The factors that contribute to the choice of flag registration for a yacht can be many. Certainly, legal aspects and tax implications are high on the list. Will the yacht operate predominantly in U.S. waters, European waters or worldwide? Let us not forget perception, politics, nationalism, and personal contacts. An owner's decision for registering a yacht is not simply picking the flag with the prettiest colors.
One option that is always discussed with captains, brokers, documentation agents, attorneys, and all others associated with our industry: Should the yacht be registered as private or commercial? Unless an owner has the intention to charter the yacht, the prevalent answer is usually a thunderous, "private only."
Why is this? There is a spectrum of answers ranging from "too expensive" to "no interest in chartering" and best of all, "too much paperwork." Let's take a look at some of the more popular reasons not to register commercial and clarify the points.
Too expensive.
Certainly, expenses and fees are on top of everyone's list. Let us remember that most yacht owners did not achieve their success by being foolish. This is especially true when it comes to finances. Running a yacht, either private or commercial, is not cheap.
For a commercial yacht there are additional costs involved in safety equipment, required third-party inspections, registration and legal fees. However, solely considering the amount of tax that is levied on the value of a private yacht, plus the future taxes on her fuel, those costs are almost immediately recouped.
The potential negative effect the absence of commercial certification has on the resale value is also a factor.
Owner has no intention of chartering.
Having a yacht certified for commercial operations does not obligate an owner to charter the yacht. When, where and if an owner so decides is completely at the owner's discretion.
Having a yacht meet the standards of commercial certification is a statement to the level of safety implemented on board. It is also a tremendous positive when the time comes for her resale.
Compare it to used car sales. Does one have a higher level of confidence when purchasing a certified, pre-owned vehicle, in comparison to the same car you saw down the road at someone's house?
Unlike a private yacht, commercial yachts are inspected annually. This promotes continual improvement and assures a consistent standard.
Commercial certification provides a third-party, objective view of the condition of the yacht.
Too much paperwork.
This is the most popular response. Running a yacht is a business. No company today can be operated without some type of management system. If not, then it is not operating correctly.
However, too much administration can be an indication of micro-management or inexperience. If a captain and crew are being inundated with paperwork, then something is wrong.
A simple and professional administrative system when implemented properly will save any yacht - private or commercial - a considerable amount of money.
Operating a commercially certified yacht does not create paperwork disproportionate to its advantages.
Manning.
Depending upon the flag of registry, this can be an issue. If the yacht operates under a national flag, such as the United States, cabotage laws require that the yacht is manned with U.S. citizens and no more than 25 percent legal residents.
Open registries, such as the Cayman Islands and Marshall Islands, allow for any nationality on the IMO-approved STCW Code "white list." This permits a more international crew.
Remember that certification discussed here is different from qualification. Licenses, certificates and the standards enforced by the STCW Code are just that, an internationally recognized minimum standard.
Officer licenses and crew training certificates are not a guarantee of quality. Quality comes with experience. Personnel certification on a commercial yacht is a must, but why would an owner use someone that has not met a minimum standard?
The yacht is not classed.
This has always been a huge hurdle for yachts wanting to achieve commercial certification. There are many well-built and maintained yachts that, because of their hull construction or age, are not able to meet the standards of a classification society's rules.
The costs for putting a yacht "in class" can also be substantial, not to mention the time involved.
The prerequisite for a yacht to be classed is a requirement of the UK MCA's Large Yacht Code. This safety code is a national standard for British yachts only. It is enforced by the Red Ensign flags (UK, Cayman Islands, Isle of Man, Bermuda, etc).
While highly popular and internationally recognized, being "MCA" is not the only option for a yacht. Several other flags have their own commercial yacht codes. These "non-Red Ensign yachts" are also commercially certified. They are not certified as "MCA" solely because they are not British flagged.
It is equally important to note that other flags' yacht codes have recognized the many unclassed but excellent yachts that previously could not operate commercially. Their codes allow for certain unclassed yachts to be certified as a commercial yacht.
This is particularly true for yachts below 500 gross tons. While not as well-known, these non-UK national standards for commercial yachts are equivalent and equally recognized internationally. The options are there. They only need to be researched.
Commercially certifying a yacht has traditionally been a taboo subject for all but the largest of vessels seeking to charter. Breaking this chain of incorrect, pass-down, verbal history for "impossibility" is imperative for raising the standard of operation within our industry to the next level.
Capt. Jake DesVergers is chief surveyor for the International Yacht Bureau, an organization that provides inspection services to Marshall Islands-registered private yachts of any size and commercial yachts up to 500 gross tons. A deck officer graduate of the U.S. Merchant Marine Academy at Kings Point, he previously sailed as master on merchant ships, acted as designated person for a shipping company, and served as regional manager for an international classification society. Comments on this column are welcome at 954-596-2728 or through www.yachtbureau.org .