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New path for U.S. flag registry underway for large yachts

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By Dorie Cox

While a recent amendment to a U.S. law recognizing that a private yacht can be well over 300 GT may be good news to American owners of today’s megayachts, the U.S. flagging of these vessels is not out of rough waters yet.

The U.S. Coast Guard has been given until 2020 to fulfill a mandate from the U.S. Congress to develop a U.S. Large Yacht Code governing the flagging requirements for these large yachts. In the meantime, officials must come up with an interim process.

The Triton talked with one captain who has found the application process challenging.

“We don’t have to be inspected, but what we’re going through now is a crazy amount of paperwork,” the captain said. “It’s all very, very new. The U.S. has different rules. They are not allowing RINA [Registro Italiano Navale] or Lloyds to issue certificates on their behalf, and the U.S. doesn’t know how to do it. If they don’t issue the certificates, I’m operating illegally.”

The captain, who asked that neither he nor the yacht be named as the legal papers for tax and registry are underway, said his yacht meets the Large Commercial Yacht Code, currently the U.K.’s Maritime and Coastguard Agency’s (MCA) LY3. And that is exactly where U.S. officials are starting for comparable recognition by the U.S. government.

There are a variety of reasons why some owners prefer to flag their yachts under the United States registry – patriotism, easier travel within the country, fewer restrictions for advance notice of arrivals and pilotage requirements, to name a few. But until this summer, Americans with private yachts larger than 300 GT were only able to flag them in the U.S. as commercial vessels, which meant compliance with the same regulations as freighters and cargo ships. That’s because a law dating back to 1920 defined a yacht as a vessel up to 300 GT.

Now, as of Aug. 14, an amendment to the law has changed that. But with no allocated funding, staff or resources associated with the change in the law, the process of developing an interim protocol has been hindered by layers of national and international laws, according to Charles Rawson, a naval architect working with the USCG Office of Design and Engineering Standards.

Lt. Cmdr. Peter Bizzaro, USCG office of Commercial Vessel Compliance (left), and Charles Rawson, a naval architect working with the USCG, discussed the new U.S. flag option at a seminar yesterday. Photo by Tom Serio

Rawson is one of the officers charged with implementation of the new law. He and Lt. Cmdr. Peter Bizzaro, USCG Office of Commercial Vessel Compliance, met with about 50 people during the Fort Lauderdale International Boat Show for a U.S. Flag Registry open forum on Nov. 3. The event, hosted by the U.S. Superyacht Association, included yacht captains, brokers, agents, management companies, lawyers and others.

Some of the misunderstandings with the new law have to do with terminology. “Registered” is commonly interpreted as the process to get a certificate of documentation from the USCG, and many chartered yachts of all tonnages get registered as commercial, known officially as “coastwise,” on their certificate of documentation. The 300-GT threshold has to do with regular inspection of the yachts, according to Rawson.

It is “definitely easier to get other flags,” the captain in the application process said. So, as an interim process is worked out, the captain recommends the U.S. set up contracts to work with internationally recognized governing bodies to accept their documents and issue a U.S. version.

A slowdown during the process is the timing for certificates, the captain said. “One thing is having an idea, another is implementing it.”

Many questions surround the U.S. flag in regard to charters. Charter is only allowed as demise (the charterer pays all expenses for vessel operation and maintenance, and officers and crew work for the charterer) or bareboat (a demise charter where the charterer has the right to place its own master and crew on board).

During the FLIBS forum, the USCG’s Rawson clarified that yachts under the new law cannot be chartered with a crew. If the yacht is bareboat chartered, it may carry no more than 12 passengers. It must be a recreational vessel, not an uninspected passenger vessel. And it will not be subject to SOLAS, load lines or STCW because of its status as “pleasure yacht not engaged in trade.”

“It exempts yachts from some requirement for inspected vessels, but not every requirement,” Rawson said. “Yachts are still subject to manning requirements in the U.S. code.”

Lt. Cmdr. Bizzaro explained which parts of the code would be affected.

“We need to protect our fleet in regard to manning,” he said. “Yachts may still have to comply with USCG requirements for manning, immersion suits and certificates of financial responsibility, navigate with required safety equipment, and comply with marine casualty and accident reporting.”

If the yacht carries more than 12 passengers and charters, then it is a passenger vessel and subject to inspection, Rawson said. “Therefore you are not eligible for this exemption.”

The yacht currently in the process of flagging plans to charter and may cruise in Alaska in the future.

“The only way we can do it is bareboat. It’s just a bit more paperwork, but I don’t think it matters too much,” the captain said. And the yacht meets U.S. manning requirements.

“All of our officers are U.S. citizens,” he said. “Non-critical crew can be foreign, but it’s easier with U.S. crew.”

There are yachts over 300 GT flagged U.S., but they are inspected vessels, such as M/Y Honey, a 164-foot Westport  run by Capt. Kevin Smart. He worked about 18 months to complete the process for a U.S. flag for the 492-GT,   U.S.-built boat. The private yacht is not exempt from inspections, is not allowed to charter, and is required to meet manning requirements for 10 crew and 12 passengers.

During last year’s inspection, he talked about the flag change with inspectors. This year, they were familiar with the yacht and knew it met safety requirements, even though the yacht is “white and pretty,” he said.

“Basically, the rule they go by is, if another legitimate agency has that rule, they will accept it,” Capt. Smart said. “Our rescue tender is white, but that’s not an issue with MCA or the U.S. It’s on the safety plan that is stamped by the Coast Guard.”

Capt. Smart said he is pleased with the flag, but has a couple of recommendations for the USCG, including to allow green card holders to work as U.S. crew. As an inspected vessel, the yacht has a U.S. Certificate of Inspection, which defines the minimum manning requirements, the safety equipment and appliances required to be on board. M/Y Honey runs with all U.S. crew except one who holds a green card. They have requested a letter of equivalency, Capt. Smart said.

As the interim procedure gets worked out, the USCG’s Rawson expects that some citizenship requirements for crew will go away.

“They will have requirements for masters and mates who will stand watches under other laws,” he said. “They have to have USCG credentials, that’s where citizenship comes in. As far as we know, it’s master and mate. I’m not sure about engineers – it is a topic of debate. Tweaks have to happen with standing-watch positions.”

Capt. Smart suggested the USCG find ways to make the U.S. flag registry profitable. The Coast Guard sends officers to inspect vessels and issues Certificate of Inspections and does not charge, he said. “The MCA costs money, maybe they should contract the work out?”

As to the restrictions on chartering, he said other countries, such as the Bahamas, charge hundreds of dollars for cruising permits.

“Why limit the owners from charter if we could get money from it? They shouldn’t limit it.” he said.

Many captains and yacht owners see benefits with the new option for a U.S. flag.

“We cruised New England with no Notice of Arrivals and no pilots,” Capt. Smart said.

The captain in the process of flagging U.S. agreed.

“It would be great to see more U.S. flags. There’s a certain pride in pulling up that flag in the morning. It’s something nostalgic.”

Dorie Cox is editor of The Triton. Comments are welcome below. To offer suggestions or comments for the U.S. flag process, contact Lt. Cmdr. Peter Bizzaro at peter.a.bizzaro@uscg.mil; Charles Rawson at charles.e.rawson@uscg.mil; or Kitty McGowan, president of the U.S. Superyacht Association, at info@ussuperyacht.com.

 

U.S. Coast Guard officials have been tasked with implementing a simpler path for U.S. yacht owners to fly a U.S. flag on a private boat by 2020. The law was passed as part of an annual funding mechanism, John S. McCain National Defense Authorization Act, that affects how the USCG military gets funded every year. The Large Recreational Vessel Regulations, Section 3529, was passed for fiscal year 2019, according to Kitty McGowan, president of the U.S. Superyacht Association.

Click to see the full bill, click here: https://www.congress.gov/bill/115th-congress/house-bill/5515

 

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About Dorie Cox

Dorie Cox is editor of The Triton.

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