Superyachts in Port Hercules, Monaco.
John Lamb | The Image Bank | Getty Images
A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.
American boat buyers and European shipyards are scrambling to assess the damage from the proposed U.S. 15% tariffs on European-made goods.
With many of the world’s recreational boats and yachts made in Europe, and most of the biggest buyers in the U.S., industry experts are bracing for the fallout from President Donald Trump’s Monday tariff announcement.
The European Boating Industry issued a statement this week saying, “The U.S. is the most important export market for the recreational boating industry in Europe. The 15% tariff rate presents serious challenges for businesses in Europe.”
Granted, most Americans can who buy a $10 million or $100 million yacht can likely afford another 15% tax. Yet brokers said the cost equation for many buyers will change with the tariffs.
“I don’t know any stupid rich people,” said Kevin Merrigan, chairman of Northrop & Johnson, the yacht brokerage firm. “What matters to them matters. If they hear they’re going to have to spend another 15%, it has an impact.”
Most boat contracts require the builder to pay duties. Yet attorneys said the new tariffs aren’t likely to fall under existing duties, and the buyers will likely have to pay a portion, if not the majority. Brokers said many buyers who purchased their yachts a year or two ago — since a specialized build can take three years from start to finish —are negotiating now with the shipyards.
In the meantime, brokers said the wealthy will do what they typically do when faced with a new tax — find a way around it. The most common strategy will likely be to register the boat in another country, known as “foreign flagging.”
An American buyer can register their yacht in one of several countries that have agreements with the U.S. The most common are the Cayman Islands, the Marshall Islands, Malta and Jamaica, brokers said. By registering the yacht abroad, the owner can enter the U.S. as a visiting vessel and therefore avoid the tariff.
There are restrictions and rules, and special cruising permits are required. And it can cost $5,000 to over $20,000 to register in another country. But the savings on a multimillion-dollar yacht are substantial.
“If it’s never technically imported and it never crosses the customs border line, the tariff doesn’t apply,” said Michael Moore, a maritime attorney with Moore & Co.
Registering in another country usually only makes financial and logistical sense for larger yachts, while smaller boats (say, those under 45 feet) will still likely end up paying the tariff. In that sense, the new tariff regime will create a new class of have-yachts and have-superyachts, with the super-yachters best equipped to escape the 15% tax.
Brokers said the tariffs could increase demand for U.S. yacht makers like Westport, Trinity or Burger Boat Company. And with demand for preowned yachts in a slump after a post-Covid surge, many hope sales and prices for preowned yachts already registered in the U.S. will strengthen.
“That’s my hope,” Merrigan said. “That’s what we’re all hoping.”
