EU Tariffs on US-Built Yachts Offering More Options But Less Flexibility: When the European Union announced a 25 percent tariff on US-built yachts entering its waters in 2018, the move caused a wave of anxiety throughout the industry. The move wasn’t immediately felt, however, as many yachts had already entered EU waters when the tariffs came into effect last June.
While the Mediterranean remains the preferred cruising grounds for superyachts, with 71% of charters sailing there, the umber of U.S.-built yachts is not remarkably large. Yet, 2019 is a different story as the tariff’s impact on the charter market and the service industry that developed around it could have significant impact if the tariffs are strictly applied.
After reviewing current important schemes, France (and through an agreement, Monaco), issued new guidelines based on a reinterpretation of current regulations. The move minimized the impact of tariffs on American-built yachts and tenders for owners who want to cruise or charter in the Mediterranean.
The reinterpretation presents the following rules in France and Monaco:
• Private yachts are not affected by the tariffs. French Customs has indicated that they may enter the EU under a Temporary Admission (TA) provision without being subject to tariffs or paying VAT
• The Yacht’s flag and owner must be non-EU and the owner or user must not be an EU resident. There may be possibly VAT liability of EU residents cruise onboard
• Once the yacht has entered the EU under this tariff agreement, it can move freely without undergoing any further customs formalities for 18 months
• MCA-compliant private yachts may conducted limited charter operations under YET (Yachts Engages in Trade), a temporary admission scheme
Until 2019, French Customs indicted that in order to engage in charter, a yacht had to be commercially registered. No Customs no longer considers chartering to be a commercial use. In 99% of charters, the yacht is used for pleasure and not business, thus the end purpose does not fulfill commercial use criteria.
The Flag State must allow dual use operation. The yacht must be at least 24 meters LOA, be in class and fully comply with the requirements of the Large Yacht Code.
While there are a number of advantages for the UBO offering a yacht for charter under YET (Yacht Engaged in Trade), some drawbacks exist. No EU residents can board during a charter. Failure to comply will expose the yacht to VAT payment. Charters are currently limited to French and Monaco waters. In addition, the yacht cannot take on VAT exempt fuel. To be part of the EU YET program takes some forethought as the Flag State must approve it prior to arrival in the EU and cannot be done after entry.
All commercially registered U.S.-built yachts are affected by the tariffs unless imported and in the EU before June 22, 2018. Even if a yacht left the EU, she may be able to re-enter the Union under a scheme called Return of Goods Relief (RGR). Commercial yachts that failed to meet the June 22, 2018 cut-off may enter the EU under TA and carry out limited charter under the YET program.
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