[Federal Register Volume 65, Number 97 (Thursday, May 18, 2000)]
[Rules and Regulations]
[Pages 31430-31454]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-12159]


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DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

15 CFR Part 902

50 CFR Part 600

[Docket No. 980812215-0109-02; I.D. 072898D] 648-AK76


Magnuson-Stevens Act Provisions; Fishing Capacity Reduction 
Program

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

ACTION: Interim final rule; request for public comments.

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SUMMARY: NMFS issues interim final framework regulations specifying 
procedures for requesting and conducting fishing capacity reduction 
programs (reduction programs). A reduction program pays harvesters in a 
fishery with too much fishing capacity either to surrender their 
fishing permits for that fishery or both to surrender all their fishing 
permits and withdraw their fishing vessels from all fishing. Reduction 
costs can be paid by post-reduction harvesters, taxpayers, or others. 
The intent is to decrease excess harvesting capacity, increase the 
economic efficiency of harvesting, and facilitate the conservation and 
management of fishery resources in each fishery in which NMFS conducts 
a reduction program.

DATES: This interim final rule is effective June 19, 2000. Comments 
must be received on or before June 19, 2000.

ADDRESSES: Copies of the Regulatory Impact Review may be obtained from 
Michael L. Grable, Chief, Financial Services Division, NMFS, 1315 East-
West Highway, Silver Spring, MD 20910-3282. Written comments should be 
sent to Michael L. Grable at the above address. Comments also may be 
sent, via facsimile, to (301) 713-1306. NMFS will not accept comments 
sent by e-mail or the Internet. Comments involving the reporting burden 
estimates or any other aspects of the collection of information 
requirements contained in this interim final rule should be sent to 
both Michael L. Grable and to the Office of Information and Regulatory 
Affairs, Office of Management and Budget (OMB), Washington, D.C. 20503 
(ATTN: NOAA Desk Officer).

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

SUPPLEMENTARY INFORMATION:

Background

    Many U.S. fisheries have excess fishing capacity. Excess fishing 
capacity decreases earnings, complicates management, and imperils 
conservation. To provide for fishing capacity reduction programs, 
Congress amended the Magnuson-Stevens Fishery Conservation and 
Management Act (Magnuson-Stevens Act) by adding section 312(b)-(e) (16 
U.S.C. 1861a(b)-(e)). To finance reduction costs, Congress amended 
Title XI of the Merchant Marine Act, 1936 (Title XI), by adding new 
sections 1111 and 1112. The Title XI provisions involving fishing 
capacity reduction loans have been codified at 46 U.S.C. App. 1279f and 
g.
    This action adds a subpart L to 50 CFR part 600 establishing 
framework regulations for requesting and conducting fishing capacity 
reduction programs. These framework regulations were published as a 
proposed rule on February 11, 1999 (64 FR 6854-6869), with a public 
comment period that ended on April 12, 1999.
    While NMFS received numerous comments on the proposed rule 
(addressed in more detail below), it believes further comment on the 
revised capacity reduction referenda provisions would be useful.

Comments on Proposed Rule and Responses

    NMFS received comments from 24 entities. Most of the comments are 
from organizations that represent the views of many parties. All but 
one of the comments supported fishing capacity reduction, although many 
comments disagreed with some aspects of the proposed rule. The 
following summarizes the comments and gives NMFS' responses.

[[Page 31431]]

    Comment Issue 1: Five comments addressed interest rates for loans 
financing capacity reduction costs.
    Three comments said that a reduction loan interest rate 2 percent 
higher than the interest cost for borrowing loan capital from the U.S. 
Treasury is unnecessary, burdensome, and counterproductive.
    One comment said that the interim final rule should state whether 
the reduction loan interest rate is fixed or adjustable and that the 
interest rate projected for reduction planning purposes can change 
before reduction implementation.
    One comment said that there should be no interest prepayment 
penalties.
    Response: A reduction loan interest rate 2 percent higher than 
NMFS' interest cost is required by the statute (46 U.S.C. App. 1279g).
    Reduction loan interest rates depend on prevailing yields on 
comparable maturity Treasury obligations at the time the U.S. Treasury 
Department establishes the interest rate NMFS must pay on loan capital 
borrowed from the U.S. Treasury. The actual interest rate NMFS charges 
for a specific reduction loan could be higher or lower than the 
interest rates projected for reduction planning purposes. The 
projection of an interest rate could occur many months before the 
disbursement of reduction loan funds. The interim final rule revises 
the proposed rule to more fully address this issue (see 
Sec. 600.1012(b) and (c) and the definition of ``Treasury percentage'' 
in Sec. 600.1000).
    All reduction loan interest rates are fixed rather than adjustable. 
There is no prepayment penalty.
    Comment Issue 2: Ten comments involved the reduction program 
process.
    Six comments said that referenda about industry fee systems should 
occur earlier in the reduction process. Most believed that, until 
referenda first demonstrate the fishing industry's willingness to pay 
for financed reduction programs, fishery management councils (FMCs) 
will be reluctant to process fishery management plan (FMP) amendments 
complementing reduction programs and industry will be reluctant to 
submit reduction bids. Some also believed that industry will be 
reluctant to prepare business plans until after successful referenda.
    Three comments said that the reduction process would be shorter if 
all its components were concurrent.
    One comment said that the process for reduction loans should be 
kept as simple as possible, or the fishing industry will seek 
subsidized reduction programs rather than financed ones.
    Two comments said that pre-bidding referenda should involve ranges 
of projected reduction results, with a minimum acceptable level.
    Response: NMFS based the proposed rule's process for financed 
reduction programs on two concepts. First, industry reduction 
proponents and an FMC should demonstrate their commitment to a 
reduction program by establishing, at the time of making a reduction 
program request, everything necessary for prompt and reliable reduction 
program completion. Second, reduction bidding results need to be known 
before a referendum asks post-reduction harvesters to commit themselves 
to repaying a reduction loan.
    NMFS acknowledges that FMCs may be reluctant to invest the time and 
resources necessary to prepare and process FMP reduction amendments, 
and industry may be reluctant to submit reduction bids, unless 
referenda have first demonstrated the industry's willingness to pay for 
financed reduction programs. The interim final rule revises the 
proposed rule in many places to better address these concerns (see, 
particularly, Sec. 600.1010).
    The interim final rule provides for pre-bidding referenda and, if 
necessary, a post-bidding referendum as well. The necessary pre-bidding 
referendum can occur at any time after an FMC requests a reduction 
program and before NMFS proposes a plan and regulations to implement 
the program. Each pre-bidding referendum is based on a reduction loan 
amount not greater than the maximum specified in the business plan 
being sufficient to reduce at least the minimum amount of fishing 
capacity specified in the business plan. A post-bidding referendum 
occurs only if the maximum reduction loan amount is insufficient to 
reduce at least the minimum amount of fishing capacity.
    If an initial pre-bidding referendum occurs before the FMC adopts 
any FMP reduction amendment necessary, the referendum is based on the 
FMP reduction amendment that the business plan specifies. If 
afterwards, the referendum is based on the FMP reduction amendment that 
the FMC adopts.
    If the initial pre-bidding referendum is successful, the reduction 
process proceeds. If the referendum precedes any FMP reduction 
amendment necessary, a second pre-bidding referendum is required if, in 
NMFS' judgment, the adopted FMP reduction amendment differs materially 
from the FMP reduction amendment that the business plan specifies. A 
material difference would, for example, be a post-reduction harvesting 
allocation for the harvesters who must repay a reduction loan that is 
less than the allocation specified in the business plan. The second 
pre-bidding referendum is to determine whether the referendum voters 
approve an industry fee system despite any such material difference.
    If the initial pre-bidding referendum is unsuccessful, the 
reduction process then either ceases or is suspended pending an 
appropriate amendment of the business plan.
    The interim final rule requires the business plan to specify the 
maximum amount of a reduction loan and the minimum amount of fishing 
capacity this must be sufficient to reduce. The interim final rule also 
requires the business plan to provide guidance about when pre-bidding 
referenda should occur.
    Under the interim final rule, a reduction request from an FMC based 
on a business plan serves as the FMC's endorsement, in principle, of 
all aspects of the business plan that depend on the FMC's action (see 
Sec. 600.1003(g)). Endorsement in principle does not, however, mean 
that the FMC will eventually vote to recommend implementing the 
business plan's concept of an FMP reduction amendment. Implementing any 
FMP reduction amendment necessary remains subject to all the 
requirements applicable to all other FMP amendments. Endorsement in 
principle merely means that the FMC has taken whatever action the FMC 
deems necessary to endorse the business plan (including the business 
plan's proposed FMP reduction amendment) by requesting NMFS to initiate 
a reduction program based on the business plan. Subsequent 
consideration, in accordance with the ordinary Magnuson-Stevens Act 
process, of the FMP reduction amendment may result either in no FMP 
amendment or one that differs from the business plan specifications.
    Nevertheless, an FMC may not make a reduction request based on a 
business plan that the FMC does not endorse in principle. If an FMC 
cannot endorse the business plan in principle, the FMC should not make 
a reduction request.
    If reduction bidding achieves, with a reduction loan not greater 
than the maximum amount that the business plan specifies, at least the 
minimum amount of fishing capacity reduction that the business plan 
specifies, then a post-bidding referendum does not occur. A post-
bidding referendum occurs only if bidding does not achieve at least the 
minimum reduction for not more than the maximum reduction loan.

[[Page 31432]]

Any necessary post-bidding referendum is to determine whether the 
referendum voters approve an industry fee system for a reduction less 
than the minimum.
    This pre- and post-bidding approach should solve several problems. 
First, the approach should solve the problem of an FMC not wanting to 
make a large time and resource investment in an FMP reduction amendment 
without assurance that the industry is willing to repay a reduction 
loan. The business plan's survey (Sec. 600.1003(n)(12) in the interim 
final rule) of potential referendum voters should provide an FMC with 
enough assurance for the FMC to make a reduction request based upon 
that business plan. A successful pre-bidding referendum reinforces this 
assurance before an FMC invests time and resources in an FMP reduction 
amendment.
    Second, allowing a second pre-bidding referendum should solve the 
problem of an actual FMP reduction amendment that differs materially 
from the FMP reduction amendment specified in the business plan.
    Third, allowing a post-bidding referendum should solve the problem 
of reduction bidding results that do not achieve at least the minimum 
amount of fishing capacity reduction that the business plan specifies 
for a reduction loan whose principal amount is not greater than the 
maximum that the business plan specifies.
    Finally, the approach eliminates the need for a linear processing 
sequence that precludes concurrent work on different parts of the 
reduction process. The revision allows the FMP reduction amendment 
process to proceed concurrently with the rest of the reduction process 
that occurs before NMFS proposes a plan and regulations to implement a 
reduction program. All other components of the reduction process, up to 
NMFS' publication of a plan and regulations implementing each reduction 
program, may now occur before an FMC prepares and processes, and NMFS 
approves, an FMP reduction amendment. The FMP reduction amendment must 
still, however, be in place before NMFS proposes the reduction plan and 
implementing regulations.
    A completed business plan, however, remains essential both to an 
FMC's reduction request and the pre-bidding referendum that follows. 
Without a completed business plan, the FMC cannot fully know what it is 
endorsing in principle, NMFS does not fully know what the FMC and the 
industry is requesting, and referendum voters do not fully know for 
what they are voting.
    The interim final rule requires that the business plan specify the 
maximum reduction cost and the minimum reduction that must be achieved 
for that cost. This achieves the same result as specifying ranges of 
projected reduction results, with a minimum acceptable level.
    Comment Issue 3: Five comments involved payment and collection of 
the reduction loan repayment fee.
    All 5 comments, to one degree or another, said that the proposed 
rule's fee payment and collection provisions are too costly, 
burdensome, or complicated.
    One comment said that fish buyers in California, Washington, and 
Oregon collect other fees for state and industry groups, and that the 
interim final rule should allow the payment and collection of the 
reduction loan repayment fee to conform to established regional 
practices.
    One comment said that the fee payment and collection provisions 
provide an incentive for ``kickbacks'' based on misreported fish 
deliveries, and that this could change the assumptions upon which 
accurate catch reporting depends.
    One comment said that these provisions do not accommodate fish 
buyers paying for fish on a periodic, rather than a trip, basis.
    One comment said that collecting the fee that repays reduction 
loans is not the fish buyers' business, and that the fish buyers' cost 
of collecting the fee could itself be considered an illegal fee under 
the Magnuson-Stevens Act.
    One comment said that, because bank rules about interest bearing 
accounts vary widely from state to state, some fish buyers might be 
able to offset some fee collection costs by interest earnings while 
others might not. The comment said that this violates section 301(a)(4) 
of the Magnuson-Stevens Act.
    One comment said that fee collection audits are unrestricted.
    One comment said that fish buyers are the enforcers of fee 
collection, without protection against fish sellers who might sue them. 
If a fish buyer deducts the fee over a fish seller's protest, the fish 
buyer risks the fish seller's legal action. Fish buyers refusing to buy 
fish from fish sellers who refuse to pay the fee (the alternative to 
deducting the fee over the fish seller's protest) is inconsistent with 
the business of buying fish.
    One comment said that the proposed rule's provision about state 
confidentiality requirements not preventing NMFS' access to fish 
tickets places fish buyers in an impossible position.
    One comment said that many fish buyers will be unaware of their fee 
collection responsibilities.
    Response: The proposed rule is a framework rule involving matters 
common to all reduction programs. Some aspects of a framework rule will 
apply, without exception, to all reduction programs. Other aspects of 
the framework rule may be inappropriate for application to some 
reduction programs in some reduction fisheries. Nevertheless, these 
aspects provide a framework against which everyone can measure the 
circumstances of different reduction programs in different reduction 
fisheries. The rule's fee collection, deposit, disbursement, 
accounting, record keeping, and reporting procedures are of the latter 
type. Sec. 253.27(q)(10), Sec. 253.36(f), and Sec. 253.37(h) of the 
proposed rule provide sufficient opportunity for approaches in each 
reduction program different from the framework approach. Nevertheless, 
the interim final rule revises the proposed rule to require business 
planners to consult with fish buyers before including in their business 
plan any special circumstances in their reduction fishery that might 
require some fee provisions different from the framework provisions 
(see Sec. (n)(9)). Thus, the interim final rule provides opportunity 
for reduction program to accommodate the circumstances of, and 
practices, in different fisheries as long as accommodation does not 
jeopardize the intent and purpose of the framework rule provisions.
    There are substantial penalties for misreporting catches and 
otherwise failing to pay and collect the fees due. The rule's fee 
accounting and reporting provisions require documentation that provides 
ample audit opportunity, and NMFS intends to audit sufficiently to 
ensure compliance.
    NMFS believes the time at which fish sellers deliver fee fish to 
fish buyers is the most appropriate time for the fish sellers to pay 
and the fish buyers to collect the fee. The interim final rule, 
however, revises the proposed rule to provide for paying and collecting 
fees on bonuses at the time the bonuses first become known rather than 
at the time the fish sellers deliver the fee fish involving the bonuses 
to fish buyers (see Sec. 600.1013(c)(2)).
    The Magnuson-Stevens Act requires fish buyers to collect the fee. 
Interest earnings on collected fee revenues might allow, depending on 
state banking regulations, some fish buyers to offset some of the costs 
of discharging this statutory obligation.
    A reduction loan can involve up to $100 million repaid on a 
incidental

[[Page 31433]]

basis amortized over 20 years by many fish sellers, and collected by 
many fish buyers, as a small percentage of variable revenue from many 
fishing trips. This loan collection environment is susceptible to 
considerable nonperformance and fraud. Due diligence requires audit 
and, where necessary, enforcement.
    Auditing is not, however, unrestricted. The rule restricts audits 
to those ``reasonably necessary...to ensure proper fee payment, 
collection, deposit, disbursement, record keeping, and reporting.'' The 
rule also restricts audits to ``reasonable times and places...'' NMFS 
does not intend any greater auditing burden than reasonable due 
diligence requires for the proper repayment of reduction loans. Audits 
may either be random (deterrent) or triggered by circumstances that 
indicate fee payment and collection activities inconsistent with this 
rule's requirements, but will not be more frequent or burdensome than 
needed to fulfill due diligence.
    NMFS does not anticipate that fish sellers will violate these 
regulations by refusing to pay the fee. If any do, this does not excuse 
fish buyers from failing to comply with these regulations, either by 
collecting the fee over the fish seller's protest or by refusing to buy 
fish from fish sellers from whom fish buyers are unable to collect the 
fee as the Magnuson-Stevens Act requires.
    The interim final rule does not contain the proposed rule's 
provision about fish tickets and state confidentiality requirements.
    The interim final rule requires fish buyers to maintain the records 
and to submit the reports specified in Sec. 600.1014(d) (or whatever 
alternative records and reports might be specified, under 
Sec. 600.1014(j), in the implementation regulations for each reduction 
program). If landing records that a state requires contain some or all 
of the data that Sec. 600.1014(d) requires and state confidentiality 
provisions do not prevent NMFS' access to the records maintained for 
the state, then fish buyers can use those records to meet appropriate 
portions of the Sec. 600.1014(d) requirements. If, however, state 
confidentiality provisions make those records unavailable to NMFS, then 
fish buyers will be required to maintain separate records that meet the 
requirements of Sec. 600.1014(d).
    Where it becomes necessary to audit the reports that fish buyers 
submit in compliance with Sec. 600.1014(d), trip tickets (or equivalent 
accounting records establishing the pounds of fee fish purchased and 
the price paid) are essential audit documentation. If, for any reason, 
any state law or regulation makes it illegal for fish buyers to keep 
separate records that involve some or all of the same data as the 
landing records that the fish buyers keep for state purposes, then a 
financed reduction program will not be possible unless there is a 
change in the state law or regulations to give NMFS access to the 
records necessary for administration of reduction loans. The interim 
final rule revises the proposed rule accordingly (see 
Sec. 600.1003(n)(11)(i) and Sec. 600.1014(f) and (g)).
    Existing regulations require many fish buyers to have dealer 
permits, so NMFS often knows who the authorized fish buyers are. The 
rule also requires each business plan to include information about fish 
buyers who can, after reduction, reasonably be expected to have fee 
collection responsibilities. The rule requires NMFS to notify, both by 
a Federal Register notice and by mailed notification to fish buyers of 
whom NMFS is aware, all fish buyers about their fee collection 
responsibilities.
    Comment Issue 4: Four comments involved exempting reduction 
requests preceding publication of the proposed rule from some aspects 
of the interim final rule.
    All four comments generally said that various parties had expended 
much effort and expense on two reduction requests that substantially 
preceded NMFS's publishing the proposed rule. The proposed rule 
required the FMCs and the business planners for these two reduction 
requests to start at the beginning of a process of which they were 
unaware before NMFS published the proposed rule. Thus, these parties 
would have to expend additional time and money for the sole purpose of 
resubmitting their requests to conform with the interim final rule. 
This may be inequitable, because NMFS assured the parties involved that 
the lack of a proposed rule would not deter NMFS from processing their 
reduction requests as far as possible without a interim final rule. The 
interim final rule should ensure expeditious consideration of these two 
reduction requests.
    Response: On November 27, 1997, the Pacific FMC submitted a request 
for a financed reduction program in the fishery for Pacific coast 
groundfish (limited entry trawl fishery). On October 10, 1997, the 
North Pacific FMC submitted a request for a financed reduction program 
in the fishery for Bering Sea and Aleutian Islands king and tanner 
crab. Industry proponents have since prepared business plans for each 
of these requests. The business planners and the FMCs have already 
expended considerable effort on these business plans and reduction 
requests. Both requests and their acceptances preceded, by many months, 
the publication of the proposed rule. NMFS agrees that it is 
counterproductive to now require the FMCs to resubmit these two 
reduction requests. The FMCs do not, consequently, have to resubmit 
these two reduction requests in accordance with the process in the 
interim final rule. However, the business planners and the FMCs will 
have to submit some additional information required by the interim 
final rule. After review of both plans and the interim final rule, NMFS 
will specify this additional information.
    Comment Issue 5: Six comments concerned proposed rule provisions 
that allow financed reduction programs to involve only fishing permits 
in the reduction fishery, rather than requiring reduction programs to 
involve all fishing permits held by reduction program participants. 
These comments were evenly divided between supporting and opposing 
these provisions.
    Three comments supported the proposed rule provisions. These 
comments generally said that it is impractical and unreasonable to 
require post-reduction harvesters in reduction fisheries to pay for the 
cost of reducing fishing permits in non-reduction fisheries, and 
otherwise agreed with the proposed rule's preamble discussion of this 
aspect.
    Three comments opposed the proposed rule provisions. These comments 
generally said that reducing only the fishing permits in the reduction 
fishery causes reduction program fishing vessels to shift their effort 
from the reduction fishery to any non-reduction fisheries for which the 
vessels also have fishing permits. The goal of each reduction program 
should be removing the fishing capacity involved in a reduction program 
from all fishing rather than just fishing in the reduction fishery. To 
enable this result, one of these comments said that the interim final 
rule must define the term ``fishery'' differently than the Magnuson-
Stevens Act does.
    One comment said that the proposed rule provisions are inconsistent 
with the objective in section 312(b)(2) of the Magnuson-Stevens Act 
because the proposed rule provisions merely shift reduction costs to 
other fisheries in which reduction participants' vessels might also 
have fishing permits rather than obtaining the maximum sustained 
reduction in fishing capacity at the least cost.
    Another comment said that all reduction programs should involve

[[Page 31434]]

analysis of the reduction programs' impact on non-reduction fisheries 
and that it is unacceptable and contrary to the Magnuson-Stevens Act 
for improvements in a reduction fishery to occur at the expense of any 
other fishery.
    Response: The Magnuson-Stevens Act authorizes conducting reduction 
programs, like fishery management plans, on a fishery-by-fishery basis. 
Each reduction program must occur within a fishery that meets the 
Magnuson-Stevens Act's definition of ``fishery''. This requires each 
reduction program to occur in ``one or more stocks of fish which can be 
treated as a unit for purposes of conservation and management and which 
are identified on the basis of geographical, scientific, technical, 
recreational, and economic characteristics...'' and to involve 
``fishing for such stocks...'' The objective in section 312(B)(2) of 
the Magnuson-Stevens Act relates to each reduction program in each 
reduction fishery.
    While section 312(b)(2)(A) of the Magnuson-Stevens Act authorizes 
reductions that include both fishing permit revocations and fishing 
vessel scrappings (or title restrictions that prevent future fishing), 
section 312(b)(2)(B) also authorizes reductions that are restricted to 
fishing permit revocations alone.
    In a financed program, the post-reduction harvesters in the 
reduction fishery are paying for fishing capacity reduction. They are 
retiring excess capacity in their fishery. The Government is simply 
lending them the money to do this. NMFS should not require a borrower 
composed of post-reduction harvesters to spend any of the borrower's 
reduction loan proceeds on reducing fishing capacity that the borrower 
does not want to reduce. This includes reducing capacity in non-
reduction fisheries, which benefits parties other than the borrower.
    In a subsidized program, however, the taxpayers are paying the cost 
of reducing fishing capacity. The taxpayers can choose, through their 
Government, the fishing capacity reduction alternative that provides 
the broadest fishery conservation and management benefit. This may 
include withdrawing fishing vessels (either by scrapping them or 
imposing title restrictions that prevent their fishing) and revoking 
all fishing permits associated with the scrapped vessels that are not 
individually transferable. Individually transferable fishing permits in 
non-reduction fisheries could not, however, be revoked as part of such 
a reduction program (because these permits may be used by vessels other 
than the vessels whose fishing is prevented by scrapping or title 
restriction). Revoking individually transferable fishing permits in 
non-reduction fisheries would require separate reduction programs in 
the non-reduction fisheries involved.
    A financed reduction program is, in essence, a contribution from 
post-reduction harvesters in a reduction fishery to fisheries 
conservation and management in that fishery. It is a contribution that 
is in the best economic interest of the post-reduction harvesters, but, 
nonetheless, it is their voluntary contribution. NMFS should not limit 
the opportunities for satisfying the statutory purposes by requiring 
post-reduction harvesters willing to repay the cost of buying and 
retiring fishing permits in their reduction fishery to also pay the 
cost of buying and retiring fishing permits in non-reduction fisheries. 
It is not in the taxpayers' interest to do so, because the net effect 
may be to limit most reduction programs to those whose entire cost the 
taxpayers bear. This is true because harvesters in reduction fisheries 
are generally unlikely to approve industry fee systems in reduction 
fisheries for repaying reduction loans that benefit harvesters in non-
reduction fisheries.
    In the interim final rule's revision of the proposed rule, business 
planners have the option of reducing only fishing permits in the 
reduction fishery or both doing that and withdrawing fishing vessels by 
scrapping or title restriction. The latter enables the revocation of 
all permits, except individually transferrable ones in non-reduction 
fisheries, associated with withdrawn vessels. Although business 
planners may voluntarily choose to withdraw fishing vessels, either by 
scrapping them or imposing title restrictions that prevent their 
fishing, FMCs may not require business planners to do so.
    There is, however, one exception where a financed reduction program 
should always include the reduction of fishing permits that involve 
species other than those in the reduction fishery. That exception is 
fishing permits that merely allow the incidental catch of non-reduction 
species during directed fishing for reduction species. Once the 
directed fishing permits are bought and retired, the incidental fishing 
permits are of no further use. In addition to being useless, the 
incidental fishing permits were always a corollary of the directed 
fishing permits, and should be revoked along with the directed fishing 
permits. Accordingly, the interim final rule revises the proposed rule 
in this respect (see Sec. 600.1011(d)).
    The interim final rule also revises the proposed rule to require 
business planners and FMCs to consider the effect on non-reduction 
fisheries of financed reduction programs that involve only fishing 
permits in the reduction fishery (see Sec. 600.1003(l) and 
Sec. 600.1003(n)(9)).
    NMFS notes that there may be other potential alternatives to deal 
with this situation. One alternative might be combining fisheries for 
fishery conservation and management purposes, which might then allow a 
financed reduction program to relate to the combined fishery rather 
than just to one of the fisheries. Another alternative might be 
conducting a separate financed (indeed, even subsidized) program in a 
fishery that a reduction program in another fishery affects. Both these 
potential alternatives would avoid one group of post-reduction 
harvesters paying for another group's benefit.
    Comment Issue 6: Two comments concerned post-reduction fish 
allocations in financed reduction programs that do not involve all the 
harvesters in the reduction fishery. For example, say, a reduction 
fishery involves both longline and pot gear, but the financed reduction 
program in that reduction fishery involves only fishing permits for the 
longline gear.
    One comment supported, and one comment opposed, allocations of this 
type and the proposed rule's treatment of this issue. The supporting 
comment said that allocation of the post-reduction resource protects 
the investment of the post-reduction harvesters who must repay a 
reduction loan as well as the interest as the Federal Government in 
ensuring the reduction loan's repayment. The opposing comment said that 
the allocation might damage the operators of non-reduction fishing gear 
who may have been less responsible for overfishing and, thus, creating 
the crisis in the fishery to which the financed reduction program 
relates.
    Response: NMFS believes post-reduction allocation is essential in 
financed reduction programs that involve fewer than all the harvesters 
in a reduction fishery.
    Assume that a fishery is composed of ``A'' gear fishermen and ``B'' 
gear fishermen, each group has a pre-reduction allocation equal to 50 
percent of the fishery's total allowable catch, and the ``A'' gear 
fishermen encumber themselves with a 20-year debt to pay for buying and 
retiring 50 percent of the ``A'' gear fishing permits. Unless their 
post-reduction allocation stays at 50 percent of the fishery's total 
allowable catch, there is no economic incentive for the ``A'' gear 
fishermen to pay for

[[Page 31435]]

buying half of the pre-reduction ``A'' gear fishing permits. Similarly, 
neither does the government have the requisite assurance that up to 5 
percent of the ``A'' gear fishermen's post-reduction trip proceeds will 
be sufficient to repay the reduction loan over a 20-year period. 
Without post-reduction allocations, there is little economic incentive 
either for the reduction borrowers to borrow or for the reduction 
lender to lend, and the taxpayers may, consequently, be called upon to 
pay for most reduction programs of this type.
    Moreover, it is inequitable for ``A'' gear fishermen to pay for a 
benefit that ``B'' gear fishermen receive without payment. Business 
plans for, and FMPs complementing, financed reduction programs that 
involve only one of several gear types within a reduction fishery must 
adequately address this critical issue sufficiently to provide economic 
incentive both for reduction borrowers and the reduction lender.
    Financed reduction programs cannot usefully address the possibility 
that allocations to gear operators who some perceive as less 
responsible harvesters may have impacted allocations to other gear 
operators who some perceive as more responsible harvesters.
    Comment Issue 7: Two comments involved consultation with fishing 
communities and other interested parties during reduction program 
development. One comment pointed out, in the context of reduction 
programs that involve only fishing permits in a reduction fishery, that 
the law requires this consultation. The other comment said that, if 
NMFS consults with conservation organizations (and other interested 
parties who are, presumably, not directly involved in the reduction 
fishery), ``those entities must have their own substantiated fishery 
and economic data base [sic] to be considered a valid consulting 
participants [sic], or we will challenge their participation. No more 
rhetoric of how many people they represent, they will deal in facts and 
not personal agenda generalities.''
    Response: The statutory reduction provisions require consultation 
``as appropriate, with Councils, Federal agencies, State and regional 
authorities, affected fishing communities, participants in the fishery, 
conservation organizations, and other interested parties throughout the 
development and implementation of any...'' reduction program.
    Comment Issue 8: One comment addressed the potential for the 
eventual replacement of the fishing capacity that reduction programs 
remove from reduction fisheries (and other comments also indirectly 
involved this issue). The comment expressed concern about the potential 
for post-reduction fishing capacity to gradually expand through the 
post-reduction adoption of new technology and the pre-reduction 
existence of latent fishing capacity. This comment said that analysis 
of the Fishing Capacity Reduction Demonstration Program and the Fishing 
Capacity Reduction Initiative in the Northeast multispecies fishery 
suggests that the existence of significant latent fishing capacity will 
result in little or no long-term reduction in the multispecies 
fishery's fishing capacity.
    Response: The reduction programs in the Northeast multispecies 
fishery were authorized under the Interjurisdictional Fisheries Act 
rather than under the Magnuson-Stevens Act. The Interjurisdictional 
Fisheries Act does not address the issue involved in this comment, but 
the reduction provisions of the Magnuson-Stevens Act do. The reduction 
provisions of the Magnuson-Stevens Act require FMPs for reduction 
fisheries to prevent the replacement of fishing capacity removed by the 
program through a moratorium on new entrants, restrictions on vessel 
upgrades, and other effort control measures, taking into account the 
full potential fishing capacity of the fleet (16 U.S.C. 
1861a(b)(1)(B)(i)).
    The proposed rule addresses this statutory provision by requiring 
each reduction request (and, in the instance of financed reduction 
programs, each business plan) to demonstrate how the FMP complies with 
this statutory provision or will comply with it after an FMP reduction 
amendment. The interim final rule continues this requirement.
    Comment 9: NMFS should evaluate the efficacy of each reduction 
program two years after the reduction program's implementation. The 
evaluation should help identify areas where capacity leaks back into 
the fishery and will help in designing future reduction programs. It 
will take a few more reduction programs to iron out the difficulties in 
designing efficient reduction programs, and post-program evaluation 
will be critical.
    Response: NMFS agrees. NMFS will include post-reduction evaluations 
as part of the SAFE reports under 50 CFR 600.315(e).
    Comment 10: Reduction is an extremely valuable tool to remove 
capital from fisheries in a rational and orderly fashion. Many of the 
proposed rule's elements will allow capacity reduction to move forward.
    Response: NMFS agrees.
    Comment 11: The proposed rule does not define ``capacity''. If this 
is intentional in order to provide flexibility in constructing 
reduction programs this should be stated. The proposed rule's preamble 
uses ``excess capacity'', but does not define the term. ``Excess 
capacity'' could mean either that there are more vessels than necessary 
for maximum economic efficiency or that the capacity exceeds the 
resource's ability to support the capacity. The use of ``full potential 
fishing capacity'' highlights this problem. Defining these terms has 
enormous implications for interpreting the regulations and these 
definitions should undergo public comment before their adoption. 
Alternatively, the interim final rule should state that definitions for 
these terms will be included in the program implementation regulations.
    Response: The term ``excess capacity'' did not appear in the 
proposed rule (the term appeared only once in the proposed rule's 
preamble).
    The statutory term ``full potential fishing capacity'' appeared 
once in the proposed rule (in the definition of the term ``non-
replacement requirement'') and once in the proposed rule's preamble.
    The appropriate context in which to make distinctions between 
concepts like ``more vessels in a fishery than are necessary for 
maximum economic efficiency'' and ``capacity in the 
fishery...[exceeding] what the resources can support'' is 
implementation of the Magnuson-Stevens Act's provision that authorizes 
a reduction program only if the reduction program ``is necessary to 
prevent or end overfishing, rebuild stocks of fish, or achieve 
measurable and significant improvements in the conservation and 
management of the fishery.'' Each reduction program must meet one of 
these criteria. For the sake of flexibility, NMFS does not qualify 
these criteria further. Each reduction request must make its best case 
on the merits of the request's own particulars.
    Comment 12: ``Reduction fishery'' traditionally refers to fisheries 
that convert fish to meal and/or oil. Substitute ``buyback fishery'' 
for ``reduction fishery''.
    Response: ``Fishing capacity reduction'' is the operative statutory 
term. NMFS chose, for brevity's sake, to define a fishery in which 
reduction is proposed or occurs as a ``reduction fishery'' rather than 
a ``fishing capacity reduction fishery''. The interim final rule 
defines the term ``reduction fishery'' sufficiently to distinguish this 
term from a fishery involving the production of fish meal and oil.
    Comment 13: The interim final rule should ``include criteria that 
will be used to determine...'' a reduction loan's

[[Page 31436]]

repayment period. A repayment period can be longer than the maximum 5 
percent repayment fee might otherwise indicate.
    Response: The amount annually required to service debt is a 
function of principal, interest, and the repayment term. Business 
planners must propose an annual reduction loan debt service burden that 
post-reduction harvesters are likely to be willing to undertake in 
return for a finite reduction in fishing capacity. Harvester referenda 
must subsequently approve this. Subject to the statutory constraints 
(maximum 5 percent fee and maximum 20-year repayment period), NMFS will 
accommodate each business plan's debt service proposal unless the 
circumstances of the reduction program involved clearly warrant doing 
otherwise.
    Comment 14: Failure to address how in-kind compensation (e.g., dock 
space, ice) affects the delivery value used to calculate the reduction 
loan repayment fee could result in ``creative reimbursement 
arrangements to avoid fees.'' The interim final rule should avoid this 
result by addressing this issue.
    Response: The fee rate required to repay reduction loans is applied 
to ``delivery value''. The proposed rule's definition of ``delivery 
value'' excludes in-kind compensation because ``delivery value'', as 
defined in the proposed rule, is the ``full, fair market value...in an 
arm's length transaction...'' Full, fair market value in an arm's 
length transaction cannot, by definition, include in-kind compensation. 
In-kind compensation cannot, consequently, be used to avoid the fee. 
Nevertheless, the interim final rule revises the proposed rule's 
definition of ``delivery value'' to clarify that the term includes 
``the value of in kind compensation or all other goods or services 
exchanged in lieu of cash.'' (see the definition of ``delivery value'' 
in Sec. 600.1000).
    Comment 15: The proposed rule's definition of ``fee fish'' requires 
fishing vessels in a post-reduction fishery to pay the reduction loan 
repayment fee on fish harvested incidentally to the targeted reduction 
species. The definition of this term should allow each reduction 
program to define the ``fee fish'' that will be used to calculate the 
fee. Some fisheries may have an incidental catch of ``fee fish'', and 
the interim final rule should ``clearly state that incidental catches 
in non reduction program fisheries are not subject to the fee unless 
those fisheries are included in the referendum for a financed reduction 
program.''
    Response: The term ``fee fish'', as defined in the interim final 
rule, means all fish harvested from the reduction fishery. The term fee 
fish excludes fish harvested incidentally while fishing for fish not 
included in the reduction fishery. The term ``reduction fishery'', as 
defined in the interim final rule, means the fishery or portion of a 
fishery to which a program applies. The reduction fishery must specify 
each included species, as well as any limitations by gear type, size of 
fishing vessel, geographic area, and any other relevant factor. Except 
in extraordinary instances, the interim final rule's intent is to limit 
fee fish to those that are directly rather than incidentally harvested.
    Comment 16: The proposed rule requires a reduction request to list 
all parties who are authorized to fish in the proposed reduction 
fishery and to specify the catch allocated to those parties for the 
past five years. The proposed rule also requires a business plan to 
analyze the proposed reduction loan's cost effectiveness based on the 
best historical fishing revenue and expense date available in the 
reduction fishery. NMFS is a likely source for this information, but 
these data are considered confidential at the individual fishing vessel 
level required by the regulations. The regulations in 50 CFR 600 
Subpart E state that this type of information can only be released to 
NMFS employees or contractors, state employees, and Council staff or 
contractors. Thus, business planners will not have access to this 
information. The interim final rule should address this by requiring 
NMFS to provide, in an aggregate form, the data business planners need.
    Response: The proposed rule intends catch allocation data to be 
aggregate data for all parties authorized to fish in the reduction 
fishery rather than individual data for each such party. The interim 
final rule revises the proposed rule to make this intent clearer (see 
Sec. 600.1003(j) and Sec. 600.1005(f)).
    Section 253.27(q)(5)(1) of the proposed rule merely requires that 
business plans include the ``Best historical fishing revenue and 
expense data (and any other relevant productivity measures) available 
in the reduction fishery.'' This neither requires these data to be 
provided at the individual fishing vessel or fishing permit level nor 
requires those data to be identified with specific fishing vessels or 
fishing permits. The interim final rule revises this aspect of the 
proposed rule to clarify that NMFS seeks the ``best and most 
representative historical...data... available...'' (see 
Sec. 600.1003(n)(5)(l)).
    NMFS does not know, in every fishery that may become the subject of 
a reduction request (which includes fisheries managed by states), who 
may have the best available data. NMFS may have these data for some 
fisheries, but may not have them for others. The fishing industry 
itself generally is the source of these data, and, if adequate data 
have not been elsewhere gathered, business planners must arrange to 
make available sufficiently representative data from the industry in 
order to make the business planners' case.
    This aspect of the rule does not require NMFS to violate data 
confidentiality, and NMFS intends, upon request, to make available to 
business planners, in a way that does not violate data confidentiality, 
whatever useful data NMFS has.
    Comment 17: The proposed rule requires the FMCs to provide the 
names and addresses of fishing permit holders authorized to fish in a 
reduction fishery, but NMFS (as the permitting authority) has the most 
current information and should supply the information itself.
    Response: NMFS has these data for fishing permits in Federal 
fisheries. Nevertheless, the referenda aspect of the statutory 
reduction provisions requires NMFS, ``in consultation with the FMC...'' 
to ``identify, to the extent practicable, and notify all permit or 
vessel owners who would be affected by the...'' (16 U.S.C. App. 1861a) 
reduction. The proposed rule was premised on the assumption that an FMC 
would ask NMFS for the data needed to complete this aspect of a 
reduction request, examine the data NMFS provided, and, where 
necessary, consult with NMFS about any aspect of the data before 
confirming the data by including them in a reduction request to NMFS. 
NMFS continues to believe this is the most appropriate approach. 
Moreover, reduction programs can involve state, as well as Federal, 
fisheries, and NMFS may not have these data for fishing permits in 
state fisheries.
    The interim final rule revises the proposed rule to clarify that 
NMFS is a source of Federal fishing permit data (see Sec. 600.1003(i) 
and Sec. 600.1005(e)).
    Comment 18: The proposed rule requires the FMCs to provide the 
names and addresses of likely post-reduction fish buyers, but NMFS has 
this information in NMFS' dealer permit database and should, 
consequently, remove this requirement.
    Response: The proposed rule requires business planners, not FMCs, 
to provide this information (although FMCs must include business plans 
with reduction

[[Page 31437]]

requests). NMFS may not always have these data even for all Federal 
fisheries, let alone state fisheries. Where NMFS has these data, 
however, NMFS will be pleased to supply the data to business planners 
for their review, (where appropriate) revision, and inclusion in their 
business plans. Where NMFS does not have these data, business planners 
must produce the data for inclusion in their business plans.
    Comment 19: Business planners must be able to gauge the amount of 
time NMFS will take to implement reduction. The regulations should 
specify a maximum time for the agency to do this.
    Response: NMFS will process reduction requests as quickly as NMFS 
can, but cannot specify time limits for doing so.
    Comment 20: Reduction amendments to FMPs may not always be 
necessary to accommodate reduction because ``some Councils may be able 
to adjust management plans through a framework adjustment rather than a 
full plan amendment.'' The interim final rule should change ``reduction 
amendment'' to ``reduction amendment or framework adjustment.''
    Response: The interim final rule revises the proposed rule's 
definition of the term ``reduction amendment'' to include framework 
adjustments (see the definition of this term in Sec. 600.1000).
    Comment 21: In some cases, latent fishing permits may be held by 
parties who do not own fishing vessels. The basis of the referendum 
voter lists should be explained (``in particular, whether it is based 
on vessels or permits''). The proposed rule ``does not state if a 
reduction program could apportion voting rights based on landings, 
permit categories, days-at-sea usage, or other criteria.'' Referenda 
results ``may require as much as one-third of the industry to fund a 
program they oppose.'' This could both be unfair and make designing 
successful reductions difficult. In a fishery where the few catch most 
of the fish, the many who catch few of the fish could force the former 
into a reduction they oppose. (The example given is a 100 permit 
fishery where 20 percent of the fishing permit holders catch 80 percent 
of the fish). ``The interim final rule should clearly state how voting 
rights are apportioned...[and should allow apportionment] based on 
relative criteria determined by the designers of the program.'' The 
proposed rule does not specify what happens if an eligible voter is 
inadvertently omitted. The interim final rule should provide for an 
appeal process prior to referendum ballot distribution.
    Response: Referenda voters under the statutory reduction provisions 
are ``permit or vessel owners who would be affected by the program...'' 
The rule mirrors the statutory language by including either fishing 
vessel owners or fishing permit owners as potential referenda voters. 
Nevertheless, because reduction programs can occur only in limited 
access fisheries, NMFS believes referenda voters will always be those 
who hold fishing permits at the time of the referenda.
    The proposed rule requires each reduction implementation plan to 
include the names and addresses of all parties eligible to vote in a 
referendum. The interim final rule, however, revises the proposed rule 
to allow referenda before reduction implementation plans. This requires 
public comment about voter eligibility to occur earlier in the 
reduction process. Consequently, the interim final rule also revises 
the proposed rule to make the names and addresses of eligible voters 
subject to public comment by including them in the Federal Register 
notice that NMFS publishes when NMFS accepts a request for a financed 
reduction program (see Sec. 600.1003(i) and Sec. 600.1004(a)).
    During the proposed rule's formulation, NMFS considered the 
possibility of apportioning referenda votes according to various 
criteria. NMFS believed, however, that the most equitable approach in 
the greatest number of cases is a one fishing permit/one vote rule. 
NMFS still believes this. NMFS believes that the concern in this 
comment might be better addressed by an FMC. This Council, by refusing 
to request a reduction program (based on a business plan that allows 
the many who catch little to force a reduction of their fishing permits 
on the few who catch much) unless it appears to be in the best 
conservation and management interest of the reduction fishery and in 
the best economic interest of all post-reduction harvesters in the 
reduction fishery. However, NMFS does not, for a variety of reasons, 
anticipate that this hypothetical situation will often occur. 
Initiating a financed reduction program requires NMFS, for example, to 
determine that post-reduction harvesters will be able to repay the 
reduction loan. If, prospectively, the cost of buying 80 percent of the 
fishing permits that produce 20 percent of the fish were so high that 
the remaining 20 percent of fishing permit holders could not, with 20 
percent more fish to harvest, reasonably afford to repay that cost over 
20 years at a maximum fee limited to 5 percent of ex-vessel landings, 
then NMFS could decide not to initiate the reduction program.
    Comment 22: The interim final rule should address the impact of 
fishing vessels or fishing permits being sold, bankruptcies, and 
corporate dissolutions during the interim between bid acceptance and 
actual fishing capacity reduction.
    Response: Bids are irrevocable offers. NMFS' acceptance of bids 
creates reduction contracts that entitle NMFS to specific performance 
of the contract obligations. This is as far as NMFS can reasonably go 
to ensure that reduction contracts culminate in the reduction results 
upon which referenda are based. NMFS will, as a matter of course, take 
whatever legal action may be available to NMFS to enforce specific 
performance of reduction contracts, but cannot predict the outcome of 
hypothetical future events. NMFS realizes that some circumstances 
(e.g., bankruptcy) could conceivably delay or prevent NMFS' enforcing 
specific performance, but NMFS will have to deal with these 
circumstances as they present themselves during the conduct of each 
reduction program. Nevertheless, the interim final rule revises the 
proposed rule to more specifically address the impact of these 
potential occurrences (see Sec. 600.1011, particularly Sec. 600.1011(f) 
and (g)).
    Comment 23: ``There may be a long period between bidding and actual 
implementation of the program. While at some point the bidders must 
commit to participation...they should...[be able to] withdraw up to the 
point...referendum ballots are prepared.''
    Response: The proposed rule requires NMFS immediately after bid 
closing to accept bids, notify bidders, and conduct a referendum.
    The proposed rule also requires NMFS to tally all ballots and 
notify all referendum voters, within seven business days after the last 
day for receipt of ballots, of the referendum results.
    Additionally, in response to other comments about the proposed 
rule, the interim final rule revises the proposed rule to restrict 
post-bidding referenda to situations in which bidding results are 
insufficient for the maximum reduction loan amount specified in the 
business plan to reduce the minimum amount of fishing capacity 
specified in the business plan (see Sec. 600.1010(c)).
    NMFS will do everything possible to keep the elapsed time between 
bid closing and actual reduction as short as possible. NMFS fully 
realizes the commercial necessity of doing so.

[[Page 31438]]

    NMFS' reduction experience in the Northeast multispecies fishery 
demonstrates that irrevocable bids are essential to effective 
reduction. Irrevocability will limit bidding to fishing permit or 
fishing vessel owners who are serious about reduction. This will also 
prevent the situation in which bid results that initially conformed 
with a business plan's capacity reduction specifications become 
nonconforming because of subsequent bid withdrawals.
    Comment 24: Invitations to bid ``should include projections of the 
benefits of capacity reduction on the management plan for the subject 
species, notice of possible capital gains tax liabilities, and other 
limitations such as to CCF contributions. This information may not be 
readily apparent to permit holders.''
    Response: The reduction plan that NMFS publishes in the Federal 
Register will, for each financed reduction program, ``describe in 
detail all relevant aspects of implementing...'' each reduction 
program. NMFS believes the reduction plan may be the better place to 
discuss, if appropriate, any matters like those involved in this 
comment. Invitations to bid are contractual in nature, and NMFS 
believes they should focus only on contractual matters.
    Comment 25: The interim final rule ``should specify that NMFS will 
follow established standards for conducting referenda.'' The proposed 
rule does not specify that voting would be conducted by secret ballot, 
but the interim final rule should.
    Response: NMFS does not know to what standards this comment refers. 
The interim final rule revises the proposed rule to clarify ballot 
confidentiality (see Sec. 600.1010(d)(10)).
    Comment 26: Where reduction programs involve withdrawing fishing 
vessels from fishing, the proposed rule requires state registered 
fishing vessels to always be scrapped (rather than either being 
scrapped or having their titles restricted). This complicates reduction 
programs involving both Federally registered and state registered 
fishing vessels, and may increase reduction cost or put owners of 
state-registered fishing vessels at a disadvantage. Some states may 
have the ability to impose title restrictions that will prevent the 
future use of state-registered fishing vessels in other fisheries. 
Fishing vessels not required to be scrapped should not be allowed to be 
sold to other countries if they exacerbate overcapacity in (presumably) 
any other fishery in the world. ``Vessels should also not be allowed to 
be sold to foreigners and then enter a fishery in U.S. waters that may 
not be subject to U.S. jurisdiction.''
    Response: Although some states may have this title-restriction 
ability, NMFS has no way of ensuring that these states will enforce 
such title restrictions for as long as the fishing vessels exist. 
Moreover, little may prevent a fishing vessel owner whose fishing 
vessel title has been restricted in one State from re-registering the 
vessel in another state that cannot or will not similarly restrict the 
vessel's title. Federal title restrictions for Federally-documented 
fishing vessels are effective for reduction purposes, but state title 
restrictions for state-registered fishing vessels may not always be 
effective.
    For the reasons stated in the preamble to the proposed rule, NMFS 
does not believe it should, for fishing vessels involved in financed 
reduction programs, impose any non-statutory use restrictions. No 
foreign country need allow these fishing vessels to be registered under 
the country's national flag or harvest fisheries resources under the 
country's national jurisdiction if the country believes that this 
registration is inconsistent with: the country's economic interests, 
the country's fisheries conservation and management responsibilities, 
the country's obligations under treaties or international law, or any 
other aspect of the country's sovereign affairs. Finally, all vessels 
fishing in U.S. waters are subject to U.S. jurisdiction.
    Comment 27: The interim final rule should state that reduction loan 
repayment is the only basis for post-reduction fee increases. The 
interim final rule should ``describe the criteria NMFS will use to 
increase the fee amount rather than extend the period of the payback... 
This should include a determination that the increased fee will not 
result in a significant impact on ...[post-reduction fishermen or 
communities].''
    Response: The only statutory authority NMFS has for any reduction 
fee (including the subsequent increase of an initial fee) is repayment 
of a reduction loan. Absent specific circumstances that clearly warrant 
the contrary, NMFS has no particular preference, in the instance of a 
reduction loan whose initial maturity was shorter than the statutory 
maximum, for either fee increases or longer repayment periods. NMFS 
will certainly attempt to avoid significantly adverse effects on post-
reduction harvesters and fishing communities, but, where actual gross 
revenue experience in a reduction fishery clearly indicates the 
projected need for a fee increase in order to repay a reduction loan 
within the maximum maturity, NMFS is obliged to increase the fee up to 
and including the maximum fee.
    Comment 28: Harvesters base their referenda votes on the fee rate 
projected to be necessary to repay the reduction loan. Additional fees 
during the time that post-reduction harvesters are paying the reduction 
loan repayment fee may become an economic burden. The interim final 
rule should prohibit the adoption of additional fees (e.g., for 
observer programs, for research or enforcement costs) during the period 
the industry is paying back reduction loan.
    Response: Neither the reduction framework rule nor reduction 
regulations implementing any reduction program can control matters not 
pertinent to fishing capacity reduction. Fees involving matters other 
than the repayment of reduction loans may become necessary or advisable 
at some time during the 20 years during which reduction loans are 
repayable. While NMFS will always attempt to avoid fees that have 
significant adverse impacts, neither the reduction framework rule nor 
reduction program implementation regulation can prohibit whatever non-
reduction fees may become necessary or advisable in the future. 
Furthermore, a reduction program should make the fishery economical and 
paying reduction fees should not be overly burdensome.
    Comment 29: The proposed rule's requirement that the fishing 
industry submit business plans and the FMCs make certain other 
submissions places an enormous burden on the industry and the 
Councils--or, for state requests, on the states--to prepare capacity 
reduction programs. This shifts the burden of preparation from the 
Secretary to the Council and the industry. This is a shift that has not 
been accompanied by an increase in Council resources. Business plans 
should not always be required. The interim final rule should allow 
flexibility in determining the lead authority for the preparation of a 
financed reduction program or, alternatively, NMFS should immediately 
identify resources that will be made available to Councils to meet the 
requirements imposed by the regulation.
    Response: For the reasons stated in the preamble to the proposed 
rule, NMFS believes that the business plan requirements appropriately 
place, on a reduction's industry proponents, the burden of developing 
proposals for financed reduction programs. NMFS realizes that business 
plans require industry to undertake a large effort. This is, however, 
no different from planning

[[Page 31439]]

for other business investments. NMFS views financed reduction programs 
as post-reduction harvesters making business investments in their 
economic future by retiring some of their competition, thereby 
increasing their harvests of finite natural resources. NMFS can lend 
post-reduction harvesters the money required to make this investment. 
As a lender, however, it is not appropriate for NMFS to do the business 
planning that may determine whether the investment succeeds or fails. 
Moreover, no one is more qualified to do this business planning than 
the harvesters affected by the plan and who will be required to 
mortgage, in effect, up to 5 percent of their future gross revenue over 
as much as 20 years to repaying the reduction investment's cost. 
Reduction planning is expensive, but so is most business planning. 
Reduction planning may, however, from time-to-time be eligible for 
grants. The Saltonstall-Kennedy Fisheries Research and Development 
Program's fiscal year 2000 grant cycle includes reduction planning.
    Although FMCs have the lesser burden of reviewing, rather than 
preparing, business plans, the burden is one that cannot reasonably be 
avoided. It is the FMCs' responsibility to manage and conserve the 
national fisheries. Determining if a reduction program will assist in 
this is integral to an FMC's mandate. The reduction framework rule is 
not the proper venue for addressing FMC personnel or resource matters.
    Comment 30: ``By failing to list the four possible funding sources 
included in the statute, the proposed rule sends a strong message that 
reduction programs must be industry funded. The interim final rule 
should clearly identify possible funding sources and ...emphasize that 
industry funding is only one way to finance a reduction program.''
    Response: Financed reduction programs, in which the direct 
beneficiaries of a reduction program repay the programs' cost, are the 
preferred way of funding most reduction programs. The proposed rule, 
however, also equally addressed subsidized reduction programs, in which 
the taxpayers or other contributors fund reduction program costs. These 
are the only two basic methods of funding reduction program costs. 
Under the proposed rule, if any portion of a reduction program's cost 
is funded by a reduction loan, the reduction program is a financed 
reduction program. All other reduction programs are subsidized 
reduction programs, even though three different statutory funding 
sources are included in this category: (1) appropriations under the 
reduction provisions of the Magnuson-Stevens Act, (2) appropriations 
under the Saltonstall-Kennedy Act, and (3) contributions from States or 
other public or private sources. In the first 2 funding sources for 
subsidized reduction programs, Federal taxpayers provide the subsidy; 
in the third, State taxpayers or other public or private entities 
provide the subsidy. There appears to be no functional reason for the 
reduction framework rule to separately address the 3 different sources 
of subsidized funding.
    Comment 31: Different industry groups may present competing 
business plans to the FMCs. The proposed rule does not provide criteria 
for deciding what industry groups have standing. ``Do the FMCs decide 
which proposals are forwarded to the Secretary for review? How will 
specific reduction proposals be compared and how will the choice be 
made between them?'' The interim final rule should allow the FMCs to 
decide what reduction request to forward to NMFS, but should clearly 
explain the criteria the FMCs should consider in making this decision.
    Response: NMFS believes it is best to leave this to the FMCs' 
discretion. NMFS cannot, in a fishery subject to an FMC's jurisdiction, 
undertake a reduction program unless the FMC first requests NMFS to do 
so. Consequently, the FMCs have discretion to entertain reduction 
proposals from whatever industry reduction proponents the FMCs deem 
appropriate. The FMCs may reject proposals, merge or consolidate 
proposals, or accept proposals as submitted. If the industry proponents 
of a financed reduction program and the appropriate FMC cannot come to 
agreement about a prospective reduction program, it makes little sense 
for the FMC to request a financed reduction program. In financed 
reduction programs, NMFS believes the FMCs should defer to 
representative business planners who make a strong case for increasing 
the economic efficiency of post-reduction harvesters in the reduction 
fishery and, most particularly, for the widespread industry support 
that successful referenda require. Proposals for financed reduction 
programs that do not potentially enjoy widespread industry support will 
fail and waste much time, effort, and resources.
    Comment 32: Reduction ``is important for the preservation of 
natural resources and the economic stability of American fisheries.''
    Response: NMFS agrees.
    Comment 33: The requirement that a proposed reduction be lawful at 
the time of reduction must be made clear. No person or government body 
can guarantee what will be lawful in the future. Future judicial 
interpretation is always an unknown. As long as a proposed reduction is 
not known to be unlawful at the time it is requested, all such 
requirements should be deemed satisfied.
    Response: All reduction programs will be lawful at the time of 
their occurrence, and NMFS agrees that no one can guarantee what will 
be lawful in the future.
    Comment 34: The proposed rule is sufficient for fisheries under 
Federal jurisdiction. For state-managed fisheries, however, it would be 
useful to have a sample request and business plan accessible at NMFS' 
web site.
    Response: The proposed rule outlined the required contents of 
reduction requests and business plans for both Federal and state 
fisheries. NMFS does not have any samples that NMFS could post at NMFS' 
web site. NMFS is, however, willing to advise all parties about 
reduction in any appropriate way NMFS can.
    Comment 35: The proposed rule ``has been thoughtfully and 
thoroughly developed...'' and ``has great merit and practical 
application ...'' to the salmon driftnet and purse seine fishery in 
Bristol Bay, Alaska.
    Response: NMFS notes this comment.
    Comment 36: ``In some cases...industry-funded license reductions 
may represent the only viable alternative to achieving needed 
reductions of capacity. In complex fisheries, overcapacity and 
inadequate management in any major fishery can lead to adverse 
consequences for other fisheries.''
    Response: NMFS agrees.
    Comment 37: Where fishing permit reductions involve Bristol Bay and 
Chignic, the number of fishing permits bought back from local residents 
must be proportional with the number of fishing permits bought back 
from parties who do not reside in Alaska. 1,325 Bristol Bay salmon 
fishing permits were initially issued to residents of the Bristol Bay 
and Chignic watershed region. Today, only about 900 of these remain 
owned by local residents. Each fishing permit sold to non-residents of 
the local area results in the loss of 2 crewmen jobs from the local 
economy. This devastates the local economy.
    Response: A framework rule involving matters common to all 
reduction programs is not the appropriate place to address this matter.
    Comment 38: The ``technical requirements for information ...[should 
not be] implemented in a way that the available databases and their 
managers

[[Page 31440]]

cannot accommodate. Flexibility to meet the data variability and 
personnel constraints should be clearly provided.''
    Response: It is not clear to what ``technical requirements for 
information'' this comment related. Requiring unavailable data is 
nonfunctional. The interim final rule is a framework rule common to all 
reduction programs, and NMFS will accommodate specific data or 
technical information circumstances that do not reasonably allow 
individual requests for reduction programs to comply with the framework 
rule. The interim final rule revises the proposed rule to provide 
flexibility in this and other respects (see Sec. 600.1001(f)).
    Comment 39: Reduction planners (either industry business planners 
or Government reduction planners) will be unqualified to fully 
understand fisheries complexity and to ``comprehensively formulate a 
feasible...plan.'' Theoretical reduction plans might not achieve the 
intended purpose, and might have unplanned impacts on ``the permit 
holder, vessel owner, financiers, and buyers (fish fee collectors)...'' 
Experience demonstrates that ``decisions are reached to appease 
political agendas, therefore, constituents of the fisheries will not 
take a plan or program at face value.'' Industry members will incur 
substantial expense in analyzing reduction plans. Reduction plans will 
involve a major economic impact on small fishery businesses. The 
``massive economic data that will be required...'' may be nonexistent.
    Response: Financed reduction programs are based on business plans 
that the fishing industry itself develops. When FMCs request financed 
reduction programs, they must base their requests on those business 
plans. If NMFS undertakes financed reduction programs, NMFS must, to 
the greatest extent possible, base these programs on those business 
plans. Moreover, all fishing permit holders or fishing vessel owners 
affected have the opportunity, through a referendum, to approve or 
reject the business plans upon which financed reduction programs are 
based. A financed reduction program is not possible unless at least 
two-thirds of those voting in a referendum approve the fee necessary to 
repay a reduction loan.
    Subsidized reduction programs are based on implementation plans 
that NMFS develops from general FMC recommendations. The rule provides 
ample opportunity for the views of all affected parties to be heard and 
duly considered.
    Whether to offer one's fishing capacity for reduction in either a 
financed or subsidized reduction program is the voluntary decision of 
each fishing permit holder and/or fishing vessel owner.
    Comment 40: A business plan should be subjected to a referendum of 
fishing permit holders and fishing vessel owners. Additionally, the 
fish buyers that are responsible for collecting the fee that repays a 
reduction loan should vote in a referendum about (presumably) the ``fee 
collection, disbursement, and accounting...'' aspects of the reduction. 
Moreover, a referendum committee of fishing vessel and fishing permit 
owners and fish buyers should review the results of all referenda 
involving financed reduction programs ``to alleviate [sic] any 
questions by the fishery as to the valid tally of support or non-
support...'' A subsidized reduction program should also be subjected to 
a referendum of fishing permit and fishing vessel owners.
    Response: The Magnuson-Stevens Act reduction provisions authorize 
referenda only for fee payers (fish sellers), not fee collectors (fish 
buyers). Fish buyers pay no fee, and cannot vote in referenda about fee 
payment. The statutory reduction provisions do not authorize referenda 
for subsidized reduction programs, where no one either pays or collects 
a fee. Those provisions do, however, require NMFS to consult with fish 
sellers, fish buyers, and all other affected parties through the 
development and implementation of subsidized reduction programs.
    NMFS is the referendum authority under the statutory reduction 
provisions, and NMFS believes it can competently exercise this 
authority. NMFS does not, consequently, perceive a need for fish-seller 
and fish-buyer committees that will review referenda results. Moreover, 
the fact that referenda may sometimes follow irrevocable bidding 
precludes any referenda review or collaboration that lengthens the time 
between the submission of irrevocable bids and completing the reduction 
programs to which the bids relate.
    Comment 41: It is good ``that industry is expected to pay 
for...[reduction] in the long run.'', but landing taxes are already 
high (``nearly 10 percent off the top for salmon in
    Alaska...'') This, combined with the high cost of business and 
depressed markets, threatens the survival of many family fishing 
businesses. Further landing taxes should be minimal. As an alternative, 
consider putting ``a large tax [25 percent or more] on the sales of 
permits.''
    Response: In financed reduction programs, the industry's business 
plans project the amount by which fishing capacity is reduced and the 
prospective fee rate necessary to pay for that reduction. Fee rates are 
based on post-reduction gross revenue that can only be projected over 
the life of the reduction loans, but all business is planned on the 
basis of future income that can only be projected. For a financed 
reduction loan to be possible, affected fishing vessel or fishing 
permit owners must vote in a referendum to approve the fee necessary to 
repay a reduction loan of a certain maximum amount whose disbursement 
in the form of reduction payments will reduce fishing capacity by a 
certain minimum amount. Business planners are unlikely to suggest a fee 
higher than post-reduction producers are reasonably likely to be able 
to pay, and, in the event they do, referenda voters are unlikely to 
approve a higher fee. Post-reduction fee rates may increase if post-
reduction gross revenue proves to be lower than projected at the time 
of reduction, but may never exceed 5 percent of gross revenue. NMFS has 
no authority to consider the alternative this comment suggested.
    Comment 42: The proposed rule is a ``very well done plan on how to 
implement. It is believable, do-able, and very much needed in the 
fishing industry.''
    Response: NMFS notes this comment.
    Comment 43: The comment applauds this avenue to reduce 
overcapitalization, return economic viability to fishing, and resolve 
many concerns (including bycatch and habitat) that the race for fish 
creates. Reductions reduces fishermen's pressure by eliminating ``derby 
fisheries.''
    Response: NMFS agrees that fishing capacity reduction can help 
improve fisheries economics and fisheries conservation and management.
    Comment 44: The fee for fish processed at sea cannot equitably be 
calculated in the same way as the fee for raw fish delivered ashore. 
Using appropriate recovery rates, NMFS should convert processed fish to 
the fish's round weight equivalent and calculate the fee based on the 
ex-vessel price for raw fish. If there is an ex-vessel price for raw 
fish delivered at sea, NMFS should use this. If not, NMFS should use 
the ex-vessel price for raw fish delivered ashore. Where all fish in a 
reduction fishery are processed and delivered at sea, NMFS must devise 
an appropriate proxy for a raw-fish, ex-vessel price. The fee should, 
in all cases, be based on the ex-vessel price for raw fish, rather than 
on the value that at-sea processing adds.
    Response: NMFS considered this issue during the proposed rule's 
formulation, but elected in the proposed

[[Page 31441]]

rule to define ``delivery value'' and associated terms in a way that 
required payment of the reduction loan repayment fee based on fish in 
whatever form the fish existed at the time that the party who harvested 
the fish first delivered the fish for value to an unrelated fish buyer. 
This resulted, for fish harvested and processed at sea by the same 
party, in applying the fee rate to a higher delivery value than for 
fish delivered unprocessed and subsequently processed ashore by an 
unrelated fish buyer. There are good arguments for and against this 
approach, but, on balance, the more equitable way to resolve this issue 
is, as this comment suggests, to apply the fee to unprocessed fish. 
Doing so, however, creates considerable problems of its own.
    One primary problem is a formula for accurately and efficiently 
converting the weight of processed fish to the weight of unprocessed 
fish. Another is a common value for unprocessed fish (prices may vary 
from time to time and from fish buyer to fish buyer). Nevertheless, the 
interim final rule revises the proposed rule to make the fee payable on 
the basis of the value of unprocessed fish. The interim final rule 
requires each business plan, for fisheries in which related parties 
both catch and process fish at sea, to formulate an accurate and 
efficient means of converting processed weight to unprocessed weight 
and of commonly valuing unprocessed fish (see, in Sec. 600.1000, the 
definition of the terms ``delivery value'', ``processed fish'', and 
``unprocessed fish'' and, in Sec. 600.1003(n)(11), the new business 
plan requirement in this respect).
    Comment 45: The framework rule represents an ``excellent job of 
distilling common sense answers from some very difficult and complex 
issues.''
    Response: NMFS notes the comment.
    Comment 46: The reduction loan repayment fee is the delivery value 
of fee fish times the fee rate. The definition of ``delivery value'', 
however, excludes ``any deductions whatsoever'' from the price that a 
fish buyer pays a fish seller when the fish seller first delivers fish 
to the fish buyer. This excludes ``weighbacks'' (small, unmarketable 
fish that the fish buyer deducts from the weight of delivered fish upon 
which the fish buyer calculates the delivery value). To comply with the 
statute's restriction of the fee to no more than 5 percent of ex-vessel 
value, the fee rate must be applied to the net weight of delivered fish 
(landed fish minus ``weighbacks'').
    Response: Representative fish tickets provided with this comment 
deduct the weight of weighbacks from the gross weight of fee fish 
delivered before applying the purchase price per pound to the resulting 
net weight. Under these circumstances, the fee is not, as the proposed 
rule defined the relevant term, applied to the weighbacks because the 
fish buyer did not pay any ``delivery value'' for the weighbacks 
because they were deducted from the total weight of delivered fish 
before calculating the ``delivery value'' on the net weight of 
delivered fish. The rule bases the fee on whatever value fish buyers 
pay fish sellers for fish subject to the fee (see the definition of the 
term ``delivery value'' in Sec. 600.1000).
    Comment 47: This comment supported fishing capacity reduction, but 
is frustrated that ``the system'' moves so slowly.
    Response: NMFS will expedite the process as much as it possibly 
can, but fishing capacity reduction is a complex undertaking. The FMP 
amendment required to complement each reduction program may become a 
major source of delay in implementing each reduction program.
    Comment 48: The reduction concept is ``totally objectionable and 
immoral.'' Allowing ``two thirds of the fishermen in a fishery...'' to 
authorize the fee system required to repay a loan forces the other one 
third to repay a loan they do not want. The commenter objects to 
``forced loans.'' The commenter does not ``believe in borrowing...'', 
and ``objects] to being forced to pay back a loan to stay fishing.'' 
Government should not be in the business of making loans. Reduction 
programs will not increase the price of post-reduction fish. The 
reduction concept ``has the potential to force out small boat owners.''
    Response: NMFS notes the comment. The Magnuson-Stevens Act 
authorizes reduction programs and specifies the way in which they must 
be conducted. This rule implements the Act.
    The reduction concept has the potential to reduce fishing capacity 
of every size, but decisions about whether to offer any fishing 
capacity for reduction are always the voluntary decisions of individual 
fishing permit and/or fishing vessel owners.
    Comment 49: Reduction might have the collateral effect of putting 
some shoreline processors out of business, because fewer fishing 
vessels could result in the need for fewer shoreline processors.
    Response: Absent concurrent reductions in total allowable catches, 
post-reduction harvests will require the same fish processing capacity 
as pre-reduction harvests. NMFS hopes that fewer harvesters catching 
the same amount of fish will not always mean a need for fewer 
processors, but it sometimes unavoidably may. Nevertheless, the 
statutory objective of the reduction provisions of the Magnuson-Stevens 
Act is to reduce fishing capacity.
    Comment 50: ``Congress made it very clear in the Sustainable 
Fisheries Act of 1996 that all capacity reduction plans must achieve 
measurable and significant improvements in the conservation and 
management of the fishery in question...''
    Response: The rule reflects this aspect of the statutory reduction 
provisions.

Summary of Revisions

    The proposed rule was Subpart D of 50 CFR Part 253. The interim 
final rule, however, is subpart L of 50 CFR Part 600.
    The following sections of the interim final rule revise the 
proposed rule:
    (1) Sec. 600.1000. This section is revised to add some terms, 
delete some terms, rename some terms, and amend the definition of some 
terms. Added terms include: ``address of record'', ``bid'', ``business 
week'', ``fair market value'', ``fishing capacity reduction 
specifications'', ``net delivery value'', ``post-bidding referendum'', 
``pre-bidding referendum'', ``processed fish'', ``reduction amendment 
specifications'', ``request'', ``treasury percentage'', ``unprocessed 
fish'', and ``vote''. Deleted terms include: ``consistency 
requirement'', ``control requirement'', ``Council'', ``necessity 
requirement'', and ``nonreplacement requirement''. Renamed terms 
include: ``program plan'', which becomes ``implementation plan''; 
``program regulations'', which becomes ``implementation regulations''; 
and ``management plan'', which becomes ``controlling fishery management 
plan or program (CFMP)''. Amended definitions include ``borrower'', 
``delivery value'', ``fee fish'', ``fish buyer'', ``fish delivery'', 
``fish seller'', ``reduction amendment'', ``reduction fishery'', and 
``reduction payment''.
    (2) Sec. 600.1001(f). This section is added to provide for waivers 
of framework rule provisions in order to accommodate special 
circumstances in particular reduction fisheries.
    (3) Sec. 600.1002. This section is new. It encompasses four general 
requirements, three of which were, in the proposed rule, terms defined 
in Sec. 253.25. This new section required conforming revisions of 
various other sections of the proposed rule.
    (4) Sec. 600.1003. Paragraph (g) of this section is revised to 
require each request for a financed reduction program to include the 
FMC's endorsement in principle of any reduction amendment

[[Page 31442]]

to the FMP that the business plan proposes. Paragraph (i) of this 
section is revised to clarify that NMFS is a source for the fishing 
permit data that this section requires in requests for financed 
reduction programs. Paragraph (j) of this section is revised to clarify 
that financed reduction program requests require aggregate, rather than 
individual, catch data. Paragraph (n)(11) of this section is revised to 
require the business plan included in each financed reduction request 
to evaluate the need for fee payment and collection provisions in each 
reduction fishery's implementation regulations different from the fee 
collection provisions in the framework rule.
    (5) Sec. 600.1005. Paragraph (e) of this section is revised to 
clarify that NMFS is a source for the fishing permit data that this 
section requires in requests for subsidized reduction programs. 
Paragraph (f) of this section is revised to clarify that financed 
reduction program requests require aggregate, rather than individual, 
catch data.
    (6) Sec. 600.1010. This section is revised extensively to provide 
for referenda preceding reduction amendments to FMPs as well as other 
referenda that may be required by no longer limiting referenda to those 
following reduction bidding. This also required appropriately revising 
other sections of the proposed rule that referenced referenda. 
Paragraph (d)(10) of this section is revised to establish the 
confidentiality of referenda ballots.
    (7) Sec. 600.1011. This section, particularly paragraphs (f) and 
(g), is revised to clarify the effect of reduction payments that NMFS 
is unable to make because of reduction contract non-performance.
    (8) Sec. 600.1012. This section is new. Paragraphs (b) and (c) of 
this section pertain to reduction loan interest rates, including the 
effect of any difference between prospective and actual reduction loan 
interest rates. The balance of this new section pertains to the 
reduction loan obligation, including principal amount, repayment term, 
and penalties for non-payment or non-collection.
    (9) Sec. 600.1013(c)(2). This paragraph is revised to clarify that 
the fee applicable to post-delivery fish bonuses is paid and collected 
when the bonuses first become known rather than when fish sellers first 
deliver fish to fish buyers.
    (10) Sec. 600.1015. This section is new. This provision is 
necessary to ensure prompt payment.
    (11) Sec. 600.1016. This section is new. This provision is 
necessary to ensure compliance.
    The interim final rule further revises the proposed rule to make 
the rule briefer, clearer, and more internally consistent.
    NOAA codifies its OMB control numbers for information collection at 
15 CFR part 902. Part 902 collects and displays the control numbers OMB 
assigned to NOAA's information collection requirements pursuant to the 
Paperwork Reduction Act (PRA). This interim final rule codifies OMB 
control number 0648-0376 and OMB control number 0648-0413 for Part 600 
Subpart L--Fishing Vessel Capacity Reduction.

Classification

    The Assistant Administrator for Fisheries, NMFS, determined that 
this interim final rule is consistent with the Magnuson-Stevens Act and 
other applicable laws.
    This interim final rule has been determined to be significant for 
purposes of E.O. 12866, and a Regulatory Impact Review has been 
prepared by NMFS (see ADDRESSES).
    The Chief Counsel for Regulation of the Department of Commerce 
certified to the Chief Counsel for Advocacy of the Small Business 
Administration when this rule was proposed that, if adopted as 
proposed, it would not have a significant economic impact on a 
substantial number of small entities. NMFS received no comments about 
this certification. Because this interim final rule only establishes a 
framework for implementing future reduction programs in specific 
reduction fisheries, each future reduction program will require its own 
implementation regulations and analysis of effects on small entities. 
As a result, a regulatory flexibility analysis was not prepared.
    Notwithstanding any other provision 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 PRA unless that collection of information displays a currently 
valid OMB control number.
    This interim final rule contains new collection of information 
requirements subject to the PRA that have been approved by OMB, under 
OMB Control No. 0648-0376. The estimates of the public reporting burden 
for these requirements are: 6,634 hours for developing a business plan, 
4 hours per voter for a referendum, four hours to make a bid, 10 
minutes per fishing trip to maintain records on transactions, 2 hours 
for a buyer's monthly report, 4 hours for a buyer's annual report, 2 
hours for a buyer/seller report (where either a buyer refuses to a fee 
or the seller refuses to pay the fee to the buyer), and 270 hours for 
state approval of a business plan and amendments to a state fishery 
management plan.
    Emergency clearance has also been obtained under OMB Control Number 
0648-0413 to conduct, in accordance with the interim final rule's 
revised referenda procedures, more than one referendum for each 
reduction program if the circumstances of a reduction program require 
multiple referenda. The response time per voter for these referenda is 
4 hours. NMFS intends to ask OMB for a three-year extension of the 
clearance for these requirements, which are currently only approved on 
an emergency basis.
    The response time estimates above 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 the extension of the emergency clearance or 
any other aspect of the collection of information requirements 
contained in this rule, including the burden hour estimates, and 
suggestions for reducing the burdens to NMFS (see ADDRESSES) and to OMB 
(see ADDRESSES).

List of Subjects

15 CFR Part 902

    Reporting and recordkeeping requirements.

50 CFR Part 600

    Fishing capacity reduction, Fisheries, Fishing permits, Fishing 
vessels, Intergovernmental relations, Loan programs-business, Reporting 
and recordkeeping requirements.

    Dated: May 8, 2000.
Penelope D. Dalton,
Assistant Administrator for Fisheries, National Marine Fisheries 
Services.
    For the reasons set out in the preamble, 15 CFR part 902, chapter 
IX, is amended and 50 CFR part 600 is amended as follows:

15 CFR Chapter IX

PART 902--NOAA INFORMATION COLLECTION REQUIREMENTS UNDER THE 
PAPERWORK REDUCTION ACT; OMB CONTROL NUMBERS

    1. The authority citation for part 902 continues to read as 
follows:

    Authority: 44 U.S.C. 3501 et seq.

    2. In Sec. 902.1, the table in paragraph (b) is amended by adding 
under 50 CFR the following entries in numerical order:


Sec. 902.1  OMB control numbers assigned pursuant to the Paperwork 
Reduction Act.

* * * * *

[[Page 31443]]

    (b) * * *

------------------------------------------------------------------------
                                             Current OMB control number
 CFR part or section where the information  (All numbers begin with 0648-
     collection requirement is located                    )
------------------------------------------------------------------------
 
                     *    *    *    *    *    *    *
50 CFR
 
                     *    *    *    *    *    *    *
600.1001                                    - 0376
600.1003                                    - 0376
600.1005                                    - 0376
600.1006                                    - 0376
600.1009                                    - 0376
600.1010                                    - 0376 and-0413
600.1011                                    - 0376
600.1012                                    - 0376
600.1013                                    - 0376
600.1014                                    - 0376
 
                     *    *    *    *    *    *    *
------------------------------------------------------------------------


    3. The authority citation for 50 CFR part 600 continues to read as 
follows:

    Authority: 5 U.S.C. 561 and 16 U.S.C. 1801 et seq.

    4. In Sec. 600.5, a paragraph (c) is added to read as follows:


Sec. 600.5  Purpose and scope.

* * * * *
    (c) This part also governs fishing capacity reduction programs 
under the Magnuson-Stevens Act.

    5. A subpart L is added to read as follows:

50 CFR Chapter VI

PART 600 MAGNUSON-STEVENS ACT PROVISIONS

Subpart L--Fishing Capacity Reduction
Sec.
600.1000  Definitions.
600.1001  Requests.
600.1002  General requirements.
600.1003  Content of a request for a financed program.
600.1004  Accepting a request for, and determinations about 
initiating, a financed program.
600.1005  Content of a request for a subsidized program.
600.1006  Accepting a request for, and determinations about 
conducting, a subsidized program.
600.1007  Reduction amendments.
600.1008  Implementation plan and implementation regulations.
600.1009  Bids.
600.1010  Referenda.
600.1011  Reduction methods and other conditions.
600.1012  Reduction loan.
600.1013  Fee payment and collection.
600.1014  Fee collection deposits, disbursements, records, and 
reports.
600.1015  Late charges.
600.1016  Enforcement.
600.1017  Prohibitions and penalties.
600.1018  Implementation regulations for each program. [Reserved]

Subpart L--Fishing Capacity Reduction

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


Sec. 600.1000  Definitions.

    In addition to the definitions in the Magnuson-Stevens Fishery 
Conservation and Management Act (Magnuson-Stevens Act) and in 
Sec. 600.10 of this title, the terms used in this subpart have the 
following meanings:
    Address of Record means the business address of a person, 
partnership, or corporation. Addresses listed on permits or other NMFS 
records are presumed to be business addresses, unless clearly indicated 
otherwise.
    Bid means the price a vessel owner or reduction fishery permit 
holder requests for reduction of his/her fishing capacity. It is an 
irrevocable offer in response to the invitation to bid in 
Sec. 600.1009.
    Borrower means, individually and collectively, each post-reduction 
fishing permit holder and/or fishing vessel owner fishing in the 
reduction fishery.
    Business plan means the document containing the information 
specified in Sec. 600.1003(n) and required to be submitted with a 
request for a financed program.
    Business week means a 7-day period, Saturday through Friday.
    Controlling fishery management plan or program (CFMP) means either 
any fishery management plan or any state fishery management plan or 
program, including amendments to the plan or program, pursuant to which 
a fishery is managed.
    Delivery value means:
    (1) For unprocessed fish, all compensation that a fish buyer pays 
to a fish seller in exchange for fee fish; and
    (2) For processed fish, all compensation that a fish buyer would 
have paid to a fish seller in exchange for fee fish if the fee fish had 
been unprocessed fish instead of processed fish.
    Delivery value encompasses fair market value, as defined herein, 
and includes the value of all in-kind compensation or all other goods 
or services exchanged in lieu of cash. It is synonymous with the 
statutory term ``ex-vessel value'' as used in section 312 of the 
Magnuson Act.
    Deposit principal means all collected fee revenue that a fish buyer 
deposits in a segregated account maintained at a federally insured 
financial institution for the sole purpose of aggregating collected fee 
revenue before sending the fee revenue to NMFS for repaying a reduction 
loan.
    Fair market value means the amount that a buyer pays a seller in an 
arm's length transaction or, alternatively, would pay a seller if the 
transaction were at arm's length.
    Fee means the amount that fish buyers deduct from the delivery 
value under a financed reduction program. The fee is the delivery value 
times the reduction fishery's applicable fee rate under section 
600.1013.
    Fee fish means all fish harvested from a reduction fishery 
involving a financed program during the period in which any amount of 
the reduction loan remains unpaid. The term fee fish excludes fish 
harvested incidentally while fishing for fish not included in the 
reduction fishery.
    Final development plan means the document NMFS prepares, under 
Sec. 600.1006(b) and based on the preliminary development plan the 
requester submits, for a subsidized program.
    Financed means funded, in any part, by a reduction loan.
    Fish buyer means the first ex-vessel party who:
    (1) in an arm's--length transaction, purchases fee fish from a fish 
seller;
    (2) takes fish on consignment from a fish seller; or
    (3) otherwise receives fish from a fish seller in a non arm's-
length transaction.
    Fish delivery means the point at which a fish buyer first purchases 
fee fish or takes possession of fee fish from a fish seller.
    Fishing capacity reduction specifications means the minimum amount 
of fishing capacity reduction and the maximum amount of reduction loan 
principal specified in a business plan.
    Fish seller means the party who harvests and first sells or 
otherwise delivers fee fish to a fish buyer.
    Fishery Management Plan (FMP) means any Federal fishery management 
plan, including amendments to the plan, that the Secretary of Commerce 
approves or adopts pursuant to section 303 of the Magnuson-Stevens Act.
    Fund means the Fishing Capacity Reduction Fund, and each subaccount 
for each program, established in the U.S. Treasury for the deposit 
into, and disbursement from, all funds, including all reduction loan 
capital and all fee revenue, involving each program.
    Implementation plan means the plan in Sec. 600.1008 for carrying 
out each program.

[[Page 31444]]

    Implementation regulations mean the regulations in Sec. 600.1008 
for carrying out each program.
    Net delivery value means the delivery value minus the fee.
    Post-bidding referendum means a referendum that follows bidding 
under Sec. 600.1009.
    Post-reduction means after a program reduces fishing capacity in a 
reduction fishery.
    Pre-bidding referendum means a referendum that occurs at any time 
after a request for a financed program but before a proposal under 
Sec. 600.1008 of a implementation plan and implementation regulations.
    Preliminary development plan means the document specified in 
Sec. 600.1005(g) and required to be submitted with a request for a 
subsidized program.
    Processed fish means fish in any form different from the form in 
which the fish existed at the time the fish was first harvested, unless 
any such difference in form represents, in the reduction fishery 
involved, the standard ex-vessel form upon which fish sellers and fish 
buyers characteristically base the delivery value of unprocessed fish.
    Program means each instance of reduction under this subpart, in 
each reduction fishery--starting with a request and ending, for a 
financed program, with full reduction loan repayment.
    Reduction means the act of reducing fishing capacity under any 
program.
    Reduction amendment means any amendment, or, where appropriate, 
framework adjustment, to a CFMP that may be necessary for a program to 
meet the requirements of this subpart.
    Reduction amendment specifications mean the reduction amendment to 
a CFMP specified in a business plan.
    Reduction contract means the invitation to bid under Sec. 600.1009, 
together with each bidder's irrevocable offer and NMFS' conditional or 
non-conditional acceptance of each such bid under Sec. 600.1009.
    Reduction cost means the total dollar amount of all reduction 
payments to fishing permit owners, fishing vessel owners, or both, in a 
reduction fishery.
    Reduction fishery means the fishery or portion of a fishery to 
which a program applies. The reduction fishery must specify each 
included species, as well as any limitations by gear type, fishing 
vessel size, geographic area, and any other relevant factor(s).
    Reduction loan means a loan, under section 1111 and section 1112 of 
Title XI of the Merchant Marine Act, 1936, as amended (46 U.S.C. 1279f 
and g App.), for financing any portion, or all, of a financed program's 
reduction cost and repayable by a fee under, and in accordance with, 
Sec. 600.1012, Sec. 600.1013, and Sec. 600.1014.
    Reduction payment means the Federal Government's fishing capacity 
reduction payment to a fishing permit owner, fishing vessel owner, or 
both, under a reduction contract. Additionally, it is payment for 
reduction to each bidder whose bid NMFS accepts under Sec. 600.1009. In 
a financed program each reduction payment constitutes a disbursement of 
a reduction loan's proceeds and is for either revoking a fishing permit 
or both revoking a fishing permit and withdrawing a vessel from fishing 
either by scrapping or title restriction.
    Reduction permit means any fishing permit revoked in a program in 
exchange for a reduction payment under a reduction contract.
    Reduction vessel means any fishing vessel withdrawn from fishing 
either by scrapping or title restriction in exchange for a reduction 
payment under a reduction contract.
    Referendum means the voting process under Sec. 600.1010 for 
approving the fee system for repaying a reduction loan.
    Request means a request, under Sec. 600.1001, for a program.
    Requester means a Council for a fishery identified in 
Sec. 600.1001(c), a state governor for a fishery identified in 
Sec. 600.1001(d), or the Secretary for a fishery identified in 
Sec. 600.1001(e).
    Scrap means to completely and permanently reduce a fishing vessel's 
hull, superstructures, and other fixed structural components to 
fragments having value, if any, only as raw materials for reprocessing 
or for other non-fisheries use.
    Subsidized means wholly funded by anything other than a reduction 
loan.
    Treasury percentage means the annual percentage rate at which NMFS 
must pay interest to the U.S. Treasury on any principal amount that 
NMFS borrows from the U.S. Treasury in order to generate the funds with 
which to later disburse a reduction loan's principal amount.
    Unprocessed fish means fish in the same form as the fish existed at 
the time the fish was harvested, unless any difference in form 
represents, in the reduction fishery involved, the standard ex-vessel 
form upon which fish sellers and fish buyers characteristically base 
the delivery value of unprocessed fish.
    Vote means a vote in a referendum.


Sec. 600.1001  Requests.

    (a) A Council or the Governor of a State under whose authority a 
proposed reduction fishery is subject may request that NMFS conduct a 
program in that fishery. Each request shall be in writing and shall be 
submitted to the Director, Office of Sustainable Fisheries, NMFS. Each 
request shall satisfy the requirements of Sec. 600.1003 or 
Sec. 600.1005, as applicable, and enable NMFS to make the 
determinations required by Sec. 600.1004 or Sec. 600.1006, as 
applicable.
    (b) NMFS cannot conduct a program in any fishery subject to the 
jurisdiction of a Council or a state unless NMFS first receives a 
request from the Council or the governor to whose jurisdiction the 
fishery is subject.
    (c) For a fishery subject to the jurisdiction of a Council, only 
that Council can or must make the request. If the fishery is subject to 
the jurisdiction of two or more Councils, those Councils must make a 
joint request. No Council may make a request, or join in making a 
request, until after the Council conducts a public hearing about the 
request.
    (d) For a fishery subject to the jurisdiction of a State, only the 
Governor of that State can make the request. If the fishery is subject 
to the jurisdiction of two or more states, the Governors of those 
States shall make a joint request. No Governor of a State may make a 
request, or join in making a request, until the State conducts a public 
hearing about the request.
    (e) For a fishery under the direct management authority of the 
Secretary, NMFS may conduct a program on NMFS' own motion by fulfilling 
the requirements of this subpart that reasonably apply to a program not 
initiated by a request.
    (f) Where necessary to accommodate special circumstances in a 
particular fishery, NMFS may waive, as NMFS deems necessary and 
appropriate, compliance with any specific requirements under this 
subpart not required by statute.


Sec. 600.1002  General requirements.

    (a) Each program must be: (1) Necessary to prevent or end 
overfishing, rebuild stocks of fish, or achieve measurable and 
significant improvements in the conservation and management of the 
reduction fishery;
    (2) Accompanied by the appropriate environmental, economic and/or 
socioeconomic analyses, in accordance with applicable statutes, 
regulations, or other authorities; and
    (3) Consistent with the CFMP, including any reduction amendment, 
for the reduction fishery.
    (b) Each CFMP for a reduction fishery must: (1) Prevent the 
replacement of fishing capacity removed by the program through a 
moratorium on new

[[Page 31445]]

entrants, restrictions on vessel upgrades, and other effort control 
measures, taking into account the full potential fishing capacity of 
the fleet;
    (2) Establish a specified or target total allowable catch or other 
measures that trigger closure of the fishery or adjustments to reduce 
catch; and
    (3) Include, for a financed program in a reduction fishery 
involving only a portion of a fishery, appropriate provisions for the 
post-reduction allocation of fish between the reduction fishery and the 
rest of the fishery that both protect the borrower's reduction 
investment in the program and support the borrower's ability to repay 
the reduction loan.


Sec. 600.1003  Content of a request for a financed program.

    A request for a financed program shall:
    (a) Specify the reduction fishery.
    (b) Project the amount of the reduction and specify what a 
reduction of that amount achieves in the reduction fishery.
    (c) Specify whether the program is to be wholly or partially 
financed and, if the latter, specify the amount and describe the 
availability of all funding from sources other than a reduction loan.
    (d) Project the availability of all Federal appropriation authority 
or other funding, if any, that the financed program requires, including 
the time at which funding from each source will be available and how 
that relates to the time at which elements of the reduction process are 
projected to occur.
    (e) Demonstrate how the program meets, or will meet after an 
appropriate reduction amendment, the requirements in Sec. 600.1002(a).
    (f) Demonstrate how the CFMP meets, or will meet after an 
appropriate reduction amendment, the requirements in Sec. 600.1002(b).
    (g) If a reduction amendment is necessary, include an actual 
reduction amendment or the requester's endorsement in principle of the 
reduction amendment specifications in the business plan. Endorsement in 
principle is non-binding.
    (h) Request that NMFS conduct, at the appropriate time, a 
referendum under Sec. 600.1010 of this subpart.
    (i) List the names and addresses of record of all fishing permit or 
fishing vessel owners who are currently authorized to harvest fish from 
the reduction fishery, excluding those whose authority is limited to 
incidentally harvesting fish from the reduction fishery during directed 
fishing for fish not in the reduction fishery. The list shall be based 
on the best information available to the requester. The list shall take 
into account any limitation by type of fishing gear operated, size of 
fishing vessel operated, geographic area of operation, or other factor 
that the proposed program involves. The list may include any relevant 
information that NMFS may supply to the requester.
    (j) Specify the aggregate total allowable catch in the reduction 
fishery during each of the preceding 5 years and the aggregate portion 
of such catch harvested by the parties listed under paragraph (i) of 
this section.
    (k) Specify the criteria for determining the types and number of 
fishing permits or fishing permits and fishing vessels that are 
eligible for reduction under the program. The criteria shall take into 
account:
    (1) The characteristics of the fishery;
    (2) Whether the program is limited to a particular gear type within 
the reduction fishery or is otherwise limited by size of fishing vessel 
operated, geographic area of operation, or other factor;
    (3) Whether the program is limited to fishing permits or involves 
both fishing permits and fishing vessels;
    (4) The reduction amendment required;
    (5) The needs of fishing communities;
    (6) Minimizing the program's reduction cost; and
    (7) All other relevant factors.
    (l) Include the requester's assessment of the program's potential 
impact on fisheries other than the reduction fishery, including an 
evaluation of the likely increase in participation or effort in such 
other fisheries, the general economic impact on such other fisheries, 
and recommendations that could mitigate, or enable such other fisheries 
to mitigate, any undesirable impacts.
    (m) Include any other information or guidance that would assist 
NMFS in developing an implementation plan and implementation 
regulations.
    (n) Include a business plan, prepared by, or on behalf of, 
knowledgeable and concerned harvesters in the reduction fishery, that:
    (1) Specifies a detailed reduction methodology that accomplishes 
the maximum sustained reduction in the reduction fishery's fishing 
capacity at the least reduction cost and in the minimum period of time, 
and otherwise achieves the program result that the requester specifies 
under paragraph (b) of this section. The methodology shall:
    (i) Establish the appropriate point for NMFS to conduct a pre-
bidding referendum and be sufficiently detailed to enable NMFS to 
readily:
    (A) Design, propose, and adopt a timely and reliable implementation 
plan,
    (B) Propose and issue timely and reliable implementation 
regulations,
    (C) Invite bids,
    (D) Accept or reject bids, and
    (E) Complete a program in accordance with this subpart, and
    (ii) Address, consistently with this subpart:
    (A) The contents and terms of invitations to bid,
    (B) Bidder eligibility,
    (C) The type of information that bidders shall supply,
    (D) The criteria for accepting or rejecting bids,
    (E) The terms of bid acceptances,
    (F) Any referendum procedures in addition to, but consistent with, 
those in Sec. 600.1010, and
    (G) All other technical matters necessary to conduct a program;
    (2) Projects and supports the reduction fishery's annual delivery 
value during the reduction loan's repayment period based on documented 
analysis of actual representative experience for a reasonable number of 
past years in the reduction fishery;
    (3) Includes the fishing capacity reduction specifications upon 
which both the pre-bidding referendum and the bidding under 
Sec. 600.1009 will be based. The reduction loan's maximum principal 
amount cannot, at the interest rate projected to prevail at the time of 
reduction, exceed the principal amount that can be amortized in 20 
years by 5 percent of the projected delivery value;
    (4) States the reduction loan's repayment term and the fee rate, or 
range of fee rates, prospectively necessary to amortize the reduction 
loan over its repayment term;
    (5) Analyzes and demonstrates the ability to repay the reduction 
loan at the minimum reduction level and at various reduction-level 
increments reasonably greater than the minimum one, based on the:
    (i) Best and most representative historical fishing revenue and 
expense data and any other relevant productivity measures available in 
the reduction fishery, and
    (ii) Projected effect of the program on the post-reduction 
operating economics of typical harvesters in the reduction fishery, 
with particular emphasis on the extent to which the reduction increases 
the ratio of delivery value to fixed cost and improves harvesting's 
other relevant productivity measures;
    (6) Demonstrates how the business plan's proposed program meets, or 
will

[[Page 31446]]

meet after an appropriate reduction amendment, the requirements in 
Sec. 600.1002(a);
    (7) Demonstrates how the CFMP meets, or will meet after an 
appropriate reduction amendment, the requirements in Sec. 600.1002(b);
    (8) Includes, if a reduction amendment is necessary, the reduction 
amendment specifications upon which the pre-bidding referendum will be 
based;
    (9) Includes an assessment of the program's potential impact on 
fisheries other than the reduction fishery, including an evaluation of 
the likely increase in participation or effort in such other fisheries, 
the general economic impact on such other fisheries, and 
recommendations that could mitigate, or enable such other fisheries to 
mitigate, any undesirable impacts;
    (10) Specifies the names and addresses of record of all fish buyers 
who can, after reduction, reasonably be expected to receive deliveries 
of fee fish. This shall be based on the best information available, 
including any information that NMFS may be able to supply to the 
business planners;
    (11) Specifies, after full consultation with fish buyers, any 
special circumstances in the reduction fishery that may require the 
implementing regulations to contain provisions in addition to, or 
different from, those contained in Sec. 600.1013 and/or Sec. 600.1014 
in order to accommodate the circumstances of, and practices in, the 
reduction fishery while still fulfilling the intent and purpose of 
Sec. 600.1013 and/or Sec. 600.1014--including, but not limited to:
    (i) In the case of reduction fisheries in which state data 
confidentiality laws or other impediments may negatively affect the 
efficient and effective conduct of the same, specification of who needs 
to take what action to resolve any such impediments, and
    (ii) In the case of reduction fisheries in which some fish sellers 
sell unprocessed, and other fish sellers sell processed fish to fish 
buyers, specification of an accurate and efficient method of 
establishing the delivery value of processed fish; and
    (12) Demonstrates by a survey of potential voters, or by any other 
convincing means, a substantial degree of potential voter support for 
the business plan and confidence in its feasibility.
    (o) Include the requester's statement of belief that the business 
plan, the CFMP, the reduction amendment specifications, and all other 
request aspects constitute a complete, realistic, and practical 
prospect for successfully completing a program in accordance with this 
subpart.


Sec. 600.1004  Accepting a request for, and determinations about 
initiating, a financed program.

    (a) Accepting a request. Once it receives a request, NMFS will 
review any request for a financed program to determine whether the 
request conforms with the requirements of Sec. 600.1003. If the request 
does not conform, NMFS will return the request with guidance on how to 
make the request conform. If the request conforms, NMFS shall accept it 
and publish a notice in the Federal Register requesting public comments 
on the request. Such notice shall state the name and address of record 
of each eligible voter, as well as the basis for having determined the 
eligibility of those voters. This shall constitute notice and 
opportunity to respond about adding eligible voters, deleting 
ineligible voters, and/or correcting any voter's name and address of 
record. If, in NMFS' discretion, the comments received in response to 
such notice warrants it, or other good cause warrants it, NMFS may 
modify such list by publishing another notice in the Federal Register.
    (b) Determination about initiating a financed program. After 
receipt of a conforming request for a financed program, NMFS will, 
after reviewing and responding to any public comments received in 
response to the notice published in the Federal Register under 
paragraph (a) of this section, initiate the program if NMFS determines 
that: (1) The program meets, or will meet after an appropriate 
reduction amendment, the requirements in Sec. 600.1002(a);
    (2) The CFMP meets, or will meet after an appropriate reduction 
amendment, the requirements in Sec. 600.1002(b);
    (3) The program, if successfully implemented, is cost effective;
    (4) The reduction requested constitutes a realistic and practical 
prospect for successfully completing a program in accordance with this 
subpart and the borrower is capable of repaying the reduction loan. 
This includes enabling NMFS to readily design, propose, and adopt a 
timely and reliable implementation plan as well as propose and issue 
timely and reliable implementation regulations and otherwise complete 
the program in accordance with this subpart; and
    (5) The program accords with all other applicable law;


Sec. 600.1005  Content of a request for a subsidized program.

    A request for a subsidized program shall:
    (a) Specify the reduction fishery.
    (b) Project the amount of the reduction and specify what a 
reduction of that amount achieves in the reduction fishery.
    (c) Project the reduction cost, the amount of reduction cost to be 
funded by Federal appropriations, and the amount, if any, to be funded 
by other sources.
    (d) Project the availability of Federal appropriations or other 
funding, if any, that completion of the program requires, including the 
time at which funding from each source will be available and how that 
relates to the time at which elements of the reduction process are 
projected to occur.
    (e) List the names and addresses of record of all fishing permit or 
fishing vessel owners who are currently authorized to harvest fish from 
the reduction fishery, excluding those whose authority is limited to 
incidentally harvesting fish from the reduction fishery during directed 
fishing for fish not in the reduction fishery. The list shall be based 
on the best information available to the requester, including any 
information that NMFS may supply to the requester, and take into 
account any limitation by type of fishing gear operated, size of 
fishing vessel operated, geographic area of operation, or other factor 
that the proposed program involves.
    (f) Specify the aggregate total allowable catch in the reduction 
fishery during each of the preceding 5 years and the aggregate portion 
of such catch harvested by the parties listed under paragraph (e) of 
this section.
    (g) Include a preliminary development plan that: (1) Specifies a 
detailed reduction methodology that accomplishes the maximum sustained 
reduction in the reduction fishery's fishing capacity at the least cost 
and in a minimum period of time, and otherwise achieves the program 
result that the requester specifies under paragraph (b) of this 
section. The methodology shall:
    (i) Be sufficiently detailed to enable NMFS to prepare a final 
development plan to serve as the basis for NMFS to readily design, 
propose, and adopt a timely and reliable implementation plan and 
propose and issue timely and reliable implementation regulations, and
    (ii) Include:
    (A) The contents and terms of invitations to bid,
    (B) Eligible bidders,

[[Page 31447]]

    (C) The type of information that bidders shall supply,
    (D) The criteria for accepting or rejecting bids, and
    (E) The terms of bid acceptances;
    (2) Specifies the criteria for determining the types and numbers of 
fishing permits or fishing permits and fishing vessels that are 
eligible for reduction under the program. The criteria shall take into 
account:
    (i) The characteristics of the fishery,
    (ii) Whether the program is limited to a particular gear type 
within the reduction fishery, or is otherwise limited by size of 
fishing vessel operated, geographic area of operation, or other factor,
    (iii) Whether the program is limited to fishing permits or involves 
both fishing permits and fishing vessels,
    (iv) The reduction amendment required,
    (v) The needs of fishing communities, and
    (vi) The need to minimize the program's reduction cost; and
    (3) Demonstrates the program's cost effectiveness.
    (h) Demonstrate how the program meets, or will meet after an 
appropriate reduction amendment, the requirements in Sec. 600.1002(a).
    (i) Demonstrate how the CFMP meets, or will meet after an 
appropriate reduction amendment, the requirements in 
Sec. 600.1002(b)(1) and (2).
    (j) Specify any other information or guidance that assists NMFS in 
preparing a final development plan and a proposed implementation plan 
and proposed implementation regulations.
    (k) Include the requester's statement of belief that the program 
constitutes a reasonably realistic and practical prospect for 
successfully completing a program in accordance with this subpart.


Sec. 600.1006  Accepting a request for, and determinations about 
conducting, a subsidized program.

    (a) Accepting a request. NMFS will review any request for a 
subsidized program submitted to NMFS to determine whether the request 
conforms with the requirements of Sec. 600.1005. If the request does 
not conform, NMFS will return it with guidance on how to make the 
request conform. If the request conforms, NMFS shall accept it and 
publish a notice in the Federal Register requesting public comments 
about the request.
    (b) Final development plan. After receipt of a conforming request, 
NMFS will prepare a final development plan if NMFS determines that the 
reduction requested constitutes a realistic and practical prospect for 
successfully completing a program in accordance with this subpart. This 
includes enabling NMFS to readily design, propose, and adopt a timely 
and reliable implementation plan as well as propose and issue timely 
and reliable implementation regulations and otherwise complete the 
program in accordance with this subpart. NMFS will, as far as possible, 
base the final development plan on the requester's preliminary 
development plan. Before completing the final development plan, NMFS 
will consult, as NMFS deems necessary, with the requester, Federal 
agencies, state and regional authorities, affected fishing communities, 
participants in the reduction fishery, conservation organizations, and 
other interested parties in preparing the final development plan.
    (c) Reaffirmation of the request. After completing the final 
development plan, NMFS will submit the plan to the requester for the 
requester's reaffirmation of the request. Based on the final 
development plan, the reaffirmation shall: (1) Certify that the final 
development plan meets, or will meet after an appropriate reduction 
amendment, the requirements in Sec. 600.1002(a);
    (2) Certify that the CFMP meets, or will meet after an appropriate 
reduction amendment, the requirements in Sec. 600.1002(b)(1) and (2); 
and
    (3) Project the date on which the requester will forward any 
necessary reduction amendment and, if the requester is a Council, 
proposed regulations to implement the reduction amendment. The 
requester shall base any necessary reduction amendment on the final 
development plan.
    (d) Determinations about conducting a subsidized program. After 
NMFS' receipt of the requester's reaffirmation, any required reduction 
amendment, and any proposed regulations required to implement the 
amendment, NMFS will initiate the program if NMFS determines that: (1) 
The program meets, or will meet after an appropriate reduction 
amendment, the requirements in Sec. 600.1002(a);
    (2) The CFMP meets, or will meet after an appropriate reduction 
amendment, the requirements in Sec. 600.1002(b)(1) and (2); and
    (3) The program is reasonably capable of being successfully 
implemented;
    (4) The program, if successfully implemented, will be cost 
effective; and
    (5) The program is in accord with all other applicable provisions 
of the Magnuson-Stevens Act and this subpart.


Sec. 600.1007  Reduction amendments.

    (a) Each reduction amendment may contain provisions that are either 
dependent upon or independent of a program. Each provision of a 
reduction amendment is a dependent provision unless the amendment 
expressly designates the provision as independent.
    (b) Independent provisions are effective without regard to any 
subsequent program actions.
    (c) Dependent provisions are initially effective for the sole 
limited purpose of enabling initiation and completion of the pre-
reduction processing stage of a program.
    (d) All dependent provisions of a reduction amendment for a 
financed program are fully in force and effect for all other purposes 
only when NMFS either: (1) For bidding results that conform to the 
fishing capacity reduction specifications and are not subject to any 
other condition, notifies bidders, under Sec. 600.1009(e)(3), that 
reduction contracts then exist between the bidders and the United 
States; or
    (2) For bidding results that do not conform to the fishing capacity 
reduction specifications or are subject to any other condition, 
notifies bidders whose bids NMFS had conditionally accepted, under 
Sec. 600.1010 (d)(8)(iii), that the condition pertaining to the 
reduction contracts between them and the United States is fulfilled.
    (e) If NMFS does not, in accordance with this subpart and any 
special provisions in the implementation regulations, subsequently make 
all reduction payments that circumstances, in NMFS' judgment, 
reasonably permit NMFS to make and, thus, complete a program, no 
dependent provisions shall then have any further force or effect for 
any purpose and all final regulations involving such dependent 
provisions shall then be repealed.


Sec. 600.1008  Implementation plan and implementation regulations.

    (a) As soon as practicable after deciding to initiate a program, 
NMFS will prepare and publish, for a 60-day public comment period, a 
proposed implementation plan and implementation regulations. During the 
public comment period, NMFS will conduct a public hearing of the 
proposed implementation plan and implementation regulations in each 
state that the program affects.
    (b) To the greatest extent practicable, NMFS will base the 
implementation plan and implementation regulations for a financed 
program on the business plan. The implementation plan for a financed 
program will describe in detail

[[Page 31448]]

all relevant aspects of implementing the program, including:
    (1) The reduction fishery;
    (2) The reduction methodology;
    (3) The maximum reduction cost;
    (4) The maximum reduction loan amount, if different from the 
maximum reduction cost;
    (5) The reduction cost funding, if any, other than a reduction 
loan;
    (6) The minimum acceptable reduction level;
    (7) The potential amount of the fee;
    (8) The criteria for determining the types and number of fishing 
permits or fishing permits and fishing vessels eligible to participate 
in the program;
    (9) The invitation to bid and bidding procedures;
    (10) The criteria for determining bid acceptance;
    (11) The referendum procedures; and
    (12) Any relevant post-referendum reduction procedures other than 
those in the implementation regulations or this subpart.
    (c) NMFS will base each implementation plan and implementation 
regulations for a subsidized program on the final development plan. The 
implementation plan will describe in detail all relevant aspects of 
implementing the program, including: (1) The reduction fishery;
    (2) The reduction methodology;
    (3) The maximum reduction cost;
    (4) The reduction-cost funding, if any, other than Federal 
appropriations;
    (5) The criteria for determining the types and number of fishing 
permits or fishing permits and fishing vessels eligible to participate 
in the program;
    (6) The invitation to bid and bidding procedures;
    (7) The criteria for determining bid acceptance; and
    (8) Any relevant post-bidding program procedures other than those 
in the implementation regulations or this subpart.
    (d) The implementation regulations will:
    (1) Specify, for invitations to bid, bids, and reduction contracts 
under Sec. 600.1009:
    (i) Bidder eligibility,
    (ii) Bid submission requirements and procedures,
    (iii) A bid opening date, before which a bidder may not bid, and a 
bid closing date, after which a bidder may not bid,
    (iv) A bid expiration date after which the irrevocable offer 
contained in each bid expires unless NMFS, before that date, accepts 
the bid by mailing a written acceptance notice to the bidder at the 
bidder's address of record,
    (v) The manner of bid submission and the information each bidder 
shall supply for NMFS to deem a bid responsive,
    (vi) The conditions under which NMFS will accept or reject a bid,
    (vii) The manner in which NMFS will accept or reject a bid, and
    (viii) The manner in which NMFS will notify each bidder of bid 
acceptance or rejection;
    (2) Specify any other special referendum procedures or criteria; 
and
    (3) Specify such other provisions, in addition to and consistent 
with those in this subpart, necessary to regulate the individual terms 
and conditions of each program and reduction loan. This includes, but 
is not limited to:
    (i) Provisions for the payment of costs and penalties for non-
payment, non-collection, non-deposit, and/or non-disbursement of the 
fee in accordance with Sec. 600.1013 and Sec. 600.1014,
    (ii) Prospective fee rate determinations, and
    (iii) Any other aspect of fee payment, collection, deposit, 
disbursement, accounting, record keeping, and/or reporting.
    (e) NMFS will issue final implementation regulations and adopt a 
final implementation plan within 45 days of the close of the public-
comment period.
    (f) NMFS may repeal the final implementation regulations for any 
program if: (1) For a financed program, the bidding results do not 
conform to the fishing capacity reduction specifications or a post-
bidding referendum does not subsequently approve an industry fee system 
based on the bidding results;
    (2) For a subsidized program, NMFS does not accept bids; and
    (3) For either a financed program or a subsidized program, if NMFS 
is unable to make all reduction payments due to a material adverse 
change.


Sec. 600.1009  Bids.

    (a) Each invitation to bid, bid, bid acceptance, reduction 
contract, and bidder--or any other party in any way affected by any of 
the foregoing--under this subpart is subject to the terms and 
conditions in this section: (1) Each invitation to bid constitutes the 
entire terms and conditions of a reduction contract under which:
    (i) Each bidder makes an irrevocable offer to the United States of 
fishing capacity for reduction, and
    (ii) NMFS accepts or rejects, on behalf of the United States, each 
bidder's offer;
    (2) NMFS may, at any time before the bid expiration date, accept or 
reject any or all bids;
    (3) For a financed program in which bidding results do not conform 
to the fishing capacity reduction specifications, NMFS' acceptance of 
any bid is subject to the condition that the industry fee system 
necessary to repay the reduction loan is subsequently approved by a 
successful post-bidding referendum conducted under Sec. 600.1010. 
Approval or disapproval of the industry fee system by post-bidding 
referendum is an event that neither the United States nor the bidders 
can control. Disapproval of the industry fee system by an unsuccessful 
post-bidding referendum fully excuses both parties from any performance 
and fully discharges all duties under any reduction contract;
    (4) For a financed program in one reduction fishery that is being 
conducted under appropriate implementation regulations simultaneously 
with another financed program in another reduction fishery, where the 
acceptance of bids for each financed program is conditional upon 
successful post-bidding referenda approving industry fee systems for 
both financed programs, NMFS' acceptance of all bids is, in addition to 
any condition under paragraph (a)(3) of this section, also subject to 
the additional conditions that both referenda approve the industry fee 
systems required for both financed programs--all as otherwise provided 
in paragraph (a)(3) of this section;
    (5) Upon NMFS' acceptance of the bid and tender of a reduction 
payment, the bidder consents to:
    (i) The revocation, by NMFS, of any reduction permit, and
    (ii) Where the program also involves the withdrawal of reduction 
vessels from fishing:
    (A) Title restrictions imposed by the U.S. Coast Guard on any 
reduction vessel that is federally documented to forever prohibit and 
effectively prevent any future use of the reduction vessel for fishing 
in any area subject to the jurisdiction of the United States or any 
state, territory, commonwealth, or possession of the United States, or
    (B) Where reduction vessel scrapping is involved and the reduction 
vessel's owner does not comply with the owner's obligation under the 
reduction contract to scrap the reduction vessel, take such measures as 
necessary to cause the reduction vessel's prompt scrapping. The 
scrapping will be at the reduction vessel owner's risk and expense. 
Upon completion of scrapping, NMFS will take such action as may be 
necessary to recover from the reduction vessel owner any cost or 
expense NMFS incurred in causing the reduction vessel to be scrapped 
and any other damages NMFS may have incurred and such

[[Page 31449]]

owner shall be liable to the United States for such cost, expenses, and 
damages;
    (6) Money damages not being an adequate remedy for a bidder's 
breach of a reduction contract, the United States is, in all 
particulars, entitled to specific performance of each reduction 
contract. This includes, but is not limited to, the scrapping of a 
reduction vessel;
    (7) Any reduction payment is available, upon timely and adequately 
documented notice to NMFS, to satisfy liens, as allowed by law, against 
any reduction permit/and or reduction vessel; provided, however, that:
    (i) No reduction payment to any bidder either relieves the bidder 
of responsibility to discharge the obligation which gives rise to any 
lien or relieves any lien holder of responsibility to protect the lien 
holder's interest,
    (ii) No reduction payment in any way gives rise to any
    liability of the United States for the obligation underlying any 
lien,
    (iii) No lien holder has any right or standing, not otherwise 
provided by law, against the United States in connection with the 
revocation of any reduction permit or the title restriction or 
scrapping of any reduction vessel under this subpart, and
    (iv) This subpart does not provide any lien holder with any right 
or standing to seek to set aside any revocation of any reduction permit 
or the title restriction or scrapping of any reduction vessel for which 
the United States made, or has agreed to make, any reduction payment. A 
lien holder is limited to recovery against the holder of the reduction 
permit or the owner of the reduction vessel as otherwise provided by 
law; and
    (8) Each invitation to bid may specify such other terms and 
conditions as NMFS believes necessary to enforce specific performance 
of each reduction contract or otherwise to ensure completing each 
program. This includes, but is not limited to, each bidder's 
certification, subject to the penalties in Sec. 600.1017, of the 
bidder's full authority to submit each bid and to dispose of the 
property involved in the bid in the manner contemplated by each 
invitation to bid.
    (b) NMFS will not invite bids for any program until NMFS determines 
that: (1) Any necessary reduction amendment is fully and finally 
approved and all provisions except those dependent on the completion of 
reduction are implemented;
    (2) The final implementation plan is adopted and the final 
implementation regulations are issued;
    (3) All required program funding is approved and in place, 
including all Federal appropriation and apportionment authority;
    (4) Any reduction loan involved is fully approved;
    (5) Any non-Federal funding involved is fully available at the 
required time for NMFS disbursement as reduction payments; and
    (6) All other actions necessary to disburse reduction payments, 
except for matters involving bidding and post-bidding referenda, are 
completed.
    (c) After making the affirmative determinations required under 
paragraph (b) of this section, NMFS will publish a Federal Register 
notice inviting eligible bidders to offer to the United States, under 
this subpart, fishing capacity for reduction.
    (d) NMFS may extend a bid closing date and/or a bid expiration date 
for a reasonable period. NMFS may also issue serial invitations to bid 
if the result of previous bidding, in NMFS' judgment, warrant this.
    (e) After the bid expiration date, NMFS will: (1) Analyze 
responsive bids;
    (2) Determine which bids, if any, NMFS accepts; and
    (3) Notify, by U.S. mail at each bidder's address of
    record, those bidders whose bids NMFS accepts that a reduction 
contract now exists between them and the United States--subject, where 
appropriate, to the conditions provided for elsewhere in this subpart.
    (f) NMFS will keep confidential the identity of all bidders whose 
bids NMFS does not accept. In financed programs where bidding results 
do not conform to the fishing capacity reduction specifications, NMFS 
also will keep confidential the identity of all bidders whose bids NMFS 
does accept until after completing a successful post-bidding referendum 
under Sec. 600.1010.


Sec. 600.1010  Referenda.

    (a) Referendum success. A referendum is successful if at least two-
thirds of the ballots that qualify to be counted as referendum votes 
under subparagraph (d)(6) of this section are cast in favor of an 
industry fee system.
    (b) Pre-bidding referendum--(1) Initial referendum. An initial pre-
bidding referendum shall be conducted for each financed program. The 
business plan shall, subject to this subpart, determine the 
chronological relationship of the initial pre-bidding referendum to 
other pre-bidding aspects of the reduction process sequence. The 
initial pre-bidding referendum shall be based on the fishing capacity 
reduction specifications. If the initial pre-bidding referendum 
precedes the adoption of any necessary reduction amendment, the initial 
pre-bidding referendum shall also be based on the reduction amendment 
specifications. If the initial pre-bidding referendum follows the 
adoption of any necessary reduction amendment, the initial pre-bidding 
referendum shall also be based on the adopted reduction amendment;
    (2) Successful initial pre-bidding referendum. If the initial pre-
bidding referendum is successful, the reduction process will proceed as 
follows:
    (i) If the initial pre-bidding referendum follows reduction 
amendment adoption, no second pre-bidding referendum shall be 
conducted,
    (ii) If the initial pre-bidding referendum precedes reduction 
amendment adoption, a second pre-bidding referendum shall be conducted 
if, in NMFS' judgment, the reduction amendment subsequently adopted 
differs, in any respect materially affecting the borrower's reduction 
investment in the program and the borrower's ability to repay the 
reduction loan, from the reduction amendment specifications upon which 
the initial pre-bidding referendum successfully occurred. The sole 
purpose of any second pre-bidding referendum shall be to determine 
whether the voters authorize an industry fee system despite any such 
difference between the reduction amendment specifications and a 
subsequently adopted reduction amendment.
    (3) Unsuccessful initial pre-bidding referendum. If the initial 
pre-bidding referendum is unsuccessful, the reduction process will 
either cease or NMFS may suspend the process pending an appropriate 
amendment of the business plan and the request.
    (c) Post-bidding referendum. A post-bidding referendum shall occur 
only if, in NMFS' judgment, the result of bidding under Sec. 600.1009 
does not conform, in any material respect, to the fishing capacity 
reduction specifications and such result justifies, in NMFS' judgment, 
conducting a post-bidding referendum. Bidding that results in reducing 
fishing capacity in any amount not less than the minimum fishing 
capacity reduction amount for any reduction loan amount not more than 
the maximum reduction loan amount, and otherwise achieves all material 
requirements of the fishing capacity reduction specifications, shall 
conform to the fishing capacity reduction specifications. The sole 
purpose of any post-bidding referendum shall be to determine whether 
voters authorize an industry fee system for bidding that results in 
reducing fishing capacity in

[[Page 31450]]

any amount materially less than the minimum amount in the fishing 
capacity reduction specifications.
    (d) NMFS will conduct referenda in accordance with the following: 
(1) Eligible voters. The parties eligible to vote in each referendum 
are the parties whose names are listed as being eligible to vote in the 
notice published in the Federal Register under Sec. 600.1004(a);
    (2) Ballot issuance. NMFS will mail, by U.S. certified mail, return 
receipt requested, a ballot to each eligible voter. Each ballot will 
bear a randomly derived, 5-digit number assigned to each eligible 
voter. Each ballot will contain a place for the voter to vote for or 
against the proposed industry fee system and a place, adjacent to the 
5-digit number, for the signature of the fishing permit or fishing 
vessel owner to whom the ballot is addressed or, if the fishing permit 
or fishing vessel owner is an organization, the person having authority 
to vote and cast the ballot on the organization's behalf. Each ballot 
will contain a place for the person signing the ballot to print his or 
her name. NMFS will enclose with each ballot a specially-marked, 
postage-paid, pre-addressed envelope that each voter shall use to 
return the ballot to NMFS;
    (3) Voter certification. Each ballot will contain a certification, 
subject to the penalties set forth in Sec. 600.1017, that the person 
signing the ballot is the fishing permit or fishing vessel owner to 
whom the ballot is addressed or, if the fishing permit or fishing 
vessel owner is an organization, the person having authority to vote 
and cast the ballot on the organization's behalf;
    (4) Information included on a ballot. Each ballot mailing will:
    (i) Summarize the referendum's nature and purpose,
    (ii) Specify the date by which NMFS must receive a ballot in order 
for the ballot to be counted as a qualified vote,
    (iii) Identify the place on the ballot for the voter to vote for or 
against the proposed industry fee system, the place on the ballot where 
the voter shall sign the ballot, and the purpose of the return 
envelope,
    (iv) For each pre-bidding referendum, state:
    (A) The fishing capacity reduction specifications,
    (B) The reduction loan's repayment term, and
    (C) The fee rate, or range of fee rates, prospectively necessary to 
amortize the reduction loan over the loan's term,
    (v) For each initial pre-bidding referendum that precedes reduction 
amendment adoption, state the reduction amendment specifications,
    (vi) For each initial pre-bidding referendum that follows reduction 
amendment adoption, summarize the material aspects of the reduction 
amendment adopted,
    (vii) For each second pre-bidding referendum, summarize how the 
adopted reduction amendment materially differs from the reduction 
amendment specifications upon which a successful initial pre-bidding 
referendum occurred and how this material difference affects the 
borrower's reduction investment in the program and the borrower's 
ability to repay the reduction loan,
    (viii) For each post-bidding referendum, specify the actual bidding 
results that do not conform to the fishing capacity reduction 
specifications, and
    (ix) State or include whatever else NMFS deems appropriate;
    (5) Enclosures to accompany a ballot. Each ballot mailing will 
include:
    (i) A specially-marked, postage-paid, and pre-addressed envelope 
that a voter must use to return the original of a ballot to NMFS by 
whatever means of delivery the voter chooses, and
    (ii) Such other materials as NMFS deems appropriate;
    (6) Vote qualification. A completed ballot qualifies to be counted 
as a vote if the ballot:
    (i) Is physically received by NMFS on or before the last day NMFS 
specifies for receipt of the ballot,
    (ii) Is cast for or against the proposed industry fee system,
    (iii) Is signed by the voter,
    (iv) Is the original ballot NMFS sent to the voter bearing the same 
5-digit number that NMFS assigned to the voter, and
    (v) Was returned to NMFS in the specially-marked envelope that NMFS 
provided for the ballot's return;
    (6) Vote tally and notification. NMFS will:
    (i) Tally all ballots qualified to be counted as referendum votes,
    (ii) Notify, by U.S. mail at the address of record, all eligible 
voters who received ballots of:
    (A) The number of potential voters,
    (B) The number of actual voters who returned a ballot,
    (C) The number of returned ballots that qualified to be counted as 
referendum votes,
    (D) The number of votes for and the number of votes against the 
industry fee system, and
    (E) Whether the referendum was successful and approved the industry 
fee system or unsuccessful and disapproved the industry fee system, and
    (iii) If a successful referendum is a post-bidding referendum, NMFS 
will, at the same time and in the same manner, also notify the bidders 
whose bids were conditionally accepted that the condition pertaining to 
the reduction contracts between them and the United States is 
fulfilled;
    (7) Conclusiveness of referendum determinations. NMFS' 
determinations about ballot qualifications and about all other 
referendum matters, including, but not limited to, eligible voters and 
their addresses of record, are conclusive and final as of the date NMFS 
makes such determinations. No matter respecting such determinations 
shall impair, invalidate, avoid, or otherwise render unenforceable any 
referendum, reduction contract, reduction loan, or fee payment and 
collection obligation under Sec. 600.1013 and Sec. 600.1014 necessary 
to repay any reduction loan;
    (8) Ballot confidentiality. NMFS will not voluntarily release the 
name of any party who voted. NMFS will restrict the availability of all 
voter information to the maximum extent allowed by law; and
    (9) Conclusive authorization of industry fee system. Each 
successful referendum conclusively authorizes NMFS' imposition of an 
industry fee system--including the fee payment, collection, and other 
provisions regarding fee payment and collection under Sec. 600.1013 and 
Sec. 600.1014--to repay the reduction loan for each financed program 
that NMFS conducts under this subpart.


Sec. 600.1011  Reduction methods and other conditions.

    (a) Reduction permits or reduction permits and reduction vessels. 
Each program may involve either the surrender and revocation of 
reduction permits or both the surrender and revocation of reduction 
permits and the withdrawal from fishing either by title restriction or 
by scrapping of reduction vessels. No financed program may, however, 
require such title restriction or scrapping of reduction vessels unless 
the business plan voluntarily includes the same.
    (b) Reduction permit revocation and surrender. Each reduction 
permit is, upon NMFS' tender of the reduction payment for the reduction 
permit, forever revoked. Each reduction permit holder shall, upon NMFS' 
tender of the reduction payment, surrender the original reduction 
permit to NMFS. The reduction permit holder, upon NMFS' tender of the 
reduction payment, forever relinquishes any claim associated with the 
reduction permit and with the fishing vessel that was used to harvest

[[Page 31451]]

fishery resources under the reduction permit that could qualify the 
reduction permit holder or the fishing vessel owner for any present or 
future limited access system fishing permit in the reduction fishery.
    (c) Reduction vessel title restriction or scrapping. For each 
program that involves reduction vessel title restriction or scrapping: 
(1) Each reduction vessel that is subject to title restriction only and 
is thus not required to be scrapped, is, upon NMFS' tender of the 
reduction payment, forever prohibited from any future use for fishing 
in any area subject to the jurisdiction of the United States or any 
State, territory, possession, or commonwealth of the United States. 
NMFS will request that the U.S. Coast Guard permanently restrict each 
such reduction vessel's title to exclude the reduction vessel's future 
use for fishing in any such area;
    (2) Each reduction vessel owner whose reduction vessel is required 
to be scrapped shall, upon NMFS' tender of the reduction payment, 
immediately cease all further use of the reduction vessel and arrange, 
without delay and at the reduction vessel owner's expense, to scrap the 
reduction vessel to NMFS' satisfaction, including adequate provision 
for NMFS to document the physical act of scrapping; and
    (3) Each reduction vessel owner, upon NMFS' tender of the reduction 
payment, forever relinquishes any claim associated with the reduction 
vessel and with the reduction permit that could qualify the reduction 
vessel owner or the reduction permit holder for any present or future 
limited access system fishing permit in the reduction fishery.
    (d) Fishing permits in a non-reduction fishery. A financed program 
that does not involve the withdrawal from fishing or scrapping of 
reduction vessels may not require any holder of a reduction permit in a 
reduction fishery to surrender any fishing permit in any non-reduction 
fishery or restrict or revoke any fishing permit other than a reduction 
permit in the reduction fishery, except those fishing permits 
authorizing the incidental harvesting of species in any non-reduction 
fishery during, and as a consequence of, directed fishing for species 
in the reduction fishery.
    (e) Reduction vessels disposition. Where a business plan requires 
the withdrawal from fishing of reduction vessels as well as the 
revocation of reduction permits: (1) Each reduction vessel that is not 
documented under Federal law must in every case always be scrapped, 
without regard to whether a program is a financed program or a 
subsidized program;
    (2) No financed program may require any disposition of a reduction 
vessel documented under Federal law other than the title restriction in 
paragraph (b) of this section unless the business plan volunteers to do 
otherwise; and
    (3) Any subsidized program may require the scrapping of reduction 
vessels documented under Federal law.
    (f) Reduction payments. NMFS will disburse all reduction payments 
in the amount and in the manner prescribed in reduction contracts, 
except reduction payments that a bidder's reduction-contract 
nonperformance prevents NMFS from disbursing. In financed programs, the 
reduction loan's principal amount is the total amount of all reduction 
payments that NMFS disburses from the proceeds of a reduction loan. Any 
reduction payment that NMFS, because of a bidder's reduction-contract 
nonperformance, disburses but subsequently recovers, shall reduce the 
principal amount of the reduction loan accordingly.
    (g) Effect of reduction-contract nonperformance. No referendum, no 
reduction contract, no reduction loan, and no fee payment and 
collection obligation under Sec. 600.1013 and Sec. 600.1014 necessary 
to repay any reduction loan, shall be impaired, invalidated, avoided, 
or otherwise rendered unenforceable by virtue of any reduction 
contract's nonperformance. This is without regard to the cause of, or 
reason for, nonperformance. NMFS shall endeavor to enforce the specific 
performance of all reduction contracts, but NMFS' inability, for any 
reason, to enforce specific performance for any portion of such 
reduction contracts shall not relieve fish sellers of their obligation 
to pay, and fish buyers of their obligation to collect, the fee 
necessary to fully repay the full reduction loan balance that results 
from all reduction payments that NMFS actually makes and does not 
recover.
    (h) Program completion. Other than the payment and collection of 
the fee that repays a reduction loan and any other residual matters 
regarding reduction payments and the disposition of reduction permits 
and reduction vessels, a program shall be completed when NMFS tenders 
or makes all reduction payments under all reduction contracts that 
circumstances, in NMFS' judgment, reasonably permit NMFS to make.


Sec. 600.1012  Reduction loan.

    (a) Obligation. The borrower shall be obligated to repay a 
reduction loan. The borrower's obligation to repay a reduction loan 
shall be discharged by fish sellers paying a fee in accordance with 
Sec. 600.1013. Fish buyers shall be obligated to collect the fee in 
accordance with Sec. 600.1013 and to deposit and disburse the fee 
revenue in accordance with Sec. 600.1014.
    (b) Principal amount, interest rate, repayment term, and penalties 
for non-payment or non-collection. The reduction loan shall be: (1) In 
a principal amount that shall be determined by subsequent program 
events under this subpart, but which shall not exceed the maximum 
principal amount in the fishing capacity reduction specifications;
    (2) At an annual rate, that shall be determined by subsequent 
events, of simple interest on the reduction loan's principal balance 
that shall equal 2 percent plus the Treasury percentage; (3) Repayable 
over the repayment term specified in the business plan or otherwise 
determined by subsequent events; and
    (4) Subject to such provisions as implementation regulations shall 
specify for the payment of costs and penalties for non-payment, non-
collection, non-deposit, and/or non-disbursement in accordance with 
Sec. 600.1013 and Sec. 600.1014.
    (c) Effect of prospective interest rate. Any difference between a 
prospective interest rate projected, for the purpose of any aspect of 
reduction planning or processing under this subpart, before the U.S. 
Treasury determines the Treasury percentage and an interest rate first 
known after the U.S. Treasury determines the Treasury percentage shall 
not void, invalidate, or otherwise impair any reduction contract, any 
reduction loan repayment obligation, or any other aspect of the 
reduction process under this subpart. Should any such difference result 
in a reduction loan that cannot, at the maximum fee rate allowed by 
law, be repaid, as previously projected, within the maximum maturity, 
any amount of the reduction loan remaining unpaid at maturity shall be 
repaid after maturity by continuing fee payment and collection under 
this subpart at such maximum fee rate until the reduction loan's unpaid 
principal balance and accrued interest is fully repaid. The above 
notwithstanding, at the discretion of the Secretary, the reduction 
contract can be voided if a material adverse change affects the 
reduction contract, reduction loan obligation, or any other aspect of 
the reduction process under this subpart.

[[Page 31452]]

Sec. 600.1013  Fee payment and collection.

    (a) Amount. The fee amount is the delivery value times the fee 
rate.
    (b) Rate. NMFS will establish the fee rate. The fee rate may not 
exceed 5 percent of the delivery value. NMFS will establish the initial 
fee rate by calculating the fee revenue annually required to amortize a 
reduction loan over the reduction loan's term, projecting the annual 
delivery value, and expressing such fee revenue as a percentage of such 
delivery value. Before each anniversary of the initial fee rate 
determination, NMFS will recalculate the fee rate reasonably required 
to ensure reduction loan repayment. This will include any changed 
delivery value projections and any adjustment required to correct for 
previous delivery values higher or lower than projected.
    (c) Payment and collection. (1) The full fee is due and payable at 
the time of fish delivery. Each fish buyer shall collect the fee at the 
time of fish delivery by deducting the fee from the delivery value 
before paying, or promising to pay, the net delivery value. Each fish 
seller shall pay the fee at the time of fish delivery by receiving from 
the fish buyer the net delivery value, or the fish buyer's promise to 
pay the net delivery value, rather than the delivery value. Regardless 
of when the fish buyer pays the net delivery value, the fish buyer 
shall collect the fee at the time of fish delivery;
    (2) In the event of any post-delivery payment for fee fish-- 
including, but not limited to bonuses--whose amount depends on 
conditions that cannot be known until after fish delivery, that either 
first determines the delivery value or later increases the previous 
delivery value, the fish seller shall pay, and the fish buyer shall 
collect, at the time the amount of such post-delivery payment first 
becomes known, the fee that would otherwise have been due and payable 
as if the amount of the post-delivery payment had been known, and as if 
the post-delivery payment had consequently occurred, at the time of 
initial fish delivery;
    (3)(i) Each fish seller shall be deemed to be, for the purpose of 
the fee collection, deposit, disbursement, and accounting requirements 
of this subpart, both the fish seller and the fish buyer, and shall be 
responsible for all requirements and liable for any penalties under 
this subpart applicable to fish sellers and/or fish buyers, each time 
that a fish seller sells fee fish to:
    (A) Any party whose place of business is not located in the United 
States, who does not take delivery or possession of the fee fish in the 
United States, who is not otherwise subject to this subpart, or to whom 
or against whom NMFS cannot otherwise apply or enforce this subpart,
    (B) Any party who is a general food-service wholesaler or supplier, 
a restaurant, a retailer, a consumer, some other type of end-user, or 
some other party not engaged in the business of buying fish from fish 
sellers for the purpose of reselling the fish, either with or without 
processing the fish, or
    (C) Any other party who the fish seller has good reason to believe 
is a party not subject to this subpart or to whom or against whom NMFS 
cannot otherwise apply or enforce this subpart,
    (ii) In each such case the fish seller shall, with respect to the 
fee fish involved in each such case, discharge, in addition to the fee 
payment requirements of this subpart, all the fee collection, deposit, 
disbursement, accounting, record keeping, and reporting requirements 
that this subpart otherwise imposes on the fish buyer, and the fish 
seller shall be subject to all the penalties this subpart provides for 
a fish buyer's failure to discharge such requirements;
    (4) Fee payment begins on the date NMFS specifies under the 
notification procedures of paragraph (d) of this section and continues 
without interruption at the fee rates NMFS specifies in accordance this 
subpart until NMFS determines that the reduction loan is fully repaid. 
If a reduction loan is, for any reason, not fully repaid at the 
maturity of the reduction loan's original amortization period, fee 
payment and collection shall continue until the reduction loan is fully 
repaid, notwithstanding that the time required to fully repay the 
reduction loan exceeds the reduction loan's initially permissible 
maturity.
    (d) Notification. (1) At least 30 days before the effective date of 
any fee or of any fee rate change, NMFS will publish a Federal Register 
notice establishing the date from and after which the fee or fee rate 
change is effective. NMFS will then also send, by U.S. mail, an 
appropriate notification to each affected fish seller and fish buyer of 
whom NMFS has notice;
    (2) When NMFS determines that a reduction loan is fully repaid, 
NMFS will publish a Federal Register notice that the fee is no longer 
in effect and should no longer be either paid or collected. NMFS will 
then also send, by U.S. mail, notification to each affected fish seller 
and fish buyer of whom NMFS has knowledge;
    (3) If NMFS fails to notify a fish seller or a fish buyer by U.S. 
mail, or if the fish seller or fish buyer otherwise does not receive 
the notice, of the date fee payments start or of the fee rate in 
effect, each fish seller is, nevertheless, obligated to pay the fee at 
the fee rate in effect and each fish buyer is, nevertheless, obligated 
to collect the fee at the fee rate in effect.
    (e) Failure to pay or collect. (1) If a fish buyer refuses to 
collect the fee in the amount and manner that this subpart requires, 
the fish seller shall then advise the fish buyer of the fish seller's 
fee payment obligation and of the fish buyer's fee collection 
obligation. If the fish buyer still refuses to properly collect the 
fee, the fish seller, within the next 7 calendar days, shall forward 
the fee to NMFS. The fish seller at the same time shall also advise 
NMFS in writing of the full particulars, including:
    (i) The fish buyer's and fish seller's name, address, and telephone 
number,
    (ii) The name of the fishing vessel from which the fish seller made 
fish delivery and the date of doing so,
    (iii) The quantity and delivery value of each species of fee fish 
that the fish seller delivered, and
    (iv) The fish buyer's reason, if known, for refusing to collect the 
fee in accordance with this subpart;
    (2) If a fish seller refuses to pay the fee in the amount and 
manner that this subpart requires, the fish buyer shall then advise the 
fish seller of the fish buyer's collection obligation and of the fish 
seller's payment obligation. If the fish seller still refuses to pay 
the fee, the fish buyer shall then either deduct the fee from the 
delivery value over the fish seller's protest or refuse to buy the fee 
fish. The fish buyer shall also, within the next 7 calendar days, 
advise NMFS in writing of the full particulars, including:
    (i) The fish buyer's and fish seller's name, address, and telephone 
number,
    (ii) The name of the fishing vessel from which the fish seller made 
or attempted to make fish delivery and the date of doing so,
    (iii) The quantity and delivery value of each species of fee fish 
the fish seller delivered or attempted to deliver,
    (iv) Whether the fish buyer deducted the fee over the fish seller's 
protest or refused to buy the fee fish, and
    (v) The fish seller's reason, if known, for refusing to pay the fee 
in accordance with this subpart.
    (f) Implementation regulations at variance with this section. If 
any special circumstances in a reduction fishery require, in NMFS's 
judgment, fee payment and/or collection provisions in addition to, or 
different from, those in this section in order to accommodate the 
circumstances of, and practices in, a reduction fishery while still 
fulfilling the intent and purpose of this section,

[[Page 31453]]

NMFS may, notwithstanding this section, include such provisions in the 
implementation regulations for such reduction fishery.


Sec. 600.1014  Fee collection deposits, disbursements, records, and 
reports.

    (a) Deposit accounts. Each fish buyer that this subpart requires to 
collect a fee shall maintain a segregated account at a federally 
insured financial institution for the sole purpose of depositing 
collected fee revenue and disbursing the fee revenue directly to NMFS 
in accordance with paragraph (c) of this section.
    (b) Fee collection deposits. Each fish buyer, no less frequently 
than at the end of each business week, shall deposit, in the deposit 
account established under paragraph (a) of this section, all fee 
revenue, not previously deposited, that the fish buyer collects through 
a date not more than two calendar days before the date of deposit. 
Neither the deposit account nor the principal amount of deposits in the 
account may be pledged, assigned, or used for any purpose other than 
aggregating collected fee revenue for disbursement to the Fund in 
accordance with paragraph (c) of this section. The fish buyer is 
entitled, at any time, to withdraw deposit interest, if any, but never 
deposit principal, from the deposit account for the fish buyer's own 
use and purposes.
    (c) Deposit principal disbursement. On the last business day of 
each month, or more frequently if the amount in the account exceeds the 
account limit for insurance purposes, the fish buyer shall disburse to 
NMFS the full amount of deposit principal then in the deposit account. 
The fish buyer shall do this by check made payable to the Fund 
subaccount to which the deposit principal relates. The fish buyer shall 
mail each such check to the Fund subaccount lockbox that NMFS 
establishes for the receipt of the disbursements for each program. Each 
disbursement shall be accompanied by the fish buyer's settlement sheet 
completed in the manner and form that NMFS specifies. NMFS will specify 
the Fund subaccount lockbox and the manner and form of settlement sheet 
by means of the notification in Sec. 600.1013(d).
    (d) Records maintenance. Each fish buyer shall maintain, in a 
secure and orderly manner for a period of at least 3 years from the 
date of each transaction involved, at least the following information: 
(1) For all deliveries of fee fish that the fish buyer buys from each 
fish seller:
    (i) The date of delivery,
    (ii) The seller's identity,
    (iii) The weight, number, or volume of each species of fee fish 
delivered,
    (iv) The identity of the fishing vessel that delivered the fee 
fish,
    (v) The delivery value of each species of fee fish,
    (vi) The net delivery value,
    (vii) The identity of the party to whom the net delivery value is 
paid, if other than the fish seller,
    (viii) The date the net delivery value was paid, and
    (ix) The total fee amount collected;
    (2) For all fee collection deposits to and disbursements from the 
deposit account:
    (i) The dates and amounts of deposits,
    (ii) The dates and amounts of disbursements to the Fund's lockbox 
account, and
    (iii) The dates and amounts of disbursements to the fish buyer or 
other parties of interest earned on deposits.
    (e) Annual report. In each year, on the date to be specified in 
each implementation regulation, succeeding the year during which NMFS 
first implemented a fee, each fish buyer shall submit to NMFS a report, 
on or in the form NMFS specifies, containing the following information 
for the preceding year, or whatever longer period may be involved in 
the first annual report, for all fee fish each fish buyer purchases 
from fish sellers: (1) Total weight, number, or volume bought;
    (2) Total delivery value paid;
    (3) Total fee amounts collected;
    (4) Total fee collection amounts deposited by month;
    (5) Dates and amounts of monthly disbursements to each Fund lockbox 
account;
    (6) Total amount of interest earned on deposits; and
    (7) Depository account balance at year-end.
    (f) State records. If landing records that a state requires from 
fish sellers contain some or all of the data that this section requires 
and state confidentiality laws or regulations do not prevent NMFS' 
access to the records maintained for the state, then fish buyers can 
use such records to meet appropriate portions of this section's 
recordkeeping requirements. If, however, state confidentiality laws or 
regulations make such records unavailable to NMFS, then fish buyers 
shall maintain separate records for NMFS that meet the requirements of 
this section. If any state law or regulation prohibits fish buyers, or 
fish sellers where appropriate, from keeping, for the purpose of 
complying with any requirement of this section, separate records that 
involve some or all of the same data elements as the landing records 
that the fish buyers also keep, for state purposes and under state law 
or regulation, then a financed reduction program will not be possible.
    (g) Audits. NMFS or its agents may audit, in whatever manner NMFS 
believes reasonably necessary for the duly diligent administration of 
reduction loans, the financial records of fish buyers and fish sellers 
in each reduction fishery in order to ensure proper fee payment, 
collection, deposit, disbursement, accounting, record keeping, and 
reporting. Fish buyers and fish sellers shall make all records of all 
program transactions involving post-reduction fish harvests, fish 
deliveries, and fee payments, collections, deposits, disbursements, 
accounting, record keeping, and reporting available to NMFS or NMFS' 
agents at reasonable times and places and promptly provide all 
requested information reasonably related to these records that such 
fish sellers and fish buyers may otherwise lawfully provide. Trip 
tickets (or similar accounting records establishing the pounds of fee 
fish that each fish buyer buys from each fish seller each time that 
each fish buyer does so and each price that each fish buyer then pays 
to each fish seller for the fee fish) are essential audit 
documentation.
    (h) Confidentiality of records. NMFS and NMFS' auditing agents 
shall maintain the confidentiality of all data to which NMFS has access 
under this section and shall neither release the data nor allow the 
data's use for any purpose other than the purpose of this subpart; 
provided, however, that NMFS may aggregate such data so as to preclude 
their identification with any fish buyer or any fish seller and use 
them in the aggregate for other purposes).
    (i) Refunds. When NMFS determines that a reduction loan is fully 
repaid, NMFS will refund any excess fee receipts, on a last-in/first-
out basis, to the fish buyers. Fish buyers shall return the refunds, on 
a last-in/first-out basis, to the fish sellers who paid the amounts 
refunded.
    (j) Implementation regulations at variance with this section. If 
any special circumstances in a reduction fishery require, in NMFS's 
judgment, fee collection deposit, disbursement, or records provisions 
in addition to, or different from, those in this section in order to 
accommodate the circumstances of, and practices in, a reduction fishery 
while still fulfilling the intent and purpose of this section, NMFS 
may, notwithstanding this section, include such provisions in the 
implementation regulations for such reduction fishery.

[[Page 31454]]

Sec. 600.1015  Late charges.

    The late charge to fish buyers for fee payment, collection, 
deposit, and/or disbursement shall be one and one-half (1.5) percent 
per month, or the maximum rate permitted by state law, for the total 
amount of the fee not paid, collected, deposited, and/or disbursed when 
due to be paid, collected, deposited, and/or disbursed. The full late 
charge shall apply to the fee for each month or portion of a month that 
the fee remains unpaid, uncollected, undeposited, and/or undisbursed.


Sec. 600.1016  Enforcement.

    In accordance with applicable law or other authority, NMFS may take 
appropriate action against each fish seller and/or fish buyer 
responsible for non-payment, non-collection, non-deposit, and/or non-
disbursement of the fee in accordance with this subpart to enforce the 
collection from such fish seller and/or fish buyer of any fee 
(including penalties and all costs of collection) due and owing the 
United States on account of the loan that such fish seller and/or fish 
buyer should have, but did not, pay, collect, deposit, and/or disburse 
in accordance with this subpart. All such loan recoveries shall be 
applied to reduce the unpaid balance of the loan.


Sec. 600.1017  Prohibitions and penalties.

    (a) The following activities are prohibited, and it is unlawful for 
any party to: (1) Vote in any referendum under this subpart if the 
party is ineligible to do so;
    (2) Vote more than once in any referendum under this subpart;
    (3) Sign or otherwise cast a ballot on behalf of a voter in any 
referendum under this subpart unless the voter has fully authorized the 
party to do so and doing so otherwise comports with this subpart;
    (4) Interfere with or attempt to hinder, delay, buy, or otherwise 
unduly or unlawfully influence any eligible voter's vote in any 
referendum under this subpart;
    (5) Submit a fraudulent, unauthorized, incomplete, misleading, 
unenforceable by specific performance, or inaccurate bid in response to 
an invitation to bid under this subpart or, in any other way, interfere 
with or attempt to interfere with, hinder, or delay, any invitation to 
bid, any bid submitted under any invitation to bid, any reduction 
contract, or any other reduction process in connection with any 
invitation to bid;
    (6) Revoke or attempt to revoke any bid under this subpart;
    (7) Fail to comply with the terms and conditions of any invitation 
to bid, bid, or reduction contract under this subpart, including NMFS' 
right under such reduction contracts to specific performance;
    (8) Fail to fully and properly pay and collect any fee due payable, 
and collectible under this subpart or otherwise avoid, decrease, 
interfere with, hinder, or delay any such payment and collection,
    (9) Convert, or otherwise use for any purpose other than the 
purpose this subpart intends, any paid or collected fee;
    (10) Fail to fully and properly deposit on time the full amount of 
all fee revenue collected under this subpart into a deposit account and 
disburse the full amount of all deposit principal to the Fund's lockbox 
account--all as this subpart requires;
    (11) Fail to maintain full, timely, and proper fee payment, 
collection, deposit, and/or disbursement records or make full, timely, 
and proper reports of such information to NMFS--all as this subpart 
requires;
    (12) Fail to advise NMFS of any fish seller's refusal to pay, or of 
any fish buyer's refusal to collect, any fee due and payable under this 
subpart;
    (13) Refuse to allow NMFS or agents that NMFS designates to review 
and audit at reasonable times all books and records reasonably 
pertinent to fee payment, collection, deposit, disbursement, and 
accounting under this subpart or otherwise interfere with, hinder, or 
delay NMFS or it agents in the course of their activities under this 
subpart;
    (14) Make false statements to NMFS, any of the NMFS' employees, or 
any of NMFS' agents about any of the matters in this subpart;
    (15) Obstruct, prevent, or unreasonably delay or attempt to 
obstruct, prevent, or unreasonably delay any audit or investigation 
NMFS or its agents conduct, or attempt to conduct, in connection with 
any of the matters in this subpart; and/or
    (16) Otherwise materially interfere with the efficient and 
effective conduct of reduction and the repayment of reduction loans 
under this subpart.
    (b) Any party who violates one or more of the prohibitions of 
paragraph (a) of this section is subject to the full range of penalties 
the Magnuson-Stevens Act and 15 CFR part 904 provide-- including, but 
not limited to: civil penalties, sanctions, forfeitures, and punishment 
for criminal offenses--and to the full penalties and punishments 
otherwise provided by any other applicable law of the United States.
    (c) Additionally, NMFS may take any and all appropriate actions, 
including the communication of action at law, against each party 
responsible for the non-payment, non-collection, non-deposit, and/or 
non-disbursement in accordance with Sec. 600.1013 and/or Sec. 600.1014 
to enforce the United States' receipt from such party of any fee--
including penalties and all costs of collection--due and owing the 
United States on account of the reduction loan that such party should 
have, but did not, pay, collect, deposit, and/or disburse in accordance 
with Sec. 600.1013 and/or Sec. 600.1014. All such reduction loan 
recoveries shall be applied to reduce the unpaid balances of reduction 
loans.


Sec. 600.1018  Implementation regulations for each program. [Reserved]

[FR Doc. 00-12159 Filed 5-17-00; 8:45 am]
BILLING CODE 3510-22-F