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Fewer than one percent of vessels in the U.S. are
documented with the Coast Guard with most pleasure boats
opting for state registration. Among the statutes
dealing with registration are the Federal Motorboat
Act of 1910 which placed on the federal government
the responsibility to regulate recreational boating in
the U.S.; the Federal Numbering Act of
1918 which instituted a numbering system for all
undocumented vessels; the Federal Boating Act
of 1958 which shifted the responsibility of numbering
undocumented vessels from the federal government to the
states; and the Federal Boating Safety Act
of 1971, mostly dealing with recreational boating, which
entrusted states and territories with insuring minimum
registration requirements set by the federal government.
Among those requirements are navigation rules, vessel
numbering, safety equipment, lights and day shapes,
pollution rules and distress assistance.
Pursuant to the legislation cited above, states are
required to assign numbers to all vessels with
propulsion machinery that are used in waters under
federal jurisdiction. Exceptions to that requirement are
documented vessels (not in every case) and foreign
vessels temporarily in the U.S. The way numbers are
assigned to vessels by states is either through a title
or registration system. A registration system basically
requires the payment of an annual fee in order to get a
number and sticker. This type of registration system
does not protect good faith purchasers from the
acquisition of stolen or lien burdened vessels because
no chain of title is provided. The only purpose of the
registration is to establish who holds the current
registration of the vessel. The titling of a boat
follows the same principles as the titling of an
automobile with the title showing seller and purchaser
as well as mortgagees and other lenders who are still
owed money. When the boat is resold, the title is signed
over to a the new owner who gets his own title upon
registration. The chain of title is thus established.
Documentation of vessels is the responsibility of the
Coast Guard. Documentation was originally required only
for large commercial vessels but is gradually being used
for smaller and pleasure boats for the added security it
affords lenders. The National Vessel Documentation
center is located in Falling Waters, West Virginia.
Unlike simple registration or titling by states, the
documentation procedure requires numerous forms and
documents. They include the application for initial
issue of certificate of documentation; the builder
certificate and first transfer of title; a bill of sale
on appropriate federal form; and declaration of
citizenship.
When the owner of a vessel is an individual all he
needs to show as proof of citizenship is his passport or
naturalization certificate. A corporation, however, may
present more complex issues. A corporation is deemed a
citizen if (a) it is incorporated under the laws of the
United States or of a state, territory, district or
possession; (b) its president, or other chief executive
officer and its chairman of the board are United States
citizens; (c)no more of its directors than a minority of
the number necessary to constitute a quorum are
non-citizens; and (d) the controlling interest in the
corporation is owned by United States citizens or, if
the vessel is documented for coastwise trade, at least
75 percent of the interest in the corporation is owned
by United States citizens.
It should be noted that the regulations only find
control and ownership in a corporation if (I) title to
at least a majority of the stock is vested in United
States citizens free of any trust or fiduciary
obligation in favor of any person who is not a United
States citizen; (ii) at least the majority of the voting
power is vested in U.S. citizens; (iii) there is no
contract or understanding through which it is arranged
that the majority of the voting power may be exercised
directly or indirectly on behalf of any person who is
not a U.S. citizen; and (iv) there are no other means
whatsoever by which control of the corporation is
conferred upon or permitted to be exercised by any
person who is not a U.S. citizen.
One of the most cumbersome requirements of the
documentation procedure is the builder's certification
and first transfer of title or the establishment of a
chain of title, on federal bills of sale forms, to be
signed by each and every successive owner. That
requirement applies to initial documentation only,
whether or not there has been a state chain of title.
While this requirement does not present a problem for
new vessels, it can be a major challenge for old ships
whose builder is no longer in business and which have
had many owners. In some cases a waiver may be available
but, most of the time it is necessary to rely on the
services of documentation companies who track down all
the successive owners.
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