Introduction
Prospective yacht owners in the United States of America are staring down the barrel at the potential for significant cost increases due to US tariffs. Whilst uncertainty over the imposition and applicability of tariffs remains given the most recent order of the US Court of International Trade, there is risk of significant cost increases for US persons, especially at the <24m segment of the yacht market seeking to import foreign-built vessels.
Whilst the Cayman Islands and British Virgin Islands are popular jurisdictions of incorporation and vessel registration for larger vessels, many prospective owners of smaller vessels <24m are now seeking alternative ownership and registration structures to mitigate against this risk. In Cayman and the BVI, we have seen a spike in enquiries.
Overview of Tariff Impacts
The imposition of tariffs by the US government and subsequent pause ordered by the US Court of International Trade has captured the attention of the world. It is complex and time will tell the outcome but the resulting uncertainty for US yacht buyers has impacted the market. At the time of writing, it remains unclear what goods originating from outside the US will attract additional cost and at what rate.
Yachts imported to the US had always faced tariffs beween 1.5% to 6%. A baseline 10% tariff rate applicable to all imports purported to be effective as of April 2025 (and potential further tariffs) has been put on hold by the US Court of International Trade but reports suggest that this ruling will be challenged. In any case, it is thought that the US administration’s 25% “sectoral” tariffs on steel and aluminium imports as well as some others will remain in force.
So what does a US buyer do in the meantime? Any prospective owner of a valuable luxury asset needs certainty when it comes to the cost of acquisition. Larger yachts with complex operating patterns are commonly structured through Cayman and BVI vehicles but the same is not necessarily true for many <24m vessels. Where these are for use within US waters for at least some of the year, it may be most common to structure ownership and registration through the US jurisdiction. The present risk to this, however, is whether this approach may attract tariffs now or in the future and in what shape or form. As a result, we have been seeing US persons seeking other options.
Ownership and registration structures for <24m vessels acquired by US persons are emulating those more typical of larger vessels. By combining Cayman or BVI ownership and flag registration with an application for a cruising permit issued by US Customs and Border Protection, there is an option to avoid importation into the US subject to certain specific conditions. This may be a good option at least until the position on tariffs is finally determined but there are a number of considerations involved and US legal and tax advice is crucial.
Why the Cayman Islands or British Virgin Islands?
The Cayman Islands and British Virgin Islands are well established as leading jurisdictions for yacht registration. The respective ship registries are helpful, efficient and sophisticated. Further, in each jurisdiction, clients enjoy the following benefits:
- Company incorporation can be a quick as within 24 hours.
- There is tax neutrality – no income, corporation, capital gains, gift or other wealth tax is imposed.
- A range of vehicle types can be used, including companies and limited liability companies.
- Simple and cost appropriate corporate maintenance requirements offering a value proposition.
- Annual fees for corporate maintenance in both jurisdictions are competitive.
Conclusion
The combination of a Cayman Islands or British Virgin Islands ownership and registration structure with a US cruising permit may be a useful tool for prospective owners of <24m vessels seeking to mitigate against current US tariff uncertainty. With this said, there is no “one size fits all” approach and careful consideration must be given in conjunction with US legal counsel and tax advisors when setting up this type of structure. We have experienced, in any case, that the US market has noted an expanded value proposition to offshore jurisdictions for <24m vessels.
