Dennis, What part of foreign flag don't you understand?
If a Canadian or any other foreigner wants to go down to Bellingham and buy a recreational boat from an American and keep it there, he can. He does not have to document the boat (he can't anyway) and he doesn't have to form some shell corporation to get around some imagined requirement. He certainly does not need to obtain a cruising license, as a matter of fact, he can't because the boat isn't a foreign flag boat until or unless the buyer wants to make it one by putting it on a foreign register, but doesn't that counter all the issues you complained about at the start of the thread?
Just because a foreigner buys a boat doesn't make the boat "foreign flagged" any more than a German buying a Chevrolet makes it a Mercedes. It is no different than buying a house or a horse. As long as the State registration and taxation requirements are met no one cares what passport the owner holds.
You are erroneously co-mingling foreign owner with foreign flag and the concept of documentation in a national ship registry.