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How to legally avoid U.S. yacht tarrifs: A smarter way to register your yacht
Discover how foreign flag registration can help you legally avoid U.S. yacht tariffs and state taxes. A practical, proven strategy—explained simply.
If you're buying a yacht and plan to keep it in the United States — whether its Florida, Connecticut, Rhode Island, or Massachusetts — you may have heard about the new import tariffs. As of April 2025, a 10% universal import tariff applies to all foreign-built yachts, and if your yacht is from the European Union, like Zeelander, that jump to 20%. For a $10 million yacht, that's up to $2 million in extra costs. But there's good news: many yacht owners are using a legal, well-established strategy to avoid these taxes altogether.
The foreign flag loophole
It all comes down to foreign flag registration. Instead of registering your yacht in the U.S., you register it under a foreign flag, such as the Cayman Islands, Marshall Islands, or Malta. By doing this, your yacht enters the U.S. as a visiting vessel, not as an import, and therefore isn’t subject to the tariff.
Let's walk through how it works, what the best options are, and how much you could save. We’ll keep things straightforward and practical.
Why Foreign Flagging Works
When you register your yacht in a foreign country and enter U.S. waters, you can apply for a U.S. cruising permit. This permit allows you to cruise for up to one year without having to formally import the yacht. That means no import duty and often no state use tax either.
This route is fully legal and very common. Thousands of yachts docked in Florida and throughout the Northeast fly Cayman or Marshall Islands flags for exactly this reason.
For example, Florida caps use tax on boats at $18,000. But in Connecticut, the rate is 6.35% with no cap. On a $10 million yacht, that’s $635,000 in tax — a huge difference. This makes foreign flagging especially attractive for owners based in the Northeast.
Top Foreign Flag Options (and How They Compare)
Here are the three most popular choices for American yacht owners:
1. Cayman Islands
Reputation: Prestigious Red Ensign Group member, widely respected.
Who Can Register: Any nationality. You can register as an individual or through a U.S. LLC.
Taxes: No income, sales, or corporate tax.
Costs: A few thousand dollars upfront. Low annual tonnage and registration fees.
Cruising Permit: Eligible for U.S. cruising permit.
Other Perks: You don’t need to visit the Cayman Islands, and you get worldwide recognition.
2. Marshall Islands
Reputation: Very common among American owners. Tied to the U.S., with a solid safety record.
Who Can Register: Any nationality, but must own the yacht through a Marshall Islands entity or a recognized foreign entity like a Delaware LLC.
Taxes: Zero income or corporate tax.
Costs: Setup may cost $2,000–3,000. Annual costs similar to Cayman.
Cruising Permit: Eligible.
Other Perks: U.S.-friendly. Known for fast and easy registration.
3. Malta
Reputation: Great for European cruising. Part of the EU.
Who Can Register: Any nationality. Must appoint a Maltese resident agent.
Taxes: Can benefit from reduced VAT (as low as 5.4%) through special leasing structures.
Costs: Similar registration fees. Low annual tonnage tax.
Cruising Permit: Not eligible for U.S. cruising permit. Requires more paperwork in U.S. ports.
Best For: Owners who split time between the Med and the U.S.
Bottom Line: For U.S.-based cruising — whether in the Southeast or the Northeast — Cayman Islands and Marshall Islands are the smoothest options. Malta is better suited for European operations.
How Much You Can Save: A Real Comparison
Let’s say you’re buying a Zeelander for $10,000,000. Here’s how the numbers compare:
Example A: U.S. Registration (Connecticut)
Import Tariff (20%): $2,000,000
Connecticut Use Tax (6.35%): $635,000
Setup & Documentation: ~$1,000
Total First-Year Cost: $2,636,000
Example B: Cayman Islands Registration + Cruising Permit
Import Tariff: None
State Use Tax: None
Setup & Documentation: ~$3,000
Annual Renewal: ~$1,000
U.S. Cruising Permit: Free or minimal
Total First-Year Cost: ~$4,000
Net Savings: Over $2.6 million saved in year one
And you can still cruise legally in U.S. waters — from Florida to New England.
What Are the Rules?
If you go the foreign flag route, here are the key rules to follow:
Apply for a Cruising Permit: Once your yacht enters U.S. waters, apply through U.S. Customs and Border Protection (CBP). Permit is valid for one year.
Don’t Use for Charter: The yacht can only be used privately. No charters, no paid guests.
Leave Once a Year: After 12 months, you must leave U.S. waters (e.g., go to the Bahamas or Mexico) for at least 15 days before applying for a new cruising permit.
Not for Sale in U.S.: You can’t list the yacht for sale to U.S. residents while it’s in U.S. waters. If you want to sell it to a U.S. buyer, you'll either import the yacht and pay duty or close the sale outside the U.S.
How to Register a Foreign Flag (Step-by-Step)
Choose Your Flag: Cayman or Marshall Islands are easiest for U.S. cruising.
Set Up Ownership: Either in your name or through an LLC or offshore company.
Work with an Agent: Hire a yacht documentation specialist to handle the forms. We know the best ones.
Provide Documents: Builder's certificate, bill of sale, proof of ID, tonnage certificate.
Get Provisional Registration: Valid for up to 6 months while final paperwork is processed.
Receive Final Certificate: Now your yacht is officially foreign-flagged.
Apply for U.S. Cruising Permit: Do this when entering U.S. waters.
How Zeelander Can Help You Navigate It All
You don’t need to figure this out alone. At Zeelander, we don’t just build your yacht — we help you navigate the ownership journey from start to finish. That includes introducing you to the most trusted registration experts, flag advisors, and documentation specialists we work with regularly. Whether it’s your first yacht or your fifth, we’ll make sure you feel confident, compliant, and well-informed every step of the way.
If you're exploring ownership and want to better understand how foreign flag registration fits into your plans, we’re happy to walk through it with you. We know the process, we know the people, and we’re here to help you make the right decision for your lifestyle.
We understand these new tariffs may raise questions or concerns. But rest assured, this foreign flag strategy is legal, common, and effective. You’re not cutting corners — you’re simply choosing a smarter route.
Many of our clients already cruise this way, and with the right guidance, it’s a smooth process. Whether you’re based in South Florida or the Northeast, foreign flagging gives you clarity, flexibility, and real savings.
If you're looking at your new Zeelander and wondering how to make the numbers work, know that you can enjoy your yacht, spend time in the U.S., and avoid the extra burden.
Want to learn more? We're happy to connect you with legal and registration experts we've worked with.
Once again, the largest boat show in the world is upon us, and Zeelander is excited to be a part of this amazing event. In partnership with Northrop & Johnson, we are hosting an exclusive private viewing of our yachts during the Fort Lauderdale International Boat Show from October 25th to 29th.
