Flag, EU VAT, Third Party Liability only Insurance

[ccannan]

I, a US resident citizen, purchased my sailboat (1993 Alubat OVNI 47 made in France) in the USA, and it is USCG documented. My boat is currently in the Med (Greece), and I'm having increasing difficulty (like impossible) finding Third Party Liability (TPL)(only, no survey required) insurance. Most the European insurers are not willing to insure US flagged boats. Pantaenius (Germany) may insure my boat if I register my boat in Delaware, and the registration paperwork contains a Delaware address. I'm seriously considering doing so. At a minimum it seems it would require hiring a mail forwarding service, and registering my boat in Delaware. So I have multiple questions:

1) Can I maintain the USCG documentation and register the boat in Delaware?

I think the answer is yes.

As an alternative it appears as a UK passport holder (dual citizen) I can add my boat to the British Register of Ships in Jersey (under part 3). I would do so with the goal of increasing/improving opportunites to purchase TPL. It appears that adding my boat to the British Register of Ships in Jersey would allow VAT-free temporary importation into EU for non-EU residents (that's me).

2) Does anyone have first hand experience that EU member states would allow a Jersey registered boat (under British Register of Ships part 3) VAT-free temporary importation into the EU for non-EU residents?

3) Would the UK tax (VAT) my boat?

The previous ownere imported the boat into the USA and paid the duty. I do have that documentation.

If at a later date I wanted to reflag the boat back into the US would I have to pay US import duty?

There are lots of moving parts here.

The bottom line is I only want to purchase TPL for sailing the Med, I don't want to pay for a survey (yes, I know Jersey registration requires a survey, but it is a simple measurement survey not a much more costly condition survey), and I'm looking for the least expensive solution.

Thoughts, comments, and ideas would be greatly appreciated.

[Pete7]

Originally Posted by ccannan

As an alternative it appears as a UK passport holder (dual citizen) ..... would allow VAT-free temporary importation into EU for non-EU residents (that's me).

2) Does anyone have first hand experience that EU member states would allow a Jersey registered boat (under British Register of Ships part 3) VAT-free temporary importation into the EU for non-EU residents?

3) Would the UK tax (VAT) my boat?

The previous ownere imported the boat into the USA and paid the duty. I do have that documentation.

If at a later date I wanted to reflag the boat back into the US would I have to pay US import duty?

There are lots of moving parts here.

You are a EU citizen for now until the UK leaves, currently scheduled for Dec 20, perhaps

You bought the yacht outside the EU and imported it. You are liable as a UK citizen for import duty and VAT on import. That would / may include the UK after we leave the EU.

I think the Delaware option is probably the simplest and keep schtum about being a dual citizen.

Pete

[ccannan]

Pete,

My understanding is that non-EU boats can be temporarily imported into the EU for up to 18 months by EU citizens but not EU residents. Do I have that wrong?

Originally Posted by Pete7

You are a EU citizen for now until the UK leaves, currently scheduled for Dec 20, perhaps.

You bought the yacht outside the EU and imported it. You are liable as a UK citizen for import duty and VAT on import. That would / may include the UK after we leave the EU.

[Pete7]

Originally Posted by ccannan

Pete,

My understanding is that non-EU boats can be temporarily imported into the EU for up to 18 months by EU citizens but not EU residents. Do I have that wrong?

True, but you are an EU citizen at the moment.

Pete

[ccannan]

Agreed, but I'm not sure what your point is. I noted in my original post, I'm contemplating registering my boat in Jersey, and I had some questions about the implications given the circumstances (one of which is that while I am a UK/EU citizen, I am not a UK/EU resident).

Cheers

Originally Posted by Pete7

True, but you are an EU citizen at the moment.

[Pete7]

You asked a lot of questions, I answered some of them. Its not me you have to convince about not being a UK citizen, it will be a customs officer in a foreign country. It may be better next year if the UK leaves since we (UK) could be treated like all other countries outside the UK, with 90/180 days etc, but the details are yet to be thrashed out.

Part 3 Small Ships Registration normally needs a UK or Jersey address, is this an option.

Pete

[Montanan]

There appears to be a possible important distinction between being a citizen of an EU country that is a resident of the EU and an citizen of an EU country that is non-resident in the EU. You have dual nationality. I would double check on the aspect of if your keeping of a non-resident status of the EU but having citizenship of an EU state could revoke the waiver of VAT from temporary importation basis.

Non-residents can bring in non-EU flagged boats under temporary importation and cruise for 18 months before need to remove the boat from the EU customs territory.

Temporary Importation to EU
If a yacht operates in EU waters Value Added Tax (VAT) must be considered. These considerations can also impinge on the choice of Flag State, the yacht’s ownership structure and the place of ownership.
The EU’s Sixth Directive on Value Added Tax was amended in 1993. This amendment states that all yachts which are owned or used by an EU resident in EU waters must pay VAT or have proof of VAT exemption. Failure to comply with EU regulations can have serious consequences for a yacht and its owners – this can include detention or seizure of the yacht, or severe financial penalties.
It is therefore vital that the yacht complies with all regulations and has appropriate ownership structures in place.
Owners who are non EU residents, or a yacht which is non EU Flagged, who wish to sail their yachts in EU waters for private purposes may temporarily bring their yacht into the EU without customs duties or VAT needing to be paid.
The boats concerned have to be placed under the 'temporary importation procedure' (TI) with Customs and the period of use in the EU is limited in time to eighteen months. The temporary importation rules are covered under Article 562 of the Customs Code. When the time is up the boat has to leave, in official jargon this period is called 'the period of discharge'. The re-exportation of the goods from the customs territory of the Community is the usual way of ending or 'discharging' a temporary importation procedure. If the boat does not leave before the end of that time then customs
duty and VAT become due.
A boat is temporarily imported into the EU and not into one of the constituent Member States. Thus it can move from one Member State to another with no further customs formalities during the 18 month period allowed.
After 18 months the yacht must be exported before re-entering the EU under the same rules.
How can a yacht be placed under TI? Just crossing the frontier of the customs territory of the Community is in general sufficient. But, the yacht may be required to use a route specified by customs and they may require the vessel to make an oral or written customs declaration. It is possible that customs may require the provision of some kind of security or guarantee to cover the payment of the customs duties and VAT that become due if the boat does not leave the EU.
The legal provisions on temporary importation are found in Articles 562 and 137 to 144 of the Customs Code.

Of issue to insurance is that insurance companies need to be licensed to insure in the USA and that license is required of each State in which they perform underwriting. You are trying to obtain TPI coverage for a vessel that is not in USA waters.

As to Delaware registration, the vessel can only be validly registered in a State of the USA if it resides in that States waters. A State may require registration of a vessel that has been documented by the USCG, not all States require registration of USCG documented vessels but it is their right to require registration. If your vessel does not reside in Delaware then I see no reason you would register with the State as such registration is invalid due to lack of situs. Your USCG documentation provides the basis for USA flagging of the vessel under UNCLOS. A vessel with just a State registration and no USCG documentation does not have USA nationality for UNCLOS because a State is not a nation state under the United Nations Convention of the Law of the Sea. Your hailing port under USCG documentation must be a place in the United States included in the U.S. Department of Commerce's Federal Information Processing Standards Publication 55DC. The hailing port must include the State, territory, or possession in which the hailing port place is located. That hailing port does not have to have any association as to where the owner resides or where the vessel resides, it just needs to be a place listed in the publication. That place has nothing to do with insurance or ownership, it is just a place picked from a list of places.

A vessel must be registered in its “State of Principal Use.” That is the state on whose waters the vessel is used or to be used most during a calendar year. Delaware regulations state that if the vessel is to be used, docked, or stowed on the waters of this State for over 60 consecutive days, Delaware is its “State of Principal Use.

Note that third party liability claims generally are determined under the law where the claim incident derived.

[ccannan]

I thought full registration with the British Register of Ships in Jersey is referred to as Part 3.

I thought the Jersey Small Ships Register is only for Jersey residents.

It is my understanding that non-Jersey residents applying for full registration with the British Register of Ships in Jersey does require appointing a representative person (Jersey resident).

Did I get any/all of that wrong?

Originally Posted by Pete7

Part 3 Small Ships Registration normally needs a UK or Jersey address, is this an option.

[ccannan]

Thanks Montanan for your reply.

I currently have and have had (since 2014) TPL only insurance {provided by EU insurers Pantaenius (Spain) and Bavaria} for my boat that is in EU waters. If what you say is accurate, EU insurers had licenses to sell TPL in some states and are not renewing them. How does your last sentence jive with licensed to sell insurance in a particular state?

"State of Principal Use" seems to be a key phrase.

Copied from the Delaware Registration form:

NOTICE: VESSELS CAN ONLY BE REGISTERED IN THE STATE OF PRINCIPLE OPERATION*. (If you do not use your vessel in Delaware waters more often than waters of another state during the calendar year, you cannot register your vessel in Delaware.) Do you intend to operate this vessel outside the waters of the U.S. and its territories?

I don't intend to operate my boat more often in waters of another state. I intend to operate my vessel outside the waters of the US and its territories.

I run accross Delaware registered boats throughout the Med. I'm not saying they are doing it legally, but it is being done by many people/boats.

Originally Posted by Montanan

Of issue to insurance is that insurance companies need to be licensed to insure in the USA and that license is required of each State in which they perform underwriting. You are trying to obtain TPI coverage for a vessel that is not in USA waters.

A vessel must be registered in its “State of Principal Use.” That is the state on whose waters the vessel is used or to be used most during a calendar year. Delaware regulations state that if the vessel is to be used, docked, or stowed on the waters of this State for over 60 consecutive days, Delaware is its “State of Principal Use.

Note that third party liability claims generally are determined under the law where the claim incident derived.

[Montanan]

Originally Posted by ccannan

Thanks Montanan for your reply.

I currently have and have had (since 2014) TPL only insurance {provided by EU insurers Pantaenius (Spain) and Bavaria} for my boat that is in EU waters. If what you say is accurate, EU insurers had licenses to sell TPL in some states and are not renewing them. How does your last sentence jive with licensed to sell insurance in a particular state?

"State of Principal Use" seems to be a key phrase.

Copied from the Delaware Registration form:

NOTICE: VESSELS CAN ONLY BE REGISTERED IN THE STATE OF PRINCIPLE OPERATION*. (If you do not use your vessel in Delaware waters more often than waters of another state during the calendar year, you cannot register your vessel in Delaware.) Do you intend to operate this vessel outside the waters of the U.S. and its territories?

I don't intend to operate my boat more often in waters of another state. I intend to operate my vessel outside the waters of the US and its territories.

I run accross Delaware registered boats throughout the Med. I'm not saying they are doing it legally, but it is being done by many people/boats.

Invalidly registered if they do not use the vessel in State of Delaware so as to establish the State as a Principal State of Use.

Note that a boat may need to reregister with States if its State of Principal Use becomes fulfilled in one or more States. Registration is for a period time, during that period of time multiple Principal States of Use could be realized.

That would be similar to registration of a vehicle. If it is not to be used in a State it is not to be registered in a State. If one moves the vehicle to a different State for a specified period of time then the vehicle needs to the become registered in the new State.

Why would one register in a State that has no association with the vessel? Particularly if the vessel has been documented with the USCG which is a form of national registration.

If the vessel stays out of State waters it does not need or validly qualify for a State registration. The vessel can receive nationality by flagging. Your dual citizenship opens up dual opportunity for ship registry, the USA or the UK.

The USA Brexited 244 years ago. Taxation without representation being one of the many reasons.

As to Delaware:

Section 1. Code of Federal Regulations.
These regulations reference provisions from the Code of Federal Regulations (CFR), revised as of July 1, 1997, and October 1, 1996, for U.S.C. Titles 33 and 46, respectively.

Section 2. Application of Regulations.
Unless otherwise specified, these regulations shall apply to all vessels used on the waters of this
State.

BR-2. DEFINITIONS.
For purposes of BR-3 through BR-12, the following words and phrases shall have the meanin ascribed to them unless the context clearly indicates otherwise:

(29) “State of principal use” shall mean a state on whose waters a vessel is used or to be used most during a calendar year. It shall mean this State if the vessel is to be used, docked, or stowed on the waters of this State for over 60 consecutive days.


BR-3. REGISTRATION, NUMBERING, AND MARKING OF VESSELS.
Section 1. Applicability.
This regulation shall apply to all vessels propelled by any form of mechanical power, including electric trolling motors, used or placed on the waters of this State, except the following:
(1) Foreign vessels temporarily using such waters;
(2) Military or public vessels of the United States, except recreational-type public vessels;
(3) A vessel whose owner is a state or subdivision thereof, other than this State, which is used principally for governmental purposes, and which is clearly identifiable as such;
(4) A vessel used exclusively as a boat docking facility, as defined in Section 24 of this regulation, or a ship’s lifeboat; and
(5) Vessels which have been issued valid marine documents by the Coast Guard.


Section 3. Reciprocity.
(a) When the state of principal use is a state other than this State and the vessel is properly numbered by that state, the vessel shall be deemed in compliance with the numbering system requirements of this State in which it is temporarily used.
(b) When this State becomes the state of principal use for a vessel numbered by another state, the vessel’s current number shall be recognized as valid for a period of 60 consecutive days before numbering is required by this State.

Section 11. Removal of Number and Validation Decal.
The person whose name appears on a certificate of number as the owner of a vessel shall remove the number and validation sticker from the vessel when:
(1) The vessel is documented by the Coast Guard;
(2) The certificate of number is invalid under Section 14(b)(4) or (c) of this regulation; or
(3) This State is no longer the state of principal use.



Section 14. Validity of Certificate of Number; Surrender of Certificate of Number.
(a) Except as provided in subsections (b), (c), (d) and (e) of this section, a certificate of number is valid until the date of expiration prescribed by this State.
(b) A certificate of number issued by this State is invalid after the date upon which:
(1) The vessel is documented or required to be documented;
(2) The person whose name appears on the certificate of number as owner of the vessel transfers all of his/her ownership in the vessel;
(3) The vessel is destroyed or abandoned; or
(4) The Division revokes, cancels or suspends the certificate of number.
(c) A certificate of number issued by this State is invalid if:
(1) The application for the certificate of number contains a false or fraudulent statement; or
(2) The fees for the issuance of the certificate of number are not paid.
(d) A certificate of number is invalid 60 days after the day on which another state becomes the state of principal use.

Reference link: http://http://www.dnrec.delaware.gov...y/boatregs.pdf

Ships without nationality, also called stateless, flagless, or unregistered vessels, undermine the law-of-the-flag regime. Because stateless vessels do not have a flag state, no state can exercise control over them on the high seas or provide diplomatic protection on their behalf. Ships can become stateless in a variety of ways. They may lose their nationality if they violate their flag state’s laws or do not comply with its requirements; their flag state may be unrecognized by the international community; or they may never register with any state. Furthermore, ships that sail under more than one flag, using one or the other according to convenience, are “assimilated” to stateless ships under UNCLOS. Because stateless ships do not enjoy the protection of any state, some countries and scholars have asserted that any state can assert jurisdiction over them. But, a ship’s statelessness alone may not authorize such actions on the high seas.

[ccannan]

Originally Posted by Montanan

If the vessel stays out of State waters it does not need or validly qualify for a State registration.

Please, specifically address why the Delaware Registration application specifically asks registrants:

Do you intend to operate this vessel outside the waters of the U.S. and its territories?

In a previous post you wrote statements that don't seem compatible, please explain or amplify.

Originally Posted by Montanan

Of issue to insurance is that insurance companies need to be licensed to insure in the USA and that license is required of each State in which they perform underwriting.

Note that third party liability claims generally are determined under the law where the claim incident derived.

Thanks

[kas_1611]

You can't register on the Jersey Small Ships Register (part 3) unless you are a Jersey resident, same as the UK SSR is only for UK Residents. You could register on the full Shipping Register (part 1) with all the relevant restrictions and qualifications for that but it would still mean you would be a NON EU FLAGGED VESSEL as The Channel Islands have never been part of the EU.

And as a UK passport holder, therefore currently an EU Citizen (albeit non resident) you could get caught by VAT rules. I say could as that is a bit of a grey area. I looked at flagging in the Isle of Man when Croatia joined the EU some years back and despite IoM being Non EU as UK passport holders we would still be subject to VAT.

If your boat is already in Greece was it already VAT PAID by the previous owner? If so no problem but as the sale was in the EU you might be subject to VAT anyway. Again a grey area unless you take the boat out of EU waters then temporarily reimport.

It might be simpler and cheaper in the long run to purchase a full insurance policy but to keep the cost as low as possible take a big Excess and limit the value of things covered. Take market value on the hull for instance and minimal accessories valuations. Note that you may need to include outboard engine(s) as some countries (Italy I do know) will require these to be listed and covered.

[Montanan]

Originally Posted by ccannan

Please, specifically address why the Delaware Registration application specifically asks registrants:

Do you intend to operate this vessel outside the waters of the U.S. and its territories?

In a previous post you wrote statements that don't seem compatible, please explain or amplify.



Thanks

I will endeavor to contact by email or phone the designated contact person in Delaware regarding vessel registrations to see if they can clarify why they have the curious question on their application. It is a rather odd question. Kind of a WTF? Maybe they should modify the question to be: Do you intend to operate this vessel in a COVID-19 free zone?

Ms. Vicki Rhodes
Division of Fish & Wildlife
89 Kings Highway
Dover, DE 19901
302.739.9916

As you had previous noted as to the State of Delaware: VESSELS CAN ONLY BE REGISTERED IN THE STATE OF PRINCIPLE OPERATION.

Substituting the legal definition for State of Principle Operation into that notice, one derives this notice:

Vessels can only be registered in a state on whose waters a vessel is used, or to be used most during a calendar year. It shall mean this State if the vessel is to be used, docked, or stowed on the waters of this State for over 60 consecutive days.

Therefore if a vessel is not used on the waters in the state, or is not to be used on the waters of the state the most during a calendar year, then it would not thence be validly permitted or required to be registered in the state.

Now clearly there could be incidences wherein the vessel will be used on the waters in the State of Delaware, either mostly, or for at least 60 continuous days, and also be utilized outside the waters of the United States or its territories, e.g. spending some of time say in nearby Canadian waters or Snowbirding to the Caribbean being quite likely, or perhaps traveling across the pond to Europe.

You stated that your boat is documented with the USCG. FYI: Do note that USCG documented vessels are specifically excluded from the applicability of the State of Delaware's registration, numbering and marking laws.

Also if the boat had been registered with the State of Delaware and numbered and marked as being so registered that:

The person whose name appears on a certificate of number as the owner of a vessel shall remove the number and validation sticker from the vessel when:
(1) The vessel is documented by the Coast Guard;
AND / OR
(3) This State is no longer the state of principal use.

That is to say, a Delaware registration can become invalid by the above actions and should have its registration number and validation sticker markings removed by the owner.

If I am able to contact Ms. Rhodes and gain feedback on the reason for the question I will provide feedback on this thread.

All the best.

[ccannan]

Montanan,

Thanks. I can call just as easily as you, and so I will. I'm interested in hearing from Forum members that have first hand experience.

In a previous post you wrote statements that don't seem compatible, please explain or amplify.

Originally Posted by Montanan

Of issue to insurance is that insurance companies need to be licensed to insure in the USA and that license is required of each State in which they perform underwriting.

Note that third party liability claims generally are determined under the law where the claim incident derived.

[Montanan]

Originally Posted by ccannan

Montanan,

Thanks. I can call just as easily as you, and so I will. I'm interested in hearing from Forum members that have first hand experience.

In a previous post you wrote statements that don't seem compatible, please explain or amplify.

qu'est-ce que c'est.

Side point: If your vessel is USCG documented the issue of Delaware state registration appears to be rather moot.