A client asked me the other day whether she could put her french-built sailboat into a charter program in the US. The answer is yes, but only as a “Bareboat” charter.
The use of foreign owned or foreign built yachts in a commercial application is strictly prohibited by the Jones Act (46 U.S.C. § 55102). However, foreign-built and foreign-owned yachts may operate in U.S. waters for pleasure and non-commercial purposes. These vessels may also be chartered in U.S. waters, as well, but only for non-commercial purposes.
Per the Jones Act , “a vessel may not provide any part of the transportation of merchandise by water between points in the US, either directly or via a foreign port, unless the vessel: (1) is wholly owned by a US citizen for purposes of engaging in coastwise trade and (2) has been issued a US Certificate of Documentation with a coastwise endorsement.”
The Passenger Service Act (46 U.S.C § 55103) restricts the use of foreign-built vessels to carry passengers for hire or trade between US ports. Foreign-flagged, owned and built yachts can operate only non-commercially in the United States. Although the carrying of passengers for hire is considered to be a commercial use, demise (bareboat) charters are not considered to be commercial uses, so long as the charterers are using the vessels non-commercially.
The demise charter (aka bareboat charter) agreement’s main characteristic is that it places possession of the vessel in the hands of the charter party. Simply put, at the time the charter starts, the owner relinquishes possession of the vessel and the charterer takes over crew selection, vessel operation and management. To use the legal terminology, the owner must relinquish “possession, command and navigation of the vessel” as to be “tantamount to, although just short of, an outright transfer of ownership.” The charterer is responsible for hiring and maintaining a crew and for the vessel’s operation, and he or she assumes responsibility for the vessel and its activities. The owner must have no ties to the crew selection or a company employing the crew (which the law may construe as retaining some control over the vessel, in breach of the basic premise of this agreement). The charterer is obligated to maintain the vessel in a good state or repair during the charter and must return it in the same condition it was when it was received, ordinary wear and tear excepted.
Mike Wales is a maritime lawyer and co-owner of AGL Yacht Sales, Inc. along with his wife Leilani Wales, a licensed California Yacht Broker. You can reach Mike at email@example.com or at 480.250.5651.