I am shopping for a boat that would be suitable for use in California as a commercial fishing boat and also for whale-watching trips and other passenger excursions. One of the boats that I am looking at is a 65-foot Canadian-built boat that is registered with the California Department of Motor Vehicles (DMV) and is being used locally as a commercial fishing boat. I had always understood that a boat must be built in the United States if it is to be used in any type of commercial service here. Is there an exception to that rule if the boat is registered with the California DMV rather than with the Coast Guard? On a similar note, do the regulations allow for a foreign-built boat to be used as a six-passenger or “six-pack” charter boat?
Our reader has identified several elements of the law concerning the documentation of vessels, where a failure by the Coast Guard to enforce the law has evolved into a type of de facto loophole.
There are no statutes or regulations in California that require a commercial boat to be built in the United States or that require the commercial use of a boat to be noted on a boat’s California registration or pink slip. Federal law, however, does include such requirements. A Coast Guard-documented boat that carries at least one passenger for hire must obtain a “coastwise endorsement” on its Certificate of Documentation, and a commercial fishing boat must have a “fisheries endorsement.”
These endorsements are issued by the Coast Guard only for boats that are built in the United States and that are eligible for documentation. To be eligible for documentation, a boat must measure at least 5 net tons and be owned by an American citizen. “Net tonnage” is a theoretical calculation of the cargo carrying capacity of a boat. It has nothing to do with the weight of the boat, but a 5 net ton boat is usually around 30 feet in length.
With all of this in mind, any commercial boat larger than 30 feet in length must be Coast Guard-documented and built in the United States. So, how did our reader find a local 65-foot commercial fishing boat that was built in Canada? The answer is traced back to the information printed on the foreign registration documents.
When a boat is imported into the United States and transferred to either state registration or Coast Guard documentation, the foreign registration documents are surrendered to the DMV or the Coast Guard, and the dimensions of the boat that are printed on the foreign registration are transferred to the new registration without conducting any inspection of the boat. If the information on the foreign registration is wrong, the new domestic registration will also be wrong.
With all due respect to our friends to the north, the information printed on Canadian registration documents can be pretty screwy, and we have seen the registration for boats as big as 80 feet in length list the net tonnage as “1 net ton.”
The Coast Guard, unfortunately, lacks the resources to investigate the information printed on foreign registration forms, and this failure to enforce the law has evolved into a loophole that allows large foreign boats to be used in commercial activities in the U.S.
“Six-pack” charters present a similar problem. These are charters that carry six or fewer passengers for hire — and, as such, they are exempt from Coast Guard passenger vessel inspection. Since the boats are not on the Coast Guard’s “radar,” the foreign construction does not come to their attention and the operation is allowed to continue. Once again, a failure to enforce a Coast Guard regulation has evolved into a loophole that allows foreign-built boats to be used in commercial activities in the U.S.
We are frequently asked by clients to evaluate whether they are likely to get caught when they violate a “minor” law such as foreign construction restrictions discussed above. It’s impossible — and unethical — for a lawyer to answer a question like that. But the bottom line is that the cost of compliance with the law is usually less than the cost of being caught after breaking the law.
Our reader should probably just limit his search to U.S.-built boats. We should also note that the evaluation of commercial vessel regulations can be very complicated, so people who are interested in starting a maritime business should always discuss their plans with an experienced maritime lawyer.