EU Tariffs Affect 2019 Med Season

25 February 2019 By Lauren Beck

On June 22, 2018, the European Commission approved 25 percent tariffs on a range of U.S. products in response to the Trump administration’s Section 232 25 percent tariff on aluminum and 10 percent on steel imports. The 25 percent tariff is applied to U.S.-built vessels, specifically “sea going boats and yachts, with or without auxiliary motor, for pleasure or sports” imported to the EU from the U.S.

“Collectively, these tariffs are causing the price of raw materials and marine parts to rise rapidly and [are] stifling U.S. boat exports,” the National Marine Manufacturers Association (NMMA) reports on its site. “It essentially closes out the market,” says John-Michael Donahue, communications director, government relations at the NMMA. “We’re encouraged by the progress with the new NAFTA [agreement]…and we’re hoping that the same approach can be transferred to the EU, [which] will help eliminate retaliatory tariffs. As long as these tariffs remain in place, we will not be doing much exporting to our top international markets.”

That tariff is now ready to hit the charter market, specifically U.S. charter yachts in the EU, according to Thierry Voisin of the European Committee for Professional Yachting (ECPY). “For the 2019 season, there will be an impact as the U.S.-built yachts are due to pay the twenty-five percent tax if their intention is to charter in the EU Med,” says Voisin. “Most of the owner[s] will not accept to pay tax; then the consequence is that the yacht will not come to the EU this season. We have identified forty yachts [that are] U.S. built that are impacted — most of them fifty meters and above.”

“We have been discussing this weekly for months now with no further assurance to offer owners. [It’s] very frustrating,” says Daphne D’Offay of Ocean Independence USA. “My U.S. boats have had to make other plans — Bahamas/Central America mostly now.”

ECPY has been working to clarify the tariff’s details and has been in contact with French custom authorities and the EU Commission regarding enforcement. Voisin explains that ECPY has received word from the custom authorities “that are opening some doors to allow U.S.-built yachts to perform commercial activities. This letter opens the door to negotiations that are going to start next Monday,” he says. French Custom authorities have reportedly clarified that the tax will not apply to private U.S.-built yachts in EU waters, provided they respect the 18-month temporary admission for private use, says Voisin.

Voisin added that since the tariff is in response to Trump’s decision to tax aluminum and steel imported into the U.S, “It might disappear one day, or it might remain for years. Nobody knows! The ECPY aim is to go as fast as possible on this negotiation to inform the yachting community on what is possible,” Voisin says. “So, at the moment, the message to the industry is: you have to wait a little bit more.”

UPDATE: 4/5/2019
The European Committee for Professional Yachting (ECPY) has been working behind the scenes to get answers to the confusion surrounding the 25 percent tariff set to affect U.S.-built yachts this upcoming Med season. ECPY’s Thierry Voisin released an update today.

“We confirm that an American-built yacht commercially registered formally imported into the EU before 22nd June, 2018, will not have to pay the twenty-five percent custom additional duties upon her return to Europe if she is imported under the Returned Good Relief regime,” he writes. “This is applicable even if the yacht has been previously permanently exported or in absence of export declaration (alternative proof will have to be produced).”

Voisin explains that under this system, the vessel will receive the same exemptions as those under the French Commercial Exemption (FCE) or the French Reverse Charge, depending on its previous regime. If FCE, the vessel would need to prove compliance with the 70 percent rule concerning trips outside French waters.

Voisin also confirms that U.S.-built yachts that were not imported before June 22, 2018, and those that were but have subsequently changed ownership (on the certificate of registry) won’t be able to benefit from this exemption and will be subject to the 25 percent custom tax. These vessels, he explains, may possibly be able to charter under the Temporary Admissions for Private Use status, whether commercially or privately registered — without being subject to the 25 percent tariff — but charter under private registration will only be permitted with flag authorization. Voisin explains that this has some restrictions — the vessel cannot carry EU-resident charterers aboard, and not all EU countries allow private yachts to charter under Temporary Admission (France does).

“The 25 percent tax is a political battle,” Voisin said when we met at the recent Palm Beach show. “Will it end or not, we don’t know.” Stay tuned for more updates.