The legal stipulations are strict, and violating them could land a yacht in a sea of trouble.
Every yacht owner or captain, at some time or another, has been approached by someone who said, “You can make a lot of money by bareboat chartering your vessel.” While it sounds like a good way to make some money or defray costs, there are considerable legal ramifications and procedural hoops to jump through to do it lawfully. Interested recreational yacht owners need to be aware of the U.S. Coast Guard regulations regarding the yacht and the crew.
First, for it to be a valid bareboat charter, the owner must completely relinquish “possession, command, and navigation” of the vessel. That means control of the vessel is turned over to the charterer, and it must be done under written contract. Although that seems simple, realistically, few owners are willing to completely give up control of their vessel and hand it over to strangers. Frankly, most charterers and owners don’t realize that is what just happened.
In simple terms, full possession and control over the vessel must be vested in the charterer, with the owner neither providing nor specifying the crew employed. This is similar to renting a car from Avis as opposed to sitting in the back of a chauffeured limousine.
The Coast Guard will look at the written agreement and how the vessel is operated to determine if it is, in fact, a valid bareboat charter operation. In order to be considered as such, the following conditions must be met:
- The charterer must select the captain and crew, although the owner may require general levels of proficiency for the crew that is retained based on federal statutes.
- The charterer must pay the captain and crew.
- All food, drinks, fuel, and stores must be provided by the charterer and paid for under an Advance Provisioning Allowance (APA) as a separate charge apart from the fee for chartering the vessel.
- Insurance must be obtained by the charterer for the duration of the charter. Also, be aware that recreational yacht insurance policies do not allow chartering unless the owner has specifically requested and received an endorsement for chartering the vessel, which generally results in a higher insurance premium.
- The charterer is responsible for the safe navigation of the vessel.
- The charterer may discharge, for cause, the captain or any crew member without referral to the owner.
- The vessel must be surveyed upon its delivery and return.
To be very clear, the captain and crew must not be under the owner’s control, and cannot be the owner’s regular crew moonlighting as a bareboat charter crew. The owner cannot be employed as captain or crew, nor the owner’s employees, offered with the option to pick one, as well as a choice of crew.
If you do not follow these guidelines, the vessel could be deemed to be operating as an “uninspected passenger vessel.” If so, the USCG could find that you are in violation of 46 USC § 3301 by operating as a passenger vessel requiring a coastwide endorsement to operate in coastwide trade under the Passenger Safety Act, 46 USC § 55103.
Passenger vessels or uninspected passenger vessels require operators to hold proper mariners’ credentials, 46 USC § 2101, comply with chemical/drug testing, 46 CFR § 16, and comply with passenger vessel requirements. Fines and penalties can be as high as $50,000 or more.
The USCG may issue a Captain of the Port Order to cease operations as an uninspected passenger vessel. A violation of the COTP Order is a civil penalty (up to $100,000), and a knowing violation is a class D felony, so these are serious consequences.
These regulations are intended to ensure the safety of the vessel, guests, passengers, and crew. Before deciding to enter into such an operation, review your contract, and make sure that your charter agreements and captain/crew agreements comply with USCG rules and guidelines. You can bareboat charter your recreational yacht, you just have to follow the rules.
MICHAEL R. KARCHER IS A MARITIME ATTORNEY WITH THE ROBERT ALLEN LAW FIRM IN MIAMI, FLORIDA.
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