The New Tariffs on Boats
As we look over the list of countries that have the new tariff, we note that the hardest hit are—
- China, with 34% tariff
- European Union, with 20% tariff
- Japan, with 24% tariff
- Malaysia, with 46% tariff
- South Korea, with 25% tariff
- Taiwan, with 32% tariff
- Turkey, with 30% tariff
To these amounts, should be added 1.47% to cover “base duty” and “custom fees.”
These tariffs, at the present, will effect about 100 boat brands sold in the us, mostly larger boats, and a dozen engine manufacturers, both outboards and diesel inboard engines.
These boat brands are sold by hundreds of dealers across the United States, and many have their own U.S. headquarters, sales and distribution staffs here. Some have their own services facilities in the U.S.
Boats Built in Canada or Mexico
Boats built in Mexico or Canada can qualify for tariff-free access to the U.S. market under the USMCA (United States–Mexico–Canada Agreement passed in 2020) — but only if they meet the agreement’s “rules of origin.” That means the components and the “transformation” from parts to the finished product must be substantially made in North America.
What Happens to Commissioned Boats in Progress?
Unlike automobiles, or the purchase of most imported items, sizable amounts of money are usually paid by the consumer to the builder through the dealer, so that work can begin on a large boat.
The question begs: What is going to happen to people who have put down deposits on boats that will now incur a huge tariff when landed? In many cases this can involve hundreds of thousands, or over a million dollars of tariff. That wasn’t part of the contract that was signed by all parties. What will happen?
Our advice is to contact the dealer and builder involved. They will have answers and, chances are, some solutions..
There are mechanisms to protest to the tariff given a binding contract. Refer to: https://www.cbp.gov/trade/nafta/guide-customs-procedures/appeal-procedures and to https://www.ecfr.gov/current/title-19/chapter-I/part-174
What About Components of U.S. Origin?
We quote from the executive order--
“More generally, the ad valorem rates of duty set forth in this order shall apply only to the non-U.S. content of a subject article, provided at least 20 percent of the value of the subject article is U.S. originating. For the purposes of this subsection, “U.S. content” refers to the value of an article attributable to the components produced entirely, or substantially transformed in, the United States. U.S. Customs and Border Protection (CBP), to the extent permitted by law, is authorized to require the collection of such information and documentation regarding an imported article, including with the entry filing, as is necessary to enable CBP to ascertain and verify the value of the U.S. content of the article, as well as to ascertain and verify whether an article is substantially finished in the United States.”
In the case of boats with U.S.-made outboard engines or inboard engines, the cost of those engines alone might well exceed 20% of the value of the boat, in which case those items can be subtracted from the cost of the boat upon which the tariff is assessed.
The 20% Threshold
For example, if the cost of a boat was $300,000, and the engines cost $60,000, the boat would be tariffed on $240,000. Once the 20% threshold is reached, there might be other items of equipment sourced in the U.S. which would also be eligible for deduction from the tariff, making the tariff exclusion even greater.
If the boat in the example above were built in the EU, which has 20%, instead of paying 21.47% (20% + 1% + .47%) on $300,000, which would be $64,410, the tariff would be $55,822. This effectively reduces the tariff by 13%.
If components are from a number of different countries in addition to the 20% from the U.S., with different tariffs, these will be considered the same nationality as the country where the parts are being transformed into the finished product.
What Should a Boat-Buyer Do?
Because boat sales have been slow for the last 12 months or so, many boat brands built outside the U.S. have inventory already landed in the U.S. Smart buyers will seek out these boats and buy them -- because they'll never be less costly than they are now. These are genuine "good deals" by any definition, and in the big scheme of things, it is an incredible buying opportunity because there is no doubt about the future of pricing.
Once the boats currently in inventory are gone, we advise consumers to consult with the boat dealer or factory store. All of the builders we have spoken with have a variety of solutions to ease what appears to be an onerous tariff. But, almost no matter what happens, and no matter what companies are able to do, boats -- both built in the U.S. and overseas -- will be more expensive than they are today.