Introduction
Prospective yacht owners in the United States of America are staring down the barrel at significant cost increases due to the imposition of new US tariffs. Whilst the scope of tariffs continues to take shape, there is risk for US persons at the <24m segment of the yacht market seeking to import foreign-built vessels into the US and register them under US flag and ownership.
Whilst the Cayman Islands and British Virgin Islands are popular jurisdictions of incorporation and vessel registration for larger vessels, now that there is uncertainty regarding how tariff discussions may develop, the value proposition for offshore ownership structures has expanded. In Cayman and the BVI, we have seen a spike in enquiries.
Overview of Tariff Impacts
The imposition of tariffs by the US government has captured the attention of the world. It is complex and the conversation is continuing, but the simplest point is that goods originating from outside the US now attract significant additional cost.
Yachts imported to the US previously faced tariffs ranging from 1.5% to 6%. The now baseline 10% tariff rate applicable to all imports effective as of April 2025 increases up to 50% depending on origin of the good; the result being a significant impact on the overall cost of acquiring a luxury depreciating asset.
Owners need certainty when it comes to pricing whilst tariff levels remain under consideration. Higher value larger yachts are commonly structured through Cayman and BVI vehicles but the same is not necessarily true for many <24m vessels. Most US persons acquiring a <24m yacht for use within US waters, for at least some of the year, would typically structure through the US, but the present risk is that this may attract tariffs upon importation of a new vessel. As a result, US persons are seeking other options.
We are seeing a shift; increasing numbers of <24m vessels will end up emulating ownership and registration structures 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. 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 structure and US cruising permit may be a useful tool for prospective owners of <24m vessels that contemplate travel in and out of US waters. 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 offshore ownership structures. Whilst tariff discussions continue, however, it is clear that the US market has seen an expanded value proposition to offshore jurisdictions at the <24m vessel segment.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
