[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
    OVERSIGHT HEARING ON UNITED STATES OWNERSHIP OF FISHING VESSELS

=======================================================================

                           OVERSIGHT HEARING

                               before the

      SUBCOMMITTEE ON FISHERIES CONSERVATION, WILDLIFE AND OCEANS

                                 of the

                         COMMITTEE ON RESOURCES
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                             SECOND SESSION

                               __________

                      JUNE 4, 1998, WASHINGTON, DC

                               __________

                           Serial No. 105-98

                               __________

           Printed for the use of the Committee on Resources


                               


 Available via the World Wide Web: http://www.access.gpo.gov/congress/house
                                   or
           Committee address: http://www.house.gov/resources



                      U.S. GOVERNMENT PRINTING OFFICE
 49-404 CC                   WASHINGTON : 1998
------------------------------------------------------------------------------
                   For sale by the U.S. Government Printing Office
 Superintendent of Documents, Congressional Sales Office, Washington, DC 20402



                         COMMITTEE ON RESOURCES

                      DON YOUNG, Alaska, Chairman
W.J. (BILLY) TAUZIN, Louisiana       GEORGE MILLER, California
JAMES V. HANSEN, Utah                EDWARD J. MARKEY, Massachusetts
JIM SAXTON, New Jersey               NICK J. RAHALL II, West Virginia
ELTON GALLEGLY, California           BRUCE F. VENTO, Minnesota
JOHN J. DUNCAN, Jr., Tennessee       DALE E. KILDEE, Michigan
JOEL HEFLEY, Colorado                PETER A. DeFAZIO, Oregon
JOHN T. DOOLITTLE, California        ENI F.H. FALEOMAVAEGA, American 
WAYNE T. GILCHREST, Maryland             Samoa
KEN CALVERT, California              NEIL ABERCROMBIE, Hawaii
RICHARD W. POMBO, California         SOLOMON P. ORTIZ, Texas
BARBARA CUBIN, Wyoming               OWEN B. PICKETT, Virginia
HELEN CHENOWETH, Idaho               FRANK PALLONE, Jr., New Jersey
LINDA SMITH, Washington              CALVIN M. DOOLEY, California
GEORGE P. RADANOVICH, California     CARLOS A. ROMERO-BARCELO, Puerto 
WALTER B. JONES, Jr., North              Rico
    Carolina                         MAURICE D. HINCHEY, New York
WILLIAM M. (MAC) THORNBERRY, Texas   ROBERT A. UNDERWOOD, Guam
JOHN SHADEGG, Arizona                SAM FARR, California
JOHN E. ENSIGN, Nevada               PATRICK J. KENNEDY, Rhode Island
ROBERT F. SMITH, Oregon              ADAM SMITH, Washington
CHRIS CANNON, Utah                   WILLIAM D. DELAHUNT, Massachusetts
KEVIN BRADY, Texas                   CHRIS JOHN, Louisiana
JOHN PETERSON, Pennsylvania          DONNA CHRISTIAN-GREEN, Virgin 
RICK HILL, Montana                       Islands
BOB SCHAFFER, Colorado               RON KIND, Wisconsin
JIM GIBBONS, Nevada                  LLOYD DOGGETT, Texas
MICHAEL D. CRAPO, Idaho

                     Lloyd A. Jones, Chief of Staff
                   Elizabeth Megginson, Chief Counsel
              Christine Kennedy, Chief Clerk/Administrator
                John Lawrence, Democratic Staff Director
                                 ------                                

      Subcommittee on Fisheries Conservation, Wildlife and Oceans

                    JIM SAXTON, New Jersey, Chairman
W.J. (BILLY) TAUZIN, Louisiana       FRANK PALLONE, Jr., New Jersey
WAYNE T. GILCHREST, Maryland         NEIL ABERCROMBIE, Hawaii
WALTER B. JONES, Jr., North          SOLOMON P. ORTIZ, Texas
    Carolina                         SAM FARR, California
JOHN PETERSON, Pennsylvania          PATRICK J. KENNEDY, Rhode Island
MICHAEL D. CRAPO, Idaho
                    Harry Burroughs, Staff Director
                     Dave Whaley, Legislative Staff
               Jean Flemma, Democratic Legislative Staff



                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held June 4, 1998........................................     1

Statement of Members:
    Pallone, Jr., Hon. Frank, a Representative in Congress from 
      the State of New Jersey....................................     2
        Prepared statement of....................................     3
    Saxton, Hon. Jim, a Representative in Congress from the State 
      of New Jersey..............................................     1
        Prepared statement of....................................     2
    Young, Hon. Don, a Representative in Congress from the State 
      of Alaska..................................................     4
        Prepared statement of....................................     7

Statement of Witnesses:
    Asicksik, Eugene, President, Norton Sound Economic 
      Development Corporation....................................    52
        Prepared statement of....................................   128
    Bohannon, Frank, Vice-President, United Catcher Boats........    56
        Prepared statement of....................................   152
    Evans, David, Deputy Director, National Marine Fisheries 
      Service, Department of Commerce............................    31
        Prepared statement of....................................    73
    Gilmore, Jim, Director of Public Affairs, At-Sea Processors 
      Association................................................    50
        Prepared statement of....................................    77
    Kirk, Michael, Cooper, Carvin and Rosenthal..................    54
        Prepared statement of....................................    83
    Leape, Gerald, Greenpeace....................................    58
        Prepared statement of....................................   167
    North, Rear Admiral Robert C., U.S. Coast Guard, Department 
      of Transportation, accompanied by Thomas Willis, United 
      States Coast Guard.........................................    34
        Prepared statement of....................................    75
    Plesha, Joe, General Counsel, Trident Seafoods Corporation...    48
        Prepared statement of....................................    91
    Stevens, Hon. Ted, a Senator in Congress from the State of 
      Alaska.....................................................     8
        Prepared statement of....................................    16

Additional material supplied:
    Alaska Ocean Seafood Limited Partnership, prepared statement 
      of.........................................................   198
    Fraser, Dave, Captain, FV Muir Milach, prepared statement of.   184
    Giles, Don, President, Icicle Seafoods, Inc., prepared 
      statement of...............................................    86
    The Alaska Crab Coalition, prepared statement of.............   206
    The Capacity Reduction and Buyback (``CRAB'') Group, prepared 
      statement of...............................................   202
    Hendricks, Jeff, General Manager, Alaska Ocean Seafood 
      Limited Partnership, prepared statement of.................   211
    TCW Special Credits, Los Angeles, California, prepared 
      statement of...............................................    87

Communications submitted:
    Assessment of the World's Fishing Fleet 1991-1997, A Report 
      to Greenpeace International, John Fitzpatrick and Chris 
      Newton.....................................................   194



    OVERSIGHT HEARING ON UNITED STATES OWNERSHIP OF FISHING VESSELS

                              ----------                              


                         THURSDAY, JUNE 4, 1998

        House of Representatives, Subcommittee on Fisheries 
            Conservation, Wildlife, and Oceans, Committee 
            on Resources, Washington, DC.
    The Subcommittee met, pursuant to other business, at 10:43 
a.m., in room 1324, Longworth House Office Building, Hon. Jim 
Saxton (chairman of the Subcommittee) presiding.
    Mr. Saxton. I ask you now, with consent, that Mr. Pombo and 
Mrs. Chenoweth be invited to sit on the panel, inasmuch as they 
are not members of the Subcommittee.
    The Subcommittee on Fisheries Conservation, Wildlife, and 
Oceans will come to order for purposes of a hearing.

STATEMENT OF HON. JIM SAXTON, A REPRESENTATIVE IN CONGRESS FROM 
                    THE STATE OF NEW JERSEY

    Mr. Saxton. Today we are discussing the American ownership 
of fishing vessels under the Magnuson-Stevens Fishery 
Conservation and Management Act and the Commercial Fishing 
Industry Vessel Anti-Reflagging Act of 1987.
    The Magnuson-Stevens Act has largely achieved the goal of 
eliminating foreign fishing in the EEZ and in developing 
domestic fisheries. In addition to this primarily successful 
legislation, Congress has taken other steps to foster further 
Americanization of the fleet. One bill to achieve this was the 
Commercial Fishing Industry Vessel Anti-Reflagging Act of 1987. 
This legislation created a new ownership standard, required 
that vessels engaged in the U.S. fishery be built in the United 
States, and required that specific manning requirements by 
American crews be maintained.
    Two primary principles of this legislation, the American 
ownership standard and the American built standard, included 
grandfather or savings clauses. This was to allow vessel owners 
who were already in the fishery, or those who had made 
substantial investments to rebuild vessels in foreign 
shipyards, to maintain their eligibility to participate in U.S. 
fisheries.
    The Coast Guard, under the jurisdiction of the Department 
of Transportation, was charged with the implementing of these 
new requirements for fishing vessels. Differences in the 
interpretation of the two grandfather clauses by the Coast 
Guard has led to unfulfilled goals for the legislation. And 
that is why the Subcommittee is meeting today to analyze this 
issue.
    I am especially interested in the subject of U.S. ownership 
after this Subcommittee's scrutiny of the ATLANTIC STAR.
    Welcome to our many distinguished witnesses, and I look 
forward to their testimony.
    [The prepared statement of Mr. Saxton follows:]

  Statement of Hon. Jim Saxton, a Representative in Congress from the 
                          State of New Jersey

    Good morning. Today we are discussing the American 
ownership of fishing vessels under the Magnuson-Stevens Fishery 
Conservation and Management Act and the Commercial Fishing 
Industry Vessel Anti-Reflagging Act of 1987.
    The Magnuson-Stevens Act has achieved the goal of 
eliminating foreign fishing in the EEZ and developing domestic 
fisheries. In addition to this largely successful legislation, 
Congress has taken other steps to foster further 
Americanization of the fleet. One bill to achieve this was the 
Commercial Fishing Industry Vessel Anti-Reflagging Act of 1987. 
This legislation created a new ownership standard, required 
that vessels engaged in the U.S. fishery be built in the United 
States, and required that specific manning requirements by 
American crews be maintained.
    Two primary principles in the legislation, the American 
ownership standard and the American built standard, included 
grandfather or ``savings'' clauses. This was to allow vessel 
owners who were already in the fishery--or those who had made 
substantial investment to build or rebuild vessels in foreign 
shipyards--to maintain their eligibility to participate in U.S. 
fisheries.
    The Coast Guard, under the jurisdiction of the Department 
of Transportation, was charged with implementing these new 
requirements for fishing vessels. Differences in the 
interpretation of the two grandfather clauses by the Coast 
Guard has led to unfulfilled goals of the legislation. And that 
is why the Subcommittee is meeting to analyze this issue. I am 
especially interested in the subject of U.S. ownership after 
this Subcommittee's scrutiny of the ATLANTIC STAR. Welcome to 
our many distinguished witnesses I look forward to your 
testimony.

    Mr. Saxton. Before I turn to Mr. Young to introduce our 
first witness, let me ask Mr. Pallone if he has any opening 
statement.

   STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Mr. Chairman. I want to thank you 
for having this oversight hearing today. You mentioned the 
Commercial Fishing Industry Vessel Anti-Reflagging Act which 
was signed into law in 1988. And that required that only 
vessels which are owned by a majority of U.S. interests can be 
U.S. flagged and eligible to fish in the U.S. Exclusive 
Economic Zone. And the law also required that fish processing 
vessels entering the U.S. fishery be U.S. built, and that 
vessels rebuilt abroad be prohibited from participating in the 
U.S. Fishing industry. The Coast Guard was given the 
responsibility for enforcing these requirements. Unfortunately, 
loopholes in the law have allowed several large vessels to be 
rebuilt overseas, thereby circumventing the law and going 
against congressional intent.
    According to a 1990 GAO report, the Anti-Reflagging Act's 
American control provisions have had little impact on ensuring 
that U.S. fishery operations are controlled by U.S. citizens. 
And this is a result of the Coast Guard's interpretation 
allowing the grandfather exemption to remain with a vessel even 
if the vessel is subsequently sold to a foreign-owned company. 
Consequently, should the Congress desire another result, it may 
wish to consider changes to the existing legislation.
    Now I understand that Senator Stevens will testify before 
us, and he has introduced the American Fisheries Act in the 
Senate, S. 1221, which would increase the minimum U.S. 
ownership requirement for U.S. flagged fishing vessels to 75 
percent in order to fly the U.S. flag and qualify for fishery 
endorsements. This bill would also phaseout the use of fishing 
vessels greater than 165 feet in length and prohibit vessels 
rebuilt abroad from participating in the U.S. fishing industry.
    As I understand it--and the Senator will probably talk more 
about it--his bill is primarily a fisheries allocation bill for 
the North Pacific U.S. EEZ. And while the bill would likely 
have a limited impact on fishing vessels off the Atlantic 
Coast, it could dramatically change the make-up of fishing 
vessels on the West Coast and the Bering Sea.
    I believe that U.S. flagged vessels should be primarily 
U.S. owned. The American citizens, not foreign interests, 
should be the ones to catch fish in our waters. And we should 
ensure that our important fishery resources are adequately 
protected for the current and future generations.
    I understand that today's hearing is not meant to debate 
the merits of the Senator's bill, but rather to shed light on 
what progress has been made, if any, in increasing the American 
control of fishing vessels in our EEZ.
    And again, I just want to thank you for holding this 
hearing, and I certainly look forward to the statement that 
Senator Stevens will be making.
    [The prepared statement of Mr. Pallone Jr., follows:]

Statement of Hon. Frank Pallone, Jr., a Representative in Congress from 
                        the State of New Jersey

    Mr. Chairman,
    Thank you for holding this oversight hearing today on 
United States Ownership of Fishing Vessels. As you know, our 
Committee has jurisdiction over responsibly managing our 
fishery resources under the Magnuson-Stevens Act.
    The Commercial Fishing Industry Vessel Anti-Reflagging Act 
was signed into law in 1988. It required that only vessels 
which are owned by a majority of U.S. interests can be U.S. 
flagged and eligible to fish in the U.S. Exclusive Economic 
Zone. The law also required that fish processing vessels 
entering the U.S. fishery be U.S. built and that vessels 
rebuilt abroad be prohibited from participating in the U.S. 
fishing industry. The Coast Guard was given the responsibility 
for enforcing these requirements. Unfortunately, loopholes in 
the law have allowed several large vessels to be rebuilt 
overseas, thereby circumventing the law and going against 
Congressional intent.
    According to a 1990 General Accounting Office report, ``The 
Anti-Reflagging Act's American control provisions have had 
little impact on ensuring that U.S. fishery operations are 
controlled by U.S. citizens. This is a result of the Coast 
Guard's interpretation allowing the grandfather exemption to 
remain with a vessel even if the vessel is subsequently sold to 
a foreign-owned company. Consequently, should the Congress 
desire another result, it may wish to consider changes to the 
existing legislation.''
    Senator Stevens who will testify before us shortly, has 
introduced the American Fisheries Act in the Senate. S. 1221 
would increase the minimum U.S. ownership requirement for U.S. 
flagged fishing vessels to 75 percent in order to fly the U.S. 
flag and qualify for fishery endorsements. The bill would also 
phase out the use of fishing vessels greater than 165 feet in 
length and prohibit vessels rebuilt abroad from participating 
in the U.S. fishing industry.
    As I understand it, S. 1221 is primarily a fisheries 
allocation bill for the North Pacific U.S. EEZ. And while the 
bill would likely have a limited impact on fishing vessels off 
the Atlantic Coast, it could dramatically change the make up of 
fishing vessels on the West Coast and Bering Sea. I believe 
that U.S. flagged vessels should be primarily U.S. owned. 
American citizens, not foreign interests, should be the ones to 
catch fish in our waters. We must also ensure that our 
important fishery resources are adequately protected for the 
current and future generations.
    Today's hearing is not meant to debate the merits of the 
Stevens Bill, but rather to shed light on what progress has 
been made, if any, in increasing the American control of 
fishing vessels in our EEZ.
    Thank you again, Mr. Chairman, for holding this hearing. I 
look forward to hearing from Senator Stevens, the Coast Guard, 
National Marine Fisheries Service, and others today on this 
matter.

    Mr. Saxton. Thank you, Mr. Pallone.
    I ask unanimous consent that all Subcommittee members be 
permitted to include their opening statements in the record; 
without objection. And for purposes of introduction of our 
colleague from the Senate and an opening statement----
    Mr. Miller. I just want to ask----
    Mr. Saxton. The gentleman from California.
    Mr. Miller. I just want to join with Mr. Pallone and others 
to say that I believe that this hearing raises very, very 
serious issues about the goal of the Americanization of this 
resource and other issues about the capitalization of the 
fishing resources here.
    And I want to thank you for holding this hearing. It's an 
important hearing.

STATEMENT OF HON. DON YOUNG, A REPRESENTATIVE IN CONGRESS FROM 
                      THE STATE OF ALASKA

    Chairman Young. Mr. Chairman, I appreciate you holding 
these hearings, and I will go through my opening statements as 
quickly as possible.
    Mr. Saxton. May I just interrupt you----
    Chairman Young. Yes.
    Mr. Saxton. [continuing] long enough to ask unanimous 
consent that Mr. Smith be permitted to sit on the panel as much 
as he's not a member?
    Chairman Young. That's fine.
    Mr. Saxton. Thank you.
    Chairman Young. Now, may I continue?
    Mr. Saxton. Please.
    Chairman Young. Thank you.
    [Laughter.]
    I appreciate it.
    Before I introduce our esteemed witness and the author of 
S. 1221--which we're not holding the hearing on today--I just 
thank you, Mr. Chairman, for holding this hearing. It's deeply 
important to me, and I believe the fisheries, itself.
    There are many who may not know the Magnuson-Stevens Act 
originated in this Committee. Of course, now it's named the 
Magnuson-Stevens Act, and it was enacted in 1976. This Act 
gives Americans control of the fisheries. That was the first 
step; it was the right step.
    And then we passed the Commercial Fishing Industry Vessel 
Anti-Reflagging Act in 1987 to make sure that American owned 
and controlled vessels harvested our fishery resources. I 
specifically supported this bill because I believed it was 
important to have U.S. owned and U.S. manned vessels harvesting 
U.S. resources.
    While we thought both laws were successful in Americanizing 
the fisheries, it appears we weren't as successful as we 
thought. In trying to be fair to those vessel owners who had 
already made substantial investment in fishing vessels--either 
those vessels already in the fisheries or those being rebuilt 
in foreign shipyards--Congress created grandfather clauses 
which the Coast Guard has now misinterpreted and which have 
potentially allowed the opposite results to occur.
    It now appears the Coast Guard has ruled that any vessel 
which was already in the fishery at the time of the passage of 
the Act could be sold to foreign interests. I'm deeply 
disappointed in the Coast Guard, although I have always been a 
strong supporter of it. Someone needs some better legal advice. 
And according to the GAO report in 1990, that Coast Guard 
ruling could lead to 29,000 fishing vessels that were in the 
fisheries at the time of the Anti-Reflagging Act's passage to 
be sold to foreign interests. This is clearly not what we 
intended.
    I was the sponsor of the ownership amendment at the 
Merchant Marine and Fisheries Committee markup. Existing law at 
the time allowed foreign entities to set up American 
corporations, even if they were foreign controlled, and own 
fishing vessels harvesting fish in U.S. waters. The intent of 
my amendment was to require a majority of voting stock to be in 
the hands of individuals who are American citizens. The Coast 
Guard ruling has created an opposite effect.
    In addition, the interpretation of the grandfather clause 
which allowed a certain number of vessels to be rebuilt in 
foreign shipyards and retain their eligibility to fish in U.S. 
waters may have had unintended consequences. There have been 
allegations that a number of speculative contracts were written 
to allow vessels to be rebuilt and brought to the U.S. 
fisheries when there had been no intent to do so prior to the 
grandfather clause, and the Coast Guard's interpretation of 
that clause.
    I am also concerned that the Coast Guard did not seem to 
think that changes in the specifications of the vessels being 
rebuilt mattered. In several documented cases, vessels went to 
shipyards with the intent of being converted to fish tender 
vessels which do not harvest fish. And when they came out of 
that shipyard, low and behold, they were large factory trawlers 
certain to harvest fish.
    I also believe the Coast Guard missed the boat on 
interpreting the ownership requirement by allowing vessels 
which entered foreign shipyards as U.S.-owned projects to leave 
the shipyard and enter U.S. fisheries as totally foreign-owned 
projects.
    Most of the vessels which entered the U.S. fisheries 
through these grandfather clauses are now involved in the 
Bering Sea groundfish fishery. There is an overcapitalization 
problem in this fishery. I don't think anyone, including the 
witnesses, will debate that issue. I have tried not to assess 
blame nor have I claimed that eliminating all factory trawlers 
is the solution to that problem. There is an overcapitalization 
problem.
    Having said that, it is important that bycatch be further 
reduced in this fishery. Now I've talked to all sides in this 
issue, urged them to set down, stop the free-for-all, and stop 
the bycatch. So far, I've not had a proposal other than from 
the CDQ community. And by the way, I want to remind the people, 
the CDQ program was adamantly opposed by certain people in this 
audience when we tried to pass it. And now they're hiding 
behind the program. Very frankly, I might want to look at the 
CDQ program, and maybe we ought to CDQ the whole fishery. Let's 
really get working together where we don't have a free-for-all, 
and where we do maintain the shots, and we protect this 
fishery.
    This is not about allocation; this is about protecting the 
Bering Sea. I'm deeply disturbed that some people would think 
that the current situation is perfectly alright. That we don't 
have to worry about the sea; we can continue to catch these 
fish. We can continue to do harm to other species other than 
what they're targeted. I think this is terribly incorrect.
    Again, most of you in this room have talked to me some time 
or other, and I've suggested you sit down and talk this over. 
You have not done so. Now I'm going to tell you right now, this 
issue is not going away. This issue is going to be with us. 
We're not talking about S. 1221, but we're talking about 
legislation that will be supported universally.
    This trawl fleet has to understand they're small in 
numbers; they're not large in numbers. Yes, they have a few 
dollars, and they have a lot of ships. But, in fact, the 
American public wants this industry to clean its act up.
    I'm hoping that the witnesses today will take and address 
the issues I've just suggested--and even those issues in S. 
1221, although we're not debating that bill today.
    And the last issue, may I say one thing? For those honored 
guests in this Committee today, this is not a property taking. 
Fishing has always been at the privilege of a State or the 
Federal Government. It has never been a right in any coastal 
area in the United States. It has always been a prerogative of 
the State or the prerogative of the Federal Government, and it 
is not a taking. And to have someone that has been a hired gun 
write a legal opinion deeply disturbs me. A hired gun, not one 
that doesn't have an interest, but somebody that's been 
employed, has been hired, and now writes an opinion saying it's 
a taking. I also have another little group of people called the 
National Public Policy Research. And I don't know who in the 
world they are. God help us; there are so many of these people 
around that say, ``the bill in Congress, S. 1221, the American 
Fisheries Act managed to, all by itself, to violate the first 
three of the four abuses above.'' And I won't read those. ``The 
bill sponsored by Alaska's Ted Stevens would throw 1,500 
Americans in Washington State out of work.'' Are we worried 
about jobs, or are we worried about the species? Are we worried 
about jobs, or are we worried about a continued ability not 
only to harvest but do it correctly?
    That's the role of this Committee. If we continue to do 
what's been done, we'll destroy the fisheries. The jobs will be 
lost, and we'll lose a great part of our history if we don't do 
something.
    And, Mr. Chairman, I want to compliment you again for 
having this hearing today. And I'm a little bit excited now, 
but if you think I'm excited, watch my Senator.
    [Laughter.]
    [The prepared statement of Mr. Young follows:]

  Statement of Hon. Don Young, a Representative in Congress from the 
                            State of Alaska

    Mr. Chairman, I appreciate you holding this hearing today 
on the American ownership of fishing vessels. This is an issue 
that has been debated and addressed by Congress since the 
1970's.
    The Magnuson-Stevens Fishery Conservation and Management 
Act, enacted in 1976, gave first preference to American-flag 
vessels for the harvesting of fishery resources in U.S. waters. 
This was the first step in replacing foreign fleets in U.S. 
waters with our own fishing vessels.
    We then passed the Commercial Fishing Industry Vessel Anti-
Reflagging Act of 1987 to make sure that American owned and 
controlled vessels harvested our fishery resources. I 
specifically supported this bill because I believed it was 
important to have U.S. owned and U.S. manned vessels harvesting 
U.S. resources.
    While we thought both laws were successful in Americanizing 
the fisheries, it appears we weren't as successful as we 
thought. In trying to be fair to those vessel owners who had 
already made substantial investment in fishing vessels--either 
already in the fisheries or being rebuilt in foreign 
shipyards--Congress created grandfather clauses which the Coast 
Guard has now mis-interpreted which has potentially allowed the 
opposite results to occur.
    It now appears that the Coast Guard has ruled that any 
vessel which was already in the fishery can be sold to foreign 
interests. According to a GAO report in 1990, that could lead 
to 29,000 fishing vessels that were in the fishery at the time 
of the Anti-Reflagging Act's passage to be sold to foreign 
interests. That is clearly not what Congress intended. I was 
the sponsor of the ownership amendment at the Merchant Marine & 
Fisheries Committee markup. Existing law at the time allowed 
foreign entities to set up American corporations, even if they 
were foreign controlled, and own fishing vessels harvesting 
fish in U.S. waters. The intent of my amendment was to require 
a majority of voting stock to be in the hands of individuals 
who are American citizens. The Coast Guard ruling has created 
the opposite effect.
    In addition, the grandfather clause which allowed a certain 
number of vessels to be rebuilt in foreign shipyards and retain 
their eligibility to fish in U.S. waters may have had 
unintended consequences. There have been allegations that a 
number of speculative contracts were written to allow vessels 
to be rebuilt and brought into U.S. fisheries when there had 
been no intent to do so prior to the grandfather clause and the 
Coast Guard's interpretation of that clause.
    I am also concerned that the Coast Guard did not seem to 
think that changes in the specifications of the vessels being 
rebuilt did not matter. In several cases, I understand vessels 
went into shipyards with the intent of being converted to fish 
tender vessels which do not harvest fish. When they came out of 
the shipyard they were large factory trawlers which certainly 
do harvest fish.
    I also believe the Coast Guard missed the boat on 
interpreting the ownership requirements, by allowing vessels 
which entered foreign shipyards as U.S.-owned projects to leave 
the shipyard and enter U.S. fisheries as totally foreign-owned 
projects.
    Most of the vessels which entered the U.S. fisheries 
through these grandfather clauses are now involved in the 
Bering Sea groundfish fishery. There is an overcapitalization 
problem in this fishery. I don't think anyone here will debate 
that issue. I have tried not to assess blame nor have I claimed 
that eliminating factory trawlers is the solution to that 
problem.
    Having said that, it is important that bycatch be further 
reduced in this fishery. I am not happy that in some years this 
fishery is closed not because the target species quota is met, 
but rather because the bycatch quota is reached. The amount of 
salmon, crab and halibut that are wasted in this fishery is 
criminal. I understand the CDQ vessels are required to meet 
more stringent conservation requirements when they fish in this 
fishery. That is something else we need to look into.
    I suspect we will hear more about these issues from the 
witnesses and I expect the Coast Guard will detail why they 
followed the interpretations that allowed these things to 
happen.
    A number of people have attempted to turn this hearing into 
a debate on S. 1221, introduced by Senator Stevens. This is not 
a hearing on that legislation and, at this point, no 
legislation has been introduced on the House side. It is clear 
that the Stevens bill does raise some interesting questions 
about why the goals of Americanizing the fisheries were not 
realized, but this hearing is not on that bill.
    In addition, some people have questioned whether fishing 
permits and licenses are considered property and have tried to 
turn this into a debate on property rights. Let me very clearly 
state that fishing permits and licenses do not give the permit 
holder any right to fishery resources in U.S. waters. Permits 
are a privilege that allow the permit holder to attempt to 
harvest fish. There are no guarantees beyond that. No one here 
should question my leadership in the area of defending personal 
property rights but in this case there is no claim of property 
associated with fishing permits or licenses.
    I look forward to hearing today's witnesses and engaging in 
a frank discussion of why the goals of Americanizing the U.S. 
fisheries has not been fully realized.
    Thank you, Mr. Chairman.

    Chairman Young. At this time, I'd like to introduce my dear 
and good friend that has been with me for many, many years, 
that knows this issue probably better than anybody in this 
room--including myself--and that works very hard to try to make 
sure, not only Alaska, but all of the seas are protected. This 
is our Senior Senator. To look at him, I'm beginning to wonder 
if he's not taking something--well, there's new drugs out on 
the market nowadays----
    [Laughter.]
    [continuing] but I tell you----
    [Laughter.]
    He is the person that has introduced the legislation. He'd 
like to talk about this issue. It's my honor to introduce our 
Senior Senator, Senator Ted Stevens.
    Senator, welcome.
    Mr. Saxton. Senator, thank you for being here. Why don't 
you proceed as you see fit. And we've allocated enough time for 
you to make your case thoroughly. So why don't you proceed?

STATEMENT OF HON. TED STEVENS, A U.S. SENATOR IN CONGRESS FROM 
                      THE STATE OF ALASKA

    Senator Stevens. Mr. Chairman, thank you very much. And, 
Congressman Young, Mr. Chairman, I appreciate your comment. You 
know as I look around this room I've been sort of----
    Chairman Young. Senator, pull that mike just a little 
closer to you.
    Senator Stevens. I've been reminiscing a little bit because 
40 years ago, as legislative counsel to the Interior 
Department, I came up here and spent many hours, many days, in 
this room as we fought for statehood. And to now appear once 
again before you and know that our Congressman is the chairman 
of this Full Committee, it's just something that is hard to 
believe. Those days of 40 years ago are too bright in my mind 
really. I'm liable to start reminiscing about them, but I hope 
I won't.
    And I do thank you all for your statements. Mr. Pallone, 
I'd like to hear your comments. And Mr. Miller, George, I hope 
you will go into this very deeply because it's a very serious 
issue. It's of great importance, I think, to the United States 
fisheries as a whole. And it's obvious, from what Congressman 
Young has said, it's extremely important to the fisheries off 
our shore. And I hope by the time you conclude these hearings, 
Mr. Chairman, you will be convinced--as I was--that legislation 
in this area is very much needed.
    I brought a series of charts that my staff has prepared to 
illustrate why Congress passed the Anti-Reflagging Act. And 
I've got to tell you, ladies and gentlemen, I've just returned 
from a flight to California and back in less than 24 hours 
because of a serious illness of one of my children--which was a 
very successful operation, thank God. But if I'm a little slow 
this morning and not as hot as Congressman Young would like to 
have me be, it's because I'm slightly restrained by a little 
lack of sleep.
    From 1984 to 1987, the foreign-flag fishing was phased out 
under the Magnuson Act. In 1986, we realized that nothing in 
our Federal law prevented foreign-flag vessels from simply 
reflagging to become U.S. flags. So, we introduced and 
proceeded with the Commercial Fishing Industry Vessel Anti-
Reflagging Act of 1987. Its goals were to require the U.S. 
control of fishing vessels that fly the U.S. flag, and to stop 
foreign construction of U.S. flag vessels under the existing 
interpretation of the term ``rebuild,'' and to require U.S. 
flag fishing vessels to carry U.S. crews.
    Of these goals, only the U.S. crew requirement was 
achieved. We did not stop foreign interests from owning and 
controlling U.S. vessels. In fact, as Congressman Young has 
stated, over 29,000 of the 33,000 U.S. flag fishing vessels in 
existence are not subject to any controlling interest 
requirement. Let me say it again: 29,000 of the 33,000 are not 
required to be controlled by the United States even though they 
fly--by United States citizens--even though they fly the U.S. 
flag.
    We also failed to stop the massive Norwegian ship-building 
program, which took place between 1987 and 1990, that allowed 
20 of the world's largest fishing vessels ever built to come 
into our fisheries and fish in our exclusive zone as American 
ships. Today, half of the Nation's largest fishery, which is 
the Bering Sea pollock, continues to be harvested by foreign 
interests on foreign-build vessels that are not subject to the 
U.S.-controlling interest standard.
    Now if you look at this chart, if you look at the later 
years, you'll see that those are the white bars--they're 
labeled domestic. If we had it shaded for those that are really 
foreign controlled, it would be more than half. So, while the 
Magnuson Act has worked and we have Americanized the fisheries, 
we have not Americanized the vessels.
    So, on September 25, I introduced the American Fisheries 
Act that some of you have mentioned, S. 1221. Senators from 
just about every region of the country joined in support of 
this measure. The co-sponsors now include Senator Breaux from 
the Gulf, Senator Hollings from the Southeast, Senator Gregg 
from Northeast, Senator Wyden from the West Coast, and my 
colleague, Senator Mikulski. This bill would eliminate the 
foreign ownership loophole that the Coast Guard interpreted 
into the Anti-Reflagging Act. Congress provided a grandfather 
clause in that Act to allow vessels whose owners did not meet 
the new 51 percent standard, to continue to fish until that 
vessel is sold. Once the vessel is sold, it was intended to 
have to comply with the controlling interest standard.
    The Coast Guard misinterpreted that grandfather clause to 
run with the vessel--the legal concept of running with the 
vessel, to go with the vessel as the vessel is sold. And the 
matter was taken to court, and the DC Court of Appeals upheld 
the Coast Guard reading, but all sides agreed that the 
practical result was absurd giving the congressional primary 
intent of eliminating foreign control over our EEZ fishing.
    The next chart I have is chart 2, indicates why I believe 
the Coast Guard took the position it did. In the 3 months after 
the Anti-Reflagging Act became law, the Coast Guard Vessel 
Docu-

mentation Office began issuing letter rulings that granted 
permanent U.S. ownership waivers. The letter rulings were 
signed by the Chief of the Vessel Documentation Office, who--
according to the Coast Guard at the time--was not required to 
get any other clearance to issue such letters. About three-
quarters of the rulings were issued in response to requests 
from two attorneys, one who was a former employee of the 
Documentation Office. As the chart shows, by the time a Coast 
Guard legal opinion was prepared in December 1988, the 
Documentation Chief had granted at least nine permanent 
waivers. This December 1998 legal analysis, prepared by the 
Chief of the Coast Guard Maritime and International Law 
Division, correctly concluded that the grandfather provision 
could only be interpreted to apply to the current owner of a 
vessel. Nevertheless, the Documentation Office continued to 
issue letter rulings granting permanent exemptions.
    Almost 2 years later, on November 16, 1990, the Chief of 
the Coast Guard Operational Law Enforcement Division wrote a 
memorandum asking why the earlier legal opinion was not being 
followed. By that time, the Documentation Office had issued at 
least 13 permanent waivers. For reasons still not clear, the 
Coast Guard ultimately ignored the Maritime and International 
Law Division memo, the previous legal opinions I have 
mentioned, and in its final rule 2 years after the letter 
rulings, the Coast Guard read the grandfather provision once 
again to run with the vessel. We have since learned that the 
Coast Guard did not provide the Maritime and International Law 
Division opinion to either the district or appeal courts during 
the lawsuits.
    At our Senate hearing in March, I called on the General 
Accounting Office to investigate these Coast Guard actions. The 
GAO will deliver its report to our committee--the Congress 
committee and to you--in mid-July, and I expect it will be 
helpful in ensuring that similar mistakes are not made again by 
the Coast Guard. For instance, the Coast Guard informed us that 
the letter rulings were permitted by the Administrative 
Procedures Act. And I suggest that that might be a subject, Mr. 
Chairman, you should look into, as we do, as to whether or not 
that should be changed. For one official to be able to issue a 
decision which binds the United States forever to recognize a 
grandfather and running with the ship until it expires, 
contrary to the intent of Congress, because of a provision 
that's been misinterpreted in the Administrative Procedures 
Act, to me, means that Act should be clarified.
    S. 1221 does not seek to make those changes, and we will 
look into that later. This bill seeks to correct the negative 
effects caused by the Coast Guard's actions which I have 
mentioned. S. 1221 would eliminate all exemptions to the U.S.-
controlling interest requirement and would raise the standard 
from 51 percent up to 75 percent. Now that happens to be the 
same standard that applies to all other vessels operating 
commercially in U.S. waters. There must be at least 75 percent 
ownership to operate a U.S. flag vessel in U.S. waters.
    And unlike the Jones Act, the system under our fisheries 
law is really a preference system for U.S. fishing industry 
interests, not an outright prohibition on foreign boats. The 
Magnuson Act--and I also note that it's the Law of the Sea 
concept, too--require that foreign flag vessels be allowed to 
harvest the portion of any U.S. catch that U.S. flag vessels 
cannot harvest. It would be possible, in other words, to bring 
in a foreign flag vessel to harvest a portion of our EEZ 
allocations if the U.S. flags could not harvest that portion. 
That is not the situation, however, in this area that we're 
talking about because these are foreign vessels that have been 
flagged as U.S. in order to pose as part of the Americanization 
effort. Without a meaningful controlling interest standard, 
there is no way to give U.S. interests the fishing preference 
envisioned under our law. Our law provides a preference for 
U.S. vessels, and so does the Law of the Sea. It provides that 
each nation can give a preference to its vessel.
    Under our bill, S. 1221, vessel owners would have 18 months 
to comply with the new controlling interest standard and could 
be sold or otherwise transferred to meet those requirements. 
The Maritime Administration, instead of the Coast Guard, would 
review company documents for compliance. MarAd has already 
expertise in this kind of work through the Federal loan and 
subsidy programs for ocean carriers that it administers. And to 
my knowledge, we've not had any conflict over their rulings.
    Fishing vessels under 100 tons, which tend to be owner-
operated, would continue to demonstrate compliance as they do. 
Now there is a simple form that they file. The fishing vessels 
over 100 tons, of which there are about 3,500, would be 
reviewed annually, as well as whenever a new owner acquires 
more than 5 percent ownership of the vessel.
    Gentlemen and ladies, even if we enact that bill, S. 1221, 
in the Congress today, it would be a quarter of a century 
before we would achieve Americanization as envisioned by the 
1976 Magnuson Act. And again, in my judgment, everything in S. 
1221 is in compliance with the Law of the Sea concepts.
    Now let me turn to foreign rebuilds. A second, major 
component of S. 1221 would correct the Coast Guard's 
misinterpretation of the foreign rebuild grandfather provision. 
Prior to the Anti-Reflagging Act, Federal law allowed U.S. flag 
vessels to be rebuilt in foreign shipyards. Under the Coast 
Guard's interpretation of that rebuild law, a vessel could be 
essentially built in a foreign shipyard as long as any portion 
of that vessel came from a U.S. hull. Now to illustrate how 
extreme the rebuild could be, I want you to look at this next 
board that's there by my young assistant. It's chart 3; it 
shows the vessel ACONA, which was a 74-foot, 167-ton vessel 
fishing in U.S. waters, before being rebuilt in Norway. There 
it is, that little vessel right in the center tied up--I don't 
know which dock it is; looks like it's tied up in Cordova. It 
could be Kodiak.
    Now take a look at this next one; this is chart 4, the 
ACONA after being rebuilt. A 74-foot, 167-ton vessel is now 252 
feet, weighs over 5,000 tons, and is now the ACONA. The only 
thing left of the--and it's now called the AMERICAN TRIUMPH, it 
was the ACONA. The only thing left of the ACONA is a piece of 
steel in the side. I'm told there may be two pieces of steels, 
one in each side. Now that's a rebuild. It really is a totally 
new Norwegian vessel brought in and now poses as an American 
vessel. And it is flagged as an American vessel. This is one of 
about 20 of the so-called rebuilt vessels that now fish in the 
Bering Sea off our State.
    The Anti-Reflagging Act amended Title 46 to prohibit U.S. 
flag vessels from being rebuilt overseas. Unfortunately, it 
included this grandfather clause we've mentioned for six 
vessels which we knew of at the time for which legitimate 
investments had been made to rebuild those vessels. The 
grandfather provision allowed a vessel to be rebuilt in a 
foreign yard and still qualify for the U.S. flag if the U.S. 
hull was purchased by July 28, 1987; a contract for rebuilding 
was signed within 6 months after the enactment of the Anti-
Reflagging Act; and the vessel was redelivered to the owner by 
July 28, 1990.
    Now, Congress specifically required the rebuilt vessel to 
be delivered to the owner of the U.S. hull in order to 
discourage speculators from buying U.S. hulls during the time 
we were working on this bill. Unfortunately, the Coast Guard 
did not require the same owner to receive the rebuilt vessel. 
And the speculation we sought to prevent became quite great. 
So, we're not talking really about American fishermen. We're 
not talking about people who have jobs on American boats. We're 
talking about stealth foreign vessels in our waters flying the 
U.S. flag.
    Now, the next chart, No. 5, shows the speculative contracts 
for U.S. hulls that were signed between the original House 
markup which was scheduled for June 9, 1987, and the 
rescheduled markup which was held on July 28, 1987, which 
became the cutoff dates for contracts on U.S. hulls that could 
be rebuilt. Contracts for at least 13 vessels were signed in 
those 6 weeks, including 4 on the day before the markup.
    As you can see on the chart, like the ACONA, these vessels 
were rebuilt into massive fishing vessels. And the chart shows 
the extent to which that rebuilding took place. It's just 
staggering, the changes. A rebuilt vessel, when they first 
started going overseas--they went overseas primarily because 
they were putting in new types of accommodations for the 
fishermen. And they're what we call the hotel rebuilds. They 
were sent over to have these new rooms added that they 
redesigned, and they came back, and they're essentially the 
same hull. If you look at this, you will find what happened to 
these vessels as they went from 500 tons or less than 500 tons 
to almost 5,000 tons. I think this is one of the scandals of 
the fishing industry, what happened during this period.
    S. 1221--and incidently, I'm not going to rest until I get 
to the bottom of that scandal. I believe there was real fraud. 
I believe there were improper actions taken. And I intend to 
see that suits are brought and we, under the Freedom of 
Information, get the information that will show the conspiracy 
that existed at that time by a group of speculators to take 
advantage of this delay in the markup, over here in the House 
side, to just throw paper around and claim that those papers 
represented vessels that were to be rebuilt.
    S. 1221 would correct the problems created by this 
unintended influx of capacity by requiring some of those 
vessels to leave. As Congressman Young has said, there is no 
question--I don't think anyone before you will assert that 
there is not tremendous overcapacity in the fleet that harvests 
the area that is still the most productive of all of our 
fishery areas. Half of the fish that Americans consume is 
caught off of the State of Alaska. Now, this is not a bill to 
deal with allocations between U.S. and foreign vessels. It's 
not a bill to try to deal with any legitimate ownership. It's 
to try to deal with the situation that came about because of 
the actions taken by that Documentation Office that continued 
to approve pieces of paper that have now been ruled to go with 
the vessels that were constructed as enormous new vessels 
overseas, and allow them into our waters as rebuilt vessels.
    We do not eliminate all of the foreign factory trawlers, or 
even all of the foreign factory trawlers that came in through 
that rebuild loophole. S. 1221 would remove from the fisheries 
only half of the rebuild vessels that continued to be foreign-
controlled on September 25, 1997. I might add, many of them 
have gone through new devices to try to show they're not 
foreign-controlled since that date.
    From the records we have, it appears that 18 vessels were 
speculative, where the original owner of the hull did not 
receive delivery of the rebuild vessel. That's my definition of 
speculative, where someone stepped in and bought the paper that 
represented a vessel that was over there like the ACONA and 
rebuilt it into an enormous factory trawler. It had nothing to 
do with trawling before that time. It became a factory trawler 
after the rebuild clause was fused. Of those 18, only 13 appear 
to be foreign-owned on September 25, 1998. Of the 13 foreign-
owned boats, 3 have already left. They went over and reflagged 
in Russia, and continue to fish there so far as I know. Under 
S. 1221, the remaining vessels, which we believe to be 10, 
would have to find a vessel of equal or greater size to 
surrender its U.S. flag in order to continue flying the U.S. 
flag. And there are vessels out there that are on the beach; 
they could be bought if they wish to stay on that basis.
    This was a more lenient approach than requiring all of the 
speculative vessels to leave U.S. fisheries. It would make the 
current owners of the vessels that caused the 
overcapitalization problems responsible for fixing the problem, 
but with the potential for some time to remain in the fishery.
    Let me parenthetically tell you one of the things we're 
working on in the Senate is a new concept of trying to find 
some way to have a buyout of some of those vessels in the North 
Pacific. Several of the fisheries have come to us and said they 
want to have an opportunity to do what has been done in New 
England and to buy down some of those vessels. And the owners 
of the vessels would borrow the money from a fund and repay 
that fund so that it would not be taxpayers' money that would 
be used. But they're devising ways to try and bring about a 
voluntary reduction in the capacity in each of these fisheries. 
But this main fishery, the pollock fishery, the investments are 
so large and the numbers are so large of the foreign-owned 
vessels, that that's just not possible to approach this problem 
on that basis.
    The foreign rebuild provisions of S. 1221 would likely 
result in only five factory trawlers leaving the Bering Sea 
fisheries. It will allow 50 to 55 factory trawlers to remain, 
provided they comply with the U.S.-controlling interest 
standard--which any lawyer will tell you, it's not that 
difficult. We thought--those of us who designed this bill in 
the Senate side thought, under the circumstances, that this 
bill is very fair. I think we bent over backward to be fair. 
But since September, I have seen clearly that the people who 
have brought these vessels in knew what they were doing; they 
knew they were invading Congressional intent. And they have 
conducted just a staggering campaign now to try and defeat S. 
1221.
    And my last chart I have there is chart 6. It shows the 
foreign rebuild grandfather was implemented by the Coast Guard 
in much the same way as the ownership grandfather clause. There 
are two separate grandfather clauses in the Anti-Reflagging 
Act. At least 13 rebuild waivers were granted before the final 
rule was promulgated, essentially foreclosing the possibility 
of correctly interpreting the provision. As with the ownership 
grandfathers, the letter rulings were issued primarily by the 
chief of the Vessel Documentation Office, and the majority were 
issued to two attorneys, again, one of whom was a former 
employee of the person that issued those letters. When you 
finish your review today, I hope you will consider whether we 
should remove all of the speculative vessels that came through 
the loophole and continue to be foreign-owned.
    If we continue to be opposed on a basis of our FARE bill, 
we're going to have a knock-down, drag-out fight in the 
Congress to win this issue to protect these fisheries in the 
North Pacific. We might as well go ``whole hog'' and get out of 
the whole area those who have speculated and tried to now 
destroy our fisheries based upon that speculation.
    I know I'm taking a long time, but there are some 
interesting views on the final major component of the bill. We 
called it the large vessel phaseout. It provides that no new 
fishing vessels greater than 165 feet, 750 tons, or 3,000 shaft 
horsepower would be allowed into these fisheries. Fishing 
vessels above any of these three thresholds that are already in 
the fisheries on September 25, 1997, could stay in for the 
useful life of the vessel, provided they meet the controlling 
interest standard and don't surrender their fishery's 
endorsement.
    This phaseout could easily be called a moratorium. The 
measure would not only prevent new boats from entering, it 
would prevent foreign flag vessels from coming back into the 
U.S. fleet. I mention that of great importance because many of 
these large vessels went over to Russia and started fishing 
there as Russian vessels. And now they want to come back and 
claim they're still U.S. vessels.
    After the Senate hearing, I told many of the people 
involved I'd be willing to consider allowing the Councils, the 
Regional Fisheries Councils, to provide a means to override the 
moratorium even though I've yet to hear a single U.S. fishery 
that needs or wants any more large fishing vessels. It does 
seem to me Council created the regional corporations; the 
regional corporations should be the ones to decide if there is 
any need for any new vessels that would exceed that standard 
set by S. 1221.
    The bill also includes a special measure for Atlantic 
herring and mackerel fisheries, in part because a factory 
trawler recently modified overseas obtained a fishery 
endorsement before the control date of S. 1221. I believe 
that's sought by the people in the area very strongly.
    I would make one suggestion in closing, Mr. Chairman, and 
that is on what Congressman Young discussed--the concept of 
taking. I have practiced law now for almost 50 years, Mr. 
Chairman, and I would not draft a bill that would violate the 
Constitution knowingly. It was not a taking when we phased out 
the foreign flag vessels in the early-1980's. They were all 
foreign flag vessels then, and we've set up a provision for 
Americanization through the joint venture phase. And even the 
joint ventures were phased out by an act of Congress. And it 
will not be a taking when we remove the foreign-controlled 
vessels that purported to be U.S. flags from the U.S. flag 
registration. In both cases, we are eliminating a privilege the 
United States granted to those entities.
    In the case of foreign-flag vessels, the privilege came as 
a fishing permit that allowed them to operate in U.S. waters. 
That was before the Magnuson Act. In the case of foreign-
controlled vessels, the privilege is in the form of a fishery's 
endorsement--a piece of paper issued by an administrative 
officer that allows them to operate in U.S. waters as U.S. 
vessels. As with the original Magnuson Act and the 1987 Anti-
Reflagging Act, S. 1221 would not take anyone's vessel or 
prevent them from using it anywhere in the world with the 
proper fishery's endorsement.
    It's ironic to me that some of the same factory trawler 
owners who now argue that their permits cannot be revoked, 2 
years ago told us--when arguing for IFQs, Individual Fishing 
Quotas--that fishing was a privilege which could be revoked 
without compensation. These people have gone each way on 
several issues.
    With respect to IFQs, Congress should make clear that there 
will be no IFQs ever issued to foreign interests in our waters. 
That ought to be another thing we did not do that you should 
consider. Put the marker down now and state to everybody that 
if we go the IFQ route, there will be no foreign fishing IFQs 
in our water.
    Now the last chart I said was the last, but I'm mistaken. 
There is another chart, chart 7. It showed what happened to the 
Bering Sea pollock fishery since the foreign rebuilds entered. 
The allowable biological catch, which is called ABC, has 
declined by one-third, meaning there are one-third fewer fish 
to catch. And the Council, now, because of the pressure of all 
of these vessels, has eliminated what we call the buffer 
between that allowable biological catch and the total allowable 
catch, which is the TAC. So now, that if the ABC accidently 
gets set too high, the fleet will have already exceeded what 
should be the maximum catch.
    All of these mechanisms were designed to protect the fish, 
the reproductive capability of these fisheries--not to protect 
fisherman, not to protect who owns the vessel at any length, 
but to protect the reproductive capability. And because of the 
pressure of this overcapitalization the Council, now, has been 
forced to eliminate one of the basic protections for the 
species themselves, and that was the buffer. The decline in the 
allowable catch may be part of a normal stock cycle, but the 
shift to a riskier management practice is probably the direct 
result of the increased capital and harvesting capacity that go 
back to these erroneous rulings that I've mentioned.
    Now, ladies and gentlemen, you've been very patient with 
me. I can't tell you how chagrined I am to have to come and 
confess that when we marked up that bill, we just didn't do a 
good job. We should have closed that door, and we should have 
been very plain about what rebuild was. And when we said, ``to 
the owner,'' we should have said, ``to the original owner,'' to 
the owner who submit-

ted the papers at the time that the exemption was sought; but 
we didn't. In other words, this is not something for the courts 
to deal with; its not something--and by the way, the Court of 
Appeals said it was something for Congress to deal with. We 
should have done it more specifically, and we need to now go 
back and do what we intended to do--assure that only U.S. flag 
vessels that are built in the United States can, in fact, be 
flagged as U.S. vessels to harvest a portion, the American 
portion, of the fisheries within our 200 mile limit.
    And I commend you again, ladies and gentleman. I hope that 
you will pursue it. There are several other things here that I 
could mention about this issue, but I think, in the interest of 
time, I'll see if you have any questions of me. It is to me, 
the most serious thing that faces our great North Pacific 
fishery, and I'm saddened that it's viewed by some as being 
Alaska versus the State of Washington issue. It is not. And if 
anyone's got any solution to help us prove that, I'd be glad to 
explore any solution. We are not taking any of these vessels 
out on the basis of where their home port is, or anything. 
We're looking to take them out on the basis of whether they 
fraudulently came into the fishery. And I hope that you'll 
address it from that point of view.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Senator Stevens follows:]

Statement of Hon. Ted Stevens, a Senator in Congress from the State of 
                                 Alaska

    Thanks to Chairman Young and Subcommittee Chairman Saxton 
for allowing me to testify today.
    The matter you are about to consider is of great importance 
in the U.S. fisheries, and particularly in the fisheries off 
Alaska. By the time you conclude today, it is my hope you will 
be convinced, as I was, that legislation is greatly needed.
    My first chart (chart 1) illustrates why Congress passed 
the Anti-Reflagging Act. From 1984 to 1987, foreign-flag 
fishing was being phased out of the EEZ under the Magnuson Act. 
In 1986 we realized that nothing in Federal law prevented the 
foreign-flag vessels from simply reflagging to the U.S. flag. 
The goals of the ``Commercial Fishing Industry Vessel Anti-
Reflagging Act of 1987'' were therefore: (1) to require the 
U.S.-control of fishing vessels that fly the U.S. flag; (2) to 
stop the foreign construction of U.S.-flag vessels under the 
existing interpretation of the term ``rebuild''; and (3) to 
require U.S.-flag fishing vessels to carry U.S. crews.
    Of these goals, only the U.S. crew requirement was 
achieved. We did not stop foreign interests from owning and 
controlling U.S.-flag vessels. In fact over 29,000 of the 
33,000 U.S. flag fishing vessels in existence are not subject 
to any controlling interest requirement. We also failed to stop 
the massive Norwegian shipbuilding program between 1987 and 
1990 that allowed about 20 of the largest fishing vessels ever 
built to come into our fisheries.
    Today, half of the nation's largest fishery--Bering Sea 
pollock--continues to be harvested by foreign interests on 
foreign-built vessels that are not subject to the U.S.-
controlling interest standard. Therefore, while the white bars 
in the later years on the chart are labeled ``domestic,'' half 
of each could still correctly be labeled ``foreign.''
    On September 25, 1997, I introduced the American Fisheries 
Act (S. 1221) to fix these mistakes. Senators from just about 
every fishing region of the country have joined me in support 
of this measure. (Cosponsors include Senators Breaux (Gulf); 
Hollings (Southeast); Gregg (Northeast); Wyden (West Coast) and 
Murkowski).

Foreign Ownership

    S. 1221 would eliminate the foreign ownership loophole the 
Coast Guard interpreted into the Anti-Reflagging Act. Congress 
provided a grandfather in that Act to allow vessels whose 
owners did not meet the new 51 percent standard to continue to 
fish until they sold the vessel. Once the vessel was sold, it 
was intended to have to comply with the controlling interest 
standard. The Coast Guard misinterpreted this grandfather to 
``run the vessel.'' While the DC Court of Appeals upheld this 
Coast Guard reading, all sides agreed that the practical result 
was absurd given Congress' primary intent of eliminating 
foreign control.
    My next chart (chart 2) indicates why I believe the Coast 
Guard took the position it did. In the three months after the 
Anti-Reflagging Act became law, the Coast Guard Vessel 
Documentation Office began issuing letter rulings that granted 
permanent U.S. ownership waivers. The letter rulings were 
signed by the Chief of the Vessel Documentation Office, who, 
according to the Coast Guard, was not required to get any other 
clearance in issuing the letters. About three-quarters of the 
rulings were issued in response to requests from two attorneys, 
one of whom was a former employee of the Documentation Office.
    As the chart shows, by the time a Coast Guard legal opinion 
was prepared on December 19, 1988, the Documentation Chief had 
granted at least 9 permanent waivers. This December 1988 legal 
analysis--prepared by the Chief of the Coast Guard Maritime and 
International Law Division--correctly concluded that the 
grandfather provision could only be interpreted to apply to the 
current owner of a vessel. Nevertheless, the Documentation 
Branch continued to issue letter rulings granting permanent 
exemptions.
    Almost two years later, on November 16, 1990, the Chief of 
the Coast Guard Operational Law Enforcement Division wrote a 
memo asking why the earlier legal opinion was not being 
followed. By that time, the Documentation Office had issued at 
least 13 permanent waivers. For reasons still not clear, the 
Coast Guard ultimately ignored the Maritime and International 
Law Division memo. In its final rule--two years after the 
letter rulings--the Coast Guard read the grandfather provision 
to run with the vessel. We've since learned that the Coast 
Guard did not provide the Maritime and International Law 
Division opinion to the either the district or appeals courts 
during the law suit which it won.
    At our hearing in March, I called on the General Accounting 
Office to investigate these Coast Guard actions. The GAO will 
deliver its report in mid-July, and I expect it will be helpful 
in ensuring that similar mistakes are not made again by the 
Coast Guard. For instance, the Coast Guard informed us that the 
letter rulings were permitted by the Administrative Procedures 
Act, and perhaps that should be changed.
    S. 1221, however, does not seek to make these kinds of 
changes--it seeks to correct the negative effects by the Coast 
Guard's actions. S. 1221 would eliminate all exceptions to the 
U.S.-controlling interest requirement, and would raise the 
standard from 51 percent up to 75 percent, the same standard as 
other vessels operating commercially in U.S. waters.
    Unlike the Jones Act, the system under our fisheries law is 
really a preference system for U.S. fishing interests, not an 
outright prohibition on foreign boats. The Magnuson Act (and 
Law of the Sea) require that foreign-flag vessels be allowed to 
harvest the portion of any U.S. catch that U.S.-flag vessels 
can't harvest. Without a meaningful controlling interest 
standard, there is no way to give U.S. interests the fishing 
preference envisioned under this law.
    Under S. 1221, vessel owners would have 18 months to comply 
with the new controlling interest standard, and could be sold 
or otherwise transferred to meet the requirements. The Maritime 
Administration, instead of the Coast Guard, would review 
company documents for compliance. MarAd already has expertise 
in this kind of work through the Federal loan and subsidy 
programs for ocean carriers that it administers.
    Fishing vessels under 100 tons--which tend to be owner-
operated--would continue to demonstrate compliance as they do 
now (with a simple form). Fishing vessels over 100 tons--of 
which there are about 3,500--would be reviewed annually, as 
well as whenever a new owner acquires more than 5 percent 
ownership.
    Even if we enact S. 1221 today, it will have taken a 
quarter century to achieve the Americanization we envisioned in 
1976.

Foreign Rebuilds

    The second major component of S. 1221 would correct for the 
Coast Guard's misinterpretation of the foreign rebuild 
grandfather.
    Prior to the Anti-Reflagging Act, Federal law allowed U.S.-
flag fishing vessels to be ``rebuilt'' in foreign shipyards. 
Under the Coast Guard's interpretation of ``rebuild,'' a vessel 
could be essentially built in a foreign shipyard so long as 
some portion came from a U.S. hull. To illustrate how extreme a 
``rebuild'' could be, my next board (chart 3) shows the vessel 
ACONA--which was 74-feet long and 167 tons before being rebuilt 
in Norway.
    Take a good look--the board after (chart 4) shows the 
``ACONA'' upon the completion of its rebuild. It measures 252 
feet and over 5,000 tons, and is now called the AMERICAN 
TRIUMPH. This is no reasonable way to call this the same 
vessel. This particular vessel is currently under investigation 
by the Coast Guard because docu-

ments used in obtaining the rebuild waiver may have been back-
dated. This is one of about 20 so-called ``rebuilt'' vessels 
that now fish in the Bering Sea.
    The Anti-Reflagging Act amended title 46 to prohibit U.S.-
flag fishing vessels from being rebuilt overseas. 
Unfortunately, it also included a grandfather provision for 6 
vessels for which legitimate investments had been made. The 
grandfather provision allowed a vessel to be rebuilt in a 
foreign yard and still qualify for the U.S.-flag if (1) the 
U.S. hull was purchased by July 28, 1987; (2) a contract for 
rebuilding was signed within 6 months of the enactment of the 
Anti-Reflagging Act; and (3) the vessel was ``redelivered to 
the owner'' by July 28, 1990.
    We specifically required the rebuilt vessel to be delivered 
to the owner of the U.S. hull in order to discourage 
speculators from buying U.S. hulls during the time we were 
working on the bill. Unfortunately, the Coast Guard did not 
require the same owner to receive the rebuilt vessel--and the 
speculation we sought to prevent became quite great.
    My next chart (chart 5) shows the speculative contracts for 
U.S. hulls signed between the original House markup (June 9, 
1987) and the rescheduled markup July 28, 1987 which became the 
cutoff date for contracts on U.S. hulls that could be rebuilt. 
Contracts for at least 13 vessels were signed in those six 
weeks--including 4 on the day before the markup. As you can see 
on the chart, like the ACONA, these vessels were ``rebuilt'' 
into massive fishing vessels (see increases on the chart).
    S. 1221 would correct the problems created by this 
unintended influx of capacity by requiring some of those 
vessels to leave. S. 1221 would not--as some have suggested--
eliminate all of factory trawlers or even all of the factory 
trawlers that came through the rebuild loophole. It would 
remove from the fisheries only half of the rebuild vessels that 
continued to be foreign-controlled on September 25, 1997 (the 
day of introduction).
    From records we have, it appears that 18 vessels were 
speculative (where the original owner of the U.S. hull did not 
receive delivery of the rebuilt vessel). Of those 18, only 13 
appear to have been foreign-owned on September 25, 1998. Of the 
13 foreign-owned boats, three already have left the fisheries 
(reflagged to fish in Russia). Under S. 1221, the remaining 
vessels (we believe 10) would have to find a vessel of equal or 
greater size to surrender its U.S. flag in order to continue 
flying the U.S. flag.
    This was a more lenient approach than requiring all of the 
speculative vessels to leave the fisheries. It would make the 
current owners of the vessels that caused the 
overcapitalization problems responsible for fixing the 
problems--but with the potential for some to remain in the 
fisheries. The foreign rebuild provisions of S. 1221 would 
likely result in only 5 factory trawlers leaving the Bering Sea 
fisheries--and allow 50 to 55 factory trawlers to remain, 
provided they comply with the U.S.-controlling interest 
standard. We thought this, under the circumstances, was very 
fair--we bent over backwards to be fair. Since September I have 
seen clearly that the people who brought these vessels in knew 
exactly what they were doing--and that they were evading 
Congressional intent.
    As my next chart (chart 6) shows, the foreign rebuild 
grandfather was implemented by the Coast Guard in much the same 
way as the ownership grandfather. At least 13 rebuild waivers 
were granted before a final rule was promulgated--essentially 
foreclosing the possibility of correctly interpreting the 
provision. As with the ownership grandfathers, the ruling 
letters were issued primarily by the Chief of the Vessel 
Documentation Office, and the majority were issued to two 
attorneys, one of whom was a former employee. When you finish 
your review today, perhaps you will conclude that we should 
remove all of the speculative vessels that came through 
loophole and that continue to be foreign owned.

Large Vessel Moratorium

    There are some interesting views on the final major 
component of the bill. In S. 1221, we called it the large 
vessel ``phase out.'' No new fishing vessels greater than 165 
feet, 750 tons, or 3,000 shaft horsepower would be allowed into 
the fisheries. Fishing vessels above any of these thresholds 
that were already in the fisheries on September 25, 1997 could 
stay for the useful life of the vessel--provided they meet the 
controlling interest standard, and don't surrender their 
fishery endorsement.
    This ``phase out'' could as easily be called a 
``moratorium.'' The measure would not only prevent new boats 
from entering, but would prevent former-U.S. flag vessels from 
coming back into the U.S. fleet. After the Senate hearing, I 
said I would be willing to consider allowing the Councils to 
override the moratorium--even though I've yet to hear of a 
single U.S. fishery that needs or wants any more large fishing 
vessels. I should mention that the bill includes a special 
measure for the Atlantic herring and mackerel fisheries, in 
part because a factory trawler recently modified overseas 
obtained a fishery endorsement before the control date in S. 
1221.

Closing

    Before concluding, I will comment on the suggestion that 
this bill would constitute a taking. It was not a taking when 
we phased out foreign-flag vessels in the early-1980's, and it 
will not be a taking when we remove foreign-controlled vessels 
who happen to fly the U.S. flag. In both cases, we are 
eliminating a privilege the United States granted to those 
entities.
    In the case of foreign-flag vessels, the privilege came as 
a fishing permit that allowed them to operate in U.S. waters. 
In the case of the foreign-controlled vessels the privilege is 
in the form of a fishery endorsement that allows them to 
operate in U.S. waters. As with the original Magnuson Act and 
the 1987 Anti-Reflagging Act, S. 1221 would not ``take'' 
anyone's vessel or prevent them from using it anywhere else in 
the world.
    It's ironic to me that some of the same factory trawler 
owners who now argue their permits can't be revoked, two years 
ago told us--when arguing for IFQs--that fishing was a 
privilege which could be revoked without compensation. And with 
respect to IFQs, Congress should make clear that there will be 
no IFQs issued to foreign entities.
    My final chart (chart 7) shows what has happened in the 
Bering Sea pollock fishery since the foreign rebuilds entered: 
(1) the ``allowable biological catch'' (ABC) has declined by a 
third--meaning there are fewer fish to catch; and (2) the 
Council has eliminated the buffer between the ABC and the 
``total allowable catch'' (TAC)--so that now if the ABC 
accidentally gets set too high, the fleet may already have 
exceeded what should have been maximum catch. The decline in 
the allowable catch may be part of the normal stock cycles, but 
the shift to a riskier management practice is probably the 
direct result of the increased capital and harvesting capacity 
stemming back to the early-199Os.
    Mr. Chairmen and Committee members, I appreciate the time 
you have taken to listen to me, and commend you for addressing 
these important issues today.

[GRAPHIC] [TIFF OMITTED] T9404.001

[GRAPHIC] [TIFF OMITTED] T9404.002

[GRAPHIC] [TIFF OMITTED] T9404.003

[GRAPHIC] [TIFF OMITTED] T9404.004

[GRAPHIC] [TIFF OMITTED] T9404.005

[GRAPHIC] [TIFF OMITTED] T9404.006

[GRAPHIC] [TIFF OMITTED] T9404.007

    Mr. Saxton. Senator Stevens, thank you very much for the 
very thorough, and explicit, and articulate testimony.
    And first, I ask unanimous consent that Mr. Delahunt and 
Mrs. Smith be permitted to sit on the panel. Thank you very 
much.
    Second, let me thank you, Senator, for including the 
provisions of the House bill relative to the northeastern part 
of the country, and specifically the ship that we referred to, 
in the language, I believe is the ATLANTIC STAR. We appreciate 
very much your including those provisions in your bill. We 
think that's of great importance, particularly to Mr. Delahunt 
and I, and Mr. Pallone, and other Members of the Congress who 
represent sections of the northeast.
    I'd just like to make one point if I may, and then I'm 
going to ask Mr. Young for his questions or comments. I'd like 
to try to help clear up this issue regarding property rights. 
You spoke very eloquently, and I understand what you said, and 
I agree with you. I would just like to underline this and 
perhaps you can respond to this statement. On February 28 of 
1995, the American Factory Trawler Associations wrote to the 
Chairman of the Full Committee, Mr. Young. And I have a three-
page letter signed by Joseph Blum, the executive director. And 
I might add that the American Factory Trawler Association is 
represented here today by Jim Gilmore. They are now called the 
At Sea Processor's Association, so they'll have a chance to 
comment on this as well. In addressing the issue of ITQs, 
there's an interesting passage--statement here on page 2 of 
this letter. In speaking to what Congress ought to do relative 
to a number of issues involving the North Pacific fisheries, 
and they are addressing the issues of ITQs. And they say, and 
I'll quote this, ``Specifically,'' they say, ``Congress should 
clarify that a quota share issued to a person under a ITQ 
program is not a property right. Under the ITQ program, an 
individual is provided with a privilege of harvesting a 
percentage of the annual allowable catch.'' This is the 
American Factory Trawlers Association which I believe today may 
be taking a different view.
    I would just like you, if you would, sir, Senator, to 
comment on this statement and how you see it in the context of 
our discussion today.
    Senator Stevens. Well, Mr. Chairman, I think you're correct 
that the group that represents the factory trawler have taken 
all three sides of that same issue. On CDQs, IFQs, and on the 
fishery's endorsement, they, on one hand, argue that it is a 
property right. On the other hand, when it's convenient, argue 
that it's just a privilege. It just depends on what they want 
in terms of what the constitutional provision means as far as 
I'm concerned. They have not addressed this issue, I think, 
fairly on a legal basis. There is no constitutional right; 
there is no taking of any property right here. I know of no one 
that previously had claimed that about a fishery's endorsement 
issued by the Coast Guard. And as such, I just hope the 
Committee and the Congress will ignore this new argument.
    Mr. Saxton. If fishery quotas or fishing privileges were 
property rights, we'd have a hard time regulating fisheries at 
all, wouldn't we?
    Senator Stevens. You're right. As a matter of fact, the 
Regional Councils under the Magnuson Act can take those down 
and can stop them from exercising those rights at any time. If 
they were property rights, they could not do that without 
compensation. But the Regional Fishings Councils have been 
doing that since day one under the Magnuson Act because they 
set the allowable catch, and they tell you how much that 
endorsement is worth in each year. And the Act, as well as the 
Law of the Sea, contemplates that that because they're both 
provisions to protect the fish--not protect the fishermen or 
any vessel. Now, their argument would mean that a vessel that 
acquires such an endorsement has a greater right than an 
American-built vessel. Think of that, Mr. Chairman. There is no 
such concept involved, that I know of, in constitutional law.
    Mr. Saxton. Senator, thank you very much.
    Mr. Young.
    Chairman Young. Thank you, Mr. Chairman.
    Before you leave, Senator, I'd like to have both of the two 
pictures of the so-called rebuilt ship. I want to leave those 
here and remind each member, that is a classic example of what 
was not intended. Because other than the Senator and myself, 
we're the only two that were here. We knew what we were 
intending to do, and now to have that abused as was done is 
just absolutely beyond my comprehension. You know, I have 
hundreds, Senator--and I know you do, too--of people coming in 
and asking for changes in the Jones Act; we need documentation 
to get our vessel out of Canada, for instance. The Coast Guard 
said you can't do it. And this is the example I think of 
malfeasance, if I've ever seen it.
    And, Senator, one question--and I want to thank you for 
your testimony----
    Senator Stevens. Congressman?
    Chairman Young. Yes.
    Senator Stevens. May I interrupt just--sir, attached to 
each one of the statements we've provided you, are a black and 
white----
    Chairman Young. There's something about--maybe it's the 
maturity--there's something about a little picture and a big 
picture.
    Senator Stevens. Oh.
    Chairman Young. I would rather look at the big picture, 
believe me.
    Senator Stevens. Senators have the trouble of seeing the 
big picture every once in awhile.
    [Laughter.]
    Chairman Young. OK. The other thing is, to your knowledge, 
Senator, is there any fishing in any State that it is a right, 
other than the Indian treaties? That all fisheries, to your 
knowledge, within the three-mile limit are managed by the State 
Fish and Game; is that correct?
    Senator Stevens. That's correct.
    Chairman Young. Nobody has the right. They can shut it 
down. Let's go beyond the three-mile limit. What happens if the 
Council changes the size of the net from an eight-inch net 
which they used to use, to a two-and-one-half-inch net, or from 
a two-and-one-half-inch to eight-inch net? Would that be a 
taking, for instance?
    Senator Stevens. Absolutely not. As a matter of fact, look 
at the foreign factory trawlers; they argued before the Council 
and got a ruling of the Council that changed the allocation of 
fish. It used to be 65 percent onshore, 35 percent offshore. 
Now, it's 65 percent off-

shore and 35 percent onshore. In other words, the Council, in 
its ruling, put more than half of the boats that were fishing 
or bringing the fish back to shore put them on the beach. Now 
that wasn't deemed to be a taking. They're arguing right now 
before the Council for a larger allocation of this fish.
    Chairman Young. All right. I'm----
    Senator Stevens. All the endorsement gives you is the right 
to take the amount of fish the Council says you can take.
    Chairman Young. All right.----
    Senator Stevens. How can that be a property right?
    Chairman Young. Senator, if I'm an onshore processor. And 
if the Council determines I'd get 50 percent of the fish for 
example. The Council rules that instead of my getting 50 
percent, I get 35 percent; it goes to the offshore trawl fleet. 
That is not considered a taking from me. But under their 
premise, it would be a taking. Is that correct?
    Senator Stevens. Well, they consider it to be a taking when 
we say that they have to give up the rights they acquired 
through the improper interpretation of the law. Now that is on 
another phase of this question of constitutionality. That flag 
that they get, you can see how temporary it is. They have 
voluntarily given up--if they just go across the line and start 
fishing in Russia, they give up that right. Now if it's a 
property right, how can Congress provide it just by going 
across an imaginary line? They lose that constitutional right. 
Their property right argument is just full of holes. It has 
never been a property right. And I do not understand----
    Chairman Young. Again, Senator, I know what this is. This 
is an attempt to what we call ``muddy the water,'' not ``tongue 
in cheek.'' There is something really fishy about that 
argument, and I hope we are able to beach it so it never swims 
again.
    Thank you, Mr. Senator.
    [Laughter.]
    Senator Stevens. Well, let me tell you, Congressman, these 
vessels, if we take their flag away from them, they can still 
fish in U.S. waters at any time that any Council says that the 
American effort is not sufficient to harvest all the fish. We 
have not taken away the right to fish; we've just taken away 
their privilege to fish as a U.S. flag vessel when they really 
are foreign-built, foreign-operated vessels.
    Mr. Saxton. Thank you.
    I believe Mr. Farr has some questions.
    Mr. Farr. Well, thank you very much, Mr. Chairman. I 
appreciate you having this hearing and request that my remarks 
be submitted in the record.
    And I really want to thank the Senator for being here. This 
is the International Year of the Ocean. Next week is the 
National Oceans Conference out of my district in Monterey--and 
a district that you are familiar with because I understood you 
spent some years at Fort Ord there--and I appreciate the 
connection. It's also very interesting because Monterey used to 
be the largest sardine port in the world. And we lost that 
fishery because we never paid attention to what happens if you 
don't manage the fisheries.
    And I think often people forget that our responsibility as 
elected Members of Congress--and frankly, it's only our 
responsibility be-

cause State legislators and local governments can't do it--is 
to protect the resources of this country which have been 
declared to be the fisheries out to 200 miles. I mean, in 
sense, the Law of the Sea Treaty recognizes that all ocean 
politics are local.
    And I appreciate the fact that you're bringing this 
legislation and this issue to us because if we don't--the 
bottom line is really fisheries management. And this goes in to 
how you better manage the fisheries so that there is not an 
unusual amount of harvesting or harvesting that we can't 
control, and that that benefit of that doesn't inure to 
American businesses; that we have been a country that has 
always looked at the bottom line, and I think that often in 
resources, we forget that the bottom line is one that really 
needs to be managed appropriately.
    And as far as this idea that anything we would do in this 
area in regards to taking or--I'd like to remind the Members of 
Congress that in where you have local fisheries in the States--
the State that I come from, California, we've banned gill nets, 
and there was no takings issue in that. We have required 
limited entry in numerous fisheries, and there was no takings 
in that. We have required trawlers to have new gear that is--
and we have provided the loan program so that they can transfer 
from old technology to new technology; there was no takings in 
that.
    I agree with the Senator; this is not a takings issue. To 
go in and fish in American fisheries is a privilege, not a 
right. And that privilege is extended by law that is created by 
this Congress. And I think if we don't pay attention to the 
fact that we need to be on top of that law, making sure that 
that law is a wise law, smart law, is law that really does the 
best we can to regulate a fishery, then we are losing 
perspective of what we are here elected to do. So I appreciate 
you bringing this bill to this Committee. And I look forward to 
working with you on it.
    Senator Stevens. Thank you very much. In years gone by, 
Senator Magnuson sent me to the Law of the Sea Conference. I 
had known him for many years before I came to the Senate. He 
had wanted me to go to the Law of the Sea Conference to 
represent the Congress committee when he was chairman, and I 
was a minority member.
    I came back and told Warren that I thought that the major 
issue facing us was the jurisdiction beyond the three-mile 
limit, and we prepared to draw up--and I drafted the first 
Magnuson Act and introduced it as a matter fact. Warren made it 
his bill when he wanted to get it passed, and I think that was 
the way we got it passed. He was the chairman, and I respected 
him very greatly, but what I'm telling you is we were not 
looking at any kind of conflict between States or between 
anyone, we were looking to try and satisfy the objectives of 
the Law of the Sea. And when we adopted the concept of the 200-
mile limit, the world did.
    Mr. Farr. That's right.
    Senator Stevens. But it adopted it with the Law of the Sea 
concept that the Nation didn't have the capacity to harvest 
within the 200-mile limit, it had to allow foreign vessels to 
come in and harvest up to the allowable quota. Now that 
provision that came out of the Law of the Sea is what inhibited 
us when we wrote the Magnuson Act. We couldn't go against what 
we'd argued worldwide, so we said if we find that there's any 
place where we cannot harvest it with American fleets, we must 
allow the foreign fishing vessels in. And for the first 7 or 8 
years--we've given you the chart--after the Magnuson Act 
passed, the foreign vessels continued to harvest within our 
waters.
    These people that came in later, whether they are U.S. 
flags or foreign flags, they have no property right within that 
200-mile limit, as you rightly state. And these people now that 
are foreign built, foreign dominated, they're arguing that our 
Constitution protects their right because they came in under 
our flag. But our own flag people don't have that right. Well I 
hope that everybody keeps that in mind.
    Thank you very much.
    Mr. Saxton. Senator, thank you very much. We very much 
appreciate your being here and your willingness to spend this 
amount of time with us. We have two other panels to deal with 
here this morning, so at this point, unless you have something 
further, we will move on to our second panel. And thank you, 
again, very much.
    Senator Stevens. We welcome your interest greatly, Mr. 
Chairman, and all of your patience with me. Thank you very 
much.
    Mr. Saxton. Thank you, sir.
    I will now introduce our second panel. We have Dr. David 
Evans, the Deputy Director of the National Marine Fisheries 
Service, and Rear Admiral Robert C. North of the U.S. Coast 
Guard.

  STATEMENT OF DAVID EVANS, DEPUTY DIRECTOR, NATIONAL MARINE 
           FISHERIES SERVICE, DEPARTMENT OF COMMERCE

    Mr. Saxton. While you are coming forward to take your 
seats, and before we hear your testimony--Dr. Evans, prior to 
your testimony I have one question which I'd like you to 
respond to if you don't mind. The Subcommittee submitted budget 
questions to your agency on March 27, 1998, and asked for a 
response by April 17, in order to permit us to include these 
responses in today's record. Now, June 4, 1998, almost 2 months 
later, and we still haven't seen responses to the questions. 
What has been the hold up, and when will we receive these 
responses?
    Dr. Evans. Mr. Saxton, the answers to those questions are 
right now at OMB, and I am told that they will be released 
almost immediately. But I don't know the exact day.
    Mr. Saxton. Well, we would appreciate whatever you can do 
to break the answers to those questions loose because we 
believe that they are extremely important. And OMB has 
apparently had them for quite some time, and has failed to 
release them. Is that correct?
    Dr. Evans. Yes. There's been some discussion back and forth 
between the Department and OMB on these questions to get them 
to you. We're very much aware of the importance of your having 
that information so that you can continue with this year's 
process, and we are working very hard to get them to you.
    Mr. Saxton. Do you know roughly how long OMB has had your 
responses?
    Dr. Evans. No, I don't, sir.
    Mr. Saxton. OK. Thank you very much. You may proceed, Dr. 
Evans, to give your testimony. We are about an hour and 15 min-

utes into this process, and so we are going to abide by our 5-
minute rule for the second and third panel, so if you would 
proceed to try to stay within the 5 minutes, we would 
appreciate it. Those little lights there in front of you will 
help you understand or know when the time limit has expired. 
So, proceed, sir.
    Dr. Evans. Thank you very much, Mr. Chairman, members of 
the Committee. I'm pleased to be here today to present the 
views of the Department of Commerce on the Americanization of 
the U.S. fishing fleet and U.S. ownership of fishing vessels.
    Before I focus on the Americanization issue, I'd like to 
comment on the overcapacity and overcapitalization issue that 
was raised in your letter--it was noted in your letter. It's 
increasingly evident that excessive investments in harvesting 
capacity can contribute to resource overutilization in 
fisheries. Both domestically and internationally, there's 
little doubt that a significant number of our most valuable 
commercial fisheries are burdened with excessive levels of 
investment and harvesting capacity. The most obvious domestic 
examples of these problems are New England groundfish and 
scallop fisheries, the West Coast groundfish fishery, and the 
Alaska crab fishery.
    The National Marine Fisheries Service is involved in both 
international and domestic activities that will help us better 
manage capacity in the fishery sector. Internationally, we're 
working with the Department of State on an initiative sponsored 
by the Fish and Agriculture Organization of the United Nations 
on managing harvesting capacity throughout the world. At home, 
NMFS has sponsored vessel and permit buyout programs in New 
England, Texas, and the Pacific Northwest and is currently 
working with both the Pacific and North Pacific Councils to 
review the first industry-funded buyout programs developed 
under the new authority for fishing capacity reduction under 
the Magnuson-Stevens Fishery Act. We believe that the Councils 
provide an appropriate mechanism for evaluating the best ways 
to maximize the benefits to the industry while minimizing 
potential costs or social impacts from capacity reduction 
efforts.
    Now, let me address the main matter for today. The 
Committee has requested the Department's evaluation of the 
Americanization of our coastal fisheries. We use the term 
``Americanization'' to mean actions taken to ensure that the 
benefits derived from the use of the U.S. Exclusive Economic 
Zone (EEZ) resources are effectively channeled to U.S. 
enterprises and citizens. This effort began in earnest with the 
passage of the original Fishery Conservation and Management Act 
in 1976. The goals of the FCMA were to phase out foreign 
fishing off U.S. coasts, expand domestic capacity, optimize 
domestic benefits, achieve optimum yield, and enhance economic 
and employment opportunities. In addition to establishing the 
200-mile EEZ, the Act directed the Secretary of Commerce to 
provide the domestic fishing industry priority access to the 
fishery resources in the EEZ.
    In 1979, the Department undertook a major effort to study 
the social costs and benefits of accelerating utilization of 
fishery resources in the EEZ. Based on these findings, the 
White House established a fisheries development policy which 
stated that significant opportunities for industry expansion 
existed and that partner-

ships between local, State, and Federal governments in the 
fishing industry were needed.
    This policy led to the enactment of the American Fisheries 
Promotion Act of 1980 which was directed toward expanding 
commercial and recreational fishing efforts in underutilized 
fisheries. The amendments specifically authorized financial 
assistance to industry, supported the development or expansion 
of market opportunities for U.S. fishery products, and allowed 
foreign access to fishery resources in exchange for ``chips,'' 
including trade concessions, technology transfer, and so on.
    In 1982, the Processor Preference Amendment gave U.S. 
processors preference over joint venture processors for fishing 
allocations, and accelerated the phaseout of joint venture 
processing.
    Finally in 1987, the Anti-Reflagging Act sought to tighten 
domestic ownership requirements by increasing the minimum 
domestic share to 51 percent. These actions had greatly 
Americanized fishing operations by the end of that decade.
    One way to determine whether the goal of Americanizing the 
U.S. fishing fleet has been achieved is to review the level of 
foreign fishing in the EEZ under Governing International 
Fisheries Agreements, GIFAs. The United States currently has 
GIFAs in force, or is taking steps to extend GIFAs, with 
Estonia, Latvia, Lithuania, China, Poland, and Russia.
    At present, the only foreign fishing activity occurring 
within U.S. jurisdiction is joint venture processing of U.S. 
harvested fish off the northeast coast. We permitted joint 
venture processing for Atlantic mackerel and herring by two 
processing vessels from Estonia and two others from Lithuania. 
The total amount of fish available for these activities is 
15,000 metric tons of mackerel and 40,000 metric tons of 
herring.
    Finally, we've also issued transshipment permits under 
section 204(d) of the Magnuson-Stevens Act to one vessel each 
from Cambodia, Russia, and Panama to receive and transport 
processed mackerel from those operations. In addition, last 
year we issued transshipment permits to 14 Canadian herring 
transport vessels operating in the Gulf of Maine.
    While the Department can state that Americanization of the 
U.S. fleet has been achieved, based on the relatively low GIFA-
related fishing activity, it cannot provide the Committee with 
a clear picture of the ownership structures of the U.S. fishing 
fleet. The 1987 Anti-Reflagging Act applied only to vessels 
documented after the date of enactment. However, it's clear 
that significant foreign participation remains because our 
maritime and cabotage laws enable foreign firms to retain and 
even increase ownership shares in some segments of the U.S. 
fishing fleet. Approximately 25,000 fishing vessels documented 
prior to the enactment of the Anti-Regflagging Act are exempt 
from the ownership requirements of that statute. And we have no 
certain information on their present ownership.
    The Department applauds the Committee for its efforts to 
deal with national policy issues on excess harvesting capacity 
and Americanization. However, our fisheries are highly diverse 
and vary substantially in the nature of the fishing vessels 
deployed in different fisheries. Our limited knowledge suggests 
that foreign investment differs markedly from region to region. 
While it would be appropriate for Congress to continue with the 
established trend of Americanizing U.S. fisheries, I'd urge you 
to carefully examine any retroactive application of the 
ownership requirement. Such measurements could have unintended 
impacts on those sectors of the industry currently exempt from 
ownership requirements or on those that rely on foreign 
investment. The retroactive application of the ownership 
requirements could also raise concerns about compliance with 
U.S. obligations to foreign investors under a variety of 
international treaties.
    The National Marine Fisheries Service is prepared to work 
with the Councils, the fishery constituencies, and Congress to 
determine the most appropriate course of action for our 
Nation's fishermen and fisheries. It is the Department's desire 
to reduce levels of harvesting capacity among all classes of 
fishing vessels to levels that are matched with sustainable use 
of our resources and that maximize the economic benefit to our 
Nation.
    Mr. Chairman, this concludes my remarks, but I'm prepared 
to respond to any questions that you might have. Thank you very 
much.
    [The prepared statement of Dr. Evans may be found at end of 
hearing.]
    Mr. Saxton. Admiral North, you may proceed.

 STATEMENT OF REAR ADMIRAL ROBERT C. NORTH, U.S. COAST GUARD, 
  DEPARTMENT OF TRANSPORTATION, ACCOMPANIED BY THOMAS WILLIS, 
                   UNITED STATES COAST GUARD

    Admiral North. Yes, sir. Good morning, Mr. Chairman, 
members of the Committee, I am Rear Admiral Bob North, the 
Assistant Commandant for Marine Safety and Environmental 
Protection. I am pleased to represent the Coast Guard before 
this Subcommittee today to discuss the Americanization of the 
U.S. fishing fleet. With me to my left is Mr. Tom Willis, who 
is the Director of the Coast Guard's National Vessel 
Documentation Center.
    The Anti-Reflagging Act was designed to prohibit the 
reflagging of foreign-built vessels for participation in U.S. 
fisheries. It harmonized fisheries and maritime laws, by 
generally imposing requirements regarding the documentation, 
ownership, manning, and construction of vessels engaged in the 
fisheries trade similar to those imposed on vessels engaged in 
the coastwise trade. The Act also broadened the definition of 
fisheries to include processors and tenders.
    Prior to enactment of Anti-Reflagging Act, it was possible 
to use foreign-built and 100 percent foreign-owned fish 
processing vessels to participate in U.S. fisheries. As a 
result of the Anti-Reflagging Act, fishing vessels today are 
required to have a certificate of documentation with the 
fishery's endorsement, must have 51 percent of their stock 
owned by U.S. citizens, except for vessels that are 
grandfathered from the American control provisions of the Anti-
Reflagging Act.
    Two portions of the Anti-Reflagging Act prove problematic. 
These are the grandfather provisions intended to protect the 
interests of investors already committed to the U.S. fisheries, 
and deal with foreign rebuilding and ownership. I will address 
each separately, because each has a different impact on the 
Americanization of the U.S. fishing industry.
    Prior to the Anti-Reflagging Act, fishing vessels had to be 
built in the United States, but could be rebuilt abroad. The 
Act, among other things, prohibited vessels seeking fishery 
endorsements from being rebuilt in foreign shipyards. However, 
the rebuild grandfather provision in the Act exempted vessels 
that were built in the U.S. before July 28, 1987, and rebuilt 
in a foreign country under a contract entered into before July 
11, 1988, and also purchased or contracted to be purchased 
before July 28, 1987, with the intent to use the vessel in the 
fisheries. The rebuilding grandfather provision also required 
that a vessel rebuilt under the above circumstances had to be 
redelivered to the owner before July 28, 1990. The window of 
eligibility for this exemption has long passed, so no 
additional vessels may be rebuilt outside of the United States 
and enter or reenter the U.S. fishery. Furthermore, no 
additional foreign-built vessels may be documented for use as 
fish processors.
    As mentioned earlier, the Act requiring a fishing vessel to 
be owned by a majority of U.S. citizens. Under the grandfather 
provision, the required 51 percent of U.S. ownership does not 
apply if before July 28, 1987, the vessel was documented and 
operating as a fishing vessel in the Exclusive Economic Zone or 
as contracted for purchase for use as a fishing vessel in the 
U.S. fisheries.
    The ownership grandfather provision of the Anti-Reflagging 
Act has been the subject of much controversy. The Coast Guard, 
following careful examination of the law, concluded that based 
on the plain language of the statute the grandfather provision 
ran with the vessel. Although this was seemingly contrary to 
the purpose of the law, grandfather provisions by their very 
nature run contrary to the overall purpose of a statute.
    Recently, the Senate began consideration of the American 
Fisheries Act of 1998, S. 1221, a bill which among other things 
directly addresses the problems that arose as a result of the 
ownership and rebuild grandfather provisions of the Anti-
Reflagging Act.
    First, S. 1221 would repeal the ownership grandfather 
effective 18 months after enactment. In addition, it would 
increase the American control provision for entities owning 
fishing vessels from 51 to 75 percent. Entities currently 
owning documented fishing vessels and which meet the majority 
American control provisions of the Anti-Reflagging Act would 
have 18 months to conform to the new standard. A proposed 
ownership standard would place fisheries on a par with the 
ownership standard for coastwise trade.
    Additionally, S. 1221 would also provide for the orderly 
phase out of larger vessels, including all of the processing 
vessels known to have been deemed grandfathered from the 
rebuild prohibition of the Anti-Reflagging Act. This would 
remove the remaining 20 vessels which were rebuilt foreign 
under the grandfather provision of the Anti-Reflagging Act.
    The Coast Guard appreciates the opportunity to testify 
about this important matter and stands ready to work with the 
Congress on this issue. I'd be pleased to answer any questions 
that you may have, sir.
    [The prepared statement of Admiral North may be found at 
end of hearing.]
    Mr. Saxton. Admiral, thank you very much.
    I understand, Mr. Willis, you're here just to respond to 
questions. You don't have any testimony? OK, thank you.
    As you noted, we are now into the second bells of our vote. 
We're going to go vote. There are 2 votes, so we'll be 20 
minutes or so before we get back. And at that time, we'll begin 
with our questions. Thank you.
    [Recess.]
    Mr. Saxton. I would like, at this time, to turn the floor 
over to Mr. Young for his questions.
    Chairman Young. Thank you, Mr. Chairman.
    Dr. Evans, does the administration believe the United 
States has the right to restrict the harvest of U.S. fisheries 
resources by foreign vessels?
    Dr. Evans. Does the United States believe that we have the 
right to restrict the--yes, sir.
    Chairman Young. You do?
    Dr. Evans. Yes, under the Magnuson Act. Yes, sir.
    Chairman Young. OK. I want to make certain that that is 
clear for the record.
    Does it concern NOAA, the agency responsible for managing 
and conserving in our fisheries resources that there's 
approximately 29,000 U.S. fishing vessels for which there is 
lack of knowledge about ownership?
    Dr. Evans. Well, it can concern us on a couple of grounds. 
Principally, we're responsible for managing the resource, 
looking out for biology of the resource, and dealing with the 
enforcement of the regulations that are promulgated, initiated 
by the Councils. And from a practical perspective, we apply the 
same kind of enforcement policies regardless of who is driving 
the vessels and where they come from. We look to the Coast 
Guard to provide us with guidance on the ownership and 
documentation of the ownership of the vessels. We need to 
enforce the regulations relative to the harvest and provide for 
the conservation of the stocks regardless of who is on board.
    Chairman Young. Doctor Evans, I just have one comment. You 
know, the Coast Guard's reputation has been thoroughly sullied 
in this whole operation. Have you requested documentation of 
who owns what in these vessels?
    Dr. Evans. Any time that a person applies for a permit to 
go fishing, we rely on the Coast Guard to provide us with 
documentation----
    Chairman Young. Have they done so?
    Dr. Evans. [continuing] for an endorsement.
    Chairman Young. Have they done so?
    Dr. Evans. Yes, they do.
    Chairman Young. Well, we'll get back to you later and see 
how recently this has occurred.
    What's the total number of factory trawlers in the Bering 
Sea fisheries, and the total number in the North Pacific 
fisheries?
    Dr. Evans. I believe it's around 55. Let me check. I have 
Mr. Kent Lind from our North Pacific----
    Chairman Young. He'll write you in a little note there in a 
minute.
    Dr. Evans. OK.
    Chairman Young. How many of these factory trawlers meet or 
exceed the U.S. ownership requirement of 51 percent?
    Dr. Evans. I don't know the answer to that question, sir. I 
don't know the ownership characteristics of those trawlers. 
That's information----
    Chairman Young. Admiral, do you know the ownership 
characteristics?
    Admiral North. Of those in the Bering Sea?
    Chairman Young. Yes.
    Admiral North. Not without knowing which specific vessels 
they are.
    Chairman Young. I would suggest, with all due respect, that 
you knew this hearing was coming forth. I would suggest that 
you find out.
    Admiral North. Sir?
    Chairman Young. Because that is the law.
----------
    From the list of 35 vessels identified as Catcher 
Processors permitted to target North Pacific Pollock for 1997, 
provided to the Coast Guard by the National Marine Fisheries 
Service, 20 meet or exceed the U.S. ownership requirement of 51 
percent.
    Dr. Evans, how does NMPS view fishing permits and fishing 
licenses? Are they revokable? If so, does NMPS issue 
compensation? Are permits or licenses given forever? If not, 
how long are permits or licenses issued? And what's the 
difference between IFQ and other fishery permits?
    Dr. Evans. I'm sorry, sir. I didn't hear the very last part 
of your question.
    Chairman Young. Well, answer the first one. How do you view 
fishing permits and licenses?
    Dr. Evans. Fishing permits are basically permission to use 
the fisheries resource.
    Chairman Young. Are they revokable?
    Dr. Evans. Yes, they're revokable.
    Chairman Young. Do you issue compensation?
    Dr. Evans. No, we do not.
    Chairman Young. They're not forever, are they?
    Dr. Evans. No, they're not.
    Chairman Young. How long are they usually issued? And how 
long are the permits or licenses usually issued?
    Dr. Evans. Well, they vary from fishery to fishery. 
There're some which are renewed annually; some which are issued 
for a period of 3 years. It varies.
    Chairman Young. What's the longest one?
    Dr. Evans. The longest.
    Chairman Young. I mean it's usually 1 to 3 years?
    Dr. Evans. Typically, yes.
    Chairman Young. OK. So in reality, if I was a boat owner, a 
vessel owner, and I caught 16 sea lions in my nets repeatedly, 
you could revoke by permit. Is that correct?
    Dr. Evans. Probably. I would imagine that----
    Chairman Young. If you didn't, I'm sure somebody would----
    Dr. Evans. [continuing] under the Marine Mammal Protection 
Act, where if the 16 sea lions were, you know, characterized as 
a problem, that's a possibility. Certainly, yes.
    Chairman Young. Very likely. Well, let's say I caught an 
abundance amount of bycatch beyond in anyone's acceptable 
amount. You could revoke it, couldn't you?
    Dr. Evans. I'm not sure that there are provisions to do 
that right now. We tend to use other measures to control 
bycatch.
    Chairman Young. OK. Let's get back--how do you revoke a 
license, and what for?
    Dr. Evans. Typically, as a consequence of violations of 
regulations, licenses have been and----
    Chairman Young. That's what I just asked.
    Dr. Evans. [continuing] should be revoked. Yes.
    Chairman Young. What, I mean----
    Dr. Evans. Exceeding a quota, having----
    Chairman Young. I just asked----
    Dr. Evans. [continuing] prohibited species on board, for 
example. Yes.
    Chairman Young. Admiral, how many vessels currently 
involved in the U.S. fisheries are majority foreign? I asked 
that question, majority foreign owned?
    Admiral North. Sir, there's 29,000 some vessels in the 
fishery. There's no data base that shows the total number of 
foreign majority.
    Chairman Young. How many in the Bering Sea?
    Admiral North. I don't know how many in the Bering Sea are 
majority-owned. I don't know what vessels are----
    Chairman Young. Mr. Chairman, I'm going to suggest we have 
the Coast Guard before this Committee for a prolonged period of 
time for more questioning when they are better prepared.
    Why did the Coast Guard follow a course of ownership 
standard which could have led to fully foreign-owned fishing 
fleet in the United States? And didn't the internal Coast Guard 
documents raise this issue, and indicate that it was counter to 
the congressional intent?
    Admiral North. The Coast Guard did what it did in 
interpreting the plain language of the statute.
    Chairman Young. Now, Admiral, be careful here. Did not your 
legal branch warn you of this?
    Admiral North. There were a number of legal opinions within 
Coast Guard that were expressed, and the discussion or the----
    Chairman Young. You chose to disregard them?
    Admiral North. Those were not disregarded; those were 
considered by the Chief Counsel. The Chief Counsel's final 
conclusion was that the grandfather ran with the vessel.
    Chairman Young. OK. That's why we're having a GAO 
investigation, isn't it?
    Admiral North. Yes sir. That's right.
    Chairman Young. That wasn't on your watch, was it?
    Admiral North. It was not.
    Chairman Young. That's good. Well, then, thank God for 
that.
    [Laughter.]
    Because, you know, I have been a big support of your 
agency, and I am thoroughly, thoroughly disappointed.
    Admiral North. Yes sir.
    Chairman Young. I think that someone ought to take the time 
to do a little more research, and I'm not going to particularly 
beat up any individuals. But this is not the intent. Like I 
say, I was the only one sitting on this Committee. We knew what 
our intent was. I'm probably remiss in not finding out what was 
occurring. But to have the Coast Guard, especially, Mr. 
Chairman, when I have about a hundred requests a year on 
documentation for Canadian-made vessel or vessel made in Hong 
Kong or something. And the Coast Guard says, ``Oh, we can't 
document it.'' And yet, I look at this vessel over here. Now if 
you can tell there is some justification for that. I mean that 
is a disgrace to have that--in fact, I want to find out where 
that remaining piece of metal is on that ship. Maybe it's in 
the captain's quarters; it's the only place I can figure out it 
would be. I wonder how they can identify; maybe it has a DNA.
    [Laughter.]
    Thank you, Mr. Chairman.
    Mr. Saxton. We have three members with us who are members 
of the Full Committee but not members of this Committee. And, 
Mr. Pombo, if you would like to take your 5 minutes at this 
point.
    Mr. Pombo. Thank you, Mr. Chairman.
    Admiral, I just have a few questions. Is it standard 
practice for the rights and privileges relating to vessels to 
run with the vessel or with the owner?
    Mr. Willis. Standard practice is that the rights run with 
the vessel. Certain rights accrue only to owners, such as the 
right to engage in coastwise trade because of 75 percent 
ownership. And if a coatwise-eligible vessel was sold to an 
entity that didn't meet the 75 percent during that time of 
ownership, the vessel would not be eligible for coastwise 
trade. If it were sold to an entity that did qualify to engage 
in coastwise trade, the vessel would again hold that right.
    Mr. Pallone. So typically, if they meet the ownership 
requirement, it runs with the vessel?
    Mr. Willis. That is correct.
    Mr. Pombo. Was there a general industry understanding in 
1987 as to the amount of work necessary for a vessel to be 
considered to have been rebuilt overseas?
    Admiral North. There's a regulatory standard for what 
constitutes a new vessel, what constitutes a rebuild. So----
    Mr. Pombo. And that's a regulatory standard?
    Admiral North. Yes.
    Mr. Pombo. And it was understood both within the agency as 
well as in the industry what that standard was at that time?
    Admiral North. It was understood within the agency. Whether 
everyone in the industry understood it or not, I could not tell 
you.
    Chairman Young. Will the gentleman yield?
    Mr. Pombo. Yes.
    Chairman Young. Is that in the regulations there?
    Admiral North. Yes.
    Chairman Young. That is under regulations? There's only two 
pieces of steel; that's considered a rebuild?
    Admiral North. Yes, sir.
    Chairman Young. Where is that regulation?
    Admiral North. 46 CFR 67.
    Chairman Young. You have it? That's not the current 
standard. Hello?
    Admiral North. Yes.
    Chairman Young. It's the current standard.
    Admiral North. Yes sir.
    Chairman Young. I beg to differ with you, but I'd like to 
see where it is. And I don't think that's the standard at all.
    Admiral North. It is the standard.
    Chairman Young. OK. Well, we'll see.
    Mrs. Linda Smith. Would the gentleman yield?
    Chairman Young. Yes.
    Mrs. Linda Smith. Those pictures before me, that is a 
rebuild?
    Admiral North. Yes. That is correct.
    Mrs. Linda Smith. Does that meet that standard?
    Admiral North. Yes.
    Mrs. Linda Smith. So that any piece of metal of any size is 
the standard?
    Admiral North. Not any piece of metal of any size.
    Mrs. Linda Smith. Obviously, there isn't much there. 
There's nothing that is structurally going to build that boat 
and that. So, give me the standard then. I can see no standard. 
That's like the little one we take out compared to one that is 
commercial. That's barely commercial. We have one of those like 
that in our family. But that is not that.
    Mr. Willis. Typically, rebuilt vessels may include mid-
bodies, and so forth. That has been a fact since the second 
proviso was enacted back in the 1950's. The standard is that if 
any structural parts from an existing vessel are used in 
constructing a vessel and those parts are not torn down to a 
degree where they're committed to use in building a vessel, you 
do not have a new vessel.
    The new vessel standard was written very tightly to protect 
American interests. In this case, it has been turned in a 
different direction.
    Mrs. Linda Smith. Obviously, that's not a standard.
    Chairman Young. Madam, I'm getting a little confused 
because I got something in front of me, Admiral, that says only 
7.5 percent of a vessel can be changed on a rebuild in order to 
keep your U.S. documentation.
    Now, the gentleman on the right, is that correct?
    Mr. Willis. No, sir, that is not correct. If it's 7.5 
percent or less it is not deemed rebuilding at all; between 7.5 
and 10 percent, it may be a rebuilding; above 10 percent, it is 
a rebuilding. We're talking about two separate issues here--new 
vessel versus rebuilding.
    Chairman Young. We're talking about rebuilding?
    Mr. Willis. Yes, sir.
    Chairman Young. Now to keep your documentation, there is no 
standard then? There is no standard. That is not--that cannot 
be a standard. If it is, we've got to change it. That is not a 
standard.
    Mr. Willis. The standard, Mr. Young, is that if you rebuild 
and use less than 7.5 percent, you do not lose any entitlements 
which you might have such as coastwise; but if you do exceed 
the 10 per-

cent, then you will lose entitlement to engage in the coastwise 
trade and fisheries.
    Chairman Young. You think that's more than 10 percent 
there?
    Mr. Willis. Yes, sir, I do. And if that project were 
performed today, it would absolutely lose all privileges.
    Chairman Young. When----
    Mr. Willis. Absolutely.
    Chairman Young. [continuing] did they change?
    Mr. Willis. Pardon?
    Chairman Young. When did that change? Since 1987, when 
was--did the Coast Guard change it?
    Mr. Willis. No, sir, the Coast Guard did not change it. The 
Anti-Reflagging Act, as we read it, permitted rebuildings. This 
is a rebuilding. It is not a new vessel.
    Mrs. Linda Smith. Would the gentleman yield?
    Chairman Young. Yes, I'll continue to yield.
    Mrs. Linda Smith. Then my understanding is on the 
reflagging, then at that point we dropped all reasonable 
standards of a rebuilding and you took that opportunity then. 
Up to that point, there were reasonable standards. But at that 
point, anything went, and we no longer had standards because it 
qualified then, as you said, as a rebuild. So, we changed.
    Mr. Willis. The Coast Guard did not change the standard. 
Any vessel could be completely rebuilt overseas without losing 
privileges prior to effective date in the Anti-Reflagging Act.
    Mrs. Linda Smith. So there was no standard----
    Mr. Willis. There was no standard----
    Mrs. Linda Smith. [continuing] as to what percentage?
    Mr. Willis. [continuing] for fishing vessels prior to the 
Anti-Reflagging Act.
    Chairman Young. This vessel, ma'am--this vessel was built 
in that gap, wasn't it?
    Mr. Willis. Yes, it was, sir.
    Chairman Young. In fact, it was put on the waves after the 
passage of the Act.
    Mr. Willis. Yes, sir.
    Chairman Young. I'm thoroughly confused. You said it 
couldn't be done after the reflagging.
    Mrs. Linda Smith. That's right.
    Mr. Willis. It couldn't be done after the windows enacted 
in the Anti-Reflagging Act.
    Admiral North. Unless it were grandfathered.
    Chairman Young. Was this vessel on the waves when we passed 
the Act?
    Mr. Willis. No, sir. But the Anti-Reflagging Act required 
that it be rebuilt under a contract entered into within 6 
months after enactment of the Anti-Reflagging Act.
    Chairman Young. Do you know when this contract was entered 
into?
    Mr. Willis. We can provide that information; yes, sir.
    Chairman Young. Thank you.
    [The information follows:]
----------
    The date of the ACONA's contract was July 10, 1988.
    Mr. Pombo. Can I have two additional minutes?
    [Laughter.]
    Which leads me to my next question.
    [Laughter.]
    Assuming that all relevant documents provided to the Coast 
Guard concerning the grandfather vessels to be true and 
correct, does the Coast Guard consider the foreign rebuilding 
of grandfather vessels that are purchased, or sailed since 
1987, or their entry into U.S. fish areas as fraudulent or 
illegal?
    Admiral North. No.
    Mr. Pombo. So the statement that these entered into the 
fisheries fraudulently or illegally, the Coast Guard would not 
consider to be correct?
    Admiral North. Of those 23 vessels that were rebuilt under 
the grandfather clause, there was one vessel, this vessel in 
particular, where an issue has been raised as to whether the 
documentation that was provided was appropriate or correct. We 
have no other knowledge or reason to believe that of the other 
22 vessels, the documentation provided to prove the rebuild of 
the vessel, the grandfather rebuild, was not correct.
    Mr. Pombo. If you were provided with the documentation 
showing that these vessels entered in a way that was not true 
and correct, that they were fraudulent or illegal, would you 
remove them?
    Admiral North. It could be removed, yes.
    Mr. Pombo. And what would that take to remove them? Could 
the Coast Guard do it?
    Admiral North. Can we do that? Yes, but we would need 
whatever documentation one has that would tend to prove the 
documentation originally submitted was false.
    Mr. Pombo. So, if anyone could provide you a documentation 
showing that these vessels entered into the fishery 
fraudulently or illegally, you could remove them----
    Admiral North. Yes.
    Mr. Pombo. [continuing] under current law?
    Admiral North. Yes.
    Mr. Pombo. If there was evidence of speculation by 
particular vessel owners subsequent to the passage of the Anti-
Reflagging Act, would such speculation have provided the Coast 
Guard with a legal basis under this or any other act for 
refusing to issue such a vessel a certificate of documentation 
with a fishery's endorsement?
    Admiral North. I'm not sure how you would define 
speculation. I know Senator Stevens gave us his definition, but 
if you look at the documentation again for the various vessels 
involved, and you look at the time frames provided under the 
Act, with the exception of the ACONA and the information we've 
been provided in that case, there is nothing to suggest that 
the documentation was not correct.
    Chairman Young. Will the gentleman yield just for a moment?
    Mr. Pombo. Sure.
    Chairman Young. Admiral?
    Admiral North. Yes.
    Chairman Young. Most of these were done within a 2-month's 
period. You don't call that speculation? Maybe it's seize an 
opportunity, but it's speculation, too.
    Admiral North. Not my definition.
    Chairman Young. I know it's not your definition, I know, 
but I hope you don't take offense because you weren't on this 
watch. I wished you were on the watch.
    Admiral North. Yes, sir.
    Chairman Young. You'd have a lot of problems today. But 
you've got to tell me that you don't think--you don't consider 
that speculation? Do you deal in the stock market?
    Admiral North. No, I don't.
    Chairman Young. You don't? Well, you're probably smarter 
than I am then. Thank you.
    [Laughter.]
    Mr. Pombo. The difference between a permit to fish and 
endorsement on a ship, can you explain that to me?
    Admiral North. I believe we're talking about a permit 
issued by NOAA for certain species, versus the endorsement on a 
certificate of documentation which allows a vessel to engage in 
a trade called the fisheries.
    Mr. Pombo. So the definitions are not interchangeable? One 
is the permission to fish in a particular fishery, the other 
one is the ability to use a boat to fish?
    Admiral North. One is the ability to engage in a trade; the 
other is a permit to allow you to take a certain amount of 
catch or to engage in a certain fishery.
    Mr. Pombo. So you would--your answer is that there is a big 
difference between a----
    Admiral North. Yes.
    Mr. Pombo. [continuing] permit and an endorsement?
    Admiral North. Yes.
    Mr. Pombo. Thank you, Mr. Chairman.
    Mr. Saxton. Thank you, Mr. Pombo.
    Mrs. Chenoweth.
    Mrs. Chenoweth. Admiral?
    Admiral North. Yes, ma'am.
    Mrs. Chenoweth. The Coast Guard issues the endorsement?
    Admiral North. The endorsement on the certificate of 
documentation, yes.
    Mrs. Chenoweth. And the endorsement transfers with 
ownership? It's pertinent to the vessel?
    Mr. Willis. The endorsement can be issued if the vessel 
meets the qualifications for the trade. Transfer of an 
endorsement is not automatic, however. In order for the 
endorsement to be transferred, the new owner must qualify for 
the endorsement, either by conforming to the law or qualifying 
under a grandfather provision, and must make application for 
the endorsement. Even if the vessel is qualified for an 
endorsement, if the new owner does not qualify for the 
endorsement, it cannot be transferred. If the new owner does 
not apply for the endorsement because of a desire to use the 
vessel in a service for which the endorsement is not required, 
the endorsement will not be issued. However, this does not 
prevent a future qualified owner from obtaining the 
endorsement.
    Mrs. Chenoweth. But the endorsement is different than the 
permit, and----
    Mr. Willis. The endorsement is different from the permit.
    Mrs. Chenoweth. Can you use the vessel for fishing purposes 
without the endorsement?
    Mr. Willis. Not on U.S. navigable waters or in the EEZ.
    Mrs. Chenoweth. So the endorsement, then, is appurtenant to 
the vessel ability to fish?
    Mr. Willis. Absolutely.
    Mrs. Chenoweth. Then one could say that the endorsement is 
a private-property use right?
    Mr. Willis. I'm not qualified to answer that question.
    [Laughter.]
    Mrs. Chenoweth. If you aren't, who is?
    [Laughter.]
    Now, does NOAA issue the permit to fish?
    Dr. Evans. Yes, we do.
    Mrs. Chenoweth. So the permits and the endorsements are two 
entirely different--one's a permit, and one----
    Dr. Evans. Right.
    Mrs. Chenoweth. [continuing] is a right.
    Dr. Evans. There is a wide range of permits. There are 
different kinds of permitting that take place in different 
fisheries and different places. They last for different times. 
Some of them are tied to quotas; some of them are permission to 
fish in open access fisheries. There's a wide variety of 
permits. It's the way that we have to regulate the fisheries 
basically, yes.
    Mrs. Chenoweth. Dr. Evans, none of the permits that you 
have referred to in your answer to me are endorsements?
    Dr. Evans. That's correct.
    Mrs. Chenoweth. There's only one endorsement and that goes 
with the vessel, right?
    Dr. Evans. That's correct.
    Mrs. Chenoweth. The permit goes with the season and the 
conditions of the ocean?
    Dr. Evans. Right.
    Mrs. Chenoweth. Thank you.
    Mr. Saxton. Thank you, Mrs. Chenoweth.
    Mrs. Smith.
    Mrs. Linda Smith. Thank you, Mr. Chairman. You've been very 
lenient so far, and I appreciate that.
    I have two issues I'm trying to grapple with and that is 
private-property rights, and obviously the last question Mrs. 
Chenoweth addressed that. I'm going to try to clarify a 
question. It's because I don't totally understand, and 
certainly you do understand the fishery better than I at this 
point.
    In our household and in our family, we both fish. And we 
have some that commercially fish, and we have some that are 
private. But we have known for a long time that when we buy 
equipment whether it be for private or commercial, that we are 
relying then on the resource being allocated to us. When I buy 
fishing licenses or hunting licenses, or even picking berries, 
I have to go get that permit. And sometimes I get it, depending 
on the resource, and sometimes they'll restrict it to me. I 
bought equipment, but the equipment can't be used unless I get 
the permit. Tell me how it is different with these ships who 
have the same characteristics, or is it similar? I'm trying to 
establish a private-property right discussion because I am 
trying to sort that out. I don't have a right--from what I can 
see--to hunt or fish anytime I want because I happen to have 
the equipment. Is there a difference here that would designate 
some type of a right beyond the fact that I have the equipment. 
And my equipment is authorized, as are certain of my guns and 
certain of my--I can't fish with hooks in certain fishing runs 
if certain equipment is allowed. How is it any different than 
having equipment and a permit when you come to this fishery?
    Dr. Evans. You're directing that--I'll take a crack at that 
and see if I understand it.
    Mrs. Linda Smith. Yes, thank you.
    Dr. Evans. Obviously, you need appropriate equipment, and 
we can place regulations upon the characteristics of the 
equipment that is used to pursue the fishery. But you also need 
to have a permit; you need to fish in season; you need to 
comply with a whole variety of regulations with----
    Mrs. Linda Smith. Which is what I get when I get a 
license----
    Dr. Evans. Exactly.
    Mrs. Linda Smith. [continuing] or a permit.
    Dr. Evans. Exactly.
    Mrs. Linda Smith. So it has the same two characteristics.
    Dr. Evans. Yes.
    Mrs. Linda Smith. I'm trying to establish whether I have a 
private-property right because I have both.
    Dr. Evans. I can't answer that. I can tell you that the 
permit is quite analogous to your hunting or fishing permit in 
general, or your berry-picking permit, for that matter, yes.
    Mrs. Linda Smith. The other question I have comes around 
the amount of investment in these ships. I'm trying to sort 
each one of them out--where they come from, when they were 
retrofitted or rebuilt, where they were rebuilt, and where they 
were capitalized. Because some of them, I'm finding, have 51 
percent in America; but where the money is, is really where the 
control is. So they'll have 51 percent in our State or in our 
country, but they were totally capitalized somewhere else. They 
are built--all the money came from somewhere else. So they 
might show controlling stock interests, but we all know that he 
that he who has the money is really the one in control. So, 
what I'm asking is a question of value of these ships. My 
understanding is we're talking about several million, hundreds 
of millions of dollars to build these. Is that right?
    Dr. Evans. I'm sure in the case of some vessels, yes.
    Mrs. Linda Smith. OK. So, if an asset only had--say the 
value of the original ship was an American vessel, which is 
what we need, right? We needed something, one little piece of 
something to be the original. If, let's say, that was the only 
American investment in dollars, and it was $100,000 dollars in 
assets. But on paper, it shows that the American interest, 
which is that, is 51 percent; is that 51 controlling percent 
just because it shows on paper to be controlling stock?
    Mr. Willis. We require that 51 percent of all classes of 
stock be owned by U.S. citizens, and in our regulations we 
state that equity is the issue. So we are concerned about U.S. 
equity in the regulation.
    Mrs. Linda Smith. OK. So, that does answer what you're 
concerned with. I don't know that that answers the actual 
application right now. But you do consider equity?
    Mr. Willis. Yes.
    Mrs. Linda Smith. OK, you've answered my questions. Thank 
you.
    Mr. Pombo. Will the gentle lady yield? I had an additional 
question.
    Mrs. Linda Smith. Yes, I'll yield.
    Mr. Pombo. If we were to remove--is it 23 vessels? Would 
there be less fish--and I guess this is for Dr. Evans--less 
fish caught then are currently caught if we took this class of 
boats out of the fishery? Would you then have less fish taken 
out of the fishery next year?
    Dr. Evans. No, I don't think so. There's plenty of capacity 
there to harvest the full quota of pollock, for example.
    Mr. Pombo. So it's not a matter of there being there or 
less fish caught? That would not impact----
    Dr. Evans. I don't think so.
    Mr. Pombo. [continuing] the decision that you make?
    Dr. Evans. I don't think so.
    Mr. Saxton. Will the gentleman yield?
    Mr. Pombo. Yes.
    Mr. Saxton. Just let me try to make a point which you're 
speaking to. When Senator Stevens was here, he made the point, 
and I think he repeated the point, that this is an 
overcapitalized fishery. And Dr. Evans is right; it is so 
overcapitalized that taking these ships out of the fishery 
probably would not reduce the catch, but it moves toward a 
lesser capitalized fishery which is where we want, eventually, 
to go.
    Mrs. Chenoweth. Would the lady yield?
    Mr. Saxton. The gentle lady's time has expired. We'll be 
lenient and permit you to ask one more question, and then we're 
going to move on.
    Mrs. Chenoweth. Mr. Chairman, in focusing on the 
overcapitalization rather than either a scarce resource or the 
overriding public health, safety, and welfare goal which 
usually has been the standards in the courts for a governmental 
taking. I, out of great respect for the chairman, I honestly do 
feel that we're moving into new and unchartered waters. And I 
appreciate the fact that you are holding this hearing and 
allowing these issues to come out. And I just want to thank you 
very much for doing that. But I do think that if this Congress 
establishes overcapitalization as a new standard for perhaps 
taking, we may be moving into dangerous waters.
    Thank you very much.
    Mr. Saxton. Admiral, let me just ask my questions, if I 
may. Other types of fishing vessels are endorsed by the Coast 
Guard as well; is that right? Smaller vessels?
    Admiral North. Yes, sir. All vessels that are in the 
fishery, whatever fishery it may be.
    Mr. Saxton. Scallop fishery, the long-line fishery----
    Admiral North. For U.S. flag vessels.
    Mr. Saxton. [continuing] whatever the fishery is?
    Admiral North. Yes, sir.
    Mr. Saxton. In New England, we recently saw--or there is 
recently pending from Dr. Evans' shop, a proposal to 
dramatically reduce fishing days permitted for scallopers. If 
that new regulation is adopted, does there come into play a 
takings issue?
    Admiral North. Again, I don't believe that I can really 
answer a question on taking versus----
    Mr. Saxton. Well has there historical, when we reduce 
permitted catches? Has there ever been a takings issue?
    Admiral North. Not that I'm aware of. I'm not versed in 
what a taking issue is. I'm not a lawyer; all I can tell you is 
the vessel documentation laws don't get into that issue.
    Mr. Saxton. Dr. Evans, would you like to comment?
    Dr. Evans. Let me just check with my counsel. I don't 
believe that there's a case.
    No, to the best of our knowledge, there's not--the issue 
has not been raised. We regulate fisheries, increase quotas, 
decrease days at sea, increase them, have closed areas. There 
are many kinds of regulations which greatly impact the fisher's 
ability to prosecute the fishery.
    Mr. Saxton. In the Gulf of Mexico, back in the 1980's, we 
required a gear change for shrimpers with the provisions 
relative to turtle-excluder devises. Was there any takings 
issue considered there?
    Dr. Evans. Not that I'm aware of.
    Mr. Saxton. When we closed the red fish fishery in the Gulf 
of Mexico, was there a takings issue?
    Dr. Evans. No, sir.
    Mr. Saxton. Striped bass in the northeast?
    Dr. Evans. No.
    Mr. Saxton. Fifty percent reduction in shark in the 
Atlantic?
    Dr. Evans. I don't think so; no. It hasn't been raised as 
an issue.
    Mr. Saxton. Sea urchins on the West Coast?
    Dr. Evans. No, sir.
    Mr. Saxton. So without going further, which I could do, 
basically we have set a--we're not upon setting out on new 
waters here or creating a new precedent with our discussion 
here. If we fail to issue permits or if--let me ask this 
question. Can the Congress change the eligibility standings for 
qualifying for fishing permits?
    Dr. Evans. I believe so; yes.
    Mr. Saxton. And as far as you----
    Dr. Evans. I mean you've established the laws under which 
we issue the permits. We try to prosecute those laws as best we 
can.
    Mr. Saxton. And if we choose to say, in establishing 
qualifications for fishing permits that of a ship over 165-feet 
long with more than 3,000 horsepower does not qualify for a 
fishing permit, then you could administer that law without fear 
of reprisal under some kind of a takings?
    Dr. Evans. Well, I'm not sure--we would certainly 
administer that law. If you passed it, we would certainly 
administer that law. But in my experience in the Fishery 
Service it seems possible for us to be, you know, sued and 
challenged on almost all the decisions that we prosecute----
    [Laughter.]
    [continuing] so, I wouldn't go so far as to say that we 
wouldn't be, but we would certainly comply.
    Mr. Saxton. Does changing qualifications lead to any 
compensation generally to those who don't meet new 
qualifications?
    Dr. Evans. Not that I'm aware of; no.
    Mr. Saxton. Thank you very much. I have no further 
questions.
    Mrs. Chenoweth. Would the gentleman yield?
    Mr. Saxton. Briefly.
    Mrs. Chenoweth. Thank you, Mr. Chairman. I very much 
appreciate your indulgence, but I think there's a fine line 
that you so astutely were able to bring out.
    Dr. Evans, do you have any authority or any jurisdiction 
over the issuance of an endorsement?
    Dr. Evans. No, ma'am, we do not. The endorsements are 
issued by the Coast Guard.
    Mrs. Chenoweth. And so, for the retrofitting of a boat such 
as we see here, you have absolutely no authority over that?
    Dr. Evans. That's correct.
    Mrs. Chenoweth. And your authority lies with the issuance 
of the permit and the carrying out of the terms and conditions 
of the permit?
    Dr. Evans. That's correct.
    Mrs. Chenoweth. Such as closing fishing to certain species 
in certain areas, you have that authority?
    Dr. Evans. That's right.
    Mrs. Chenoweth. And the permit is seasonal?
    Dr. Evans. Can be, yes. Or----
    Mrs. Chenoweth. And the permit is not appurtenant to the 
property or the vessel, itself; right? The permit is issued on 
the basis of ocean conditions and the season?
    Dr. Evans. Right, and can only be issued to people who are 
qualified, for example, who would have an endorsement.
    Mrs. Chenoweth. The endorsement has to come first?
    Dr. Evans. Right.
    Mrs. Chenoweth. Thank you, Doctor.
    Mr. Saxton. Thank you very much, Panelists, for your 
testimony and for answering our questions.
    At this time, we're going to move on to panel No. 3. We 
have Mr. Joe Plesha, the general counsel of Trident Foods 
Corporation; Mr. Jim Gilmore, director of Public Affairs at the 
At-Sea Processors Association; Mr. Eugene Asicksik, president 
of Norton Sound Economic Development Corporation; Mr. Michael 
Kirk of Cooper, Carvin and Rosenthal; Mr. Frank Bohannon, the 
vice-president of United Catcher Boats; and Mr. Gerald Leape of 
Greenpeace.
    Welcome aboard, if you can all fit.

  STATEMENT OF JOE PLESHA, GENERAL COUNSEL, TRIDENT SEAFOODS 
                          CORPORATION

    Mr. Plesha. Thank you, Mr. Chairman, members of the 
Committee. I appreciate the opportunity to testify today. My 
name is Joe Plesha, and I work for Trident Seafoods.
    Mr. Chairman, during consideration of the Anti-Reflagging 
Act, you, Congressman Young, and other Members of Congress were 
led to believe that there were substantial, identifiable, and 
irrevocable commitments by U.S.-owned fishing companies to 
rebuild their vessels in foreign shipyards. In reliance on 
those representations, Congress allowed foreign rebuilding for 
particular owners of vessels which were purchased before July 
27, purchased with the intent that the vessels be used in the 
fishery, and which had entered into a contract to rebuild that 
vessel in foreign shipyards by July 12, 1988.
    I'd love it if I could describe each and every project that 
entered in under this grandfather provision, but because of 
time, I just want to describe two that came in under this 
grandfather.
    Congress was told that the vessel STATE EXPRESS would be 
converted into a 500-gross ton, Coast Guard-inspected 
refrigeration cargo vessel. The facts are that on July 8, 1987, 
Sunmar Holdings acquired an option to purchase the STATE 
EXPRESS. The agreement required that Sunmar convey in writing 
to the seller its intent to purchase or reject the vessel by 
September 6th. That option was extended twice.
    Finally, on February 29, 1988, 7 months after the purchase 
cutoff date, Sunmar gave written notice of its intent to 
purchase the vessel. Then on July 10, 1988, 2 days before the 
rebuild cutoff date, Sunmar signed a document which 
contemplated rebuilding this vessel in a Norwegian shipyard. 
But the document contained conditions which allowed either 
party to walk away from the project without penalty. Under U.S. 
law, there was no legally binding consideration. Lawyers 
representing the project said that U.S. law didn't matter 
because the agreement was a valid contract under Norwegian law.
    The STATE EXPRESS, a vessel of less than 500 gross tons was 
ultimately rebuilt into a 376-foot factory trawler of almost 
5,000 gross tons, now called the ALASKA OCEAN.
    A second example is the vessel ACONA. Although the rebuilt 
grandfather specifically requires that evidence of the intent 
that the vessel was purchased for use in the fishery be in the 
contract of purchase itself, this small research vessel was 
grandfathered based solely on a very short letter of intent. 
According to the seller of the ACONA, he was asked to sign that 
undated letter of intent well after the actual sale. The letter 
was then allegedly backdated and submitted to the Coast Guard 
as evidence of the intent that the vessel was purchased for use 
in the fishery. The paperwork for this project was then sold to 
a foreign-owned fishing company, and the vessel was rebuilt 
into what now is the AMERICAN TRIUMPH, the single largest fish 
producer in the Bering Sea pollock fishery.
    Now lawyers representing these projects claimed that they 
were just following the plain meaning of the statute's 
grandfather provisions. But the plain meaning of the language 
requires that these foreign rebuilt vessels be under a contract 
of purchase, not an option to purchase. The plain meaning of 
the statute requires evidence of intent to use the vessel in 
the fishery, quote, ``be in the contract itself,'' close quote, 
not in a backdated letter of intent. The plain meaning requires 
a rebuilding contract entered into by July 12, 1988. And I can 
only assume that Congress meant a rebuilding contract valid 
under U.S., not Norwegian, law.
    These boats do not belong in the U.S. fishery under the 
law, Mr. Chairman. The Coast Guard blew the call. I think the 
Coast Guard made a disastrous decision when it issued ruling 
letters allowing foreign-owned corporations to purchase any 
vessel that was in the fishery as of 1987.
    In the case of the foreign ownership grandfather, though, 
at least the Coast Guard's Division of Maritime and 
International Law got the call right when it held the correct 
interpretation is that the savings provision terminates once 
the vessel is sold or transferred. Unfortunately, the Coast 
Guard's written, legal opinion was not followed by its Special 
Documentation Office.
    Because of abuses in the Act's grandfather provisions, a 
flood of foreign-built, foreign-owned, foreign-subsidized 
vessels has entered the North Pacific fisheries. Foreign 
control of our fisheries is increasing each year. It is likely 
that over a billion pounds of groundfish is now harvested in 
the North Pacific by foreign-owned fishing vessels. The pollock 
season has been reduced from a year-round fishery in 1989 to 
one that lasts just over 2 months each year now. The remainder 
of the year, our investments lie idle.
    My company, Trident Seafoods, is 100 percent American-
owned. It's a seafood processing company, and during its 25-
year history, we have never once declared a dividend for our 
company shareholders. Instead, all of our earnings have been 
reinvested back into the business. After the Anti-Reflagging 
Act was passed in late 1987, we invested well over $100 million 
dollars to expand our plants in Alaska to process pollock into 
various product forms including surimi. Every penny of the 
money of those investments came from earnings or borrowings 
from U.S. banks. Trident's plants were built with U.S. 
materials, U.S. labor; our employees are U.S. residents.
    We made these investments because the cornerstone of the 
Magnuson-Stevens Act was to Americanize the utilization of our 
Nation's fishery resources. Yet, unless Congress removes the 
fishing privileges--and I do mean privileges--from the vessels 
that blatantly abuse the Act's rebuild provision and requires 
true U.S. ownership and control of American flag fishing 
vessels, the goals of the Magnuson-Stevens Act will have been 
defeated. And those of us who invested everything that we had 
in this industry to truly Americanize the fishery will be 
displaced.
    Thank you.
    [The prepared statement of Mr. Plesha may be found at end 
of hearing.]
    Mr. Saxton. Thank you very much.
    Mr. Gilmore, please.

 STATEMENT OF JIM GILMORE, DIRECTOR OF PUBLIC AFFAIRS, AT-SEA 
                     PROCESSORS ASSOCIATION

    Mr. Gilmore. Thank you, Mr. Chairman, and members of the 
Committee. I am Jim Gilmore; I represent the At-Sea Processors 
Association, a trade association comprised of companies that 
own and operate 23 U.S. flag catcher/processor vessels. Our 
member vessels participate primarily in the Bering Sea pollock 
and West Coast Pacific whiting fisheries. APA companies have 
made signifi-

cant contributions to Americanizing U.S. fishery resources and 
in creating benefits in the local, regional, and national 
economy.
    Recently, competing fishing interests have attempted to 
mischaracterize U.S. flag catcher/processors as foreign vessels 
because of foreign investment in the fleet, such as that found 
in many other sectors of the U.S. seafood industry.
    All vessels in the U.S. catcher/processor fleet are U.S.-
built vessels and are operated by U.S. corporations formed 
under the laws of the U.S. or a State. The corporations and 
documented U.S. vessels are subject to all laws of the U.S., 
including tax, environmental, labor, and all other applicable 
laws and regulations. We are subject to maritime manning 
requirements, that 75 percent of the crew members on-board 
vessels be U.S. residents. We estimate that APA member vessels 
easily exceed that minimum requirement.
    Our principal competitors, onshore processors, are not 
subject to similar manning requirements. And independent 
reports indicate that, indeed, Bering Sea shore plants hire a 
high percentage of foreign guest workers. Government surveys 
report that at-sea processing workers earn two to three times 
higher wages than workers in onshore plants. Also, the catcher/
processor fleet produces a higher percentage of pollock 
products for the domestic consumer. Major U.S. seafood buyers 
such as Long John Silver's restaurants point out that onshore 
plants, particularly the Japanese-owned onshore processors in 
the Bering Sea, largely produce surimi for export to Japan 
regardless of what market prices are between surimi and fillet 
products, the two principal product forms.
    It has also been pointed out by the National Marine 
Fisheries Service, and more importantly in the seafood 
marketplace, that at-sea processed products are consistently 
higher grade than pollock products made onshore. That benefits 
the American consumer and helps boost U.S. export earnings for 
those products that we do produce for overseas markets.
    While our record of Americanizing the North Pacific 
fisheries is good, some suggest going further. Some suggest 
revoking the ownership grandfather contained in the Anti-
Reflagging Act that extends to most U.S. fishing and fish 
processing vessels. The grandfather exempts these vessels from 
having to meet the 51 percent U.S. citizen ownership 
requirement.
    APA member companies support eliminating the grandfather 
rights that cover all of our catcher/processor vessels. 
Revoking the grandfather will result in changes of ownership 
for certain companies. APA urges that companies be provided a 
reasonable period of time to comply with the new set of rules. 
In addition, we do compete in an international marketplace, and 
ask Congress not to limit our ability to sign long-term 
marketing agreements with foreign buyers or to seek financing 
from abroad.
    Unfortunately, some advocate going even further, that is 
revoking fishery endorsements for a substantial portion of the 
U.S. catcher/processor fleet when they come into compliance 
with new ownership standards. That's right. Some advocate 
eliminating vessels from the fishery that have lawfully and 
responsibly participated in U.S. fisheries since 1990 and 
earlier. This proposal places at risk at least 1,500 jobs held 
by licensed officers, fishermen, and processing workers. It 
will also force the forfeiture of investments held by 
individuals who relied on the law as well as executive and 
judicial branch rulings that confirm that their projects were 
consistent with all relevant laws and regulations.
    We have up here a third chart--perhaps a little less 
dramatic than Senator Stevens: You see the cover of this 
month's Alaska Fishermen's Journal, ``In and Out?''--question 
mark. You'll see the two vessels in the top right-hand corner. 
They are foreign-built vessels that would be allowed to stay in 
under the Senate bill. The other vessels are U.S.-built, but 
foreign-rebuilt, vessels that would be out under the 
legislation.
    Some advance the rationale that revoking fishery 
endorsements for certain U.S. catcher/processors is intended to 
punish speculators. These speculators are individuals deemed to 
have rushed through business deals back in 1987 that resulted 
in the rebuilding of vessels overseas. But the proposal to bar 
certain vessels from the fishery doesn't penalize the 
speculators, they are long gone. It punishes the American 
workers, fishermen who have stayed the course, or more recent 
purchasers of vessels who made investments based upon the law.
    Another rationale is that the fisheries are 
overcapitalized. Mr. Plesha and Mr. Bohannon suggest that 
someone has to go, and that someone would be us. And that is 
the nub of the issue, allocation. Should Congress be in the 
business of allocating fish among participants in the fishery?
    NMFS has stated in its Senate testimony that proposals to 
bar certain vessels from the Bering Sea pollock fishery offer 
no conservation benefits and are not an effective method of 
addressing overcapitalization. The same amount of fish will be 
caught. There will continue to be a race for the fish. And NMFS 
has even suggested that within 1 or 2 years, capacity would 
return to the fishery that was taken out under the Senate 
legislation. There is not likely to be a reduction in bycatch, 
nor will there be increased utilization of fishery resources as 
the race continues.
    There will be winners and losers, but legislating winners 
and losers in the marketplace is not Americanization.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Gilmore may be found at end 
of hearing.]
    Mr. Saxton. Thank you very much.
    Mr. Asicksik.

STATEMENT OF EUGENE ASICKSIK, PRESIDENT, NORTON SOUND ECONOMIC 
                    DEVELOPMENT CORPORATION

    Mr. Asicksik. Yes, thank you, Mr. Chairman, members of the 
Committee. My name is Eugene Asicksik. I am president of Norton 
Sound Economic Development Corporation, which is a managing 
organization for 15 western Alaska villages participating in 
the Western Alaska Community Development Quota Program.
    Let me start by saying that NSEDC is totally in support of 
the Americanization of the Bering Sea fisheries. In fact, from 
our standpoint we are not only in support of Americanization, 
but also Alaskanization.
    This has happened in our case where 15 western Alaska 
villages of NSEDC have 50 percent ownership of Glacier Fish 
Company, a company which owns two catcher/processors and one 
long-line vessel. Our ownership carries through to the 
harvesting, the processing, and the marketing of the fishery. 
Through our direct participation and in ownership in the Bering 
Sea fisheries, we have learned a lot about the Bering Sea, both 
what is working and what is not working.
    In addition to NSEDC, another CDQ group has an ownership 
position in catcher/processor, and several CDQ groups have 
ownership positions in long-line vessels and crabbers.
    In the pollock fishery, which is the single largest fishery 
in the Bering Sea, there is extensive foreign ownership in the 
onshore sector. Nearly 70 percent of the onshore factories 
which process Bering Sea pollock are foreign-owned. This 
foreign-owned processing carries directly through to foreign-
owned marketing. Almost all of the production of the shore-
based plant is surimi, which is largely the Japanese market. In 
addition, foreign ownership is increasing in the catcher boat 
fleet which delivers to the foreign-owned processors.
    In summary, the Bering Sea pollock and onshore trend is 
actually going backward to more foreign.
    I should clarify a point here which occasionally causes 
confusion. In the Bering Sea pollock fishery, the term onshore 
and offshore refer to the physical location of the processing 
facilities. They do not mean domestic and foreign as the 
onshore and offshore label might imply if we were referring to, 
for example, banks.
    So back to the pollock fishery; in the offshore sector, 
there are vessels called motherships which are vessels which 
only process the pollock after being harvested and delivered by 
catcher boats. And there are catcher/processors in which both 
activities take place on the single hull. The three motherships 
in the fishery are all owned, financed, or operated by foreign 
entities.
    In the catcher/processor portion of the fishery, the 
companies operating the fishery are mostly U.S.-owned. But one 
large firm is foreign-controlled. This firm has most vessels so 
that where the catcher/processors overall, foreign ownership is 
approximately 60 percent. We estimate that our little only 
owned, U.S.-owned and half Alaskan-owned company, Glacier Fish 
Company, has about 9 percent market share among the catcher/
processors. To our knowledge, there are no Alaskan ownership 
with a shore-based processing plants. The Alaskan ownership 
which has started to show up in the Bering Sea pollock 
fisheries in the offshore sector. In the Bering Sea there is 
still significant foreign presence. In the biggest picture of 
harvesting and processing and marketing pollock, 
Americanization has occurred the most among the catcher/
processors including a trend of Alaskanization of which we are 
very proud of.
    In our support of Americanization, we have an additional 
point we wish to make. Some of the measures and proposals which 
might be proposed and those of Senate bill 1221 have measures 
regarding both Americanization and capacity reduction. We 
believe that this is critically important for Congress if it is 
to affect measure regarding capacity reduction, to take 
precautionary measures against reallocation of fish to less 
Americanization sectors. If, for example, there were capacity 
reductions in catcher/processor fleet such as might occur in 
the passage of S. 1221, we are very fearful that there will be 
assertions in North Pacific Fishery Management Council that 
Congress intended for there to be a companion at reallocation 
for the onshore sector. Any such reallocation would defeat 
Americanization; Congress would have succeeded in Americanizing 
the offshore fleet. Then the fishery would slip away to the 
foreign-dominated onshore fleet.
    In conclusion, Mr. Chairman, we believe strongly in 
Americanization because of the great benefit which the Bering 
Sea fisheries have brought to western Alaska villages through 
the CDQ program. We also are very proud of the Alaskanization 
of this fishery. And most American presence in this fishery to 
date is with the catcher/processors. We would support further 
Americanization. We have a fear, however, that a measure to 
Americanize the fishery are at risk of being defeated if they 
do not apply equally to the onshore sector. If they are not to 
be applied equally to the shore-side sector, then we strongly 
urge to be viewed to place a moratorium on other protective 
measures to prevent our Bering Sea resources from being 
reallocated from an Americanized sector to foreign-dominated 
sector.
    Thank you.
    [The prepared statement of Mr. Asicksik may be found at end 
of hearing.]
    Mr. Saxton. Thank you very much, Mr. Asicksik.
    Mr. Kirk, please.

    STATEMENT OF MICHAEL KIRK, COOPER, CARVIN AND ROSENTHAL

    Mr. Kirk. Thank you, Mr. Chairman. Mr. Chairman, members of 
the Committee, I appreciate the opportunity to be here today. 
My purpose was to lay to rest the tenuous argument that has 
been made by some that legislation along the lines of S. 1221 
would work a taking of private property in violation of the 
takings clause of the Fifth Amendment. In large part, however, 
Mr. Chairman, you and Chairman Young and Senator Stevens have 
beaten me to the punch and have made the point that is 
dispositive of any claim that a taking would take place.
    Fishing is not--and throughout our history has never been--
a property right. Rather, it is a privilege that has been 
granted by the State and Federal Governments and is, and 
continues to be, fully subject to the regulatory authority of 
Congress and the States.
    My partner, Chuck Cooper, who during the Reagan 
Administration served as head of the Office of Legal Counsel in 
the Department of Justice, has carefully analyzed the claim 
that has been made that a bill like S. 1221 would work a 
taking. And I can report with some confidence that the Supreme 
Court's Fifth Amendment jurisprudence, along with numerous 
cases from the lower Federal courts, fully confirm your 
understanding of the law in this area.
    As an initial matter, no reasonable claim can be made--and 
I don't understand one to be made--that the Senate bill or like 
legislation would result in a physical taking of the vessels, 
for the bill neither directly appropriates vessels nor ousts 
the owner of possession of the vessels, nor does it require 
owners to acquiesce in any physical invasion or occupation of 
their vessels. Any takings challenge, therefore, must allege 
that the bill effects what the Supreme Court has called a 
regulatory taking of some right that's been secured by 
regulation. Analysis under either of the two broad conceptual 
approaches that the Supreme Court has taken to regulatory 
takings yields the inescapable conclusion that S. 1221 or any 
legislation like it would not effect a regulatory taking.
    Now some have argued that under the Supreme Court's 
decision in the Lucas versus South Carolina Coastal Commission 
case, a taking of vessels could be effected because a bill like 
S. 1221 somehow denies owners of all economically beneficial 
use of the vessels. For several reasons, that analysis is 
inapt. As an initial matter, it is not at all clear that Lucas 
even applies to personal property like vessels. The Supreme 
Court did note in Lucas, that the principles applied to the 
real property at issue in that case did not necessarily give 
rise to similar conclusions in cases involving personal 
property.
    But beyond whether or not it applies to personal property, 
the plain fact is that the value of affected fishing vessels 
simply will not be significantly diminished by any legislation 
such that it could be said that the bill would deprive vessel 
owners of all economically beneficial use of their vessels.
    The courts that have applied that test have determined 
without setting a specific threshold that it generally means 
upwards of 90 percent of the fair market value of the property 
must be taken to work a regulatory taking in this area.
    There can be no question that legislation such as that 
introduced by Senator Stevens would at most require owners of 
vessels subject to the bill to sell their vessel or to use 
their vessel in fisheries outside the EZZ--EZE, excuse me, EEZ, 
I'll get it right the third time. In that regard, it is 
noteworthy that well over 90 percent of the fish that have been 
harvested worldwide have been harvested outside the EEZ. 
Accordingly, there can be no question that any sale that would 
take place in response to legislation enacted by Congress would 
take place at a price at or approaching fair market value. In 
other words, at a value far in excess of any claim that all 
economically beneficial use has been deprived. Even vessels 
that are forced to surrender their fishery endorsements would 
continue to be able to fish outside the EEZ. And finally, any 
vessels that lose or have their ability to fish within the EEZ 
limited by such legislation could be converted to other 
economically beneficial uses.
    In summary, whatever policy considerations may guide the 
members of this Committee as you deliberate over the merits of 
proposals to alter Magnuson-Stevens or the Anti-Reflagging Act, 
the potential that the Federal Government will be compelled to 
pay compensation to owners of affected fishing vessels can 
safely be dismissed.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Kirk may be found at end of 
hearing.]
    Mr. Saxton. Thank you very much, Mr. Kirk.
    Mr. Bohannon.

  STATEMENT OF FRANK BOHANNON, VICE-PRESIDENT, UNITED CATCHER 
                             BOATS

    Mr. Bohannon. Thank you, Mr. Chairman. Mr. Chairman, and 
Committee Members, my name is Frank Bohannon and I am vice-
president of United Catcher Boats.
    UCB consists of 58 harvesting vessels, and we fish 
principally in the North Pacific for pollock and whiting. I 
have been a fisherman for 35 years, and I own a vessel called 
NEAHKAHNIE that participated in the first joint ventures in 
1979 and 1980 where we began the Americanization of the pollock 
and whiting fisheries. I now have two sons fishing in those 
fisheries, and one of them runs the vessel. We are an American 
fishing family.
    Over 20 years ago, we fought hard to pass the 200-mile 
limit law to Americanize our fisheries and end foreign fishing 
in our waters. Ten years ago, Congress passed the Anti-
Reflagging Act in support of full Americanization of U.S. 
fisheries. At that time, U.S. fishermen had fully Americanized 
the harvesting but not the processing of North Pacific fishery 
resources. Today, we have more foreign fishing in our waters 
than we did 10 years ago. So, UCB asks this Subcommittee to 
approve legislation that will put an end to foreign fishing in 
our waters and fully Americanize our fisheries.
    The 1987 Act did more to harm American fishermen in the 
North Pacific than it did to help them. Boats like mine went 
from harvesting 92 percent of the catch in 1987 to only 26 
percent in 1990. Our catches were reduced by 66 percent over a 
4-year period because Congress was told that in order to 
Americanize the processing industry, our foreign partners had 
to go.
    The 1987 testimony before Congress was all about U.S. 
processing replacing foreign processing. There was almost no 
testimony about the new harvesting capacity coming into the 
fishery. The issue was processing, and we were given every 
assurance that the Congress did not intend to harm U.S. 
fishermen. Unfortunately, the 1987 Act had a severe negative 
impact on the catcher boat fleet because it allowed 17 or so 
foreign-owned, foreign-built, and heavily subsidized factory 
trawlers to enter our fishery and harvest in direct competition 
with an Americanized catcher boat fleet. This was certainly not 
the intent of the 1987 Act or the Magnuson-Stevens Act. 
Congress did not intend to allow foreign companies to buy and 
sell ownership in foreign-built factory trawlers. Yet, in spite 
of this, the Coast Guard Documentation Office, against the 
advice of their own lawyers, issued letter rulings which 
exempted foreign owners from complying with the new U.S. 
ownership and rebuild requirements. This was wrong, and I hope 
this Committee will investigate why the Coast Guard so 
subverted the intent of Congress.
    Ten years ago, my vessel fished throughout the entire year 
and harvested enough annually to create a viable business. Over 
the last 5 years, I have seen many factory trawler companies go 
broke and the vessels assimilated into the empire of a foreign 
factory trawler company. I have also watched a number of my 
fellow catcher boat captains who pioneered the North Pacific in 
the 1980's reluctantly sell their vessels to large processing 
companies. Fishing less than 3 months out of the year for 
little or no profit has taken the future out of the fishery.
    S. 1221 corrects a wrong that was done some years ago by 
restoring the intent of the Magnuson Act that American 
fishermen get first priority. We had achieved that in the late 
1980's. The misinterpretation of the Anti-Reflagging Act by the 
Coast Guard undid all our gains and has given foreign fishing 
companies a large share of our fisheries resources. It is time 
to fix that. For the sake of preserving American fishing 
communities, we ask that you approve legislation similar to S. 
1221 as quickly as possible.
    United Catcher Boat believes the key element to the 
legislation are as follows:

    Removal of the foreign-owned fleet. UCB believes that those 
foreign-owned factory ships that sneak through the loopholes in 
the 1987 Act and have not provided any meaningful markets for 
U.S. harvesters must be removed from the fishery. This non-
citizen, heavily subsidized, new entrant fleet contributed 
greatly to the overcapitalization of the industry, should not 
have been allowed to enter our fisheries in the first place, 
and have had 10 years of fishing opportunities at the expense 
of the existing fishermen.
    The ownership. A new 75 percent U.S. ownership requirement 
to be established for all fishing industry vessels. In order 
for a vessel to be eligible for a fishery endorsement, it would 
have to be owned by an entity which has at least 75 percent of 
the controlling interest vested in citizens of the United 
States. Virtually all of our vessels already meet this 
requirement, and we strongly support a tougher U.S. ownership 
standard.
    No reentry into the U.S. fishery. The legislation should 
contain a provision that will prevent the issuance of any new 
fishery endorsements for fishing vessel that have reflagged 
foreign and left our fisheries. The owners of these vessels 
have made a conscious business decision to fish in Russia or 
other foreign waters. And in light of the overcapitalization of 
our fisheries, we do not think these vessels should be allowed 
back into our fisheries.
    National vessel size limitation. UCB recommends that if 
Congress wants to establish vessel size limits within our 
fisheries that it direct the Management Councils to do so. 
While most of the harvesting vessels are under the 165-foot 
threshold proposed in the Stevens bill, several are not. Many 
of our fisheries are already under limited entry, meaning that 
the threat of new, large vessels entering the fisheries is not 
great. UCB would support a requirement that directs the 
Councils to review this issue on a fishery-by-fishery basis and 
prescribe appropriate vessel size limitations in those 
fisheries where it is needed.
    Excessive control. As catcher boat owners, UCB wants more 
competition in the marketplace so that we receive the fairest 
price for our fish. We hope that the Subcommittee will consider 
a provision that will ensure that no company would obtain 
excessive control within the fisheries as a result of the 
enactment of the legislation. In removing the foreign-owned 
fishing fleet, we would like to see additional markets open up, 
as opposed to closing markets for our catch and further 
consolidating control of the fisheries.
    Again, thank you for the opportunity to testify, and I 
would be pleased to answer any questions. Thank you for letting 
me go overtime.
    [The prepared statement of Mr. Bohannon may be found at end 
of hearing.]
    Mr. Saxton. Thank you very much, sir. We appreciate it, and 
we'll get to the questions here in a minute.
    Mr. Leape.

             STATEMENT OF GERALD LEAPE, GREENPEACE

    Mr. Leape. Thank you, Mr. Chairman. On behalf of 
Greenpeace, I want to thank you for the opportunity to testify 
at this oversight hearing on the failure of the Magnuson-
Stevens Act and the Anti-Reflagging Act to Americanize the 
ownership of fish harvesting vessels in U.S. fisheries.
    These failures have allowed 13 of the largest factory 
trawlers to enter the world's largest fishery, the pollock 
fishery between 1988 and 1990. These vessels have not only had 
a devastating environmental impact on the Bering Sea ecosystem 
and the fishery it supports, but if gone unchecked could 
eventually impact fisheries both on the Pacific Coast and in 
New England. These boats which increased fishing capacity in 
the pollock fishery exponentially have had detrimental impacts 
on the pollock stocks, on other marine mammals and birds that 
rely on fish, and as you've heard, small-scale fishermen who 
have been the life line of many of our Nation's coastal 
communities for decades.
    In addition, as the seasons have gotten shorter, it's 
become increasingly difficult for many of the factory trawler 
crews to earn livable wages. I direct you to a recent article 
in the Tacoma News Tribune. In 1989, the last year before these 
boats began to enter the fishery, boats were able to fish for 
pollock year round. And as you've heard, in 1997 the fishery 
lasted just 55 days. In 1991, the first full year that all of 
these boats were active in the fishery, factory trawlers caught 
over 1 million metric tons of pollock, or almost 70 percent of 
the total prompting the enactment of a mandated allocation 
split, split seasons, and an end to the practice by the Council 
of mandating a buffer between the scientifically suggested 
limit of catch and the actual allowable catch.
    The increased effort in the split season have forced the 
fishery into greater concentrations of fishing in smaller areas 
of the eastern Bering Sea, much of which is critical habitat to 
many marine mammals where they forage for food. In addition, 
there has been a tenfold increase in fishing on pollock as 
they're spawning.
    The impact of this increase is beginning to be seen. The 
half a million metric ton quota for the spawning season 
represents almost 25 percent of the estimated total spawning 
biomass of 2.2 million metric tons. Even if there is no 
mandated reduction in catch, as we frankly hope there will be, 
allowing the fishery to spread out over space and time will 
inevitably have a conservation benefit.
    The fishery is now dependant on a strong recruitment of a 
1996-year class to stave off more draconian action by the year 
2000. And I direct you to a plan team graph at the end of my 
testimony that you have before you.
    Finally, there is the bycatch issue. The operators of the 
boats being investigated today say that they are among the 
cleanest fishers in the world. They are careful not to compare 
themselves to their shoreside competitors. Using National 
Marine Fisheries Serv-

ice numbers, that have been cleansed to show that they 
correspond to the specific fishery, these boats have a bycatch 
rate that is two to three times that of their shoreside 
counterparts. As recently as 1997, these boats were wasting 
more fish than the catch of many of the rest of the fisheries 
in the U.S. combined.
    What is done, or not done, with these boats will have an 
impact on the rest of the country as well. For the West Coast, 
if the pollock fishery continues to decline, these large 
factory trawlers will have to look elsewhere to fish, making it 
difficult for many of the Pacific fisheries to maintain their 
limitations on entry. On the East Coast, a campaign supported 
by environmentalists such as the National Resources Defense 
Council, the American Oceans Campaign, and others, fishermen 
from coast to coast, and this Committee overwhelmingly endorsed 
action last summer, H.R. 1855, which resulted in an 
appropriations rider preventing the factory trawler, ATLANTIC 
STAR, rebuilt in a Norwegian shipyard, from entering the 
Atlantic herring and mackerel fisheries.
    As many of you know, the Fisheries Service has fought the 
implementation of that rider every step of the way. That 
moratorium on factory trawlers needs to be extended to allow 
completion of the plan without a factory trawler waiting in the 
wings.
    Toward that end, we would urge you in legislation to mirror 
the language in S. 1221 on this issue. Many of the groups that 
were active on the East Coast campaign last year have lined up 
in support of S. 1221 and would be poised to support you, Mr. 
Chairman, if you choose to introduce a companion bill in the 
House.
    All around the world over-fishing and destructive fishing 
practices on the part of factory trawlers are destroying fish 
stocks damaging ecosystems and threatening the livelihoods of 
millions of people. On the East Coast to the U.S. and Canada, 
over-fishing by foreign factory trawlers has cost almost 40,000 
jobs.
    Mr. Chairman, we strongly urge you to introduce legislation 
that will not only phaseout these boats which are being the 
subject of this hearing, but to include provisions from S. 1221 
which would limit the allowable size, weight, and power of the 
new vessels, eliminate the remaining subsidies that could be 
used to build these large boats or expand existing boats, and 
prohibit the replacement of remaining vessels that currently 
exceed these limits at the end of their useful life.
    Failure to act this session could spell the beginning of 
the end of the Bering Sea pollock fishery in the North Pacific.
    Thank you, and I'd be happy to answer any questions.
    [The prepared statement of Mr. Leape may be found at end of 
hearing.]
    Mr. Saxton. Thank you, Mr. Leape. Thank all of you for your 
very fine testimony.
    Mr. Young, do you have a question?
    Chairman Young. Thank you, Mr. Chairman.
    Eugene, the CDQs have environmental restrictions placed on 
them in the form of bycatch. Could you comment on those 
restrictions and the environmental restrictions as far as the 
open access of the fishery?
    Mr. Asicksik. Yes; the CDQ program, as you well know, is an 
allocation program, and they are six groups that apply to the 
State of Alaska who has an oversight. And each CDQ group has to 
submit a Community Development Plan to the State. And we have 
to identify the targeted fisheries, and we have to identify 
that we would have a vessel, a certain--the type of vessel, 
what kind of processing, what kind of marketing, and you know, 
the cost.
    And once all of that is submitted, the State allocates. And 
they also, when they allocate the targeted fishery, they also 
allocate a prohibited or a bycatch allocation. And the bycatch 
allocation can vary from specie to specie. But also in that 
bycatch allocation is that if we go over our bycatch in a 
targeted fishery, we cannot target the other fishery. So if we 
have two fisheries that have the same type of bycatch, and one 
is 15 percent and the other one is 20 percent. Say, we went 
over in one fishery, we can't go and harvest the other fishery.
    Chairman Young. OK. Now what I'm suggesting here is that 
you have a quota or amount of tonnage that you're allowed to 
catch; right?
    Mr. Asicksik. Yes.
    Chairman Young. You can catch that over a longer period of 
time, can't you? You don't have free-for-all fishery, do you?
    Mr. Asicksik. No, we're not. We can fish outside of the 
open access fishery, or CDQ fishery can take place outside----
    Chairman Young. OK----
    Mr. Asicksik. [continuing] or prior or after.
    Chairman Young. Now, what I've heard from everybody on that 
table that I don't--even you, Jim, think there's an 
overcapitalization of the fishery?
    Mr. Gilmore. Yes. There is certainly an overcapitalization 
of the fishery. Where the CDQ program works well is that they 
don't race to catch the fish and, therefore, they're able to 
control the bycatch similar to the Pacific whiting cooperative.
    Chairman Young. I would like to refer again to my opening 
statement--I want to stress this again, Mr. Chairman--is again, 
for those that are being paid lots of money to represent 
everybody in this room, you better listen to me very carefully 
because the issue here is the retention--with all due respects 
to Greenpeace--the retention of a viable trawl industry which 
does play a major role, other than an environmental role. A 
role that I don't think is on the positive side. That this 
overcapitalization, this free-for-all fishery, and I think the 
excessive amount of bycatch has to stop. And I think it appears 
to me, if you're right, Gene, that the CDQs have done that. Is 
that correct?
    Mr. Asicksik. Yes, we have. And as the regulations are 
being written, we will, you know, go into the other fisheries. 
We've done the pollock; we are able to do the halibut and sable 
fish. And I understand, by August, we will start the mackerel 
and----
    Chairman Young. OK.
    Mr. Asicksik. [continuing] shortly we should fish the other 
fisheries.
    Chairman Young. Joe, would you clarify something in your 
testimony? The District Court and the Appeals Court rulings, 
with regard to Southeast Shipyards Association of the United 
States versus United States case, specifically did the original 
case deal with both the American ownership and foreign 
rebuilding saving clauses? And did the Appeals Court ruling 
deal with both issues?
    Mr. Plesha. Thank you, Mr. Chairman. Just to refresh your 
recollection, that case was about two vessels, the GULF FLEET 
10 and the GULF FLEET 14. Those vessels were purchased on the 
very last day, July 27, right before the Committee's markup. 
They were then contracted to be rebuilt in a Norwegian 
shipyard. After that, they were subsequently sold to a foreign 
company--I believe a Japanese company. They were then taken to 
Japan and rebuilt in a Japanese shipyard to completely 
different specifications than the original rebuild contract. 
Southeast Shipyards brought a lawsuit against the Coast Guard. 
That lawsuit made two allegations. One is that the Coast Guard 
misinterpreted the ownership requirement because they allowed 
the boat to be transferred to foreign ownership. And second, 
they requested in their complaint that these specific vessels 
be investigated, the Coast Guard make findings, and revoke the 
fishery endorsements because they had violated the rebuild 
provision of the Anti-Reflagging Act.
    The District Court granted the plaintiff's motion for 
summary judgment because their memorandum in support of that 
then discussed the idea that the concept of the Anti-Reflagging 
Act was Americanization, the Coast Guard asked for a 
clarification. The clarification was denied. The ownership 
issue was appealed, and eventually reversed. But the Order, 
with regard to the rebuilding provision specific to those two 
boats, has never been reversed.
    Chairman Young. And so the Coast Guard hasn't fulfilled 
their obligation, according to that?
    Mr. Plesha. I believe so.
    Chairman Young. Again, I think the Coast Guard came here 
very ill-prepared for this testimony, as they did in the 
Senate. And I think it's a slap to the Congress. And now we 
have this court case that actually verifies that.
    I'm about out of time, Mr. Chairman, so go ahead and I'll 
ask more questions later on.
    Mr. Saxton. Thank you very much.
    Mr. Pombo.
    Mr. Pombo. Thank you, Mr. Chairman.
    Mr. Kirk, I had the opportunity to review your analysis. 
Since your original analysis in March, and there has been a 
Federal Court decision on a similar issue, the Martirans versus 
United States, concern Federal legislation requiring oil 
tankers in the U.S. waters to have double-hulls by a set date 
causing significant property devaluation for the owners of the 
single-hull vessels. The Court held that the plaintiffs in that 
case had a takings claim. The Court's opinion stated, ``that 
the right to use vessels has been described as one of the 
classical property rights inherent in the ownership of vessels 
is the right to use them.''
    How does that affect your analysis?
    Mr. Kirk. Thank you, Mr. Pombo. You're correct. The 
Maritrans decision was issued after we put in the paper that we 
submitted in the context of Senator Steven's hearing in March. 
I would correct one--quibble with one statement you made in 
describing the opinion. Judge Hodges did not hold in Maritrans 
that the plaintiff had a takings claim. That is still the 
subject of that litigation. Rather, the judge rejected certain 
arguments that the United States had made in seeking to dismiss 
the claim, and the case will continue. There's been no final 
determination that the plaintiffs have a takings claim.
    But beyond that, to address the substance of the point you 
were making, I think the most significant portion of Judge 
Hodges' decision--Judge Hodges, as you know, Congressman, is on 
the Court of Federal Claims here in Washington--is the care 
with which he distinguished the long line of decisions holding 
that revocation of permits--permits going to such activities as 
building, grazing, prospecting, mining, traversing, and fishing 
on public lands or in government-regulated waters--all of which 
hold that such revocations do not constitute takings under the 
Fifth Amendment. In particular, he talked about a decision from 
the Court of Appeals for the Federal Circuit called Mitchell 
Arms which explained this principle.
    So at bottom, the Maritrans decision in no way changes our 
view. In fact, most of the portion of his opinion dealing with 
the line of permits cases confirms our view.
    Mr. Pombo. Can you differentiate between the permit 
processes and the endorsement process on these boats? Do you 
know the difference, and that there is a difference? And I'm 
sure you've had the opportunity to read this case from your 
answer to my question. There's a distinct difference in the 
judge's decision between the permit and the endorsement.
    Mr. Kirk. Well, I don't think the judge's decision 
addressed the endorsements that are before this----
    Mr. Pombo. The argument that you laid forth in answering my 
question, you dealt with the permit issue--whether it's grazing 
permit or a fishing license, or whatever it is. That's one side 
of the argument, and we could have an interesting debate as to 
whether or not that is truly a taking. But I do believe that 
there is a difference between a permit and an endorsement. And 
in the answer to the question you gave, you seemed to try to 
run all of that together in order to make your point. And I 
think that you're mistaken in----
    Mr. Kirk. With respect, Congressman, I have to disagree 
with you on that. When one is looking at this from a 
constitutional perspective and analyzing a potential takings 
claim, the endorsements that the Coast Guard issues under 
current law are really no different than the fishing permits. 
Yes, it is true and in answer to some of the questions that 
were put to the prior panel, some distinctions between the 
endorsements----
    Mr. Pombo. So your argument is there's no difference?
    Mr. Kirk. As a matter of constitutional law, no. At the end 
of the day, what the endorsement does is it allows fishing to 
take place.
    Mr. Pombo. So you disagree with the judge's opinion that 
inherent in the ownership of vessels is the right to use them?
    Mr. Kirk. I do not disagree with that point, but with 
holding the----
    Mr. Pombo. Which part of it do you agree with?
    Mr. Kirk. I----
    Mr. Pombo. If the permit and the endorsement are the same 
thing in your mind, I don't see how you can say that you agree 
with the judge's statement.
    Mr. Kirk. The judge didn't address the distinctions that 
the Coast Guard has between permits and endorsements. He had 
before him a completely different case. The statement that you 
read concerning----
    Mr. Pombo. It was a very similar case.
    Mr. Kirk. Well----
    Mr. Pombo. In terms of a regulatory taking, it was a very 
similar case. Unfortunately, I'm just about out of time. I'm 
sure the chairman will be very lenient----
    [Laughter.]
    If you----
    [Laughter.]
    If you accept that the revocation of a fishing endorsement 
completely destroys the market value of these ships, would you 
concede that the Lucas decision applies, if that were the case?
    Mr. Kirk. If you start with the assumption--which I don't 
share--that a revocation of the fishing endorsement completely 
destroyed all economic value in the vessel, there would still 
be a significant question as to whether or not Lucas led to the 
conclusion that a taking had taken place because Lucas was 
quite--the Supreme Court in Lucas was quite clear in limiting 
its decision to real property. And of course, vessels are 
personal property. So, I would not say that it necessarily 
follows that there is a taking, even under that hypothetical 
that you offer.
    Mr. Pombo. In your understanding of the Constitution, does 
the Fifth Amendment say that only real property applies? Or 
does it say private property?
    Mr. Kirk. It just uses the word ``property,'' but in the 
Supreme Court's cases addressing issues of takings, they've 
noted that expectations are different with regard to real 
property as opposed to personal property. Throughout our 
history, both the States and Congress have regulated personal 
property with considerably more detail, so property owners have 
a greater expectation with regard to real property.
    Mr. Pombo. Because that's where the cases have been, but 
the cases have not----
    Mr. Saxton. Mr. Pombo, why don't you ask one final question 
so we can move on to Mrs. Chenoweth?
    Mr. Pombo. Mr. Chairman, I'm going to ask for a second 
round of questioning. Thank you.
    Mr. Saxton. Mrs. Chenoweth.
    Mrs. Chenoweth. Thank you, Mr. Chairman.
    Mr. Kirk?
    Mr. Kirk. Yes, ma'am.
    Mrs. Chenoweth. I'm aware of a March 12th document produced 
by your firm, Cooper, Carvin and Rosenthal entitled 
``Constitutional Analysis of S. 1221, the American Fisheries 
Act.'' On whose behalf did you prepare this analysis? And who 
paid your fees to prepare this document?
    Mr. Kirk. We are appearing in this proceeding, and I 
believe in Senator Steven's hearing in connection with which 
the document you are referring to was submitted on behalf of 
the American Fisheries Act Coalition.
    Mrs. Chenoweth. But that's not the question I asked you.
    Mr. Kirk. I apologize.
    Mrs. Chenoweth. All right. Let me repeat it.
    Mr. Kirk. Yes, ma'am.
    Mrs. Chenoweth. Mr. Kirk, I'm aware of a document that was 
produced by your firm dated March 12, 1998, entitled 
``Constitutional Analysis of S. 1221, the American Fisheries 
Act,''----
    Mr. Kirk. Yes, ma'am.
    Mrs. Chenoweth. [continuing] prepared by the firm that you 
work for, Cooper, Carvin and Rosenthal. I assume you work for 
that firm?
    Mr. Kirk. I'm a partner in that firm. Yes, ma'am.
    Mrs. Chenoweth. All right; you're a partner. On whose 
behalf did the firm prepare that document?
    Mr. Kirk. We prepared that document, I believe, in my 
name--I didn't write it, my partners did. But it was my 
understanding that we prepared it on behalf of the American 
Fisheries Act Coalition. I hope that's responsive.
    Mrs. Chenoweth. And you don't want to add----
    Mr. Kirk. And I believe that second----
    Mrs. Chenoweth. [continuing] anything to your answer, 
right?
    Mr. Kirk. I wanted to respond to the second part of your 
question. You'd, I believe, also inquired as to who paid our 
fees, and it's my understanding that it was Tysons Seafood.
    Mrs. Chenoweth. All right. Thank you.
    In the Maritrans case, the court did distinguish from cases 
involving guns and nuclear power, as you referred to in your 
testimony, from cases such as this one. And as you know the 
facts of the Maritrans case goes to the requirement of 
regulation that oil tankers in U.S. waters have to have double-
hulls by a certain date.
    Mr. Kirk. Yes, ma'am.
    Mrs. Chenoweth. And the Court held that the inquiry is not 
so simple as examining whether the government prevents the 
exercise of a property right by regulating it, transforming the 
property right into one totally dependent on the government's 
regulatory regime. ``That is tautology,'' the Court said, 
``mere participation in a regulated industry does not preclude 
a finding that a taking has occurred.'' So the Court did rule 
that a taking had occurred in that case.
    I wanted to ask Mr. Plesha----
    Mr. Plesha. Yes.
    Mrs. Chenoweth. You mentioned the fact that vessels were, 
of course, taken over to Japan and retrofitted and so forth. 
Are you aware that on July 28, 1987, the Committee adopted a 
provision allowing vessels purchased for use as fish processors 
up until the date of the markup to be rebuilt overseas? Were 
you aware of that bit of history?
    Mr. Plesha. Actually they had to be purchased before the 
date of the markup. They had to actually be purchased, and then 
they had to have a contract to rebuild by July 12, 1988. So, 
yes; I was certainly aware of that provision.
    Mrs. Chenoweth. So, if any of the vessels that you were 
referring to in your testimony violated those provisions, then 
it would be a legal question, wouldn't it?
    Mr. Plesha. Is it a legal question? Had the statute of 
limitations passed----
    Mrs. Chenoweth. A question of violation of the contract?
    Mr. Plesha. We have not even learned of how these contracts 
are put together until the last 6 months. We have just now 
discovered, for example, that the STATE EXPRESS was never had a 
contract to purchase by the right date. They had an option to 
purchase. I didn't know that 6 months ago, and I assume that 
the statute of limitations has passed for anything that can be 
done in court.
    Mrs. Chenoweth. You know----
    Mr. Plesha. But the honest answer is that the Coast Guard 
made a mistake in how they interpreted the Anti-Reflagging 
Act's grandfather provisions. They didn't follow the literal 
meaning of the statute. They basically just allowed these 
vessels in on representations of their owners.
    Mrs. Chenoweth. Don't you think in most cases, though, that 
people who invested in the vessels invested on the basis that 
they were assured that they could make those investments under 
the 1987 Amendment?
    Mr. Plesha. There were people who had these projects that 
absolutely had no investments. They had no financial 
investments whatsoever prior to the boats being rebuilt and 
delivered into the United States. That's part of the problem. 
For example, on one of the boats, it was a conditional sales 
contract without any money being put down in the contract 
whatsoever. They had no obligation to pay a cent; that's not a 
financial investment.
    Mrs. Chenoweth. Then, wouldn't that be a question for the 
courts? I mean if somebody--like the chairman, our Chairman 
Young said, there's malfeasants. Gosh, if there is somebody 
should be hung for that. And our concern here, as members of 
the Committee, is to protect those who legally and honestly 
have relied on the current laws and----
    Mr. Plesha. Excuse me, but what about us who tried to 
follow the intent of Congress and have spent everything that we 
have following that intent by trying to Americanize this 
fishery? We are the people who are impacted by that boat. Now 
if that boat's legal, there's a backdated document allegedly 
involved in that qualifying. We have for 10 years suffered from 
that boat being in the fishery. And I mean what we've tried to 
do from day one is follow the intent of Congress to Americanize 
this fishery with American dollars from American banks.
    Mrs. Chenoweth. You know, Mr. Plesha, I have great concern 
over our fisheries being over-fished, being from Idaho. I don't 
want to see our salmon over-fished. I identify with that issue; 
but capitalization as a means for a taking is a concern that we 
have here. And so if someone has failed to follow the law, if 
they have not been honest in upgrading their fishing vessels, 
then they should be taken to court.
    Mr. Plesha. You know, I reflect back to Oscar Dyson who had 
the PEGGY JO. That was the very first steel-hulled crap catcher 
vessel in Alaska. It fished there for 15 years, and he was the 
pioneer of the crab fishery. There is a moratorium put in place 
that eliminated that boat from ever fishing crab again. And 
PEGGY JO--its value was impacted by that. It found alternative 
uses, but that is a boat that--I don't know the distinction 
that you're trying to reach between a permit and an 
endorsement, but it will never, ever fish crab again, because 
of a regulation.
    Mr. Saxton. The gentlelady's time has expired. Let me----
    Mrs. Chenoweth. Chairman, I would like to have another 
round of questioning.
    Mr. Saxton. OK, we'll get to it. We sure will; that will be 
fine.
    [Laughter.]
    Let me just explore two points, if I may. First, with Mr. 
Plesha. Mrs. Chenoweth just made a point--I believe, perhaps 
incorrectly--that people, investors who invested in the fishing 
vessels which in effect would have their endorsement nullified 
by Stevens' bill would suffer a loss on their investment which 
we, in essence, according to the premise of the question, 
provided assurance that they would have some kind of security. 
I would make a different point; those decisions apparently were 
made--and you correct me if I'm wrong; I want to make sure I 
understand this. Those decisions were made to enter into 
contracts during a window of opportunity that was provided 
because of a delay in the Merchant Marine and Fisheries 
Committee. And that those contracts were signed--A, not knowing 
whether the law would ever be passed; B, not knowing what the 
provisions of the law would be, if it passed; and C, not 
knowing what--given those two facts--not knowing what the 
competition or the fishery would be like subsequent to the 
passing of that law. Is that a fair statement?
    Mr. Plesha. That's correct. The markup was July 28, 1987, 
and the bill was signed into law December 11, 1988. So it was a 
long period of time between the markup and eventual signing.
    Mr. Saxton. So one could conclude that during that period 
of time when those decisions were made, that the individuals 
who made those decisions didn't really have any assurance as to 
what the future would be like, anymore than when those of us 
who buy mutual funds or put our money into real estate 
investments or any other type of investment decision that we 
make, they certainly didn't have any greater assurance than any 
other investor. Is that a fair statement?
    Mr. Plesha. That's correct.
    Mr. Saxton. And so if one were to lose on an investment of 
this type, it would be no more out of character than any other 
investor in a free economy?
    Mr. Plesha. That's exactly correct.
    Mr. Saxton. Thank you.
    Mr. Kirk?
    Mr. Kirk. Yes, Mr. Chairman.
    Mr. Saxton. With regard to my friend, the gentleman from 
California, Mr. Pombo's questions regarding the endorsement 
issue and whether or not there would be a taking if the Stevens 
bill were to pass, I believe, and I may--anyone can correct me, 
including Mr. Pombo, but I think the assumption was--part of 
the question was an assumption that there would be a 
significant devaluation in the property known as a fishing 
vessel; right? Is that--can you explain from a legal point of 
view how that devaluation would generally be considered by the 
Court?
    Mr. Kirk. Yes, Mr. Chairman. In analyzing a takings claim, 
the economic impact is one factor that a court will look at 
assuming that the predicate has been established that there is 
a property right there in the first place. In my view, that 
predicate cannot be established here for the reasons that I 
discussed in my testimony.
    But even assuming that there is--that a takings challenge 
could overcome that hurdle and get to the question that the 
analysis that the Supreme Court developed in the Penn Central 
case, and economic impact was something that the court looked 
at, in my opinion, notwithstanding--the impact in this case 
would not be sufficient to support a taking. There are cases on 
the books where upwards of 70 percent of the value of the 
plaintiff's property has been diminished by regulations enacted 
by Congress. And the courts have held that that's not enough.
    In view of all the remaining uses that these vessels would 
have upon passage of legislation like Senator Steven's bill, I 
just don't believe that the economic impact is severe enough to 
support a takings finding.
    Mr. Saxton. Thank you. Now, let me just make a statement, 
and then perhaps you would like to respond to it. With regard 
to devaluation in this circumstance, should the Stevens bill 
pass?
    I would make the point that there is at least some evidence 
to indicate that there would be no significant devaluation 
based on information I have here in front of me involving other 
opportunities, or potential opportunities, for these ships. 
This is verified, I believe, quite well by the situation 
involving the huge Dutch factory trawler known as the ATLANTIC 
STAR which recently announced its arrival in the Mauritanian 
waters off the coast of Africa to begin a new fishing venture 
on pelagic species. Also, in May 1998, China announced its 
rapidly expanding distant water fishing industry will need an 
unspecified number of 240 to 250 to 300-foot factory trawlers 
soon after the turn of the century. In 1998, a German fish 
company announced taking delivery of a refitted 171-foot 
factory trawler to replace two others that were sold abroad. In 
May, also of this year, an Icelandic fishing company announced 
its intent to purchase a 195-foot factory trawler from 
Lithuania for fishing in the North Atlantic, and--I won't read 
all these, but there an additional 8 or 10 opportunities for 
sales.
    So it seems to me that if you were dead wrong, with regard 
to your interpretation of whether or not there was a taking, 
that there is ample evidence here for us, at least, to assume 
that there is a market or an opportunity for these ships to be 
put to other uses which certainly would have an economic value 
speaking strongly against the position that would be taken when 
someone suggests that there is a taking here.
    Mr. Kirk. The only comment I have, Mr. Chairman, is I agree 
wholeheartedly with the point you just made.
    Mr. Saxton. Thank you very much.
    Mr. Pombo, would you like to----
    [Laughter.]
    Mr. Kirk. That's a risky position.
    Mr. Saxton. [continuing] take another shot here?
    Mr. Pombo. Yes, I would, Mr. Chairman.
    Mr. Kirk, have you been heavily involved with the fishing 
industry in the past?
    Mr. Kirk. No, I've not, Mr. Pombo.
    Mr. Pombo. And are you familiar with the sale of boats and 
fishing vessels, and have you done a lot of work in that area?
    Mr. Kirk. No, sir, I've not.
    Mr. Pombo. What about in the property rights area? Have you 
done an extensive amount of work on that area?
    Mr. Kirk. In that area, I do have a fair amount of 
experience; yes, sir. We've represented--and I've personally 
represented clients in a wide-range of industries, primarily 
bringing takings claims against either the United States or 
various States. And I've testified a number of times before 
State legislatures, I believe up until today, always arguing 
that the legislation on the table would effect the taking of 
private property. This is the first time that I've testified 
that, in my view, the proposed legislation would not effect a 
taking.
    Mr. Pombo. Mr. Gilmore, the question that the chairman just 
asked about the sale of these boats on the open market; would 
you like to comment on that?
    Mr. Gilmore. I'm not an expert on the brokerage of vessels 
either, however, what the Senate legislation would do would be 
to put 18 factory trawlers from the United States out of 
business within an 18-month period. That would be a capital 
value of $400 to $500 million that would be on the market at 
one time. They would lose their fishery endorsement in the U.S. 
Comments were made earlier that there are opportunities for 
foreign flag vessels in the U.S. 200-mile zone, but these boats 
were built for the largest fishery in the United States, the 
Bering Sea pollock fishery. I don't know of any other joint 
venture type operations that would be available to them. The 
fate of the ATLANTIC STAR would indicate that there are 
relatively few opportunities, and so I think it would be highly 
unlikely that these vessels would--in fact, if you go to 
Seattle, when you go down to pier 91, you'll find a boat called 
the AMERICAN MONARCH, a $60 million catcher/processor vessel 
that was permitted to fish in Chile that had its permit in 
Chile revoked. I don't know the takings law in Chile, maybe 
we've got something here, but had its permit revoked before it 
ever caught a fish in Chile, and has been sitting idle for over 
a year now at the dock there. So, if there are opportunities, I 
think they're few and far between. And for the forced-sale of 
assets in such a short time-frame, it would be very difficult 
to get a fair market price.
    Mr. Pombo. Mr. Leape, is that correct? The organization 
that you represent, and in your testimony, you stated that you 
would like to see a reduction in the number of fish that are 
taken in this fishery. Is that accurate?
    Mr. Leape. Yes. If legislation is introduced, we have urged 
that a mandated reduction be included.
    Mr. Pombo. And the boats that they're talking about here--
the 18 boats or whatever it is--if they were taken out of 
production, would that be enough to satisfy the reduction that 
you're talking about?
    Mr. Leape. Yes, our request urge the Congress to direct the 
Councils to achieve an approximate reduction as the boats 
leave. So, yes; the answer to your question would be yes.
    Mr. Pombo. So, just so I understand your position, what 
you're saying is that if you took these boats out of production 
and the remaining boats just caught the number of fish they are 
now, that would meet your goal?
    Mr. Leape. Well, as I said in my statement, a lot of things 
would happen if those boats left. Currently, the fishery lasts 
55 days. And as recently as 1989, it was year-round. If it was 
allowed to lengthen, fishing would slow. It could be spread 
out, and it would have less of an impact. You wouldn't see the 
problem of localized depletions and heavy focus of effort on 
the pollock when they're spawning. And it could be run in a 
much more environmentally friendly manner.
    Mr. Pombo. But the total number of fish that are caught 
would remain the same? That instead of doing it in 3 months, 
they might be able to do it year-round, but the total number of 
fish would remain the same?
    Mr. Leape. Well, what's hard about this hearing, Mr. Pombo, 
is it's an oversight hearing and not on specific legislation. 
And so if we comment about specific legislation, it's about 
what's out there, and that's S. 1221 currently. And what I said 
is, we would be urging that a change be included in the 
legislation to provide for a mandated reduction in the fishery. 
Currently, as the legislation stands, no, it doesn't contain 
that.
    Mr. Pombo. Well, I wasn't referring to legislation 
necessarily, I was trying to figure out where your position was 
on total number of fish being caught, or at least your 
organization's position, because you said that you wanted to 
see a reduction----
    Mr. Leape. Right.
    Mr. Pombo. [continuing] in the number of fish that were 
caught. And I was trying to figure what that reduction was----
    Mr. Leape. Well, we felt----
    Mr. Pombo. [continuing] that you would prefer----
    Mr. Leape. [continuing] if you take out the factory 
trawlers in question, from estimates, it seems to be that they 
account for about 30 percent of the harvest. That would 
approximate what we feel would be the appropriate level of 
reduction.
    There are others who disagree with us. I can only speak for 
Greenpeace and what we feel would be appropriate.
    Mr. Pombo. So, you believe that a 30 percent reduction 
would be appropriate?
    Mr. Leape. Yes; and we have said that before the North 
Pacific Council 2 years running.
    Mr. Pombo. Is that just in this particular fishery, or is 
that in all fisheries?
    Mr. Leape. Well, let's keep with the matter at hand, with 
all due respect. These factory trawlers fish primarily in the 
pollock fishery, and some of them fish in the whiting fishery. 
We have been focusing on the pollock fishery because that's 
where they all fish. You know, fisheries are different as you 
go around the coast, and the conditions they're in are 
different. For now, that request is just for the pollock 
fishery in the Bering Sea.
    Mr. Saxton. Mrs. Chenoweth.
    Mrs. Chenoweth. Thank you, Mr. Chairman.
    Mr. Kirk, are you here on behalf of Mr. Cooper? Was the 
testimony that was prepared which stated testimony of Mr. 
Cooper was that all along supposed to be your testimony?
    Mr. Kirk. Let me explain the circumstances, Mrs. Chenoweth. 
My partner, Mr. Cooper, is today in the midst of a 7-week trial 
in the Court of Federal Claims. At the time we prepared the 
testimony, we had hoped that he would be able to personally 
break away from the trial and appear and give the testimony. As 
matters developed, the government's expert witness that he was 
responsible for dealing with was up this morning, and so I was 
prepared to and appeared in his stead.
    Mrs. Chenoweth. Well, in Mr. Cooper's written analysis of 
S. 1221, and I noticed that in your oral testimony you skipped 
over this part. But he stated that the Supreme Court's decision 
in Lucas versus South Carolina Coastal Council set forth a per 
se rule applicable to the taking of all beneficial and 
productive use of private property; that it is limited only to 
land. I noticed you very carefully said private--or property, 
private property. Do you agree with him that it's only limited 
to land? And is it your position that Lucas, then, does not 
apply to other property rights as defined by the Supreme Court 
such as contracts entered into by Savings and Loan and----
    [Laughter.]
    [continuing] I mean it's----
    Mr. Kirk. That's a----
    Mrs. Chenoweth. Where do you go with this?
    Mr. Kirk. The specific holding in Lucas, Congresswoman, was 
limited to real property. And the Supreme Court carefully noted 
that. I think it's an open question as to whether the per se 
taking analysis where all economically beneficial use of the 
property has been taken would apply to rights other than real 
property.
    That being said, it is certainly not our view, and I don't 
believe we've said anywhere that a taking claim, in general, 
can not be brought involving contract rights, personal 
property, or other forms of property aside from land. In the 
Savings and Loan case that you referenced, coincidentally 
enough, that's the case Mr. Cooper is trying, the damages phase 
of that case. The takings claims there were not based upon the 
standard in Lucas. It was based on other Supreme Court takings 
jurisprudence.
    Mrs. Chenoweth. I assume you have read Lucas?
    Mr. Kirk. Yes, ma'am.
    Mrs. Chenoweth. You know that Lucas was involved--the 
taking and the case centered around a special permit procedure. 
The court did rule that, with regards to the State's power over 
the bundle of rights which includes land and the permits and 
the right to build on the land, including a house, that they 
acquire, when they take title to property, in other words when 
they take the title, they have actually taken the bundle of 
rights. ``Because it is not consistent with the historical 
compact embodied in the takings clause that title to real 
estate is held subject to the State's subsequent decision, to 
eliminate all economically beneficial use of regulation hav-

ing that effect cannot be newly decreed and sustained without 
compensations being paid the owner.''
    Mr. Kirk. Yes, ma'am.
    Mrs. Chenoweth. And I'm quoting directly from Lucas.
    Mr. Kirk. Yes, ma'am.
    Mrs. Chenoweth. Now, Mr. Kirk, you've heard my line of 
questioning before. Section 201(b), I think it is, in the new 
Bennett 1221 would prescribe new requirements for the size of 
the ship and where it was built, and so forth. That would 
effectively render, unless someone could meet those new 
requirements, render the endorsement useless, wouldn't it? 
Unless they could meet the new requirements of section 201(b) 
without paying for it?
    Mr. Kirk. It would deprive them of the endorsement, but I 
don't believe that it would render the underlying vessel 
economically useless for the reasons that the chairman gave. It 
appears likely to me that the underlying vessel would continue 
to have almost all, if not all, of its current market value.
    Mrs. Chenoweth. Isn't it true that without the endorsement, 
they cannot use the vessel to fish?
    Mr. Kirk. No, ma'am. It's true that they cannot use the 
vessel to fish within the----
    Mrs. Chenoweth. Legally?
    Mr. Kirk. Legally within the----
    Mrs. Chenoweth. Right.
    Mr. Kirk. I can never----
    Mr. Saxton. The EEZ.
    Mr. Kirk. [continuing] get the acronym right. The EEZ, 
thank you. They could still use the--and actually even that's 
not true. As I understood Senator Stevens's testimony, when the 
full quota has not been fished out of the particular area, the 
foreign vessels who don't possess the endorsements are allowed 
to come in and fish.
    Mrs. Chenoweth. That is under the permit, and I'm talking 
about the endorsements that are appurtenant to the vessel. So, 
when the endorsement is taken away from vessel, it cannot be 
used for fishing, correct?
    Mr. Kirk. Within the EEZ. It could still be used for 
fishing anywhere else in the world.
    Mrs. Chenoweth. So my question is, who would buy a vessel 
that would have no place to fish immediately after sale? I 
mean, you know, those are just dynamics of the marketplace.
    Mr. Kirk. Yes, ma'am.
    Mrs. Chenoweth. So----
    Mr. Kirk. I would assume somebody who wanted to use it to 
fish elsewhere in the world would be interested in buying it. I 
assume somebody who could, himself, obtain the endorsement 
would be interested in buying it. Or I assume somebody who 
would be interested in converting it to other uses----
    Mrs. Chenoweth. Why would we----
    Mr. Kirk. [continuing] would be interested in buying it.
    Mrs. Chenoweth. [continuing] as lawmakers assume that under 
these sets of circumstances a forced sale under these sets of 
circumstances would bring a full market-value price? And 
therein lies the question with the taking.
    Thank you, Mr. Chairman.
    Mr. Kirk. Thank you, ma'am.
    Mr. Saxton. Thank the gentlelady very much for her very 
thoughtful questions. And I thank the panelists very much also 
for their patience in sticking with us here today. Thank you 
very much everyone for your participation, and the hearing is 
adjourned.
    [The prepared statement of Mr. Giles may be found at end of 
hearing.]
    [Whereupon, at 2:16 p.m., the Subcommittee adjourned 
subject to the call of the Chair.]
    [Additional material submitted for the record follows.]
Statement of Dr. David Evans, Deputy Assistant Administrator, National 
      Marine Fisheries Service, National Oceanic and Atmospheric 
                 Administration, Department of Commerce

    Thank you, Mr. Chairman, for the opportunity to present the 
views of the Department of Commerce on the Americanization of 
the U.S. fishing fleet and U.S. ownership of fishing vessels.
    Before I focus on the main topic of this hearing, the 
Americanization of U.S. fisheries, I would like to take this 
opportunity to discuss briefly the issue of overcapacity and 
overcapitalization. As noted in the letter of invitation, it 
has become increasingly recognized both in the United States, 
as well as many other countries, that excessive harvesting 
capacity and investments in the harvesting sector are 
contributing to the difficulty in developing management 
policies to address widespread resource overutilization in 
capture fisheries. In a global context, the Food and 
Agriculture Organization (FAO) of the United Nations has 
estimated excess capacity in world fisheries for the most 
important commercial species at about 30 percent. From a 
domestic standpoint, similar concerns have intensified in 
recent years, and it now appears beyond doubt that a 
significant number of our most valuable commercial fisheries 
are burdened with excessive levels of harvesting capacity and 
investment in that sector. The most obvious example of these 
problems are the New England groundfish and scallop fisheries, 
the West Coast groundfish fishery, and the Alaska crab fishery.
    NMFS is heavily involved in both international and domestic 
initiatives that we believe will help us better manage capacity 
in the fishery sector. Internationally, NMFS is working with 
the Department of State on an FAO-sponsored initiative on 
managing harvesting capacity throughout the world. Recently, 
FAO held a technical experts consultation in La Jolla, 
California, which will result in a report on defining and 
measuring harvesting capacity and analyzing the effectiveness 
of possible remedies to the capacity problem. This report is 
intended to provide the basis for the development of a FAO 
global plan of action. In the domestic sphere, NMFS has 
sponsored vessel and permit buyout programs in New England, 
Texas, and the Pacific Northwest. The agency has been working 
with both the Pacific (West coast groundfish) and North Pacific 
Fishery Management (Alaska Crab fishery) Councils to review the 
first industry funded buyout proposals developed under new 
authority for fishing capacity reduction under the Magnuson-
Stevens Fishery Conservation and Management Act (MSFCMA). These 
proposals have been initiated by the industry and are under 
review by the appropriate Councils. In addition to buyouts, the 
Councils continue to have the authority to design fishery 
management programs and amendments on a case-by-case basis. 
This allows Councils to recommend appropriate harvesting 
regimes that meet the individual needs of specific fisheries. 
Obviously, actions that remove and/or reduce excess harvest 
capacity at the least economic and social costs are the most 
desirable. We believe that the Councils provide an appropriate 
mechanism for evaluating the best ways to maximize the benefits 
to the industry while minimizing any potential costs and/or 
social impacts from capacity reduction efforts.
    Now, let me address the issue before the Committee today. 
The Committee has expressed its interest in the Department's 
evaluating of the Americanization of the fisheries off the 
coasts of the United States. The term ``Americanization'' can 
be characterized as actions taken over the last two decades to 
ensure that the benefits derived from the use of Exclusive 
Economic Zone (EEZ) resources are effectively channeled to U.S. 
enterprises and, generally, to U.S. citizens. This effort began 
in earnest with the passage of the original Fishery 
Conservation and Management Act (FCMA) in 1976. The goals of 
the FCMA were to phase out foreign fishing off U.S. coasts and 
expand domestic capacity, optimize domestic benefits, achieve 
and maintain optimum yield from each fishery on a continuing 
basis, and enhance economic and employment opportunities. In 
addition to establishing the 200-mile Exclusive Economic Zone, 
the FCMA directed the Secretary of Commerce, through the 
development of fishery management plans, to provide the 
domestic fishing industry priority access to the fishery 
resources in the EEZ.
    In 1979, the Department undertook a major effort to study 
the production potential and development patterns for 
underutilized species, the social costs and benefits of 
developing policy to accelerate utilization of fishery 
resources in the EEZ, and the export market opportunities for 
underutilized species. Based on these findings, the White House 
established a fisheries development policy that found that 
significant opportunities for industry expansion existed, that 
a partnership between the Federal Government, state and local 
governments, and the fishing industry was needed; that each 
region had different problems to be addressed; and that 
development for all sectors of the U.S. industry should be 
considered.
    This policy led to the enactment of American Fisheries 
Promotion Act of 1980 (AFPA) which was directed towards 
expanding commercial and recreational fishing efforts in 
underutilized fisheries. The amendments specifically authorized 
financial assistance to industry through a competitive grant 
program (the Saltonstall/Kennedy grants program); supported the 
development or expansion of market opportunities for U.S. 
fishery products; and allowed foreign access to fishery 
resources in exchange for ``chips,'' including trade 
concessions; harvesting technology transfers, foreign 
investment in U.S. processing facilities, and over-the-side-
sales of U.S.-harvested fish (joint ventures). The ``Processor 
Preference Amendment'' to the MSFCMA was enacted in 1982 to 
give U.S. processors preference over joint venture processors 
for fishing allocations. This had the effect of accelerating 
the phase-out of joint venture processing and boosting 
investment in U.S. harvesting and processing capacity. Finally, 
the 1987 Anti-Reflagging Act (ARA) sought to tighten domestic 
ownership requirements by increasing the minimum domestic share 
to 51 percent. During the period covered above, foreign fishing 
operations in the U.S. EEZ were progressively reduced and 
finally eliminated, and the harvesting sector was--at least 
apparently--fully Americanized by the end of the last decade.
    The most straightforward way of determining whether the 
goal of Americanizing the U.S. fishing fleet has been achieved 
is to review the level of foreign fishing in the EEZ under 
General International Fisheries Agreements (GIFAs). GIFAs 
provide a mechanism by which a foreign nation can petition the 
U.S. for access to stocks for which U.S. harvesting effort is 
expected to take less than the total allowable harvest for that 
year. Participation in a GIFA is the only way foreign fishing 
vessels can participate in U.S. fisheries.
    With the largest EEZ of any country in the world, the 
United States historically shared significant quantities of its 
fisheries resources with GIFA partners. The United States has 
negotiated GIFAs with many countries under authority of Section 
201 (c) of the MSFCMA. GIFAs' set forth the terms and 
conditions under which foreign fishing activity may be 
permitted within the U.S. EEZ. I say ``foreign fishing 
activity'' because the MSFCMA broadly defines the word 
``fishing'' so as to include, for example, at-sea processing. 
The United States currently has GIFAs in force, or is taking 
steps to extend GIFAs, with Estonia, Latvia, Lithuania, China, 
Poland, and Russia. In addition, the United States has had 
GIFAs with Bulgaria, Cuba, Denmark, European Union, German 
Democratic Republic, Iceland, Japan, Korea, Mexico, Norway, 
Portugal, Romania, Spain, and Taiwan.
    GIFA partners were also permitted to send processing 
vessels into U.S. waters to receive U.S.-harvested fish under 
joint venture arrangements, but these activities dwindled in 
the early l990s. At present, the only foreign fishing activity 
occurring within U.S. jurisdiction is joint venture processing 
of U.S.-harvested fish off the northeast coast. We have 
permitted joint venture processing for Atlantic mackerel and 
herring by two processing vessels from Estonia and two others 
from Lithuania. Russia is preparing an application for one 
additional vessel. The total amount of fish available for these 
activities is 15,000 metric tons of mackerel and 40,000 metric 
tons of herring.
    Activities in the Northeast under these permits provide a 
small but important outlet for U.S. fishermen who are coping 
with our rebuilding programs for the groundfish stocks. They 
have enabled four U.S. vessels from the States of Massachusetts 
and New Jersey to harvest almost 2,000 metric tons of mackerel 
and almost 500 metric tons of herring worth $375,000 and 
$30,000, respectively. Our rebuilding programs are headed in 
the right direction, and, in the meantime, delivering product 
to foreign processing vessels has allowed U.S. fishermen to 
continue to earn income during the rebuilding period for the 
major U.S. stocks.
    We have also issued transshipment permits under Section 
204(d) of the Magnuson-Stevens Act to one vessel each from 
Cambodia, Russia, and Panama to receive and transport processed 
mackerel from these operations. In addition, last year we 
issued transshipment permits to 14 Canadian herring transport 
vessels operating in the Gulf of Maine, as provided for under 
Section 105(e) of the Sustainable Fisheries Act.
    While the Department can state that the Americanization of 
the U.S. fleet has been achieved, based on the relatively low 
level of GIFA-related fishing activity, it cannot provide the 
Committee with a clear picture of the ownership structures of 
the U.S. fishing fleet. The 1987 Anti-Reflagging Act sought to 
tighten domestic ownership requirements by increasing the 
minimum domestic ownership share to 51 percent but only for 
vessels documented after the date of enactment. However, it is 
clear that significant foreign participation remains because 
our maritime and cabotage laws enable foreign firms to retain 
and even increase ownership shares in some segments of the U.S. 
fishing fleet. While Commerce is not responsible for 
administering the ARA, welfare committed to working closely 
with the U.S.C.G. to en-

sure that all U.S. fishing vessels are properly documented 
before being allowed to participate in federally managed 
fisheries. However, fishing vessels documented prior to 
enactment of the ARA are exempt from the ownership requirements 
of that statute, resulting in approximately 25,000 U.S. fishing 
vessels for which there is a lack of knowledge about ownership. 
This lack of information constrains our ability to provide an 
analysis of the financial characteristics of the U.S. fishing 
fleet.
    The Department applauds the Committee for its efforts to 
deal with national policy on the issues of excess harvesting 
capacity and Americanization. However, our fisheries are highly 
diverse and vary substantially in the nature of the fishing 
vessels deployed in different regions and in fisheries taking 
different species. In addition, our limited knowledge suggests 
that levels of foreign investment and ownership differ markedly 
from region to region. We need to be sensitive to the differing 
needs in various fisheries. While it would be appropriate for 
Congress to continue with the established trend of 
prospectively Americanizing U.S. fisheries, including 
increasing the U.S. ownership requirement, I would urge 
Congress to carefully examine any retroactive application of 
the ownership requirement. Such a measure could have possible 
unintended impacts on the financial foundation of those sectors 
of the fishing industry currently exempt from ownership 
requirements and who currently rely on foreign investment. The 
retroactive application of ownership requirements could also 
give rise to questions concerning compliance with U.S. 
obligations to foreign investors under certain international 
agreements.
    The National Marine Fisheries Service is prepared to work 
with the Councils, the various fishery constituencies, and the 
Congress to determine the most appropriate course of action for 
our Nation's fishermen and fisheries. It is the Department's 
desire to reduce levels of harvesting capacity among all 
classes of fishing vessels to levels that are sustainable and 
provide the greatest economic benefit to the fishing industry 
and our Nation.
    Mr. Chairman, this concludes my remarks and I am prepared 
to respond to questions from Members of the Committee.
                                ------                                


Statement of Rear Admiral Robert C. North, U.S. Coast Guard, Department 
                           of Transportation

    Good morning, Mr. Chairman. I am pleased to represent the 
Coast Guard before this Committee's oversight hearing on 
Americanization of the U.S. fishing fleet. The Coast Guard is 
the agency responsible for implementing the provisions of the 
Commercial Fishing Industry Vessel Anti-Reflagging Act of 1987 
(Public Law 100-239), commonly known as the Anti-Reflagging 
Act.
    The primary purpose of the Anti-Reflagging Act was to 
prohibit the reflagging of foreign built processing vessels 
under the Magnuson Fisheries Conservation and Management Act. 
The Anti-Reflagging Act harmonized fisheries and maritime laws. 
It did this by imposing similar requirements regarding the 
documentation, ownership, manning, and construction of vessels 
engaged in the fisheries trade as are imposed on vessels 
engaged in coastwise trade. The Act also broadened the 
definition of fisheries to include activities previously 
excluded. This harmonization was accomplished by modifying the 
U.S. documentation laws so that only U.S. built vessels are 
admitted into fishery related activities, and vessels lose 
fisheries privileges if rebuilt in a foreign country.
    Prior to enactment of the Anti-Reflagging Act, vessels 
engaged in fish processing activities were not required to be 
documented with a fisheries endorsement. As a result, it was 
possible to use foreign-built vessels for fish processing 
activities. Following enactment of the Anti-Reflagging Act, 
documentation with a fisheries endorsement is required for fish 
processing.
    The Anti-Reflagging Act amended the ownership requirements 
for vessels in the fisheries trades. Prior to enactment of the 
Anti-Reflagging Act, it was possible for corporations organized 
under U.S. laws and meeting citizenship criteria for the 
corporate president, chairman of the board, and control of the 
board of directors, to document vessels for use in U.S. 
fisheries; even if 100 percent of the stock was owned by 
foreign citizens. Today, U.S. citizens must own 51 percent of 
the stock, except for a vessel that is grandfathered from the 
American control provisions of the Anti-Reflagging Act.
    The Anti-Reflagging Act also addressed the past practice of 
using foreign crew and officers on commercial fishing industry 
vessels. Today, the citizenship requirements for fishing 
industry vessels are identical to the requirements for other 
commercial vessels in the Exclusive Economic Zone; except when 
fishing exclusively for highly migratory species.
    To carry out its responsibilities under the Anti-Reflagging 
Act, the Coast Guard has amended its regulations in Title 46 
Code of Federal Regulations. These regulations are enforced in 
the Coast Guard's daily regulatory activities and in our 
compliance and enforcement boarding activities.
    Two portions of the Anti-Reflagging Act proved problematic. 
These were the provisions intended to protect the interests of 
investors already committed to the U.S. fisheries. These 
provisions dealt with foreign rebuilding and ownership. I will 
address each separately, because each has had a different 
impact on the Americanization of the U.S. fishing industry.
    Prior to the Anti-Reflagging Act, fish harvesting vessels 
had to be built in the U.S., but could be rebuilt abroad. 
Section 3 of the Anti-Reflagging Act, among other things, 
amended 46 U.S.C. 12108 by prohibiting vessels seeking fishery 
endorsements from being rebuilt in foreign shipyards. Section 4 
of the Anti-Reflagging Act made new 46 U.S.C. 12108(a)(3) 
inapplicable to a vessel which (1) was built in the United 
States before July 28, 1987 and (2) was rebuilt in a foreign 
country under a contract entered into before July 11, 1988, and 
(3) was purchased or contracted to be purchased before July 28, 
1987 with the intent to use the vessel in the fisheries. This 
rebuilding savings clause, or grandfather provision, also 
required that a vessel rebuilt under the above circumstances 
had to be redelivered to the owner before July 28, 1990. 
Because the window of eligibility for this exemption has long 
passed, no additional vessels may be rebuilt outside of the 
U.S. and enter or reenter the U.S. fisheries. Furthermore, no 
additional foreign built vessels may be documented for use as 
fish processors.
    Section 7 of the Anti-Reflagging Act, among other things, 
amended 46 U.S.C. 12102 by requiring a majority of voting 
shares in a corporation owning a fishing vessel to be owned by 
U.S. citizens. Section 7 of the Act also provided a savings 
clause, or grandfather provision. Under this grandfather 
provision, the ``American control'' provision requiring 51 
percent U.S. ownership does not apply if before July 28, 1987 
the vessel was (1) documented and operating as a fishing vessel 
in the EEZ; or (2) was contracted for purchase for use as a 
fishing vessel in the U.S. fisheries. The Coast Guard, 
following careful examination of the provision of the Anti-
Reflagging Act grandfathering vessels from the American control 
provision, concluded that the grandfathered provision ran with 
the vessel. Although this was seemingly contrary to the purpose 
of the law, grandfather provisions by their very nature run 
contrary to the overall purpose of a statute. The Coast Guard 
was aware there were many persons who believed the ownership 
grandfather provision should terminate on sale or transfer of 
the vessel. However, after deliberating this issue, the Coast 
Guard concluded the plain language of the statute did not allow 
the Coast Guard to adopt a rule that the ownership grandfather 
provision's protection terminates when there is a change of 
ownership or control. As a result, almost 28,000 vessels 
currently documented for the fisheries are eligible for the 
ownership grandfather. This means that they can be sold and 
still retain full fisheries privileges, without having to meet 
the 51 percent U.S. citizen ownership provisions. Furthermore, 
those vessels can be rebuilt in the U.S. into much larger 
vessels, and still be employed in the fisheries by foreign 
controlled corporations.
    Recently, the Senate began consideration of the American 
Fisheries Act of 1998 (S. 1221), a bill which, among other 
things, directly addresses the problems that arose from the 
ownership and rebuild grandfather provisions of the Anti-
Reflagging Act.
    First, S. 1221 would repeal the ownership grandfather 
effective 18 months after enactment. In addition, it would 
increase the American control provisions for entities owning 
fishing vessels from 51 to 75 percent. Entities currently 
owning documented fishing vessels and which meet the majority 
American control provisions of the Anti-Reflagging Act would 
have 18 months to conform to the new standard. The proposed 
ownership standard would place fisheries on a par with the 
ownership standard for coastwise trade.
    Additionally, S. 1221 would also provide for the orderly 
phase out of larger vessels, including all of the processing 
vessels known to have been deemed grandfathered from the 
rebuild prohibition of the Anti-Reflagging Act. This would 
remove the remaining 20 vessels which were rebuilt foreign 
under the grandfather provision of the Anti-Reflagging Act.
    The Coast Guard appreciates the opportunity to testify 
about this important matter and stands ready to work with the 
Congress on this issue. I would be happy to answer any 
questions you may have.
                                ------                                


        Statement of Jim Gilmore, At-Sea Processors Association

    Thank you, Mr. Chairman and Members of the Committee for 
the opportunity to testify before the Subcommittee on issues 
relating to the conduct of the North Pacific fisheries, 
including the relative contributions of various sectors of the 
fishing and fish processing industry to the domestic economy. I 
am Jim Gilmore, Director of Public Affairs, for the At-sea 
Processors Association (APA).
    APA represents companies that operate twenty-four U.S.-flag 
at-sea fish processing vessels. APA's catcher/processors are 
principally engaged in the Bering Sea pollock fishery and the 
West Coast whiting fishery. By volume, these two fisheries 
account for almost 30 percent of all fish landed in the U.S. 
Over 90 percent of the fleet's revenues are derived from its 
participation in these two fisheries. Pollock and whiting are 
harvested using trawl nets, cone-shaped fishing nets towed 
behind the vessel in the middle of the water column. These two 
fisheries are widely recognized as two of the cleanest 
fisheries in the world, that is, the target species comprise 
about 98 percent of the catch.
    In the context of this hearing on the status 
Americanization, it is important to emphasize that the fleet is 
entirely composed of American-flag vessels operated by U.S. 
corporations. The fleet substantially exceeds Federal 
requirements that at least 75 percent of the crewmembers on 
board U.S. fishing and fish processing vessels be American 
citizens or qualified U.S. residents. APA estimates that over 
90 percent of the workforce in the pollock catcher/processor 
fleet consists of American citizens or permanent U.S. 
residents. The at-sea pollock processing fleet alone directly 
employs about 4,000 American workers. A majority of the workers 
live in Washington state, but Alaska, Oregon, California and 
Idaho residents are also strongly represented.
    American catcher/processor vessels supply substantially 
more of their products to the domestic consumer market than 
their competitors. Our principal competitors in the pollock 
fishery are onshore processors located at, or near, Unalaska on 
the Aleutian Islands chain. Two Japanese multinational seafood 
companies, Nippon Suisan and Maruha, own or control roughly 70 
percent of the Bering Sea onshore pollock processing capacity. 
Under current allocations, the North Pacific Fishery Management 
Council reserves more than one-third of the Bering Sea pollock 
harvest for an onshore processing sector that is dominated by 
Nippon Suisan and Maruha.
    Unlike the at-sea processing sector, there is no U.S. hire 
requirement applied to onshore processors. A study commissioned 
by the National Bank of Alaska reports that onshore processors 
employ a high percentage of Third World foreign guest workers 
who live in company bunkhouses and send home most of their 
wages. Virtually all of the onshore pollock production is made 
into surimi, most of which is exported to Japan for valued-
added secondary processing and distribution.
    The balance of APA's testimony focuses on the following 
four issues:

        1. The U.S.-flag pollock catcher/processor fleet provides 
        greater national benefits than competing industry sectors. The 
        U.S.-flag fleet provides family wage jobs for approximately 
        4,000 workers. A recent State of Alaska study reported wages in 
        the at-sea sector are two and one-half times higher than wages 
        paid to workers in onshore processing plants. At-sea processors 
        also provide a significantly higher percentage of pollock 
        products to the domestic market than onshore competitors, thus 
        creating jobs and wealth in the U.S. through value-added 
        activities. Because fish are processed within hours of being 
        caught in the at-sea sector, higher quality is also achieved; 
        therefore, export earnings are maximized on pollock products 
        that are shipped to overseas markets.
        2. Twenty-three U.S. vessels were rebuilt abroad in the 1980's 
        in accordance with requirements of the Commercial Fishing 
        Industry Vessel Anti-Reflagging Act of 1987 (the Anti-
        Reflagging Act) and documented as vessels of the United States 
        with fisheries endorsements. The vessels received U.S. Coast 
        Guard letter rulings approving their conversion to catcher/
        processors. Seventeen of these vessels currently participate in 
        the Bering Sea pollock fishery, comprise more than half the 
        pollock catcher/processor fleet, and enhance U.S. 
        competitiveness in the seafood industry. The right of these 
        vessels to continue to participate in the fishery should not be 
        in question.
        3. All sectors of the Bering Sea pollock fishing industry are 
        responsible for the overcapitalization that has occurred in the 
        harvesting and processing sectors. Congress ought not to 
        legislate certain participants out of business for the benefit 
        of companies seeking preferential access to fishery resources, 
        including Tyson Foods which is a recent and appar-

        ently unsuccessful entrant into the fishery. Competing 
        interests should work together to resolve the problem of 
        overcapitalization in a manner fair and equitable to all 
        participants.
        4. APA supports eliminating the ownership grandfather contained 
        in the Anti-Reflagging Act, thus requiring at least 51 percent 
        or more of the stock in U.S. corporations owning fishing and 
        fish processing vessels be held by U.S. citizens.

1. The At-sea Processing Sector Provides the Greatest Benefits to the 
Nation.

    The Magnuson-Stevens Fishery Conservation and Management Act (the 
Magnuson-Stevens Act) was amended in 1978 to emphasize the need ``for a 
national program for the development of fisheries which are 
underutilized or not utilized by the United States fishing industry, 
including bottom fish off Alaska. . .'' At that time, the enormous and 
healthy North Pacific groundfish fishery was dominated by foreign-flag 
fishing and fish processing vessels because the U.S. industry lacked 
sufficient harvesting and processing capacity.
    APA represents the U.S.-flag catcher/processor fleet that 
contributed substantially to achieving Americanization of the 
fisheries. The association's member vessels cover the spectrum from 
vessels with little or no foreign investment to vessels in which 
foreign investment is substantial. We also represent vessels that were 
built or rebuilt exclusively in the U.S. and those U.S.-built vessels 
that were converted overseas in the 1980's in conformance with the 
Anti-Reflagging Act. One thing that all of the vessels have in common 
is that they participate in the sector of the Bering Sea pollock 
industry that produces the greatest benefits to the U.S.

a. U.S.-flag Catcher/Processors Provide Family Wage Jobs for Americans.

    As stated above, Federal law mandates that U.S. residents comprise 
75 percent of the crew on board U.S.-flag at-sea fish processing and 
fishing vessels. There is no similar requirement for the three large 
companies operating onshore Bering Sea pollock processing plants. As 
noted above, a report prepared for the National Bank of Alaska found 
that foreign guest workers account for a significant percentage of the 
work force in shoreside plants. A recent survey conducted by the Alaska 
Department of Community and Regional Affairs discusses the wage 
disparity between the onshore and at-sea processing sectors. Wages for 
crew members on catcher/processors are about two and one-half times 
higher than for employees holding comparable jobs onshore.

b. Catcher/Processors Maximize the Value of U.S. Fishery Resources.

    Surimi and fillets are the primary products made from pollock. In 
the pollock ``A'' season, valuable roe products are produced, the flesh 
of the pollock is then processed into fillet and surimi products. With 
respect to the principal processed products, surimi accounts for about 
60 percent of the catcher/processor fleet production; fillet-type 
products account for 40 percent. The product mix for the Japanese-
dominated onshore processing sector is about 90 percent surimi and 10 
percent fillets.
    Most surimi is exported to Asian markets, principally Japan, where 
Nippon Suisan's and Maruha's secondary processing plants and 
distribution networks capture the added value. In short, Nippon 
Suisan's and Maruha's U.S. subsidiaries are geared towards capturing 
America's pollock resource primarily to support parent company 
operations in Japan.
    In testimony provided to the Senate Commerce Committee in March, 
major domestic seafood buyers, Long John Silver's, Gorton's Seafoods, 
and LD Foods stated that the Japanese owned plants produce surimi 
regardless of how low surimi prices might drop or fillet prices might 
rise. Domestic seafood buyers are placed at a significant disadvantage 
in attempting to purchase pollock products from onshore processors 
because production by the Japanese-owned plants is dedicated almost 
entirely to feeding the home market of these vertically integrated 
multinationals.
    The U.S.-flag catcher/processor fleet's sales of pollock fillets to 
the domestic market provide additional evidence of how the at-sea 
sector provides greater national benefits than its onshore competitors. 
By relying on the domestic market for 40 percent of our sales, jobs and 
value are created not only at the secondary processing stage but 
throughout the distribution chain to retail and food service outlets. 
The benefits are not inconsequential since last year the catcher/
processor fleet produced 100 million pounds of pollock fillet-type 
products.
    In addition to the issue of product mix, quality issues affect 
value. The National Marine Fisheries Service's (NMFS') testimony to the 
Senate Commerce Committee on S. 1221 confirmed that at-sea processed 
pollock products are generally of higher quality and consequently 
command a higher price in the marketplace. Thus, in the surimi market, 
U.S. export earnings are maximized by at-sea processing of pollock. 
Because we earn higher prices for our products, catcher/processors that 
supplement their own harvests by purchasing fish from catcher vessels 
provide the ancillary benefit of paying higher prices to fishermen than 
our shoreside competitors.
    Catcher/processor production of fillet products reduces U.S. 
dependence on the Japanese market for seafood sales. Currently, the 
troubled Japanese economy, and the accompanying decline in the value of 
the yen, means U.S. producers are facing near record low prices for 
surimi products. Meanwhile, the domestic pollock fillet market is quite 
strong. Maintaining a viable and diverse catcher/processor fleet that 
adjusts its product mix in response to market conditions will enable 
the U.S. to realize greater national benefits from fishery resources.

c. Catcher/Processors Offers Greater Opportunities for Fishing 
Communities.

    Recent changes to the Magnuson-Stevens Act require consideration of 
the needs of fishing communities. The at-sea fish processing sector, 
particularly the catcher/processor fleet, makes vital contributions to 
Northwest fishing communities by providing direct and indirect 
employment for thousands of fishermen, processors and support industry 
personnel. The importance of the fleet to the maritime economy should 
not be overlooked. The U.S.-flag catcher/processor fleet spends $15-20 
million annually in Northwest and Alaska shipyards. This economic 
activity combined with the other substantial contributions of the fleet 
to local communities prompted the Washington State Labor Council and 
the AFL-CIO's Maritime Trades Department to oppose proposals to revoke 
fisheries endorsements for vessels in the fleet.
    The catcher/processor fleet also makes important economic 
contributions to the Alaskan economy. In 1991, the catcher/processor 
fleet initiated training and hiring programs for residents of Western 
Alaska native communities, a precursor to the Community Development 
Quota (CDQ) program. The CDQ program implemented a year later 
formalized efforts to create jobs and economic opportunities for more 
than 50 Western Alaska native communities. Catcher/processor companies 
became partners in the six CDQ groups that formed. Two of the CDQ 
groups have invested in at-sea processing vessels or in companies that 
operate such vessels. Further consolidation or shrinking of the fleet, 
particularly by legislative fiat, threatens those investments. It could 
also reduce the value of the 200 million pound annual CDQ pollock 
apportionments since fewer companies would be left to bid on contracts.
    It is also important to note that in addition to providing an 
important market for pollock fishermen, catcher/processors provide 
alternative marketing opportunities in Alaska's salmon fishery. Some 
catcher/processors also operate solely as motherships in the Pacific 
whiting fishery taking deliveries from smaller Northwest trawl fishing 
vessels.
    This situation contrasts with the onshore pollock processing plants 
that are located in only two Alaska communities, Unalaska and Akutan. 
No doubt, the onshore Bering Sea pollock plants make important economic 
contributions in the area, but perhaps less so than one might think. 
For example, the local tribal council in Akutan wrote that ``few local 
residents have elected to work at the (Trident Seafoods) plant because 
of the conditions related to processing line jobs: very long hours at 
minimum wages.'' With a high percentage of foreign guest workers 
employed onshore, operating in areas remote from other Western Alaska 
communities, and producing primary processed products for overseas 
parent companies, Congress should carefully consider the effects of 
proposals that harm U.S.-flag catcher/processors.

2. The Growth of the Catcher/Processor Fleet, While Rapid, Was 
Anticipated. The Fleet, Including Vessels Re-built Overseas in the 
1980's, Enhances U.S. Competitiveness.

    In 1987, most of the Bering Sea pollock harvest was being harvested 
by U.S.-flag fishing vessels, but was being processed on board foreign-
flag processing vessels operating in the U.S. 200-mile zone. The U.S. 
fishing industry was slowly making progress to develop domestic 
processing capability, principally by building catcher/processor 
vessels. The priority accorded U.S. processors under the Magnuson 
Stevens Act over foreign processors was helpful, but there were many 
hurdles to overcome, including acquiring state-of-the-art technology, 
gaining market access in Japan, and perhaps most challenging, obtaining 
financing and willing investors.
    Congress recognized that one circumstance could preclude 
development of domestic processing capability--the right of foreign-
built, foreign-flag processing ships to simply re-flag U.S. To prevent 
the reflagging of these vessels, which were fully amortized and would 
make development of a U.S.-flag catcher/processor fleet problematic, 
Congress acted to bar the reflagging of foreign built processing 
vessels to U.S.-flag.
    Testimony provided in mid-1987 at Congressional hearings on 
legislation to bar reflagging affirmed U.S. fishing companies intent on 
harvesting and processing pol-

lock were purchasing U.S. vessel hulls for the purpose of rebuilding 
them overseas into catcher/processors. It was already common knowledge 
that U.S. hull vessels were being sought for these planned conversions. 
In January 1987, the Maritime Administration even placed advertisements 
in fishery trade publications offering for sale offshore oil industry 
vessels that had been repossessed by the agency, vessels which were 
``suitable for conversion to a number of fishing applications.''
    Foreign rebuilding of U.S.-built vessels for the purpose of 
operating in U.S. fisheries was permitted prior to enactment of the 
Anti-Reflagging Act. The decision to take these projects abroad was not 
surprising; after all, foreign shipyards had been building catcher/
processors since the 1950's. U.S. shipyards had no experience in 
constructing fishing vessels that included state-of-the-art processing 
facilities on board the vessel. It was clear that conversions would 
entail significant rebuilding since accommodating an onboard surimi 
processing plant, quarters for a crew of 100 or more, adequate galley 
facilities, and other non-fishing functions is virtually impossible to 
fit into a vessel smaller than 275 feet in length. Bob Morgan of 
Oceantrawl, a company that rebuilt overseas three of the largest 
vessels in the Bering Sea pollock fishery, described the scope of the 
vessel projects in testimony before the Senate Commerce Committee.
    Lists of vessel projects were circulated in Congress and dozens of 
overseas rebuild projects were identified. Identifying potential 
business. some U.S. shipyards lobbied Congress to expand the scope of 
the legislation beyond simply barring the reflagging of foreign built 
processing vessels. The yards sought to limit foreign rebuilding of 
U.S. vessels as well. Congress acted to address shipyard interests 
while protecting investments made by those already engaged in overseas 
conversion projects. On July 28, 1987 the House Merchant Marine and 
Fisheries Committee ``marked-up'' anti-reflagging legislation that 
provided a rebuild ``grandfather'' to U.S. vessels being converted 
overseas to catcher/processors as long as the vessel was contracted for 
purchase by the bill's date of enactment.
    In other words, the Committee created a window for new projects 
beyond those projects already in the pipeline on the date of the 
Committee ``mark-up.'' By July 28th, twenty-four vessels had already 
received Coast Guard rulings approving the planned overseas conversions 
as consistent with existing law. A total of 36 vessel projects had been 
identified by the date of the ``mark-up.'' A list circulated by Marco 
Shipyard on August 3, 1987, just one week after the ``mark-up'' claimed 
that more than 100 foreign rebuild projects were planned. With this 
information in hand, the rebuild provision was tightened significantly 
during House floor consideration of the anti-reflagging legislation in 
November, 1987. A retroactive provision was added providing that only 
vessels contracted for purchase by July 28, 1987--the date of the House 
``mark-up,'' not the date of enactment--were eligible for the rebuild 
grandfather. The bill even included language to make eligible for 
rebuilding abroad one vessel project that did not meet the revised, 
stricter standards included in the final version of the Act.
    Since 1987, Congress has not held a single hearing, nor has 
legislation been introduced, that evidenced concern about the number of 
rebuilt catcher/processors qualified to participate in U.S. fisheries 
under the rebuild ``grandfather'' provisions of the Anti-Reflagging 
Act. There was an unsuccessful court challenge to the Coast Guard's 
interpretation of the ownership grandfather. In a unanimous opinion the 
Court of Appeals for the District of Columbia ruled that the plain 
language of the statute required the Coast Guard to interpret the 
statute as it had.
    A 1990 General Accounting Office report found that passage of the 
Anti-Reflagging Act effectively limited the rebuilding of U.S. vessels 
abroad. No foreign rebuilt vessels, or any other pollock catcher/
processors for that matter have entered the fishery since 1990. The 
Anti-Reflagging Act has been amended once since 1987. The 1989 Coast 
Guard authorization bill contained a provision providing an exemption 
from the Anti-Reflagging statute to allow a foreign built vessel to be 
reflagged and to enter the Bering Sea pollock fishery as a mothership 
vessel. In short, two years after enacting legislation to bar the 
reflagging of foreign vessels as U.S. processors and to limit foreign 
conversions of U.S.-built vessels, Congress made a special exception to 
allow a foreign built vessel to enter the fishery. Ironically, this 
late entrant into the fishery, which is controlled by Maruha, will not 
lose its fisheries endorsement under Senate legislation that eliminates 
certain U.S.-built, foreign rebuilt catcher/processors.

3. All Sectors of the Bering Sea Pollock Fishery Are Responsible for 
Overcapitalization and Should Work Cooperatively on a Solution.

    Overcapitalization in the Bering Sea pollock fishery is a serious 
concern. The fishery management regime, which rewards those who catch 
fish the fastest, creates an incentive for continued capitalization by 
participants. Fishermen and processors alike have obliged. Neither the 
current moratorium on new vessel entry into the fishery, nor the 
approved license limitation program developed by the North Pacific 
Fishery Management Council, address the issue of overcapitalization 
because neither management measure stops the ``race for fish.'' As a 
result, virtually all participants in the pollock industry--onshore 
plants, catcher vessels, and at-sea processors--contribute equally and 
substantially to overcapitalization.
    The economic pressures sparked by overcapacity that face the 
fishing industry have led many industry members to seek a rational 
management regime that focuses on ending the race for fish. Others, 
such as Tyson Foods, which bought into the fishing industry in 1992, 
and Trident Seafoods, are seeking to legislate competitors out of 
business. Their preferred vehicle is S. 1221, the Senate bill which 
revokes fishery endorsements for certain U.S. vessels rebuilt overseas 
in the 1980's. Their proposal to remove fishing rights from 18 U.S.-
flag catcher/processors valued at approximately $400 million raises 
numerous issues of policy and law, including assertions that the 
revocation of fisheries endorsements constitutes a ``takings.'' Of 
course, it will be left to the courts to determine the 
constitutionality of any such action, but it is clear that serious 
equity issues are raised by proposals to revoke fishing rights for 
vessels that have participated lawfully and responsibly in the Bering 
Sea pollock fishery since 1990 and earlier. Regardless of the legal 
avenue available to vessel owners, revocation of fishing rights for 
vessels will lead to substantial economic and social hardship for 
affected workers, disruptions to the market place, and other 
significant adverse impacts.
    Even if the group of vessels targeted by S. 1221, or any other 
group, is excluded by law from the North Pacific groundfish fishery, 
overcapitalization would remain a problem. NMFS concluded in its Senate 
Commerce Committee testimony on S. 1221 that arbitrarily revoking 
fishing privileges for certain vessels is not an effective method of 
addressing overcapitalization. The agency stated that capacity removed 
from the pollock fishery without ending the race for fish would be 
replaced within one to two years.
    It is important to remember that despite concerns about 
overcapitalization, North Pacific fish stocks in general, and the 
pollock resource in particular, are healthy and well managed. Despite 
the relatively long-standing presence of excess harvesting and 
processing capacity in the pollock fishery, fishery managers continue 
to set the allowable biological catch (ABC) level at or below the safe 
harvest level as determined by Federal, state and university 
scientists. Catches are closely monitored and recorded by Federal 
fishery observers onboard all vessels longer than 125 feet. Electronic 
reporting of catch data ensures that harvest amounts are calculated on 
a real time basis so the quotas are not exceeded.

a. Overcapitalization in the Onshore Pollock Processing Sector.

    In 1992, the Federal Shoreside Processor Preference rule was 
imposed requiring that 35 percent of the annual Bering Sea pollock 
harvest be delivered onshore for processing. Three large seafood 
companies, Nippon Suisan, Maruha and Trident Seafoods are the principal 
beneficiaries of this fishery management regulation. Onshore 
production, which increased significantly from 1987 to 1991, has 
remained relatively stable during the 1990's. While production levels 
remain relatively constant, the length of the onshore fishing season 
has declined from about 150 days a year when the 1992 Shoreside 
Preference rule was implemented to 75 days in 1997. According to the 
Department of Commerce's 1990 report on the Anti-Reflagging Act, 
onshore pollock processing capacity was 290,000 metric tons during the 
year round fishery in 1988; onshore capacity in 1998 is at least 1 
million metric tons, or three times the annual onshore production 
levels.
    In sum, onshore processors do not compete against catcher/
processors in a race for the fish. They compete only against one 
another. After years of expanding their plants, upgrading processing 
equipment, and financing and purchasing catcher vessels with increased 
fishing power and capacity, onshore processors are suffering the 
consequences of overcapitalization. The onshore processors are 
currently seeking a change in the Shoreside Preference rule that would 
give them an increased percentage of the annual pollock harvest. 
Because overcapitalization onshore is a self-inflicted problem, their 
case for gaining an increased share of the pollock harvest is weak. To 
increase their chances of acquiring a greater onshore pollock 
allocation, the onshore processors' benefit from legislating catcher/
processors out of business and demanding their share of the harvest.

b. Both Catcher Vessels and Catcher/Processors Have Contributed to 
Overcapitalization in the Harvesting Sector.

    Some claim that the development of the U.S. catcher/processor fleet 
preempted opportunities for catcher vessel operators. Those making that 
claim point to catch to-

tals from the mid-1980's when only a half dozen U.S.-flag catcher/
processors were operating. At that time, virtually all of the harvest 
was taken by catcher vessels operating in joint venture operations, 
that is, they were delivering their catch to foreign-flag processing 
vessels operating within the U.S. 200-mile zone. A number of catcher 
vessel operators, taking advantage of U.S. processor preference 
provisions in the Magnuson-Stevens Act, embarked on projects to build 
U.S. catcher/processors. Thus, much of the harvest taken by the catcher 
vessel sector in the mid-1980's and then by the catcher/processor 
sector by 1990 went to the same individuals or companies; they had 
simply made the transition to a more Americanized fishing industry.
    Interestingly, since 1991 the catcher vessel sector has increased 
its share of the annual pollock harvest from 35 percent to just over 50 
percent. The catcher/processor sector share of the catch has declined 
from 65 percent to just under 50 percent. The number of catcher boats 
and the fleet horsepower have increased by more than 40 percent, the 
tank capacity is up by one-third, and the catch per day has grown by 
nearly 70 percent. These figures demonstrate dramatically that 
overcapitalization in the catcher vessel sector continued unabated.
    To be sure, the catcher/processor sector continued to add capacity 
as well to try to stay competitive in the race for fish. The solution 
to overcapitalization lies in adopting a rational fishery management 
system that ends the race for fish and that is a position advocated by 
the catcher/processor fleet (and the catcher vessel fleet) throughout 
the decade. The solution is not to have Congress select allocation 
winners and losers by summarily revoking fishing rights for some long-
term participants for the short-term benefit of a few.

4. APA Supports Eliminating the Anti-Reflagging Act Ownership 
Grandfather.

    The principal purpose of the Anti-Reflagging Act, as indicated by 
its title, was to prevent the reflagging of foreign-built processing 
vessels from foreign to U.S.-flag status. After considerable debate and 
negotiation in Congress, an ownership provision was included. Prior to 
passage of the Anti-Reflagging Act, there was no limit on how much, or 
how little, interest foreign nationals could own in a U.S. corporation 
operating fishing or fish processing vessels. The Anti-Reflagging Act 
imposed a requirement that a minimum 51 percent interest in a 
corporation owning a fishing or fish processing vessel must be held by 
U.S. citizens.
    A ``grandfather''provision was included and that right attached to 
an existing qualified fishing vessel. There is no reference in the 
statute to the ``grandfather'' right applying to the vessel owner and, 
therefore, almost 30,000 fishing vessels enjoy ``grandfather'' rights 
under the Act. Some assert that this result was not Congress intent, 
but the legislative history of the Anti-Reflagging Act indicates 
otherwise. It is replete with statements opposing limits on foreign 
investment in U.S. corporations operating fishing and fish processing 
vessels. It is not at all surprising that in the ``give and take'' of 
the legislative process that compromise language would impose a 
prospective ownership standard, but that existing vessels and vessel 
projects would be ``grandfathered.'' The significance, of course, of 
``grandfather'' rights running with the vessel, and not the owner of 
the vessel, is that the ``grandfather'' does not expire when a transfer 
of ownership in the vessel takes place.
    The Coast Guard, relying on a plain reading of the statute, issued 
a rule confirming that the ownership ``grandfather'' attached to the 
vessel. The agency's interpretation was challenged in court. The U.S. 
District Court of Appeals unanimously upheld the Coast Guard's 
interpretation. Thus the situation today that most fishing vessels 
remain ``grandfathered'' under the Act and are not subject to the 51 
percent U.S. ownership standard adopted in 1987.
    APA supports eliminating the ownership ``grandfather'' while 
providing for a scheduled phase-in of U.S. ownership in corporations 
operating fishing and fish processing vessels, at or perhaps above, the 
51 percent level. If Congress acts to eliminate the ownership 
``grandfather,'' APA suggests that the following points be considered. 
First, companies should be granted sufficient time to come into 
compliance with new ownership requirements. We suggest that Congress 
establish a three-year time period. Second, preserve the 
competitiveness of U.S. seafood companies in the world marketplace. If 
Congress acts to increase the level of U.S. citizen ownership and 
control in American corporations operating fish and fish processing 
vessels, care should be given not to preclude, or impede, domestic 
seafood companies from signing long-term marketing agreements with 
foreign buyers or arranging for financing from abroad. Third, protect 
the interests of U.S. shareholders in corporations required to 
restructure their ownership because of a change in the law. The Senate 
bill, S. 1221, imposes a 75 percent U.S. ownership and control 
standard. Failure to meet that new standard would result in revocation 
of a vessel's fisheries endorsement, rendering the vessel valueless for 
use in U.S. fisheries. This provision raises a possibility that foreign 
investors holding more than 25 percent ownership interest in vessels 
might refuse to sell their share to their American partners. Faced with 
a loss of fishing rights in the U.S., American partners could be 
leveraged into selling their vessel (or buying out their foreign 
partner) on unfavorable terms.
    Domestic ownership raises another important issue. Serious 
consideration should be given to the effects of foreign control of the 
Bering Sea onshore pollock processing sector given the dominance of 
Nippon Suisan and Maruha in the Japanese surimi market. If Congress 
believes that limiting foreign investment in the fisheries is necessary 
to increase national benefits, then perhaps similar ownership 
limitations should be applied to the onshore processing sector. A 
recent annual report issued by Maruha boasts that the conglomerate 
controls 100,000 metric tons of surimi annually, or one-quarter of the 
annual Japanese consumption. Nippon Suisan is a similar sized company. 
Without extending limits on ownership to the foreign-dominated plants, 
fishermen will continue to receive less than 9 cents per pound for 
pollock while Nippon Suisan and Maruha realize all of the economic 
benefits of value-added activities from primary processing through sale 
to the Japanese consumer. These rules are at least as important to a 
truly Americanized fishery as proposals requiring foreign divestment of 
ownership in the catcher/processor fleet.
    Once again, thank you for the opportunity to appear here today. I 
am pleased to answer any questions that you might have.
                                 ______
                                 

  Statement of Michael W. Kirk, Partner, Cooper, Carvin & Rosenthal, 
         PLLC, Counsel for the American Fisheries Act Coalition

    Mr. Chairman, members of the Committee, I appreciate the 
opportunity to be here today. I represent the American 
Fisheries Act Coalition, an association of domestic fishing 
vessel owners and operators. My purpose today is to lay to rest 
an extremely tenuous argument made by some opponents of the 
Senate bill that the legislation would work a taking of private 
property without providing just compensation in violation of 
the Takings Clause of the Fifth Amendment to the United States 
Constitution.
    Briefly, the American Fisheries Act is designed both to 
further the long-standing congressional policy to 
``Americanize'' United States fisheries and to address the 
problem of over-capacity in those fisheries. The bill would 
accomplish these objectives by (1) establishing a new 
``corporate control'' standard for the owners of fishing 
vessels seeking fishery endorsements; (2) closing certain 
loopholes in the citizen control and foreign rebuild provisions 
of the Commercial Fishing Industry Vessel Anti-reflagging Act 
of 1987 that have allowed foreign-controlled and foreign-
rebuilt fishing vessels to obtain fishery endorsements; and (3) 
prohibiting the issuance of new fishery endorsements for large 
fishing vessels and requiring that the fishery endorsements for 
certain such vessels be permanently surrendered.
    Enactment of the bill will result in the loss of fishery 
endorsements for certain United States flag fishing vessels 
currently operating within the Exclusive Economic Zone 
(``E.E.Z.''), including vessels that were purchased, built, or 
rebuilt in reliance upon the loopholes in existing law making 
such vessels eligible for fishery endorsements.
    My partners Charles Cooper, Vincent Colatriano, and I have 
analyzed the claim that the bill could effect a taking of 
private property in some detail, and I summarize our 
conclusions today. At the most fundamental level, the Senate 
bill regulates access to the fish in the sea, and no one 
asserts a property right to the fish.
    As an initial matter, we have concluded that no reasonable 
claim can be made that the Senate bill would result in a 
physical taking of the vessels, for the bill neither directly 
appropriates the vessels, nor ousts the owner of possession of 
the vessels, nor requires the owner to acquiesce in a physical 
invasion or occupation of the vessels. Indeed, the bill's 
opponents do not claim that a physical taking would occur. Any 
takings challenge, therefore, must allege that the bill effects 
a ``regulatory taking'' of the vessels. Analysis under either 
of the two broad conceptual approaches to regulatory takings 
yields the inescapable conclusion that the bill does not effect 
a regulatory taking of fishing vessels.
    Opponents argue that, under the Supreme Court's decision in 
Lucas v. South Carolina Coastal Commission, 505 U.S. 1003 
(1992), the bill effects a taking of vessels because it somehow 
denies the owners ``all economically beneficial use'' of those 
vessels which no longer qualify for fishery endorsements. For 
several reasons, the Lucas analysis is inapplicable to the 
bill.
    The Lucas decision contains language suggesting that the 
``deprivation of all economically beneficial use'' analysis is 
limited to real property. It is unlikely, therefore, that the 
Lucas test would even apply to governmental regulation of 
property other than land. But even if the Lucas test applies to 
regulation of personal prop-

erty, it is unlikely that the value of affected fishing vessels 
will be so significantly diminished by the bill that the bill 
can be said to deprive vessel owners of all economically 
beneficial use of their vessels. The ``all economically 
beneficial use'' test, according to court decisions applying 
it, means upwards of 90 percent of the fair market value of the 
property in question. If the bill does in fact result in some 
loss in value, the loss could not possibly amount to such a 
high proportion of total value. For example, as to vessels 
failing the bill's new corporate control test, the bill merely 
requires domestic control which presumably could be effected by 
a sale either of the vessel itself or of an interest in the 
vessel-owning entity. Since any such sale would presumably take 
place at a price at or approaching fair market value, any loss 
in value would certainly constitute far less than all 
economically beneficial use. Even vessels that are forced to 
surrender their fishery endorsements would continue to be able 
to fish in waters outside the E.E.Z. Finally, any vessels that 
lose their ability to fish in the E.E.Z. could be converted to 
economically beneficial uses other than fishing. Many of the 
vessels in question, after all, were converted from non-fishing 
uses in the first place. In fact, I understand that at least 
one has actually been converted into a seismic research vessel, 
and a number of vessels have been put to use in foreign waters. 
The analyses put forward by the bill's opponents ignore these 
alternatives.
    Those who argue that the bill would effect a taking 
similarly ignore an even more fundamental point. Since at least 
1976, the Federal Government has maintained plenary authority 
to regulate access to the E.E.Z. A fishery endorsement merely 
allows fishing in the E.E.Z. subject to the government's 
authority to regulate. A fishery endorsement does not give the 
holder the assurance of use. To the contrary, fishing quotas in 
the E.E.Z. can be reduced to zero. Moreover, an endorsement 
holder has no right to exclude others from a given fishery--all 
who meet statutory requirements are entitled to receive an 
endorsement. Endorsement holders pay essentially nothing for 
the endorsement itself. These features of the endorsements 
confirm that a fishery endorsement is not private property; its 
revocation is not a taking. Rather, the endorsement is merely a 
permit to fish in waters over which the government retains 
complete authority.
    A long line of cases considering the revocation of permits 
to perform activities--building, grazing, prospecting, mining, 
traversing, and fishing--on public land and government 
regulated waters holds that such revocations cannot rise to the 
level of a Fifth Amendment taking. In one such case, the United 
States Court of Appeals for the Eleventh Circuit noted that 
``both Federal and other state cases stand for the proposition 
that permits to perform activities on public land--whether the 
activity be building, grazing, prospecting, mining or 
traversing--are mere licenses whose revocation cannot rise to 
the level of a Fifth Amendment taking.'' Marine One, Inc. v. 
Manatee County, 898 F.2d 1490, 1492-93 (11th Cir. 1990) 
(emphasis in original); see United States v. Locke, 471 U.S. 
84, 104-05 (1985) (``The United States, as owner of the 
underlying fee title to the public domain, maintains broad 
powers over the terms and conditions upon which the public 
lands can be used, leased, and acquired. . . . Claimants thus 
must take their mineral interests with the knowledge that the 
Government retains substantial regulatory power over those 
interests.''); United States v. Chicago, Milwaukee, St. Paul & 
Pac. R.R. Co., 312 U.S. 592, 596 (1941); Acton v. United 
States, 401 F.2d 896, 899-900 (9th Cir. 1968), cert. denied, 
395 U.S. 945 (1969); Osborne v. United States, 145 F.2d 892, 
896 n.5 (9th Cir. 1944); Burns Harbor Fish Co. v. Ralston, 800 
F. Supp. 722, 727 (S.D. Ind. 1992); Organized Fishermen of 
Florida v. Watt, 590 F. Supp. 805, 815-816 (S.D.Fl. 1984), 
aff'd sub nom. Organized Fishermen of Florida v. Hodel, 775 
F.2d 1544 (11th Cir. 1985), cert. denied, 476 U.S. 1169 (1986). 
In Acton, the Ninth Circuit held that a government license to 
mine uranium on public land was not property which, when 
canceled, entitled the licensee to compensation. Noting that 
the plaintiff had made large expenditures in reliance on the 
expectation that mining would be permitted to take place, the 
court made clear that the value of government permits and 
licenses does not transform a government privilege into 
property protected by the Takings Clause. Relying on an early 
Supreme Court decision involving grazing permits, the court 
reasoned:

        Unquestionably, the grazing permits were of value to the 
        ranchers. They were an integral part of the ranching unit--
        indeed, the fee lands are practically worthless without them. 
        But, `the existence of value alone does not generate interests 
        protected by the Constitution against diminution by the 
        government, however unreasonable its action may be.' 
        Reichelderfer v. Quinn, 287 U.S. 315, 319, 53 S. Ct. 177, 178, 
        77 L.Ed. 331.
Acton, 401 F.2d at 900.
    Particularly instructive is Organized Fishermen of Florida, which 
considered whether the National Park Service's cancellation of permits 
to engage in commercial fishing, as a preference to sport fishermen, in 
waters enclosed by Everglades National Park constituted a taking of 
private property. 590 F. Supp. at 815-816. The court held that despite 
the long-standing practice of allowing commercial fishing in the area 
in question, ``the annual permits are merely a license to conduct 
commercial fishing activity, . . . [are] a privilege granted by the 
Park Service, and [are] . . . by [their] very nature, revocable.'' Id. 
at 815. Comparing the commercial fishing permit to the grazing licenses 
considered in Acton, that held:

        [A] permit for grazing has been considered ``a privilege which 
        is withdrawable at any time for any use by the sovereign 
        without payment of compensation.'' Similarly, plaintiffs in the 
        instant case have no Fifth Amendment taking claim.
Id. at 816 (citations omitted).
    In sum, given that the Federal Government has plenary authority 
over fishing in the E.E.Z. and that a fishery endorsement merely grants 
to the holder the nonexclusive privilege to engage in commercial 
fishing in the E.E.Z., the revocation of a fishery endorsement--like 
the revocation of a grazing permit--does not trigger a claim for 
compensation. Accordingly, any resulting loss of value in a fishing 
vessel is also not compensable.
    The same result is yielded under the ad hoc regulatory taking test 
announced by the Supreme Court in Penn Central Transportation Co. v. 
New York, 438 U.S. 104 (1978). This test calls for inquiry into (1) the 
character of the governmental action, (2) the economic impact of the 
action on a claimant, and (3) the action's interference with the 
claimant's reasonable ``investment-backed'' expectations.'' See id. at 
124; Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1005 (1984).
    For many of the same reasons that the bill would not, under Lucas, 
deprive vessel owners of all economically beneficial use of their 
fishing vessels, it is doubtful that the ``economic impact'' of the 
bill, under the Penn Central test, would be considered particularly 
severe. These fishing vessels could be sold for fair market value, or 
if not sold, would still be able to fish in waters outside the E.E.Z., 
and, under certain conditions, in waters within the E.E.Z. Moreover, 
they can be converted to non-fishing uses.
    The inquiry into the ``character of the governmental action'' also 
weighs heavily against a finding that the bill effects a regulatory 
taking. The bill merely seeks to refine standards for vessel 
documentation and endorsement, and to redefine the conditions under 
which foreign interests will be allowed to fish in United States 
sovereign waters. Both of these areas are well within the Federal 
Government's plenary and long-standing authority. The bill thus hardly 
represents an initial Federal foray into a new area; nor is it a 
dramatic departure from past regulatory practice.
    These same considerations also defeat a claim that the bill unduly 
interferes with the reasonable investment-backed expectations of vessel 
owners. No provision of current law regarding the standards for issuing 
fishery endorsements can be read to provide some sort of governmental 
guarantee, contractual or otherwise, that those standards were 
permanent. Any such claim would amount to the assertion that whenever 
Congress tightens the standards for eligibility for Federal licenses or 
permits, it must compensate the adversely affected licensees. Such a 
rule would have the practical effect of handcuffing Congress from ever 
increasing the standards or requirements for Federal licenses or other 
privileges, and there is no principle of takings law that supports such 
a far-reaching proposition. Moreover, as under the Lucas analysis, the 
fundamental proposition that fishery endorsements, like other 
governmental licenses, do not create property interests in the 
licensees defeats any claim that the endorsements could form the basis 
for some type of reasonable investment-backed expectation that an 
endorsement, once obtained, would never be lost.
    Our analysis, moreover, is unchanged by the United States Court of 
Federal Claims' recent decision in Maritrans Inc. v. United States, 
1998 WL 214268, No. 96-483C (Fed. Cl. Apr. 24, 1998), cited by some in 
support of their arguments against the bill. In Maritrans, owners of 
single hulled oil barges are claiming that Federal regulation which 
phases out the use of single hulled oil vessels, in preference for 
double hulled vessels for environmental reasons, constitutes a taking 
of the single hulled barges. I should first note that the decision of 
the court does not decide whether the phasing out of single hulled 
tankers effects a taking. The opinion merely rejects two of the 
arguments presented by the government that would have barred a claim. 
But even if the court ultimately does order that compensation must be 
paid, the case is easily distinguished from the line of cases I 
described earlier concerning permits to use government land or waters. 
That the bill's opponents have even cited Maritrans suggests the 
difficulty they face fashioning a case that the bill takes private 
property.
    In summary, whatever policy considerations may guide the members of 
this Committee as you deliberate over the merits of this legislation, 
the potential that the Federal Government will be compelled to pay 
compensation to the owners of affected fishing vessels can safely be 
dismissed. Thank you.
                                 ______
                                 

        Statement of Don Giles, President, Icicle Seafoods, Inc.

    Thank you, Mr. Chairman, for the opportunity to provide a 
statement for the record concerning Icicle Seafood's views on 
legislation to Americanize the United States flag fishing 
fleet.
    By way of introduction, Icicle Seafoods started in 1965 
when a group of local fishermen and businessmen purchased a 
salmon cannery in Petersburg, Alaska. Today our seafood 
processing company continues to be 100 percent American owned, 
with a majority of our ownership held by Alaskan fishermen and 
employees. Icicle employs, at peak, over 2500 workers at our 
processing facilities in Alaska and Washington. As one of the 
largest American seafood processing companies, we have 
concentrated our business on all species of crab, fresh/frozen/
canned salmon, fresh and frozen halibut, herring, sablefish, 
and surimi analog products. This year we are the crab 
processing partner for four of the six CDQ groups in western 
Alaska.
    Icicle supports the goals of S. 1221, introduced by 
Senators Stevens, Breaux, Murkowski, Hollings, and Wyden. We 
believe that legislation should be enacted to Americanize our 
fisheries by ``establishing a meaningful and enforceable 
standard of U.S. citizen ownership and control for U.S. flag 
vessels employed in the fisheries.'' Icicle also strongly 
supports the revocation of the fishery endorsements of foreign 
owned and foreign controlled factory trawlers that entered our 
fisheries contrary to the intent of Congress. However, we do 
have some concerns about the bill, which are explained below.

Americanization

    As one of the few truly American seafood companies and one 
of the only major independent Alaskan processors left, we 
strongly support the full Americanization of our fishing 
industry. Because we are one of the very few independents 
within the seafood industry, we have no multi-national partners 
pressuring us to pursue specific agendas, actions or policies. 
We are concerned that S. 1221 may not be tough enough in terms 
of preventing foreign owned companies from controlling fishing 
and processing vessels. Today we have reason to believe there 
are highly integrated foreign-owned corporations that control 
fishing and processing vessels, as well as halibut and 
sablefish ITQ's, contrary to the intent of the law. In this 
regard Icicle would like to encourage the Subcommittee to 
consider strict and enforceable standards, such as those found 
in section 2 of the Shipping Act, 1916, to ensure that U.S. 
fishing and fish processing vessels are truly controlled by 
U.S. citizens.

Removal of Foreign Owned/Controlled Factory Trawlers

    As a matter of fairness, we support the removal of the 
seventeen or so foreign owned or controlled factory trawlers 
that sneaked into our fisheries through a misinterpretation of 
the law by the U.S. Coast Guard. During the debate on the 
Commercial Fishing Industry Vessel Anti-Reflagging Act of 1987, 
Icicle and two other American companies seriously looked into 
the design, construction, and proforma of a new U.S. built 
factory trawler. We collectively spent over $150,000 in 
securing bids from four major American shipyards. However, we 
ultimately came to the conclusion that it was not a prudent 
investment, considering the amount of over-capitalization that 
was pouring into the pollock fishery from foreign owned and 
foreign built factory trawlers that jumped through the 
loopholes of the 1987 Act. We believe our project was precisely 
the type of investment that Congress intended to encourage 
through the establishment of the American preference policy 
that provides priority access to our fishery resources to 
American fishermen and American processors. Icicle's plans to 
participate in the Alaska groundfish fisheries were preempted 
by foreign-owned and foreign built factory trawlers and we see 
no reason that these vessels should be allowed to continue to 
thwart the policies of the Congress.

Market Consolidation/Unintended Consequences

    Icicle is concerned that if S. 1221 or similar legislation 
is enacted into law, it could have the unintended consequence 
of creating greater market concentration or excessive control 
of the fisheries within the hands of a few huge domestic and 
foreign controlled seafood companies. If pollock that had been 
previously harvested and processed by the vessels eliminated 
from the fishery through enactment of a new law now becomes 
available to only the remaining pollock participants, the 
effects will be detrimental. Under such a situation, their 
power will increase as a result of a windfall profit and 
increased impacts on the market. Some of these companies are 
vertically integrated and/or are already dominant players, 
therefore they would now become even more powerful. Such an 
outcome could stifle competition within the industry and would 
not be beneficial to United States fishermen or independent 
shoreside processors like Icicle. Even though Icicle is not in 
the business of harvesting or processing pollock, we could be 
harmed by these unintended spillover effects of S. 1221 or 
similar legislation.
    One way to address this issue is to add a provision to the 
legislation that would cap at current levels the amount of 
quota any large seafood company/entity could control. The term 
large seafood entity could be defined as any vessel owner or 
corporation that controlled X percent or more of the pollock 
landings over the previous three year period. We believe NMFS 
and the Council have this vessel landing history readily 
available. In determining who controls the quota NMFS should 
apply criteria similar to those used to determine control under 
section 2 of the Shipping Act, 1916, rather than the less 
rigorous review used today in the halibut/sablefish fishery. 
Such a provision would ensure that small vessels and processing 
companies benefit from removing foreign owned or controlled 
factory trawlers. Under this scenario, we would envision 
increased competition to purchase, process, and sell pollock 
end-products.
    Another way to address corporate consolidation or excessive 
control within the fishery is to take a portion of the 
unallocated quota (quota made available as a result of removing 
foreign owned or controlled factory trawlers) and make it 
available to traditional American companies that were preempted 
from entering the fishery by the foreign owned and built 
factory trawlers. We think this approach would be good for the 
industry and are confident that specific fair criteria could be 
developed to guide this reallocation of quota to bona fide 
American companies. These criteria could include a company's 
history and investment in all fisheries, local employment, 
history of processing in the Bering Sea area, ownership 
structure, participation in community development programs and 
evidence of specific plans or projects that did not go forward 
because they were preempted by the foreign owned and built 
factory trawlers.

Conclusion

    Icicle hopes that our comments will be useful to you as the 
Subcommittee considers legislation to continue the 
Americanization of the fishery that began with the Magnuson-
Stevens Act. We support S. 1221 or similar legislation, and 
encourage the Subcommittee to include measures to address the 
concerns we have raised. If this were done, it would make the 
bill much stronger, and we urge your prompt action on such a 
bill. The long term health of the fishing industry makes it 
critical that Congress act soon to fully Americanize our 
fisheries and ensure that they are not dominated by huge 
corporations.
                                ------                                


       Statement of TCW Special Credits, Los Angeles, California

Introduction

    TCW Special Credits submits this statement to provide 
comments with respect to the general subject of United States 
ownership of fishing vessels and S. 1221, the American 
Fisheries Act, and requests that this statement be made a part 
of the June 4, 1998, hearing record.
    TCW Special Credits is an affiliate of The TCW Group, Inc., 
a Los Angeles based investment management group that includes 
Trust Company of the West, a California trust company and bank. 
The TCW Group entities manage over $50 billion of assets on 
behalf of public and private pension and retirement plans, 
educational and college endowments, charitable foundations, 
and, to a lesser extent, certain mutual funds. TCW Special 
Credits is a California general partnership which serves as 
investment manager of specific funds, trusts and separate 
accounts under the TCW umbrella. As such, TCW Special Credits 
is a registered investment adviser regulated by the U.S. 
Securities and Exchange Commission pursuant to the Investment 
Advisers Act of 1940, and is a Qualified Pension Asset Manager 
regulated by the U.S. Department of Labor pursuant to the 
Employees Retirement Income Security Act of 1994.
    Total assets under management by TCW Special Credits are 
approximately $1.5 billion today. Investors in these funds and 
accounts, like the clients of Trust Company of the West 
generally, consist mostly of large public and corporate pension 
plans, charitable and educational trusts, as well as some 
individual investors. Among the investors in the funds managed 
by TCW Special Credits are pension funds of nine states and 
municipalities, the endowments of 18 colleges and univer-

sities as well as 14 charitable foundations, and the retirement 
plans of 12 of Fortune's top 200 companies.
    TCW Special Credits, as agent and nominee of the above-
described funds and accounts, is the holder of record of a 
first preferred ship mortgage on the factory fishing vessel 
ARCTIC FJORD (Official No. 940866). The ship mortgage secures a 
term loan made to Arctic Fjord, Inc., the owner of the vessel, 
in the amount of $17 million.
    As currently drafted, S. 1221 could substantially impair 
the security interest of TCW Special Credits in the ARCTIC 
FJORD. For the reasons set forth in this statement, TCW Special 
Credits requests that the Subcommittee make changes in this 
bill to avoid penalizing TCW Special Credits, which is a U.S. 
investor in a company that is now wholly owned by U.S. 
citizens, including the Bristol Bay Economic Development 
Corporation.

Background of the Bill

    S. 1221 would amend the vessel documentation laws of the 
United States to establish a new rule of citizenship control 
for vessels engaged in the fisheries of the United States. To 
operate as a U.S. flag vessel in the navigable waters and 200-
mile exclusive economic zone, a fishing vessel must be properly 
documented under Title 46 of the United States Code and owned 
by certain qualifying entities. In 1976, when fisheries 
jurisdiction was extended to 200 nautical miles in the Magnuson 
Fishery Conservation and Management Act (now called the 
``Magnuson-Stevens Act''), Congress rejected an amendment that 
would have established a vessel citizenship/ownership 
requirement similar to that required for vessels operating in 
the coastwise trade. Instead, the less restrictive rule of 
allowing foreign nationals to be equity investors (of up to 100 
percent) in vessel-owning companies was continued. Douglas v. 
Seacoast Products, 431 U.S. 265 (1977). It is clear that this 
investment rule assisted the fairly rapid development of a 
large fleet of U.S. factory trawlers sufficient in capacity to 
exclude entirely the foreign fishing fleets that had dominated 
fish harvests off the U.S. coast prior to 1974.
    By the end of the 1980s, Congress became concerned about 
the growth of the U.S. fishing fleet and the practice of 
reflagging foreign-built and foreign-converted fishing/fish 
processing vessels and enacted the Commercial Fishing Industry 
Vessel Anti-Reflagging Act of 1987 (``Anti-Reflagging Act''). 
Although justified in part by the purported need to conserve 
the affected fish resources, support for this legislation 
primarily emanated from competitive and allocation pressures 
between and among various sectors of the fishing industry, 
primarily in the Pacific Northwest. Moreover, for many years, 
domestic fishing industry interests have been concerned about 
foreign investment generally, due to the fact that overseas 
investors play such a large role because of strong foreign 
demand for U.S. seafood products, in particular salmon, 
herring, crab, and groundfish from Alaska. Congress clearly 
believed that policies should be established that reduced 
foreign involvement in U.S. fisheries and, concomitantly, that 
benefited U.S. citizens.
    The Anti-Reflagging Act was intended to limit foreign 
ownership of U.S. flag fishing vessels and cut off the ability 
to ``rebuild'' fishing vessels in foreign shipyards. Southeast 
Shipyard Ass'n v. U.S., 979 F.2d 1541 (D.C.Cir.1992). Under 
that law, specifically 46 U.S.C. Sec. 12102(c)(1), a vessel-
owning corporation or partnership had to be owned at least 51 
percent by U.S. citizens to document new vessels for the 
fisheries. However, if a vessel, prior to July 28, 1987, had 
been documented under U.S. flag or had been contracted for 
purchase to be used in the U.S. fisheries, foreign citizens 
could still own a controlling interest in the owning entity, so 
long as the corporation's president, chairman of the board of 
directors, and a majority of the board were U.S. citizens. This 
ownership ``grandfather'' clause was confirmed by the D.C. 
Court of Appeals in the Southeast Shipyard case.
    In addition, prior to the Anti-Reflagging Act, fishing 
vessels could undergo substantial reconstruction in foreign 
shipyards and not lose their eligibility to operate in the U.S. 
fisheries. The Anti-Reflagging Act ended that practice. Again, 
however, Congress provided a saving ``grandfather'' clause to 
allow vessels that met certain pre-existing conditions to be 
rebuilt overseas notwithstanding the change in law.

History of the ARCTIC FJORD

    The factory fishing vessel ARCTIC FJORD began as the BRAE 
SEA, an offshore supply vessel built in Seattle, Washington at 
Todd Shipyard Corp. and delivered in 1975. The vessel was later 
purchased by Orion Trawlers, Inc. (``Orion''), a U.S. 
documentation citizen under 46 U.S.C. Sec. 12102(a)(4), for 
conversion to a factory trawler. However, during the relevant 
time period, the stock of Orion was owned by non-citizens. This 
purchase was agreed to in a contract entered into before July 
28, 1987. The vessel was rebuilt in a Norwegian shipyard 
pursuant to a contract also entered into before July 28, 1987. 
Upon its conversion to a factory fishing vessel, it was renamed 
the MICHELLE IRENE.
    Upon delivery following reconstruction, ownership in the 
vessel was transferred to three Washington State corporations 
as tenants in common: WestcodII, Inc. (50 percent), Simonson 
Enterprises V, Inc. (25 percent), and BTI, Inc. (25 percent). 
Westcod II, Inc. was a documentation citizen but the 
controlling interest in the company was not held by U.S. 
citizens consistent with the new test in 46 U.S.C. 
Sec. 12102(c)(1). The other two companies were controlled by 
U.S. citizens. Thus, the same entity that purchased or 
contracted for, and entered into the rebuilding contract, was 
not the same entity that owned or controlled the vessel upon 
documentation at redelivery.
    All these transactions complied with the requirements of 
the Anti-Reflagging Act. The U.S. Coast Guard, the agency 
responsible for overseeing compliance with the documentation 
laws, confirmed in writing that this particular vessel 
qualified for both the citizenship and rebuild grandfather 
clauses under the Anti-Reflagging Act and that the transactions 
did not result in loss of fishing privileges.
    In 1993, the owners came into difficulty with their lender, 
Christiana Bank og Kreditkasse, and foreclosure action was 
taken against the MICHELLE IRENE, then named the PACIFIC ORION. 
In 1994, the vessel was sold to Arctic Fjord, Inc. and renamed 
ARCTIC FJORD. Shortly thereafter, TCW Special Credits purchased 
the loan on the vessel from Christiana Bank.
    The vessel was owned entirely by Arctic Fjord, Inc. until 
1995, when an ownership agreement was entered into with the 
Bristol Bay Economic Development Corporation (``Bristol Bay'') 
to carry out the purposes of the Community Development Quota 
program. As a result of that agreement, Bristol Bay purchased 
20 percent of the stock in Arctic Fjord, Inc. The ARCTIC FJORD 
is currently owned and managed in accordance with that 
agreement. The ownership structure involves only U.S. citizens.

Effect of S. 1221 on ARCTIC FJORD

    In his introductory statement, Senator Ted Stevens (A-
Alaska) said that the rebuilding provisions of the Anti-
Reflagging Act were misinterpreted by the Coast Guard and 
abused by speculators, resulting in 14 factory trawlers 
entering the fisheries off Alaska that should have been 
prohibited by the Anti-Reflagging Act. Based on the fact that 
the vessel was subject to the ownership and rebuild grandfather 
clauses of the Anti-Reflagging Act, the ARCTIC FJORD is one of 
those vessels. In addition, because the same entity did not own 
the vessel upon redelivery after its foreign conversion, Sec. 
201 (b)(3)(D) of the bill applies to the vessel. Under that 
provision of S. 1221, if the controlling interest in a vessel 
such as the ARCTIC FJORD materially changes, regardless of who 
now owns the vessel or security interests in it, the vessel 
must permanently lose its fishery endorsement unless another 
active vessel of comparable size and capacity surrenders its 
endorsement. S. 1221; Sec. 201(b). This intent is confirmed in 
Senator Stevens' introductory comments.
    Although the bill is unclear as to every material change in 
ownership that brings about this draconian result, we presume 
that a foreclosure of TCW Special Credits' ship mortgage and 
resulting sale of the vessel is in fact such a material change. 
Moreover, other sales of interests in the vessel could be 
material, such as the sale of the vessel to another company, a 
reorganization of Arctic Fjord, Inc., a change in the current 
ownership arrangement with Bristol Bay, or even the death of a 
partner in part of the ownership structure. Consequently, it is 
quite possible, if the bill is enacted in its current form, 
that the value of the ARCTIC FJORD could be far less than the 
$17 million face value of the mortgage it secures because it 
will not be allowed thereafter to engage in the fisheries of 
the U.S. TCW Special Credits has also been advised that it 
would be immensely difficult, if not impossible, to operate the 
vessel in any other world fishery. Such a result would be a 
severe blow to TCW Special Credits' investment in this loan and 
its primary security for the loan, which is the vessel itself.
    Furthermore, as a lender, TCW Special Credits is concerned 
about the size and capacity restrictions set forth in Sec. 
301(a) of the bill that extinguish a vessel's fishery 
endorsement if the length, tonnage, and horsepower of that 
vessel is increased after September 25, 1997. We understand 
that changes in tonnage could occur inadvertently because of 
the way tonnage is calculated. In addition, every minor 
alteration of the vessel, routinely done during drydock 
repairs, would create uncertainty into the future.
    Overall, S. 1221, as presently drafted, is very ominous for 
TCW Special Credits' investment in the Pacific Northwest 
fishing industry. It is difficult to fully understand why a 
U.S. lender, representing U.S. investors and contracting with 
U.S. citi-

zen borrowers, should face the substantial impairment of its 
investment in this arbitrary manner. No warning about this 
significant change in policy was ever given.

Summary and Conclusion

    If enacted in its present form, S. 1221 could result in the 
loss of fishing privileges for the ARCTIC FJORD, a vessel owned 
by U.S. citizens including an Alaska native corporation and 
significantly impair the security in the vessel held by TCW 
Special Credits, also a U.S. citizen. Whatever the policy goals 
of the bill, this result is clearly unfair with respect to this 
vessel unless it is changed to exclude a vessel such as the 
ARCTIC FJORD that is owned 75 percent by U.S. citizens at the 
present time. TCW Special Credits understands that all vessels 
currently operating in U.S. fisheries are subject to 
rationally-based management policies that assure the 
sustainability of the nation's fishery resources. TCW Special 
Credits also understands that one of the sponsors' goals is to 
reserve these resources for U.S. citizens. But in the case of 
the ARCTIC FJORD, S. 1221 will punish U.S. citizens for having 
acquired interests in the vessel simply because of its history 
of prior foreign involvement, contrary to the espoused policy 
of supporting U.S. investments in the U.S. fishing industry. It 
is important to emphasize that nothing in the previous history 
of the ARCTIC FJORD indicates that it was not in compliance, at 
any time, with all vessel documentation laws then in effect.
    TCW Special Credits respectfully requests this Subcommittee 
to consider these views and keep them in mind if any 
legislation comes before the Subcommittee for action.

[GRAPHIC] [TIFF OMITTED] T9404.008

[GRAPHIC] [TIFF OMITTED] T9404.009

[GRAPHIC] [TIFF OMITTED] T9404.010

[GRAPHIC] [TIFF OMITTED] T9404.011

[GRAPHIC] [TIFF OMITTED] T9404.012

[GRAPHIC] [TIFF OMITTED] T9404.013

[GRAPHIC] [TIFF OMITTED] T9404.014

[GRAPHIC] [TIFF OMITTED] T9404.015

[GRAPHIC] [TIFF OMITTED] T9404.016

[GRAPHIC] [TIFF OMITTED] T9404.017

[GRAPHIC] [TIFF OMITTED] T9404.018

[GRAPHIC] [TIFF OMITTED] T9404.019

[GRAPHIC] [TIFF OMITTED] T9404.020

[GRAPHIC] [TIFF OMITTED] T9404.021

[GRAPHIC] [TIFF OMITTED] T9404.022

[GRAPHIC] [TIFF OMITTED] T9404.023

[GRAPHIC] [TIFF OMITTED] T9404.024

[GRAPHIC] [TIFF OMITTED] T9404.025

[GRAPHIC] [TIFF OMITTED] T9404.026

[GRAPHIC] [TIFF OMITTED] T9404.027

[GRAPHIC] [TIFF OMITTED] T9404.028

[GRAPHIC] [TIFF OMITTED] T9404.029

[GRAPHIC] [TIFF OMITTED] T9404.030

[GRAPHIC] [TIFF OMITTED] T9404.031

[GRAPHIC] [TIFF OMITTED] T9404.032

[GRAPHIC] [TIFF OMITTED] T9404.033

[GRAPHIC] [TIFF OMITTED] T9404.034

[GRAPHIC] [TIFF OMITTED] T9404.035

[GRAPHIC] [TIFF OMITTED] T9404.036

[GRAPHIC] [TIFF OMITTED] T9404.037

[GRAPHIC] [TIFF OMITTED] T9404.038

[GRAPHIC] [TIFF OMITTED] T9404.039

[GRAPHIC] [TIFF OMITTED] T9404.040

[GRAPHIC] [TIFF OMITTED] T9404.041

[GRAPHIC] [TIFF OMITTED] T9404.042

[GRAPHIC] [TIFF OMITTED] T9404.043

[GRAPHIC] [TIFF OMITTED] T9404.044

[GRAPHIC] [TIFF OMITTED] T9404.045

[GRAPHIC] [TIFF OMITTED] T9404.046

[GRAPHIC] [TIFF OMITTED] T9404.047

[GRAPHIC] [TIFF OMITTED] T9404.048

[GRAPHIC] [TIFF OMITTED] T9404.049

[GRAPHIC] [TIFF OMITTED] T9404.050

[GRAPHIC] [TIFF OMITTED] T9404.051

[GRAPHIC] [TIFF OMITTED] T9404.052

[GRAPHIC] [TIFF OMITTED] T9404.053

[GRAPHIC] [TIFF OMITTED] T9404.054

[GRAPHIC] [TIFF OMITTED] T9404.055

[GRAPHIC] [TIFF OMITTED] T9404.056

[GRAPHIC] [TIFF OMITTED] T9404.057

[GRAPHIC] [TIFF OMITTED] T9404.058

[GRAPHIC] [TIFF OMITTED] T9404.059

[GRAPHIC] [TIFF OMITTED] T9404.060

[GRAPHIC] [TIFF OMITTED] T9404.061

[GRAPHIC] [TIFF OMITTED] T9404.062

[GRAPHIC] [TIFF OMITTED] T9404.063

[GRAPHIC] [TIFF OMITTED] T9404.064

[GRAPHIC] [TIFF OMITTED] T9404.065

[GRAPHIC] [TIFF OMITTED] T9404.066

[GRAPHIC] [TIFF OMITTED] T9404.067

[GRAPHIC] [TIFF OMITTED] T9404.068

[GRAPHIC] [TIFF OMITTED] T9404.069

[GRAPHIC] [TIFF OMITTED] T9404.070

[GRAPHIC] [TIFF OMITTED] T9404.071

[GRAPHIC] [TIFF OMITTED] T9404.072

[GRAPHIC] [TIFF OMITTED] T9404.073

[GRAPHIC] [TIFF OMITTED] T9404.074

[GRAPHIC] [TIFF OMITTED] T9404.075

[GRAPHIC] [TIFF OMITTED] T9404.076

[GRAPHIC] [TIFF OMITTED] T9404.077

[GRAPHIC] [TIFF OMITTED] T9404.078

[GRAPHIC] [TIFF OMITTED] T9404.079

[GRAPHIC] [TIFF OMITTED] T9404.080

[GRAPHIC] [TIFF OMITTED] T9404.081

[GRAPHIC] [TIFF OMITTED] T9404.082

[GRAPHIC] [TIFF OMITTED] T9404.083

[GRAPHIC] [TIFF OMITTED] T9404.084

[GRAPHIC] [TIFF OMITTED] T9404.085

[GRAPHIC] [TIFF OMITTED] T9404.086

[GRAPHIC] [TIFF OMITTED] T9404.087

[GRAPHIC] [TIFF OMITTED] T9404.088

[GRAPHIC] [TIFF OMITTED] T9404.089

[GRAPHIC] [TIFF OMITTED] T9404.090

[GRAPHIC] [TIFF OMITTED] T9404.091

[GRAPHIC] [TIFF OMITTED] T9404.092

[GRAPHIC] [TIFF OMITTED] T9404.093

[GRAPHIC] [TIFF OMITTED] T9404.094

[GRAPHIC] [TIFF OMITTED] T9404.095

[GRAPHIC] [TIFF OMITTED] T9404.096

[GRAPHIC] [TIFF OMITTED] T9404.097

[GRAPHIC] [TIFF OMITTED] T9404.098

[GRAPHIC] [TIFF OMITTED] T9404.099

[GRAPHIC] [TIFF OMITTED] T9404.100

[GRAPHIC] [TIFF OMITTED] T9404.101

[GRAPHIC] [TIFF OMITTED] T9404.102

[GRAPHIC] [TIFF OMITTED] T9404.103

[GRAPHIC] [TIFF OMITTED] T9404.104

[GRAPHIC] [TIFF OMITTED] T9404.105

[GRAPHIC] [TIFF OMITTED] T9404.106

[GRAPHIC] [TIFF OMITTED] T9404.107

[GRAPHIC] [TIFF OMITTED] T9404.108

[GRAPHIC] [TIFF OMITTED] T9404.109

[GRAPHIC] [TIFF OMITTED] T9404.110

[GRAPHIC] [TIFF OMITTED] T9404.111

[GRAPHIC] [TIFF OMITTED] T9404.112

[GRAPHIC] [TIFF OMITTED] T9404.113

[GRAPHIC] [TIFF OMITTED] T9404.114

[GRAPHIC] [TIFF OMITTED] T9404.115

[GRAPHIC] [TIFF OMITTED] T9404.116

[GRAPHIC] [TIFF OMITTED] T9404.117

[GRAPHIC] [TIFF OMITTED] T9404.118

[GRAPHIC] [TIFF OMITTED] T9404.119

[GRAPHIC] [TIFF OMITTED] T9404.120

[GRAPHIC] [TIFF OMITTED] T9404.121

[GRAPHIC] [TIFF OMITTED] T9404.122

[GRAPHIC] [TIFF OMITTED] T9404.123

[GRAPHIC] [TIFF OMITTED] T9404.124

[GRAPHIC] [TIFF OMITTED] T9404.125

[GRAPHIC] [TIFF OMITTED] T9404.126

[GRAPHIC] [TIFF OMITTED] T9404.127

[GRAPHIC] [TIFF OMITTED] T9404.128

[GRAPHIC] [TIFF OMITTED] T9404.129

[GRAPHIC] [TIFF OMITTED] T9404.130

[GRAPHIC] [TIFF OMITTED] T9404.131

[GRAPHIC] [TIFF OMITTED] T9404.132

[GRAPHIC] [TIFF OMITTED] T9404.133

[GRAPHIC] [TIFF OMITTED] T9404.134

[GRAPHIC] [TIFF OMITTED] T9404.135

[GRAPHIC] [TIFF OMITTED] T9404.136

[GRAPHIC] [TIFF OMITTED] T9404.137

[GRAPHIC] [TIFF OMITTED] T9404.138

[GRAPHIC] [TIFF OMITTED] T9404.139

[GRAPHIC] [TIFF OMITTED] T9404.140

[GRAPHIC] [TIFF OMITTED] T9404.141

[GRAPHIC] [TIFF OMITTED] T9404.142

[GRAPHIC] [TIFF OMITTED] T9404.143

[GRAPHIC] [TIFF OMITTED] T9404.144

[GRAPHIC] [TIFF OMITTED] T9404.145

[GRAPHIC] [TIFF OMITTED] T9404.146

[GRAPHIC] [TIFF OMITTED] T9404.147

[GRAPHIC] [TIFF OMITTED] T9404.148

[GRAPHIC] [TIFF OMITTED] T9404.149

