Citizenship and documentation. Recent changes.

[jmschmidt]

If one of the four passports your children hold is US that child may be able "buy" a vessel, foreign build or US built, and flag it (aka "document" it) US. Some states, especially those with a personal property tax, will also require "state registration."

If foreign build and flagged US as a "recreational" vessel you will need a waiver from the US Maritime Commission to reflag to one of the various USCG commercial classifications. You may also need an original signed copy of the Builder's Certificate or similar to obtain this waiver. If granted, these waivers have several restrictions, including the size of the vessel and area of its operation. The reflagging for commercial use with the USCG will also be required even if US built if you plan to operated in commercially in US waters. See US Coast Guard Form CG-1258.

Once you've decided on the boat, how it will be owned by a US Citizen (or US entity majority controlled by a US citizen or citizens) and where it will be home ported (aka Hailing Port) if you finance the purchase it is very important the loan be evidence by a Preferred Ship Mortgage (PSM) and recorded with the USCG. This is the only form of lenders lien that gives you and your mortgagee (the lender) the ultimately protection.

Once flagged and covered by a PSM any lien filed against the vessel in state or federal court will be junior to the PSM. In fact, US Maritime law does not even recognize liens stemming from actions filed in state courts or local courts.

Believe it or not many banks and others who lend on small vessels do not realize this.

Any vessel eligible for US documentation, 5 Gross Registered Tons (GRT) or greater, being the minimum should be documented. Don't panic, GRT has nothing to do with the actual weight or displacement of your vessel. It is derived from a formula which you can use to calculate the GRT yourself online on USCG Form CG-5397.

I have foreign build, 47 ft. catamaran, US flagged which weighs 33,000 pounds but it calculates out to 66 GRT. It is US flagged and documented as recreational vessel in US waters but holds a Commercial Recreational Vessel License issued by the government of the British Virgin Island where it is in charter service.

Good luck. Hope this helps.

[jmschmidt]

Law 104–324, section 1113 (1996). Since the issuance of Public Law 104– 324, the National Vessel Documentation Center (NVDC) has allowed vessel owners to mortgage their vessels to non- citizens, and it has not restricted the eligibility of a vessel mortgaged to a non-citizen to earn registry or coastwise endorsements, even though 33 CFR 67.17(c) and 67.19(d)(3) continue to explicitly state these restrictions. Therefore, amending these sections will align regulatory text with the current and longstanding 20-year practice of the NVDC, consistent with the statutory requirements, and these changes will result in no impact on industry.
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Am I completely misreading this? Do you have any advice for me?

Yes, I afraid your are. This is just government house-keeping the rules. This "change" only clarifies wording to reflect the fact that the NVCD has been recording Preferred Ship Mortgages on US Flag vessels in coastwise service which have taken out loans from foreign sources for the last twenty years. So you can borrow money for a Swiss bank to finance your boat and the Swiss bank can record a Preferred Ship Mortgage on your boat with the USCG. There is no change to the requirement that all US Flag (Documented) vessels must be owned entirely by a US citizen or an entity controlled by a US citizen majority.

[jmschmidt]

No, US flag "documented" vessel can be taken out of documentation at any time for any reason by the l owner indicated on the documentation certificate.

[Chachacha]

Thanks for your informative replies.

So, what I'm getting from this is that I should probably keep it in a state registration for a few years and not remove it from the US. But is it hard to get a loan on a state registered boat?
(Light bareboat local chartering - at most a few days up or down the Intracoastal Waterway or a few hours harbor cruises in a very touristy area with a long season is what I have in mind. A bit of overnight accommodation too. The marina doesn't mind. Just to recoup some of the costs.)

If, when we are ready to bring it off-shore, the majority of the loan will possibly be paid off, we could coast guard document it under our kid's US citizenship as a 51% co-owner. Our kid would be an adult by then.

I guess we could deal with that situation, but it would be nice to know whether we could go out of the country and come back. If we flag it in Australia, we can't keep it for long in the US afterwards. If it's flagged in Europe, would we have to pay the VAT even if it doesn't stay there long?

Sorry for all these endless questions, but you are so knowledgeable. I've been reading all similar threads but everyone's situation is different...

[jmschmidt]

OK, that should work for you if you get a six-pack (OUPV), need the green card or work visa for that. Better check on the foreign built issue. You didn't the origin of the boat.

Several years they shut down "Captain Zodiac" and his adventure tours on Kauai (Hawaii) for running French build inflatables in US commerce. His solution...get a guy with a heat gun, melt all the seams, glue it back together and have the guy give him a labor and materials bill that was more that 50% of what he paid for the Zodiac and he was good to go. Not necessary today, Zodiac was doing so much business with the US military that to keep Congress happy they built a factory in the US so you can now buy a US-built one. Berretta did the same thing for their 9mm pistol sales to the US military.

[KP44]

Welcome to this forum.

As I understand it, only a US citizen may own a US documented vessel. I don't think there can even be minority ownership by other than US citizen. And that is likely because in the event of death of the US citizen, full ownership of US documented vessel would pass to ineligible owner(s).
A foreign citizen may lend you money to purchase but cannot hold any ownership of the boat.

[KP44]

Originally Posted by Chachacha

If, when we are ready to bring it off-shore, the majority of the loan will possibly be paid off, we could coast guard document it under our kid's US citizenship as a 51% co-owner. Our kid would be an adult by then.

I don't think you will be able to co-own a US documented vessel. Either your son will be the sole owner or you will want to document your vessel as part of a country where you are a citizen.

[Paul L]

As long as you are staying local why not just state register it? You can use that registration in places like the Bahamas, Canada and Mexico for short trips. Then when you are ready to take off long term register it in one of your 'home' countries or USCG via an LLC with 51% ownership in your son's name. You might need to shop a little harder for a loan on the boat or use a cheaper home equity loan to fund if that is feasible in your position.

[jmschmidt]

Originally Posted by KP44

I don't think you will be able to co-own a US documented vessel. Either your son will be the sole owner or you will want to document your vessel as part of a country where you are a citizen.

Read Section L of USCG Form CG-1258 CITIZENSHIP OF OWNER (CHECK THE BOX(ES) TO SHOW THE TYPE(S) OF ENTITY(IES) THAT OWNS THE VESSEL)

The entity owner had best have automatic succession provisions in its corporate, LLC or partnership documents to insure that the vessel would not fall out of US documentation if one or more required US owners died. It's up to the owner(s) to such provision, not the Coast Guard.

[Chachacha]

Hmmmm.... Since I can't document the boat and I can't get a six-pack license because I'm only a green card holder, and, I don't have to, because bareboat charters fall under recreational use, it looks like I only CAN do a state registration. Bareboat chartering does not fall under commercial activities.

I'm not sure where the country of origin comes in. As far as I've understood, that's only for commercial activities.

I found this on
http://www.marinetitle.com/vessel-do...n/advisor.htm:


Why should I document my vessel with the U.S. Coast Guard?
USCG vessel documentation is not required for pleasure or recreational usage, which includes bareboat charters. However, there are several reasons for which vessels are placed into USCG documentation. First, a vessel can not engage in commercial activities unless it becomes documented and attains the respective trade endorsements. Second, marine lenders usually require vessel documentation in order to acquire a preferred mortgage which grants the ultimate contractual lien against any vessel. Third, owners who venture into international waters usually elect to document their vessels in order to attain certain protections afforded by the U.S. flag. A certificate of documentation makes it easier for passage into foreign ports and is widely accepted by customs officials. Finally, some owners elect to document their vessel just for the prestige of owning a vessel which is said to carry the U.S. flag. From a visual perspective, Coast Guard documentation also precludes vessels from having to display any state registration numbers."



From same (very useful) page as above:

"Must I obtain USCG vessel documentation for a six-pack charter operation?
If the vessel meets tonnage requirements for Coast Guard documentation it must become documented with a "coastwise" endorsement. This applies even if you carry just one passenger for hire. A bare-boat charter operation where the boat is rented or leased and not skippered by the owner or owner's agent does not fall under these rules. This is considered as "recreational" usage by the Coast Guard and documentation is optional."

[Chachacha]

Originally Posted by Paul L

As long as you are staying local why not just state register it? You can use that registration in places like the Bahamas, Canada and Mexico for short trips. Then when you are ready to take off long term register it in one of your 'home' countries or USCG via an LLC with 51% ownership in your son's name. You might need to shop a little harder for a loan on the boat or use a cheaper home equity loan to fund if that is feasible in your position.

So, if we change from state registration to a foreign flag (like Australia) when we are ready to go to Europe with the boat, does it get complicated then to RE-register to our home state in the US? How long can a foreign flagged boat stay in the US if we are permanent residents? A year? In The Mediterranean there are enough countries to pop over to and back, but from where we are on the US east coast, it's a long way to Canada or Bahamas for a small boat. And then, if we stay as a foreign flagged vessel, don't we have to jump through extra hoops every time I go from port to port, say from Savannah to Charleston?

[Paul L]

Originally Posted by Chachacha

So, if we change from state registration to a foreign flag (like Australia) when we are ready to go to Europe with the boat, does it get complicated then to RE-register to our home state in the US? How long can a foreign flagged boat stay in the US if we are permanent residents? A year? In The Mediterranean there are enough countries to pop over to and back, but from where we are on the US east coast, it's a long way to Canada or Bahamas for a small boat. And then, if we stay as a foreign flagged vessel, don't we have to jump through extra hoops every time I go from port to port, say from Savannah to Charleston?

States are pretty liberal when it comes to registering. They just want it registered and taxed. You would probably have to import the boat if you were removing the foreign flag. Maybe you should be checking with a yacht based customs broker. There's a reference to one down this page https://www.denisonyachtsales.com/20...in-u-s-waters/

. If the boat is U.S.-built and owned by a U.S. citizen or permanent resident, you may be able to obtain a successive cruising license when the old one expires

[weavis]

An observation. Getting your citizenship would solve all these problems...

[roland stockham]

I don't know the US regulations in detail but you mention that you are looking at running the boat as a business. In many country if the boat is owned by a business then it must be registered in the county where the business is registered. This may simplify things. If you are allowed to register a business in the US then there should be no problems registering the boat in the US.

[Chachacha]

Originally Posted by weavis

An observation. Getting your citizenship would solve all these problems...

Other than not being able to vote and consular services, green card holders normally have the same rights as citizens. This is the first time I've come across something where it is annoying to not be a citizen. That's why I thought it was a mistake in language. So many people mix the terms resident and citizen. Obtaining US citizenship is not desirable for everybody. Just for sailing purposes, for example, renouncing my European passport would mean having to limit stays in Europe to 3 months. Oh yeah, there's another negative of not being US citizen: if I leave the country to go cruising for a year, I could jeopardize my green card status even if I'd still be paying taxes here. Ok, things can get complicated, and that's why I'm doing all this research in my early planning stages. But having a drawer full of passports between the three of us, from three different continents (all desirable countries), where we know we can pack up and leave any time, is a nice thing. So if the only consequence for now is that I can't do skippered charters but only bareboat charters, oh well. That wasn't my intention from the beginning anyhow.
My kid, however might get a captain's license sooner or later, she is a fine sailor, races MC Scows and Flyingg Scots, teaches sailing to little kids in summer camps, my spouse likes crewing on other people's boats and has a few certifications, but I'm the one in the family who actually wants to GET a boat and get into the cruising lifestyle. Just looking for a way to financially actually be able to do it. Therefor the business plan with chartering.

Btw, one of the boats I have at the top of my wishlist is not US-built.

So, thanks, everyone for all your input, this info really helped.