goes wrong, it’s no big deal. But if something does, it’s a huge risk, one that most owners and captains don’t seem willing to accept.

A few facts as I know them:

The bulk of the global charter fleet business is in the Mediterranean in summer.

The bulk of charter clients are American.

The bulk of new yacht owners come into yachting through charter.

What does that all mean? Well, the Med certainly doesn’t make chartering easy, although recently some countries have relaxed rules to make it at least possible. And it’s not cheap. But it works, and guests are happy with the chance to see some of the world’s most beautiful historical cities and be seen in some of the world’s most exclusive high-end locales.

One charter broker told me that the real problem is one of supply and demand. The Med market is huge because charter clients – mostly Americans, remember – want to travel on their holiday, go somewhere. They don’t want to spend $100,000 or $300,000 for a week’s charter and go to … Rhode Island.

OK, I’ll buy that. But Europeans might. The U.S. East Coast has phenomenal places, terrific history (albeit younger than our European cousins) and great cruising, much of it still relatively unseen. And as the Med destinations become so familiar among repeat charter clients, they will continue to seek out new destinations. That’s why Croatia exploded in the last decade. That’s why Cuba is such a draw right now. Both are close to the fleet, and new to the clients.

(That proximity is also why terrific charter locations such as Tahiti and Fiji continue to work hard attracting charter yachts. It’s just so far from the bulk of the fleet.)

The most bizarre part of this topic, to me, is that each person I asked about it had a different take on what can and can’t be done, and why. And they each saw a different reason for a relatively weak charter market in the United States.

So is it worth fixing? Is it worth fighting for? Not everyone agrees it is.

But if we are committed to protecting the global yachting industry, and fortifying it so that it can grow, one thing we have to look at is expanding chartering options in the United States.

“We’re missing a huge market,” the veteran charter captain said. “The rest of the world would love to come here, but can’t.”

It’s not that they can’t, exactly. It’s that we make it so challenging. I guess my point is: Why is that?

 

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

 

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