Monaco, a superyacht in Port Hercules.
John Lamb | Image Bank | Getty Images
This version of the article first appeared on CNBC’s Inside Wealth Newsletter. This is Robert Frank, our weekly guide to Net-Worth Investor and Consumer. Sign up to receive future editions directly in your inbox.
American boat buyers and European shipyards are rushing to assess the damage from the proposed US 15% tariff on European-made goods.
With many of the world’s recreational boats and yachts made in Europe, as well as most of the largest buyers in the US, industry experts are blessed with fallout from President Donald Trump’s Monday tariff announcement.
The European boating industry issued a statement this week saying, “The US is the most important export market for the European recreational boating industry. The 15% tariff rate presents serious challenges for European businesses.”
Certainly, most Americans who buy a $10 million or $100 million yacht can pay an additional 15% tax. However, the broker said the cost equation for many buyers changes with tariffs.
“I don’t know the stupid rich people,” said Kevin Merrigan, chairman of Northrop & Johnson, a yacht broker. “What’s important to them is important. If you hear they have to spend another 15%, that will have an impact.”
Most boat contracts require the builder to pay the duties. However, the lawyer said new tariffs are unlikely to fall under existing obligations and that buyers will likely have to pay some, if not the majority. According to brokers, many buyers who purchased a yacht a year or two ago are negotiating with shipyards as professional builds can take three years from start to finish.
In the meantime, brokers said they do what they typically do when wealthy people face new taxes – find a way around that. The most common strategy is to register your boat in another country, perhaps known as a “foreign flag.”
American buyers can register yachts in one of several countries that have an agreement with the US. The most common are the Cayman Islands, the Marshall Islands, Malta and Jamaica, the broker said. By registering yachts overseas, owners can enter the US as a visiting vessel, thus avoiding customs duties.
There are restrictions and regulations and special cruise permits are required. Additionally, registering in other countries can cost between $5,000 and $20,000. But the savings on a multi-million dollar yacht are substantial.
“If it is not technically imported and does not cross the customs boundary, no customs duties will apply,” said Michael Moore, a maritime lawyer at Moore & Co.
Registering in other countries usually only makes economic and logistical meaningful to larger yachts, but smaller boats (for example, boats under 45 feet) can end up paying customs duties. In that sense, the new tariff regime will create new classes of Have Yachts and Has-Superyachts, as the new tariff regime is equipped with super yachts, perfect for avoiding a 15% tax.
The broker said the tariff could increase demand for US yacht manufacturers such as Westport, Trinity and Burger Boat Company. Additionally, the sluggish demand for owned yachts following the post-Covid surge, which will strengthen the desired sales and prices of many of the owned yachts already registered in the US.
“That’s my hope,” said Merrigan. “That’s what we all want.”
