In a certain jurisdiction, they decide as a result of that, you now owe VAT on the value of your vessel. That's kind of the worst case scenario. Right, yes. Welcome to the home of marine industry insights. This is the Ben Taylor Podcast. Hi, everybody. Welcome to the Ben Taylor Podcast. Today we have quite an intricate, quite technical topic. I'm here with Joe Asale. Nice to see you, Joe. Good to see you. Thanks for having me. You're very, very welcome. Give us an overview, I suppose, context first. Who are you? What do you do? Then we can hear where this is coming from. Great. Well, my name's Joe Asale, and I am the yacht's commercial director at the Marshall Island Shipping Registry. What we're really here today to talk about is an exciting evolution in our Yacht Engaged in Trade program, or YET program, as most people call it, and how that's affecting us here in the UEE, and specifically Dubai. I suppose, from the outset, what is the YET program for? What does it actually do? Why is it important? Absolutely. The Yacht Engaged in Trade program was established 10 years ago, so it's our anniversary this year. In 2015, it was established. It allows privately registered vessels to undertake limited commercial operations or limited numbers of charters. What that means is that a yacht that is privately registered, that has all of the correct underlying technical certificates as if it were to be commercial, is allowed to conduct up to 84 days or 12 weeks charter in any one calendar year. Okay. I think there's an immediate question here. Why is that useful? Okay. We've got a couple of reasons. The way in which an owner structures his registration type and how he wants to operate the boat depend on many different factors. There are elements such as in Europe, whether you're going to import your boat, are you VAT paid, whether you want to charter your own boat to yourself, you're commercially registered boat, you actually have to charter your own boat at a commercial rate. As a result, you have to pay VAT, which you lose. You can't recover that because you're the individual. For individuals who want to run their boat privately, but want to take advantage of these limited numbers of charters every year, get a little bit of income from the vessel. This provides a really nice opportunity for them to have this, what we call dual use. They're privately registered, so they can take advantage of some limited charters up to those 12 weeks a year. How popular is that to do? Is there a big difference between most privately owned vessels and the larger yachts? Yeah. Statistically, we've been increasing our number of vessels that are, let's call it, yet capable or yet ready. A lot of people have the underlying certification. They do the annual surveys that are required in case they want to take advantage of this. They don't all do it every year. It will depend where they are geographically because you can't do it everywhere, which is what we'll obviously come on to being here in Dubai now. Of our yet capable boats, we've seen on average a 40% rise in the number of boats that we have over the last five years. This is an ever growing thing. Even though the Yacht Programme was established 10 years ago, we're actually seeing a faster rate of uptake and growth now than we actually did initially. What's causing that? Is it just people using boats in different ways? I think it's exactly that. I think there's an understanding. There's a perception. There's an understanding of how the programme actually works and what benefits they can get from it. Okay. There's also been a slight simplification in the way that the programme works. When we initially launched it in 2015, there was a kind of an extra step that had to be gone through for the customs, the fiscal side, where you had to enter and exit what we referred to at the time as a commercial bubble, which was purely on the fiscal side. That's gone now. Right. I think there's a simplification. Some people that maybe had initially dismissed the programme are being reintroduced to it and seeing the advantages. Yes. Why did that face resistance? What made that change into, okay, what might be adopted? I think it's an understanding thing. I think people, there's the fear of the unknown and there's also the fear of getting it wrong. If you are operating a vessel that is, let's say, for example, not VAT paid in a way in which it shouldn't be, in a certain jurisdiction, they decide as a result of that, you now owe VAT on the value of your vessel. That's kind of the worst case scenario. We're not talking about potential VAT on a charter or something. We're talking about, is your vessel being used in the way that it should be in those waters and if it's not, are you liable to VAT on what we refer to as the hull, so the value of the vessel? Yes. If it's not VAT on, it's big money. That's a big deal. That's a very big deal. As a result, some people are overly cautious and shy away from things that they're not sure about or their team may not have used before, so their corporate service providers or their advisors may say, oh, look, I've not done this. I don't know. It kind of breeds a little bit of cautiousness. Yes. Does that tie into also the way that people are starting to use vessels? Okay, charters, it can go for a long time, but I suppose it's getting more popular in more and more places around the world and then shared ownership and all these different aspects. It's not as simple as, well, it's a privately owned vessel. It's for recreational use. You're absolutely right. I don't know if it used to be, but the industry used to perceive it very simply. You're either private or you're commercial. You're in one of those two camps and I think the way in which owners want to use their boat is very different. An owner who runs his vessel commercially, it's still a private vessel that he wants to use normally with his family or for work or whatever it is. That's why they got it in the first place. That's why they have the boat. Almost inevitably. It happens to be structured in a commercial framework or be commercially registered and it can charter, but very few of these boats are set up purely to make money. They're not a commercial enterprise. They're still a privately owned vessel that happens to charter when the owner's not on board. It's normally a cost reduction strategy. Exactly that. I think as people become more aware of that and they're really examining their own use, like how often will I charter? How often do I want to use the boat on my own? When you're privately registered, it also gives you opportunities to do other things. For example, with the Marshall Islands, if you are privately registered, we don't limit the number of guests that you have on board other than some basic technical parameters that you need to comply with. If you have a large yacht, you can have 16, 18 guests on board. We permit that without having to issue a dispensation every time your guests come on board. It gives you a lot of ease of flexibility, but you still have a platform that's able to be chartered with up to 12 guests for those 12 weeks a year under the Yacht Programme. Okay. Right. Clever. Let's focus on this region in particular. We're here in Dubai. You've had some developments and you've been working very hard on the UAE as a region. What's happened there? The Yacht Programme was initially established in the Mediterranean. You've got effectively three pillars that need to come into alignment for the Yacht Programme to work. You have to have a maritime administration who allows privately registered yachts to charter and has to make sure that they are still compliant with the underlying international framework. So it's generally encouraged to charter? It means that the underlying regulations have to be as if it were commercially ready. So Marshall Islands do that. So we're saying, right, we allow within our regulatory framework. It's allowed. Okay. We then need the local jurisdiction to allow it. Okay. So they need to be aware that a vessel that has private written on its certificate or certificate of registry when it kind of comes into the region, if it's going to engage in charter activities, what do our certificates look like? What are its underlying compliance look like? And once that might be accepted in the South of France or in Spain or in Portugal or in the Caribbean, it might be a different set here in the UAE. Exactly that. Exactly that. And then the third pillar is making sure that the customs and fiscal elements are all in arrangement for the actual payment of the VAT that will be due on any charter. Okay. So when this was introduced in the Mediterranean, the authorities that are kind of engaged with the process of getting it developed saw the advantage of this. These are vessels that would not normally charter. And if we allow them to charter, then we get the VAT on that charter. It's as simple as that. So for a vessel that would normally sit there for these 12 weeks a year, we can say, well, actually, we will do a £100,000 charter a week or call it a million pounds, and then we're getting £200,000 worth of that revenue from that charter. Okay. So it's a simple incentive for the local jurisdiction to accept this. And so how does the YET programme plug into that system? What's it actually do? So as a maritime administration, it's our job to make sure that we have the regulations in place that the vessels operating with our flag is compliant with international conventions. So we effectively say that we're happy for this to happen, and our local laws allow a vessel with that registration type to operate in that way. What we've been doing in this region, and when we've engaged with the Mediterranean countries, is we're engaging with the maritime administration in the region to explain to them how this programme works, that these vessels are fully certificated for all the environmental protection, for seafarer protection, for safety, security, and we say these are fully compliant vessels. They just happen to be registered in a different way. Okay. And once we've explained that to them, and Dubai being our latest case, they say, that's fantastic. We would love to be able to encourage more foreign flag vessels into the region to charter. So we have approval from the Ministry of Energy and Infrastructure to say, yes, marshland and flag vessels are permitted to operate in this way, and they will be eligible for the charter licences. Right. Fantastic. And so from the vessel's point of view, they then have more flexibility and a bit of a framework to say, well, if we're going to operate in the UAE, here's the activities we're legally allowed to do, and the YET programme will be universally recognised here in the UAE. Yeah. So it adds to the way in which the owner can use the vessel or allow the vessel to be used when he's not on board. So if an owner's deciding to come down and cruise in this region, or he's stopping off in the UAE on the way somewhere else, it means that he's, we talked about offsetting some costs. This vessel can then be made available for the period that he's not here. You know, if they go heading down to the Seychelles, be like, well, actually, I'm going to be in Dubai for a month, talk to a local charter company, let's make the boat available for a couple of weeks. And I think that's important for the region because we're, I don't think we're quite at the point where we're selling, you know, seven day charters in the same way that we do in the Mediterranean. But we also have like a stock problem with the number of large boats. So our average size yacht engagement trade yacht is nearly 60 meters. So we're talking good size boats. So if we get, you know, significant size vessels over 500 gross tons coming down and then seasonally becoming available in the region just for a couple of weeks, a couple of days, day charters, introduce people to bigger boats, introduce people to what a serious luxury larger vessel is like compared to, you know, some of these day boats we see kind of pootling around behind us. And I feel like that's going to really help stimulate the whole charters market. It almost creates the market. It does. And it's also going to create a very diverse market because you have vessels coming through and they're quite transient. So they might come through, they'll be available for maybe a month, couple of months, they're going to go off, do what they're going to do. Then they maybe will come back 18 months later. Other vessels are going to be passing. So it's going to create hopefully quite an interesting and diverse stock of vessels that are not normally available for charter, but will be specifically available in this region. And that could really kind of fire things up regionally. The way you've said that is, it aligns so well with what I've heard for the last few days in the Dubai World Trade Center. The whole mission of Dubai is it's where the world meets and make it a destination. Everybody's welcome. Let's attract the wealth and really make things happen. Yeah. So I can imagine your conversation with the UAE saying, well, actually we're on the same page here. This is more opportunity. It brings more money to the region. It's flexibility. And it's just one of those kind of nuances. If it wasn't there, you'd know about it because you would turn up at all. And when you explain some of these vessels are as safe as a commercial vessel, they comply with all the international conventions, which it's just a yacht nuance on how we write things on that registration certificate and on the vessel type that's quite specific. Once they get their head around that and they realize the implications and how it can really stimulate that kind of whole industry, we managed to get it across the line, which is fantastic. Okay. Great stuff. And what does this mean for the wider Gulf region? So this is specifically for the UAE? That's correct. There's other markets which present a lot of opportunity. What's kind of next? How does this expand? So we are engaging with the other Gulf region countries on the same level, maritime administration to maritime administration. And we're really close to getting another couple across the line. I can't say anything quite yet. I hope by the time we kind of maybe more formally celebrate Yacht Engaged in Trade's 10-year anniversary towards the end of the year 2025, we may have a few more countries we can add to that list. Okay. But we want to see it as a kind of a hub in itself. We have some countries in the Mediterranean where people are used to using this program. And we've used this program very successfully all around the world because the principles of it just need to be explained. Now, we don't always get official maritime administration approval as a principle for the whole program. But when we engage on behalf of vessels or with vessels to operate in places like Singapore or Norway or countries in South America, it's been almost universally accepted when we have had that level engagement. What we wanted to do here and what we're trying to do in the Gulf is take it that step further and actually get written documentation from each administration. So we kind of build a portfolio so people can understand geopolitical situation aside. You can enter into the Red Sea, Egypt, Red Sea Authority, NEOM, cruise, transit down. We could be doing Oman, UAE, Qatar. I see it as this whole region. And then you start to think, well, actually, we can now start doing seven, 10-day programs because we're going to a lot of different places. There's a bit of a network effect. There's a cluster of destinations there. So I don't mean I can't. They're all very diverse. They're all for different things. So I don't want to be so presumptuous and say, well, you know, we're going to treat everyone the same. But that diversity does then make an incredible kind of cruising itinerary. It'll attract more. Exactly. Because if one of those niches suits you, OK, right, there's a little market there. That could be the hub of our little operation. But we can still come and day trip to Dubai or go down to Abu Dhabi or do these things and have these really unique programs kind of evolved. I find this so interesting because new markets are always exciting to market and say, well, it's new. It's got this. It's got something different. When it comes to regulation, it essentially presents a bunch of problems that need to be resolved. But in this case, it's almost like you're looking at other regions where this kind of activity is more well-established. I've always learnt over time what is a really effective regulation and what perhaps actually was quite difficult. Because, I mean, we're a tiny industry. It's very, very niche to take a vessel of the size as we see today and just cruise around with them. Historically, that was a cargo ship or a cruise ship. You know, and the impact that they have, you know, there is an economic impact with these vessels, chartering, and then the impact they have on everywhere they go, all their little touch points. So when you're talking to, yes, an administration who has very high priorities on security or environmental or on, you know, deepwater shipping, offshore energy, and you need to have a conversation with you about yachts, you know, often we're just, yeah, as you say, we are a very small industry. We are, yeah. So getting people to listen can be difficult. But I think there's an appetite in the region, and that's what's got us excited, is being here, being at the show, for example, this week. You can see how much it's growing, you see how quickly it's developing, and we have owners who want to operate their boats here. So we're just trying to facilitate that, to make sure that people can use their boats in the best possible way. And so what does this become? So let's have a vision looking forward, I suppose we've touched on it with other regions getting on board with it, but what's the main goal? Clusters of formally approved regions, I think in the medium term would be fantastic. So we would have kind of the Gulf cluster where we knew we could operate the boat. We already have the Mediterranean cluster, and that's also expanding. So we're working with a lot of administrations and essentially reintroducing them to this. The fiscal element that I mentioned at the beginning depends on the application and unfortunately interpretation of what should be a universal EU customs code, but every country applies it ever so slightly differently. But for example, the Italians rewrote theirs last year. So as they update regulations, those are openings for us to have new conversations, to talk to people, to reeducate, and keep this expanding. So I would see in the long term, a world where yacht engagement trade as a concept is something whether a country has formally accepted or not, it's a principle that's understood. And when you turn up at a new jurisdiction that may not be familiar with yachting, you can point to where these clusters are or how well adopted it is elsewhere in the world. And that's kind of half the battle in acceptance because it's already got such impressive. Okay, thank you very much for your insights. Great. Thank you so much. Cheers. I hope you enjoyed that and found it very, very insightful. All being well, we'll see you on the next episode. That's it for now. Bye.