Why We Did NOT Register Our Boat In The USA

Why We Did NOT Register Our Boat In The USA

We thought you guys were Americans, well we are! Bikini is in the Marshall Islands and that’s where we registered our boat.

Now why you might be asking that, is a very good question and the answer might surprise you because it definitely did us got it. Every boat has to have a home Port, a flag AKA registration and that information is then entered into a global registry, it’s sort of like a car.

The Decision

Our last boat was registered with the United States Coast Guard because while it was already a USA imported vessel, we could have registered it in our home state of Texas but then we would have had to pay state taxes and we had no intentions of taking the boat to Texas.

We chose the Coast Guard because it is federally designated to register the boat meaning we don’t have to pay any individual state taxes and it’s much better for a world Cruiser. It was a super straightforward process all we needed was a documentation agent and that was it but with the new boat, it’s never been registered or imported anywhere. That’s completely up to us.

Reasons for Chosing Foreign Flag

One is our cruising grounds and two is insurance. We had no intentions to sail to the US within the first couple years because we picked up our boat in Asia and we plan on cruising around here for at least a couple years.

As far as insurance goes, well that’s been the bane of our sailing existence from the beginning. We got the email that our insurance company is dropping us because they’re dropping all US flag vessels in the South Pacific. We’ve kind of gotten used to that yearly email because the US is notoriously litigious which makes it difficult to get insurance and on our last boat, the further away we sailed from the USA the more challenging that process became.

The Research

So before we decided on a flag for this boat we called on our insurance agent for a little advice:

A flag has no impact on premiums, but determines whether an insurer is prepared to offer terms. Carefully select your registry. Long established open Registries, meaning you don’t need to be a local citizen provide the most Insurance options.

Three Most Popular Foreign Flags for World Cruisers

Currently popular are Cook Islands Marshall Islands and BVI. Remember, traditionally one role of a flag state is to come to your assistance if your vessel is detained by a foreign power or state.

One word of caution for US flagged vessels: we are aware of only two reputable insurers that offer Bluewater Insurance to us flagged vessels so if either shuts their book I suspect there will be a stampede to re-register and that right there explains why it was always so hard for us to get insurance and that is not an experience I am looking to repeat anytime soon.

Research Leads to Hiring a Lawyer

The more we dug in, the more confused we became. But yet we’d go to a marina or an Anchorage and see hundreds of foreign flags and even some of our friends had registered in the Cayman or the BVI. We weren’t sure why they chose those flags or how they went about the process so we started asking around.

The answers for why were unanimous – their boats were built in South Africa or France or Vietnam, and if they imported them into the US, they’d have to pay unnecessary taxes, import fees or tariffs. And the reason those fees are unnecessary is because they had no intentions of sailing around the us and we’re in that same boat.

The process so complicated, we hired a lawyer – Eugene. He’s a maritime lawyer based in Annapolis. We asked him to help us explain all this because well if we knew what we were talking about, we wouldn’t have needed to hire them. We’ve recommended two names over and over: there’s a guy in California and a guy in Annapolis.

Eugene Explains

Eugene said the rule of thumb is if you’re registration over 5 years, it is cheaper to go with a foreign flag than the US or Marshal Islands. If over five years its cheaper to go with the US flag then you go with the US flag.

The Reputable Flags and Scrutiny When Checking In at Foreign Ports

If you’re facing an importation problem, you should consider registering with a foreign flag. The most popular are the Cayman Islands which is the top of top or the New York Yankees registering a vessel. So what you’re saying is you’re not a Mets fan – I’m an Orioles fan!

Then you have BVI and martial Islands, those are generally the three.

Sailing into the USA

If we sail into the US as a foreign vessel we would be getting what’s called a cruising permit. When you entered the Philippines, you had to get a cruising permit and made a whole story about it.

You would arrive in the United States and receive a cruising permit which is good for a year so for whole year you can travel inside the United States without having to worry about those taxes or import Duty because you are a piece of the martial Islands inside the US. To reset it all you have to do is leave the US for 7 days hit a foreign Port come back renew your of purpose.

Cool so just like anywhere in the world, you get a permit, fill out a little bit of paperwork, you pay a small fee and then you just have to make sure you get out of there before your cruising permit expires.

Why an Attorney over a Documentation Agent?

The answer is for how well that’s unanimous too it so complicated. We hired Eugene. A documentation agent is what he does but they can’t do certain things he can.

He has letters behind his name, which carries a lot of weight when it comes to International problems and also the corporate side – they may not be able to answer how to structure your LLC or how to do your operating agreement for people who are going vote as a business there’s a lot of nuance that the doc agent may not be able to answer.

The Rapid Fire Questions Answered by Eugene

Can the flag we choose help us with financing options – yes, but picking some of those cheaper flags could eliminate financing options.

If we set off an EPIRB while out at sea, it’s a complicated answer. Any vessel regardless of flag nationality or status must respond to a Mayday so the Navy of a country will respond to its flag for example: US vessel in distress can call the US Navy; a British flagged vessel can call the British Navy.

Interesting is that the Marshall Islands can call the US Navy as they have a treaty that requires them to come and get them. Can it impact the availability of getting insurance? Yes you could have a problem with some secondary markets but not the top flags such as UK, BVI, Marshall. Will it impact the checking in process or cruising permit process – there’s extra scrutiny definitely.

It’s our business, our biggest investment, it’s our life, and we don’t want to get into trouble or lose our vessel. The last thing we will warn you about is foreigners can flag US by using a Delaware registration – that will get you in a lot of trouble because there’s no such thing as a Delaware flag unless you plan to stay within 3 nautical miles of the US territorial waters but then you’re going to have problems with Customs or and the Coast Guard anyway.

The last question is can it affect resale value of our vessel? No, it shouldn’t. And if you’ve ever gone into Yacht World, you’ve probably seen a lot of boats that say not for sale to US owners. All those boats sold to Americans hire marittime attorney – I will explain to you how it gets done because that would actually be legal advice and that requires an attorney client relationship.

Conclusion

We really appreciate all your help Eugene and we really appreciate it. We feel like you know on the other side of it, it’s been worth it. You really helped us a lot!

And that was just the uh condensed edited version of our conversation but hopefully that kind of explains why we chose the Marshall Islands and why it says bikini on the back of our boat.