[Federal Register Volume 75, Number 241 (Thursday, December 16, 2010)]
[Rules and Regulations]
[Pages 78619-78631]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-31641]
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DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration
50 CFR Part 253
[Docket No. 0908061221-0533-02]
RIN 0648-AY16
Shipping Act, Merchant Marine, and Magnuson-Stevens Fishery
Conservation and Management Act (Magnuson-Stevens Act) Provisions;
Fishing Vessel, Fishing Facility and Individual Fishing Quota Lending
Program
AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Final rule.
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SUMMARY: NMFS issues these regulations pursuant to its authority under
Chapter 537 of the Shipping Act, (formerly known as Title XI of the
Merchant Marine Act of 1936, as amended and codified), as well as the
Magnuson-Stevens Act. These regulations revise the operating rules of
the Fisheries Finance Program (FFP or Program) and set forth
procedures, eligibility criteria, loan terms, and other requirements
related to FFP lending to the commercial fishing and aquaculture
industries. FFP assistance includes
[[Page 78620]]
loans for fishing vessels, fish processing facilities, aquaculture
facilities, individual fishing quota (IFQ) permits, and participants in
community development quota (CDQ) programs.
DATES: This final rule is effective January 18, 2011.
ADDRESSES: Copies of supporting documents that were prepared for this
final rule, as well as the proposed rule, are available via the Federal
e-Rulemaking portal, at http://www.regulations.gov. Those documents are
also available from the NMFS, MB5, 1315 East-West Highway, Silver
Spring, Maryland 20910.
FOR FURTHER INFORMATION CONTACT: Earl Bennett, NMFS, Fisheries Finance
Program, 301-713-2390.
SUPPLEMENTARY INFORMATION:
Electronic Access
This final rule is also accessible at http://www.gpoaccess.gov/fr.
Background
On May 5, 2010, NMFS published a proposed rule to revise the FFP's
lending regulations, as found in subpart B of 50 CFR Part 253, and
requested public comment (75 FR 24549). This final rule strikes and
replaces the current Subpart B with new regulations reflecting the 2006
revision of Chapter 537 of the Shipping Act (referenced as ``Title
XI''), the amended Magnuson-Stevens Act, Section 211(e) of the American
Fisheries Act (AFA), Public Law 105-277, Div. C, Title II, Subtitle II,
and the Coast Guard and Maritime Transportation Act of 2006, Public Law
109-241. In addition to revising definitions and updating general
lending requirements, this final rule provides detail and clarity to
the term ``Actual Cost;'' establishes procedures for refusing to
approve, close or disburse a loan to borrowers with unresolved
fisheries enforcement violations; and sets forth specialized terms and
requirements for halibut and sablefish quota share (HSQS) loans, Bering
Sea and Aleutian Island (BSAI) crab IFQ loans, and loans to North
Pacific CDQ program participants.
Comment and Responses
Between May 5, 2010, and June 4, 2010, NMFS solicited comments on
the proposed rule. On August 25, 2010, NMFS reopened the comment period
for an additional two weeks when it discovered that a misprint in the
preamble to the proposed rule could have hindered submission of
comments on http://www.regulations.gov (75 FR [page 52300]).
Public comments on the proposed rule are summarized below, with
responses from NMFS. NMFS received comments from four separate
commenters. Overall, the comments about the Program and the proposed
rule were favorable. Only one commenter had negative comments. The
negative comments did not pertain to the specifics of the proposed
rule, but addressed general NMFS policy.
Comment 1: The FFP has proved enormously beneficial to its
participants. The proposed rule conforms to the intent of Congress, the
North Pacific Fishery Management Council, and the Secretary of
Commerce. The Crab IFQ loan program is the only step of crab
rationalization that has yet to be implemented, so the proposed rule
should be made final promptly.
Response: NMFS notes the comment.
Comment 2: The FFP is based on 1936 law and is outdated. The FFP
should be a private sector lending operation, and there is no reason
for American taxpayers to lend money to build boats or help commercial
fishermen become profitable. There is much graft and corruption in the
FFP; it should be defunded, and NMFS should be shut down.
Response: NMFS notes that the most recent version of the FFP's
primary statutory authorization was enacted in 2006, so the FFP is in
fact not outdated. Additionally, NMFS disagrees with the sentiments the
commenter expressed about the fishing industry and the purpose of the
FFP. Commercial fishing is an important industry and many Americans
make their livelihood fishing. Maintaining a vibrant fishing sector is
important to the National economy, as well as to coastal communities.
NMFS notes that the FFP does not lend money to finance the construction
of new vessels or improvements that increase harvest capacity.
Moreover, NMFS disagrees with the commenter's characterization of the
FFP. The FFP is audited annually by KPMG, an independent auditing
company, and from time to time has been reviewed by NOAA auditors and
the Department of Commerce's Office of the Inspector General. No
allegations of graft or corruption have resulted from any of these
reviews.
Comment 3: When NMFS funds a boat, it is likely to grant that boat
too much quota to catch.
Response: FFP lending decisions and fishery management decisions
are unrelated. Whether a vessel has an FFP loan has no bearing on
whether it receives any authorization to harvest, process, or sell fish
or fishery resources. Moreover, the FFP will not lend money for a
fishing vessel unless the owner can demonstrate that it and the vessel
possess all necessary harvest authorizations and permits and fully
complies with all applicable law.
Comment 4: Americans do not want to fund aquaculture. Aquaculture
pollutes horribly and spending on it is stupid and graft personified.
Response: NMFS disagrees. NMFS believes that sustainable
aquaculture will create employment and business opportunities in
coastal communities; provide safe, sustainable seafood; and complement
NOAA's comprehensive strategy for maintaining healthy and productive
marine populations, species, and ecosystems. All Program lending for
aquaculture facilities require that such facilities are in compliance
with all Federal, state and local environmental statutes and
regulations. Additionally, they must possess all required licenses and
permits.
Comment 5: A requirement for a preferred ship mortgage when
financing a fishing vessel is not set forth in the proposed rule.
Response: NMFS notes the comment. Taken together, 46 U.S.C.
53709(b)(1) and (b)(4) limit FFP loans to 80 percent of the actual cost
or depreciated actual cost of collateral pledged as security. NMFS
acknowledges that the statutory provisions require the FFP to take a
security interest in project property; otherwise the statutory terms
would be rendered meaningless. Although the FFP's past practice has
always been to take a security interest in project property, NMFS has
clarified that it will take security interest in project property in
this final rule in response to this comment. Such security interest may
consist of, for example, a preferred ship mortgage for vessel
financings, a real property deed of trust, mortgage, assignment of
lease or other adequate collateral interest for aquaculture and
shoreside facilities, etc. The final rule retains the Program's
discretion to require additional collateral, as the FFP deems
necessary, to protect the Program's credit interest.
Comment 6: Subject to a few exceptions, the proposed rule expresses
a clear policy against financing the construction of new vessels or
vessel improvements that increase harvest capacity. This policy, which
has the effect of precluding the use of FFP loans to construct new
vessels, should not apply in rationalized quota fisheries where total
allowable catch is allocated to quota holders. In such fisheries,
increasing a vessel's harvest capacity is irrelevant because each quota
holder is limited to harvesting only a specific
[[Page 78621]]
amount of fish. In addition, replacing existing vessels would reduce
fuel consumption and vessel traffic as older platforms are replaced
with larger, more efficient ones. Section 253.26(d)(1) should be
amended to allow the FFP to lend for, ``Activities that assist in the
transition to reduced fishing capacity or where such activities will
not adversely increase fishing effort in targeted fisheries.''
Response: Although NMFS acknowledges that regulatory fishing effort
controls (especially in fisheries that may allocate specific amounts of
catch with catch shares) can effectively manage harvest capacity, NMFS
declines to change its capacity neutral lending policy, as requested by
the commenter. However, NMFS notes that vessel improvements that assist
in the transition to reduced fishing capacity, as well as those adding
technologies or upgrades that improve data collection, reduce bycatch,
improve harvest selectivity, reduce adverse environmental impacts of
fishing gear, or improve safety, will continue to be eligible for
financing even if such projects make ancillary increases to a vessel's
harvest capacity.
Even in so called ``rationalized fisheries,'' adding new vessels
and introducing vessels with augmented harvest capacity can push effort
into other fisheries. Although overall harvest levels may remain
unchanged, as a new vessel replaces an existing vessel, the owner or
operator may have an incentive to sell the old vessel or employ it in a
different fishery. Similarly, efficiencies brought on by increasing a
vessel's harvest capacity may displace one or more additional vessels,
and the displaced vessel(s) may exacerbate problems in other locations
by moving into them. In addition to fishing effort displacement, the
FFP lacks the staff resources to undertake detailed reporting and
heightened due diligence required to support loan commitments for new
vessel construction. Currently, the FFP's credit risk model doesn't
account for the added risks associated with taking security interests
in construction materials or addressing shipyard liens. Accordingly,
NMFS will retain its policy against financing the construction of new
vessels or vessel improvements primarily designed to increase harvest
capacity.
Comment 7: Only the six CDQ group entities specified in section
305(i)(1)(D) of the Magnuson-Stevens Act should be eligible to
participate in the CDQ loan program. Listing all of the villages and
not the representative groups is misleading, since the villages can
only participate through their groups. The CDQ program is a closed
class and no new villages or entities can be added without a statutory
amendment.
Response: While it is true that section 305(i) of the Magnuson-
Stevens Act, as amended, focuses on the six CDQ groups, the CDQ lending
program in this final rule is authorized by section 211(e) of the AFA.
Section 211(e) of the AFA extends loan eligibility to the ``communities
eligible to participate'' consistent with the section 305(i) provisions
in effect in 1998, the time of the AFA's passage. However, NMFS
recognizes that meaningful participation in the loan program would be
enhanced by the involvement of the six CDQ groups. Accordingly, NMFS
listed CDQ groups in the proposed rule and lists them again in this
final rule. Although NMFS acknowledges that only the six groups and
various villages listed in the final rule are eligible, NMFS will
retain the section 253.29(c)(7) provision to allow statutory expansion
of the CDQ program without the need to wait for a corresponding change
in the regulations.
Comment 8: The 2006 Science-State-Commerce Appropriations Act,
Public Law 109-108, as amended by section 416(c)(2) of the Coast Guard
and Maritime Transportation Act of 2006, Public Law 109-241, and
section 211(e) of the AFA, mandate that eligible CDQ borrowers be
allowed to use loan funds for the purchase of all or part of ownership
interests in fishing or processing vessels.
Response: NMFS agrees that borrowers in the CDQ loan program may
use FFP financing to purchase full or partial interests in BSAI fishing
vessels, shoreside facilities, and fishing licenses; and NMFS is
willing to lend for these purposes, so long as the borrower is able to
provide a valid security interest in collateral financed by the loan.
However, NMFS has determined that the statutory provisions that the
commenter cites do not create any ``mandate'' to lend that would
supersede the requirements of other statutes. Notably, section 211(e)
of the AFA expands the legal authority found in the FFP's primary
statutory authority (the provisions referenced as ``Title XI'') to
allow the FFP to make loans to CDQ eligible entities, for the purposes
specified in the statute. Also, the 2006 appropriation act, as amended,
provides the actual funds to cover the budgetary cost under the Federal
Credit Reform Act of 1990, 2 U.S.C. 661 et seq., so that the FFP can
``afford'' to make the loans. The authority to make CDQ loans still
stems from Title XI, which requires that the FFP obtain adequate
security interests in its collateral, and the FFP knows of no other
provisions that supersede this requirement. Thus, while NMFS agrees
that certain loan funds may be used to purchase all or part of an
interest in a fishing or processing vessel, other requirements still
attach to those loans, even if there is a ``mandate'' for such loans.
NMFS cannot make any loans, even to CDQ borrowers for eligible
purposes, without adequate security interest(s) in the collateral.
Comment 9: In order to allow CDQ program entities to purchase a
partial interest in a vessel without a first lien position security
interest, NMFS should change section 253.29(d)(2) of the rule by adding
the following sentence: ``Notwithstanding any other provision in this
section, the Program shall not require a first lien position on the
whole of the primary collateral when only a partial interest of such
primary collateral is purchased with such loan funds.'' NMFS'
requirement for a lien upon the whole of a vessel has precluded one or
more CDQ entities from using FFP loan funds to make a purchase of a
partial ownership interest because the other owner did not want its
interest encumbered by a NMFS preferred ship mortgage.
Response: NMFS is unable to make the requested change because it
contravenes existing law. Under the Ship Mortgage Act, 46 U.S.C.
sections 31301-30, a mortgage lien must apply to the whole vessel
pledged as collateral in order to attain the status of a ``first
preferred ship mortgage,'' regardless of whether the financing is used
to purchase or acquire a whole vessel or only a partial ownership
interest in the vessel. Pursuant to the requirements of 46 U.S.C.
53711, NMFS determines that a recorded preferred ship mortgage is the
only instrument that will create, attach and perfect the requisite
security interest in a federally documented vessel or its
appurtenances, which in turn is necessary to protect the interest of
the United States Government. NMFS has more flexibility to adjust the
priority of its mortgage liens to allow for unique circumstances or
complex transactions, but NMFS is unable to alter the requirements of
the Ship Mortgage Act.
Comment 10: The relevant statutes and the proposed rule mandate
flexibility in regards to the collateral requirements for FFP loans to
the CDQ program entities.
Response: Although Title XI grants NMFS some discretion to adjust
collateral requirements, the Program's authorizing statute still
requires that the FFP, at a minimum, take a security interest in the
property that the loan finances or refinances. NMFS does not
[[Page 78622]]
construe the proposed regulations or the statutory provisions
applicable to CDQ lending as superseding the required security
determinations, loan limits and collateral requirements set forth in
statute, in particular 46 U.S.C. 53709 and 53711. Moreover, NMFS is not
under any requirement to approve every loan application. Nevertheless,
NMFS remains committed to make reasonable loans to CDQ groups with as
much flexibility in the collateral requirements, as is appropriate,
within the bounds of its lending authorities.
Comment 11: Including the current market value of the land used by
a facility that is pledged as collateral in the revised definition of
Actual Cost better reflects the true value of the collateral.
Response: NMFS agrees. The unique nature of land can result in
absurd results when using pure cost basis to determine asset value. For
instance, using the purchase price and accounting costs may fail to
reflect actual value if an applicant has owned the land for an extended
period; and, purchase price alone may not reflect the true liquidation
value of real property in times of price volatility. Accordingly, NMFS
uses current market valued to determine asset value for the purposes of
loans under the Program.
Comment 12: Valuing refinanced limited entry privileges using a
current market value metric based on contemporaneous comparable sales
will provide existing permit holders with flexibility for their
existing permits.
Response: The FFP's experience over the last 12 years has shown
that the value of quota can fluctuate over time, making current market
value the most useful starting point to evaluate quota. In its approval
process, the FFP will also examine the trend in value of individual
fisheries' quota. However, NMFS emphasizes that the final rule retains
the FFP's policy to deny applications that will disburse more than an
applicant's outstanding indebtedness, calculated as principal and
accrued interest, when refinancing an existing loan.
Comment 13: FFP funds should not be used to finance the purchase of
new limited entry privileges at this time. This opposition is based
solely on the practical fact that the FFP loan authority is not
sufficiently funded at this time to enable the agency to meet all
traditional loan applications, as well as financing for aquaculture,
new IFQ financing, and new permit funding. Loan authority should be
restored to the peak levels of prior budget cycles.
Response: The FFP receives two separate loan funding authorities.
One is for the traditional loan program, and a separate authorization
is for IFQ lending. Approving IFQ loans does not decrease the loan
authority available for traditional loans and vice versa. Although NMFS
has no final control over what is ultimately established as a lending
ceiling, or funds given in annual appropriations legislation, NMFS will
track the demand for both traditional and IFQ lending, and may include
a request in its submission for the President's budget for greater loan
authority if it deems it necessary.
Comment 14: FFP loan authority should be used to implement an IFQ
loan program consistent with the Magnuson-Stevens Act. The onset of the
new NOAA policy on catch shares will make FFP lending an important tool
for the commercial fishing industry.
Response: NMFS notes the comment; however, NMFS points out that the
decision to implement an IFQ program for any particular fishery lies
with the appropriate Fishery Management Council.
Changes From the Proposed Rule
General FFP credit standards and requirements section 253.11 (j) is
changed to reflect the terms of 46 U.S.C. 53709(b)(1) and (b)(4) which,
collectively, require that any loan amount be limited to 80 percent of
the actual cost or depreciated actual cost of the property used as
security. By implication, this will require the FFP to take a security
interest in the specified project property, and that the value of the
collateral pledged will limit the aggregate amount of the loan. The
proposed rule allowed the Program to waive this requirement or allow
substitute collateral. This rule now requires a first lien position on
the project's primary collateral. The FFP may still take junior lien
positions on secondary collateral. NMFS also made minor changes to
correct errors or improve readability that do not affect the
substantive provisions of the rule.
Classification
The NMFS Assistant Administrator has determined that this final
rule is published under the authority of Chapter 537 of the Shipping
Act, and is consistent with the Magnuson-Stevens Act, as amended, and
other applicable law.
Executive Order 12866
This final rule has been determined to be not significant for
purposes of Executive Order 12866. This rule does not duplicate,
overlap, or conflict with any other relevant Federal rules.
Regulatory Flexibility Act
The Chief Counsel for Regulation of the Department of Commerce has
certified to the Chief Counsel for Advocacy of the Small Business
Administration (SBA) that this rule will not have a significant
economic impact on a substantial number of small entities. The reasons
for this certification are explained in the proposed rule (75 FR 24549)
and are not fully repeated here. Briefly, the Department certified that
this rule will not have a significant economic impact on a substantial
number of small businesses because:
Both small and large entities benefit from the availability of
long-term, fixed rate financing. Community Development Quota (CDQ)
groups, which consist of 65 Western Alaskan villages combined into
six community coalitions, benefit from the positive economic
opportunities that FFP lending provides. The proposed rule has no
adverse impacts on small business entities because of the nature of
the rule. Applications by small business entities for program
financing are voluntary. No mandatory requirements are placed on any
small business. No small entities are directly regulated by this
rule. Those small business entities that use the program do so for
beneficial impacts.
This certification was provided to the public for comment, and NMFS
received no comments or concerns related to the certification.
Accordingly, no regulatory analysis is required and none has been
prepared.
Paperwork Reduction Act
This final rule contains collection-of information requirements
subject to the Paperwork Reduction Act (PRA). The collections of
information have been approved by the Office of Management and Budget
(OMB) under OMB Control Numbers 0648-0012 (traditional loan
application) and 0648-0272 (IFQ loan application). The public reporting
burden for the FFP financing is estimated to average eight hours per
response, including the time for reviewing instructions, searching
existing data sources, gathering and maintaining the data needed, and
completing and reviewing the collection of information. Send comments
regarding these burden estimates or any other aspect of this data
information, including suggestions for reducing the burden, to NMFS
(see ADDRESSES) and by e-mail to [email protected], or fax
to 202-395-7285.
List of Subjects in 50 CFR Part 253
Aquaculture, Community development groups, Direct lending,
[[Page 78623]]
Financial assistance, Fisheries, Fishing, Individual fishing quota.
Dated: December 10, 2010.
Samuel D. Rauch III,
Deputy Assistant Administrator for Regulatory Programs, National Marine
Fisheries Service.
0
For the reasons set out in the preamble, 50 CFR part 253 is revised as
follows.
PART 253--FISHERIES ASSISTANCE PROGRAMS
Subpart A--General
Sec.
253.1 Purpose.
Subpart B--Fisheries Finance Program
253.10 General definitions.
253.11 General FFP credit standards and requirements.
253.12 Credit application.
253.13 Initial investigation and approval.
253.14 Loan documents.
253.15 Recourse against other parties.
253.16 Actual cost.
253.17 Insurance.
253.18 Closing.
253.19 Dual-use CCF.
253.20 Fees.
253.21 Demand by guaranteed noteholder and payment.
253.22 Program operating guidelines.
253.23 Default and liquidation.
253.24 Enforcement violations and adverse actions.
253.25 Other administrative requirements.
253.26 Traditional loans.
253.27 IFQ financing.
253.28 Halibut sablefish IFQ loans.
253.29 CDQ loans.
253.30 Crab IFQ loans.
253.31-253.49 [Reserved]
Subpart C--Interjurisdictional Fisheries
253.50 Definitions.
253.51 Apportionment.
253.52 State projects.
253.53 Other funds.
253.54 Administrative requirements.
Authority: 46 U.S.C. 53701 and 16 U.S.C. 4101 et seq.
Subpart A--General
Sec. 253.1 Purpose.
(a) The regulations in this part pertain to fisheries assistance
programs. Subpart B of this part governs the Fisheries Finance Program
(FFP or the Program), which makes capacity neutral long-term direct
fisheries and aquaculture loans. The FFP conducts all credit
investigations, makes all credit determinations and holds and services
all credit collateral.
(b) Subpart C of this part implements Public Law 99-659 (16 U.S.C.
4100 et seq.), which has two objectives:
(1) Promote and encourage State activities in support of the
management of interjurisdictional fishery resources identified in
interstate or Federal fishery management plans; and
(2) Promote and encourage management of interjurisdictional fishery
resources throughout their range.
(3) The scope of this part includes guidance on making financial
assistance awards to States or Interstate Commissions to undertake
projects in support of management of interjurisdictional fishery
resources in both the executive economic zone (EEZ) and State waters,
and to encourage States to enter into enforcement agreements with
either the Department of Commerce or the Department of the Interior.
Subpart B--Fisheries Finance Program
253.10 General definitions.
The terms used in this subpart have the following meanings:
Act means Chapter 537 of Title 46 of the U.S. Code, (46 U.S.C.
53701-35), as may be amended from time to time.
Actual cost means the sum of all amounts for a project paid by an
obligor (or related person), as well as all amounts that the Program
determines the obligor will become obligated to pay, as such amounts
are calculated by Sec. 253.16.
Applicant means the individual or entity applying for a loan (the
prospective obligor).
Application means the documents provided to or requested by NMFS
from an applicant to apply for a loan.
Application fee means 0.5 percent of the dollar amount of financing
requested.
Approval in principle letter (AIP) means a written communication
from NMFS to the applicant expressing the agency's commitment to
provide financing for a project, subject to all applicable regulatory
and Program requirements and in accordance with the terms and
conditions contained in the AIP.
Aquaculture facility means land, structures, appurtenances,
laboratories, water craft built in the U.S., and any equipment used for
the hatching, caring for, or growing fish, under controlled
circumstances for commercial purposes, as well as the unloading,
receiving, holding, processing, or distribution of such fish.
Capital Construction Fund (CCF), as described under 46 U.S.C.
53501-17, allows owners of eligible vessels to reserve capital for
replacement vessels, additional vessels, reconstruction of vessels, or
reconstructed vessels, built in the United States and documented under
the laws of the United States, for operation in the fisheries of the
United States.
Captain means a vessel operator or a vessel master.
Charter fishing means fishing from a vessel carrying a ``passenger
for hire,'' as defined in 46 U.S.C. 2101(21a), such passenger being
engaged in recreational fishing, from whom consideration is provided as
a condition of carriage on the vessel, whether directly or indirectly
flowing to the owner, charterer, operator, agent, or any other person
having an interest in the vessel.
Citizen means a ``citizen of the United States,'' as described in
46 U.S.C. 104, or an entity who is a citizen for the purpose of
documenting a vessel in the coastwise trade under 46 U.S.C. 50501.
Crewman means any individual, other than a captain, a passenger for
hire, or a fisheries observer working on a vessel that is engaged in
fishing.
Demand means a noteholder's request that a debtor or guarantor pay
a note's full principal and interest balance.
Facility means a fishery or an aquaculture facility.
Fish means finfish, mollusks, crustaceans and all other forms of
aquatic animal and plant life, other than marine mammals and birds.
Fisheries harvest authorization means any transferable permit,
license or other right, approval, or privilege to engage in fishing.
Fishery facility means land, land structures, water craft that do
not engage in fishing, and equipment used for transporting, unloading,
receiving, holding, processing, preserving, or distributing fish for
commercial purposes (including any water craft used for charter
fishing).
Fishing means:
(1) The catching, taking, or harvesting of fish;
(2) The attempted catching, taking, or harvesting of fish;
(3) Any other activity which can reasonably be expected to result
in the catching, taking, or harvesting of fish;
(4) Any operations at sea in support of, or in preparation for, any
activity described in paragraphs (1) through (3) of this section.
(5) Fishing does not include any scientific research activity which
is conducted by a scientific research vessel.
Fishing industry for the purposes of this part, means the broad
sector of the national economy comprised of persons or entities that
are engaged in or substantially associated with fishing, including
aquaculture, charter operators, guides, harvesters, outfitters,
processors, suppliers, among others, without regard to the location of
their
[[Page 78624]]
activity or whether they are engaged in fishing for wild stocks or
aquaculture.
Guarantee means a guarantor's contractual promise to repay
indebtedness if an obligor fails to repay as agreed.
Guarantee fee means one percent of a guaranteed note's average
annual unpaid principal balance.
Guaranteed note means a promissory note from an obligor to a
noteholder, the repayment of which the United States guarantees.
IFQ means Individual Fishing Quota, which is a Federal permit under
a limited access system to harvest a quantity of fish, expressed by a
unit or units representing a percentage of the total allowable catch of
a fishery that may be received or held for exclusive use by a person.
IFQ does not include community development quotas.
Noteholder means a guaranteed note payee.
Obligor means a party primarily liable for payment of the principal
of or interest on an obligation, used interchangeably with the terms
``note payor'' or ``notemaker.''
Origination year means the year in which an application for a loan
is accepted for processing.
Program means the Fisheries Finance Program, Financial Services
Division, National Marine Fisheries Service, National Oceanic and
Atmospheric Administration, U.S. Department of Commerce.
Project means:
(1) The refinancing or construction of a new fishing vessel or the
financing or refinancing of a fishery or aquaculture facility or the
refurbishing or purchase of an existing vessel or facility, including,
but not limited to, architectural, engineering, inspection, delivery,
outfitting, and interest costs, as well as the cost of any consulting
contract the Program requires;
(2) The purchase or refinance of any limited access privilege, IFQ,
fisheries access right, permit, or other fisheries harvest
authorization, for which the actual cost of the purchase of such
authorization would be eligible under the Act for direct loans;
(3) Activities (other than fishing capacity reduction, as set forth
in part 600.1000 of this title) that assist in the transition to
reduced fishing capacity;
(4) Technologies or upgrades designed to improve collection and
reporting of fishery-dependent data, to reduce bycatch, to improve
selectivity or reduce adverse impacts of fishing gear, or to improve
safety; or
(5) Any other activity that helps develop the U.S. fishing
industry, including, but not limited to, measures designed or intended
to improve a vessel's fuel efficiency, to increase fisheries exports,
to develop an underutilized fishery, or to enhance financial stability,
financial performance, growth, productivity, or any other business
attribute related to fishing or fisheries.
RAM means the Restricted Access Management division in the Alaska
Regional Office of NMFS or the office that undertakes the duties of
this division to issue or manage quota shares.
Refinancing means newer debt that either replaces older debt or
reimburses applicants for previous expenditures.
Refinancing/assumption fee means a one time fee assessed on the
principal amount of an existing FFP note to be refinanced or assumed.
Refurbishing means any reconstruction, reconditioning, or other
improvement of existing vessels or facilities, but does not include
routine repairs or activities characterized as maintenance.
Security documents mean all documents related to the collateral
securing the U.S. Note's repayment and all other assurances,
undertakings, and contractual arrangements associated with financing or
guarantees provided by NMFS.
Underutilized fishery means any stock of fish (a) harvested below
its optimum yield or (b) limited to a level of harvest or cultivation
below that corresponding to optimum yield by the lack of aggregate
facilities.
U.S. means the United States of America and, for citizenship
purposes, includes the fifty states, Commonwealth of Puerto Rico,
American Samoa, the Territory of the U.S. Virgin Islands, Guam, the
Republic of the Marshal Islands, the Federated States of Micronesia,
the Commonwealth of the Northern Mariana Islands, and any other
commonwealth, territory, or possession of the United States, or any
political subdivision of any of them.
U.S. Note means a promissory note payable by the obligor to the
United States.
Useful life means the period during which project property will, as
determined by the Program, remain economically productive.
Vessel means any vessel documented under U.S. law and used for
fishing.
Wise use means the development, advancement, management,
conservation, and protection of fishery resources, that is not
inconsistent with the National Standards for Fishery Conservation and
Management (16 U.S.C. 1851) and any other relevant criteria, as may be
specified in applicable statutes, regulations, Fishery Management
Plans, or NMFS guidance.
Sec. 253.11 General FFP credit standards and requirements.
(a) Principal. Unless explicitly stated otherwise in these
regulations or applicable statutes, the amount of any loan may not
exceed 80 percent of actual cost, as such term is described in Sec.
253.16; provided that the Program may approve an amount that is less,
in accordance with its credit determination.
(b) Interest rate. Each loan's annual interest rate will be 2
percent greater than the U.S. Department of Treasury's cost of
borrowing public funds of an equivalent maturity at the time the loan
closes.
(c) Ability and experience requirements. An obligor and the
majority of its principals must demonstrate the ability, experience,
resources, character, reputation, and other qualifications the Program
deems necessary for successfully operating the project property and
protecting the Program's interest in the project.
(d) Lending restrictions. Unless it can document that unique or
extraordinary circumstances exist, the Program will not provide
financing:
(1) For venture capital purposes; or
(2) To an applicant who cannot document successful fishing industry
ability and experience of a duration, degree, and nature that the
Program deems necessary to successfully repay the requested loan.
(e) Income and expense projections. The Program, using conservative
income and expense projections for the project property's operation,
must determine that projected net earnings can service all debt,
properly maintain the project property, and protect the Program's
interest against risks of loss, including the industry's cyclical
economics.
(f) Working capital. The Program must determine that a project has
sufficient initial working capital to achieve net earnings projections,
fund all foreseeable contingencies, and protect the Program's interest
in the project. In making its determination, the Program will use a
conservative assessment of an applicant's financial condition, and at
the Program's discretion, some portion of projected working capital
needs may be met by something other than current assets minus
liabilities (i.e., by a line or letter of credit, non-current assets
readily capable of generating working capital, a guarantor with
sufficient financial resources, etc.).
(g) Audited financial statements. Audited financial statements will
ordinarily be required for any obligor
[[Page 78625]]
with large or financially complex operations, as determined by the
program, whose financial condition the Program believes cannot be
otherwise assessed with reasonable certainty.
(h) Consultant services. Expert consulting services may be
necessary to help the Program assess a project's economic, technical,
or financial feasibility. The Program will notify the applicant if an
expert is required. The Program will select and employ the necessary
consultant, but require the applicant to reimburse the Program for any
fees charged by the consultant. In the event that an application
requires expert consulting services, the loan will not be closed until
the applicant fully reimburses the Program for the consulting fees.
This cost may, at the Program's discretion, be included in the amount
of the note. For a declined application, the Program may reimburse
itself from the application fee as described in Sec. 253.12, including
any portion known as the commitment fee that could otherwise be
refunded to the applicant.
(i) Property inspections. The Program may require adequate
condition and valuation inspection of all property used as collateral
as the basis for assessing the property's worth and suitability for
lending. The Program may also require these at specified periods during
the life of the loan. These must be conducted by competent and
impartial inspectors acceptable to the Program. Inspection cost(s) will
be at an applicant's expense. Those occurring before application
approval may be included in actual cost, as actual cost is described in
Sec. 253.16.
(j) Collateral. The Program shall have first lien(s) on all primary
project property pledged as collateral. The Program, at its discretion,
may request additional collateral and will consider any additional
collateral in its credit determinations.
(k) No additional liens. All primary project property pledged as
collateral, including any additional collateral, shall be free of
additional liens, unless the Program, at the request of the applicant,
expressly waives this requirement in writing.
(l) General FFP credit standards apply. Unless explicitly stated
otherwise in these rules, all FFP direct lending is subject to the
above general credit standards and requirements found in Sec. Sec.
253.12 through 253.30. The Program may adjust collateral, guarantee and
other requirements to reflect individual credit risks.
(m) Adverse legal proceedings. The Program, at its own discretion,
may decline or hold in abeyance any loan approval or disbursement(s) to
any applicant found to have outstanding lawsuits, citations, hearings,
liabilities, appeals, sanctions or other pending actions whose negative
outcome could significantly impact, in the opinion of the Program, the
financial circumstances of the applicant.
Sec. 253.12 Credit application.
(a) Applicant. (1) An applicant must be a U.S. citizen and be
eligible to document a vessel in the coastwise trade: and
(2) Only the legal title holder of project property, or its parent
company (or the lessee of an appropriate long-term lease) may apply for
a loan; and
(3) An applicant and the majority of its principals must generally
have the ability, experience, resources, character, reputation, and
other qualifications the Program deems necessary for successfully
operating, utilizing, or carrying out the project and protecting the
Program's interest; and
(4) Applicants should apply to the appropriate NMFS Regional
Financial Services Branch to be considered.
(b) Application fee. An application fee of 0.5 percent of the
dollar amount of an application is due when the application is formally
accepted. Upon submission, 50 percent of the application fee, known as
the ``filing fee,'' is non-refundable; the remainder, known as the
``commitment fee,'' may be refunded if the Program declines an
application or an applicant withdraws its application before the
Program issues an AIP letter, as described in Sec. 253.13(e). The
Program will not issue an AIP letter if any of the application fee
remains unpaid. No portion of the application fee shall be refunded
once the Program issues an AIP letter.
(c) False statement. A false statement on an application is grounds
for denial or termination of funds, grounds for possible punishment by
a fine or imprisonment as provided in 18 U.S.C. 1001 and an event of a
security default.
Sec. 253.13 Initial investigation and approval.
(a) The Program shall undertake a due diligence investigation of
every application it receives to determine if, in the Program's sole
judgment, the application is both:
(1) Eligible for a loan because it meets applicable loan
requirements; and
(2) Qualified for a loan because the project is deemed an
acceptable credit risk.
(b) The Program will approve eligible and qualified applicants by
evaluating the information obtained during the application and
investigation process.
(c) Among other investigations, applicants may be subject to a
background check, fisheries violations check and credit review.
Background checks are intended to reveal if any key individuals
associated with the applicant have been convicted of or are presently
facing criminal charges such as fraud, theft, perjury, or other matters
which significantly reflect on the applicant's honesty or financial
integrity.
(d) The Program, at its own discretion, may decline or delay
approval of any loans or disbursements to any applicant found to have
outstanding citations, notices of violations, or other pending legal
actions or unresolved claims.
(e) The Program may place any terms and conditions on such
approvals that the Program, in its sole discretion, deems necessary and
appropriate.
(f) Credit decision. (1) The Program shall issue to approved
applicants an AIP letter, which shall describe the terms and conditions
of the loan, including (but not limited to) loan amounts, maturities,
additional collateral, repayment sources or guarantees. Such terms and
conditions are at the Program's sole discretion and shall also be
incorporated in security documents that the Program prepares. An
applicant's non-acceptance of any terms and conditions may result in an
applicant's disqualification.
(2) Any application the Program deems ineligible or unqualified
will be declined.
Sec. 253.14 Loan documents.
(a) U.S. Note. (1) The U.S. Note will be in the form the Program
prescribes.
(2) The U.S. Note evidences the obligor's indebtedness to the
United States.
(i) For financing approved after October 11, 1996, the U.S. Note
evidences the obligor's actual indebtedness to the U.S.; and
(ii) For financing originating before October 11, 1996, that
continues to be associated with a Guaranteed Note, the U.S. Note shall
evidence the obligor's actual indebtedness to the U.S. upon the
Program's payment of any or all of the sums due under the Guaranteed
Note or otherwise disbursed on the obligor's behalf.
(iii) The U.S. Note will, among other things, contain provisions to
add to its principal balance all amounts the Program advances or
incurs, including additional interest charges and costs incurred to
protect its interest or accommodate the obligor.
(3) The U.S. Note shall be assignable by the Program, at its sole
discretion.
(b) Security documents. (1) Each security document will be in the
form the Program prescribes.
[[Page 78626]]
(2) The Program will, at a minimum, require the pledge of adequate
collateral, generally in the form of a security interest or mortgage
against all property associated with a project or security as otherwise
required by the Program.
(3) The Program will require such other security as it deems
necessary and appropriate, given the circumstances of each obligor and
the project.
(4) The security documents will, among other things, contain
provisions to secure the repayment of all additional amounts the
Program advances or incurs to protect its interest or accommodate the
obligor, including additional interest charges and fees.
Sec. 253.15 Recourse against parties.
(a) Form. Recourse by borrowers or guarantors may be by a repayment
guarantee, irrevocable letter of credit, additional tangible or
intangible collateral, or other form acceptable to the Program.
(b) Principals accountable. The principal parties in interest, who
ultimately stand most to benefit from the project, will ordinarily be
held financially accountable for the project's performance. The Program
may require recourse against:
(1) All major shareholders of a closely-held corporate obligor;
(2) The parent corporation of a subsidiary corporate obligor;
(3) The related business entities of the obligor if the Program
determines that the obligor lacks substantial pledged assets other than
the project property or is otherwise lacking in any credit factor
required to approve the application;
(4) Any or all major limited partners;
(5) Non-obligor spouses of applicants or obligors in community
property states; and/or
(6) Against any others it deems necessary to protect its interest.
(c) Recourse against parties. Should the Program determine that a
secondary means of repayment from other sources is necessary (including
the net worth of parties other than the obligor), the Program may
require secured or unsecured recourse against any such secondary
repayment sources.
(d) Recourse unavailable. Where appropriate recourse is
unavailable, the conservatively projected net liquidating value of the
obligor's assets (as such assets are pledged to the Program) must, in
the Program's credit judgment, substantially exceed all projected
Program exposure or other risks of loss.
Sec. 253.16 Actual cost.
Actual cost shall be determined as follows:
(a) The actual cost of a vessel shall be the sum of:
(1) The total cost of the project depreciated on a straight-line
basis, over the project property's useful life, using a 10-percent
salvage value; and
(2) The current market value of appurtenant limited access
privileges or transferable limited access privileges vested in the name
of the obligor, the subject vessel or their owners, provided that such
privileges are utilized by or aboard the subject vessel and will be
pledged as collateral for the subject FFP financing.
(b) The actual cost of a facility shall be the sum of:
(1) The total cost of the project, not including land, depreciated
on a straightline basis over the Project Property's useful life, using
a 10-percent salvage value;
(2) The current market value of the land that will be pledged as
collateral for the subject FFP financing, provided that such land is
utilized by the facility; and
(3) The net present value of the payments due under a long term
lease of land or marine use rights, provided that they meet the
following requirements:
(i) The project property must be located at such leased space or
directly use such marine use rights;
(ii) Such lease or marine use right must have a duration the
Program deems sufficient; and
(iii) The lease or marine use right must be assigned to the Program
such that the Program may foreclose and transfer such lease to another
party.
(c) The actual cost of a transferable limited access privilege
shall be determined as follows:
(1) For financing the purchase of limited access privileges, the
actual cost shall be the purchase cost.
(2) For refinancing limited access privileges, the actual cost
shall be the current market value.
(d) The actual cost of any Project that includes any combination of
items described in paragraphs (a), (b) or (c) of this section shall be
the sum of such calculations.
Sec. 253.17 Insurance.
(a) All insurable collateral property and other risks shall be
continuously insured so long as any balance of principal or interest on
a Program loan or guarantee remains outstanding.
(b) Insurers must be acceptable to the Program.
(c) Insurance must be in such forms and amounts and against such
risks the Program deems necessary to protect the United States'
interest.
(d) Insurance must be endorsed to include the requirements the
Program deems necessary and appropriate.
(1) Normally and as appropriate, the Program will be named as an
additional insured, mortgagee, or loss payee, for the amount of its
interest; any waiver of this requirement must be in writing;
(2) Cancellation will require adequate advance written notice;
(3) The Program will be adequately protected against other
insureds' breaches of policy warranties, negligence, omission, etc., in
the case of marine insurance, vessel seaworthiness will be required;
(4) The insured must provide coverage for any other risk or
casualty the Program may require.
Sec. 253.18 Closing.
(a) Approval in principle letters. Every closing will be in strict
accordance with a final approval in principle letter.
(b) Contracts. Promissory notes, security documents, and any other
documents the Program may require will be on standard Program forms
that may not be altered without Program written approval. The Program
will ordinarily prepare all contracts, except certain pledges involving
real property or other matters involving local law, which will be
prepared by each obligor's attorney at the direction and approval of
the Program.
(c) Additional requirements. At its discretion the Program may
require services from applicant's attorneys, other contractors or
agents. Real property services required from an applicant's attorney or
agent may include, but are not limited to: Title search, title
insurance, mortgage and other document preparation, document execution
and recording, escrow and disbursement, and legal opinions and other
assurances. The Program will notify the applicant in advance if any
such services are required of the applicant's attorneys, contractors or
other agents. Applicants are responsible for all attorney's fees, as
well as those of any other private contractor. Attorneys and other
contractors must be satisfactory to the Program.
(d) Closing schedules. The Program will not be liable for adverse
interest-rate fluctuations, loss of commitments, or other consequences
of an inability by any of the parties to meet the closing schedule.
Sec. 253.19 Dual-use CCF.
The Program may require the pledge of a CCF account or annual
deposits of some portion of the project property's net income into a
dual-use CCF. A dual-use CCF provides the normal CCF tax-
[[Page 78627]]
deferral benefits, but also gives the Program control of CCF
withdrawals, recourse against CCF deposits, ensures an emergency
refurbishing reserve (tax-deferred) for project property, and provides
additional collateral.
Sec. 253.20 Fees.
(a) Application fee. See Sec. Sec. 253.10 and 253.12(b).
(b) Guarantee fee. For existing Guaranteed Loans, an annual
guarantee fee will be due in advance and will be based on the
guaranteed note's repayment provisions for the prospective year. The
first annual guarantee fee is due at guarantee closing. Each subsequent
guarantee fee is due and payable on the guarantee closing's anniversary
date. Each is fully earned when due, and shall not subsequently be
refunded for any reason.
(c) Refinancing or assumption fee. The Program will assess a fee of
one quarter of one (1) percent of the note to be refinanced or assumed.
This fee is due upon application for refinancing or assumption of a
guaranteed or direct loan. Upon submission, the fee shall be non-
refundable. The Program may waive a refinancing or assumption fee's
payment when the refinancing or assumption's primary purpose will
benefit the United States.
(d) Where payable. Fees are payable by check to ``U.S. Department
of Commerce/NOAA.'' Other than those collected at application or
closing, fees are payable by mailing checks to the ``U.S. Department of
Commerce, National Oceanic and Atmospheric Administration, National
Marine Fisheries Service,'' to such address as the Program may
designate. To ensure proper crediting, each check should include the
official case number the Program assigns.
Sec. 253.21 Demand by guaranteed noteholder and payment.
Every demand by the guaranteed noteholder must be delivered in
writing to the Program and must include the noteholder's certified
record of the date and amount of each payment made on the guaranteed
note and the manner of its application. The only period during which a
guaranteed noteholder can make demand for a payment default begins on
the thirty-first day of the payment default and continues through the
ninetieth day of a payment default. The noteholder must possess
evidence of the demand's timely delivery.
Sec. 253.22 Program operating guidelines.
The Program may issue policy and administrative guidelines, as the
need arises.
Sec. 253.23 Default and liquidation.
Upon default under the terms of any note, guarantee, security
agreement, mortgage, or other security document the Program shall take
remedial actions including, but not limited to, where appropriate,
retaking or arrest of collateral, foreclosure, restructuring,
debarment, referral for debt collection, or liquidation as it deems
best able to protect the U.S. Government's interest.
Sec. 253.24 Enforcement violations and adverse actions.
(a) Compliance with applicable law. All applicants and Program
participants shall comply with applicable law.
(b) Applicant disqualification. (1) Any issuance of any citation or
Notice of Violation and Assessment by NMFS enforcement or other
enforcement authority may constitute grounds for the Program to:
(i) Delay application or approval processing;
(ii) Delay loan closing;
(iii) Delay disbursement of loan proceeds;
(iv) Disqualify an applicant or obligor; or
(v) Declare default.
(2) The Program will not approve loans or disburse funds to any
applicant found to have an outstanding, final and unappealable
fisheries fine or other unresolved penalty until either: Such fine is
paid or penalty has been resolved; or the applicant enters into an
agreement to pay the penalty and makes all payments or installments as
they are due. Failure to pay or resolve any such fine or penalty in a
reasonable period of time will result in the applicant's
disqualification.
(c) Foreclosure in addition to other penalties. In the event that a
person with an outstanding balance on a Program loan or guarantee
violates any ownership, lease, use, or other provision of applicable
law, such person may be subject to foreclosure of property, in addition
to any fines, sanctions, or other penalties.
Sec. 253.25 Other administrative requirements.
(a) Debt Collection Act. In accordance with the provisions of the
Debt Collection Improvement Act of 1996, a person may not obtain any
Federal financial assistance in the form of a loan (other than a
disaster loan) or loan guarantee if the person has an outstanding debt
(other than a debt under the Internal Revenue Code of 1986) with any
Federal agency which is in a delinquent status, as determined under
standards prescribed by the Secretary of the Treasury.
(b) Certifications. Applicants must submit a completed Form CD-511,
``Certifications Regarding Debarment, Suspension and Other
Responsibility Matters; Drug-Free Workplace Requirements and
Lobbying,'' or its equivalent or successor form, if any.
(c) Taxpayer identification. An applicant classified for tax
purposes as an individual, limited liability company, partnership,
proprietorship, corporation, or legal entity is required to submit
along with the application a taxpayer identification number (TIN)
(social security number, employer identification number as applicable,
or registered foreign organization number). Recipients who either fail
to provide their TIN or provide an incorrect TIN may have application
processing or funding suspended until the requirement is met.
(d) Audit inquiry. An audit of a Program loan may be conducted at
any time. Auditors, selected at the discretion of the Program or other
agency of the United States, shall have access to any and all books,
documents, papers and records of the obligor or any other party to a
financing that the auditor(s) deem(s) pertinent, whether written,
printed, recorded, produced or reproduced by any mechanical, magnetic
or other process or medium.
(e) Paperwork Reduction Act. The application requirements contained
in these rules have been approved under OMB control number 0648-0012.
The applications for the halibut/sablefish QS crew member eligibility
certificate have been approved under OMB control number 0648-0272.
Notwithstanding any other provisions of law, no person is required to
respond to, nor shall any person be 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 OMB control number.
Sec. 253.26 Traditional loans.
(a) Eligible projects. Financing or refinancing up to 80 percent of
a project's actual cost shall be available to any citizen who is
determined to be eligible and qualified under the Act and these rules,
except--
(1) The Program will not finance the cost of new vessel
construction.
(2) The Program will not finance a vessel refurbishing project that
materially increases an existing vessel's harvesting capacity.
(b) Financing or refinancing. (1) Projects, other than those
specified in paragraphs (a) (1) and (a)(2) of this section, may be
financed, as well as refinanced.
[[Page 78628]]
(2) Notwithstanding paragraph (a)(1) of this section, the Program
may refinance the construction cost of a vessel whose construction cost
has already been financed (or otherwise paid) prior to the submission
of a loan application.
(3) Notwithstanding paragraph (a)(2) of this section, the Program
may refinance the refurbishing cost of a vessel whose initial
refurbishing cost has already been financed (or otherwise paid) prior
to the submission of a loan application.
(4) The Program may finance or refinance the purchase or
refurbishment of any vessel or facility for which the Secretary has:
(i) Accelerated and/or paid outstanding debts or obligations;
(ii) Acquired; or
(iii) Sold at foreclosure.
(c) Existing vessels and facilities. The Program may finance the
purchase of an existing vessel or existing fishery facility if such
vessel or facility will be refurbished in the United States and will be
used in the fishing industry.
(d) Fisheries modernization. Notwithstanding any of this part, the
Program may finance or refinance any:
(1) Activities that assist in the transition to reduced fishing
capacity; or
(2) Technologies or upgrades designed to:
(i) Improve collection and reporting of fishery-dependent data;
(ii) Reduce bycatch;
(iii) Improve selectivity;
(iv) Reduce adverse impacts of fishing gear; or
(v) Improve safety.
(e) Guaranty transition. Upon application by the obligor, any
guaranteed loans originated prior to October 11, 1996, may be
refinanced as direct loans, regardless of the original purpose of the
guaranteed loan.
(f) Maturity. Maturity may not exceed 25 years, but shall not
exceed the project property's useful life. The Program, at its sole
discretion, may set a shorter maturity period.
(g) Credit standards. Traditional loans are subject to all Program
general credit standards and requirements. Collateral, guarantee and
other requirements may be adjusted in accordance with the Program's
assessment of individual credit risks.
Sec. 253.27 IFQ financing.
The Program may finance or refinance the project cost of
purchasing, including the reimbursement of obligors for expenditures
previously made for purchasing, individual fishing quotas in accordance
with the applicable sections of the Magnuson-Stevens Fishery
Conservation and Management Act or any other statute.
Sec. 253.28 Halibut sablefish IFQ loans.
(a) Specific definitions. For the purposes of this section, the
following definitions apply:
(1) Entry-level fishermen means fishermen who do not own any IFQ in
the year they apply for a loan.
(2) Fishermen who fish from small vessels means fishermen wishing
to purchase IFQ for use on Category B, Category C, or Category D
vessels, but who do not own, in whole or in part, any Category A or
Category B vessels, as such vessels are defined in 50 CFR 679.40(a)(5)
of this title.
(3) Halibut sablefish quota share means a halibut or sablefish
permit, the face amount of which is used as the basis for the annual
calculation of a person's halibut or sablefish IFQ, also abbreviated as
``HSQS'' or ``halibut/sablefish QS.''
(4) Halibut/Sablefish IFQ means the annual catch limit of halibut
or sablefish that may be harvested by a person who is lawfully
allocated halibut or sablefish quota share, a harvest privilege for a
specific portion of the total allowable catch of halibut or sablefish.
(b) Entry level fishermen. The Program may finance up to 80 percent
of the cost of purchasing HSQS by an entry level fisherman who:
(1) Does not own any halibut/sablefish QS during the origination
year;
(2) Applies for a loan to purchase a quantity of halibut/sablefish
QS that is not greater than the equivalent of 8,000 lb. (3,628.7 kg) of
IFQ during the origination year;
(3) Possesses the appropriate transfer eligibility documentation
duly issued by RAM for HSQS;
(4) Intends to be present aboard the vessel, as may be required by
applicable regulations; and
(5) Meets all other Program eligibility, qualification, lending and
credit requirements.
(c) Fishermen fishing from small vessels. The Program may finance
up to 80 percent of the cost of purchasing HSQS by a fisherman who
fishes from a small vessel, provided that any such fisherman shall:
(1) Apply for a loan to purchase halibut or sablefish QS for use on
vessel Categories B, C, or D, as defined under 50 CFR 679.40(a)(5) of
this title;
(2) Not own an aggregate quantity of halibut/sablefish QS
(including the loan QS) of more than the equivalent of 50,000 lb.
(22,679.6 kg) of IFQ during the origination year;
(3) Not own, in whole or in part, directly or indirectly (including
through stock or other ownership interest) any vessel of the type that
would have been assigned Category A or Category B HSQS under 50 CFR
679.40(a)(5);
(4) Possess the appropriate transfer eligibility documentation duly
issued by the RAM for HSQS;
(5) Intend to be present aboard the vessel, as may be required by
applicable regulations, as IFQ associated with halibut/sablefish QS
financed by the loan is harvested; and
(6) Meet all other Program eligibility, qualification, lending and
credit requirements.
(d) Refinancing. (1) The Program may refinance any existing debts
associated with HSQS an applicant currently holds, provided that--
(i) The HSQS being refinanced would have been eligible for Program
financing at the time the applicant purchased it, and
(ii) The applicant meets the Program's applicable lending
requirements.
(2) The refinancing is in an amount up to 80 percent of HSQS'
current market value; however, the Program will not disburse any amount
that exceeds the outstanding principal balance, plus accrued interest
(if any), of the existing HSQS debt being refinanced.
(3) In the event that the current market value of HSQS and
principal loan balance do not meet the 80 percent requirement in
paragraph (d)(2) of this section, applicants seeking refinancing may be
required to provide additional down payment.
(e) Maturity. Loan maturity may not exceed 25 years, but may be
shorter depending on credit and other considerations.
(f) Repayment. Repayment will be by equal quarterly installments of
principal and interest.
(g) Security. Although quota share(s) will be the primary
collateral for a HSQS loan, the Program may require additional security
pledges to maintain the priority of the Program's security interest.
The Program, at its option, may also require all parties with
significant ownership interests to personally guarantee loan repayment
for any applicant that is a corporation, partnership, or other entity.
Subject to the Program's credit risk determination, some projects may
require additional security, collateral, or credit enhancement.
(h) Crew member transfer eligibility certification. The Program
will accept RAM certification as proof that applicants are eligible to
hold HSQS. The application of any person determined by RAM to be unable
to receive such certification will be declined. Applicants who fail to
obtain
[[Page 78629]]
appropriate transfer eligibility certification within 45 working days
of the date of application may lose their processing priority.
(i) Program credit standards. HSQS loans, regardless of purpose,
are subject to all Program general credit standards and requirements.
Collateral, guarantee and other requirements may be adjusted to
individual credit risks.
Sec. 253.29 CDQ loans.
(a) FFP actions. The Program may finance or refinance up to 80
percent of a project's actual cost.
(b) Eligible projects. Eligible projects include the purchase of
all or part of ownership interests in fishing or processing vessels,
shoreside fish processing facilities, permits, quota, and cooperative
rights in any of the Bering Sea and Aleutian Islands fisheries.
(c) Eligible entities. The following communities, in accordance
with applicable law and regulations are eligible to participate in the
loan program:
(1) The villages of Akutan, Atka, False Pass, Nelson Lagoon,
Nikolski, and Saint George through the Aleutian Pribilof Island
Community Development Association.
(2) The villages of Aleknagik, Clark's Point, Dillingham, Egegik,
Ekuk, Ekwok, King Salmon/Savonoski, Levelock, Manokotak, Naknek, Pilot
Point, Port Heiden, Portage Creek, South Naknek, Togiak, Twin Hills,
and Ugashik through the Bristol Bay Economic Development Corporation.
(3) The village of Saint Paul through the Central Bering Sea
Fishermen's Association.
(4) The villages of Chefornak, Chevak, Eek, Goodnews Bay, Hooper
Bay, Kipnuk, Kongiganak, Kwigillingok, Mekoryuk, Napakiak, Napaskiak,
Newtok, Nightmute, Oscarville, Platinum, Quinhagak, Scammon Bay,
Toksook Bay, Tuntutuliak, and Tununak through the Coastal Villages
Region Fund.
(5) The villages of Brevig Mission, Diomede, Elim, Gambell,
Golovin, Koyuk, Nome, Saint Michael, Savoonga, Shaktoolik, Stebbins,
Teller, Unalakleet, Wales, and White Mountain through the Norton Sound
Economic Development Corporation.
(6) The villages of Alakanuk, Emmonak, Grayling, Kotlik, Mountain
Village, and Nunam Iqua through the Yukon Delta Fisheries Development
Association.
(7) Any new groups established by applicable law.
(d) Loan terms. (1) CDQ loans may have terms up to thirty years,
but shall not exceed the project property's useful life. The Program,
at its sole discretion, may set a shorter maturity period.
(2) CDQ loans are subject to all Program general credit standards
and requirements. Collateral, guarantee and other requirements may be
adjusted to individual credit risks.
Sec. 253.30 Crab IFQ loans.
(a) Specific definitions. For the purposes of this section, the
following definitions apply:
(1) Crab means those crab species managed under the Fishery
Management Plan for Bering Sea/Aleutian Island (BSAI) King and Tanner
Crab.
(2) Crab FMP means the Fishery Management Plan for BSAI King and
Tanner Crab.
(3) Crab quota share means a BSAI King and Tanner Crab permit, the
base amount of which is used as a basis for the annual calculation of a
person's Crab IFQ, also abbreviated as ``Crab QS.''
(b) Crab captains or crewmen. The Program may finance up to 80
percent of the cost of purchasing Crab QS by a citizen:
(1) Who is or was:
(i) A captain of a crab fishing vessel, or
(ii) A crew member of a crab fishing vessel;
(2) Who has been issued the appropriate documentation of
eligibility by RAM;
(3) Whose aggregate holdings of QS will not exceed any limit on
Crab QS holdings that may be in effect in the Crab FMP implementing
regulations or applicable statutes in effect at the time of loan
closing; and will not hold either individually or collectively, based
on the initial QS pool, as published in 50 CFR Part 680, Table 8; and
(4) Who, at the time of initial application, meets all other
applicable eligibility requirements to fish for crab or hold Crab QS
contained in the Crab FMP implementing regulations or applicable
statutes in effect at the time of loan closing.
(c) Refinancing. (1) The Program may refinance any existing debts
associated with Crab QS that an applicant currently holds, provided
that:
(i) The Crab QS being refinanced would have been eligible for
Program financing at the time the applicant purchased it;
(ii) The applicant meets the Program's applicable lending
requirements; and
(iii) The applicant would meet the requirements found in the Crab
FMP implementing regulations at the time any such refinancing loan
would close.
(2) The Program may refinance an amount up to 80 percent of Crab
QS's current market value; however, the Program will not disburse any
amount that exceeds the outstanding principal balance, plus accrued
interest (if any), of the existing Crab QS debt being refinanced.
(3) In the event that the current market value of Crab QS and
current principal balance do not meet the 80 percent requirement in
paragraph (c)(2) of this section, applicants seeking refinancing may be
required to provide additional down payment.
(d) Maturity. Loan maturity may not exceed 25 years, but may be
shorter depending on credit and other considerations.
(e) Repayment. Repayment schedules will be set by the loan
documents.
(f) Security. Although the quota share will be the primary
collateral for a Crab QS loan, the Program may require additional
security pledges to maintain the priority of the Program's security
interest. The Program, at its option, may also require all parties with
significant ownership interests to personally guarantee loan repayment
for any applicant that is a corporation, partnership, or other entity.
Subject to the Program's credit risk determination, some projects may
require additional security, collateral, or credit enhancement.
(g) Crew member transfer eligibility certification. The Program
will accept RAM transfer eligibility certification as proof that
applicants are eligible to hold Crab QS. The application of any person
determined by RAM to be unable to receive such certification will be
declined. Applicants who fail to obtain appropriate transfer
eligibility certification within 45 working days of the date of
application may lose their processing priority.
(h) Crab Quota Share Ownership Limitation. A program obligor must
comply with all applicable maximum amounts, as may be established by
NMFS regulations, policy or North Pacific Fishery Management Council
action.
(i) Program credit standards. Crab QS loans are subject to all
Program general credit standards and requirements. Collateral,
guarantee and other requirements may be adjusted to individual credit
risks.
Sec. Sec. 253.31--253.49 [Reserved]
Subpart C--Interjurisdictional Fisheries
Sec. 253.50 Definitions.
The terms used in this subpart have the following meanings:
[[Page 78630]]
Act means the Interjurisdictional Fisheries Act of 1986, Public Law
99-659 (Title III).
Adopt means to implement an interstate fishery management plan by
State action or regulation.
Commercial fishery failure means a serious disruption of a fishery
resource affecting present or future productivity due to natural or
undetermined causes. It does not include either:
(1) The inability to harvest or sell raw fish or manufactured and
processed fishery merchandise; or
(2) Compensation for economic loss suffered by any segment of the
fishing industry as the result of a resource disaster.
Enforcement agreement means a written agreement, signed and dated,
between a state agency and either the Secretary of the Interior or
Secretary of Commerce, or both, to enforce Federal and state laws
pertaining to the protection of interjurisdictional fishery resources.
Federal fishery management plan means a plan developed and approved
under the Magnuson Fishery Conservation and Management Act (16 U.S.C.
1801 et seq.).
Fisheries management means all activities concerned with
conservation, restoration, enhancement, or utilization of fisheries
resources, including research, data collection and analysis,
monitoring, assessment, information dissemination, regulation, and
enforcement.
Fishery resource means finfish, mollusks, and crustaceans, and any
form of marine or Great Lakes animal or plant life, including habitat,
other than marine mammals and birds.
Interjurisdictional fishery resource means:
(1) A fishery resource for which a fishery occurs in waters under
the jurisdiction of one or more states and the U.S. Exclusive Economic
Zone; or
(2) A fishery resource for which an interstate or a Federal fishery
management plan exists; or
(3) A fishery resource which migrates between the waters under the
jurisdiction of two or more States bordering on the Great Lakes.
Interstate Commission means a commission or other administrative
body established by an interstate compact.
Interstate compact means a compact that has been entered into by
two or more states, established for purposes of conserving and managing
fishery resources throughout their range, and consented to and approved
by Congress.
Interstate Fisheries Research Program means research conducted by
two or more state agencies under a formal interstate agreement.
Interstate fishery management plan means a plan for managing a
fishery resource developed and adopted by the member states of an
Interstate Marine Fisheries Commission, and contains information
regarding the status of the fishery resource and fisheries, and
recommends actions to be taken by the States to conserve and manage the
fishery resource.
Landed means the first point of offloading fishery resources.
NMFS Regional Director means the Director of any one of the five
National Marine Fisheries Service regions.
Project means an undertaking or a proposal for research in support
of management of an interjurisdictional fishery resource or an
interstate fishery management plan.
Research means work or investigative study, designed to acquire
knowledge of fisheries resources and their habitat.
Secretary means the Secretary of Commerce or his/her designee.
State means each of the several states, the District of Columbia,
the Commonwealth of Puerto Rico, American Samoa, the Virgin Islands,
Guam, or the Commonwealth of the Northern Mariana Islands.
State agency means any department, agency, commission, or official
of a state authorized under the laws of the State to regulate
commercial fisheries or enforce laws relating to commercial fisheries.
Value means the monetary worth of fishery resources used in
developing the apportionment formula, which is equal to the price paid
at the first point of landing.
Volume means the weight of the fishery resource as landed, at the
first point of landing.
Sec. 253.51 Apportionment.
(a) Apportionment formula. The amount of funds apportioned to each
state is to be determined by the Secretary as the ratio which the
equally weighted average of the volume and value of fishery resources
harvested by domestic commercial fishermen and landed within such state
during the 3 most recent calendar years for which data satisfactory to
the Secretary are available bears to the total equally weighted average
of the volume and value of all fishery resources harvested by domestic
commercial fishermen and landed within all of the states during those
calendar years.
(1) The equally weighted average value is determined by the
following formula:
[GRAPHIC] [TIFF OMITTED] TR16DE10.000
[GRAPHIC] [TIFF OMITTED] TR16DE10.001
(2) Upon appropriation of funds by Congress, the Secretary will
take the following actions:
(i) Determine each state's share according to the apportionment
formula.
(ii) Certify the funds to the respective NMFS Regional Director.
(iii) Instruct NMFS Regional Directors to promptly notify states of
funds' availability.
(b) No state, under the apportionment formula in paragraph (a) of
this section, that has a ratio of one-third of 1 percent or higher may
receive an apportionment for any fiscal year that is less than 1
percent of the total amount of funds available for that fiscal year.
(c) If a State's ratio under the apportionment formula in paragraph
(b) of this section is less than one-third of 1 percent, that state may
receive funding if the state:
(1) Is signatory to an interstate fishery compact;
(2) Has entered into an enforcement agreement with the Secretary
and/or the Secretary of the Interior for a fishery that is managed
under an interstate fishery management plan;
[[Page 78631]]
(3) Borders one or more of the Great Lakes;
(4) Has entered into an interstate cooperative fishery management
agreement and has in effect an interstate fisheries management plan or
an interstate fisheries research Program; or
(5) Has adopted a Federal fishery management plan for an
interjurisdictional fishery resource.
(d) Any state that has a ratio of less than one-third of 1 percent
and meets any of the requirements set forth in paragraphs (c)(1)
through (5) of this section may receive an apportionment for any fiscal
year that is not less than 0.5 percent of the total amount of funds
available for apportionment for such fiscal year.
(e) No state may receive an apportionment under this section for
any fiscal year that is more than 6 percent of the total amount of
funds available for apportionment for such fiscal year.
(f) Unused apportionments. Any part of an apportionment for any
fiscal year to any state:
(1) That is not obligated during that year;
(2) With respect to which the state notifies the Secretary that it
does not wish to receive that part; or
(3) That is returned to the Secretary by the state, may not be
considered to be appropriated to that state and must be added to such
funds as are appropriated for the next fiscal year. Any notification or
return of funds by a state referred to in this section is irrevocable.
Sec. 253.52 State projects.
(a) General--(1) Designation of state agency. The Governor of each
state shall notify the Secretary of which agency of the state
government is authorized under its laws to regulate commercial
fisheries and is, therefore, designated receive financial assistance
awards. An official of such agency shall certify which official(s) is
authorized in accordance with state law to commit the state to
participation under the Act, to sign project documents, and to receive
payments.
(2) States that choose to submit proposals in any fiscal year must
so notify the NMFS Regional Director before the end of the third
quarter of that fiscal year.
(3) Any state may, through its state agency, submit to the NMFS
Regional Director a completed NOAA Grants and Cooperative Agreement
Application Package with its proposal for a project, which may be
multiyear. Proposals must describe the full scope of work,
specifications, and cost estimates for such project.
(4) States may submit a proposal for a project through, and request
payment to be made to, an Interstate Fisheries Commission. Any payment
so made shall be charged against the apportionment of the appropriate
state(s). Submitting a project through one of the Commissions does not
remove the matching funds requirement for any state, as provided in
paragraph (c) of this section.
(b) Evaluation of projects. The Secretary, before approving any
proposal for a project, will evaluate the proposal as to its
applicability, in accordance with 16 U.S.C. 4104(a)(2).
(c) State matching requirements. The Federal share of the costs of
any project conducted under this subpart, including a project submitted
through an Interstate Commission, cannot exceed 75 percent of the total
estimated cost of the project, unless:
(1) The state has adopted an interstate fishery management plan for
the fishery resource to which the project applies; or
(2) The state has adopted fishery regulations that the Secretary
has determined are consistent with any Federal fishery management plan
for the species to which the project applies, in which case the Federal
share cannot exceed 90 percent of the total estimated cost of the
project.
(d) Financial assistance award. If the Secretary approves or
disapproves a proposal for a project, he or she will promptly give
written notification, including, if disapproved, a detailed explanation
of the reason(s) for the disapproval.
(e) Restrictions. (1) The total cost of all items included for
engineering, planning, inspection, and unforeseen contingencies in
connection with any works to be constructed as part of such a proposed
project shall not exceed 10 percent of the total cost of such works,
and shall be paid by the state as a part of its contribution to the
total cost of the project.
(2) The expenditure of funds under this subpart may be applied only
to projects for which a proposal has been evaluated under paragraph (b)
of this section and approved by the Secretary, except that up to
$25,000 each fiscal year may be awarded to a state out of the state's
regular apportionment to carry out an ``enforcement agreement.'' An
enforcement agreement does not require state matching funds.
(f) Prosecution of work. All work must be performed in accordance
with applicable state laws or regulations, except when such laws or
regulations are in conflict with Federal laws or regulations such that
the Federal law or regulation prevails.
Sec. 263.53 Other funds.
(a) Funds for disaster assistance. (1) The Secretary shall retain
sole authority in distributing any disaster assistance funds made
available under section 308(b) of the Act. The Secretary may distribute
these funds after he or she has made a thorough evaluation of the
scientific information submitted, and has determined that a commercial
fishery failure of a fishery resource arising from natural or
undetermined causes has occurred. Funds may only be used to restore the
resource affected by the disaster, and only by existing methods and
technology. Any fishery resource used in computing the states' amount
under the apportionment formula in Sec. 253.601(a) will qualify for
funding under this section. The Federal share of the cost of any
activity conducted under the disaster provision of the Act shall be
limited to 75 percent of the total cost.
(2) In addition, pursuant to section 308(d) of the Act, the
Secretary is authorized to award grants to persons engaged in
commercial fisheries for uninsured losses determined by the Secretary
to have been suffered as a direct result of a fishery resource
disaster. Funds may be distributed by the Secretary only after notice
and opportunity for public comment of the appropriate limitations,
terms, and conditions for awarding assistance under this section.
Assistance provided under this section is limited to 75 percent of an
uninsured loss to the extent that such losses have not been compensated
by other Federal or State Programs.
(b) Funds for interstate commissions. Funds authorized to support
the efforts of the three chartered Interstate Marine Fisheries
Commissions to develop and maintain interstate fishery management plans
for interjurisdictional fisheries will be divided equally among the
Commissions.
Sec. 253.54 Administrative requirements.
Federal assistance awards made as a result of this Act are subject
to all Federal laws, Executive Orders, Office of Management and Budget
Circulars as incorporated by the award; Department of Commerce and NOAA
regulations; policies and procedures applicable to Federal financial
assistance awards; and terms and conditions of the awards.
[FR Doc. 2010-31641 Filed 12-15-10; 8:45 am]
BILLING CODE 3510-22-P