5 minute read
Maritime transactions in British Columbia
By Catherine A. Hofmann, a Vancouver Lawyer with Bernard LLP
Catherine Hofmann
There is no question that 2020 has fulfilled the blessing (or is it a curse?) that we should live in “interesting times”. Interesting times also seem to make for more complicated times and as maritime transactions become increasingly complex, the business, financial, tax and regulatory issues can become tricky to navigate. To cover all of these matters here would make for laborious reading; however, it is useful to review some of the critical issues faced in most vessel purchase transactions. Before buying any previously owned vessel, it is essential to conduct due diligence searches to ensure that there are no recorded or other liens over the vessel. Traditional maritime liens, possessory liens and statutory liens, including vessel mortgages, can all impact a seller’s ability to deliver title to the vessel free and clear of all encumbrances. Unfortunately, of these various kinds of liens, only statutory vessel mortgages are required or able to be registered in the Transport Canada Vessel Registry. Consequently, we recommend the following due diligence searches: ships registry, Bank Act, BC Personal Property Registry, court registries, bailiff, bankruptcy and Fisheries and Oceans Canada. A potential buyer should also make enquiries of the seller regarding all repair and maintenance work carried out on the vessel, including where the work was conducted, and copies of all invoices and receipts for the work done as well as any crew or insurance claims which may have been levied against the vessel. Due diligence searches are often more difficult to conduct if the vessel is flagged in a foreign jurisdiction and additional time and money should be allotted for all such investigations.
If the vessel to be purchased is in fact foreign flagged, special consideration should be given to any taxes and duties, which may be owing upon its importation into Canada. The amount of any customs duties payable upon importation depend on the tariff classification of the vessel and its country of original construction, not on the country where it is currently registered. In order to benefit from any preferential tariff treatment available under Canada’s various trade treaties, a certificate of origin for the vessel must be presented at the time of importation. Therefore, it will be critical to ensure that this document is provided by the seller at closing, along with an original (notarized) bill of sale and a certificate of deletion from its current foreign
ASSISTING THE MARINE TRANSPORTATION, FISHING AND RECREATIONAL BOATING INDUSTRIES WITH COMMERCIAL, CORPORATE AND LITIGATION MATTERS ON CANADA’S WEST COAST AND THE CANADIAN ARCTIC.
W. Gary Wharton Peter Swanson Thomas S. Hawkins David K. Jones Catherine A. Hofmann David S. Jarrett Jason Hicks Tom Beasley Connie Risi Glen Krueger Jakub Vodsedalek Harry Ormiston Ryan Bernard Je rey Wu
ASSOCIATE COUNSEL: Lorna Pawluk, Q.C.
24/7 EMERGENCY RESPONSE: 604.681.1700 or shipping@bernardllp.ca TEL: 604.681.1700 WEB: www.bernardllp.ca EMAIL: (lawyer’s last name)@bernardllp.ca ADDRESS: 1500–570 Granville St., Vancouver, BC, Canada, V6C 3P1
ship registry. Other recommended closing documents, whether the transaction occurs strictly in Canada or internationally, include corporate resolutions (with appropriate powers of attorney if required), certificates of good standing for the selling entity, warranties of title, a certificate of no liens and a protocol of delivery and acceptance, stipulating when the transfer of risk is to occur.
Subject to a few exceptions, provincial sales tax and federal goods and services taxes will generally be applicable where vessels are brought into B.C. for use within the province by a B.C. resident or by a principal for whom the B.C. resident acts as agent. The tax is calculated on the fair market value of the landed vessel plus any duties payable. Provincial sales tax does not, however, apply where the vessel is self-propelled and over 500 gross tons, or where the person bringing the goods into the province does so for the purposes of resale or lease. If you plan to charter the vessel you are bringing into Canada, even if within an affiliated corporate group, you may be eligible for certain tax exemptions. Although it is a common misconception, importation, registration and any required Transport Canada inspection are not intrinsically linked. Each requires a separate step and separate considerations.
The Canada Shipping Act, 2001 (the “Act”) sets out the statutory requirements for the ownership and registration of ships in Canada and the applicable regime depends, in part, on the nature of the vessel. In particular, section 46 of the Act requires that all vessels which are not pleasure craft, in excess of 15 gross tons, owned by a “qualified person” and not registered in a foreign state, must be registered with the Ship Registry. Commercial vessels under 15 tons must be registered in the Small Vessel Registry. The Act does not, however, set out any formalities that must be complied with before title to a vessel will pass to a new owner. A recent decision of the B.C. Supreme Court confirms that view. As a result, it will be important to ensure that the contractual terms governing the transfer of title, responsibility for registration, risk and liability for the vessel are clear between the parties to any purchase and sale. Ü
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