[Federal Register Volume 80, Number 181 (Friday, September 18, 2015)]
[Proposed Rules]
[Pages 56432-56436]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-23375]


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DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

50 CFR Part 200

[Docket No. 150227193-5193-01]
RIN 0648-BE92


Establish a Single Small Business Size Standard for Commercial 
Fishing Businesses

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

ACTION: Proposed rule; request for comment.

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SUMMARY: NMFS proposes to establish a small business size standard of 
$11 million in annual gross receipts for all businesses in the 
commercial fishing industry (NAICS 11411), for Regulatory Flexibility 
Act (RFA) compliance purposes only. The proposed $11 million standard 
would be used in RFA analyses in place of the U.S. Small Business 
Administration's (SBA) current standards of $20.5 million, $5.5 
million, and $7.5 million for the finfish (NAICS 114111), shellfish 
(NAICS 114112), and other marine fishing (NAICS 114119) sectors of the 
U.S. commercial fishing industry, respectively. Establishing a single 
size standard of $11 million for the commercial fishing industry would 
simplify the RFA analyses done in support of NMFS' rules, better meet 
the RFA's intent by more accurately representing expected 
disproportionate effects of NMFS' rules between small and large 
businesses, create a standard that more accurately reflects the size 
distribution of all businesses in the commercial fishing industry, and 
allow NMFS to determine when changes to the standard are necessary and 
appropriate.

DATES: Comments must be received by October 19, 2015.

ADDRESSES: You may submit comments on this document, identified by 
NOAA-NMFS-2015-0061, by either of the following methods:
     Electronic Submission: Submit all electronic public 
comments via the Federal e-Rulemaking Portal. Go to 
www.regulations.gov/#!docketDetail;D=NOAA-NMFS-2015-0061, click the 
``Comment Now!'' icon, complete the required fields, and enter or 
attach your comments.
     Mail: Send written comments to Mike Travis, NOAA Fisheries 
Service,

[[Page 56433]]

Southeast Regional Office, 263 13th Ave. S., St. Petersburg, FL 33701.
    Instructions: Comments sent by any other method, to any other 
address or individual, or received after the end of the comment period, 
may not be considered by NMFS. All comments received are a part of the 
public record and will generally be posted for public viewing on 
www.regulations.gov without change. All personal identifying 
information (e.g., name, address, etc.), confidential business 
information, or otherwise sensitive information submitted voluntarily 
by the sender will be publicly accessible. NMFS will accept anonymous 
comments (enter ``N/A'' in the required fields if you wish to remain 
anonymous), and will accept attachments to electronic comments in 
Microsoft Word, Excel, or Adobe PDF file formats only.

FOR FURTHER INFORMATION CONTACT: Mike Travis, Industry Economist, at 
(727) 209-5982.

SUPPLEMENTARY INFORMATION:

Background

    Prior to 2013, SBA had set the small business size standard for all 
sectors of the commercial fishing industry at the same amount. Since 
2005, this standard had been $4 million in annual gross receipts 
(revenues). Effective July 22, 2013, SBA established significantly 
different and higher size standards for the three separate sectors of 
the industry (78 FR 37398, June 20, 2013): $19 million for commercial 
finfish fishing businesses (NAICS 114111), $5.0 million for commercial 
shellfish fishing businesses (NAICS 114112), and $7.0 million for other 
commercial marine fishing businesses (NAICS 114119). These standards 
were subsequently adjusted for inflation to $20.5 million, $5.5 
million, and $7.5 million, respectively, via an interim final rule, 
effective July 14, 2014 (79 FR 33647, June 12, 2014). The Small 
Business Jobs Act of 2010 requires SBA to review all size standards 
every five years to account for changes in industry structure and 
market conditions. SBA is also required to assess the impact of 
inflation on its monetary-based size standards at least once every five 
years (13 CFR 121.102). However, as reflected by the timing of the two 
recent rulemakings adjusting the size standards, SBA is not required to 
conduct the reviews for these two purposes simultaneously. Thus, these 
size standards are likely to change on a regular basis.
    Under the RFA, an agency must prepare an initial and final 
regulatory flexibility analysis (IRFA/FRFA) for each proposed and final 
rule, respectively, unless it certifies that a rule will not have a 
significant economic impact on a substantial number of small entities. 
Agencies generally rely on the SBA size standards to identify small 
entities for RFA purposes. For NMFS, rulemaking activities that have 
been impacted by changes to the size standards for defining ``small'' 
businesses include, but are not limited to, regulatory actions and 
analyses undertaken pursuant to the Magnuson-Stevens Act (MSA), 
Endangered Species Act (ESA), Marine Mammal Protection Act (MMPA), and 
National Environmental Policy Act (NEPA). Between 2012 and 2014, NMFS 
published an average of 285 final rules per year, more than 40 percent 
of which required an RFA analysis, and a majority of those directly 
regulated commercial fishing businesses. Thus, NMFS' costs of complying 
with the RFA are significant even when the small business size 
standards are stable, and those costs increase substantially when the 
standards are changing on a recurring basis.
    NMFS and the Regional Fishery Management Councils (Councils) have 
encountered significant difficulties implementing and adjusting to the 
new standards because: (1) The change was from a single size standard 
for all commercial fishing businesses to three very different 
standards, (2) many commercial fishing businesses participate in both 
finfish and shellfish fishing activities, making it unclear which 
standard to apply in the RFA analyses, and (3) a number of rules 
simultaneously implement regulations under fishery management plans for 
both finfish and shellfish species (for e.g., 76 FR 82044, December 29, 
2011; 76 FR 82414, December 30, 2011; 77 FR 15916, March 26, 2012; and 
80 FR 41472, July 15, 2015), again making it unclear which standard to 
apply in the RFA analyses.
    Furthermore, one of the RFA's primary purposes is to determine if 
proposed regulations are expected to have disproportionate economic 
impacts on small businesses relative to large businesses and, if so, to 
consider alternatives that would minimize any significant adverse 
economic impacts on small businesses. Under SBA's current standards for 
commercial fishing businesses, practically all commercial fishing 
businesses, and particularly commercial finfish fishing businesses, 
would likely be determined to be small. Thus, in their RFA analyses, 
NMFS and the Councils would not be able to discern, consider, or 
address any disproportionate economic impacts that various regulatory 
alternatives might have on businesses NMFS and the Councils think are 
``small'' in the commercial fishing industry. Such an outcome 
effectively precludes NMFS from fulfilling one of the RFA's primary 
purposes and thus is not desirable.
    Section 601(3) of the RFA provides that an agency, after 
consultation with SBA's Office of Advocacy and after an opportunity for 
public comment, may establish one or more definitions of ``small 
business'' which are appropriate to the activities of the agency and 
publish such definition(s) in the Federal Register. Further, 13 CFR 
121.903(c) states that ``where the agency head is developing a size 
standard for the sole purpose of performing a Regulatory Flexibility 
Analysis pursuant to section 601(3) of the Regulatory Flexibility Act, 
the department or agency may, after consultation with the SBA Office of 
Advocacy, establish a size standard different from SBA's which is more 
appropriate for such analysis.'' NMFS and the Department of Commerce 
General Counsel's Office had preliminary discussions with SBA's Office 
of Advocacy about these provisions, and SBA was supportive of NMFS 
using RFA section 601(3) and 13 CFR 121.903(c) to establish its own 
size standard for the commercial fishing industry for purposes of RFA 
analyses only.
    SBA has also previously expressed support for the idea of creating 
a single size standard in instances where industries are closely 
related, as is the case for the commercial finfish and shellfish 
fishing industries. In its proposed rule to change the size standard 
for businesses in manufacturing industries (79 FR 54146, Sept. 10, 
2014), SBA stated: ``To simplify size standards and for other reasons, 
SBA may propose a common size standard for closely related industries. 
Although the size standard analysis may support a separate size 
standard for each industry, SBA believes that establishing different 
size standards for closely related industries may not always be 
appropriate. For example, in cases where many of the same businesses 
operate in the same multiple industries, a common size standard for 
those industries might better reflect the Federal marketplace. This 
might also make size standards among related industries more consistent 
than separate size standards for each of those industries.'' (79 FR 
54146, 54150, Sept. 10, 2014).
    NMFS has determined that the data used by SBA's Office of Size 
Standards to develop the new standards are incomplete and, as a result, 
not

[[Page 56434]]

representative of all commercial fishing businesses. Specifically, the 
data used by SBA only account for commercial fishing businesses that 
have employees (i.e., employer firms), and thus do not include 
commercial fishing businesses that do not have employees (i.e., non-
employer firms). Non-employer commercial fishing businesses typically 
pay their self-employed crew a percentage of the gross or net revenue 
on each commercial fishing trip rather than a standard wage or salary, 
and thus self-employed crew are not considered employees. Commercial 
fishing businesses with employees represent only about 3 percent of all 
commercial fishing businesses, while the other 97 percent are non-
employer firms.
    Further, according to SBA, annual gross revenues for finfish and 
shellfish commercial fishing businesses with employees average $1.6 and 
$0.6 million, respectively. Conversely, NMFS determined the annual 
gross revenues for commercial fishing businesses without employees is 
only about $44,000 on average. Thus, NMFS concluded the exclusion of 
commercial fishing businesses without employees is primarily 
responsible for the magnitude of the size standard increases, 
particularly for finfish fishing businesses, and the standards would 
have been very different if SBA had used data for all commercial 
fishing businesses. Because the size standards apply to all commercial 
fishing businesses, not just those with employees, when used to analyze 
the economic impacts of management actions on directly regulated 
entities under the RFA, NMFS thinks it is more appropriate to have size 
standards for RFA purposes that are based on all commercial fishing 
businesses.
    In conjunction with its recent review of size standards, SBA 
developed a ``Size Standards Methodology'' for establishing, reviewing, 
and modifying size standards, where necessary. SBA included it as a 
supporting document in the electronic docket of the September 11, 2012, 
proposed rule to change the size standards for the three sectors of the 
commercial fishing industry (77 FR 55755) at www.regulations.gov. 
Application of this new methodology resulted in the significantly 
different size standards for the three separate sectors of the 
industry. NMFS referenced this document in developing the proposed size 
standard in this proposed rule. Consistent with that methodology, SBA 
used the following industry factors to establish the current size 
standards for NAICS Sector 11 (Agriculture, Forestry, Fishing, and 
Hunting): Average firm size, as measured by simple average receipts and 
weighted average receipts; average assets size; the four-firm 
concentration ratio (i.e., the percentage of receipts accounted for by 
the four largest firms in the industry); and the Gini coefficient, 
which measures the degree of inequality in the distribution of firms by 
receipts size class under SBA's approach.
    SBA's primary source of industry data used in the rule to establish 
the new size standards for the three sectors of the commercial fishing 
industry was a special tabulation of the 2007 County Business Patterns 
data from the U.S. Bureau of Census (Census Bureau). This special 
tabulation provided SBA with data on the number of employer firms, 
number of establishments, number of employees, annual payroll, and 
annual receipts of companies by U.S. industry (6-digit NAICS code). 
These data were arrayed by various classes of firms' size based on the 
overall number of employees and gross receipts of the entire enterprise 
(all establishments and affiliated firms) from all industries. These 
data allowed SBA to estimate average firm size, the four-firm 
concentration ratio, and the Gini coefficient.
    SBA's Office of Size Standards provided these data upon request to 
NMFS. NMFS subsequently requested and received from the Census Bureau 
comparable data for non-employer businesses. NMFS aggregated data to 
the industry level (i.e., NAICS 11411) for employer and non-employer 
businesses and then combined these data. Although data confidentiality 
was not an issue with the non-employer data, prior to aggregation NMFS 
had to estimate total gross receipts in certain receipts classes for 
employer firms where the Census Bureau determined the data were 
confidential and thus could not be released. The combined data provide 
a complete accounting of the distribution of businesses and receipts by 
receipt size class category for all commercial fishing businesses. NMFS 
used these data to generate estimates of certain industry factors 
needed to establish a single size standard for the commercial fishing 
businesses, consistent with SBA's methodology to the extent 
practicable.
    Specifically, NMFS used the data it received from SBA and the 
Census Bureau to generate estimates of simple average receipts, 
weighted average receipts, and the Gini coefficient. For simple average 
receipts, each firm's share of the industry's total receipts is 
weighted equally, whereas the shares of larger firms receive larger 
weights in estimating weighted average receipts. Weighted average 
receipts and the Gini coefficient were estimated using the equations 
provided in SBA's Size Standards Methodology document. NMFS generated 
the following estimates for the commercial fishing industry: $77,178 
for simple average receipts, $12,322,365 for weighted average receipts, 
and 0.755 for the Gini coefficient. Based on the information in Table 2 
of SBA's proposed rule to change the size standards for the finfish, 
shellfish, and other marine fishing sectors of the commercial fishing 
industry (77 FR 55755), these estimates support size standards of $5 
million, $5 million, and $19 million, respectively.
    SBA also considers the average assets size of firms to be an 
important factor in establishing a size standard. NMFS does not possess 
and was not able to procure assets size data for non-employer 
businesses. SBA has such data for employer firms in the finfish and 
shellfish sectors, though not for employer firms in the other marine 
fishing sector because of the very small number of firms in that 
sector. The number of firms in the other marine fishing sector is very 
small because it includes firms primarily involved in the harvest of 
corals, sponges, reef associated plants (e.g., algae), and aquarium 
trade species, whose allowable harvest levels are very small. However, 
SBA had to purchase the assets size data for employer firms in the 
finfish and shellfish sectors from a private source and thus could not 
share the data with NMFS due to their proprietary nature. Therefore, 
NMFS created an estimate based on data that SBA published in its 
proposed rule, using the following approach.
    According to SBA's proposed rule, the average assets sizes for the 
finfish and shellfish commercial fishing sectors are $1.4 million and 
$0.4 million, respectively. Finfish fishing firms and shellfish fishing 
firms represent approximately 54 percent and 46 percent, respectively, 
of the 2,039 employer firms in those two sectors combined. Based on 
these percentages, the weighted average assets size of the combined 
finfish and shellfish commercial fishing sectors is approximately $0.94 
million. Based on Table 2 in SBA's proposed rule, this estimate 
supports a $7 million size standard.
    SBA does not consider the average receipts of the four largest 
firms to be an important factor in establishing a size standard for 
industries where the four-firm concentration ratio is below 40 percent 
(i.e., receipts of the 4 largest firms account for less than 40 percent 
of the total receipts). According to the data

[[Page 56435]]

SBA provided to NMFS, the four largest firms in the commercial fishing 
industry are commercial finfish fishing businesses. Within the finfish 
sector, these firms only account for 29 percent of total receipts 
within that sector. Therefore, within the larger commercial fishing 
industry as a whole, the percentage of receipts they account for must 
be less than 29 percent. Because the four largest firms account for 
less than 40 percent of the total receipts for the commercial fishing 
industry, consistent with SBA's methodology, NMFS did not use the four-
firm concentration ratio in establishing a single size standard for the 
commercial fishing industry.
    According to SBA's methodology, all factors should be weighted 
equally. Therefore, NMFS averaged the standards supported by the simple 
average receipts ($5 million), weighted average receipts ($5 million), 
Gini coefficient ($19 million), and average assets size ($7 million) 
estimates, which results in a size standard of $9 million. However, SBA 
only allowed for eight size standards in its final rule (79 FR 54146, 
September 10, 2014): $5 million, $7 million, $10 million, $14 million, 
$19 million, $25.5 million, $30 million, and $35.5 million. When the 
estimated size standard is not equivalent to one of these eight 
standards, SBA rounds up to the next highest size standard. For NMFS' 
estimated $9 million size standard, the next highest size standard 
would be $10 million. If the average assets size factor is not 
included, because it is based on aggregated employer data only rather 
than a combination of employer and non-employer data, the average of 
the other 3 factors is $9.67 million. Thus, the next highest size 
standard would still be $10 million.
    NMFS is aware the Census Bureau has recently released the 2012 
County Business Patterns data for employer firms. However, 2012 data 
for non-employer firms has not yet been released. As previously 
discussed, NMFS does not think it is prudent to propose a size standard 
based only on employer data because 97 percent of the commercial 
fishing businesses are non-employers. Further, even if the 2012 non-
employer data is released and NMFS generates new estimates of the 
various industry factors, NMFS would still not be able to determine 
what standards are implied by the new estimates until SBA generates an 
updated version of Table 2 in its proposed rule to change the size 
standards for the finfish, shellfish, and other marine fishing sectors 
of the commercial fishing industry (77 FR 55755) using 2012 rather than 
2007 data.
    As previously stated, SBA recently implemented a rule to adjust all 
of its receipts based size standards for inflation using the chain-type 
price index for the U.S. Gross Domestic Product (GDP price index) (79 
FR 33647, June 12, 2014). According to that rule, for all industries 
with a non-inflation-adjusted size standard of $10 million, the new 
inflation-adjusted size standard is $11 million.
    Thus, this rule proposes to establish a small business size 
standard of $11 million for all businesses in the commercial fishing 
industry (NAICS 11411) for RFA compliance purposes only. This single 
size standard for commercial fishing businesses would be used in all 
RFA analyses conducted in support of NMFS' regulatory actions. 
Establishing this single size standard would simplify the RFA analyses 
done in support of NMFS' rules, better meet the RFA's intent by more 
accurately representing expected disproportionate effects of NMFS' 
rules between small and large commercial fishing businesses, create a 
standard that more accurately reflects the size distribution of all 
businesses in the commercial fishing industry, and allow NMFS to 
determine when changes to the standard are necessary and appropriate.
    Consistent with SBA's review requirements under the Small Business 
Jobs Act of 2010 and 13 CFR 121.102, NMFS also proposes to review this 
standard at least once every 5 years to determine if a change is 
warranted. A change may be warranted because of changes in industry 
structure, market conditions, inflation, or other relevant factors. The 
reviews for these potential reasons will be conducted simultaneously in 
order to minimize the frequency of changes to the standard and 
additional rulemakings.
    Consistent with the requirements in 13 CFR 121.903(c), NMFS will 
formally consult SBA's Office of Advocacy to ensure their concurrence 
with this proposed action.

Classification

    Pursuant to section 601(3) of the RFA, the NMFS Assistant 
Administrator has determined that this proposed rule is consistent with 
the RFA and other applicable law, subject to further consideration 
after public comment.
    This proposed rule has been determined by the Office of Management 
and Budget to be significant for purposes of Executive Order 12866 
because it raises novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    The Chief Counsel for Regulation of the Department of Commerce 
certified to the Chief Counsel for Advocacy of the SBA that this rule, 
if adopted, would not have a significant economic impact on a 
substantial number of small entities. The factual basis for this 
determination is as follows.
    The purposes of the rule are to establish a single small business 
size standard of $11 million in annual gross receipts for the 
commercial fishing industry (NAICS 11411), for RFA compliance purposes 
only, and a requirement for NMFS to assess at least once every 5 years 
whether this size standard should be changed. The objectives of the 
rule are to simplify the RFA analyses done in support of NMFS' rules, 
better meet the RFA's intent by more accurately representing expected 
disproportionate effects of NMFS' rules between small and large 
businesses, create a standard that more accurately reflects the size 
distribution of all businesses in the commercial fishing industry, and 
allow NMFS to determine when changes to the standard are necessary and 
appropriate. The RFA and 13 CFR 121.903(c) serve as the legal basis for 
the rule.
    The actions in this rule are administrative in nature and thus 
would only potentially generate indirect economic effects on commercial 
fishing businesses. Specifically, the proposed size standard would only 
affect how NMFS and the Councils determine whether commercial fishing 
businesses directly regulated by future regulatory actions are small or 
large, whether and to what extent those actions have disproportionate 
economic impacts on those two classes of businesses, and when it is 
appropriate for NMFS to change the standard in the future. This rule 
would not impose any new requirements on commercial fishing businesses. 
Therefore, no small entities would be directly regulated by this rule. 
This rule would not be expected to affect the behavior or operations of 
commercial fishing businesses. As such, this rule is not expected to 
generate any direct economic effects on commercial fishing businesses.
    Based on the information above, a reduction in profits for a 
substantial number of small entities is not expected. Because this 
rule, if implemented, is not expected to have a significant economic 
impact on a substantial number of small entities, an IRFA is not 
required and none has been prepared.
    No duplicative, overlapping, or conflicting Federal rules have been 
identified. This rule would not establish

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any new reporting or record-keeping requirements.

List of Subjects in 50 CFR Part 200

    Commercial fishing, Small businesses.

    Dated: September 14, 2015.
Samuel D. Rauch III,
Deputy Assistant Administrator for Regulatory Programs, National Marine 
Fisheries Service.

    For the reasons set out in the preamble, NMFS proposes to add 50 
CFR part 200 under subchapter A to read as follows:

SUBCHAPTER A--GENERAL PROVISIONS

PART 200--SMALL BUSINESS SIZE STANDARDS ESTABLISHED BY NMFS FOR 
REGULATORY FLEXIBILITY ACT COMPLIANCE PURPOSES ONLY

Sec.
200.1 Purpose and scope.
200.2 Small business size standards and frequency of review.

    Authority:  5 U.S.C. 601 et seq.


Sec.  200.1  Purpose and scope.

    (a) This part sets forth the National Marine Fisheries Service 
(NMFS) small business size standards for NMFS to use in conducting 
Regulatory Flexibility Act (RFA) analyses for NMFS actions subject to 
the RFA. This part also sets forth the timeframe for NMFS to review its 
small business size standards.
    (b) NMFS has established the alternative size standards in this 
part, for RFA compliance purposes only, in order to simplify the RFA 
analyses done in support of NMFS' rules, better meet the RFA's intent 
by more accurately representing expected disproportionate effects of 
NMFS' rules between small and large businesses, create a standard that 
more accurately reflects the size distribution of all businesses in the 
industry, and allow NMFS to determine when changes to the standard are 
necessary and appropriate.


Sec.  200.2  Small business size standards and frequency of review.

    (a) NMFS' small business size standard for businesses, including 
their affiliates, whose primary industry is commercial fishing is $11 
million in annual gross receipts. This standard applies to all 
businesses classified under North American Industry Classification 
System (NAICS) code 11411 for commercial fishing, including all 
businesses classified as commercial finfish fishing (NAICS 114111), 
commercial shellfish fishing (NAICS 114112), and other commercial 
marine fishing (NAICS 114119) businesses.
    (b) NMFS will review each of the small business size standards in 
paragraph (a) of this section at least once every 5 years to determine 
if a change is warranted. A change may be warranted because of changes 
in industry structure, market conditions, inflation, or other relevant 
factors.

[FR Doc. 2015-23375 Filed 9-17-15; 8:45 am]
BILLING CODE 3510-22-P