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New U.S. Customs Regulation Interpretation May Wreak Havoc with Boat Use for Business Entertainment

• All recreational and commercial boats used for business entertainment may require Coastal Trade Endorsement
• All boats may require licensed captains
• Foreign-built boats may be barred from business entertainment use in U.S. waters
• Many may loose boat�s business entertainment tax deductions

The United States Custom Service recently has made changes in its interpretation of the definition of �passengers� that may negatively impact boatbuilders selling to the U.S. market; United States service and repair facilities, retail sellers, lenders and insurers; and U.S. boat owners who use their sail or powerboats for business entertainment purposes.

The United States Customs Service now interprets the definition of a �passenger� on a vessel being used for business or business entertainment purposes to mean any person onboard a boat while under way who is not directly involved in the operation, ownership, or navigation of the boat. Vessels carrying �passenger(s)� must be under the command of properly licensed operators.

Under the new interpretation, to carry a business guest (passenger), a boat must be registered in the United States Documentation System with a �coastal trade endorsement;� such an endorsement allows for the carriage of passengers for hire with a licensed captain in command. Only U. S.-built boats qualify for this �trade endorsement,� and must be of at least five net tons in its measurement, which is usually around 26' in length. Any boat built outside of the United States�whether considered recreational or commercial�could not be used for business entertainment purposes, as it would not qualify for a trade endorsement.

If this interpretation�and subsequent enforcement�of these regulations stand, it also calls into question the status of the business expense tax deductions for boats legitimately used for business entertainment.

At this time, the U. S. Coast Guard Documentation Office may not even be able to process the volume of boats that will require conversion into the United States Documentation system under the new interpretation. And, it is also questionable as to whether the licensing branch of the Coast Guard could process the number of applications needed for captain�s licenses.

Marineliens.com is currently working with a maritime attorney in the United States who is investigating the ruling and is awaiting explanation from the U. S. Coast Guard, U. S. Customs Service, and the Internal Revenue Service. We will publish the outcome of our findings on the MarineLiens.com Web site and via this exclusive newsletter as soon as the respective Government agencies respond.

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