Can I Avoid Paying the Duty on my Boat?

By: Andrew Holland It is a common theme for our clients to ask us how they can legally avoid paying US Duty and Import tax on their boat when they are entering US Waters. So, is there a way for you as a boat owner to legally avoid paying US Duty when entering the US? The simple answer to the question is yes, you can avoid paying duty on a vessel when sailing into the US. However, this does not necessarily mean that it would be beneficial, or financially prudent to do so. So, how can you legally avoid paying Duty on a vessel?

Pros and Cons of Foreign Flagging

The only way to legally avoid paying US Duty on a boat when first clearing into the US is by foreign flagging the vessel. Whether through a Virgin Island Corporation, Jamaican corporation, Cayman Corporation, or many others, a boat owner may choose to create a corporation and foreign flag the boat under this corporation. The downside of this approach of course is the cost to set up the corporation and any annual maintenance fees that may be due on the corporation. Depending on the type of corporation being set up the costs can vary, but can exceed several thousand dollars. Foreign flagging the vessel will enable a boat owner to enter into the US under what’s known as a Cruising Permit which allows foreign flagged boats to cruise in US Waters for a period of up to 12 months, before being required to clear out of US Waters. It is important to note however that a foreign flagged vessel lying in US Waters that is in the US on a cruising permit cannot be sold to a US Resident while in US Waters without paying US Duty. This is often why you will see the “Not For Sale in US Waters to a US Resident” tag on certain vessels. (Read more about this here) The trade-off of foreign flagging your vessel will be determined by the value of your vessel, and your plans moving forward with the boat. If it’s your plan to cruise up and down the eastern seaboard on a boat with a value of $200,000 with plans to eventually sell her in the US at the end of your cruise, the tradeoff of paying a few thousand dollars to set up a corporation and having to clear out of the US every 12 months is likely not worth it to save the cost of paying US Duty that would amount to approximately $4,500. (Read more about the cost of US Duty here) However, if you have a larger yacht or mega-yacht, only plan to occasionally cruise in US Waters, and eventually sell her offshore, the benefits of foreign flagging your vessel which enables you to obtain a cruising permit during your time in US Waters may be worthwhile.

About Andrew Holland

Andrew Holland is the Sales and Marketing Manager of 5 Oceans Marine Group and is an avid catamaran enthusiast. He began working at 5 Oceans Marine Group in 2007 after graduating from Temple University with a degree in Journalism and a minor in Marketing. Before joining TMC in 2007, Andrew worked for Philadelphia Media Holdings on the production team and freelanced for several major magazines around the country.

After joining the 5 Oceans Marine Group team in 2007 as the Web and Marketing Manger, Andrew began working closely with TMC President and catamaran expert, Phillip Berman, where he quickly learned the many facets of the catamaran industry and soon took over the role of Sales Manager at TMC. Now, after being aboard and sailing nearly all of the major productions cats along the Eastern coastline and Caribbean, Andrew has taken that expertise to work with TMC clients, whether they are buying or selling a catamaran.  Andrew has now oversaw the sale of over 800 catamarans around the world since he began working with TMC and is able to take the most complex transaction and make it a breeze!  Articles by Andrew Holland include: