Total new tariff rate

[Jklotz]

We are buying a used boat. FYI - Our broker, Jeff Merrill, is now insisting on the US Form 4518 from the original import of the vessel be provided for our records. It gives a paper trail to be able to prove duties have been paid. The seller had to go back to the builder, North Pacific in my case, to get it. The USGC requires this document to register a vessel, however they do not keep a copy in their records. I don't know know if I'll ever need it, but with all this craziness going on, I'm sure glad I have it.

 

[KMAL]

We are buying a used boat. FYI - Our broker, Jeff Merrill, is now insisting on the US Form 4518 from the original import of the vessel be provided for our records. It gives a paper trail to be able to prove duties have been paid. The seller had to go back to the builder, North Pacific in my case, to get it. The USGC requires this document to register a vessel, however they do not keep a copy in their records. I don't know know if I'll ever need it, but with all this craziness going on, I'm sure glad I have it.

Bravo - this form should travel with every imported boat - but reality can intervene. Nice to have a broker that is really looking out for you!!

 

[Jklotz]

You would have a choice. If you wanted the boat flagged US - you would need to import it. You would pay the current tariffs in place at the time of import (which may be higher or lower). These would be calculated based on the current market value of the boat. In theory - you could offset the value with non China equip etc. I have yet to find someone (customs broker) who has actually been able to effect an offset and further understand that the offsets expire relatively quickly (I believe three years). I do not know about the Philippine flag specifically - but under any of the recognized "white flag" flags, you could bring your boat into the US. Without a USGS cruising permit - you would be required to check into a customs office every time you go into a new US customs zone. If you have a cruising permit - you can cruise freely for up to a year and then renew your cursing permit for another year (you may need to leave the country for seven consecutive days in order to renew). I hope this helps - but a good maritime attorney expert in foreign flagging for boats owned by US citizens can really help in this area.

If one were to foreign flag a vessel and depend on the necessary yearly cruising permit, is there any guarantee the laws won't change? What if the current powers that be discover this loophole and change it to 90 days? 30 days???? I suspect, given the current trade war, we'll be seeing some changes to the laws, although that is pure speculation.

 

[Jklotz]

Bravo - this form should travel with every imported boat - but reality can intervene. Nice to have a broker that is really looking out for you!!

Yea, I have to admit he really does a good job. Another example is, when we were doing the haul out inspection, he made a sketch of the boat from both sides and made a rudimentary diagram labeling what all the through hull connections were. I'm sure that's really going to come in handy at some point. He didn't have to do that. Glad I found a good one.

 

[Andy G]

Close it.

Why?

By and large this thread is on track. A lot of the posts reflect a very good knowledge of the industry and their conclusions are worth considering.

As the mods remind us, just play nice.

 

[KMAL]

If one were to foreign flag a vessel and depend on the necessary yearly cruising permit, is there any guarantee the laws won't change? What if the current powers that be discover this loophole and change it to 90 days? 30 days???? I suspect, given the current trade war, we'll be seeing some changes to the laws, although that is pure speculation.

Of course not (no guarantees) - but characterization of maritime treaties (supporting the framework for international flags of convenience), that US propagated in the 1950's as a loophole is not accurate. Access to US waters is governed by various maritime treaties that have been in place, in some cases over 100 years as well as the Geneva Convention of 1958. While they could certainly change - keep in mind that changes would effect every foreign flagged vessel making their way into US waters - commercial, private, charter, fishing, etc. Keep in mind that most commercial ships owned by US companies are indeed registered offshore - typically for reasons having to do with crew requirements, inspections, standards, regulatory requirements etc. You might also have FL as a whole succeed from the US if foreign flagged boats/yachts where not allowed. But you are correct - no guarantees - but easily a risk I would take under the right circumstances. Let's see - $15,000 to $20,000 in legal and registration fees Vs say $700,000 in tariffs for a nice 45 footer. Today - the choice is easy for anyone who can work within the framework currently in place with CBP and the USCG - if all blows up - one can import anyway. Also important to know that the US cannot keep one from flagging a vessel wherever they choose - they can only limit that flag from using US waters. Hope this helps.

 

[DDW]

Yes - will be interesting to see what happens here. The price difference in my view on comparably equipped boats in the 45ft range was circa $300K more for a US built production boat. Tariffs on a China boat will be circa $650K leading the China boat to be more expensive by say $350K - but then the US built boat will be subject to price increases as well on all of its imported components - and then the China built boat will be paying import tariffs on propulsion and the genset etc. And the world goes round and round with the consumer paying more and more.

Thing is, the market supported a price difference of $300K between a domestic and far east built boat prior to the tariffs. It is logical to assume that it will support that price difference going forward. In other words, domestic boat builders can raise their prices to match, not just due to the tariff burden but due to relaxation of competitive pressures, which is the whole goal of protectionist tariffs.

 

[mvweebles]

Question. From time to time a boat is advertised for sale but not in US waters. Might that be related to tariff payment? Or is it something else? Also I note there European boats often specify that taxes have been paid - duty/tariff?

Thoughts?

Peter

 

[Snapdragon III]

Question. From time to time a boat is advertised for sale but not in US waters. Might that be related to tariff payment? Or is it something else? Also I note there European boats often specify that taxes have been paid - duty/tariff?

Thoughts?

Peter

I know at least some of those boats are ones that have engines that don't meet US emissions standards, and can not be imported to the US. I think the rule is that the engine has to meet the US emissions standards at the time the boat was built. If you followed the "Mobius" build blog, that boat is now for sale in the US, but not for registration here. I believe it is due to having a Gardener engine, which is illegal to import to the US in a boat built past 2004. Around 2004 the US instituted "Tier 3" emissions standards that most engines sold anywhere outside the US did not meet, or at least were not certified for. It makes importing used boats here much more complicated.
The "taxes paid" on the European boats is about VAT tax in Europe. I think it's 20-25% to buy new or import it to Europe. Once it is paid once, it can be sold within Europe without being charged again. Unlike sales tax in the US that hit's every time the boat is sold.

 

[Snapdragon III]

I feel very sorry for people who have put down deposits/progress payments on boats built overseas. What a horrible thing to be caught in the middle of. Even if it your situation was practical to foreign flag the boat and avoid the tariffs, I would think there is a huge chance that the builder, or US company could go bankrupt before your boat was finished building or shipped. Such a terrible situation.
Back in 2010 I had a 25 foot fishing boat custom built by Aluminum Chambered Boats in Bellingham WA. They went bankrupt a couple months after my boat was delivered. I got super lucky, but it was still a huge pain in the ass. There were a bunch of issues that came up over the first couple years that should have been easy warranty items, that were much more complicated and expensive due to the builder no longer existing. There were things I would not have thought of like them buying the trailer at a special manufacturer deal that didn't include the normal warranty an individual buyer would get. And some defective Garmin Electronics that were super hard to get replaced because they still owed the vendor they bought them from money, that they didn't want to help with the warranty.
I hope this isn't too political, but I am frustrated that Washington state is thinking about adding a 10% "Luxury tax" on boat purchases above $500K, in addition to the 9% sales tax we already have. It seems like a huge kick in the teeth for Washington boat builders that have been fighting the good fight competing with overseas builders for all these years. It would be such a tragedy if workers at Northern Marine, Nordic Tug, American tug, Ranger tug, etc were to loose their jobs right as their businesses should be taking off like a rocket due to the tariffs. Hopefully the Luxury tax idea will die in the legislature, and not make it into law.

 

[Nick14]

A little additional information (or entertainment), the tariff rates on products from China vary depending on the good. This article describes how the actual tariff ranges from 0% to 245% depending on the product -

How Much Are Tariffs on Chinese Goods? It’s Trickier Than You Think.

The tariff rate on Chinese imports can be as high as 245% or zero, depending on the type of product that is being imported.

www.nytimes.com

I spoke with a major boat manufacturer this week who told me the net tariff on boats built in China is now 171.5% (he also quipped 'it might as well be 10,000%').

I was going to make a joke that 'it could be worse, could be 245%' but it doesn't apply. Once the price to consumers reaches an unmarketable level, the actual 'number' of the tariff becomes irrelevant.

I know little about the ‘foreign flag’ issue that’s been extensively discussed other than what I’ve read here. FWIW a friend of mine who is Canadian suggested it’s more complicated than some may think, or the term is misused. To “foreign flag” a boat it would mean that you do not US Document it but instead put it on the Canadian Registry which is Canada’s equivalent. In Canada you can only register a vessel if you are a citizen of that country. The way the big yachts do it is to form a company in someplace with loose regulations, like Micronesia or Aruba, and then flag the boat as a corporate vessel. Then you’d need to deal with the paperwork for annual cruising permits etc. as a foreign flag corporate vessel operating in U.S. waters (and hope that some software geeks involved with the U.S. government don’t come up with some sort of system that cross-references cruising permit applications with IRS, Social Security, Medicare, etc. or other databases to ferret out U.S. citizens who might be doing this to evade taxes).

I was told you could U.S. Document a boat and take delivery in Canada. But that would only buy a year since the boat would have to leave Canadian waters within 365 days. As soon as you cross the border you’d need to import the boat into the US. You could take delivery of a US Documented vessel in Canada, pay Canadian duty + Provincial State Tax on the boat (around 25%), get Canadian vessel license numbers (like state numbers in the U.S., costs $10 filing fee), put them on the bow, and be fine — as long as you never cross the border into the U.S., when you would need to pay the import (tariffs) fee. It might be worth the gamble if you think (hope?) the tariffs on Chinese products might be lifted during the next year, but it still seems to work primarily for those close to Canadian waters (Washington and Pacific North West, and northern Maine, seems easy; for boaters in the rest of country, not so much).

FWIW and YMMV. Like most things involving taxes and evading them, it depends on how good your lawyer is, and how much risk and hassle you're willing to take.

 

[Davil1]

I placed a big order at Fisheries yesterday as I'm pretty sure what's going to happen with supply and pricing.

Also, Will Prowse has a new video talking about the impact on solar and LFP batteries. Non political and well done.

good stuff
Worth my time reading
thank you

 

[KMAL]

Question. From time to time a boat is advertised for sale but not in US waters. Might that be related to tariff payment? Or is it something else? Also I note there European boats often specify that taxes have been paid - duty/tariff?

Thoughts?

Peter

A Foreign flagged boat cannot sell in US waters - In states like Florida they can be sold at many marina's which act as free trade zones. Not sure about the status of free trade zones on the West Coast - a "simple" solution is to take the boat out to International Waters to effect the trade (12 miles out). You also want to deal with a broker who know what they are doing in and around foreign flagged vessels. Here in the NW an unimported boat is attractive on the sale market as it in effect delivers a boat into the market that can be imported into either the US or Canadian markets - or kept foreign flagged by the new buyer. Noter that the sale process described above only applies to foreign flagged vessels which they buyer would not be importing into the US. If the buyer intends to import - the vessel can be sold within US waters.

 

[mvweebles]

A Foreign flagged boat cannot sell in US waters - In states like Florida they can be sold at many marina's which act as free trade zones. Not sure about the status of free trade zones on the West Coast - a "simple" solution is to take the boat out to International Waters to effect the trade (12 miles out). You also want to deal with a broker who know what they are doing in and around foreign flagged vessels. Here in the NW an unimported boat is attractive on the sale market as it in effect delivers a boat into the market that can be imported into either the US or Canadian markets - or kept foreign flagged by the new buyer. Noter that the sale process described above only applies to foreign flagged vessels which they buyer would not be importing into the US. If the buyer intends to import - the vessel can be sold within US waters.

Good information. I assume a foreign corporation has to be formed (Caymans seems to be easy).

Someone upthread posed an interesting scenario. Seahorse Marine marketed the Diesel Ducks as being picked up by the owner in China and cruised for a while (Philippines??) before headed to the US. I assume the boat would be imported and duties (and tariff) paid on the depreciated value of the boat at time of importation. @KMAL - is that a viable plan?

Peter

 

[KMAL]

Good information. I assume a foreign corporation has to be formed (Caymans seems to be easy).

Someone upthread posed an interesting scenario. Seahorse Marine marketed the Diesel Ducks as being picked up by the owner in China and cruised for a while (Philippines??) before headed to the US. I assume the boat would be imported and duties (and tariff) paid on the depreciated value of the boat at time of importation. @KMAL - is that a viable plan?

Peter

Yes - in many cases you need to form an LLC - this is the case for both Caymans and Marshall Islands. On importing a used boat it can be more nuanced. You can import a boat at any time. When you import a used boat - the market value of the boat is used to calculate the tariffs using the rates in place at the time of import. You may be able to offset "market value" with the value of say US componentry (propulsion, genset, water maker, davit, etc. I am not fluent in this area - but I understand the DHS has an in effect, an accelerated depreciation schedule for these items which hits 100% at three years. Meaning that you would use full market value in order to determine tariffs. If you imported the boat new (dealer/importer), the tariffs are calculated on declared value with offsets for non China componentry effectively allowing you to calculate the tariffs off of approximately 40% to 50% of the boats value. If you are importing used - market value could be substantially higher than the value "used" on a new boat and you could incur higher tariffs. Of course - tariffs could change as well. So many factors to consider if this might be the right strategy. A Maritime attorney can be really helpful and most will "qualify" you to make sure the strategy is applicable before charging you a dollar. The going rate to set up a foreign flag is > $20,000 for a 40' - 50' pleasure craft - this includes establishing the LLC, Flag State fees, and attorney's fees. In most states it makes sense to get a USCG cruising permit which allows you to move between US customs jurisdictions without having to check in. You must also leave the country for seven consecutive days each year - upon re-entry you can renew the cruising permit for another year. You will need to maintain the foreign flag annually as well - in most cases circa $2K.

 

[slowgoesit]

We are buying a used boat. FYI - Our broker, Jeff Merrill, is now insisting on the US Form 4518 from the original import of the vessel be provided for our records. It gives a paper trail to be able to prove duties have been paid. The seller had to go back to the builder, North Pacific in my case, to get it. The USGC requires this document to register a vessel, however they do not keep a copy in their records. I don't know know if I'll ever need it, but with all this craziness going on, I'm sure glad I have it.

Jklotz,

Are you sure about that form number? (US Form 4518) I can't find any record of it doing an internet search.

 

[DWJensen]

Jklotz,

Are you sure about that form number? (US Form 4518) I can't find any record of it doing an internet search.

It's CBP 7501 (or Entry Summary, depending on time frame)

 

[slowgoesit]

Thanks DW, I need to look through our documents and see if we have that, but our boat was imported by the owner, not the builder, and it was in 1983 or thereabouts . . .

With some of the stuff being currently floated, I'm concerned we may have to prove duty was paid on the boat 3 owners ago . . . .

 

[SteveK]

This talk of foreign flagging to avoid duty just now realised why your customs wants the CBP setup. It was so easy with nexus to go into and return but that only saw the passengers.
Now the boat is part of the report. Good luck with your foreign flag and home address in country.

 

[KMAL]

This talk of foreign flagging to avoid duty just now realised why your customs wants the CBP setup. It was so easy with nexus to go into and return but that only saw the passengers.
Now the boat is part of the report. Good luck with your foreign flag and home address in country.

The Roam app actually facilitates the process allowing for the USCG cruising permit to be renewed upon entry - very slick. Also - don't necessarily know about the requirements you may have in Canada - but the boats and the passengers have always been part of the "report".

 

[Jklotz]

Jklotz,

Are you sure about that form number? (US Form 4518) I can't find any record of it doing an internet search.

DWJ is correct, it is form CBP 7501. Sorry about that.

 

[SteveK]

The Roam app actually facilitates the process allowing for the USCG cruising permit to be renewed upon entry - very slick. Also - don't necessarily know about the requirements you may have in Canada - but the boats and the passengers have always been part of the "report".

With Nexus they had to ask what kind & lenght of boat I had. With CBP it is recorded in advance with all passengers. That is the difference.

 

[KMAL]

With Nexus they had to ask what kind & lenght of boat I had. With CBP it is recorded in advance with all passengers. That is the difference.

Thanks - never used Nexus on the water - it sounds like it is no longer available for boaters? CBP Roam - at least for us (my wife and I), has been fantastic. We clear customs underway with ease.

 

[DDW]

A question related to this: If I buy a boat currently registered and owned in Canada, that was originally built in the USA, and bring it back to the USA, is a tariff assessed? For example a Nordic Tug, built in WA.

 

[KMAL]

A question related to this: If I buy a boat currently registered and owned in Canada, that was originally built in the USA, and bring it back to the USA, is a tariff assessed? For example a Nordic Tug, built in WA.

I don't know - the broker should be able to give you some "guidance" - I would doubt tariff's would be applicable as they are assessed on foreign built product. You would have to pay sales/use taxes and annual excise taxes (WA). I suspect you would be importing the boat as it was presumably exported to Canada on a previous sale - not sure if other fees may apply. I would suggest speaking to a customs broker or CBP in Anacortes. But - of my league on this one.

 

[SteveK]

A question related to this: If I buy a boat currently registered and owned in Canada, that was originally built in the USA, and bring it back to the USA, is a tariff assessed? For example a Nordic Tug, built in WA.

From my understanding of tariffs, no. Tariffs tax products imported that were not built in the US.
Now WA may be looking for sales tax that may be due.

 

[dpmcgarry]

We are buying a used boat. FYI - Our broker, Jeff Merrill, is now insisting on the US Form 4518 from the original import of the vessel be provided for our records. It gives a paper trail to be able to prove duties have been paid. The seller had to go back to the builder, North Pacific in my case, to get it. The USGC requires this document to register a vessel, however they do not keep a copy in their records. I don't know know if I'll ever need it, but with all this craziness going on, I'm sure glad I have it.

We purchased with Jeff as well and he was all over this. It's a relief to have that paperwork in hand in case someone questions if duty was ever paid on our boat.

 

[Nick14]

Purely for humor, on the topic of evading taxes: “How to evade taxes in Ancient Rome? A 1,900 year old papyrus offers a guide.”

How to Evade Taxes in Ancient Rome? A 1,900-Year-Old Papyrus Offers a Guide.

A manuscript discovered in the Judean desert contains trial notes on an intricate tax-evasion scheme that involved forgery, fiscal fraud and the false sale of slaves.

www.nytimes.com

Maybe some of the ideas used back then might be helpful now for evading tariffs . Methods that have stood the test of time .

Tax evasion… a time-honored tradition going back thousands of years .

 

[KMAL]

I got a chuckle when I looked up the flag state of a yacht once owned by a famous Sultan and sold to a famous New Yorker…