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Mixed Use - out with the old and in with the new

posted by Bruce Maltwood

The Yacht Engaged in Trade regime “YET”, initially introduced by the Marshall Islands and more recently launched by the Cayman Islands Ship Registry, is no longer recognised.

The YET regime was for Non-EU resident owners operating predominantly on a private pleasure basis under Temporary Admission who wished to undertake limited charter. Such charter activity could only commence in France or Monaco which was one of the limiting factors. However, it did enable charters to both EU and Non-EU resident charterers.

In 2018 we saw the Spanish authorities leading the way on the Interpretation of the Union Customs Code concerning Temporary Admission following the omission of the specific reference to “private purposes”; this resulted in the ability for such yachts to undertake charter activity but only for use by Non-EU residents.

The French authorities now also recognise such activity and can be utilised for the 2019 charter season.

The Italian authorities have not yet published an interpretation; however, it is the hope that this will follow in the coming weeks.

There are two ways to operate being either under Private flag registration for private use and yacht charters or Commercial flag registration for the transport of passengers under Transport Contracts. Only certain flag states, however, will accept such use under private registration.

One of the main drawbacks is the limitation on use to Non-EU resident charterers, although there is no definition of the term “user” under EU customs legislation. There are varying speculations on how this should be applied; however, anything other than all guests including the principal charterer being Non-EU residents increases the chance of a possible challenge from authorities.

For a Non- EU owner who wants the freedom to operate privately with the occasional charter then this could be attractive. One such market could be US owners wishing to cruise for a season in the Med without the need to put in place alternative structuring arrangements. For owners who want to charter their yacht for a number of weeks every year then a full commercial structure would still seem to be the most appropriate option.

As with all such changes, which initially appears to be a great solution must include a caveat, and in this case, it is a big one. There is pressure on French customs to change this interpretation, but even if successful, this does not mean that other EU countries will follow suit.

Each case needs to be considered on its own merits so get in touch to discuss your requirements.