State registration is simply a local taxation process much the same as automobiles, and has no federal validity in changing the flag or nationality of ownership for Customs purpose. You may find it difficult, if not impossible to finance your boat if it is not documented since many lending institutions require documentation. Fewer problems are encountered with foreign officials when traveling abroad since Customs officials all over the world are familiar with documentation because of the requirement that commercial vessels must be legally documented. You can operate your vessel in any waters of the United States without going through each state's registration procedure. Although a documented vessel may still have to comply with state boating safety and tax laws, the vessel is exempt from the state registration process once it is documented in the owner's name with the U.S. Coast Guard.
Many financial institutions require that the vessel be federally documented.
Documentation is generally a requirement of such financial institutions because it is only on a U.S. documented vessel that a lender can adequately perfect its security interest in a vessel. A mortgage is recorded against the vessel once it is documented. Federal documentation makes a lender more secure in financing the boat. The Coast Guard keeps a chronological history on all documented vessels which is always available upon request. This includes mortgages, claims of lien and other encumbrances.