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U.S. boat owners still struggling with fallout from Mexican tax investigation

At first, Thomas R. Spencer didn’t think much about it when he saw tax agents come into the Coral Marina more than three months ago, checking boat by boat.

“I had one gentleman come by the boat and ask to see some papers. I said, ‘What do you want to see?’ He said, ‘Where’s the serial number of the boat?’ I said I didn’t know, just look around,” Spencer recalled.

Little did Spencer know that he would be snared in an operation that has led to the broadest and most complicated seizure of foreign-owned sailboats and yachts in Mexico’s history, punching a hole in the hull of the nautical tourism industry and even frightening property owners. Marina owners now bail furiously to stay alive.

The impounding of 337 mostly foreign-owned sailboats and yachts at 11 marinas around Mexico on Nov. 26 has affected not only hundreds of American and Canadian boat owners but also marinas, crews, dry docks and, more broadly, Mexico’s reputation as a safe and reliable destination for boat lovers.

Nearly half the vessels have subsequently been freed. But at least 190 remain impounded, tied up in red tape and confusion in raids that initially seemed aimed at rooting out tax cheats and boat thieves.

Like many retired American sailors cruising Mexican waters, Spencer had difficulty communicating in Spanish with the federal tax agent the morning he came asking questions. But some things needed no explanation. Mexican marines posted at each wharf “had their big rifles out,” and tax agents seemed to mean business.

Spencer started to worry. He contacted the person who surveyed his cutter rig when he bought it back in 1999, asking where he could find the Hull Identification Number, equivalent to a VIN on an automobile.

“He said it’s probably on the starboard side of the hull,” Spencer recalled.

It was too late. Spencer’s 48-foot boat, Symphony, like 336 other mostly foreign-owned sailboats and yachts, was legally impounded, unable to leave harbor.

“There were four dinghies that they also impounded,” said Arnulfo Espinoza Rodriguez, the dock master at the Coral Marina. They were the exception. Most of the seized boats were large vessels, a few worth millions of dollars, but “the vast majority are in the hundreds of thousands of dollars.”

Many boat owners were not at the marina that day. Since the marina is on the Pacific coast of the Baja Peninsula, only 70 miles south of the U.S. border, owners often leave vessels docked here while living elsewhere.

“If you weren’t on a boat, there was an excellent chance you’d be impounded,” said Richard Spindler, publisher of Latitude 38, a monthly magazine for sailors published in Mill Valley, Calif.

The problem, Spindler said, is that agents had little knowledge of sailboats, unaware that those built before 1972 were not required to have hull identification numbers. Even after that date, vessels built in Europe or Asia often don’t have such a number.

Moreover, boat owners are not required to pay tax or duty if they have a 10-year Temporary Import Permit, which costs around $50.

Anger over the seizures led owners to fill the pages of Latitude 38 with letters of complaint, warning about travel to Mexico, even suggesting that buying real estate in Mexico could be risky amid arbitrary seizures. Many said they had complied with paperwork, provided serial numbers and offered proof that they’d paid for temporary import permits but still couldn’t get their vessels back.

“Nobody knew what was going on,” Spindler said. “I know of at least one boat that fled Ensenada. They sailed in the middle of the night.”

Marina owners grew incensed at the harm the seizures were doing to their industry, and the lengthy delays in releasing impounded boats.

“All of us in the Marina association agree that what the government did was very stupid and unnecessary, and that it has hurt Mexico very much,” Tere Grossman, owner of the marina in San Carlos on the Sea of Cortez, wrote this month in Latitude 38.

Grossman, who is also president of the Mexican Marina Owners Association, voiced exasperation with tax authorities in a telephone interview.

“These guys are driving me insane,” she said. “They made a big mistake and they don’t want to accept it.”

Mexico’s Tax Service Administration, equivalent to the U.S. Internal Revenue Service, declined a request for an interview. But in a Feb. 17 statement, it said auditors already had freed 147 vessels and were doing paperwork to free more.

“With these actions, the government of the republic reiterates its commitment to promote legality and support tourism . . . for the benefit of Mexicans,” the statement said, adding that boats were being freed “as their legal status in the country is demonstrated.”

None of the boats impounded has proven to be stolen, Grossman said.

A little more than a decade ago, then-President Vicente Fox started what he called a “nautical stairway” program to encourage more marinas to open in Mexico and draw more foreign yachtsmen to the nation. The program gave a strong boost to nautical tourism.

While some of the seized vessels belong to wealthy “one percenters,” others are live-aboard sailboats that serve as retirement homes for adventurous wayfarers without deep pockets.

“They don’t know if they are going to lose their boats. Some of them sold everything, and all they have is their boat,” Grossman said.

Many declined to speak to a reporter, fearing it would not help matters.

“Given the sordid ordeal I have been through since the end of November last year, until the boat is safe and in my hands I will not breathe a sigh of relief nor will I speak to anybody about my experience,” one boat owner from Canada’s Alberta province said in an email.

Spencer, the owner of Symphony, had better news. The impounding of his vessel was ended in early February. He’s still not sure what to make of the experience.

“I’ve been in Mexico now since 2009. This is the first time I’ve had any problem,” he said.