A Different Flag

Foreign registration options: what you should know.

The single most important decision a boat buyer must make before closing on a vessel is where the vessel will be registered. The buyer should understand the benefits and drawbacks of each registry before making this decision. Presently, the better-known foreign registries are the Cayman Islands, the Marshall Islands, St. Vincent and the Grenadines, and the British Virgin Islands.  However, the Jersey Islands, Malta, Canada and the Bahamas are among the other foreign registries a boat owner may select for his or her vessel.
There are several advantages to foreign registration. For one, citizenship of a country is not a requirement to form a company or to register a vessel in that jurisdiction. Further, most foreign jurisdictions provide better anonymity and asset protection. Plus, crew nationality is not an issue. In addition, it is more difficult to record a maritime lien against a foreign flagged vessel.  But, with advantages come disadvantages. For instance, it is more costly to obtain and maintain foreign registrations than documenting a vessel with the U.S., and in most jurisdictions only one name can be used on a vessel per hailing port. When cruising within the U.S., the vessel must either clear in and out of each U.S. Custom’s port or obtain a Customs Cruising License which must be renewed each year. When cruising within the U.S., even with a cruising license the vessel must call and report into each U.S. Coast Guard district the vessel enters.
Ask yourself these important questions before choosing a registry: What is the fitting ownership structure that is compatible with how I own other personal property? What are the characteristics of the vessel I am buying, such as the vessel’s classification, location of its build and current registration?  What are my expectations of this vessel, such as, will I charter it, where will I cruise, and what flag do I fly?
These are essential factors you must identify before choosing a foreign registry. In addition, any foreign registry  that I recommend to a client must have a well-resourced infrastructure with contacts worldwide, great customer service, a flag state with a good port state control record and—absent from any blacklists or targeted flag state lists—political stability and active representation in the International Maritime Organization (IMO).

Some Specifics Regarding The

Better-Known Foreign Registries.

Cayman Islands

The hailing port options are George Town, Bloody Bay or The Creek. You may register your vessel privately or commercially. The Caymans have registration offices worldwide and domestically in Fort Lauderdale. Vessels under construction may be registered prior to completion. The registry allows the vessel to be used as security to obtain a marine mortgage.
Cayman-flagged private yachts may obtain a U.S. Customs cruising license upon entry to the U.S. The Caymans has a solid political, legal and fiscal environment, while the country is a tax-neutral finance jurisdiction. It will cost you about $2,900 for a Cayman ordinary company and about $400 to register a vessel up to 150 gross tons; $600 over 150 and up to 400 gross tons. The vessel tonnage tax is about $300. Tonnage surveys are required on all yachts over 24 meters (77 feet).

Marshall Islands

The hailing port options are Jaluit or the more famous Bikini Atoll. You may register your vessel privately or commercially. The MI has registration offices worldwide and in Fort Lauderdale, Florida. The registry allows the vessel to be used as security to obtain a marine mortgage.
MI-flagged private vessels may obtain a U.S. Customs cruising license upon entry to the U.S. Owners are able to register a private vessel either for one or three years. Private vessels must be over 18 meters (59 feet) to charter and can be chartered for a total of 84 days per year without obtaining commercial registration. It will cost you about $650 to form a MI company. The one-year registration fee for a vessel 3,000 gross tons and under is $1,500, plus $500 for the annual Tonnage Tax, $100 for the issuance of the Certificate of Registration and another $100 for the issuance of the Radio License. MI requires a pre-registration inspection from an MI-appointed surveyor prior to registration approval.

St. Vincent & the Grenadines

The only hailing port is Kingstown. You may register your vessel privately or commercially. St. Vincent has registration offices worldwide and also in Fort Lauderdale, Florida. Vessels under construction may be registered prior to completion. However, vessels older than 18 years are not eligible for registration unless special permission is granted.
St. Vincent-flagged private vessels may obtain a U.S. Customs cruising license upon entry to the U.S. Private vessels are eligible to charter without obtaining commercial registration.  It will cost you about $1,000 to form a St. Vincent company and about $1,350 to register a vessel. St. Vincent does require a pre-registration inspection done by a nationally accredited marine surveyor prior to registration approval.

British Virgin Islands

The hailing port is Road Harbour. You may register your vessel privately or commercially. The BVI are the yachting mecca of the Caribbean, equipped with modern facilities, berths, supplies and services. Unfortunately, they do not have any direct U.S. registration offices.
BVI-flagged private vessels may obtain a U.S. Customs Cruising License upon entry to the U.S. It will cost you about $2,000 to form a BVI company and about $750 to register a vessel. BVI requires a tonnage survey prior to registration approval. The pros and cons of each registry above are not an exhaustive list; only a snapshot of what a buyer must consider when selecting a foreign registry for one’s vessel. If you do not have a firm understanding of why you are going with a certain registry then it’s best to contact a legal expert who does, since where you register your vessel is one of the most important decisions you will make prior to closing its purchase!
Note: The information offered in this column is a summary in nature and should not be considered a legal opinion.