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Gray Market Yachts

IYB1.Inc. image According to Webster, Gray Market is defined as “ …a market employing irregular but not illegal methods; especially : a market that legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer.”

Indeed, yacht builders set up dealers throughout the world and yacht dealers would prefer that you buy through them. But, what about brokerage yachts? They are not controlled by either shipyards or dealers. However, the problem is that some brokers often tell their clients that boats located in other countries are “Gray market” boats, and that the new owner will have problems importing such boats because of a multitude of reasons such as electrical problems, warranty, resale, etc. However, the most important reason they don’t want their clients looking at these boats is because it takes them a lot less time to sell a US located boat and time is money. Additionally, if they have the listing in the USA, in all probability, they do not have the listing overseas and that will cost them more money. So really, the term Gray Market for US yacht brokers is used solely to make more money. But, the consequence is that the client will pay more for the boat…sometimes, substantially more (look at the article in this section called “The Cost of Xenophobia.”)

To be fair, there are differences between boats sold in the US and Europe. The biggest difference is that shore power in Europe runs at 50 cycles. In the US, shore power is at 60 cycles. The cycles (hertz) in current only affects electrical equipment that runs on AC (alternating current) power, not battery power. Direct current (DC power) from the batteries whether it be 12volts, 24 volts, or 30 volts is the same in the US and Europe. And, since all battery chargers can utilize both 50 and 60 hertz AC, there are never any issues electrical equipment that uses battery power such as bilge pumps, all electronic instruments (GPS, radar, Chart Plotters, etc.), DC lighting, etc.

Alternating Current cycles is only important for motors in some fans, pumps, compressors, and other electrical equipment that use the cycles to time the motor. The most common uses on a boat are washing machines, dishwashers, and air conditioning compressors. Therefore, a European 50 cycle motor that runs on US 60 cycles will turn 20% faster. A 60 cycle American motor that runs on European 50 cycle power will turn 16.7% slower. So, what are the consequences? With washing machines, they will run 20% faster so if you want your clothes washed for 60 minutes, you might set the timer for 75 minutes instead. The same strategy works for dishwashers. With AC compressors you generally have to do nothing because they are made to usually run at 50 or 60 cycles. If they are 50 cycle compressors, the fan motor will blow 20% more air, however, the conventional wisdom is that their lifespan will be shortened 20%. Since most of these compressors last 10-15 years, that is not a major issue. In practice, we have several yachts we brought over from Europe 15 years ago, and of the 7 AC compressors aboard, only 2 have been retired. Note that major USA appliances that use a lot of power always use 220 instead of 110v so there never is any need in changing European ovens, stove tops, electric heaters, etc.

Bilge pumps on boat under 80-100 feet are usually DC pumps. However, on some bigger yachts, there are fire-fighting pumps as well as emergency bilge pumps that run on AC power. These boats brought to the US have to have the pumps changed or in the usual cases, they install a converter. Converters cost $20,000 to $100,000 depending on how much power is consumed. This is a small price to pay for a yacht that can cost millions, especially if millions are saved by buying it overseas.

Electrical outlets aboard can be a minor irritant if the boat does not come with international outlets (most new boats built in Europe do). The inexpensive solution is a 50 cent adapter in each outlet. Or, the more expensive alternative is to change the outlets at a price of $50-75 each. And, if you wish to have 110-115v aboard instead of 220-240v, a small $350 dollar transformer installed in the electrical space will do the trick.

There is one further non-consequential electrical issue. Europe 220 uses 3 wires (ground, 220 in, 220 return). American 220 uses 4 wires (ground, 2 x 110 in, 220 return). Therefore, since 110v uses a wire with a larger gauge than a 220v wire rated for the same amperage, to be safe, you should not put as much amperage through a European 3 wire harness that is using US 110 volts. The easy way to fix this is to change the breakers… by using breakers with lower amperage, especially for the electrical outlets; for example, changing 30 amp breakers to 15 amp breakers is sufficient to carry the load of most appliance plugged in an outlet. The cheapest and safest way is to leave the outlets in 220v since nowadays in the USA, all TV’s, audio equipment, computers, cell phones, etc., use either 110 or 220 volt input current and convert it to DC with an external AC-DC converter. But, that might oblige you to buy a 220 hair dryer, coffee maker, blender, and any other small appliance you might need in the galley. Gandhi Appliances in Morton Grove Illinois sells these online inexpensively, although in most cases when we buy a boat in the Med…they leave the appliances on board.

To summarize, the term Gray Boat is meant to keep American buyers away from buying a boat in Europe where you can save up to 40% for the same comparable boat in the US. The only difference between a European and an American boat of the same model is that shore power comes in at 50 cycles instead of USA 60 cycles. These differences are minor and in most case can be either completely forgotten or for the purest who want to make sure that all their on board outlets are 110-115 v the cost of conversion is extremely minor.
IYB Yachts has more than 40 years of experience buying and selling internationally. Over the last 20 years, the world has become much smaller due to improvements in travel, the Internet, and instant communications at all levels. For example, our offices in the US and the rest of the world are now linked by telephone extensions. That is hard to imagine just 10 years ago.
Twenty years ago, an American buying a yacht would not consider buying a yacht anywhere except the United States. However, today, not to look internationally for yacht purchases is a sure-fire way to pay more for a yacht for several reasons.

• The major yacht brands are now international. All the top brands in the US are also sold and owned by individuals world-wide.
• The shipyards building the major brands have consolidated their production of yachts, removing differences and adding similarities to lower their production costs.
• The floating exchange rates between the dollar and the other major currencies fluctuate wildly, not reflecting the actual value of the currency but rather the fiscal policies in place for each country or trading bloc. See here why this provides opportunities for buyers:
• The shipping rates to move yachts from any part of the world to the US have dropped considerably. For example, shipping a 50-foot yacht from Genoa Italy to Port Everglades Florida only costs about $20,000.
• The electrical differences between European models and US models are minor. It costs about $5000 to covert a 50-footer to US electrical specs and about $20,000 to convert a 120 footer.

On a million-dollar yacht, the difference in local “market” prices in two countries can be as much as $300,000, but the costs of importation and conversion can be as low as $30,000 which is the reason this international market exists and why you should look beyond the US for your next boat.



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