Fort Lauderdale wins designation, Palm Beach seeks to follow suit
The Lauderdale Marine Center, a yacht basin in Fort Lauderdale, Florida, received designation as a Foreign Trade Zone last year, providing benefits to yacht buyers, sellers and repairers. Other yacht berths in the Sunshine State are seeking to follow suit.
The yachting industry actually has several problems under current United States law when it comes to importing. Legislation dating back over one-hundred years prohibits foreign-flag yachts from being imported into the U.S. without paying a hefty import duty. That’s problematic, not only for sellers and brokers, but also for those who would like to build an industry to repair foreign-flag yachts in U.S. facilities.
The FTZ designation would benefit all these parties because FTZs are not considered part of the commercial territory of the United States, and transactions conducted within the zones are not subject to these regulations. The situation for those who would import parts for repair has become all the more acute in recent days because of the imposition by President Donald Trump of 25-percent tariffs on steel and 10-percent tariffs on aluminum.
FTZ 241 Afloat
The Marine Industries Association of South Florida partnered with the Fort Lauderdale Executive Airport Foreign Trade Zone 241 to create the first recreational boating FTZ in the country, a designation that came through in June 2017. Lauderdale Marine Center says it is planning to expand FTZ designation from its current berths as demand for space rises.
LMC was the first location of its kind to open an FTZ at its 65-acre facility, which includes a boatyard, marina and marine service center, in early June. A week later, on June 16, the Bahia Mar Marina, host of the Fort Lauderdale International Boat Show (FLIBS), opened as Fort Lauderdale’s second marine FTZ zone.
The Bahia Mar Marina announcement came just days after MIASF and Informa Exhibitions signed a new 30-year lease extension to keep the FLIBS on the marina’s property through 2050, making FLIBS the only boat show in the country where FTZ transactions can take place. With the FTZ designation, brokers can legally show foreign flagged vessels to U.S. buyers in U.S. waters without obtaining a boat show bond.
There are 13 approved sites in the Recreational Marine Foreign Trade Zone No. 241A. Lauderdale Marine Center and Bahia Mar Yachting Center are the first two to be activated. Ten other sites are in various stages of the activation process.
“Gaining designation as a marine Foreign Trade Zone allows us to establish mutually beneficial business relationships with builders, brokers, and yacht management,” said Doug West, president of LMC. “This has been the culmination of efforts from the Marine Industries Association of South Florida, U.S. Customs and Border Protection, Immigration, industry experts, and our internal team.”
Sellers and brokers benefit from the FTZ by now having a place to locally and legally show foreign-flagged vessels to U.S. buyers. Foreign-made newbuilds can be brought into the FTZ without the need to pay the typical and significant 1.5- percent import duty. These newbuilds can also be shown to prospective buyers within the FTZ. All boats in the FTZ can be shown for sale and demonstrated, including sea trials. Vessels can come and go as needed from the FTZ to accommodate owner trips or charters. In addition, newbuild yachts that have been imported into the U.S. within the past three years can use the FTZ to file for a refund on previously paid duties.
Major refit projects also can benefit from the FTZ. All parts imported can defer duties while the yacht is in the zone. Once the project is complete, the vessel may depart the U.S. without being required to pay duties or taxes. Components for installation on foreign-flagged yachts, such as engines, valves, copper—which is subject to a 60-percent tariff—and most of the 818 vessel commodities that come from China, Canada, and the European Union, are free of duty, providing a major tool to FTZ operators and substantial savings to owners.
Meanwhile, the International Yacht Brokers Association (IYBA), a Fort Lauderdale-based group, is pushing for Congress to overturn the restrictions on foreign-flagged yachts being offered “for sale to US residents while in US waters.” This 108-year old law has not been revised since the Tariff Act of 1930.
A bill in support of such relief, HR 2369, failed once before, but it has been reintroduced and has received some bipartisan support from members of Congress. “It is estimated that there are about $2 billion of boats currently afloat that cannot be offered for sale to U.S. residents,” said Bob Denison, president of Denison Yacht Sales and IYBA board member. “Many of these boats decide to stay offshore in the Caribbean, or even the Mediterranean, as it’s only there that they can be legally viewed and sold to U.S. residents.”
The bill would defer the import duty of 1.5 percent to the time of the closing, rather than at the time of listing the boat for sale. Showing the boat in a Foreign Trade Zone would also avoid the strictures of the Tariff Act but a change in the law would also be of benefit to facilities that are not part of an FTZ.
In the Port of Palm Beach, Triquest Florida, a real estate development and investment firm, has proposed to work with port management to receive FTZ designation for Berth 1. Like the FTZ in Fort Lauderdale, the new zone would provide benefits to yacht owners looking to sell their vessels to U.S. buyers, or have them repaired by marine industry craftsman in the region.
The Fort Lauderdale FTZ, as well as the prospective FTZ designation for Palm Beach’s Berth 1, would also benefit the local and regional economy, according to West. “The marine FTZ at Lauderdale Marine Center is expected to support business development in South Florida’s yachting industry,” he said “as more brokers and builders keep their inventory in the area to be shown.”