by The Importance of Proper Vessel Documentation: Navigating the NVDC Process
The USCG requires all vessels measuring at least five net tons to be documented. Exemptions are also granted for non-self-propelled vessels used in coastwise trade within a harbor, on rivers or lakes (except the Great Lakes), or in internal waters or canals of any state.
1. Ownership
Vessels that are over 5 net tons and are owned entirely by a US citizen must be documented. These include towboats, dredges and fishing vessels operated on the navigable waters of the United States (US) or in the Exclusive Economic Zone (EEZ).
Documented vessels are marked with their official number on the interior of the vessel, usually on a main beam or inside a locker. This Number identifies the vessel in the Federal documentation system for its life.
Changing the documentation status requires an application and fees for re-documentation. Changes can include changes in the vessel’s name, hailing port, trade endorsements, specifications or transfers of ownership.
Ownership changes are typically established by a Builder’s Certification or a transfer on a Manufacturer’s Certificate of Origin, State Registration or Title or foreign registration showing that the applicant owns the vessel. Abstracts of Title are required to be obtained prior to any documentation transaction. These are electronic indexes or ledgers that track mortgages, lien claims and other notational information on the documented vessel.
2. Ownership Transfer
Proper vessel documentation search is important during the ownership transfer process. It serves as an official basis for vessel identification and control, facilitates trade and commerce, and protects economic privileges of United States citizens.
Vessel documentation is managed by the United States Coast Guard (USCG) through the National Vessel Documentation Center (NVDC). It serves as a known standard for proving nationality, regulating trade among coastal territories and fishing grounds, and clarifying ownership of vessels in the U.S.
To qualify for documentation, a vessel must be at least five net tons in length and owned by a US citizen. It must also have been built in the U.S. and have a current Coast Guard official number. If the vessel is subject to a mortgage of record, it may be deleted by obtaining consent from the lender on form CG-4593 and submitting an original and one copy to the NVDC. The process is simple, but requires careful consideration of specific requirements for your boat.
3. Registration
Proper vessel documentation is one of the oldest functions of Government dating back to the 11th Act of the First Congress in 1790. It serves as a recognized standard to prove nationality for international purposes, regulate trade among coastal territories and fishing grounds, and clarify ownership of vessels in the U.S.
Vessels measuring at least 5 net tons and wholly owned by a citizen must be documented by the Coast Guard. Documentation is also required for all fishing vessels, dredges, towboats, and other craft operated in the EEZ, which is the area of ocean surrounding the coastline up to approximately 200 miles offshore.
All documented vessels must be marked with an official number, which is affixed to some clearly visible interior structural part of the hull. The vessel’s name and proper hailing port must also be affixed to the exterior of the vessel.
4. Financing
Vessel documentation is a national form of registration, which allows vessels to operate in certain restricted trades such as coastwise trade and fisheries. Documentation also enables vessel owners to obtain financing for their vessels from banks and other financial institutions.
In 1996, Congress amended the vessel-documentation laws to promote lease financing of vessels engaged in the coastwise trade (section 1113(d) of the Coast Guard Authorization Act of 1996; 46 U.S.C. 12106).
Until the 1996 Act, operators were prevented from obtaining lease financing for their vessels from foreign banks or other companies that are less than 75 percent U.S. owned because of the requirements of section 2 of the Shipping Act, 1916, which requires ownership by citizens of the United States.
The Conference Report on the 1996 Act, at pages 131 and 132, makes clear that Congress intended the law to promote “lease financing” not “leasing.” This evinces the intent of Congress to prevent the statute from being used as a loophole to avoid coastwise citizenship requirements for sub-charters or contracts involving vessels. Moreover, the statute prohibits qualification of companies in which the primary business is vessel ownership or operation.