Panama is Making a Splash in the Yachting Industry
PANAMA, MAKING A SPLASH IN THE YACHTING INDUSTRY
IYBA Compass Magazine April/May 2018
By Umberto Bonavita and Dane Stuhlsatz
Panama is already a commercial shipping powerhouse. It has its geographical location, infrastructure, and legal regime to thank for its commercial successes. But, Panama also wants to become a major player in the yachting industry as well.
Many of the pieces to become a premier yachting destination are already in place in Panama. Panama has recently completed a $5.3 billion upgrade to the Canal which allows for larger vessels to traverse the Isthmus. Panama has also recently developed two new ports which are some of the most important in the region. These infrastructure developments put Panama in prime position to be one of the top yachting industry destinations in the world.
Panama’s legal regime is also a critical component to its service offerings to the yachting industry. 2017 Panamanian legal reforms encourage, among other things, beneficial financing opportunities via lowered barriers to market entry on labor, immigration, and fiscal fronts. Examples include zero tax on servicing of foreign flagged vessels in Panama and a 20-year grace period from taxation for establishing a yacht management company in Panama. But, even with all of these benefits in place, there is still more Panama can do to encourage private and commercial yachting industry to be established there.
To encourage development of the yachting industry in Panama, the Panamanian maritime chamber has created a commission specifically dedicated to the task. A good first step toward encouraging U.S. based involvement in Panama would be to get Panama on the U.S. cruising permit list. Currently, there are only 27 countries (including the Cayman Islands and British Virgin Islands as Crown Dependencies of Great Britain) on the list. The list includes familiar regional countries such as St. Kitts and Nevis, Jamaica, The Bahamas, Honduras, and Bermuda.
U.S. cruising permit list inclusion is important because pleasure yachts from the designated countries are exempt from having to undergo formal entry and clearance procedures at all ports after the first port of entry in the U.S. For example, in Florida, a yacht is not deemed “imported,” and therefore exempt from state use tax, if the vessel qualifies for a cruising permit. This is a huge incentive for private yacht owners, that live in or spend a significant amount of their time in the U.S., to flag their vessels in countries on the list if they deem foreign flagging is in their best interest. The countries on the list have demonstrated “to the satisfaction of the Secretary of the Treasury that yachts of the United States are allowed to arrive at and depart from ports in such foreign country and to cruise in the waters of such ports without entering or clearing at the customhouse.”
A quick look at permitting requirements for U.S. vessels in listed countries gives Panama some guidance on how to structure a similar permitting scheme to become a U.S. cruising permit designated country. For example, the Bahamas require 3 pages worth of basic information about the vessel and specific categories of contents. After presentation and approval at the first port of entry, the papers become the vessel’s cruising permit allowing U.S. vessels to sail from port to port without further inspection or reporting. Processing only requires $150 for vessels under 35 feet and $300 for vessels 35 feet and over. In Bermuda, the captain of the vessel must provide the pre-arrival and declaration of health forms to customs at the St. George’s Harbour to obtain clearance. In Jamaica, U.S. vessels can obtain a cruising permit for one year after submitting a valid registration upon entry, the vessel is granted clearance by a border control agency, and the crew and personnel onboard have been satisfactorily identified. Honduras similarly issues 90-day cruising permits which can be extended.
Panama is already on the path toward becoming a major player in the yachting industry. Significant superyacht traffic already traverses the Canal every year. By incentivizing Panamanian flagging through inclusion on the U.S. cruising permit list, and all the market power and prestige the U.S. market provides, Panama can go from a conduit for yacht traffic from point A to point B and become an end destination in and of itself.
This information is provided for informational purposes only and does not constitute legal advice. Please contact your attorney regarding your specific legal concerns.
Umberto Bonavita is a Partner in the Yacht Law and Corporate Departments of Robert Allen Law, an international boutique law firm with a dynamic practice in the yachting industry. Dane Stuhlsatz is a Legal Intern at the firm and is in his 3rd year of Law school at Florida International University College of Law For more information about Umberto and Robert Allen Law, please visit www.robertallenlaw.com.