Fisheries of the Exclusive Economic Zone off Alaska; Inshore Fee System for Repayment of the Loan to Harvesters of Pollock from the Directed Fishing Allowance Allocated to the Inshore Component Under Section 206(b)(1) of the American Fisheries Act (AFA)

AGENCY:

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

ACTION:

Final rule.

SUMMARY:

NMFS issues final regulations implementing an inshore fee system for all pollock harvested under the inshore component (IC) of the Bering Sea/Aleutian Islands directed fishing allowance under section 206(b)(1) of the AFA. The AFA authorized a $75 million loan to reduce fishing capacity for offshore component (OC) pollock and an inshore fee system as the means of repaying the loan. The proceeds of the loan partly paid the cost of removing nine OC catcher-processors from all commercial fishing in the U.S. exclusive economic zone (EEZ). The intent of this rule is to implement the inshore fee system.

DATES:

This final rule is effective February 10, 2000.

ADDRESSES:

Copies of the Environmental Assessment, Regulatory Impact Review, and Final Regulatory Flexibility Analysis (EA/RIR/FRFA) may be obtained from Michael L. Grable, Chief, Financial Services Division, NMFS, 1315 East-West Highway, Silver Spring, MD 20910. Comments involving the reporting burden estimates or any other aspects of the collection of information requirements contained in this final rule should be sent to both Michael L. Grable, at the above address, and to the Office of Information and Regulatory Affairs, Office of Management and Budget (OMB), Washington, D.C. 20503 (ATTN: NOAA Desk Officer). Comments sent by e-mail or the Internet will not be accepted.

FOR FURTHER INFORMATION CONTACT:

Michael L. Grable,

(301) 713-2390.

SUPPLEMENTARY INFORMATION:

Background

The President signed the AFA into law on October 20, 1998, as part of the Omnibus Appropriations Bill for fiscal year 1999 (Pub. L. 105-277). The AFA required the Federal Government to pay, not later than December 31, 1998, $90 million to the owners of nine large catcher processors harvesting OC pollock. In return, eight of these vessels had to stop all commercial fishing in the EEZ immediately and be scrapped by December 31, 2000. Although the ninth vessel did not have to be scrapped, it also had to stop all commercial fishing in the EEZ immediately and the owner had to certify that neither the owner nor anyone who purchased the vessel from the owner intended to use the vessel outside the EEZ to harvest any fish that also occur within the EEZ.

On December 30, 1998, NMFS paid the required amount to the owners of these vessels. In accordance with the AFA, NMFS paid $15 million of this amount from an AFA appropriation and the remaining $75 million from the proceeds of a fishing capacity reduction loan under sections 1111 and 1112 of Title XI of the Merchant Marine Act, 1936 (46 U.S.C. App. 1279f and g) (Title XI). The AFA requires the loan to be repaid by fees under section 312(d)(2)(C) of the Magnuson-Stevens Fishery Conservation and Management Act (16 U.S.C. 1861a(d)(2)(C)) (Magnuson-Stevens Act).

Upon payment of the $90 million, NMFS revoked all nine vessels' domestic fishing permits, one owner provided the certificate required for the ninth vessel, and the other owners began preparing for scrapping the remaining eight vessels. All eight vessels are presently undergoing scrapping. Scrapping is scheduled to be completed before December 31, 2000.

Under the AFA and section 312(d)(2)(C) of the Magnuson-Stevens Act, all vessel owners harvesting IC pollock (fish sellers) are required to pay the fee and all parties making the first ex-vessel purchase of IC pollock (fish buyers) are required to collect the fee and account for and forward the fee revenue to NMFS for the purpose of repaying the loan. The fish sellers pay, and the fish buyers collect, the fee when the fish buyers deduct the fee from the ex-vessel value of all IC pollock before paying the net ex-vessel value of the fish to the fish sellers.

The fee is six-tenths (0.6) of one cent for each pound, round-weight, of all IC pollock that fish sellers land. The AFA provides that fee payment and collection shall begin on or after January 1, 2000. Under this final rule, the fee must be paid and collected for all landed fish that were harvested after February 10, 2000.

Although the loan's scheduled maturity is 30 years, the AFA also provides that fee payment and collection “shall * * * continue without interruption until such loan is fully repaid * * *” (section 207(b)(2)). Whether the loan is repaid before, at, or after its scheduled maturity depends on when fee payment begins, the rate at which loan principal bears interest, annually determined total allowable pollock catches after December 31, 1999, and IC pollock allocations after December 31, 2004.

NMFS has determined the loan's principal will bear interest under the statutory formula at the rate of 7.09 percent per annum. Under the AFA, the loan's interest rate is 2 percent plus the percentage rate of interest that the U.S. Treasury charges NMFS for the $75 million that NMFS borrowed from the U.S. Treasury. The latter percentage rate is 5.09 percent.

The other variables controlling the time required to fully repay the loan are not presently determinable. Several assumptions are, consequently, necessary to project how long repayment will take. The first assumption involves the time at which fee payment begins. For projection purposes, NMFS assumes that the fee will be paid on all IC pollock harvested in calendar year 2000 and in each year thereafter until the loan is fully repaid. The second assumption involves the annual total allowable catch (TAC) of pollock after December 31, 1999, which may vary from year to year. For projection purposes, NMFS assumes that the average annual TAC of pollock after December 31, 1999, will be the same as the average annual TAC of pollock over the 14-year period from the beginning of 1985 through end of 1998. This was 2.769 billion pounds, which equals 1.256 million metric tons. The third assumption involves IC pollock allocations after December 31, 2004. This depends on whether the North Pacific Fishery Management Council maintains IC pollock allocations after December 31, 2004, at the same level as IC pollock allocations under the AFA from January 1, 1999, to December 31, 2004. The AFA level is 42 percent of TAC. For the purposes of this projection, NMFS assumes that IC pollock allocations after December 31, 2004, will be at the same level as IC pollock allocations from January 1, 1999, to December 31, 2004.

Under these 3 assumptions, the loan will be repaid in 21 years. This is 9 years less than the loan's scheduled maturity. Actual conditions different than those NMFS assumes for the purpose of this projection may, however, cause loan repayment to occur sooner or later than here projected. Future TAC may be the biggest determinate of the time actually required to repay this loan.

Under this rule fee payment and collection begin on February 10, 2000 and continue without interruption until the loan is fully repaid, without regard to whether this is a period longer or shorter than the loan's scheduled maturity of 30 years.

On December 30, 1998, NMFS disbursed all $75 million of the loan's original principal amount. Interest at the rate of 7.09 percent per annum has been accruing since that date. NMFS will apply all fee receipts, first, to the payment of accrued interest and, second, to the reduction of loan principal.

Section 312(b)-(e) of the Magnuson-Stevens Act provides for fishing capacity reduction programs, which may be funded by loans under sections 1111 and 1112 of Title XI. Although the IC pollock loan is authorized by the AFA rather than by section 312(b)-(e) of the Magnuson-Stevens Act, the AFA specifies that the IC pollock loan is repayable under section 312(d)(2)(C) of the Magnuson-Stevens Act. NMFS has already proposed a framework rule for implementing section 312(b)-(e) of the Magnuson-Stevens Act (64 FR 6854, February 11, 1999). The proposed framework rule would establish detailed provisions for paying, collecting, disbursing, accounting for, and reporting about fees repaying fishing capacity reduction loans.

NMFS had hoped to implement the fishing capacity reduction framework rule before NMFS had to provide for payment and collection of the IC pollock fee. NMFS intended to provide for payment and collection of the IC pollock fee by making the loan subject to the framework rule provisions about fee payment and collection. Because NMFS has not yet adopted and promulgated the framework rule, however, NMFS must now separately provide for payment and collection of the IC pollock fee by adding a temporary subpart G to 50 CFR part 679 (subpart G). NMFS has drawn most of the procedural provisions of subpart G from the proposed framework rule. After a framework rule is adopted and promulgated, NMFS will revoke subpart G and concurrently provide, by a program implementation rule under the framework rule, for the continuing payment and collection of the IC pollock fee.

This action adds subpart G to 50 CFR part 679 establishing regulations to implement an inshore fee system for IC pollock. The proposed regulations which preceded this action were published on December 21, 1999 (64 FR 71396-71400), with a public comment period that ended on January 5, 2000.

NMFS received comments from 2 entities. The following summarizes the comments and gives NMFS' responses.

Comments and Responses

Comment 1: One comment questioned the necessity of setting up a separate account for the collected funds and suggested that fee payments be made from a regular corporate account.

Response: This is the first loan that will be repaid from fees generated by a fishery resource. We believe that it is important to the fish sellers who will repay this loan that we maintain the credibility of the collection process. Separate accounts are preferable because the fee receipts can be easily segregated from the fish buyer's normal cash flows. We also want to reduce the administrative costs of the loan collection process and separate accounts will make the audit process simpler and less expensive.

Comment 2: One comment asked if it would be possible for NMFS to be authorized to make regular wire transfer withdrawals from the separate account instead of the company sending in a check each month.

Response: We do not believe it is possible to set up a system whereby NMFS could make regular wire transfer withdrawals for several reasons. The amounts deposited in the accounts will differ from month to month. If the account was simply swept to zero, there would be no way to differentiate between funds deposited and interest earned. The contractual mechanism we set up with the bank would have to be turned on or off as the seasons begin and end. We would also encounter administrative difficulties in making separate contractual agreements with the different banks used by the companies. Finally, the rule requires the fish buyer to provide a settlement sheet tied to the amount of money transferred. This would not be possible if the account was periodically swept.

Comment 3: One comment questioned whether deposits into the separate account have to be made on a weekly basis or could be made biweekly or monthly.

Response: As we discussed in our first response, it was incumbent upon us to set up a credible system to assure the fish sellers that their payments were applied against the loan accurately and on a timely basis. One way of achieving this credibility was to set up a system that segregates the collected funds from the fish buyer's normal cash flow. Ideally, such a system should require daily deposits. We attempted to be sympathetic to operational problems daily deposits would create for the fish buyers by allowing weekly deposits.

Comment 4: One comment suggested a 5-day grace period before late payment penalties would be imposed.

Response: NMFS has amended § 679.64 of the final rule to allow a 5-day grace period before late charges will accrue.

Comment 5: One comment suggested a 2-week grace period for submission of the annual report.

Response: NMFS has amended section 679.63 of the final rule by making the due date January 15, thereby providing a 2-week grace period after year end.

Comment 6: One comment questioned the meaning of the term “business week” for fee collection purposes, since the fishing industry does not operate on a normal Monday to Friday “business week”.

Response: NMFS has added a definition of “business week” in § 679.60 which designates Friday as the end of a business week.

Comment 7: One comment involved the effective date of the fee collection and suggested that fees should be paid for all inshore pollock harvested in 2000, regardless of when the fee system becomes effective.

Response: NMFS is not authorized to collect any fees until this rule is finalized. Although we made our best effort to have the system in place before the FY 2000 season starts, we were unable to do so.

Comment 8: One comment sought the clarification of the rule to indicate that the fee and any future appropriations would be the exclusive source of loan repayment.

Response: The proposed rule states that the fee shall be the exclusive source of loan prepayment. Future appropriations could over ride this.

Comment 9: One comment suggested that any late charge or penalty should be the responsibility of the fish buyer.

Response: NMFS agrees that the fish seller should not be obligated for any late charges and has added language in section 679.64 to clarify this point.

Comment 10: One comment objected to the possibility that fish buyers may earn interest on fees paid by fish sellers.

Response: State law may or may not permit such accounts to earn interest. If the accounts can earn interest, the time limitations on transferring the funds to the Government's lock box will allow for minimal interest accrual. Nevertheless, the fish buyers collecting will incur administrative expenses in the process. Any interest earned by fish buyers would help defray the administrative costs incurred.

Summary of Revisions

The following sections of this final rule revise the proposed rule:

(1) Section 679.60. This section has been amended to include a definition of “business week” which designates Friday as the end of a business week.

(2) Section 679.61. This section is revised to state the loan's actual interest rate.

(3) Section 600.63. This section is revised to change the due date for the annual report from December 31 to January 15, thereby effectively providing a 2-week grace period for submission of the annual report.

(4) Section 679.64. This section is revised to provide for a 5-day grace period before late charges will accrue and to clarify that fish sellers should not be obligated for any late charges.

The final rule further revises the proposed rule to increase brevity, clarity, accuracy, and/or sufficiency.

Classification

The Assistant Administrator for Fisheries (AA), NMFS, determined that this final rule is consistent with the AFA, the Magnuson-Stevens Act, Title XI, and other applicable laws.

This final rule has been determined to be not significant for purposes of Executive Order 12866.

NMFS prepared a Final Regulatory Flexibility Analysis (FRFA) describing the impact of the action on small entities. In summary, the FRFA states that the rule would apply to about 100 fish sellers and about eight fish buyers. All of the fish sellers are small entities; none of the fish buyers are. The FRFA indicates that the average annual fee expense for each fish seller would likely be about $60,000. Recordkeeping and reporting requirements would fall primarily on the fish buyers, who collect the fee. The estimated annual compliance cost to fish buyers is about $5,568 per fish buyer. Several minimal recordkeeping and reporting requirements also apply to fish sellers. A fish seller must, for example, report to NMFS if a fish buyer refuses to collect the fee. The estimated compliance cost of this requirement is about $25 per report. In specific and limited circumstances when a fish seller becomes a de facto fish buyer for recordkeeping and reporting requirements, the estimated compliance cost is the same as a fish buyer's compliance cost. The Paperwork Reduction Act (PRA) discussion further details these costs. This final rule does not duplicate or conflict with any other Federal rules of which NMFS is aware.

In the FRFA, NMFS considered two alternatives that might have lessened the economic impact on small entities. These alternatives were not collecting the fee and delaying fee collection. Not collecting the fee would both cost the Nation $75 million and violate the AFA. Delaying fee collection would increase the ultimate cost to fish sellers because interest would continue to accrue on an unreduced $75 million principal balance. It would also prolong the time required for fish sellers to repay the loan because the AFA requires that the fee system remain in effect until the loan is fully repaid. The FRFA further discusses these alternatives and their economic impact on IC pollock fish sellers and fish buyers. Although no comments on the IRFA were received, public comments led to changes from the proposed rule that we believe will benefit affected entities, e.g., grace periods for submission of late charges and the annual report.

The AA determined that there is good cause to waive the 30-day delay in effectiveness for this rule under 5 U.S.C. 553 (d)(3). While the AFA stipulates that an inshore pollock fee collection system be established by January 1, 2000, or thereafter, it is important to begin collecting the fee as early in the fishing season (which begins January 20, 2000) as possible, to avoid confusion, to treat all landings similarly, and to minimize the accumulation of interest on the $75 million loan. Therefore, the rule must be in effect as soon as practicable. NMFS believes that persons needing to comply with this rule should be afforded 7 calendar days to open accounts and otherwise prepare for the fee collection. The affected inshore fleet has been aware of the imposition of this fee in exchange for the buyout of certain factory trawlers for an allocation of catch since October 1998 when the AFA was enacted. Delaying this rule beyond 7 days after publication would be contrary to the public interest and unnecessary.

Notwithstanding any other provision of law, no person is required to respond to nor shall a person be subject to a penalty for failure to comply with a collection of information subject to the PRA requirements unless that collection of information displays a currently valid OMB Control Number.

This final rule contains collection of information requirements subject to the PRA that have been approved by OMB under OMB Control Number 0648-0376. This PRA approval occurred in connection with proposal of the framework rule for implementing section 312(b)-(e) of the Magnuson-Stevens Act, including a collection of information burden for fee payment, collection, disbursement, accounting, and reporting under section 312(d)(2)(C) of the Magnuson-Stevens Act. The AFA provides that payment and collection of the IC pollock fee shall be in accordance with 312(d)(2)(C) of the Magnuson-Stevens Act.

The estimated response times for this collection of information are: 10 minutes per fishing trip to maintain records on transactions, 2 hours per fish buyer's monthly report, 4 hours per fish buyer's annual report, and 2 hours per fish buyer's or fish seller's report about fish sellers who refuse to pay, or fish buyers who refuse to collect, the fee.

These estimated response times include the time needed for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and revising the collection of information.

Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to NMFS (see ADDRESSES) and to OMB (see ADDRESSES).

List of Subjects in 50 CFR Part 679

• Alaska
• Fisheries
• Reporting and recordkeeping requirements

For the reasons set out in the preamble, 50 CFR part 679 is amended as follows:

1. The authority citation for 50 CFR part 679 continues to read as follows:

Authority: 16 U.S.C. 773 et seq., 1801 et seq., and 3631 et seq.

2. In § 679.1, a paragraph (k) is added to read as follows:

3. A subpart G is added to read as follows:

PART 679--FISHERIES OF THE EXCLUSIVE ECONOMIC ZONE OFF ALASKA

Subpart G—Inshore Fee System for Repayment of the Loan to Harvesters of Pollock from the Directed Fishing Allowance Allocated to the Inshore Component Under Section 206(b)(1) of the AFA.

Authority: Pub. L. 105-277, 16 U.S.C. 1801, et seq.