Small vessel seen in Channel Island (4)
I believe the answer is:
sark
'channel island' is the definition.
(Sark is one of the Channel Islands)
'small vessel' is the wordplay.
'small' becomes 's' (abbreviation - e.g. clothes size).
'vessel' becomes 'ark' (ark is a kind of vessel).
's'+'ark'='SARK'
'seen in' acts as a link.
(Other definitions for sark that I've seen before include "Hereditarily-ruled Channel Island" , "See 4 Down" , "Island in English Channel" , "Island near Guernsey" , "Shirt (Sc.); Ch. island" .)