[Federal Register Volume 64, Number 28 (Thursday, February 11, 1999)]
[Proposed Rules]
[Pages 6854-6869]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-3245]


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DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

50 CFR Part 253

[Docket No. 980812215-8215-01, I.D. 072898D]
RIN 0648-AK76


Fishing Capacity Reduction Program

AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and 
Atmospheric Administration (NOAA), Commerce.

ACTION: Proposed rule.

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SUMMARY: NMFS (hereinafter we or us) proposes framework regulations 
specifying procedures for requesting us to conduct a fishing capacity 
reduction program in a specific fishery and governing the conduct of 
programs initiated in response to a request or on our own initiative. 
Fishing capacity reduction programs pay harvesters in fisheries with 
too much harvesting capacity to surrender their fishing permits and/or 
withdraw their vessels from fishing. Reduction costs can be paid by 
post-reduction harvesters, taxpayers, or others. The intent of reducing 
excess harvesting capacity in a fishery is to increase harvesting 
productivity and help conserve and manage the fishery's resources.

DATES: Comments must be received by April 12, 1999.
ADDRESSES: Comments should be sent to Michael L. Grable, Chief, 
Financial Services Division, NMFS, 1315 East-West Highway, Silver 
Spring, MD 20910.

FOR FURTHER INFORMATION CONTACT: Michael L. Grable, (301) 713-2390.

SUPPLEMENTARY INFORMATION: Most U.S. fisheries have excess fishing 
capacity. Excess capacity decreases earnings, complicates management, 
and imperils conservation. To provide for fishing capacity reduction 
(reduction), Congress amended the Magnuson-Stevens Fishery Conservation 
and Management Act (16 U.S.C. 1861 et seq.)(Magnuson Act) by adding a 
new section 312(b)-(e) (16 U.S.C. 1861a(b)-(e)). To finance reduction 
costs, Congress amended Title XI of the Merchant Marine Act, 1936 (46 
App. U.S.C. 1271 et seq.) by adding new sections 1111 and 1112 (the 
portions applicable to capacity reduction loans have been codified at 
46 App. U.S.C. 1279f & 1279g). This action would add a subpart D to 50 
CFR part 253 setting forth framework regulations for requesting us to 
conduct a reduction program in a specific fishery (reduction program) 
and governing the conduct of reduction programs initiated in response 
to a request or on our own initiative.
    Under section 312(b)(2) of the Magnuson Act, a reduction program's 
objective is ``to obtain the maximum sustained reduction in fishing 
capacity at the least cost and in a minimum period of time.'' The 
reduction program pays harvesters in a program fishery (reduction 
fishery) either to surrender their fishing permits or both surrender 
their fishing permits and withdraw their vessels from all domestic 
fishing. Harvesters can withdraw vessels either by scrapping them or 
(for federally-documented vessels) by subjecting them to title 
restrictions that prevent the vessels' use for fishing.
    Reduction cost can be funded in several ways: a loan from us 
(loan), Federal appropriations, and/or contributions from states or 
other public or private sources. If a loan finances any part of the 
reduction cost, we refer to the reduction program as a financed 
program. If the reduction cost is not in any part financed by a loan, 
we refer to the reduction program as a subsidized program.
    A loan from us is a practical way to finance reduction cost. Under 
sections 1111 and 1112 of Title XI of the

[[Page 6855]]

Merchant Marine Act, a loan for a program cannot exceed $100 million, 
the repayment maturity may be no longer than 20 years, and the annual 
repayment interest rate is set at two percent of the principal amount 
outstanding plus the interest rate we are obligated to pay the U.S. 
Treasury for borrowing the money we in turn loan.
    The loans are not conventional because they involve no promissory 
notes, mortgages, or other contractual loan documentation or security. 
Section 312(d) of the Magnuson Act requires the harvesters remaining in 
the fishery after a reduction program reduces capacity to repay the 
loan through a loan-repayment fee (fee) deducted by the first ex-vessel 
purchaser from the proceeds otherwise payable to the harvester for fish 
landed from the reduction fishery (fee fish). Under section 312(d) of 
the Magnuson Act, such fees cannot exceed five percent of the ex-vessel 
value of all fee fish that the harvesters deliver. Collectively, the 
post-reduction harvesters are the borrower, and they all make 
repayments on the loan each time they deliver fee fish to a fish buyer.
    Besides being required to collect the fee by deducting it from the 
trip proceeds otherwise payable to the harvesters, the first ex-vessel 
buyers (buyers) of fee fish must account for fee revenues and forward 
them to us. We then apply the fee revenues to reduce the loan balance.
    Under sections 312(d)&(e) of the Magnuson Act, we may not impose an 
industry fee system (fee system) unless two thirds of the votes cast in 
a referendum of the fishing permit or fishing vessel owners in the 
reduction fishery first approve the fee system.
    Section 312(b) requires that a reduction program:
    (1) Be cost-effective and capable of repaying any debt obligations 
incurred;
    (2) Be necessary to prevent or end overfishing, rebuild stocks of 
fish, or achieve measurable and significant improvements in the 
conservation and management of the reduction fishery; and
    (3) Be consistent with the Federal or state fishery management plan 
(FMP) or management program in effect for the reduction fishery.
    Section 312(b) also requires that the FMP or management program in 
effect for the reduction program fishery:
    (1) Prevent the replacement of capacity that the reduction program 
removes through a moratorium on new entrants, restrictions on vessel 
upgrades, and other effort control measures (taking into account the 
reduction fishery's full potential fishing capacity); and
    (2) Establish a specified or target total allowable catch or other 
measures that trigger closure of the reduction fishery or adjustments 
to reduce catch when fisheries conservation and management so require.
    These requirements (and other reduction program aspects, such as 
post-reduction allocation) generally require an amendment to the 
controlling FMP or management program (reduction amendment).
    For a fishery managed by a Federal fishery management council 
(council), the council must request a reduction program before we can 
start the reduction program process. For a state-managed fishery, the 
Governor of the state must request a reduction program before we can 
start. If a fishery is managed by more than one council, all the 
managing councils must join in the request. If a fishery is managed by 
more than one state, the Governors of all managing states must join in 
the request. Each requester must hold a public hearing on each request 
before sending it to us. For fisheries that are neither managed by a 
council nor managed by a state (such as fisheries for highly migratory 
species), we may initiate the reduction program process on our own 
initiative.
    For a council-managed fishery, the proposed framework regulations 
would require the council to prepare and adopt any needed reduction 
amendment to the FMP and to draft regulations implementing it before 
requesting a program. We would review and, if appropriate, approve the 
reduction amendment, and issue regulations implementing it (after 
notice and opportunity for public comment), before we propose a program 
implementation plan (program plan) or propose regulations to implement 
that program plan (program regulations).
    Provisions of the reduction amendment could be made effective 
independent of implementation of the reduction program or effective 
dependent on the initiation of the reduction program or on the 
completion of the capacity reduction stage of the reduction program. 
All provisions of a reduction amendment would be considered by us to be 
dependent, unless the reduction amendment expressly designates a 
provision as independent. Dependent provisions made initially effective 
to enable completion of pre-capacity reduction stage program steps 
would have no further effect if the reduction is not completed.
    Under section 312(e) of the Magnuson Act, we must, for each 
reduction program, prepare a program plan for adoption and propose 
program regulations, and after 60-days opportunity for public comment, 
issue final program regulations and adopt (subject, for a financed 
program, to the condition precedent that the industry fee system needed 
to repay the loan be approved by a referendum), a final program plan. 
In a subsidized program, all provisions of the program regulations 
would go into effect at the same time. In a financed program, however, 
the industry fee system and related provisions of the program 
regulations would not be made effective until a subsequent referendum 
approves the fee system. These provisions would include those governing 
the performance of the obligations of all parties under the reduction 
contracts and of the post-reduction permit holders to repay the loan 
through the fee system. The obligations under the reduction contracts 
would include us disbursing the funds specified in each reduction 
contract and the vessel owners whose bids were accepted surrendering 
their fishing permits or both surrendering their permits and 
withdrawing their vessels from all domestic fishing. The provisions 
effective initially would be those necessary to conduct pre-referendum 
and referendum activities. Pre-referendum activities include: (1) 
inviting bids, (2) bidding, (3) receiving the bids, and (4) accepting, 
subject to a subsequent referendum approving the fee system, those bids 
meeting the criteria for bid acceptance.
    For a financed program, the proposed framework regulations would 
require the council or Governor to submit a final business plan with 
the request for a reduction program. A business plan is a detailed 
reduction proposal from proponents within the proposed reduction 
fishery whose post-reduction fishing permit holders would repay the 
loan. The proponents would submit the business plan to the appropriate 
potential requester. The proposed framework regulations would require 
the requester to base its request on the business plan.
    A business plan must specify: (1) how the potential borrower 
(collectively, all post-reduction harvesters in the reduction fishery) 
proposes that we accomplish reduction, (2) the minimum amount of 
capacity that we must reduce, and (3) the maximum reduction cost the 
potential borrower is willing, in the form of a loan, to repay. The 
business plan must also justify the proposed reduction program by 
demonstrating: (1) the program's cost effectiveness, (2) how it will 
enable post-reduction earnings sufficient to repay the loan, and (3) 
the likelihood both that the required

[[Page 6856]]

amount of capacity can be reduced at the reduction cost proposed and 
that a subsequent referendum will approve the industry fee system 
required to repay the loan. A business plan must also propose specific 
provisions for all other technical aspects of the reduction program. 
These include reduction amendments (involving matters such as post-
reduction upgrading restrictions and fish allocations) and other 
matters such as the provisions of invitations to bid. If we decide to 
conduct the financed program requested, we would base our program plan 
and program regulations on the business plan.
    A business plan not broadly supported by harvesters in a proposed 
reduction fishery would have little chance of producing a successful 
referendum. Business planners must, consequently, be responsive to the 
practical necessity that their business plan reflect fairly the needs 
of most harvesters in the proposed reduction fishery. These include the 
needs of both those who wish to receive reduction payments to leave the 
fishery and those who wish to remain and repay the loan. To ensure that 
the business plan fairly reflects these needs, business planners should 
conduct surveys designed to ascertain needs and extensively coordinate 
business plan preparation with all affected harvesters.
    A business plan is a complex undertaking. Reduction involves many 
variables which differ from one fishery to the next. Consequently, 
preparing a business plan requires local ingenuity and fisheries 
knowledge. We will not attempt to prescribe reduction design, 
methodology, or other such details. Harvesters who remain in the 
program fishery after reduction are the beneficiaries of a financed 
program. They are the borrower responsible for repaying the loan. Any 
business plan upon which any loan is based should be their plan.
    Each business plan must be sufficient to: (1) convince a requester 
to request the reduction program, (2) convince us to finance the 
reduction program requested, (3) allow us to readily prepare a program 
plan and program regulations, (4) enable bidding results that convince 
referendum voters to approve the required industry fee system, and (5) 
enable us to collect fee revenues sufficient to repay the loan.
    All requests will involve a large investment of effort. This will 
be wasted if reduction programs are not thoroughly analyzed, realistic, 
and well planned. Each requester should, consequently, require business 
planners to demonstrate a high degree of diligence consistent with that 
investment.
    Until we invite bids, receive them, and decide which ones to 
accept, no one really knows how much capacity can be reduced for what 
cost. Under section 312(d) of the Magnuson Act, the criteria for 
determining the types and numbers of vessels which are eligible to 
participate in the reduction program and the procedures for reduction 
program participation (such as the procedures for the submission of 
bids by vessel owners) must be part of the program plan and program 
regulations. However, for a financed program, section 312(e) of the 
Magnuson Act prohibits us from ``adopt[ing] a final implementation plan 
involving industry fees or debt obligation unless an industry fee 
system has been approved by a referendum * * *.'' This reflects 
Congressional intent that, before we make a loan, fulfill our 
obligations under the reduction contracts (i.e., pay out the loan funds 
in exchange for permit surrender or permit surrender and vessel 
withdrawal), obligate the remaining harvesters in the fishery to repay 
the loan, and impose and collect the fees, we obtain, through a 
referendum, the collective consent of those who would be obligated to 
repay the loan. However, in order to make an informed decision, the 
referendum voters must know how much capacity will be reduced and how 
much that reduction will cost. We and they cannot determine this unless 
bids are invited, received, and accepted before the referendum is 
conducted, and we cannot conduct the bid process without knowing what 
the final program plan will be and without having the program 
regulations governing the bidding process in effect.
    While for a financed program section 312(e) forbids us from 
adopting a final program plan before the fee system needed to repay the 
loan is approved by a referendum, we are not prohibited from proposing 
a program plan or from proposing regulations to implement it, or from 
publishing, after 60-days opportunity for public comment, what would be 
the program plan we would adopt if, and after, a referendum approves 
the fee system. Nor does section 312 prohibit us from issuing and 
making effective any portion of the program plan implementing 
regulations, such as the regulations governing the bidding process, not 
imposing any fee obligations or dealing with fee related matters.
    Accordingly, we have proposed framework procedures that would allow 
us to determine the amount of reduction and the cost of such reduction 
and to disseminate that information to the fee referendum voters before 
they vote, while complying with the statutory prohibition against 
adopting a final program plan (which implicitly prohibits us from 
making the loan and imposing repayment obligations) before the industry 
approves, by referendum, the fee system needed to repay the loan.
    Under our proposed procedures, we would not adopt a final program 
plan for a financed program before a referendum approves the fee 
system. However the framework procedures would require us before 
conducting a fee referendum to publish the final program plan we will 
adopt if the referendum approves the fee system and issue program 
regulations that are effective for all reduction aspects except those 
related to the fee system.
    Thus, under the framework rules, we would not conduct a referendum 
on the fee system until we first:
    (1) Approve a reduction amendment (and, in the case of a Federal 
fishery, issue appropriate implementing regulations);
    (2) Propose a program plan and program regulations for a 60-day 
public comment period;
    (3) After considering the public comments:
    (a) Publish the final program plan that we will adopt if a 
referendum subsequently approves the fee system; and
    (b) Issue the final program regulations and make effective all 
provisions except for those involving the fee system;
    (4) Issue invitations to bid;
    (5) Receive all bids; and
    (6) Conditionally accept the bids meeting the bid acceptance 
criteria in the published final program plan.
    We would then conduct a fee referendum with ballots specifying, 
among other things, the amount of reduction, the reduction cost, the 
reduction loan amount (if different from the reduction cost), and the 
reduction loan term, the fee rate prospectively necessary to amortize 
the reduction loan over its term, and the actual fee rate for the year 
following reduction. Thus, the subsequent referendum would be on 
whether to approve the fee system needed to repay a known loan amount 
that accomplishes a known amount of reduction. If the referendum 
approves the fee system, we would adopt the previously published final 
program plan and, by a notice published in the Federal Register, 
announce the adoption of the final program plan as well as the 
effective date of the fee system related provisions of the final 
program regulations.

[[Page 6857]]

    Under the proposed regulations, submitting a bid (i.e., making an 
offer to surrender a permit and/or surrender a permit and withdraw a 
vessel from all domestic fishing for the sum specified in the bid) 
would be voluntary. However, once a bid is submitted, it would be 
irrevocable. If we accept a bid, we would be entitled to specific 
performance of the resulting reduction contract. Making all bids 
irrevocable bids and enabling us to require the specific performance of 
the reduction contracts resulting from bid acceptance ensures that 
bidder non-performance cannot change the reduction cost and the amount 
of reduction upon which the referendum voters based their votes. Our 
pre-referendum acceptance of a reduction bid creates a conditional 
reduction contract. The condition is that the fee system necessary to 
repay the loan is approved by a subsequent industry referendum. If the 
referendum does not approve the necessary fee system, the bid 
acceptances and the resulting contracts are then null and void, the 
program plan would not be adopted, the loan would not be made, the fee 
provisions in the program regulations would not become effective, and 
any program regulations in effect would be revoked. If the referendum 
approves the fee system, the bid acceptances and resulting contracts 
are then unconditional and in full force and effect, entitling us to 
the contracts' specific performance. We then would adopt the program 
plan, publish a notice in the Federal Register announcing the adoption 
of the plan and the effective date of all program regulations not yet 
effective, make the loan, disburse the loan funds in exchange for the 
surrender of fishing permits and or the surrender of fishing permits 
and the withdrawal of vessels from all domestic fishing, and make the 
fee system provisions in the program regulations effective.
    Commercial reality requires that the time between accepting bids 
and subsequently conducting a referendum be as short as possible. 
Consequently, we must accept bids and conduct referenda with all 
possible dispatch. All other required components of a potential 
reduction program must be in place before we invite bids, accept bids, 
and conduct referenda based on bid results. Once we invite bids, the 
remaining process must proceed without delay.
    This proposed framework rule addresses some components of the 
reduction sequence directly and others only indirectly.
    Under the proposed regulations, the following sequence would apply 
to a financed program that is in a council-managed fishery, requires a 
reduction amendment, and results in a referendum approving the fee 
system for a loan equal to the total reduction cost:
    (1) The reduction's fishing-industry proponents:
    (a) Prepare a business plan, and
    (b) Submit the business plan to the appropriate council;
    (2) The appropriate council:
    (a) Approves the business plan;
    (b) Prepares a reduction amendment to the applicable FMP and draft 
regulations to implement it;
    (c) Holds a public hearing about the reduction program; and
    (d) Submits a reduction program request (including the business 
plan, the reduction amendment to the FMP, and the draft regulations to 
implement the reduction amendment) to us; and
    (3) We:
    (a) Determine that the requested reduction program meets all 
statutory and regulatory requirements;
    (b) Approve a loan (assumes availability of sufficient 
appropriation and/or apportionment authority);
    (c) Announce the availability of the reduction amendment to the FMP 
for public comment and propose regulations to implement it;
    (d) Approve the reduction amendment;
    (e) Issue regulations to implement the reduction amendment (except 
for any independent provisions,
    these regulations become effective only when we actually reduce 
capacity);
    (f) Propose a program plan and program regulations;
    (g) Publish the final program plan we will adopt if the fee system 
is approved by a subsequent referendum and issue the program 
regulations (provisions not necessary for program activities that 
precede a referendum and for conducting the referendum itself would not 
be effective at this point);
    (h) Invite bids;
    (i) Receive and tally the bids;
    (j) Conditionally accept the bids that meet the bid acceptance 
criteria (acceptance is expressly subject to the condition that a 
subsequent referendum approves the fee system);
    (k) Conduct a referendum;
    (l) Notify all who were mailed ballots that the referendum approved 
the fee system and notify all whose bids we accepted that our 
previously conditional acceptance of their bids is now unconditional, 
and that the reduction contracts resulting from bid acceptance are now 
in full force and effect;
    (m) Adopt the previously published final program plan and by a 
notice published in the Federal Register announce the adoption and make 
the program regulations fully effective including those implementing 
the fee system;
    (n) Reduce the capacity through distributing the loan's proceeds to 
those whose bids we accepted (all dependent provisions of the reduction 
amendment are effective at this point);
    (o) Begin to receive fees and continue to receive them until the 
loan is paid in full; and
    (p) After the loan is repaid, repeal the program regulations.
    For a subsidized program, the framework regulations would require 
the requester to prepare and submit to us a preliminary development 
plan for the reduction program. A preliminary development plan is a 
more precursory and generalized reduction proposal than the business 
plan required for a financed program. Because the reduction cost of a 
subsidized program is not borrowed, a development plan does not include 
anything about a loan, fees, or a referendum.
    We would use the preliminary development plan to prepare a final 
development plan. We would then submit the final development plan to 
the requester for approval and for reaffirmance of the request. The 
requester would prepare and adopt a reduction amendment based on our 
final program development plan and submit, along with its 
reaffirmation, the reduction amendment (and draft regulations to 
implement it if the reduction amendment is to a Federal FMP) to us for 
approval (and if for a Federal FMP, for proposal and issuance of 
regulations to implement the reduction amendment). We would then 
prepare a program plan and proposed program regulations based on the 
final development plan, and after 60-days notice and opportunity for 
comment, adopt the final program plan and issue the program 
regulations.
    The reason we require a request for a financed program to include a 
final business plan (instead of a preliminary business plan, with us 
preparing a final business plan) is that a financed program involves a 
loan. We are the lender, and the harvesters remaining in the program 
fishery after reduction are the borrower. It would be inappropriate for 
a lender to develop any part of a borrowers' business plan.
    Under the proposed regulations, the following sequence would apply 
to a subsidized program that is in a council-managed fishery, requires 
a reduction amendment to the applicable FMP, has Federal appropriations 
available to fund the reduction program's total reduction

[[Page 6858]]

cost, and results in our decision to conduct a reduction program:
    (1) The appropriate council:
    (a) Prepares a preliminary development plan;
    (b) Holds a public hearing; and
    (c) Submits a program request (based on the preliminary development 
plan) to us;
    (2) We:
    (a) Preliminarily determine that the reduction program meets all 
statutory and regulatory requirements;
    (b) Prepare a final development plan; and
    (c) Submit the final development plan to the council for approval;
    (3) The council:
    (a) Approves the final development plan;
    (b) Reaffirms (based on the final development plan) its request for 
a reduction program; and
    (c) Prepares and submits to us a reduction amendment and draft 
regulations to implement the reduction amendment; and
    (4) We:
    (a) Determine that the request meets all statutory and regulatory 
requirements;
    (b) Determine the sufficiency of all required appropriation and 
apportionment authority;
    (c) Announce the availability for public comment of the reduction 
amendment and propose regulations to implement it;
    (d) Approve the reduction amendment;
    (e) Issue regulations to implement the reduction amendment (except 
for any independent provisions,
    these regulations become effective only when we actually reduce 
capacity);
    (f) Propose a program plan and program regulations;
    (g) Adopt the final program plan and issue the final program 
regulations;
    (h) Invite bids;
    (i) Receive and tally the bids;
    (j) Accept the bids which meet the bid acceptance criteria; and
    (k) Complete the program (all dependent provisions of the reduction 
amendment become effective at this point).
    A financed program might sometimes be limited to harvesters in a 
fishery who use a particular fishing-gear type. Some harvesters in a 
fishery may, for example, use trawl gear, while others may use pot or 
long-line gear. A program in that fishery could, for example, involve: 
(1) only trawl harvesters, (2) only pot harvesters, (3) only long-line 
harvesters, (4) some combination of any of them, or (5) all of them.
    When a financed program does not involve all gear types in a 
fishery, reduction amendments must appropriately allocate post-
reduction fish resources between harvesters who are included in the 
program and those who are not. This ensures that the harvesters who 
must repay the loan that funded the reduction both receive the 
reduction's long-term benefit and remain capable of repaying the loan.
    Paramount fishery conservation and management considerations might, 
however, require post-reduction reallocation between gear types 
different from the allocations upon which reduction decisions were 
based. Assume, for example, that a financed program involves trawl-gear 
fishing permits. Assume that the reduction amendment contained 
allocation provisions designed to ensure that the holders of trawl-gear 
permits realize the post-reduction benefit of their reduction 
investment and remain capable of repaying the loan. Assume that 
paramount post-reduction fishery conservation and management 
considerations later, however, require reallocating all trawl-gear 
allocations to pot and long-line gear allocations. How can trawl-gear 
operators (the borrower) and the loan be protected?
    One potential way is for all reallocations to belong to the trawl-
gear operators, even though they may be unable to use the reallocations 
with their trawl gear. Under this approach, the trawl fishing permits 
would simply be changed to pot or long-line fishing permits, but the 
permit holders would remain the same. The permit holders might, 
depending on the provisions of the reduction-amendment, then have 
several alternatives. First, they might use the reallocations by 
changing their gear types. Second, they might dispose, for value, of 
their permits involving the reallocations to other gear operators who 
are prepared to use the permits. At any rate, the fee obligations 
necessary to repay the loan follow the original permits upon which the 
loan was based, regardless of changes in gear type, fishing permit 
owners, or fishing permit users.
    However it may be accomplished, reduction amendments must contain 
provisions adequate to protect both the reduction borrower and lender. 
Whenever any program is restricted to fewer than all the operators or 
areas of operations in a fishery, the reduction amendment must fully 
dispose of this allocation issue to our and the borrower's 
satisfaction.
    Subsidized programs involve neither borrowers nor lenders. Instead, 
they usually would involve large expenditures of public resources. If 
we receive a request for a subsidized program, we would consult with 
all interested parties in preparing a final development plan designed 
to ensure that reduction is an effective and equitable expenditure of 
public funds.
    Reduction involves either revoking fishing permits or both revoking 
fishing permits and withdrawing vessels from all domestic fishing. 
Owners could withdraw vessels by scrapping them. The owners of 
federally-documented vessels also could withdraw them by subjecting 
their titles to permanent restrictions that prevent their vessels from 
being used in any domestic fishing. In financed programs involving the 
withdrawal of vessels from domestic fishing, for federally documented 
vessels we will not require the vessels to be scrapped or subject the 
vessels to any restriction other than a prohibition on their use for 
domestic fishing. This accords with the statutory objective of 
achieving the maximum reduction for the minimum cost and in the minimum 
time. Reduction is more cost-effective, and loan amounts that must be 
repaid are reduced, when vessel owners are free to seek the highest 
market return available for vessels that can no longer be used to fish 
domestically. The owners of federally-documented vessels, thus, would 
be free, in financed programs that involve the withdrawal vessels from 
domestic fishing, to submit bids that reflect their vessels' residual 
value for any use other than for domestic fishing. The owners of non-
federally documented vessels would not have that freedom since their 
vessels would have to be scrapped. Because subsidized programs involve 
the expenditure of public funds, they may require a different approach. 
If the public wants to pay for the extra cost of scrapping federally-
documented vessels, we can require both federally-documented vessels 
and non-federally documented vessels in a subsidized program to be 
scrapped.
    Some vessels have fishing permits for multiple fisheries. For a 
financed program for a reduction program fishery, we would not require 
the surrendering of fishing permits in any non-reduction fishery. 
Neither would we impose any restrictions on any fishing permit in a 
non-reduction fishery. This makes a financed program more cost-
effective and reduces the amount of the loan required to fund reduction 
in the reduction fishery. Again, because subsidized programs involve 
the expenditure of public funds, they may require a different approach. 
If the public wants to pay the extra cost of having an owner surrender 
all of his or her fishing permits, we can require the surrender of both 
the fishing permit

[[Page 6859]]

in the reduction fishery and all other fishing permits associated with 
the reduction vessel in non-reduction fisheries.
    A financed program that reduces fishing permits in the reduction 
fishery may result in vessel owners shifting into other fisheries for 
which they also have permits. This shift could, however, occur at any 
time without a reduction program. Moreover, we cannot expect post-
reduction harvesters in a reduction fishery to borrow and repay the 
cost of reducing capacity in non-reduction fisheries. This would not be 
equitable to them or to the permit holders in the non-reduction fishery 
who would receive a reduction benefit that the permit holders in the 
reduction fishery pay for instead of them.
    Requiring permit holders in a reduction fishery to borrow and repay 
the cost of reducing permits in any non-reduction fishery would also 
frustrate the statutory requirements in several ways. First, it would 
impede the statutory objective of achieving the maximum reduction for 
the minimum cost. Second, it would functionally make every reduction 
program virtually a permit and vessel reduction, rather than enabling 
the statutory option of either a permit reduction or a permit and 
vessel reduction. This is true because a fishing vessel that cannot 
fish has a greatly reduced value.
    Permit holders in non-reduction fisheries are free to support 
reducing capacity in their own fisheries at any time. They can do so 
either with loans of their own or with whatever other resources may 
otherwise be available for funding reduction costs in their fisheries.
    Federal appropriations (or appropriation authority) is a 
prerequisite for all programs except those that are completely funded 
by non-Federal sources. These are the types of reduction programs that 
require Federal appropriation action (and the type of appropriation 
action that each requires):
    (1) Subsidized programs paid for by Federal appropriations. Actual 
funds equal to the entire federally-funded portion of a reduction 
program's reduction cost must be appropriated.
    (2) Financed programs with no Federal Credit Reform Act (FCRA) 
cost. The principal amount of the loan must be authorized in an 
appropriations act. No actual funds are, however, appropriated. 
Basically, this involves an appropriation act establishing a loan 
ceiling. After we approve the loan, we borrow the loan's principal from 
the U.S. Treasury. We then re lend to the program borrower what we 
borrowed from the Treasury. As the borrower repays us, we repay the 
Treasury.
    (3) Financed programs with FCRA cost. Actual funds equal to a 
loan's FCRA cost must be appropriated. The FCRA cost is the net present 
value of any loan principal that we project we may be unable to collect 
over the loan's life. The amount of loan authority available depends on 
how the FCRA cost-rate determination relates to the FCRA cost 
appropriated. For example, a one percent FCRA cost and a $1 million 
FCRA cost appropriation produce a loan authority of $100 million. As in 
a financed program with no FCRA cost, we borrow the loan principal from 
the U.S. Treasury (less the FCRA cost appropriation). We then re-lend 
to the program borrower both the appropriated FCRA cost plus what we 
borrowed from the Treasury (which, together, equal the principal amount 
of the loan). As the borrower repays us, we repay the Treasury.
    We believe these loans involve no FCRA cost. The interest income we 
earn from these loans is two percent higher than the interest expense 
we pay to the U.S. Treasury for the loan capital we borrow. Our loan-
loss risk should not exceed this risk premium. Our risk is low for 
several reasons. First, up to the first five percent of an entire 
fishery's delivered value is available for loan repayment. This means 
we are paid before anyone else. Second, fish buyers deduct the loan 
repayment fee from the sales proceeds of each post-reduction fishing 
trip before they pay harvesters anything. This means the borrower's 
loan repayment is automatic. These are major loan-repayment advantages.
    A loan's initial amortization cannot exceed 20 years. Should 
unforeseen circumstances prevent repayment within that maximum 
amortization period, however, the fee would continue for as long as 
full loan repayment requires.
    Thus, only complete and permanent biological or market failure of 
an entire fishery resource could reasonably prevent a loan's eventual 
payment in full. Both are so unlikely as to exclude us from projecting 
them as a realistic basis for initially assigning positive FCRA cost to 
these loans. Reduction will generally occur only in fisheries whose 
resources have a long-established market presence. The Magnuson Act 
requires fisheries conservation and management that preserve the 
maximum sustainable yield of fishery resources. Reduction programs 
facilitate fisheries conservation and management.
    Unless they are multi-year appropriations, FCRA appropriations and 
loan authorities cease to exist at the end of the fiscal year for which 
they were appropriated if they are not obligated during that fiscal 
year. The Federal budgetary cycle occurs over several years. This cycle 
and reduction's uncertain appropriation needs may not be a good match. 
Unless the Federal budget cycle makes provision several years in 
advance for programs that may never be implemented (or might not even 
yet have then been requested), reduction appropriations may have to 
proceed as supplemental appropriation requests. Otherwise, we may have 
to postpone a program until appropriation authority is available 
through the regular budget cycle. This may involve significant delay in 
the reduction process.
    We would not adopt a final program plan and program regulations 
unless appropriation and apportionment authority adequate to effect the 
program first exists. Moreover, in a financed program, we would not 
adopt a final program plan and program regulations unless a loan 
adequate to support the program has first received all required 
approvals. This is because we must be prepared to disburse loan funds 
immediately after a referendum approves the fee required to repay the 
loan.
    Regulations for fisheries assistance programs appear at 50 CFR part 
253. Part 253 now has three subparts. This proposed framework rule 
would add a fourth, subpart D, to govern reduction programs. Sections 
253.25 through 253.38 of subpart D would be framework rules common to 
all potential programs. Section 253.39 would be reserved for individual 
program regulations (to be individually proposed and adopted as we 
implement each program). It should be noted that the program 
regulations may contain provisions governing fee payment, fee 
collection, fee collection deposit, and/or fee collection records in 
addition to, or different from, those contained in Sec. 253.36 and/or 
Sec. 253.37 of this subpart if special circumstances in the reduction 
fishery make those additional or different provisions necessary to 
ensure full, complete, accurate and timely fee payment and/or full, 
complete, accurate and timely fee deposit, disbursement, accounting, 
records keeping, and reporting. It is the responsibility of the 
business planners and requester of a financed program to include such 
conditions in the business plan. However, we will deviate from the 
framework regulations in this regard only to the minimum extent 
necessary.

[[Page 6860]]

Classification

    This proposed rule has been determined to be significant for 
purposes of E.O. 12866.
    The Assistant General Counsel for Legislation and Regulation of the 
Department of Commerce certified to the Chief Counsel for Advocacy of 
the Small Business Administration that this proposed rule, if adopted, 
does not have a significant economic impact on a substantial number of 
small entities. The proposed rule does not implement any program. 
Instead, the proposed rule only establishes a framework for 
implementing future programs in specific fisheries. Each program 
requires its own program regulations to implement its own program plan. 
We cannot at this time determine the future effect on small entities 
resulting from program regulations implementing reduction in individual 
fisheries. We will consider this effect at the time that we 
individually propose program regulations for each reduction in each 
program fishery. Consequently, we did not prepare a regulatory 
flexibility analysis.
    The proposed rule contains collection-of-information requirements 
subject to Office of Management and Budget review and approval under 
the Paperwork Reduction Act.
    Notwithstanding any other provision of law, no person is required 
to respond to, nor is any person subject to a penalty for failure to 
comply with, a collection of information subject to the requirements of 
the Paperwork Reduction Act unless that collection of information 
displays a currently valid Control Number assigned by the Office of 
Management and Budget.
    For a financed program, the collection of information subject to 
these requirements includes preparing the business plan, bidding, 
voting in a referendum, and all fee payment and collection (including 
records keeping and reporting) during the first year after a loan as 
well as each subsequent year of loan repayment. We estimate that the 
public reporting burden for this would average 10,075 hours if a 
council requests the program and 10,344 hours if a state requests the 
program. In both cases, this estimate is through the first year of loan 
repayment. We estimate that the public reporting burden for each 
subsequent year of loan repayment would average 241 hours per year.
    For a subsidized program that a council requests, bidding is the 
only public reporting burden subject to these requirements. We estimate 
that this burden would average a total of 1,600 hours per program. When 
a state makes the same request, however, we estimate that total 
reporting burden would increase to an average of 8,504 hours.
    The above estimates are based on individual response times of 6,634 
hours to prepare a business plan, 270 hours to prepare a state request, 
4 hours for a referenda vote, 4 hours to prepare a bid, 10 minutes to 
submit a fish ticket for a trip, 3 hours to prepare a monthly buyer 
report, 4 hours to prepare an annual buyer report, and 2 hours to 
prepare a seller/buyer report.
    We have submitted this collection of information to the Office of 
Management and Budget for approval and we invite the public to comment 
on it. Is this collection of information necessary for properly 
conducting reduction? Does the information we propose to collect have 
practical utility? Is the burden-hour estimate accurate? How could we 
improve the quality, utility, and clarity of the information we propose 
to collect? How could we minimize the collection-of-information burden? 
Would the use of automated-collection techniques or other forms of 
information technology help? Send comments regarding this burden 
estimate, or any other aspect of this collection of information, to us 
(see ADDRESSES) and to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Washington, DC 20503 (ATTN: 
NOAA Desk Officer).

List of Subjects in 50 CFR Part 253

    Fishing capacity reduction, Fisheries, Fishing vessels, 
Intergovernmental relations, Loan programs-business, Reporting and 
record keeping requirements, Research.
    For the reasons set out the preamble, 50 CFR part 253 is proposed 
to be amended by adding a subpart D to read as follows:

PART 253--FISHERIES ASSISTANCE PROGRAMS

Subpart  D--Fishing Capacity Reduction
Sec.
253.25  Definitions.
253.26  Requests for a program.
253.27  Content of a request for a financed program.
253.28  Acceptance of a request for, and determinations as to 
whether to initiate a, financed program.
253.29  Content of a request for a subsidized program.
253.30  Acceptance of a request for, and determinations as to 
whether to conduct a, subsidized program.
253.31  Reduction amendments.
253.32  Program plan and program regulations.
253.33  Bids.
253.34  Referenda.
253.35  Reduction methods.
253.36  Fee payment and collection.
253.37  Fee collection deposits and records.
253.38  Prohibitions and penalties.
253.39  Program regulations for each reduction program. [Reserved]
Subpart D--Fishing Capacity Reduction


    Authority: 16 U.S.C. 1861a (b) through (e).


Sec. 253.25  Definitions.

    In addition to the definitions in the Magnuson-Stevens Fisheries 
Conservation and Management Act (16 U.S.C. 1801 et seq.) and in 
Sec. 600.10 of this chapter, the terms used in this subpart have the 
following meanings:
    Borrower means each post-reduction permit holder or vessel owner 
fishing in the program fishery.
    Business plan means the document containing the information 
specified in Sec. 253.27(q) and required to be submitted with a request 
for a financed program.
    Consistency requirement means the requirement of section 
312(b)(1)(B) of the Magnuson Act that each reduction program be 
consistent with the management plan in effect for a reduction fishery.
    Control requirement means the requirement of section 
312(b)(1)(B)(ii) of the Magnuson Act that each management plan in 
effect for a reduction fishery establish a specified or target total 
allowable catch or other measures that trigger closure of the reduction 
fishery or other adjustments to reduce the reduction fishery's catch 
whenever fishery conservation and management require it;
    Council means a Fishery Management Council established under the 
Magnuson Act.
    Delivery value means the full, fair-market value that a fish buyer 
pays, in an arm's-length transaction, to a fish seller for each pound 
of fee fish (in the form in which the fee fish exists at the time of 
fish delivery) that the fish seller delivers to the fish buyer, before 
any deductions whatsoever.
    Deposit principal means all collected fees that a fish buyer 
deposits in a segregated account maintained at a federally-chartered 
national bank for the sole purpose of aggregating collected fees before 
sending them to NMFS for repaying a reduction loan.
    Fee means the amount deducted for reduction loan repayment (under 
the industry fee system provided for in section 312(d) of the Magnuson 
Act) from the delivery value of fee fish and calculated by multiplying 
the applicable fee rate by the delivery value.
    Fee fish means all fish harvested from a reduction fishery 
involving a financed program during the period in which any

[[Page 6861]]

amount of the program's reduction loan remains unpaid.
    Final development plan means the document NMFS prepares for a 
subsidized program containing the information specified in 
Sec. 253.29(g) and based on the initial development plan the reduction 
program requester submits.
    Financed means funded by a reduction loan.
    Fish buyer means the first ex-vessel party who, in an arm's- length 
transaction, purchases fee fish from a fish seller.
    Fish delivery means the point at which a fish buyer first takes 
title to, or possession of, fee fish from a fish seller.
    Fish seller means the party who catches and, in an arm's-length 
transaction, first sells fee fish to a fish buyer.
    Federal Fishery Management Plan or Federal FMP means any plan 
(including amendments thereto) approved or adopted by the Secretary of 
Commerce pursuant to section 303 of the Magnuson Act.
    Fund means the Fishing Capacity Reduction Fund (and each subaccount 
for each reduction program) established in the U.S. Treasury for the 
deposit into, and disbursement from, all funds (including all reduction 
loan capital and all fee revenue) involving each reduction program.
    Management plan means any Federal FMP or state fishery management 
plan or program pursuant to which a fishery is managed.
    Necessity requirement means the requirement in section 312(b)(1)(A) 
of the Magnuson Act that each reduction program be necessary to prevent 
or end overfishing, rebuild stocks of fish, or achieve measurable and 
significant improvements in the conservation and management of the 
reduction fishery;
    Nonreplacement requirement means the requirement in section 
312(b)(1)(B)(i) of the Magnuson Act that each management plan in a 
reduction fishery prevent the replacement of the fishing capacity that 
the reduction program removes through a moratorium on new entrants to 
the reduction fishery, restrictions on vessel upgrades, and whatever 
other effort control measures may be required, taking into account the 
reduction fishery's full potential fishing capacity.
    Post-reduction means after a reduction program reduces capacity in 
a reduction fishery.
    Preliminary development plan means the document containing the 
information specified in Sec. 253.29(g) and required to be submitted 
with a request for a subsidized program.
    Program plan means the implementation plan that section 312(e) of 
the Magnuson Act requires for implementing each reduction program.
    Program regulations mean the implementation regulations that 
section 312(e) of the Magnuson Act requires for implementing each 
reduction program.
    Reduction means the act of reducing fishing capacity under any 
reduction program.
    Reduction amendment means any amendment to a management plan that 
this subpart requires for a reduction program.
    Reduction contract means the contents of a reduction bid and NMFS' 
conditional or non-conditional acceptance of such a bid.
    Reduction cost means the total dollar amount of all reduction 
payments to fishing permit owners, fishing vessel owners, or both, in a 
reduction fishery.
    Reduction fishery means the portion of a fishery to which a 
reduction program applies.
    Reduction loan means a loan, under sections 1111 and 1112 of Title 
XI of the Merchant Marine Act, 1936, as amended (46 App. U.S.C. 1279f & 
1279g), for financing any portion, or all, of a program's reduction 
cost.
    Reduction payment means the Federal Government's fishing capacity 
reduction payment to a fishing permit owner, fishing vessel owner, or 
both, under a program.
    Reduction permit means any permit covered by a reduction contract.
    Reduction program means a fishing capacity reduction program 
authorized under section 312(b)-(e) of the Magnuson Act and this 
subpart, starting with a request for a reduction program and ending 
(for a financed program) with full reduction loan repayment.
    Reduction vessel means any vessel covered by a reduction contract.
    Referendum means the referendum that section 312(d)(1) of the 
Magnuson Act requires to authorize an industry fee system for repaying 
a reduction loan for any reduction program.
    Requester means a council or a Governor identified in 
Sec. 253.26(b) and (c).
    Scrap a vessel means to completely and permanently reduce to small 
fragments having value, if any, only as raw materials for reprocessing, 
a vessel's hull, superstructures, and other fixed structural components
    Subsidized means not funded in whole or in part by a reduction 
loan.


Sec. 253.26  Requests for a program.

    (a) A council managing a proposed reduction fishery or the Governor 
of a state managing a proposed reduction fishery may request NMFS to 
conduct a reduction program in such fishery. Each request must be in 
writing and must be addressed to the Chief, Financial Services 
Division, NMFS, 1315 East-West Highway, Silver Spring, MD 20910. Each 
request must satisfy the requirements of Sec. 253.27 or Sec. 253.29, as 
applicable, of this subpart, and enable NMFS to make the determinations 
required by Sec. 253.28 or Sec. 253.30, as applicable, of this subpart.
    (b) For a council-managed fishery, only the council can make the 
request. If two or more councils manage the fishery, they must make a 
joint request. No council may make a request (or join in making a 
request) until after it conducts a public hearing about the request.
    (c) For a state-managed fishery, only the Governor of that state 
can make the request. If two or more states manage the fishery, the 
Governors of those states must make a joint request. No Governor of a 
state may make a request (or join in making a request) until the state 
conducts a public hearing about the request.
    (d) NMFS cannot conduct a reduction program in any council- or 
state-managed fishery, unless NMFS first receives a request from the 
council or the Governor of the state managing the reduction fishery. 
For a fishery subject to U.S. jurisdiction, but not council or state 
managed, NMFS may conduct a reduction program on its own motion by 
fulfilling so much of the request requirements of this subpart as NMFS, 
in its discretion, determines reasonably applies to a reduction program 
not initiated by a request.


Sec. 253.27  Content of a request for a financed program.

    A request for a financed program must:
    (a) Specify the reduction fishery;
    (b) Project the amount of the reduction and specify what a 
reduction of that amount achieves;
    (c) Project the reduction cost and specify the amount of the 
reduction cost to be financed and, if less than 100 percent of such 
cost is to be financed, specify the amounts of, and document the 
availability of, all funding from sources other than a reduction loan;
    (d) Project the availability of all Federal appropriation authority 
or other funding, if any, that the reduction program requires 
(including timing in relation to the projected reduction program 
process);
    (e) Demonstrate how the reduction program meets the necessity 
requirement;

[[Page 6862]]

    (f) Demonstrate how the reduction program meets the consistency 
requirement;
    (g) Demonstrate how the business plan is consistent with the 
management plan including any reduction amendment;
    (h) Demonstrate how the management plan including any reduction 
amendment meets the nonreplacement requirement;
    (i) Demonstrate how the management plan including any reduction 
amendment meets the control requirement.
    (j) If the reduction fishery involves only one of several types of 
harvesting gear in a fishery (or is otherwise limited by area or other 
circumstance), demonstrate how the management plan ensures post-
reduction allocations between gear types (or between operating areas or 
other circumstances) in the fishery, that adequately protect both NMFS' 
reduction-loan interest and the borrower's interest in the pre-
reduction allocations involved in the fishing capacity that the 
reduction program reduces;
    (k) Include any required reduction amendment. The reduction 
amendment must be based on the business plan. If the requester is a 
council, the requester must, at the time of the request, have adopted 
the reduction amendment and drafted proposed regulations to implement 
it;
    (l) Request that NMFS conduct, at the appropriate time, a 
referendum under this subpart;
    (m) List the names and addresses of record of all fishing permit or 
fishing vessel owners who are currently authorized to harvest fish from 
the reduction fishery. This must be based on the best information 
available to the requester and take into account any limitation by type 
of fishing gear operated, area of operation, or other consideration 
that the reduction program involves;
    (n) Specify the annual total allowable catch of fish during each of 
the past five years and the allocations of it for each of those years 
to those listed under paragraph (m) of this section;
    (o) Specify the criteria for determining the types and number of 
fishing permits or fishing permits and fishing vessels that are 
eligible for reduction under the reduction program. The criteria must 
take into account: the characteristics of the fishery, whether the 
program is limited to a particular gear type in the fishery (or 
otherwise limited by some other operational consideration), whether the 
reduction program is limited to fishing permits or involves both 
fishing permits and fishing vessels, the management plan requirements, 
the needs of fishing communities, and minimizing the reduction cost;
    (p) Include any other information or guidance that would assist 
NMFS in developing a program plan and program regulations;
    (q) Include a business plan, prepared by, or on behalf of, 
knowledgeable and concerned harvesters in the reduction fishery, that:
    (1) Specifies a detailed reduction methodology that accomplishes 
the most reduction at the least reduction cost and in the shortest time 
and otherwise achieves the reduction program result the requester 
specifies under paragraph (b) of this section. The methodology must be 
sufficiently detailed to enable NMFS to readily design, propose, and 
adopt a timely and reliable program plan, to propose and issue timely 
and reliable program regulations, to invite bids, to accept or reject 
bids, to conduct a referendum, and to complete a reduction program in 
accordance with this subpart. The methodology must include: contents 
and terms of invitations to bid, eligible bidders, type of information 
that bidders must supply, criteria for accepting or rejecting bids, 
terms of bid acceptances, referendum procedures, and all other 
technical matters required to conduct a program;
    (2) Based on actual experience for a reasonable number of past 
years in the reduction fishery, projects and justifies (with documented 
analysis) the reduction fishery's annual delivery value during the 
reduction loan's repayment period;
    (3) Specifies the principal amount and repayment term of the 
reduction loan (if the reduction loan's principal amount is less than 
the reduction cost, the business plan must adjust all affected aspects 
accordingly). The reduction loan's principal amount cannot (at the 
interest rate most likely to prevail) exceed the principal amount that 
can be amortized in 20 years by five percent of the projected delivery 
value of fee fish;
    (4) Specifies the minimum amount of reduction required for the 
reduction loan (and the reduction cost, if greater than the reduction 
loan) to be cost effective;
    (5) Fully analyzes and justifies the reduction loan's cost 
effectiveness at the minimum reduction level and at various reduction-
level increments reasonably greater than the minimum one, based on the:
    (i) Best historical fishing revenue and expense data (and any other 
relevant productivity measures) available in the reduction fishery; and
    (ii) Projected effect of the reduction program on the post-
reduction operating economics of typical harvesters in the reduction 
fishery (particularly, the extent to which the reduction increases the 
ratio of delivery value to fixed cost and improves harvesting's other 
relevant productivity measures);
    (6) Specifies how the management plan including any reduction 
amendment meets the nonreplacement requirement;
    (7) Specifies how the management plan including any reduction 
amendment meets the control requirement;
    (8) If the reduction program involves only one of several types of 
fishing gear operating in the reduction fishery (or is limited by 
operational area or other considerations), specifies management-
authority provisions for the post-reduction allocation of the fish for 
which capacity will be reduced that both allow the borrower to repay 
the reduction loan and preserve for the borrower the reduction benefit 
contemplated by the borrower's obligation to repay the reduction loan.
    (9) Specifies the names and addresses of record of all fish buyers 
who can, after reduction, reasonably be expected to receive deliveries 
of fee fish;
    (10) Specifies any special circumstances in the reduction fishery 
that may require fee payment, fee collection, fee collection deposit, 
and/or fee collection record keeping program regulations in addition 
to, or different from, those contained in Sec. 253.36 and/or 
Sec. 253.37 of this subpart to ensure full, complete, accurate, and 
timely fee payment and collection and/or full, complete, accurate, and 
timely fee deposit, disbursement, accounting, record keeping, and 
reporting.
    (11) Demonstrates by the results of a survey of potential 
referendum voters, or by other convincing means, a widespread degree of 
support by potential referendum voters for the business plan and 
confidence in its feasibility; and
    (r) Includes the requester's certification that, in the requester's 
best judgment, the business plan, the management plan, and all other 
request aspects constitute a complete, realistic, and practical 
prospect for successfully completing a reduction program in accordance 
with this subpart.


Sec. 253.28  Acceptance of a request for, and determinations as to 
whether to initiate a, financed program.

    (a) Acceptance of a request. NMFS will review any request submitted 
to it to determine whether the request conforms with the requirements 
of

[[Page 6863]]

Sec. 253.27. If the request conforms, NMFS will accept the request. If 
the request does not conform, NMFS will return the request to the 
requester with guidance on how to make the request conform.
    (b) Determination of whether to initiate a financed program. After 
receipt of a conforming request for a financed reduction program, NMFS 
will initiate the reduction program if it determines that:
    (1) The reduction program meets the necessity requirement;
    (2) The reduction program meets the consistency requirement;
    (3) The management plan including any reduction amendment meets the 
nonreplacement requirement;
    (4) The management plan including any reduction amendment meets the 
control requirement;
    (5) The management plan including any reduction amendment contains 
post-reduction allocation provisions adequate to ensure reduction-loan 
repayment;
    (6) The reduction program is cost effective;
    (7) The business plan is complete, comprehensive, practical, and 
supports a determination that the reduction program is reasonably 
capable of being successfully implemented and the borrower is capable 
of repaying the reduction loan. This includes enabling NMFS to readily 
design, propose, and adopt a timely and reliable program plan and 
propose and issue timely and reliable program regulations and otherwise 
complete the reduction program in accordance with this subpart;
    (8) The reduction program is consistent with the business plan; and
    (9) The reduction program is in accord with all other applicable 
provisions of the Magnuson Act and this subpart.


Sec. 253.29  Content of a request for a subsidized program.

    A request for a subsidized program must:
    (a) Specify the reduction fishery;
    (b) Project the amount of the reduction and specify what a 
reduction of that amount achieves;
    (c) Project the reduction cost and specify the amount of the 
reduction cost to be funded by Federal appropriations and the amount, 
if any, to be funded by other sources;
    (d) Project the availability of Federal appropriations or other 
funding, if any, that completion of the reduction program requires 
(including timing in relation to the projected reduction program 
process);
    (e) Specify the number of fishing permits authorizing the harvest 
of fish from the reduction fishery or the number of fishing vessels 
authorized to harvest fish from the reduction fishery, or both, and the 
conditions under which permit or vessel owners are authorized to fish;
    (f) Specify the annual total allowable catch of fish from the 
reduction fishery during each of the past five years and the 
allocations of it for each of those years to those currently authorized 
to harvest fish from the reduction fishery;
    (g) Include a preliminary development plan that:
     (1) Specifies a detailed reduction methodology that accomplishes 
the most reduction at the least reduction cost and in the shortest time 
and otherwise achieves the reduction-program result that the requester 
specifies under paragraph (b) of this section. The methodology must be 
sufficiently detailed to enable NMFS to prepare a final development 
plan to serve as the basis for NMFS to readily design, propose, and 
adopt a timely and reliable program plan and propose and issue timely 
and reliable program regulations. The methodology must include: 
contents and terms of invitations to bid, eligible bidders, type of 
information that bidders must supply, criteria for accepting or 
rejecting bids, and terms of bid acceptances;
    (2) Specifies criteria for determining the types and numbers of 
fishing permits or fishing permits and fishing vessels eligible to 
participate in the reduction program. The criteria must take into 
account: the characteristics of the fishery, whether the reduction 
program is limited to a particular gear type in the fishery (or is 
otherwise limited by some other operational consideration), whether the 
reduction program is limited to fishing permits or involves both 
fishing permits and fishing vessels, the management plan requirements, 
the needs of the fishing communities, and the need to minimize the 
reduction program's reduction cost; and
    (3) Demonstrates the reduction program's cost effectiveness;
    (h) Demonstrate how the reduction program meets the necessity 
requirement;
    (i) Demonstrate how the reduction program meets the consistency 
requirement;
    (j) Demonstrate that the preliminary development plan is consistent 
with the management plan or would be consistent after any needed 
reduction amendment;
    (k) Specify the management plan measures included those in any 
reduction amendment to be submitted that meet the nonreplacement 
requirement;
    (l) Specify the management plan measures included those in any 
reduction amendment to be submitted that meet the control requirement;
    (m) Specify any other information or guidance that assists NMFS in 
preparing a final development plan and a proposed program plan and 
proposed program regulations; and
    (n) State why the requester believes that, in its best judgment, 
the reduction program constitutes a reasonably realistic and practical 
prospect for successfully completing a reduction program in accordance 
with this subpart.


Sec. 253.30  Acceptance of a request for, and determinations as to 
whether to conduct a, subsidized program.

    (a) Acceptance of a request. NMFS will review any request submitted 
to it to determine whether it conforms with the requirements of 
Sec. 253.29. If the requests conforms, NMFS will accept the request. If 
the request does not conform, NMFS will return the request to the 
requester with guidance on how the request can conform.
    (b) Determination as to whether to prepare, and preparation of, a 
final development plan. After receipt of a conforming request, NMFS 
will prepare a final development plan if it determines that the 
reduction program requested constitutes a realistic and practical 
prospect for successfully completing a reduction in accordance with 
this subpart and enables NMFS to readily design, propose, and adopt a 
timely and reliable program plan and propose and issue timely and 
reliable program regulations and otherwise complete the reduction 
program in accordance with this subpart. NMFS will based the final 
development plan on the requester's preliminary development plan. NMFS 
will consult, as NMFS deems appropriate, with the requester, Federal 
agencies, state and regional authorities, affected fishing communities, 
participants in the program fishery, conservation organizations, and 
other interested parties in preparing of the final development plan.
    (c) Reaffirmation of the request. After completing the final 
development plan, NMFS will submit it to the requester for its 
reaffirmation of the request. Based on the final development plan, the 
reaffirmation must:
    (1) Certify that the final development plan is consistent with the 
management plan including any reduction amendment;

[[Page 6864]]

    (2) Demonstrate that the management plan including any reduction 
amendment meets the nonreplacement requirement;
    (3) Demonstrate that the management plan including any reduction 
amendment meets the control requirement; and
    (4) Include any required reduction amendment and, if the requester 
is a council, proposed regulations to implement it. The requester must 
base the reduction amendment on the final development plan;
    (d) Determinations as to whether to conduct a subsidized program. 
After NMFS' receipt of the requester's reaffirmation and any needed 
reduction amendment and any needed proposed regulations to implement 
it, NMFS will conduct the reduction program if it determines that:
    (1) The reduction program meets the necessity requirement;
    (2) The reduction program meets the consistency requirement;
    (3) The reduction program is consistent with the management plan 
including any reduction amendment;
    (4) The management plan including any reduction amendment meets the 
nonreplacement requirement;
    (5) The management plan including any reduction amendment meets the 
control requirement;
    (6) The reduction program is reasonably capable of being 
successfully implemented;
    (7) The reduction program, if successfully implemented, will be 
cost effective; and
    (8) The reduction program is in accord with all other applicable 
provisions of the Magnuson Act and this subpart.


Sec. 253.31  Reduction amendments.

    (a) Each reduction amendment may contain provisions that are either 
dependent upon a reduction program or independent of a reduction 
program. Each provision of a reduction amendment is considered to be a 
dependent provision unless the amendment expressly designates the 
provision as independent.
    (b) Independent provisions are effective without regard to any 
subsequent reduction program actions.
    (c) Dependent provisions are initially effective only to enable 
initiation and completion of the pre-capacity reduction stage of a 
reduction program, i.e., to enable inviting bids, bidding, and 
accepting bids, and, if a financed program is involved, to enable the 
conduct of a referendum.
    (d) All dependent provisions of each reduction amendment for a 
financed program not initially effective become fully in force and 
effective when NMFS, under Sec. 253.34(f) of this subpart, notifies 
those who were mailed referendum ballots that the industry fee system 
for the reduction program was approved by referendum; provided, 
however, that nothing subsequently prevents actual reduction payment 
and reduction. If a referendum, in accordance with this subpart and any 
special referendum provisions in the program regulations, does not 
approve the required industry fee system, no dependent provision of the 
reduction amendment then has any further force or effect.
    (e) All dependent provisions of a reduction amendment for a 
subsidized program not initially effective become fully in force and 
effective when NMFS, under Sec. 253.33(e), notifies bidders that NMFS 
accepts the bidders' offers; provided, however, that nothing 
subsequently prevents actual reduction payment and reduction. If NMFS 
does not, in accordance with this subpart and any special provisions in 
the program regulations, accept the bidders' offers, no dependent 
provision of the reduction amendment then has any further force or 
effect.


Sec. 253.32  Program plan and program regulations.

    (a) As soon as practicable after deciding to initiate a reduction 
program, NMFS will prepare and publish for a 60-day, public-comment 
period, a proposed program plan and program regulations. During the 
public-comment period, NMFS will conduct a public hearing of the 
proposed program plan and program regulations in each state that the 
program would affect.
    (b) To the greatest extent practicable, NMFS will base the program 
plan and program regulations for a financed program on the business 
plan. The program plan for a financed program will describe in detail 
all relevant aspects of implementing the reduction program, including:
    (1) The reduction fishery;
    (2) The reduction methodology;
    (3) The maximum reduction cost;
    (4) The maximum reduction loan amount (if different from the 
maximum reduction cost);
    (5) The reduction-cost funding, if any, other than a reduction 
loan;
    (6) The minimally acceptable reduction level;
    (7) The fee;
    (8) The criteria for determining the types and number of fishing 
permits or fishing permits and fishing vessels eligible to participate 
in the reduction program;
    (9) The invitation-to-bid and bidding procedures;
    (10) The criteria for determining bid acceptance;
    (11) The referendum eligibility criteria, including a list of 
eligible voters and their addresses of record, with notice and 
opportunity to respond for:
    (i) Parties who are not, but believe they should be, listed as 
eligible voters; and
    (ii) Parties whose address of record is incorrect;
    (12) The referendum procedures; and
    (13) Any relevant post-referendum reduction procedures other than 
those in the program regulations or this subpart.
    (c) NMFS will base each program plan and program regulations for a 
subsidized program on the final development plan. The program plan will 
describe in detail all relevant aspects of implementing the reduction 
program, including:
    (1) The reduction program fishery;
    (2) The reduction methodology;
    (3) The maximum reduction cost;
    (4) The reduction-cost funding (if any) other than Federal 
appropriations;
    (5) The minimally acceptable reduction level;
    (6) The fee;
    (7) The criteria for determining the types and number of fishing 
permits or fishing permits and fishing vessels eligible to participate 
in the reduction program;
    (8) The invitation-to-bid and bidding procedures;
    (9) The criteria for determining bid acceptance; and
    (10) Any relevant post-bidding program procedures other than those 
in the program regulations or this subpart.
    (d) The program regulations will:
    (1) Specify, for invitations to bid, bids, and reduction contracts 
under Sec. 253.33:
    (i) Bidder eligibility;
    (ii) Bid submission requirements and procedures;
    (iii) A bid opening date (before which a bidder may not bid) and a 
bid closing date (after which a bidder may not bid);
    (iv) A bid expiration date after which the irrevocable offer 
contained in each bid expires unless NMFS, before that date, accepts 
the bid by mailing a written acceptance notice to the bidder;
    (v) The manner of bid submission and the information each bidder 
must supply for NMFS to deem a bid responsive;
    (vi) The conditions under which NMFS will accept or reject a bid;
    (vii) The manner in which NMFS will accept or reject a bid; and
    (viii) The manner in which NMFS will notify each bidder of bid 
acceptance or rejection;

[[Page 6865]]

    (2) Specify any other special referendum procedures or criteria; 
and
    (3) Specify such other provisions, in addition to and consistent 
with those in this subpart, necessary to regulate the individual 
circumstances of each reduction program and reduction loan. This 
includes, but is not limited to:
    (i) The borrower's obligation to repay a reduction loan in a 
certain principal amount, at a certain interest rate, and over a 
certain term (and the consequences of not doing so);
    (ii) Fee rates or amount determinations; and
    (iii) Any other aspect of fee payment, collection, deposit, 
disbursement, reporting, and accounting.
    (e) NMFS will issue final program regulations and, except for a 
financed program, adopt a final program plan within 45 days of the 
close of the public-comment period. For a subsidized program, all the 
program regulations issued will go into effect 30 days after the date 
of filing for public inspection with the Office of the Federal 
Register. For a financed program, NMFS will publish in the Federal 
Register the final program plan it will adopt after, and if, a 
referendum approves the industry fee system. For a financed program, 
all the program regulations issued will go into effect 30 days after 
the date of filing for public inspection with the Office of the Federal 
Register, except for those involving the industry fee system. Thus, the 
program regulations governing inviting bids, bidding, accepting bids, 
any other program activities required to precede and conduct a 
referendum, will go into effect. If a referendum does not approve an 
industry fee system, the program regulations involving the industry fee 
system will not become effective and all other program regulations will 
be repealed. If a referendum approves an industry fee system, NMFS will 
immediately publish a document in the Federal Register adopting the 
final program plan previously published in the Federal Register and 
making the program regulations fully effective. NMFS will then complete 
the reduction.


Sec. 253.33  Bids.

    (a) Each invitation to bid, bid, bid acceptance, reduction 
contract, and bidder (or any other party in any way affected by any of 
the foregoing) under this subpart is subject to the terms and 
conditions in this section:
    (1) Each invitation to bid constitutes the entire terms and 
conditions of a reduction contract under which:
    (i) Each bidder makes an irrevocable offer to the United States of 
fishing capacity for reduction; and
    (ii) NMFS accepts or rejects, on behalf of the United States, each 
bidder's offer;
    (2) NMFS may, at any time before the bid expiration date, accept or 
reject a bid;
    (3) In a financed program, NMFS' acceptance of any bid is subject 
to the express condition subsequent, that the industry fee system 
necessary to repay the reduction loan is approved by a referendum 
conducted under Sec. 253.34. Approval or disapproval of the industry 
fee system by referendum is an event that neither the United States nor 
the bidders can control. Disapproval of the industry fee system by 
referendum fully excuses both parties from any performance, and fully 
discharges all duties, under any reduction contract;
    (4) All bids are subject to the express condition that, upon NMFS' 
acceptance of the bid, (provided, however, that NMFS' later tenders a 
reduction payment to the bidder in an amount equal to the bid amount) 
the bidder gives the bidder's full, irrevocable, and incontestible 
consent for:
    (i) NMFS to forever revoke any reduction permit; and
    (ii) Where the reduction program also involves the withdrawal of 
reduction vessels from fishing (with or without scrapping):
    (A) For the U.S. Coast Guard, upon NMFS' request, to restrict the 
title of any reduction vessel that is federally-documented to forever 
prohibit and effectively prevent any future use of that vessel for 
fishing in any area subject to the jurisdiction of the United States or 
any state, territory, commonwealth, or possession of the United States; 
and
    (B) Where reduction vessel scrapping is involved and the vessel 
owner does not comply with the owner's obligation under the reduction 
contract to scrap the vessel, for NMFS to enter upon the premises where 
the vessel is located and (at the vessel owner's risk and expense) take 
such measures as necessary to cause the vessel's prompt scrapping. 
Afterwards, NMFS will take such action as may be necessary to recover 
from the vessel owner any cost or expense NMFS incurred in causing the 
vessel to be scrapped;
    (5) Money damages not being an adequate remedy for a bidder's 
breach of a reduction contract, the United States is, in all 
particulars, entitled to specific performance of each reduction 
contract. This includes, but is not limited to, reduction vessel 
scrapping in programs involving scrapping;
    (6) Any reduction payment is available, upon adequate notice to 
NMFS, to satisfy liens against any reduction permit or reduction 
vessel; provided, however, that:
    (i) No reduction payment to any bidder either relieves the bidder 
of responsibility to discharge the obligation which gives rise to any 
lien or relieves any lien holder of responsibility to protect the lien 
holder's interest;
    (ii) No reduction payment in any way gives rise to any liability of 
the United States or of any of its officers or agents for the 
obligation underlying any lien;
    (iii) No lien holder has any right against the United States or any 
of its officers or agents in connection with the revocation of any 
reduction permit or the title restriction or scrapping of any reduction 
vessel under this subpart; and
    (iv) No lien holder has any right or standing to seek to set aside 
any revocation of any reduction permit or the title restriction or 
scrapping of any reduction vessel for which the United States made any 
reduction payment, but is, in lieu of the reduction permit and/or 
reduction vessel, limited to recovery against the reduction payment 
itself or otherwise against the reduction permit or reduction vessel 
owner's other assets; and
    (7) Each invitation to bid will specify such other terms and 
conditions as NMFS believes necessary to enforce specific performance 
of each reduction contract and otherwise to ensure completing each 
program (including, but not limited to, each bidder's certification, 
subject to the penalties in Sec. 253.38, of its full authority to 
submit each bid and to dispose of the property involved in the bid in 
the manner contemplated by each invitation to bid).
    (b) NMFS will not invite bids for any reduction program until NMFS 
determines that:
    (1) Any necessary reduction amendment is fully and finally approved 
and all provisions except those dependent on the completion of 
reduction are implemented;
    (2) The final program regulations are issued and the final program 
plan for a subsidized program is adopted or for a financed program is 
published;
    (3) All required program funding is approved and in place 
(including all Federal appropriation and apportionment authority);
    (4) Any reduction loan involved is fully approved;
    (5) Any non-Federal funding involved is fully available for NMFS 
disbursement as reduction payments; and
    (6) All other actions prerequisite to disbursing reduction payments 
(except for matters involving bidding and referenda) are completed.
    (c) Promptly after making the affirmative determinations required

[[Page 6866]]

under paragraph (b) of this section, NMFS will file with the Office of 
the Federal Register for publication a document inviting eligible 
bidders to offer, under this subpart, fishing capacity to the United 
States for reduction.
    (d) For good cause shown, NMFS may extend a bid closing date and/or 
a bid expiration date for a reasonable period. NMFS may also issue 
serial invitations to bid (if the program regulations so provide).
    (e) After the bid expiration date, NMFS, without delay, will:
    (1) Analyze responsive bids;
    (2) Determine which bids, if any, NMFS accepts; and
    (3) Notify, by U.S. mail, those bidders whose bids NMFS accepts, 
that a reduction contract (subject, in the case of a financed program, 
to the express condition subsequent that a following referendum approve 
the necessary industry fee system) now exists between them and the 
United States.
    (f) NMFS will keep strictly confidential the identity of all 
bidders whose bids NMFS does not accept. In financed programs, NMFS 
also will keep strictly confidential the identity of all bidders whose 
bids NMFS accepts until after completing a referendum under Sec. 253.34 
approving the industry fee system.


Sec. 253.34  Referenda.

    For a financed program, after NMFS accepts bids and notifies 
accepted bidders under Sec. 253.33(e), it will conduct, without delay, 
a referendum on the industry fee system needed to repay the reduction 
loan. NMFS will conduct the referendum in accordance with the 
following:
    (a) Ballot issuance. By U.S. certified mail, return receipt 
requested, NMFS will mail a ballot to each fishing permit or fishing 
vessel owner whose name appears on the list referred to in 
Sec. 253.27(m). All owners whose names appear on this list are eligible 
referendum voters. Each ballot will bear a randomly derived, 5-digit 
number assigned to each eligible voter. Each ballot will contain a 
place for the voter to vote ``for'' (yes) or ``against'' (no) the 
proposed industry fee system and a place, adjacent to the 5-digit 
number, for the signature of the permit or vessel owner to whom the 
ballot is addressed or if the permit or vessel owner is an 
organization, the person purported to have authority to vote the ballot 
on the organization's behalf. Each ballot also will contain a place for 
the person signing the ballot to print his or her name. NMFS will 
enclose with each ballot a specially-marked, postage-paid, pre-
addressed envelope that each voter must use to return the ballot to 
NMFS.
    (b) Voter certification. Each ballot also will contain a 
certification, subject to the penalties set forth in Sec. 253.38, that 
the person signing the ballot is the permit or vessel owner to whom the 
ballot is addressed or if the permit or vessel owner is an 
organization, the person having authority to vote the ballot on the 
organization's behalf.
    (c) Information included on a ballot. Each ballot mailing will:
    (1) Summarize the referendum's nature and purpose;
    (2) Specify the date by which NMFS must receive a ballot in order 
for the ballot to be counted as a referendum vote. This date may be no 
later than the end of the twentieth day from the date on which NMFS 
mails the ballot unless the twentieth day is a Saturday, Sunday, or a 
Federal holiday, in which event the receipt date may be no later than 
the next business day. NMFS will not count as referendum votes any 
ballot received after such date;
    (3) Identify the place on the ballot for the voter to vote ``for'' 
(yes) or ``against'' (no) the industry fee system, the place on the 
ballot where the voter must sign the ballot, and the purpose of the 
return envelope;
    (4) Specify the amount of reduction, the reduction cost, the 
reduction loan amount (if different from the reduction cost), and the 
reduction loan term;
    (5) Specify the fee rate prospectively necessary to amortize the 
reduction loan over its term and the actual fee rate for the year 
following reduction; and
    (6) Specify whatever else NMFS deems appropriate.
    (d) Enclosures to accompany a ballot. Each ballot mailing will 
include:
    (1) A specially-marked, postage-paid, and pre-addressed envelope 
that a voter must use to return the original of a ballot to NMFS by 
whatever means of delivery the voter chooses;
    (2) A copy of the program plan and program regulations; and
    (3) Such other material as NMFS deems appropriate.
    (e) Vote qualification. When NMFS receives a ballot returned by a 
voter, NMFS will enter the date of receipt and whether the ballot 
qualifies to be counted as a referendum vote. A completed ballot 
qualifies to be counted as a referendum vote if the ballot:
    (1) Is physically received by NMFS on or before the last day NMFS 
specified for receipt;
    (2) Is cast ``for'' (yes) or ``against'' (no);
    (3) If from a voter that is an individual, purports to be signed by 
that individual;
    (4) If from a voter that is a corporation or other limited 
liability organization, purports to be signed by an official of that 
organization authorized to vote the ballot on the organization's 
behalf;
    (5) If from a voter that is a partnership or other joint venture 
organization, purports to be signed by an official of that organization 
authorized to vote the ballot on the organization's behalf;
    (6) Is the original ballot sent to the voter bearing the same 5-
digit number that NMFS assigned to the voter; and
    (7) Was returned to NMFS in the specially-marked envelope that NMFS 
provided for the ballot's return.
    (f) Vote tally and notification. No later than seven business days 
after the last day for receipt of a ballot, NMFS will:
    (1) Tally all ballots qualified to be counted as referendum votes;
    (2) By U.S. mail, notify all parties to whom ballots were mailed 
of:
    (i) The number of potential voters;
    (ii) The number of actual voters who returned a ballot;
    (iii) The number of returned ballots that qualified to be counted 
as referendum votes;
    (iv) The number of votes for and against the industry fee system; 
and
    (v) Whether the referendum approved or disapproved the industry fee 
system.
    (3) If the referendum approved the industry fee system, NMFS, at 
the same time and in the same way, will notify the bidders whose bids 
were conditionally accepted that the express condition subsequent 
pertaining to the reduction contracts between them and the United 
States is fulfilled.
    (g) Conclusiveness of referendum determinations. NMFS' ballot 
qualification and determinations about other vote matters are 
conclusive and final.


Sec. 253.35  Reduction methods.

    Programs may involve either the surrender of reduction permits or 
both the surrender of reduction permits and the withdrawal from fishing 
or scrapping of reduction vessels.
    (a) Reduction permit revocation and surrender. Each reduction 
permit is, upon NMFS' tender of the reduction payment for such permit, 
forever revoked. The holder of a reduction permit must, upon NMFS' 
tender of reduction payment, surrender the original of the permit to 
NMFS. The reduction permit holder, upon NMFS' tender of the reduction 
payment, forever relinquishes any claim associated with the reduction 
permit and with the fishing vessel that was used to harvest fishery 
resources under that permit that could qualify the permit holder or the 
fishing vessel owner for any present or future limited access system 
fishing permit in the reduction program fishery.

[[Page 6867]]

    (b) Reduction vessel title restriction or scrapping. Each reduction 
vessel that is not required to be scrapped, is, upon NMFS' tender of 
the reduction payment, forever prohibited from any future use for any 
fishing in any area subject to the jurisdiction of the United States or 
any State, territory, possession, or commonwealth of the United States. 
NMFS will request the U.S. Coast Guard to permanently restrict each 
such reduction vessel's title to exclude the vessel's future use for 
fishing. The owner of each reduction vessel required to be scrapped 
(and any reduction vessel that is not federally-documented must always 
be scrapped) must, upon NMFS' tender of the reduction payment, 
immediately cease all further use of vessel and arrange, without delay, 
to scrap the vessel to NMFS' satisfaction. The owner of each such 
reduction vessel, upon NMFS' tender of the reduction payment, forever 
relinquishes any claim associated with the reduction vessel that could 
qualify the owner for any present or future limited access system 
fishing permit in the reduction program fishery.
    (c) Fishing permits in a non-reduction fishery. No financed program 
may either require any holder of a reduction permit in a reduction 
fishery to surrender any fishing permit in any non-reduction fishery or 
involve any restriction or revocation of any fishing permit other than 
a reduction permit in the reduction fishery. Any subsidized program 
may, however, require surrendering and revoking all fishing permits 
(except those that constitute an individual fishing quota whose title 
the permit's title holder can transfer exclusively of the title to any 
fishing vessel) that the holder of a reduction permit in the reduction 
fishery also holds in any non-reduction fishery.
    (d) Reduction vessel dispositions. No financed program involving 
reduction vessels may require, for federally-documented vessels, 
anything other than the prohibition from any future use for any fishing 
in any area subject to the jurisdiction of the United States or any 
state, territory, possession, or commonwealth of the United States. Any 
subsidized program may, however, require the scrapping of federally-
documented reduction vessels. Reduction vessels that are not federally-
documented must always be scrapped, regardless of whether the reduction 
program is financed or subsidized.
    (e) Reduction payments. NMFS will make all reduction payments in 
the amount and in manner prescribed in its reduction contracts. For 
financed programs, the total amount of all reduction payments NMFS 
disburses (or appropriate portion of the reduction payment's amount if 
a financed program is partially funded from some source other than a 
reduction loan) equals the reduction loan's principal amount and is 
exclusively repayable by fees.


Sec. 253.36  Fee payment and collection.

    (a) Amount. The fee amount is the delivery value of fee fish times 
the fee rate.
    (b) Rate. NMFS will establish the fee rate. The fee rate may never 
exceed five percent of delivery value. NMFS will establish the initial 
fee rate by determining the fee revenues annually required to amortize 
a reduction loan over its term, projecting the annual delivery value of 
fee fish, and expressing the former as a percentage of the latter. 
Before each anniversary of the initial fee-rate determination, NMFS 
will redetermine the fee rate reasonably required to ensure reduction 
loan repayment. This will include any changed delivery value 
projections and any adjustment required to correct for previous 
delivery values higher or lower than projected. NMFS' fee rate 
determinations are conclusive and final.
    (c) Payment and collection. (1) The full fee is due and payable at 
fee fish delivery. The fish buyer must collect the fee at the time of 
the fish seller's fee fish delivery by deducting the fee from the 
delivery value before paying the delivery value, minus the fee, to the 
fish seller. The fish seller must pay the fee at the time of the fish 
seller's fee fish delivery by receiving from the fish buyer the 
delivery value minus the fee.
    (2) In the event of any bonus or other retrospective payment, whose 
amount depends on conditions subsequent to fee fish delivery, that 
increases the delivery value of fee fish, the fish seller shall pay, 
and the fish buyer shall collect, at the time the fish buyer pays the 
bonus or retrospective payment to the fish seller, the additional fee 
that would otherwise have been due and payable as if the amount of the 
retrospective payment had been known, and as if the retrospective 
payment had consequently occurred, at the time of initial delivery of 
the fee fish.
    (3)(i) Each fish seller shall, for the purposes of the fee 
collection, deposit, disbursement, and accounting requirements of this 
subpart, be both the fish seller and the fish buyer (and all 
requirements and penalties under this subpart applicable to both a fish 
seller and a fish buyer shall equally apply to the fish seller) each 
time the fish seller sells fee fish to:
    (A) Any party whose place of business is not located in the United 
States, who does not take delivery, title, or possession of the fee 
fish in the United States, who is not otherwise subject to this 
subpart, or to whom or against whom NMFS cannot otherwise apply or 
enforce this subpart;
    (B) Any party who is a restaurant, a retailer, a consumer, or some 
other type of end-user; or
    (C) Any other party who the fish seller has good reason to believe 
will not comply with the fee collection, deposit, disbursement, and 
accounting requirements of this subpart applicable to a fish seller.
    (ii) In each such case the fish seller shall, with respect to the 
fee fish involved in each such case, discharge all the fee collection, 
deposit, disbursement, and accounting requirements this subpart 
otherwise imposes on the fish buyer, and the fish seller shall be 
subject to all the penalties this subpart provides for the fish buyer's 
failure to discharge such requirements.
    (4) Fee payment begins on the date NMFS specifies under the 
notification procedures of paragraph (d) of this section and continues 
without interruption at the fee rates specified by NMFS in accordance 
this subpart's requirements until NMFS determines that the reduction 
loan is fully repaid. If a reduction loan is not fully repaid at the 
maturity of the reduction loan's original amortization period, fee 
payment and collection will continue until the reduction loan is fully 
repaid (notwithstanding that the time required to fully repay the 
reduction loan exceeds the reduction loan's initially permissible 
maturity).
    (d) Notification. (1) At least 30 days before the effective date of 
any fee or of any fee-rate change, NMFS will file with the Office of 
the Federal Register for publication a document establishing the date 
from and after which the fee or fee-rate change is effective. NMFS then 
also will send, by U.S. mail, an appropriate notification to each 
affected fish seller and fish buyer of whom NMFS has notice.
    (2) When NMFS determines that a reduction loan is fully repaid, 
NMFS will file with the Office of the Federal Register for publication 
a document that the fee is no longer in effect and should no longer be 
either paid or collected. NMFS then will also send, by U.S. mail, 
notification to each affected fish seller and fish buyer of whom NMFS 
has knowledge.
    (3) If NMFS fails to notify a fish seller or a fish buyer by U.S. 
mail (or if the fish seller or fish buyer otherwise does not receive 
the notice) of the date fee payments start or of the fee rate in 
effect, each fish seller is, nevertheless, obligated to pay the fee at 
the fee rate

[[Page 6868]]

in effect and each fish buyer is, nevertheless, obligated to collect 
the fee at the fee rate in effect.
    (e) Failure to pay or collect. (1) If a fish buyer refuses to 
collect the fee in the amount and manner that this subpart requires, 
the fish seller must then advise the fish buyer of the fish seller's 
fee payment obligation and of the fish buyer's fee collection 
obligation. If the fish buyer still refuses to properly collect the 
fee, the fish seller, within the next 24 hours, must forward the fee to 
NMFS. The fish seller at the same time must also advise NMFS in writing 
of the full particulars, including:
    (i) The fish buyer's and fish seller's name, address, and telephone 
number;
    (ii) The name of the fishing vessel from which the fish seller made 
fee fish delivery and the date of doing so;
    (iii) The quantity and delivery value of each species of fee fish 
that the fish seller delivered; and
    (iv) The fish seller's reason (if known) for refusing to collect 
the fee in accordance with this subpart.
    (2) If a fish seller refuses to pay the fee in the amount and 
manner that this subpart requires, the fish buyer must then advise the 
fish seller of the fish buyer's collection obligation and of the fish 
seller's payment obligation. If the fish seller still refuses to pay 
the fee, the fish buyer must then either deduct the fee over the fish 
seller's protest or refuse to buy the fee fish. The fish buyer must 
also, within the next 24 hours, advise NMFS in writing of the full 
particulars, including:
    (i) The fish buyer's and fish seller's name, address, and telephone 
number;
    (ii) The name of the fishing vessel from which the fish seller made 
or attempted to make fee fish delivery and the date of doing so;
    (iii) The quantity and delivery value of each species of fee fish 
the fish seller delivered or attempted to deliver;
    (iv) Whether the fish buyer deducted the fee over the fish seller's 
protest or refused to buy the fee fish; and
    (v) The fish seller's reason (if known) for refusing to pay the fee 
in accordance with this subpart.
    (f) Program regulations. If any special circumstances in a 
reduction fishery require fee payment and/or collection regulations in 
addition to, or different from, those contained in this section in 
order to ensure full, complete, accurate and timely fee payment and/or 
collection, NMFS may include such regulations in the program 
regulations for that reduction program.


Sec. 253.37  Fee collection deposits and records.

    (a) Deposit accounts. Each fish buyer this subpart requires to 
collect fees must maintain a segregated account at a federally-
chartered national bank for the sole purpose of depositing collected 
fees and disbursing them directly to NMFS in accordance with paragraph 
(c) of this section.
    (b) Fee collection deposits. Each fish buyer, no more infrequently 
than at the end of each business week, must deposit, in the deposit 
account established under paragraph (a) of this section, all fees, not 
previous deposited, that the fish buyer collects through a date not 
more than two days before the date of deposit. Neither the deposit 
account nor the principal amount of deposits in the account may be 
pledged, assigned, or used for any purpose other than aggregating 
collected fees for disbursement to the Fund in accordance with 
paragraph (c) of this section. The fish buyer is entitled, at any time, 
to withdraw deposit interest (if any), but never deposit principal, 
from the deposit account for the fish buyer's own use and purposes.
    (c) Deposit principal disbursement. On the last business day of 
each calendar month, the fish buyer must disburse to NMFS the full 
amount of deposit principal then in the deposit account. The fish buyer 
must do this by check made payable to ``NOAA Fishing Capacity Reduction 
Fund.'' The fish buyer must mail each such check to the Fund lockbox 
account that NMFS establishes for the receipt of the disbursements. 
Each reduction program has its own lockbox. Each disbursement must be 
accompanied by the fish buyer's settlement sheet completed in the 
manner and form that NMFS specifies. NMFS will specify the Fund's 
lockbox account and manner and form of settlement sheet by means of the 
notification in Sec. 253.36(d).
    (d) Records maintenance. Each fish buyer, on or in such forms as 
NMFS specifies, must maintain accurate records of all transactions 
involving fees. Each fish buyer must maintain the records in a secure 
and orderly manner for a period of at least three years from the date 
of each transaction involved.
    (1) Each fish buyer must maintain the following information 
(including the fish tickets or other materials documenting such 
information) for all deliveries of fee fish that the fish buyer buys 
from each fish seller:
    (i) Delivery date;
    (ii) Fish seller's name;
    (iii) Number of pounds of each species of fee fish bought;
    (iv) Name of fishing vessel from which the fee fish off-loaded;
    (v) Delivery price per pound of each species of fee fish bought;
    (vi) Total delivery value of fee fish bought;
    (vii) Net delivery value of fee fish bought;
    (viii) Name of party to whom net delivery value paid if other than 
the fish seller;
    (ix) Date net delivery value paid;
    (x) Total fee amount collected; and
    (xi) Such other information as NMFS decides is reasonably necessary 
for each program.
    (2) Each fish buyer must maintain the following information for all 
fee collection deposits to and disbursements from the deposit account:
    (i) Dates and amounts of deposits; and
    (ii) Dates and amounts of disbursements to the Fund's lockbox 
account that NMFS designates.
    (e) Annual report. In each year (on the date to be specified in 
each program regulations) succeeding the year during which NMFS first 
implemented a fee, each fish buyer must submit to NMFS a report, on or 
in the form NMFS specifies, containing the following information for 
the preceding year (or whatever longer period may be involved in the 
first annual report) for all fee fish each fish buyer purchases from 
each fish seller:
    (1) Total pounds;
    (2) Total net ex-vessel paid;
    (3) Total fee amounts collected;
    (4) Total fee collection amounts deposited by month;
    (5) Dates and amounts of monthly disbursements to each Fund lockbox 
account;
    (6) Total amount of deposit interest fish buyer withdrew; and
    (7) Depository account balance at year-end.
    (f) Audits. NMFS may cause agents that NMFS selects to audit, in 
whatever manner NMFS believes reasonably necessary, the books and 
records of fish buyers (including, but not limited, to fish tickets) 
and fish sellers in each program fishery in order to ensure proper fee 
payment, collection, deposit, disbursement, record keeping, and 
reporting. Fish buyers and fish sellers must make records (including, 
but not limited to, fish tickets) of all program transactions involving 
post-reduction fish catches and deliveries, fee payment, collection, 
deposit, and disbursement available to NMFS or its agents at reasonable 
times and places and promptly provide all requested information 
reasonably related to these records. No state law or regulations 
involving the confidentiality of fish tickets shall prevent NMFS from 
having full access to such fish tickets for the purposes of this 
subpart.
    (g) Refunds. When NMFS determines that a reduction loan is fully 
repaid,

[[Page 6869]]

NMFS will refund any excess fee receipts, on a last-in/first-out basis, 
to the fish buyers. Fish buyers must return the refunds, on a last-in/
first-out basis, to the fish sellers who paid the amounts refunded.
    (h) Program regulations. If any special circumstances in a 
reduction fishery require fee collection deposit and/or record keeping 
regulations in addition to, or different from, those contained in this 
section in order to ensure full, complete, accurate and timely fee 
deposit, disbursement, accounting, record keeping, and reporting, NMFS 
may include such regulations in the program regulations for that 
reduction program.


Sec. 253.38  Prohibitions and penalties.

    (a) The following activities are prohibited, and it is unlawful for 
any party to:
    (1) Vote in any referendum under this subpart if the party is 
ineligible to do so;
    (2) Vote more than once in any referendum under this subpart;
    (3) Sign or otherwise cast a ballot on behalf of a voter in any 
referendum under this subpart unless the voter has fully authorized the 
party to do so and doing so otherwise comports with this subpart;
    (4) Interfere with or attempt to hinder, delay, buy, or otherwise 
unduly influence any eligible voter's vote in any referendum under this 
subpart;
    (5) Submit a fraudulent, unauthorized, incomplete, misleading, 
unenforceable (by specific performance) or inaccurate bid in response 
to an invitation to bid under this subpart or, in any other way, 
interfere with or attempt to interfere with, hinder, or delay, any 
invitation to bid, any bid submitted under any invitation to bid, or 
any other reduction program process in connection with any invitation 
to bid;
    (6) Revoke or attempt to revoke any bid under this subpart;
    (7) Fail to comply with the terms and conditions of any invitation 
to bid, bid, or reduction contract under this subpart;
    (8) Avoid, decrease, interfere with, hinder, or delay payment, 
collection, deposit, or disbursement of any fee due and payable under 
this subpart or convert any paid, collected, or deposited fee or 
otherwise use any fee for any purpose other than the purpose this 
subpart intends;
    (9) Fail to fully and properly deposit on time all fees collected 
under this subpart into a deposit account and to disburse deposit 
principal to the Fund's lockbox account--all as this subpart requires;
    (10) Fail to maintain full, timely, and proper fee payment, 
collection, deposit, and/or disbursement records or to make full, 
timely, and proper reports of such information to NMFS--all as this 
subpart requires;
    (11) Fail to advise NMFS of any fish seller's refusal to pay, or of 
any fish buyer's refusal to collect, any fee due and payable under this 
subpart;
    (12) Refuse to allow agents designated by NMFS to review and audit 
at reasonable times all books and records reasonably pertinent to fee 
payment, collection, deposit, and disbursement under this subpart or 
otherwise to interfere with, hinder, or delay agents in the course of 
their activities under this subpart;
    (13) Make false statements to NMFS, any of the its employees, or 
any of its agents about any of the matters in this subpart; and
    (14) Obstruct, prevent, or unreasonably delay or attempt to 
obstruct, prevent, or unreasonably delay any investigation
    NMFS or its agents conduct, or attempt to conduct, in connection 
with any of the matters in this subpart.
    (b) Any party who violates one or more of the prohibitions of 
paragraph (a) of this section is subject to the full range of penalties 
the Magnuson-Stevens Act and 15 CFR part 904 provide (including, but 
not limited to: civil penalties, sanctions, forfeitures, and punishment 
for criminal offenses) and to the full penalties and punishments 
otherwise provided by any other applicable law of the United States.
Sec. 253.39  Implementation regulations for each reduction program. 
[Reserved]

    Dated: February 4, 1999.
Gary C. Matlock,
Director, Office of Sustainable Fisheries, National Marine Fisheries 
Service.
[FR Doc. 99-3245 Filed 2-10-99; 8:45 am]
BILLING CODE 3510-22-F