1. Parties to a contract: sale and offers
DESIGNATION
In an offer or a sales contract, there must be 2 easily identifiable blocks: BUYER and SELLER. Each block lists the names and the addresses referred to these block titles.
PHYSICAL PERSONS
Each physical person must have the capacity to act. If the sale is an international one (different citizenships involved), it is strongly recommended that all signatories have the legal age required by the law existing at the address of each party and in accordance with the citizenship.
It is important that the names and addresses of the parties match the name and the address appearing on an official document proving where they live. A car driving license is an example.
For documents in relation with vessels already registered in Canada or vessel that will be registered in our country, the initials in the first name of the buyer are not accepted. Ex.: John H. Clarke will be refused but John Clarke or John Harry Clarke will be accepted. The seller may use initials at the condition that the boat is not already registered according to Canadian law. The Registration will be detailed in Marine Capsule no. 3, Registration, Canada and other countries.
Identification of physical persons
At least one identification document, with picture, must be presented in order to confirm that the names and addresses of the parties agree with the information appearing on the documents.
MORAL PERSONS (Company, Family Trust, Registered Name, etc.)
Canada
Company
It would be important to get, in writing, the following:
Search Certificate coming from an official source confirming that the moral person really exists and that its statute is regular. The name of the administrators should be indicated. In Quebec province, there is the IGIF system (Inspector General of the Financial Institutions) also called CIDREQ. Each province has its own system. At the federal level, there is the “Corporation Canada”system.
Resolution or Power of Attorney authorizing the signatory to sign the sale or purchase documents. The signature of the persons who signs on the Resolution/Power of Attorney must be witnessed by a Lawyer, a Notary or a Commissionner for Oats.
Family Trusts, Registered Names, etc.
Family Trusts, societies and other entities of persons are only accepted for the boats having a Vessel Licence not for Certificate of Registry.
Family Trusts had, a certain time, been accepted for the registered boats at the condition they were registered in the Company Registry Systems (IGIF) system but, since April 1st, 2007, they are no longer accepted. If such an entity already owns a registered boat, the only transaction that can be made is a sale. The dealer is a merchant, therefore.
A Registered Name belonging to a corporation may do all the normal transactions in relation with a registered boat.
Boat Dealers
A boat dealer who sells an unregistered boat (Ex.: New or with a Pleasure Craft Licence), does not have to provide a Search Certificate or a Resolution. As is a commercial seller, he acts in the normal course of his business.
If the boat owned by the dealer is registered in his name, he will have to provide a Search Certificate and a Resolution.
It often happens that a dealer acts as a yacht broker. The reason is, if he had the boat in his inventory, he would have to charge sales taxes thus, decreasing his chances to sell the boat. The real seller is not him. The sale would probably be a sale between private.
Other countries
If the vessel is purchased outside of Canada, a search is mandatory. All the countries and, often their provinces/states, have vessel registration systems (Florida, United Kingdom, British Virgin Island, etc.).
Should the seller be a corporation, a search certificate is mandatory. This search certificate is often called “Certificate of Good Standing”. In addition, a Resolution or Power of Attorney, witnessed by a Notary or by a Lawyer is needed in order to complete the transaction.
Payment to the seller
When a moral person or company is selling, the payment of the boat will be made in favor of the seller, not in favor of one of his administrator unless the company has given a written authorization to do so.
We suggest you read Marine Capsule no. 7, Selling price, payment and holdback, for more details on this subject.
This writing is a short summary of some of the topics to consider in relation with a vessel purchase, sale or credit.
Each transaction is a special case.
2. Hull, serial number secret unveiled
RULES
Builders making serial boats follow strict rules for their hull serial numbers. These numbers are referred as “HIN” numbers for Hull Identification Number.
When the boats are built outside of North America countries, the builders use the HIN system when they expect that the buyer will be Canadian or American.
In USA, the handcraft vessels also get the regulatory HIN number.
12 CHARACTERS – 3 BLOCKS
ZZZ 12345 ????
The spaces are included in this hypothetical number in order to facilitate the understanding of the present capsule.
Block # 1: ZZZ
MIC Code (Manufacturer Identification Code)
Block # 2: 12345
Production Code, at the choice of the builder
Block # 3: ????
Code indicating the build date of the hull and the model year
Block # 1 – ZZZ ==> MIC – 3 characters
“Manufacturer Identification Code”. Letters and/or digits identifying the builder or his representative in the United States. A builder may be granted several codes. Here are a few examples of these codes:
Code MIC
Manufacturer
SER
Sea Ray, USA
CDR
Carver, USA
BEY
Beneteau USA
IRI
Jeanneau, France
HSY
Queenlong Marine, Taiwan
Here is the Internet address for information on MIC codes
A new rule appearing is the one with 14 characters. Two characters are added before the usual number. They indicate the builder’s country: US for United States, CA for Canada, FR for France, etc.
Block # 2 – 12345 ==> Production – 5 characters
Left at the choice of the builder.
Bloc # 3 – ????? ==> Dates – 3 styles
Letters or digits according to 3 different styles
A – «Modern Style» (For almost all boats made since at least 20 years)
Example: H899
1st character – H
It is always a letter. It identifies the month of construction according to the following table.The rank of the letter in the alphabet is the one of the month in the calendar. It may not be larger than “L”.
Letter
Month
Letter
Month
Letter
Month
A
January
E
May
I
September
B
February
F
June
J
October
C
March
G
July
K
November
D
April
H
August
L
December
2nd character – 8
It is a digit. It is the last figure of the build year of the hull. Must be the closest to the model year.
3rd and 4th character – 99
Represents the two last figures of the model year.
Resume
The hull of this boat has been built in August 1998 and the boat is a 1999 model.
There is no detail for the year model.
B – «Style M» : «M» because the 1st character of the date code is a «M».
Example: M80B
1st character – M
Identifies that the serial number is of M style
2nd and 3rd character – 80
80 = Year the hull was built
4th character – B
Month the hull was built according to the following table:
Letter
Month
Letter
Month
Letter
Month
A
August
E
December
I
April
B
September
F
January
J
May
C
October
G
February
K
June
D
November
H
Marsh
L
July
Resume
The boat has been built in September 1980.
There is no detail on the model year.
C – Style «Old» : Called «Old» because it is no more used.
Example: 1078
1st and 2nd character – 10
Month the hull was built
3rd and 4th character – 78
Year the hull was built
Resume
The hull was built in October 1978.
There is no detail on the model year.
This writing is a short summary of some of the topics to consider in relation with a vessel purchase, sale or credit.
Each transaction is a special case.
3. Registration, Canada and other countries
TYPES OF REGISTRATION IN CANADA
There are two types of registration in Canada:
Pleasure Craft Licence, once called Vessel Licence
Certificate of Registry
Pleasure Craft Licence
Definition
Registration with Transport Canada of a boat. The licence number includes one or 2 letters identifying the province that issued the first licence for the boat. Ex.: 55E12345 or ON554321.
Obligation and restriction for the boat
Have one or more motors with the total power of 10 hp or more (7.36 kW)
Have the right to freely navigate in Canada (taxes paid, not “in bond”)
Not currently have a Certificate of Registry (“Blue Book”)
Not having the obligation to have a Certificate of Registry according to law
Process
This issuance process is managed by Service Canada since April 2006. Previously it was managed by the Canada Customs and Accise. Everything is centralized in Fredericton, NB, Canada.
For information on the licence we suggest you contact Service Canada at the following number::
(800) 622-6232
or visit their Web site: Pleasure Craft Licences
Search
To verify if debts exist against the vessel, it is necessary to contact the provincial security management systems (i.e.: RDPRM for Quebec, PPSA for some other provinces of Canada)
It is impossible, except for a few exceptions, to obtain vessel owner details from the licence number
Certificate of Registry
Definition
Legal process allowing a boat, that will be called ship, to be considered somehow as an individual.
The vessel will have a “civil status” considered as such all over the world
A citizenship (Canadian)
A specific name, unique in Canada. Two vessels names may not have the same sounding or have a close sounding causing people to be mislead
A 6 digit registration number, the Official Number. This number is carved on a metal plate (Carving Plate) affixed in a permanent way, inside the boat
A classification (Pleasure boating, fishing, passengers, etc.)
A home(Home port of registry)
Legal status defining as being composed of 64 undivided shares
An official document, more or less considered as a Canadian passport for the boat, will be issued: The Certificate of Registry. A few years ago, this document was called “Blue Book” because strangely it looked like a book with blue cover.
Relevance
Any vessel may be registered in Canada
To travel easily from country to country (the identification is easy throughout the world)
To keep the boat out of the country without having to pay any Duty fees, GST or PST in Canada
Allows the registration of marine mortgages. For more details on financing, see Marine Capsule no. 9, Marine Credit
Easily allows the separation of the 64 shares between several owners. For more details, see Marine Capsule no. 4, Ownership of a registered vessel
Could allows to determine in advance, who will be the owner after the death the owner(s) (by the “Right of Survivorship” or specific number of shares)
Facilitate the sale (title search system is more secure)
Obligation
This is the only Canadian registration issued for a boat for which Canadian due taxes have not been paid. The boat must stay outside of Canada. Boats kept outside Canada (“In Bond”) are detailed in Marine Capsule no. 10, Taxes, duties and fees
Mandatory for the registration of marine mortgages
Process
The issuance of the Certificate of Registry is handled through Transport Canada in Ottawa. There are regional offices called Ports of Registry in all the provinces
Different statutory documents must be filled and signed
The signature of the applicant must be notarized on one of the documents because, according to the law, it is considered as a declaration of Canadian citizenship or legal permanent residence
The chain of titles of ownership must be clearly established
The original of the ownership document of the applicant must be presented with a proof of full payment to the seller
Legal costs will incure
Prerequisites
The owner must be Canadian citizen or permanent resident according to the immigration law of migration or be a company registered in virtue of the Canadian law or of one of its provinces. The trusts are excluded. A registered name is accepted at the condition it belongs to a qualified corporation.
If the boat measures more than 15 metres (49ft. 2 in.) the boat must be surveyed for its tonnage by a Ship Tonnage Surveyor. This also applies for a boat in which the superstructure represents more than 70 % of the over all length or is a multi hull (catamarans or else) or having 2 or more bridges.
The boat must be paid in full before the issuance of the Certificate of registry. For more details, refer to Capsule no. 9, Marine credit.
Search
The search system is adequate for the country. Searches usually start with obtaining a “Ship Transcript of Registry”.
The names of the owners are mentioned so are the original amounts of existing registered debts, mortgages or seizures. The amount of the selling prices are confidential.
TYPES OF REGISTRATION OUTSIDE CANADA
United States
Certificate of Documentation
This registration, letter size document, looks a bit like an insurance policy by its frame drawing. It is equivalent, for its legal status, to the Canadian Certificate of Registry.
The system, for the whole country, is centralized in Western Virginia
Several vessel may have the same name
Each boat has its own Official Number
Most of the boats navigating on the seas have such a registry
The vessels have a home (port of registry)
The “Right of survivorship” applies (JTRS Joint Tenant with Right of Survivorship). See Marine Capsule no. 4, Property of a registered vessel
The search system of titles is adequate
Marine mortgages may be easily registered. In this country they are called “Preferred Mortgages”
Certificate of Title
Often just called the “Title”, it looks like to an official insurance document. It is, most of the time, smaller than letter size. It is usually colored and has a colored frame. It could be compared to a Canadian Pleasure Craft Licence but much more developed. In some states, the registration system may be verified. Often, if debts exist on the boat, the name of the lender is mentioned on the certificate itself.
Two state do not issue vessel Certificates of Title: Alabama and Louisiana.
Vessel Registration
Several states issue a “Registration” for boats. It may have the size of a car driver’s licence certificate. The search on such a registration is somewhat lengthy and difficult. The value of these boats is usually low.
France
In France, this document looks alike a small orange colored flexible booklet. The names of the lenders, if any, are mentioned. The registration system is jointly managed by the “Affaires maritimes” and the “Douanes françaises” The French territories have the same type of registration (St-Martin, Guadeloupe, Martinique, etc). Search reveal some complexities but are accurate.
British Commonwealth Countries
Certificate of Registry
Most of the countries of the British Commonwealth (they are 51), have registration systems almost similar to the Canadian one. They have the 64 share ownership and the Right of Survivorship. See Capsule no. 4, Property of a registered vessel.
Several countries still have the old Canadian Certificate of Registry presentation. The “Blue Book” but each one has its preferred shade of blue.
International agreements
Because almost every country in the world hasa signed the Brussels International Agreements, their Certificate of Registry systems and mortgage registration systems are quite reliable.
The search work gets more difficult when the boat registration is something other than a federal certificate of registry. This requires, as in Canada, local, longer and more cumbersome search.
The work required for a search is worthwhile when the coveted boat is sold for a considerable price.
Closing of foreign registry
When a vessel registered in one country is sold to a person of another country, the vessel’s registration of the seller’s country must be officially closed otherwise, the purchaser may have the boat in “his hands” but not be the official owner. This is also relevant for Canada.
Example of Registry and Registry Closing Document
Canada
Certificate of Registry
Deletion Certificate
United States
Certificate of Documentation
Deletion Certificate
France
Acte de francisation
Radiation de pavillon
United Kingdom
Certificate of British Registry
Closing Transcript
Norway
Certificate of Identity
Deletion Certificate
This writing is a short summary of some of the topics to consider in relation with a vessel purchase, sale or credit.
Each transaction is a special case.
4. Ownership of a registered vessel
SINGLE OWNER OR WITH OTHER PERSONS
When a boat is or will be owned by more than one person, property sharing decision may have an important impact upon a resale, a share or a death. Documents to be signed in order to formalize the registration will take this decision into account.
Registration is explained in more detail in the Marine Capsule no. 3, Registration, Canada and other countries.
SHARES
A registered vessel is somewhat like a company and is divided into 64 shares that may be the property of one or more persons or corporation.
OWNERSHIP
Each share or each group of shares may be owned by a maximum of 5 persons. The theoretical maximum number of owners implied in the ownership of a boat is then 5 times 64 giving 320 persons. Usually when more than 4 people wish to own a registered vessel, it is suggested that they incorporate a company.
If only a single person owns the 64 shares, he is sole owner of the entire boat.
Joint owners
Ownership in common by several persons of a specific number of shares. Two or more persons can have ownership.
Example: Mr. and Mrs. and their sister-in-law own together a boat, then they own together all the 64 shares of the vessel.
Sale
At time of sale, the payment from the buyer to the seller will be payable jointly to the three selling owners
Marine mortgage
Ex.: Mr. and Mrs. and the sister-in-law, together, borrow from the bank an amount of $ 50,000.00
– The bank prepares one loan agreement for $ 50,000.00
– All three (3) parties sign on the loan document
Each one of these persons is jointly and severally responsible for the repayment of the total amount of $ 50,000.00
– The bank records show only one mortgage signed by the three persons
Decease
Should one of the joint owners deceases, his testamentary succession does not inherit the boat. The surviving joint owners remain the only owners of the shares they were owning with the late. This is called the “Right of Survivorship”.
And so on up to the last owner’s death, for whom the usual succession process applies. The “Right of Suvivorship” applies till all owners have passed away.
Co-owners
The boat is owned by blocks of person(s). Each block of person(s) owns a number of shares smaller than 64. The total of the shares owned by all the blocks equal to 64. The number of shares owned must be an integer number of shares (fractional shares are not accepted).
Ex.:
Block A: Peter owns 30 shares
Block B: John owns 10 shares
Block C: James and his child (legal age) own 24 shares
– for a great total of 64 shares
Sale
Each block of person(s) may sell a part or all the shares it owns, and get the amount of money representing “its own sale”. It is not necessary to sell the whole boat.
Block A: Peter may sell a part or all his 30 shares for $ 1,000.00, at his own option
Block B: John may sell a part or all his 10 shares for $ 25,000,00, at his own option
Block C: James and his child must sign, together, for the sale of a part or of all their shares for a prices at their own option
Should the “whole” boat be sold, each block of seller(s) will get the part of the selling price proportional to its number of shares for a total of 64.
Marine mortgage
Ex.: The bank lends an amount of $100,000.00
– The bank prepares a loan contract for $100,000.00
– The four (4) persons sign on the loan contract.
– Each one of the four persons is jointly and severally responsible for the repayment of the total amount of $100,000.00
A financial institution will always take the full boat in security. There will be as many mortgages as there are blocks of owners. A block may give only what it owns as security.
The bank files three (3) mortgages of $100,000.00 each:
a) Mortgage for block A, signed by Peter
b) Mortgage for block B, signed by John
c) Mortgage for block C, signed by James and his child
Decease
Example:
If Peter deceases, the usual death procedures apply.
If John deceases, the usual death procedures apply.
If James or his child deceases, the survivor becomes the sole owner of the 24 shares both were owning together.
This writing is a short summary of some of the topics to consider in relation with a vessel purchase, sale or credit.
Each transaction is a special case.
5. Citizenship, seller or buyer
CANADIAN PARTIES
BUYER
At time of registration, the buyer’s citizenship status will indirectly be part of his statements. The signature will have to be sworn in or notarized.
If it turns out that the statement has not been filled correctly, the consequences could be quite important for the owner because his registration would be irregular.
If a maritime mortgage was registered against the vessel, it could be at risk. This security exist only when the registration is compliant.
Individual
The owner must be Canadian citizen or permanent resident as defined in the Canadian Immigration Act. The provided information will also be used to establish the division of the shares and the Right of Survivorship, in the the case that there are several owners. For more details, see the Marine Capsule no. 4, Ownership of a registered vessel.
Sometimes the Canadian Authorities request a copy of the Canadian passport, birth certificate or any official document confirming the status of the applicant.
Corporation
It must be a company incorporated under the laws of Canada or under law of its provinces. A registered commercial name not belonging to a corporation may not get the registry. The registration process requires the followings:
Evidence that the legal person exists and qualifies
Resolution authorizing the signatory to sign for the company. His/her signature must be sworn in or notarized.
SELLER
If the vessel was already registered at the time of the sale and the seller provided erroneous information when he registered his boat, he will have to regulate the registration before the sale.
ONE OF THE PARTIES IS FOREIGN
Foreign Buyer
If the vessel is registered under the Canadian law, the sale will be indicated in the official record of the vessel. Following, the registration record will be closed and a Deletion Certificate issued.
The Deletion Certificate will allow the foreign buyer to register the vessel according to his country’s laws.
Foreign Seller
If the vessel is registered in another country, the registration of the other country must be closed and a proof of closing issued at that time. Without this evidence, the Canadian buyer will not be able to register the vessel in Canada.
One or several bills of sale (e.g.: France requires four) shall be submitted to the country authorities of the seller in order to close the registration. Some countries require that the signature of the seller be sworn in or notarized. Others, having a “Customary law”, do not require it.
A Canadian in a foreign registry system
Sometimes a Canadian requests that the vessel registration of a foreign seller be transferred to him. This is not always the right decision; some countries refuse to acknowledge.
UNITED STATES
The USA vessel registry (Documentation) system can contain only US citizens, individuals or corporations
The “Titles” and other registration types may, in many cases, be transferred to the buyer but sales taxes are payable. A vessel registered in Canada may be exempt from sales taxes
A registration in the State of Delaware, USA, for a boat owned by a Canadian evokes questioning and suspicion. People wonder about the true buyer’s goal ?
The taxes paid to foreign countries are not credited when the boat is imported in Canada
OTHER COUNTRIES
It is easier for a Canadian to travel if he has his Canadian passport and the Canadian Certificate of Registry of his vessel.
The French “Ponce law”
This law exists in France and in its overseas territories. It allows tax exemptions in favor of the French buyers, provided that the vessel is bought new, is a French construction and is sold at the end of a 5 years period. The selling prices of these vessels, sold on a secondary market, are often interesting.
Many of these vessels are managed by fleets such as Mooring or Sunsail Worldwide. We find them all over the world: Caribbean Islands, Mediterranean sea, Adriatic sea, etc.
This writing is a short summary of some of the topics to consider in relation with a vessel purchase, sale or credit.
Each transaction is a special case.
6. Quality of title: ability, credit, privileges, etc.
LOOKING CLOSER
Too often buyers believe that only a bank loan secured by the boat can interfere with the conclusion of their transactions. That’s important but sometimes we have to look a bit closer.
ABILITY TO SELL
The vendor may be an individual, a company or a legal entity (registered name, family trust, etc.).
However, if the boat is already registered according to Canada Shipping Act, only individuals or corporations are accepted. The persons signing for a company must present a Resolution proving their authorization to sell.
The signature will be valueless if he is a minor (not of age), signs under a threat or has not the required mental ability.
It is prudent that a copy of the sale contract or purchase offer be provided to both parties at least 24 hours BEFORE the signatures are completed.
Conventional and legal guarantees will soon be detailed in the Marine Capsule no. 11, Marine Guarantees
MAIN CREDIT THAT COULD AFFECT THE VESSEL
Personal loan or line of credit
Personal loan and the personal line of credit do not directly affect the boat. But it happens that subsequently the lender, registers a security against the vessel for having a better protection. Should the amount of the loan not be very high and, if the boat is not registered, the security will be a chattel mortgage. This mortgage is registered according to the provincial laws using the RDPRM system for Quebec or the PPSA system (for Ontario and some other provinces).
If the amount is high, the security will have great chances of being a marine mortgage
If the boat is already registered at the time the loan is granted, the security against the boat will ALWAYS be a marine mortgage
Instalment or conditional sales contract
This type of credit is primarily characterized by two folds:
The lender is the real owner of the vessel
The registered owner (the buyer) will effectively become the owner of the vessel only after the last payment will have been completed
Security is registered in the provincial security system
In addition, this contract allows the lender to repossess the vessel immediately if the boat is sold without his written permission.
Marine mortgage
This loan security can exist only for a vessel registered according to Canada Shipping Act. For more details, see the Marine Capsule no. 3, Registration, Canada and other countries
In consideration of the lower rate and greater repayment flexibility granted by the lender, this one enjoys greater possibilities to assert its rights:
The repossession notice period can be very short. This is related to the possibility of difficulties to locate the vessel
The lender can sell the vessel as if he owns it, without court order. He may not become owner himself unless he has the approval of the borrower
Most lenders register a maritime mortgage as “blanket mortgage” (umbrella) in order to provide greater flexibility of use of all their credit types. This mortgage is not necessarily related to the purchase of a vessel.
One has to be careful with a seller showing his contract with a proof of payment to his seller. Maybe the payment was made by a lending bank for him.
Mortgage endorsement security
A vessel can be used to support the responsibility of a guarantor. The owner of the vessel has not borrowed money himself but he gave the vessel as security for the payment of debts due by another person or by a company.
Marina and repair expenses
A marina owner or a repairer may interfere with the taking of possession of a boat by a new buyer if money is due to him.
PRIVILEGES AND PRIORITIES (A few possible examples)
Privilege
Sometimes privileges exist on commercial vessels, small or large. One of these could be, for a period of, lets say, 5 years, the vessel builder and his wife have the right to be passenger on the vessel without having to pay their passage.
Lien for salvage
The salvage is the help granted to a vessel in distress. The rescuer who, during a storm or another moment of danger, imminent, real and exceptional, has acted “as a good citizen” to prevent a loss (vessel, passengers or cargo), could take legal action against the vessel itself to compensate for his damages.
These actions called Claims for Salvage, are usually heard in priority by some courts (Federal Court of Canada, etc.). This priority is a response to the principle which says that a person who is acting “in good citizen” should be highly considered.
These claims have a higher priority rank than the mortgage claimants. The courts will take into account the resulting success, efforts and merit of those who have provided help.
If the “salvaged” vessel was insured, insurers will be happy to discuss with the claimant. They prefer studying the possibility of payment for such claims then the one for a much more serious loss.
Collision
The damaged vessel and the owner thereof could claim for damages. One should ask: “Has the vessel been involved in an accident since the seller owns her ?” Alternatively, “Has the owner bought it recently…?”
Taxes
Foreign vessels must be involved in an import process. If a vessel navigates in Canada, the taxes in relation with the import must have been paid when the vessel entered in the country. Have they been paid ?
Since a few years, a great number of used boats are purchases in the United States. It has been encountered, several times that for a boat having a Vessel Licence “QC” Quebec, “ON” Ontario, etc. the taxes in relation with the importation at time of arrival in the country have not paid all. There is a potential danger. The boat could be, at any moment, “verified” for not having paid the import taxes.
A Pleasure Craft Vessel Licence is issued only for boats “…principally maintained and operated in Canada…”. For the issuance for boats purchased foreign, the import process must have been previously completed.
In Canada, for not imported vessel, according to the rules, the only registration document issued is the “Certificate of Registry” (Blue Book).
FOREIGN TRANSACTIONS
Buyer
According to NAFTA (North America Free Trade Agreement), it is possible that Canada Customs Agency requires a NAFTA certificate of origin for an imported boat. If your seller cannot provide it when required, you may have to pay not expected custom duties fees.
Seller
A boat built in Canada and sold in the United States can be subject to not expected US custom duties fees to be paid by the US buyer. Get the information before selling.
Details are provided in the Marine Capsule no. 10, Taxes and duties fees
To avoid headaches, when a boat is sold to a foreign citizen, it would be a good idea to check if the documents signed by the Canadian seller will allow the buyer to easily register the boat in his country. Some countries will not accept a vessel on their territory if it does not meet certain criterias. The United States have the Jones Act which contains some constraints for passenger vessels.
This writing is a short summary of some of the topics to consider in relation with a vessel purchase, sale or credit.
Each transaction is a special case.
7. Selling price, payment and holdback
SELLING PRICE
The amount of the selling price is a specific amount of money. It must be fair and real. If it is unfair or fictitious, the sale could be considered as a donation. In the case of offers, the amount is usually really determined after all clauses of the offer have been resolved.
The official vessel registration systems accept a sale for “$1.00 and other valuable considerations”. However, for the parties, a sale of this kind is usually supported by other documents which detail the expression “…. other considerations”.
If the sale or part of its value is paid by the transmission by the buyer to the seller, of another vessel, it’s a sale with a trade-in.
Any registered vessel must have its own contract and its own official documents even for a vessel in trade-in.
DEPOSIT IN RELATION WITH A PURCHASE OFFER
The deposit is a partial payment of the selling price, possibly refundable in most cases. The text of the offer may bring constraints to this refund. For safety, the deposit is kept in a trust account and not directly handed to the seller. It will be the smallest possible amount but must demonstrate that the buyer is serious.
For the seller
The deposit makes the seller more comfortable. If the purchaser is not fulfilling his obligations such as: inspecting the vessel, having a survey completed, pay the balance of the sale, etc. at a specific date, the deposit could become the property of the seller as damage and interests.
For the buyer
It is as security for the buyer. Following the acceptance of the offer by the seller, no other offer may be accepted by the seller, even though another potential buyer offers a higher price, this as long as the agreements of the accepted offer will not have been completed in the specified time limit.
US brokers
US brokers often insist on collecting an amount of 10% of the selling price before they present the offer to the seller. If a broker in Florida is too insistent saying Florida law requires the 10%, it is perhaps because he has not recently consulted the “Florida Yacht and Ship Brokers’ Act” or another law on the subject. American brokers are accustomed to work in a certain way, with their own forms but this does not mean that Canadians have to automatically adhere to their habits.
MAIN CLAUSES IN A PURCHASE OFFER
The INSPECTION AND EVALUATION clause of an offer clause covers the quality and the condition of the vessel and of her equipment following a survey in and out of the water, a mechanic verification, a sea trial (water test), etc. The results must be at the full satisfaction of the buyer. This subject is covered in more details in Marine Capsule no8, Survey and inspection
Description of the equipment sold with the vessel. This is a check list used at the taking of possession and a good help should an eventual claim be filled at an insurer
Credit approval. This will be discussed in Marine Capsule no. 9, Marine credit
Mechanic of payment and money transfers. Is there any creditor to pay, bank, marinas, repairers ?
Acceptance to furnish additional requested documents as operating and maintenance manuals, past maintenance and repair invoices, etc.
Place of taking of possession, in or out of the water, truck transportation, etc.
PAYMENT OF THE VESSEL
When the purchase conditions will have been met, the payment balance shall be provided to the Marine Advisor who will deposit it in a trust account. This money will be used to pay debts and claims and the remaining to the seller as soon as:
All sale documents will have been signed
A sufficient insurance coverage will have been issued for the buyer
In the case of Canadian registered vessels, after the sale will have been registered in the Canadian Register book
Debt due on the vessel
Debts will be paid directly to the creditors by the Marine Advisor upon receipt of a letter issued by them confirming the amounts due and the way they want to be paid. These payments are not handed to the seller or to the buyer, except in very rare cases.
The mortgage release process, in Canada and in other countries is detailed in the Maritime Capsule no. 9, Marine credit
We have seen cases where a buyer had given his seller a draft for the amount of the sale. The debt due to the bank was higher than the selling price; the bank was refusing to release the vessel.
In another case, a buyer went directly to pay his seller’s Bank debt before the sale has been completed. This poses a considerable danger. Should the seller become unable to sign (accident, death, no more time, etc.), what happens? The vessel is not yet officially sold to the buyer and the seller now has a “free and clear” vessel plus the money.
Other payments
As per the contract writing, the balance of final payment will be delivered either to the seller or to the broker. The foreign brokers, American or other countries, like to receive directly the selling price balance. It is a protection for their commission. However, the writing of the contract may differ from one transaction to another. Each word is important.
Method of payment
Payments are made by way of a Marine Advisor check but, when the amounts are sizable, they are completed by bank drafts or by wire transfer (electronic funds transfers).
Wire transfers
They are fast, effective and safe. Also, a confirmation of completed transfer (date, hour, minute) is issued by the system in the few seconds following the arrival of the money at its destination.
If your Marine Advisor processes many marine transactions, his bank will have provided him the required tools allowing the electronic wire transfers from his own office. Hebert & Associates is equipped with such a system since 2004.
The broker’s or seller’s bank will receives the money within two (2) to four (4) hours after the initiation of the transfer. (The cutoff time is 14:00 hour for transfers in Canada, the working days and 13:00 hour between Canada and USA, working days in both countries). Transfers in Europe sometimes take more than 48 hours.
Certified checks or drafts in United States
In USA, money transfer system between banks is slower than in Canada. If you pay with a certified check or draft, although the draft is drawn on a US Bank, it is very likely that the vendor bank will “freeze” the check or draft for 10 days or more, delaying the taking of the vessel and the delivery of necessary original documents.
Documents before the final payment
Canada
Relevant documents are already in possession of the Marine Advisor.
Others countries
A copy of all documents signed by the seller has already been received by the Marine Advisor. On some documents, the signature of the seller will have been witnessed by a lawyer, a notary, a notary public or a commissary for oaths authorized in the country where the documents are signed.
The seller has also confirmed, in writing, that following after the receipt of his money, he will immediately forward the original of the requested documents to the Marine Advisor, by courier, FEDEX, DHL or other. The use of this type of sending allows a closer follow up.
Holdback
Transactions completed in winter are the source of some concern to buyers unless the vessel is seating under a warm sky. The vessel has not been tested in water. It could have been recently surveyed but the most of the surveyors are reluctant to issue an opinion when the hull is too cold; there is a danger. They may not detect potential problems.
In many holdback situations, the sale is completed in short delays but, often in the cold season, a certain amount of money is kept in trust until the launching in the water in presence of the seller and the buyer. A deadline date is specified in the contract.
If problems arise at that time, the buyer will have a certain number of days (ex. 10 days) to forward to the Marine Advisor, invoices or estimates for repairs prepared by an know marine expert. The Marine Advisor will directly pay these invoices. The rest will be rendered to the seller without further delay.
In holdback situations, when everything is in order, the buyer faxes to the Marine Advisor the “Authorization for Disbursement” form and the seller gets his due immediately.
This writing is a short summary of some of the topics to consider in relation with a vessel purchase, sale or credit.
Each transaction is a special case.
8. Inspection and survey
SURVEYOR / MARINE EXPERT
For transaction between individuals, it is usual to find, in the pre-requisites of the purchase, a clauses mentioning that the boat condition must be acceptable to the buyer and its market value be compatible with the asked price. The wording of the clause will cover the following topics:
Inspection by the buyer
The buyer will go and inspect the vessel. He will have to be fully satisfied with his findings.
Survey report
The buyer will request that an accredited marine expert proceeds to a survey on the vessel and write a report on her condition, maintenance and operating. The report will also estimate a market value of the vessel.
Sea trial (water test)
The buyer accompanied by the surveyor will do a sea trial for a duration of one (1) or two (2) hours. The period of time will vary depending on the price of the vessel and its equipment and navigation complexity.
If the buyer is not fully satisfied with one of these previously mentioned points, he may refuse to purchase. He shall notify the seller. The notice must be provided to the seller under the terms mentioned in the purchase offer. Once this notice is received by the seller, this last one may submit a proposal to the buyer to get his satisfaction. If the seller cannot offer any proposal or an acceptable solution to the buyer, the purchase offer may be cancelled by the buyer. The buyer can then recover any amount of money already paid in favor of the seller.
SURVEY REPORT
Content
Identification, vessel designation and place of inspection
Approximate current market value
Technical description of the hull, equipment and comments
List of urgent repairs to insure vessel safety
List of important repairs and care to be done
List of recommendations required to help keep the boat’s value
Why getting a survey report
A significant investment
Buying a boat is an important investment. It is strongly suggested that a survey report be produced for a boat not sold by a dealer as anew and covered by the manufacturer’s warranty. The reasons related to the request of evaluation report are left at the discretion of the parties however, it is usual to get an expert opinion on the following:
General condition the vessel, its hull and its equipment
Quality of the boat seaworthiness
Risks in relation to safety and compliance with international standards (ABYC, NFPA and others)
Short term market value
Credit
A lender will request a recent survey for a boat based on the following criteria:
The vessel is used
Funding of $ 35,000.00 or more
The seller is not a dealer having the boat in his inventory
The vessel is not a series model or the manufacturer is not well known
Insurance
Request by insurers
For any reason that could influence the insurance risk
For a boat of 10 years of age or more and following, every 5 years after
Following a previous report mentioning problems, new inspection confirming that the problems have been addressed properly, before insuring the vessel.
Equipment list
Check list at the taking of possession and help for possible future insurance claims
Sometimes a copy of the report is attached to the sale contract. It reflects the condition of the vessel and her equipment
Surveyor qualifications
Training
Surveyors, also called valuation surveyors, have, for most, a diploma from Chapman School of Seamanship Inc. of Florida, USA.
They had a training enabling them to produce professional surveys complying with maritime standards. Here are a few of these standards:
American Boat and Yacht Council ABYC
National Fire Protection Association NFPA
Before ordering
Surveyors approved by the insurers and financial institutions are qualified and experienced people. They meet criteria required by these two type of institutions
It is strongly suggested that you obtain the approval from your insurer and/or your bank before ordering the work
Insurance claim experts or adjusters are not always accepted for insurance purpose
Who pays the costs ?
Survey costs are usually paid by the buyer
If the vessel must be launched to the water to proceed to a sea trial, the buyer may be required to pay the fees for launching and hauling out
Evaluation report is the property of the requester and payer
Where to find a surveyor ?
Canada, US, other countries
Your Marine Advisor, Hebert & Associates or your insurer will be happy to provide the contact information of those who are near the boat location or are available according to the type of boat you buy.
There are several major marine surveyor associations. Here are a few of them with their acronym and their Web address. Their web sites include names, addresses and phone number of their accredited member
Society of Accredited Marine Surveyors SAMS
National Association of Marine Surveyors NAMS
United States Surveyors Association USSA
You may contact one of our marine advisor who will be happy to give you the information
By phone: (514) 985-6606 or (866) 531-2645
or by e-mail: Hebert & Associates
This writing is a short summary of some of the topics to consider in relation with a vessel purchase, sale or credit.
Each transaction is a special case.
9. Marine credit
PERSONAL LOAN OR LINE OF CREDIT
This type of credit is detailed in the Marine capsule no. 6, Quality of title: capacity, credit, privileges, etc.
It has no direct link between with the boat unless it is secured by a mortgage, chattel or marine. For these loan types, the interest rates are usually quite high and the repayment period rarely exceeds five years.
CHATTEL MORTGAGE
This credit security is registered according to provincial law. In Quebec, they are registered in the RDPRM system. In Ontario and some other provinces the PPSA (Personal Property Security Act) system is used. Since this security is at a province level, it is less safe for a lender, should the vessel navigate out of the country, USA, Caribbean, etc.
It can secure all kinds of loans. Rates and repayment conditions of credits secured by chattel mortgages are less flexible than the ones secured by a marine mortgage.
In the province of Quebec, if a RDPRM mortgage is registered against a vessel already registered in Canada or in another country, it has no security value. (Code Civil du Quebec, section 2714).
FINANCING CONTRACTS (Conditional or by Installment Sales Contract)
This type of financing is widely used for various consumer goods: Automotive, furniture, etc. Lenders usually use it for vessels whose value is not very high and that will not regularly navigate in foreign waters.
It is excluded for vessels kept “in bond”. This last topic is dealt with in the Marine capsule no. 10, Taxes and duties fees
This contract transfers to right of ownership to the lender, this means that the registered owner (buyer) becomes effectively the owner of the vessel only at the moment his last payment is made
This contract is registered in the “chattel security mortgage” system, according to the relevant province law
The main terms used in this contract are:·
The vendor must be a Canadian vessel dealer
The vessel may not already be registered or in the process of being so
The sales taxes must have been paid in full
BRIDGE FINANCING
Use
Bridge financing is used when the lender wants to allow his client to benefit, immediately, of favorable rate of interest and repayment conditions related to the filing of a maritime mortgage. This financing allows the lender to disburse funds before the recording of the maritime mortgage.
General constraints
The credit instrument used will be a personal loan note or a conditional sales contract
A Marine Advisor will handle the file. He will, and not the borrower, manage the registration process and the mortgage recording
The buyer will have signed a Marine Mortgage Commitment Agreement (with an expiration of 90 days)
All registration and mortgage documents will have been signed, including a proxy to date for some documents. They will be in the hands of the Marine Advisor
Evidence of adequate insurance will have been issued; not only a commitment to get an insurance
The lender will disburse the funds directly to the seller, only after the above points will have been addressed
The Certificate of Registry will be issued only after the vessel will have been paid in full to the seller
The Certificate of Registry will be remitted by the Canadian Authorities directly to the Marine Advisor
The marine mortgage will be registered by the Marine Advisor immediately after his receipt of the Certificate of Registry
When the amount of the loan is high, a chattel mortgage is sometimes registered for the period of time elapsing between the disbursement of the funds and the marine mortgage registration.
The Marine Advisor handling these transactions must be competent and highly experienced in Canadian and international marine transactions. His role is to help and advise.
Sales by dealer
The seller is a Canadian dealer
The boat is not already registered in virtue of the Canada Shipping Act. It may be registered under a similar legislation of another country
The buyer signs a conditional (or installment) sales contract and not another credit instrument
The buyer signs an Ownership Agreement allowing the lender to waive, upon the issuance of the Certificate of Registry, his right of ownership (granted by the conditional sales contract). This right will be replaced by the ones of a first rank mortgage.
Sales by Canadian individual or seller from another country
A favorable credit investigation was completed on the seller and the boat
The boat is not already registered in Canada. It may be so in another country
The buyer can sign any credit instrument but never a Conditional Sales Contract (or installment sales contract)
MARINE MORTGAGE (Regular)
Credit security
This security is the best one existing against a vessel. It may be taken only of a boat having a Certificate of Registry in virtue of Canada Shipping Act. It is a Canadian federal security. For details, refer to the Maritime capsule No. 3, Registration, Canada and other countries
Most lenders use a marine mortgage as a collateral security for a loan (blanket / umbrella) giving more flexibility for the use their credit products.
Personal loan
Line of credit
Demand loan
Mortgage guarantee
etc.
This type of mortgage is therefore, not necessarily linked to a boat purchase.
Rates and reimbursement conditions of loans are usually improved by this type of security.
Loans may be renegotiated, renewed or replaced by others without causing any novation or derogation from the rights of the lender. There is no need for the lender to register a new mortgage as long as the total amount of advances do not exceed the registered amount of the mortgage.
Interest computation
The interest compounding for the loans secured by a maritime mortgage do not have to be semi-annual; it is usually monthly.
Penalty for early payment
Usually the Collateral Mortgage Agreement prepared by the Marine Advisor states that the borrower may reimburse his debt in whole or in part, at any time without having to pay any penalty to the lender unless the “credit instruments” stipulate differently. A lender, in agreement with his client may diverge from this rule, by writing, but it is rather rare.
Assumption of a mortgage
A maritime mortgage, except in very rare cases, may not be assumed by a new buyer because it might secure funds not related to the boat. The boat could continue to secure certain other seller’s debts. Unpleasant surprises might arise for a buyer.
Main institutional mortgage lenders
Sources of the information: Marine mortgage files handled by our office:
National Bank
Pleasure boats from dealers or sales between individuals
Passenger commercial vessels or fishing
Purchased in Canada or abroad
Vessels may remain outside of Canada
Specialized financing centers for dealers
All branches
CIBC Bank
Pleasure boats from dealers or sales between individuals
Passenger commercial vessels or fishing
Purchases in Canada or abroad
Vessels may remain outside of Canada
All branches
Laurentian Bank
Pleasure boats from Canadian dealers only
No commercial vessels
Purchase in Canada only
Specialized financing centers for dealers
Caisses Desjardins
Pleasure boats from dealers or sales between individuals
Passenger commercial vessels or fishing
Purchase in Canada or abroad
Vessels may remain outside of Canada
Specialized financing centers for dealers
All branches
Bank of Montreal
Pleasure boats from dealers or sales between individuals
No commercial vessels
Purchase in Canada only
Specialized financing centers for dealers
Private mortgage lenders
Pleasure and commercial boats
Most of these transactions are for financing balances of sale
MARINE MORTGAGE (Builder’s)
A builder’s marine mortgage may be registered against a boat under construction.
The construction work must be performed in Canada.
The port of Registry must be the closest one to the place of construction. It may be changed after the construction to accommodate the owner/buyer
Most of the time, these boats are fishing boats or commercial passenger boats
This is the only case where a marine mortgage may be registered before the Certificate of Registry is issued. All registry documents are prepared and filed and the name for the boat is reserved at that moment. The certificate will be issued following the completion of the work and the presentation of some additional document at that time.
The registered amount for the mortgage is the total of all expected lender’s disbursements up to the end of the construction. As the construction is going on, the different disbursements add up. In several occasions, for each disbursement, a Demand Loan Note is signed. At the end of the construction the total of the disbursements may be consolidated in a single loan.
PURCHASE OFFER WITH CONDITIONAL LOAN APPROVAL
When one of the purchase offer conditions is getting a loan, it should comply with the following:
The condition must be written in the purchase offer document
If the loan is refused, the seller may require a letter from the lender confirming that the loan cannot be granted
If a copy of this letter is not presented to the seller, the potential buyer may lose his deposit
RELEASE OF MORTGAGE (SATISFACTION)
Importance
It is important that the releases are registered and reports completed as soon as possible, for all mortgages, marine or chattel. The release process must be followed closely otherwise, one will have to handle it upon resale, which could bring unwanted delays.
Chattel mortgage
Some provincial systems have defined periods during which the security remains active. At the end of these periods, the security is automatically cancelled. If your lender forgets to process the release, at some time, the guarantee will be cleared.
Marine mortgage
A maritime mortgage is permanent. It is released only by the presentation of certain documents to the Canadian Authorities or following a competent Court order. The Marine Advisor will therefore, make sure that the process be done the right way:
Preparation of relevant documents
Obtaining the required signatures
Presentation to the Authorities
Obtaining a search certificate confirming the release completion
Preparation and sending of reports to the debtor, his lender and, if there is one, to the new buyer and/or his lender.
This writing is a short summary of some of the topics to consider in relation with a vessel purchase, sale or credit.
Each transaction is a special case.
10. Taxes and duty fees
PURCHASE IN CANADA
Use in the province of purchase
Seller is a dealer
If the seller is a dealer, his business must be registered with government authorities managing the federal sales tax (GST) and the provincial sales tax (PST). His tax registration numbers must appear on its sales contracts. Normally, this seller will charge these two sales taxes if you are a resident of his province.
If you remit to the dealer, as partial payment, another asset, called trade-in, the sale taxes will be figured out on the difference between the new vessel selling price and the amount allocated for the trade-in.
The two sales taxes are payable to the seller.
Seller is an individual.
The federal tax (GST) is not payable for a vessel sold by an individual not registered at the sales tax department.
The provincial sales tax is payable in some provinces even though the seller is not registered. Ex. Payable in Ontario but not in Quebec.
Purchase in Ontario, the boat is brought in another province
Seller is a boat dealer
For boats, the Ontario dealer will not collect from a resident of another province, his Ontario sales tax (PST) except in rare occasions, this at the condition that the boat leaves the Ontario territory within 30 days of the date of purchase with a proof of that. One of the exceptions maybe: some dealers have agreements with the Sales Tax Dept of certain other provinces. These dealers are usually physically close to the border of the other province. Stay alert to these situations; ask proper questions.
Should an Ontario dealer have charged the Ontario sales tax to a Canadian living in another province, it is possible for this person to claim a reimbursement to the Ontario authorities. This claim must be presented within a four year period. However, the vessel must have left permanently the Ontario territory within 30 days following the purchase. Proof of the vessel’s arrival in the other province and proof of tax payment in the other province have to be attached to the claim.
Usually, an Ontario dealer does not charge the provincial tax if he delivers the boat in another province or uses a public carrier to do so.
For more information please contact the Ministry of Finance of Ontario, Retail Tax Refund, at: (800) 615-2757.
Seller is an individual
The Ontario provincial sales tax is payable for sales by an individual. However, it is not required if the vessel leaves the territory of this province within 30 days of the purchase. It is important to keep a proof of the vessel arrival in the other province.
Vessel purchased outside of Quebec and brought in Quebec.
When an asset purchased outside of Quebec is brought to Quebec for use in Quebec, provincial sales tax is payable. The buyer must declare this purchase and pay the required sales tax. We recommend that you review section 17 of the Quebec Sales Tax
VESSEL PURCHASED OUTSIDE OF CANADA
General overview
When a vessel purchased in another country doesn’t navigate in Canada, no sales tax or duty fees are payable in Canada
A vessel purchased from a dealer in Canada and delivered outside of the country, by the seller or by a public carrier is not subject to Canadian taxes. The buyer cannot move on his own the vessel out of the country. The vessel shall not navigate in Canada as long as the Canadian taxes not have not been paid
The only possible Canadian registration for these boats is the Certificate of Registry (formerly called “Blue Book”)
The local sales taxes of the place where the vessel is standing at the time of purchase, if any, are payable for all vessels but there are exceptions
Sales taxes paid to a foreign Government are not credited by Canadian Authorities
If a vessel registration is transferable to a buyer and this last one wants the vessel registered to his name, he will have to pay the local sales taxes
Some foreign registrations are not transferable to Canadian buyer. Ex.: The United States Certificate of Documentation
If the vessel, later on, comes to Canada for navigation, she will be imported. At that moment, the taxes will be figured out on the value of the vessel at this moment and not on the value the vessel had at time of purchase
Canadian navigating with foreign registration
This sounds suspicious. One can questions : Why does the Canadian owner not use the registration of his country considering that Canada is recognized everywhere as an agreement and cooperation country.
A Delaware (USA) registration for Canadian leads to suspicion. Other countries know that a Canadian can have a vessel registered in Canada and navigate everywhere without having to pay Canadian taxes as long as it does not navigate in Canada. For what purpose has this registration been obtained ?
If a vessel, owned by a Canadian and registered in another country, comes to Canada for navigation, the custom agents will tend to ask themselves the following question: Does this Canadian have the right to navigate in Canada with such a vessel ? Have taxes been paid ?
And, if the vessel was in the name of a company, the Canadian Custom will be inclined to investigate to ensure that no Canadian is involved in the company. Their investigation is facilitated by the good cooperation and agreements between Canada and many other countries.
IN BOND VESSELS
A vessel owned by a Canadian, whether it was build in Canada of elsewhere, and for which sales taxes and customs duties were not paid in Canada is called “in bond”. This status is legal, however, the vessel may not navigate freely in Canada. There are large numbers of these vessels in USA (Lake Champlain NY, Florida, etc.), in the Caribbean or elsewhere around the world.
Canadian registration
The only Canadian registration issued for in bond vessels is the Canadian Certificate of Registry. For more details, see the Marine capsule No. 3, Registration, Canada and other countries
Vessel kept in United States
There is some risk of being taxed by the state authorities where the vessel is kept. Some states consider that the boat of a foreign person navigating in their waters for more than 30 days and not having paid the local taxes will need to pay them. This tax is called “Users Tax”. It is the same rate than the usual sales tax.
Some states having other priorities don’t follow very closely their vessel tax records.
Other states, having an economy mainly based on tourism revenue, such as Florida, have laws encouraging foreign citizens to keep their vessel there. If their law is strictly followed, there is no problem with local authorities.
In bond vessel coming to Canada
An In bond vessel may come to Canada, under very strict restrictions
An application for temporary entry must have been previously approved (form E29 – B) by the Canada Customs and Revenue Agency
Usually this process is initiated by a Canadian boat dealer. Most of the dealers close to the border with the United States are familiar with this type of transactions
The purpose of the entry in Canada must be a vessel repair or maintenance. A cost estimate must previously have been issued by a dealer/repairer.
The vessel must directly go to the dealer or repairer. No question of “small detour at grand’ ma”
If the vessel entered into the country during the spring or the summer season, the expiration date of authorization is established depending on the type of repairs to be done. The vessel must leave the country at the latest by this specific date limit
If the vessel came during the fall or winter, its repairs can be done during the winter, but it must have left the country by the following June 15th
Customs officers regularly personally check if the vessel is still on the repairer site
Missing one of these rules can lead to seizure of the vessel, mandatory taxes payment, customs duties and a strong fine
Sale of an in bond vessel
An “In bond” vessel cannot be sold while on the Canadian soil or in Canadian waters without having the taxes paid, so, in order to make a sale, it has to be taken out of Canada before, otherwise, the boat could be seized and all the applicable taxes claimed.
Importing a vessels to Canada
Vessel custom fees
As per NAFTA (North American Free Trade Agreement), a vessel built in a member country (Canada, USA or Mexico) with materials from one of these countries is exempt from customs fees. The NAFTA certificate of origin prepared by the builder must accompany the vessel at time of importing. However, it appears that for some well known builders, the process is made easier when the document is not available.
It sometimes happens that a US buyer has to pay US duty fees for a Canadian built vessel purchased from a Canadian person. This is when the vessel was built by a not very well known builder and that this builder has closed his business and no NAFTA certificate is available. The contrary is also possible.
Pleasure vessels built in a country other than one of the NAFTA group have to pay the following duty fees:
If imported in Canada: 9.5 %
If imported in USA: 1.5 %, plus other miscellaneous fees
Vessels built by Beneteau at their plant in Marion, South Carolina, USA are exempted from custom duty fees but those built at their plant in France are subject to custom and duty fees.
For more details, you can click the following Wikipedia link: NAFTA
Sales tax
In addition to custom duties, the following sales taxes are payable :
Federal sales tax (GST)
Provincial Sales Tax (PST) in the province of the buyer
NAVIGATION IN UNITED STATES
Cruising License and Decals
A Cruising License is a document issued by the U.S. Customs Authorities to navigate more easily in the U.S. territory. It is issued for one year. To renew, the vessel must leave the U.S. territory, return and request a new document. The cost is nominal. We strongly recommend that you get one.
The following Web sites give more details on the subject:
Pleasure Boats & Private Flyers
User Fee Decals and Transponders
U.S. Customs and Border Protection
Yacht Privileges and Obligations
SALES TAX IN UNITED STATES
Each state has its own rules for taxes. It would be cumbersome to provide detailed information on each of them. Below are the details of the most popular States for Canadians.
Maryland
If you sign an affidavit confirming that you will not navigate for more than 180 days per year in this State, no tax will be required.
New York and Vermont
A few years ago these states were sending their representatives in different marinas along Lake Champlain searching vessels owned by Canadians. When found, owners would receive a notice requesting the payment of their sales tax. They were asking the owners to prove that they had already paid taxes in Canada, if not, the payment of their tax was required to be paid. The tax was called “Sales/User Tax”.
The State of New York accompanied this notice with a “red colored” return envelope. Panic-stricken, many Canadian owners called us for help; most of them were leaving the US territory for ever.
It seems that the diligent representives of many business owners for these two states have pushed the authorities to show more flexibility in their tax collecting strategy, so as to encourage tourism and not put it away.
Florida
A vessel can stay in Florida indefinitely and no sales tax has to be paid if:
She is registered in a foreign country (Ex..: Canada)
The Cruising license is active, not expired
Purchase from a dealer or through a broker
A Florida Tax Affidavit signed by a buyer has to be presented to the Florida authorities within five (5) days of the sale, not a day more
A “90-Day Decal” will be issued. This sticker will be affixed immediately on the vessel hull
The vessel will have to get out of Florida within 90 days. Proof of the coming out accompanied with a copy of the Canadian registration has to be faxed immediately after to the Florida Department of Revenue
If the vessel returns back, she must be registered in another country. In this case, Florida’s Authorities will issue, upon request, a “cruising license” valid for one year
PURCHASE IN ANOTHER COUNTRY
Many vessels are purchased in the Caribbean (British Virgin Islands, Guadeloupe, etc.). Each country has its own rules. It is a good idea to get information before presenting an offer or completing a purchase.
This writing is a short summary of some of the topics to consider in relation with a vessel purchase, sale or credit.
