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The ROTAX engine exhaust gets the water from the Jet Pump itself. If you raise the buckets (fwd position) you can look through your jet nozzles and see the intake holes on the top side of the pump exit just after the impeller. That connects to a hose on the engine side of the boat. This is why you need to clamp the water intake hose if you ever have to tow (engine off) the boat at higher than 10 mph per the manual otherwise you could get water into the exhaust.
