Congratulations! After endless hours of research, meetings, and inspecting vessels, you have finally purchased that dreamboat. Now the broker is asking how you want to register her?
There are numerous options available and they may depend upon multiple issues, including your nationality, tax position, and plans for use of the yacht.
It may be beneficial to use an open registry or perhaps the national registry of your home country.
In the United States, boat and yacht owners have two choices. First, they can register a vessel with an individual state, such as Delaware or Florida. Second, they can document a vessel through the United States Coast Guard (USCG). Both allow the owner to fly a U.S. flag off the stern, but each provides much different benefits.
What is vessel documentation? Vessel documentation is a national form of registration. It is one of the oldest functions of the U.S. government, dating back to the 11th Act of the First Congress.
That was on September 1, 1789. Every nation in the world that has a vessel owned by one of its citizens has some type of vessel registration. Under U.S. law, any vessel of at least five net tons and wholly owned by a citizen of the United States is permitted to utilize federal documentation. If a corporation owns the vessel, the majority ownership must be through a U.S. citizen.
National documentation versus state registration provides several key benefits. It is conclusive evidence of nationality for international purposes. When operating outside of U.S. waters, the Certificate of Documentation is proof that the vessel is of American nationality.
While a state registration can also be interpreted the same, it is not definitive proof of nationality or ownership.
Another benefit of national documentation is that it provides for unhindered commerce between the 50 U.S. states and Puerto Rico. It also admits vessels to certain restricted trades, such as coastwise trade and the fisheries.
Per the Merchant Marine Act of 1920, commonly referred to as the Jones Act, only certain vessels may participate in domestic trade between the states.
Because trade between the states is under federal jurisdiction, documenting the vessel on the national registry clarifies that privilege, as applicable.
For marine financing, the Ship Mortgage Act, also from 1920, enhanced the availability of preferred mortgages on documented vessels. This Act provides certain protections for lenders. As such, most lenders in the U.S. will require a yacht to be documented through the USCG in order to secure the mortgage.
Federal documentation also provides for recording the title history of a vessel. This enables a buyer or seller to discover a listing of mortgages, liens, and other notes attached to the vessel. Most state registrations do not maintain records for title history.
Lastly, being USCG documented also provides the owner with certain legal rights and protections that a state registered boat would not receive, especially when in foreign waters.
Documented vessels are entitled to aid from a U.S. Consulate when outside of domestic waters, which is not the case with state-registered vessels.
Capt. Jake DesVergers currently serves as Chief Surveyor for the International Yacht Bureau (IYB), a recognized organization that provides flag-state inspection services to private and commercial yachts on behalf of several flag-state administrations. A deck officer graduate of the US Merchant Marine Academy at Kings Point, he previously sailed as Master on merchant ships, acted as Designated Person for a shipping company, and served as regional manager for an international classification society. Contact him at 954-596-2728 or www.yachtbureau.org.