[Federal Register Volume 71, Number 15 (Tuesday, January 24, 2006)]
[Proposed Rules]
[Pages 3797-3814]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-666]


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DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

50 CFR Part 270

[Docket No. 040720212-4212-01; I.D. 040204A]
RIN 0648-AS09


Fish and Seafood Promotion Act Provisions; Seafood Marketing 
Councils

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

ACTION: Proposed rule; request for comments.

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SUMMARY: In 1989, NMFS issued a final rule enacting the Fish and 
Seafood Promotion Act of 1986 (Act), as it pertains to Seafood 
Marketing Councils (Councils), for one or more species of fish or fish 
products. That rule, along with a large number of other rules and 
regulations unused or little used, was stricken from the Code of 
Federal Regulations (CFR) as part of a government-wide Presidential 
regulatory reform effort. Although the implementing regulations were

[[Page 3798]]

withdrawn from the CFR, the Act remains in effect. In response to 
renewed industry support for marketing and promotion-related 
activities, NMFS proposes regulations implementing the Act governing 
the establishment and operation of marketing Councils. Therefore, the 
intent of the proposed rule is to responsibly implement the Act to be 
consistent with NMFS' goals and mission statement. That is, to ensure 
that NMFS stewardship goal is not jeopardized while increasing benefits 
from domestic fisheries. Several revisions to the 1989 implementing 
regulations are proposed in this document in order to comply with new 
regulatory and/or legal requirements.

DATES: Comments on this proposed rule are requested, and must be 
received no later than 5 p.m., local time, February 23, 2006.

ADDRESSES: Written comments on this proposed rule should be sent by any 
of the following methods:
    <bullet> E-mail: <a href="/cdn-cgi/l/email-protection#cc9f818fafa3a1a1a9a2b8bf8ca2a3adade2aba3ba"><span class="__cf_email__" data-cfemail="63302e20000c0e0e060d1710230d0c02024d040c15">[email protected]</span></a>. Include in the subject line 
the following: ``Comments on the Proposed Rule for Seafood Marketing 
Councils;''
    <bullet> Federal e-Rulemaking Portal: http://www.regulations.gov;
    <bullet> Mail: Paper, disk, or CD-ROM comments should be sent to 
Gordon J. Helm, Acting Director, Office of Constituent Services, Room 
9553, SSMC3, 1315 East-West Highway, Silver Spring, MD 20910; and
    <bullet> Fax: (301) 713-2384.
    Copies of the Regulatory Impact Review are available from Gordon 
Helm. The Initial Regulatory Flexibility Analysis (IRFA) is contained 
in the Classification section of this proposed rule.
    Written comments regarding the burden-hour estimates or other 
aspects of the collection-of-information requirements contained in this 
rule should be submitted to Gordon Helm (see ADDRESSES) and to David 
Rostker, Office of Management and Budget (OMB), by e-mail at <a href="/cdn-cgi/l/email-protection#feba9f88979aa1ac918d8a959b8cbe91939cd09b918ed0999188"><span class="__cf_email__" data-cfemail="7e3a1f08171a212c110d0a151b0c3e11131c501b110e50191108">[email protected]</span></a>, or fax to (202) 395-7285.

FOR FURTHER INFORMATION CONTACT: Gordon J. Helm, Office of Constituent 
Services, telephone: (301) 713-2379 or E-mail: <a href="/cdn-cgi/l/email-protection#82c5edf0e6edecacc8accae7eeefc2ecede3e3ace5edf4"><span class="__cf_email__" data-cfemail="d592baa7b1babbfb9ffb9db0b9b895bbbab4b4fbb2baa3">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

Background

    The Fish and Seafood Promotion Act of 1986 (16 U.S.C. 4001 et 
seq.), enacted November 14, 1986, authorizes the creation of Seafood 
Marketing Councils. The Act provides authority to the Secretary of 
Commerce (Secretary) to: Establish Councils that would develop 
strategies and implement measures to better inform consumers; promote 
the utilization of one or more species of fish or fish products; enter 
into agreements with eligible members of the seafood industry; fund 
referenda to establish and terminate species-specific Councils; and 
establish quality standards, attend Council meetings, and approve 
seafood marketing plans.
    In 1986, when Congress enacted the Act, it found that: (1) The 
commercial fishing industry of the United States significantly 
contributed to the national economy, and could make a great 
contribution if fish resources within the United States Exclusive 
Economic Zone were more fully utilized; (2) the commercial fisheries of 
the United States provided significant employment in coastal areas and 
in processing and distribution centers; (3) fish contributed an 
important nutritional component to the American diet; (4) increased 
consumption of seafood in the United States could significantly lower 
the risk of many cardiovascular diseases; (5) Federally supported 
development programs for commercial fisheries were unable to meet 
present and future marketing needs; (6) many fish species were 
underutilized by the United States fishing industry because of 
underdeveloped markets; and (7) the United States fishing industry had 
the potential to expand greatly its contribution to interstate and 
foreign commerce, favorably affecting the balance of trade.
    A final rule implementing the Act was published in the Federal 
Register on December 7, 1989 (54 FR 50504). A National Seafood 
Marketing Council (National Council) was established under the Act. The 
National Council was authorized to enter into agreements with 
applicants to fund referenda to establish and terminate species-
specific marketing councils. However, no species-specific marketing 
councils were established and the National Council was disbanded. In 
1996, the regulations implementing the Act were removed from the CFR as 
part of the government-wide Presidential regulatory reform effort.
    The 1986 Congressional findings and statement of purpose (16 U.S.C. 
4001 & 4002) concerning the value of the commercial fisheries to the 
United States may still apply today. Furthermore, industry interest and 
support for seafood marketing and promotion-related activities has been 
expressed. Niche marketing programs have been initiated by both the 
Pacific salmon harvesters in Alaska and by the Wild American Shrimp 
organization in the southern Atlantic and Gulf of Mexico states. 
Additional interest has been expressed by U.S. tuna processors who are 
also facing declining market shares due to foreign competition. The 
accompanying IRFA and RIR indicate that at least twelve fish species 
could benefit from the development of organized marketing programs. 
Marketing and promotion plans prepared by a Council would be designed 
to increase the general demand for fish and fish products by 
encouraging, expanding, and improving the marketing and utilization of 
fish and fish products both in domestic or foreign markets, through 
consumer education, research, and other marketing and promotion 
activities. Therefore, NMFS proposes to implement regulations that 
would provide the foundation for the establishment, organization, and 
practices of the Councils. This proposed rule identifies the role of 
the Secretary of Commerce, who has delegated authority to NMFS, in the 
establishment and administration of the Council process. Also provided 
are guidelines for preparation of the application package including 
specific requirements for proposed charters, identification of sector 
participants who are eligible to vote in the referendum, descriptions 
of how a referendum would be conducted, and determination of payment 
and/or refunding of assessment fees. Also addressed are petitions of 
objection related to assessment fees and petitions for the dissolution 
of a Council. NMFS suggests that interested persons also read the Act 
along with this document for additional information.

Content and Submission of Application Package to Establish A Council

    An application package submitted to NMFS to establish a Council 
would consist of the following information: (1) An application 
requesting NMFS to establish a Council; (2) a list of sector 
participants who are eligible to vote in the referendum; (3) a proposed 
charter under which the proposed Council would operate; and (4) an IRFA 
and/or other analytical documentation addressing the requirements of 
the Regulatory Flexibility Act, E.O. 12866, the National Environmental 
Policy Act, and other information NMFS considers necessary or 
appropriate for the review and approval of the application.
    One signed original and two copies of the completed application 
package should be submitted to the Assistant Administrator for 
Fisheries, 1315 East-West Highway, Silver Spring, MD 20910. NMFS would 
acknowledge receipt of the application package and

[[Page 3799]]

contact the applicant if further information is required.
1. Application.
    The application should be comprised of the signatures or corporate 
certifications of no less than three sector participants in each sector 
who collectively accounted for, in the previous 12-month period, not 
less than 10 percent of the value of the fish or fish products that 
were handled by each such sector during that period. For purposes of 
the Act and this proposed rule, ``sector'' means: (A) The sector 
consisting of harvesters; (B) the sector consisting of importers; (C) 
the sector consisting of marketers; (D) the sector consisting of 
processors; (E) the sector consisting of receivers; or (F) the consumer 
sector consisting of persons professionally engaged in the 
dissemination of information pertaining to the nutritional benefits and 
preparation of fish and fish products.
    Persons who meet these minimum requirements would be eligible to 
submit an application to NMFS to establish a Council. The application 
should include a statement that, if established, the Council would have 
sufficient resources, e.g., cash, donated office space, services, 
supplies, etc., available for initial administrative expenditures 
pending collection of assessments.
2. List of Sector Participants Eligible to Vote in the Referendum.
    The applicant would provide a list of sector participants, to the 
extent practicable, identifying the business name and address of all 
sector participants that the applicant believes meet the requirements 
for eligibility to vote in the referendum on the adoption of the 
proposed charter. The list would include all sectors in which a sector 
participant meets the eligibility requirements. If the sector 
participant has more than one place of business located within the 
geographic area of the Council, all such places would be listed and the 
primary place of business should be designated. At the time of 
submission of the application the referendum list of sector 
participants would also contain the list of required signatures or 
corporate certifications.
    NMFS acknowledges that development of the list of sector 
participants meeting the minimum requirements stated in the proposed 
charter may be difficult. The Act requires the applicant, to the extent 
practicable, to develop such a list. NMFS would, to the extent 
practicable, verify the validity of the applicant's list, which may 
require adding or deleting names provided by applicant. At the request 
of an applicant, NMFS would provide available information in its 
possession of a non-proprietary nature to assist in developing this 
list.
    The Council, if approved, would be required to maintain a list of 
sector participants. The Council would need a current list of sector 
participants in each sector represented on the Council, particularly 
for the purposes of collecting assessments and voting in referenda.
3. Charter.
    At a minimum the text of the proposed charter would contain the 
following information:
    (1) The name of the Council and a provision proclaiming its 
establishment;
    (2) A declaration of the purposes and objectives of the Council;
    (3) A description of the species of fish and fish products, 
including the scientific and common name(s), for which the Council 
would implement marketing and promotion plans under the Act;
    (4) A description of the geographic area (state(s)) within the 
United States covered by the Council;
    (5) The identification of each sector and the number and terms of 
representatives for each sector that would be voting members on the 
Council;
    (6) The identification of those sectors (which would be required to 
include a sector consisting of harvesters, a sector consisting of 
receivers, and, if subject to assessment, a sector consisting of 
importers) eligible to vote in the referendum to establish the Council;
    (7) For each sector a threshold level specifying the minimum 
requirements, as measured by income, volume of sales, or other relevant 
factors, that a person engaging in business in the sector would be 
required to meet in order to participate in a referendum;
    (8) A description of the rationale and procedures for determining 
assessment rates based on a fixed amount per unit of weight or measure, 
or on a percentage of value of the product handled;
    (9) The proposed rate or rates that would be imposed by the Council 
on receivers and, if subject to assessment, importers during its first 
year of operation;
    (10) The maximum amount by which an assessment rate for any period 
may be raised above the rate applicable for the immediately preceding 
period;
    (11) The maximum rate or rates that would be imposed by a Council 
on receivers or importers during the operation of the Council;
    (12) The maximum limit on the amount any one sector participant 
would be required to pay under an assessment for any period;
    (13) The procedures for providing refunds to sector participants 
subject to assessments who request refunds in accordance with the time 
limits;
    (14) A provision setting forth the voting procedures by which votes 
would be cast by proxy;
    (15) A provision that the Council would have voting members 
representing the harvesting, receiving and, if subject to assessment, 
importing sectors;
    (16) A provision setting forth the definition of a quorum for 
making decisions on Council business and the procedures for selecting a 
chairperson of the Council;
    (17) A provision that members of the Council would serve without 
compensation, but would be reimbursed for reasonable expenses incurred 
in performing their duties as members of the Council;
    (18) A provision containing a requirement for submission of 
documentation as requested by NMFS for purposes of evaluating the 
performance of proposed marking plans and the Council's related 
performance;
    (19) A provision containing the minimum number of participants that 
would be needed for sustained operations that cannot receive assessment 
refunds;
    (20) A provision acknowledging that NMFS would have the right to 
participate in Council meetings;
    (21) A provision that NMFS would have final approval authority over 
proposed marketing plans and Council actions;
    (22) A provision containing a requirement for the Council to 
arrange for a complete audit report to be conducted by an independent 
public accountant and submitted to NMFS at the end of each fiscal year;
    (23) A provision containing a requirement for the Council to 
conduct a market assessment based on economic, market, social and 
demographic, and biological information as deemed necessary by NMFS; 
and
    (24) A provision containing a requirement for the Council to update 
the list of sector participants eligible to vote in a referendum on an 
annual basis.
4. Analytical Documentation.
    Analytical documentation would be required as part of the 
application package in order to determine the impacts of the proposed 
Council under applicable law. Individual Councils, once established, 
may impact on small entities, but the impacts could not be determined 
until the charter is drafted with ranges of assessments based on 
volume, income, etc., of sector participants to be involved in the

[[Page 3800]]

Council. Specifically, the imposition of assessments on certain members 
of the industry would have an effect on a firm's financial situation. 
Any other costs or requirements which the Council would impose on 
industry would also have to be considered and analyzed. Since these 
parameters would vary with each application, a determination of impact 
would be made on a case-by-case basis. Therefore, the applicant would 
provide an IRFA and/or other analytical documentation addressing the 
requirements of the Regulatory Flexibility Act, E.O. 12866, the 
National Environmental Policy Act, and other information NMFS considers 
necessary or appropriate for the review and approval of the 
application. This other necessary and appropriate information required 
for the review of the application includes, but is not limited to, an 
analysis of the primary, secondary, and tertiary affects of increasing 
demand for seafood. This information would have to be incorporated into 
the NEPA analysis to determine if a proposed council or its marketing 
program is consistent with NMFS conservation goals, national standards, 
other national guidelines, and would have to be demonstrated to be 
consistent with Federal standards and guidelines on nutrition and 
health.

Initial Decision

    NMFS would make an initial decision on the application, list of 
sector participants eligible to vote in the referendum, charter, and 
other required analytical documentation such as the IRFA within 180 
days of receipt. NMFS would determine if the application package is 
complete and complies with all of the requirements set forth in the 
implementing regulations, the Act, and other applicable law.
    If a negative determination is made, NMFS would advise the 
applicant in writing of the reasons for the negative determination, 
such as missing documentation. The applicant may submit a revised 
application package for reconsideration. NMFS would then have 180 days 
from receipt of the revised application package to make a 
determination.
    If an affirmative decision is made, the Act requires NMFS to 
publish (by such means as will result in wide publicity in regions 
affected by the proposed charter) the text of the proposed charter and 
a list of those sector participants eligible to vote in the referendum 
and provide for public comment, including the opportunity for public 
meeting and to amend the list of sector participants. NMFS intends to 
publish notification in the Federal Register and provide a formal 
comment period. That notice would serve as a proposed rule thus 
triggering the requirements of the Regulatory Flexibility Act. As is 
standard practice, NMFS in the Federal Register document would announce 
availability of the IRFA and/or other analytical documents for review 
and comment.

Referendum on Adoption of Proposed Charter

1. Sector Participant Vote
    NMFS would conduct a referendum on the adoption of the proposed 
charter within 90 days of its initial affirmative decision. The 
referendum would be conducted among all sector participants that meet 
the requirements for eligibility to participate in the referendum, as 
identified in the proposed charter. The vote may be made by any 
responsible officer, owner, or employee representing a sector 
participant.
    A vertically integrated seafood company may qualify to vote in more 
than one sector, depending on the requirements established for each 
sector by the Council. However, only one vote may be cast by each 
sector participant who is eligible to vote, regardless of the number of 
individuals that make up the ``sector participant'' and how many 
sectors the participant is engaged in. Therefore, it is requested that 
petitioners specify in the list of sector participants all sectors for 
which a sector participant meets the eligibility requirements to vote 
in a referendum. The ballot for each referendum would request that each 
person voting certify in which sector he/she is voting in that 
particular referendum. This certification by sector participants voting 
in a referendum will be important to NMFS and the Council in order to 
determine the success or failure of a referendum, since the percentage 
of sector participants voting favorably and the value of fish products 
they handled in a sector will determine the outcome.
    The referendum to establish a Council would pass if votes cast in 
favor of the proposed charter constitute a majority of the sector 
participants voting in each and every sector. Further, the majority 
must collectively account for, in the preceding 12-month period, at 
least 66 percent of the value of the fish and fish products described 
in the proposed charter that were handled during this period, in that 
sector, and by those who met the eligibility requirements to vote in 
the referendum. If the referendum passes, NMFS could establish a 
Council and approve the proposed charter. If a referendum fails to pass 
in any sector of the proposed Council, NMFS would not establish the 
Council or approve the proposed charter. NMFS would notify the 
applicants of the results of the referendum and publish the results of 
the referendum in the Federal Register.
2. Costs of Conducting a Referendum
    NMFS would initially pay all costs related to the conduct of the 
referendum to establish a Council. Once an application has been 
approved, NMFS would estimate the cost of conducting the referendum, 
notify the applicants, and request that they post a bond or provide 
other applicable security, such as a cashier's check, to cover costs of 
the referendum. Although the cost of each referendum would vary 
according to the size of the Council, there would be some cost 
categories that would be common to the conduct of all referenda, e.g., 
verification of the list of sector participants, publication of the 
application, charter, and list of sector participants in the Federal 
Register, printing and postage costs for the ballots, etc. In the event 
a public hearing is requested, this would also add to the cost.
    After the referendum has been conducted, NMFS would inform the 
applicants of the exact cost. If the referendum is approved and the 
proposed charter is adopted, the Council would be required to reimburse 
NMFS for the total actual costs of the referendum within 2 years after 
establishment of the Council. This amount would be paid for from 
assessments collected by the Council. If a referendum fails to result 
in establishment of a Council, NMFS would immediately recover all 
expenses incurred from the bond or security posted by applicants. In 
either case, such expenses would not include salaries of government 
employees or other administrative overhead, but would be limited to 
those additional direct costs incurred in connection with conducting 
the referendum to establish a Council.

Appointments, Terms, Vacancies, and Removal of Council Members

    Within 30 days after a Council is established, NMFS would solicit 
nominations for Council members from the sector participants 
represented on the Council in accordance with the approved charter. The 
members of each Council would be individuals who, by reason of their 
occupational or other experience, scientific expertise, or training, 
are knowledgeable with regard to the activities of the sector which the 
individual would represent on the Council. To the extent practicable, 
the nominations should result in equitable representation for the 
constituent regions.

[[Page 3801]]

    NMFS would appoint the members of the Council from among the 
nominees within 60 days. The term for members would be 3 years. 
Initially, to ensure continuity, half of the members' terms would be 2 
years and half would be 3 years. Reappointments would be permissible.
    Vacancies on a Council would be filled within 60 days after the 
vacancy occurs, in the same manner in which the original appointment 
was made. A member appointed to fill a vacancy occurring before the 
expiration of the term for which the member's predecessor was appointed 
would be appointed only for the remainder of that term.
    Council members would serve without compensation but would be 
reimbursed for their reasonable expenses incurred in performing their 
duties as members of the Council.
    NMFS would remove a member of a Council if the Council recommended, 
by not less than two-thirds of its members, removal for cause. Such a 
recommendation of a Council should be in writing and accompanied by a 
statement of the reasons upon which the recommendation would be based.

Continued Operation of the Council

    Continued operation of a Council would be at the discretion of NMFS 
and subject to NMFS' annual review of a market assessment prepared by 
the Council and evaluation of Council performance. Increases in product 
prices would not be the sole criteria for determining the effectiveness 
of a marketing program. The Council must demonstrate that the marketing 
plan would not adversely impact those fisheries for which conservation 
and management measures are necessary to prevent overfishing and 
rebuild overfished stocks, i.e., the market plan would be designed to 
increase profits rather than increase harvest. The marketing plan 
should also demonstrate that conservation and management efforts in 
other fisheries are not adversely affected, but the Secretary may use 
the primary, secondary, or tertiary impacts in evaluating whether the 
Council should be allowed to continue operating. Where measures have 
been implemented to reduce the overall harvest in a fishery, the 
marketing plan should clearly identify how stock conservation harvest 
capacity reduction would not be adversely impacted. Council support of 
the regional fishery management council's adoption of dedicated or 
controlled access programs, for example but not limited to programs 
such as Individual Fishing Quota, moratorium on new entrants into a 
fishery, and other effort control measures, would be programs that 
comply with this standard. In addition, NMFS would retain the authority 
to determine if the continued operation of a Council would be in the 
public interest. Councils would be required to meet performance 
standards approved by NMFS that demonstrate that marketing and 
promotion programs are effective in increasing consumer demand for 
species-specific seafood products. Councils would also be required to 
conduct market assessments based on economic, market, social and 
demographic, and biological information as deemed necessary by NMFS. 
This information and data would be provided to NMFS with the market 
assessment for review and verification of results and analysis and may 
be used by NMFS subject to normal rules and guidelines for industry 
generated data and information.

Reports and Marketing Plans

    Councils would be required to submit annual plans and budgets for 
species-specific marketing and promotion plans, including when 
applicable consumer education, research, and other activities of the 
Councils. Councils would also be required to submit progress reports on 
implementation of the marketing and promotion plans and a financial 
reports with respect to the receipt and disbursement of funds entrusted 
to it. NMFS would require a complete audit report to be conducted by an 
independent public accountant and submitted to NMFS at the end of each 
fiscal year.
    The Council must maintain reports, books, and records for a minimum 
of 3 years, even if the Council is terminated in less than 3 years. The 
purpose of this requirements is to enable NMFS to ensure that all 
remaining business of the terminated Council is concluded in an orderly 
manner. The 3-year time limit is in accordance with the Office of 
Management and Budget guidelines for implementing the Paperwork 
Reduction Act.

Assessments

    Councils would be funded through voluntary assessment of the 
industry represented on the Councils. Assessments would be imposed on 
sector participants in the receiving sector or the importing sector or 
both as specified in the approved Council charter. Assessment rates 
would be based on value that may be expressed in monetary units or 
units of weight or volume. Once a participant declines to pay an 
assessment, or elects not to participant in a Council, no future 
assessments will be imposed. With the concurrence of the Secretary, a 
Council would establish the applicable assessment for those seeking to 
rejoin or participate in a Council at a future time.
1. Sector Participant and Related Assessment.
    An assessment on sector participants in the receiving sector would 
be in the form of a percentage of the value or a fixed amount per unit 
of weight or volume of the fish described in the charter when purchased 
by receivers from fish harvesters.
    An assessment on sector participants who own fish processing 
vessels and harvest the fish described in the charter would be in the 
form of a percentage of the value or on a fixed amount per unit of 
weight or volume of the fish in the charter that is no less than the 
value if such fish had been purchased by a receiver other than the 
owner of the harvesting vessel.
    An assessment on sector participants in the importing sector would 
be in the form of a percentage of the value that an importer pays to a 
foreign supplier, as determined for the purposes of the customs laws, 
or a fixed amount per unit of weight or volume, of the fish or fish 
products described in the charter when entered or withdrawn from 
warehouse for consumption, in the customs territory of the United 
States by such sector participants.
2. Notice of Assessment to Sector Participant
    The Council would provide notice to a sector participant subject to 
assessment that the assessment is due. The notice of assessment would 
contain:
    a. A specific reference to the provisions of the Act, regulations, 
charter, and referendum that authorize the assessment;
    b. The amount of the assessment;
    c. The period of time covered by the assessment;
    d. The date the assessment would be due and payable, which would 
not be earlier than 30 days from the date of the notice;
    e. The form(s) of payment; and
    f. To whom and where the payment would be made.
    g. Notification of the right to seek review of the assessment by 
filing a written petition of objection with NMFS at any time during the 
time period to which the assessment applies in accordance with the 
procedures in Sec.  270.19.
    h. Notification of the right to request a hearing on the petition 
of objection.
    i. Notification of the a right to request a refund of the 
assessment; the request for a refund may be submitted for not less than 
90 days from the date of the

[[Page 3802]]

assessment; and the Council would make the refund within 60 days from 
the date of the receipt.
    Persons subject to an assessment would be required to pay the 
assessment on or before the date due, unless they have demanded a 
refund or filed a petition of objection with NMFS under Sec.  270.21. 
However, person who have demanded a refund under Sec.  270.22 or filed 
a petition of objection under Sec.  270.21 may submit proof of these 
actions in leu of payment. In the case of a petition of objection, NMFs 
will inform the Council and the petitioner of its finding at which time 
petitioner must pay the revised assessment if applicable.
3. Petition of Objection
    Requests for NMFS to modify or take other appropriate action 
regarding the assessment may be made by filing with NMFS a written 
petition of objection. Any sector participant subject to an assessment 
may file a written petition with NMFS alleging that the assessment, the 
plan approved upon which the assessment is based, or any obligation 
imposed under the plan, is not in accordance with the law. A petition 
of objection may request NMFS to modify or take other appropriate 
action regarding the assessment or plan. A petition may be filed only 
during the time period to which the assessment applies. The petitioner 
may also request a formal hearing. Following the hearing, or if no 
hearing is held, as soon as practicable, NMFS would decide the matter 
and serve written notice of the decision to the petitioner and the 
Council. NMFS's decision would be based on a consideration of all 
relevant documentation and other evidence submitted, and would 
constitute the final administrative decision and order of the agency.
4. Refund of Assessment
    Pursuant to 16 U.S.C. 4014, any sector participant who pays an 
assessment under the Act may demand and must promptly receive from the 
Council a refund of the assessment. A demand for refund must be made in 
accordance with procedures in the approved charter and within the time 
limits prescribed by the Council and approved by NMFS. Procedures to 
provide such a refund would be established before any such assessment 
would be collected. The refund procedures would allow the sector 
participant to request a refund for not less than 90 days from the date 
of the assessment and the Council would make the refund within 60 days 
from the date of the receipt of the request for the refund. Once a 
refund has been requested by a sector participant and paid by the 
Council, that sector participant would no longer participate in a 
referendum or other business of the Council during the remainder of the 
assessment rate period. However, if assessments should be paid during a 
future assessment rate period and no refund is requested, that sector 
participant would be able to again participate in a referendum or other 
business of the Council.

Quality Standards

    Each Council may develop and submit to NMFS for approval, or upon 
the request of a Council, NMFS would develop quality standards for the 
species of fish or fish products described in the approved charter. Any 
quality standard developed should be consistent with the purposes of 
the Act. A quality standard should be adopted by a Council by a 
majority of its members following a referendum conducted by the Council 
among sector participants of the concerned sector(s). In order for a 
quality standard to be brought before Council members for adoption, the 
majority of the sector participants of the concerned sector(s) must 
vote in favor of the standard. Further, according to the best available 
data, the majority must collectively account for, in the preceding 12-
month period, not less than 66 percent of the value of the fish or fish 
products described in the charter that were handled during such period 
in that sector by those who meet the eligibility requirements to vote 
in the referendum. Councils may develop quality standards establishing 
the criteria for the fish or fish products being promoted. The Council 
would submit a plan to conduct the referendum on the quality standards 
to NMFS for approval at least 60 days in advance of such referendum 
date. The plan would consist of the following:
    (1) Date(s) for conducting the referendum;
    (2) Method (by mail or in person);
    (3) Copy of the proposed notification to sector participants 
informing them of the referendum;
    (4) List of sector participants eligible to vote;
    (5) Name of individuals responsible for conducting the referendum;
    (6) Copy of proposed ballot package to be used in the referendum; 
and
    (7) Date(s) and location of ballot counting.
    An official observer appointed by NMFS would be allowed to be 
present at the ballot counting and any other phase of the referendum 
process, and may take whatever steps NMFS deems appropriate to verify 
the validity of the process and results of the referendum.
    Quality standards developed must meet or exceed the U.S. Food and 
Drug Administration's minimum requirements for fish and fish products 
for human consumption and must be consistent with applicable standards 
of the U.S. Department of Commerce (National Oceanic and Atmospheric 
Administration) or other recognized Federal standards and/or 
specifications for fish and fish products.
    The intent of quality standards must not be to discriminate against 
importers who are not members of the Council. Quality standards must 
not be developed for the purpose of creating non-tariff barriers. Such 
standards must be compatible with U.S. obligations under the General 
Agreement on Tariffs and Trade, or under other international standards 
deemed acceptable by NMFS.
    No quality standard adopted by a Council can be used in false or 
misleading advertising or promotion of fish or fish products. A quality 
standard may be adopted which requires sector participants to be in the 
U.S. Department of Commerce voluntary seafood inspection program.
    With respect to a quality standard adopted under this section, the 
Council would develop and file with NMFS an official identifier in the 
form of a symbol, stamp, label or seal that would be used to indicate 
that a fish or fish product meets the quality standard at the time the 
official identifier is affixed to the fish or fish product, or is 
affixed to or printed on the packaging material of the fish or fish 
product. The use of such identifier would be governed by Sec.  270.15.

Dissolution of a Council

1. Petition for Termination
    No less than three sector participants in any one sector may file a 
petition to terminate a Council. The petition would be accompanied by a 
written document explaining the reasons for the petition. If NMFS 
initially determines that the petition is accompanied by the 
signatures, or corporate certifications, of no less than three sector 
participants in the sector who collectively accounted for, in the 
preceding 12-month period, not less than 20 percent of the value of the 
fish or fish products that were handled by that sector during the 
period, NMFS within 90 days after the initial determination, would 
conduct a referendum for termination of the Council among all sector 
participants in that sector.
    NMFS would publish notification in the Federal Register of the 
referendum, including an explanation of the reasons for the petition 
for termination and any other relevant information NMFS considers 
appropriate. The notification

[[Page 3803]]

would be published at least 30 days prior to the referendum.
2. Referendum Vote on Termination
    If the referendum votes which are cast in favor of terminating the 
Council constitute a majority of the sector participants voting and the 
majority, in the preceding 12-month period, collectively accounted for 
not less than 66 percent of the value of such fish and fish products 
the that were handled during that period by the sector who filed the 
petition, NMFS would by order terminate the Council effective as of a 
date by which the affairs of the Council would be concluded.
3. Cost of Referendum
    NMFS would initially pay all costs of this referendum. However, 
prior to conducting the referendum, NMFS would require petitioners to 
post a bond or other security acceptable to NMFS in an amount which 
NMFS determines to be sufficient to pay any expenses incurred for the 
conduct of the referendum.
    If a Council is terminated, NMFS, after recovering all expenses 
incurred for the conduct of the referendum, would take action as is 
necessary and practicable to ensure that moneys remaining in the 
account established by the Council are paid on a prorated basis to the 
sector participants from whom those moneys were collected. If a 
referendum fails to result in the termination of the Council, NMFS 
would immediately recover the amount of the bond posted by the 
petitioners.
    If the amount remaining in the Council account is insufficient for 
NMFS to recover all expenses incurred for the conduct of the 
referendum, NMFS would recover the balance of the expenses from the 
petitioners that posted a bond.

Proprietary Business Data or Commercial Information

    Commercial or financial information submitted to NMFS in compliance 
with any requirement or regulation related to the Act, implementing 
regulations, or other applicable law would be treated as proprietary or 
confidential and protected from public disclosure to the extent 
possible under applicable law (see 16 U.S.C. 4012(f)). However, NMFS 
may release or make public general or statistical statements based upon 
reports of a number of persons (in aggregate or summary form) which 
does not directly or indirectly disclose the identify or business of 
any individual or business who submits the information.

Classification

    The proposed rule has been determined to be significant for the 
purposes of Executive Order 12866. The primary concern is that the 
market may have failed to provide information on the quality, safety, 
and availability of fishery products that is accurate and easily 
available to consumers. NMFS requests comments from the public on what 
market failures justifiy creation of seafood marketing councils, the 
degree to which industry structure affects these market failures, and 
whether this program is narrowly tailored to remedy those market 
failures.
    NMFS prepared an IRFA that describes the economic impacts of this 
proposed rule, if adopted, would have on small entities. A description 
of the action, why it is being considered, and the legal basis for this 
action are contained in the SUMMARY and SUPPLEMENTARY INFORMATION 
section of the preamble. This proposed rule does not duplicate, 
overlap, or conflict with other Federal rules.

Recordkeeping and Reporting Requirements

    In addition to recordkeeping and reporting requirements required to 
create a Council, small entities could also be required to complete 
forms required to administer assessment fees, petition for a refund of 
assessment fees, or participate in any referendum under a specific 
Council's charter. NMFS believes the number of burden hours to small 
entities to meet Council obligations could range between 5 and 20 hours 
annually. This proposed rule does not implement a seafood marketing 
program, therefore, the Paperwork Reduction Act requirements are not 
triggered. However, there may be a need for additional burden hours 
once a Council's charter is accepted.

Description of Small Entities Affected by this Proposed Rule

    The potential universe of entities affected by this action includes 
all harvesters, importers, marketers, and processors of seafood. With 
the exception of a small number of catcher-processor vessels, most 
harvesters are identified as small entities under the Regulatory 
Flexibility Act meeting a size standard of less than $3.5 million in 
gross receipts. Importers and marketers are characterized as small if 
the number of employees working in a typical pay period number are 100 
or fewer while seafood processors employing 500 people or less are 
considered small. A Council could be made up of any combination of 
small or large firms depending upon the sector or sectors of a 
particular fishery the Council is representing. NMFS statistics 
indicate that there are approximately 17,679 harvesters, 935 processing 
plants, and 2,446 wholesale and marketing establishments that could be 
affected by this proposed rule.

Economic Impact Analysis

Overview
    Despite a strong U.S. demand for fish and shellfish, the domestic 
seafood industry is faced with a number of challenges. The industry has 
been experiencing declining prices, sales, and earnings; increased 
input costs, particularly fuel; increasingly restrictive management; 
strong competition from imports and aquaculture; loss of access to 
supporting infrastructure (e.g., dock space); and numerous health 
advisories regarding seafood consumption. The nominal price of canned 
tuna, for example, declined from $2.55 in 1980 to $1.78 in 2004. 
Between 1979 and 2003, the real or deflated (2004 constant dollar 
value) ex-vessel price of all finfish and shellfish combined declined 
from $0.76 to $0.35 per pound. The domestic seafood industry is 
experiencing problems in the form of competition from imports and 
increased fuel prices, and established generic marketing programs have 
been shown to be effective in improving the demand for some food 
commodities. The RIR analysis summarized below indicates that similar 
marketing programs, if effective in raising prices, could generate 
positive net benefits and provide for increased national economic 
impacts.
    The economic analysis performed in support of this action examined 
12 species complexes: (1) Grouper (all species of group), (2) snapper 
(all species of snapper), (3) roundfish (cod, haddock, and pollock), 
(4) tuna (all species of tuna), (5) halibut, (6) flatfish (all species 
of flatfish), (7) salmon (all wild caught species of salmon), (8) 
scallops (all species of scallops), (9) Dungeness and snow crab, (10) 
all other species of crabs, (11) lobster (spiny and North American), 
and (12) all species of shrimp. Per capita consumption was defined as 
per-capita landings between 1950 and 2003. A synthetic inverse demand 
system (SIDS) model was specified and estimated following Park et al. 
(2004). The SIDS model was used to estimate changes in ex-vessel 
revenues and compensating variation or economic value, which might be 
induced by a successful generic marketing program. Economic impacts 
were estimated using a national input/output model, which was developed 
for NOAA Fisheries in 2004. The estimation of impacts also did not 
include the potential impacts of other

[[Page 3804]]

meat producing and consuming sectors (e.g., cattle producers and 
consumers of beef).
    Based on the potential changes in sales of Alaska's, Maryland's, 
and the Tilapia Marketing Association's marketing campaigns for salmon, 
blue crabs, and tilapia, the analysis of economic impact prepared by 
NMFS assumed that a marketing campaign could promote a 10 percent 
increase in demand. These relatively small, homogeneous groups with 
common goals were successful in reaching agreement on developing a 
marketing strategy. During the Alaskan salmon campaign, sales (quantity 
demanded) increased by 19.6 percent; sales of blue crabs in Maryland 
increased by 52.2 percent; and sales of Tilapia increased by more than 
54.5 percent between 2001 and 2003. As much as 40% of Alaskan salmon 
wild landings are based on hatchery production and tilapia is a fresh 
water aquaculture product; both products can be increased to respond to 
increases in demand. Maryland blue crab while a substantial part is 
still only a single component of a much larger market allowing for the 
reallocation of sales between different markets due to real or 
perceived quality differences. Larger, heterogeneous groups with 
different goals and objectives could have substantially higher costs of 
reaching agreement on a marketing strategy; preventing an effective 
strategy from being developed. The Federal government can assist in 
reducing these costs, but its involvement must be limited in these TAC-
limited, marine, wild-capture fisheries to the extent that an increase 
in demand would not jeopardize conservation goals and objectives.
    NOAA stewardship of fisheries resources under the Magnuson-Stevens 
Act, Endangered Species Act, and other applicable laws in managing U.S. 
fisheries ensures that conservation and management goals and objectives 
are not jeopardized. As part of this process, NMFS must submit annually 
a Status of Fisheries Stocks report to Congress reporting on the status 
of overfished fisheries and fisheries where overfishing is continuing. 
Seafood Council actions established under this rule may not interfere 
with the continued management and conservation of fisheries required 
under other statutes.
    The analysis estimated potential changes in revenues and welfare 
and was limiting since: it considered only the harvesting sector; the 
processing and final retail sectors were not included; the analysis 
considered a marketing program, which increased the per capita quantity 
demanded; no attention was given to whether or not a marketing program 
would shift out the demand or change the various quantity coefficients, 
which would be an expected effect of a marketing campaign. 
Alternatively, a marketing program would be expected to increase the 
demand for a given price, and thus, shift the demand curve out from the 
origin so that at every price, consumers would demand more seafood. 
Without detailed information on the relationship between advertising 
and seafood demand, it is difficult to even state the magnitude of bias 
from assuming that a marketing program increases the quantity demanded.
    As illustrated in Tables 1, a 10 percent increase in the demand for 
seafood generates considerable economic activity for the U.S. economy. 
If the demand for all 12 species or species grouping were to increase 
by 10 percent (or $108.1 million ex-vessel), this would, in turn, 
generate total sales of $500.7 million in the U.S. economy and $172.3 
million in income (which includes profits). Those species with the 
potential greatest level of economic impacts are shrimp, salmon, and 
tuna. Combined, they account for nearly 60 percent of the total 
potential output, 58 percent of the total potential income, and 59 
percent of the total potential employment.

[[Page 3805]]



                   Table 1. Changes in Output (1,000$ of 2004 Constant Dollars) Generated by a 10% Increase in the Demand for Seafood
--------------------------------------------------------------------------------------------------------------------------------------------------------
  Harvesting Sector             Harvesting Sector Impacts           Processor, Wholesaler, and Dealer Impacts           Impacts for All Sectors
--------------------------------------------------------------------------------------------------------------------------------------------------------
            Change In
  Species   Ex-vessel    Direct    Indirect   Induced     Total      Direct    Indirect   Induced     Total      Direct    Indirect   Induced     Total
             Revenues
--------------------------------------------------------------------------------------------------------------------------------------------------------
Grouper         561.1        335        228        745      1,308        389        272        871      1,532        724        500      1,616     2,840
--------------------------------------------------------------------------------------------------------------------------------------------------------
Snapper       1,391.3        830        566      1,846      3,242        966        673      2,159      3,797      1,796      1,239      4,005     7,040
--------------------------------------------------------------------------------------------------------------------------------------------------------
Roundfish     8,018.8      4,088      2,840     11,204     18,132      5,569      3,876     12,442     21,887      9,657      6,716     23,646    40,019
--------------------------------------------------------------------------------------------------------------------------------------------------------
Tuna         15,920.5     10,135      6,956     14,519     31,610      9,966      7,899     25,399     43,264     20,101     14,855     39,918    74,874
--------------------------------------------------------------------------------------------------------------------------------------------------------
Salmon       23,620.2     17,173     12,499     27,314     56,985     16,404     11,418     36,650     64,473     33,577     23,917     63,964   121,458
--------------------------------------------------------------------------------------------------------------------------------------------------------
Halibut       3,555.7      2,045      1,445      4,777      8,267      2,469      1,719      5,517      9,705      4,514      3,164     10,294    17,972
--------------------------------------------------------------------------------------------------------------------------------------------------------
Flatfish      6,518.5      3,891      2,808      8,563     15,262      4,447      3,166     10,165     17,778      8,338      5,974     18,728    33,040
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sea           3,362.6      1,991      1,576      4,380      7,947      2,335      1,625      5,217      9,178      4,326      3,202      9,597    17,125
 Scallop
--------------------------------------------------------------------------------------------------------------------------------------------------------
Dungeness     2,995.3      2,102      1,338      3,737      7,178      2,080      1,448      4,647      8,176      4,182      2,786      8,385    15,353
 and Snow
 Crab
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Other    10,984.6      7,709      4,908     13,706     26,332      7,629      5,310     17,043     29,981     15,338     10,218     30,749    56,313
 Crabs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Lobster       2,393.1      1,875      1,456      2,678      6,009      1,221      1,239      3,995      6,455      3,096      2,695      6,674    12,464
--------------------------------------------------------------------------------------------------------------------------------------------------------
Shrimp       28,756.5     19,681     15,987     32,489     68,157      8,450      5,916     19,631     33,998     28,131     21,903     52,120   102,155
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total       108,078.2     71,853     52,607    125,960    250,430     61,927     44,561    143,736    250,223    133,781     97,169    269,696   500,653
 harvester
 s........
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 3806]]

    A generic marketing campaign, if successful, would be expected to 
increase sales of seafood. Using the estimated changes in revenues 
associated with a generic marketing campaign, which is assumed to 
generate at least a 10 percent increase in sales, and the national I/O 
model, changes in output or sales and income are estimated. The 
analysis, however, ignores potential changes in other sectors of the 
economy, which might result from increased sales in seafood (e.g., the 
impacts on beef, pork, and poultry producers and processors). The 
impacts do, however, explicitly consider changes in demand from 
supporting or related seafood sectors (e.g., fuel and gear for vessels, 
purchases of supplies by processors, etc.).
    It was estimated that a successful generic commodity program for 
all 12 species could generate up to $108.1 million (2004 constant 
dollar value) in addition ex-vessel revenues, and $115.5 million in 
consumer welfare or compensating variation; i.e., net benefits. The 
largest gains were determined to be associated with shrimp, salmon, and 
tuna. In terms of the potential changes in economic impacts, it was 
estimated that generic commodity programs for the 12 species or species 
groupings could increase sales and income by, respectively, $500.7 
million and $172.3 million. Shrimp, salmon, and tuna were determined to 
be the largest beneficiaries of generic commodity programs, which 
successfully increased consumption by 10 percent. In addition to the 
limitations already discussed, the analysis excludes the costs of 
generic commodity programs. Existing programs in the U.S., regardless 
of whether or not the program promotes seafood or beef, pork, or 
poultry, typically impose charges on producing and/or marketing 
companies. These costs, if known, would have to be deducted from the 
estimated benefits.
    The analysis also does not consider the distribution of potential 
benefits or economic welfare; that is, it remains unknown whether or 
not a generic commodity program would benefit fishers, processors and 
dealers, retailers, all, or one group more than the other. The analysis 
also does not consider the possibility that generic commodity programs 
will potentially benefit importers and foreign producers of seafood. 
Most U.S. fisheries are heavily regulated, and there has been an 
increasing reliance on imports, and thus, it is unlikely that in the 
near future, domestic producers would be able to satisfy an increased 
demand for seafood. Alternatively, a generic commodity program, which 
resulted in increased supplies of imports, could drive domestic ex-
vessel and retail prices down. Producers would experience declining 
revenues and profits, but consumers might experience increased welfare. 
Although the RIR indicates that the potential exists for the generation 
of positive net benefits from a marketing program, the merits of a 
specific proposed council would have to be judged on a case by case 
basis.
    Unfortunately, data necessary for conducting an economic analysis 
of the potential benefits and impacts of generic marketing campaigns or 
generic commodity programs are not available. There is insufficient 
information to statistically examine the relationship between 
advertising expenditures for seafood and the demand for seafood. Data 
are not available on retail prices and consumption, by species, or mode 
of sale (e.g., fish markets, grocery stores, and restaurants). Cost and 
earnings data are highly inconsistent over time, and thus it is not 
possible to consider returns to the various producing and marketing 
sectors--harvesters, processors, wholesalers, retail outlets, and 
restaurants. Moreover, no seafood entity has yet proposed a generic 
commodity program.
    A review of the scant empirical data available on generic commodity 
programs reveals mixed evidence about the success of generic marketing 
campaigns, particularly relative to seafood. One study suggests that 
generic advertising to promote the sales of seafood either had no 
effect on sales or depressed sales. Another study concluded that 
advertising and health awareness significantly affected the demand for 
seafood; these studies, however, were restricted to one retail firm in 
Houston, and used inches of print in fliers and newspapers as a measure 
of advertising. The Alaska Seafood Marketing Institute (ASMI), the 
Maryland Seafood Marketing Advisory Commission, and the Tilapia 
Marketing Institute have stated that they implemented successful 
marketing campaigns, respectively, for salmon, blue crabs, and tilapia. 
Up to 40 percent of the wild-capture, Alaskan salmon starts its life in 
hatcheries and tilapia is a product of fresh-water aquculture product, 
both of which can be increased in supply to match market pressures. Per 
capita consumption of tilapia increased by nearly 55.0 percent between 
2001 and 2003; they initiated the marketing campaign in 1999. Total 
landings of Alaskan salmon increased 21.8 percent between 2001 and 
2002; the years the ASMI conducted a generic marketing program for 
salmon. Maryland blue crab, on the other hand, is a wild-capture 
fishery that needs to be carefully monitored to ensure that overfishing 
does not occur. Large increases in sales were also found to 
characterize Maryland blue crabs following their implementation of a 
marketing program for blue crabs. While a significant part, Maryland 
blue crab landings are only a portion of the total fishery and these 
increases in landings could represent a reallocation of demand from one 
segment of the market to another in response to changes in perceived 
product quality. While promotional programs involving homogeneous and 
species-specific products have been for the most part successful, an 
attempt to form a national seafood Council to promote an increase in 
consumption of all seafood failed because of difficulty in getting 
agreement among fishermen, processors, and marketing firms over 
funding, program thrusts, and other elements required to make a program 
successful. In addition, increases in generic seafood demand in times 
prior to the large scale availability of imported seafood products 
created concerns among managers that increased prices at the dockside 
might create additional harvesting pressure for already overexploited 
fish stocks.
    While data are not available to measure the direct effects of 
advertising on seafood demand, over the last two decades agricultural 
economists have estimated rates of return from promotional programs 
under the Department of Agriculture's checkoff programs developed for 
beef, pork, and soybeans. In a checkoff program, producers are required 
to pay a fee based on a fraction of their production to commodity 
marketing and development boards. The fees are used to promote 
consumption and support production and utilization research. A 2000 
study to measure effects of the pork checkoff program on demand 
estimated returns to advertising investment as measured by a net 
benefit cost ratio (NBCR) to be 15 to 1, while in 2001, the NBCR for 
advertisement and research investment for soybeans was estimated at 8 
to 1. These large benefit to cost ratios need to be tempered when 
applied to fishery products because agricultural product supplies can 
be increased when prices rise creating additional benefits in the form 
of producer and consumer surplus. Fish product supplies are generally 
fixed by regulation and increases in prices can cause the dissipation 
of rents in a command and control managed fishery. In a rationalized 
fishery, such as

[[Page 3807]]

halibut/sablefish or wreck fish, such rent dissipation would not occur 
and net benefits could increase substantially as was demonstrated in 
recent studies of proposed rationalization programs for the Gulf of 
Mexico shrimp fishery.

Potential Economic Impact to Small Entities

    Agricultural commodity promotional programs have yielded aggregate 
profitability of varying degrees as measured by several studies using 
econometric techniques. Furthermore, as indicated through referenda for 
beef, poultry, and pork, agricultural producers have in large part 
supported checkoff programs in their respective commodities. The few 
studies involving seafood marketing programs indicate that they have 
been, for the most part, successful when involving a specific product. 
Based on the results of these studies NMFS has concluded that marketing 
boards that are species and or product specific are likely to be 
successful in increasing demand and, hence, profitability for the 
sector or sectors of the fishery represented by the Council. Therefore, 
small entities, on average, would likely profit, at least in the short 
term, from a well-run and managed Council. While the typical fishery 
may profit from increased demand through advertising and other 
promotions, there would be no guarantee that all fisheries and all 
sectors of fisheries and the firms comprising those sectors would 
profit equally. This would depend on individual firm's profit margins, 
the assessment fee, and price effects caused by advertising (positive) 
and the ability of non-participants to profit from free advertising 
(negative) by increasing supply and driving down prices (also known as 
the free rider problem). There is also the mandatory versus voluntary 
participation or the ``under-advertising'' argument.

Profit Margins

    NMFS recognizes that profit margins will vary largely by fishery 
sector and individual firms within fishery sectors. There are examples 
of small firms with larger profit margins within a fishery or sector of 
a fishery than their larger counterparts, e.g., small-vessel groundfish 
harvesters in the Northeast. Producers of specialty products for niche 
markets such as fancy canned albacore, smoked mussels, shrimp cocktail, 
etc. are assumed to have higher profit margins than their large volume 
counterparts. Nevertheless, direct impacts to the profit margins of 
individual firms from seafood marketing programs would depend on the 
increase in gross receipts attributable a Council's marketing efforts 
versus the amount of fees they are assessed. Increased demand would 
increase revenues to the aggregate of firms comprising any one market, 
but this does not guarantee that individual firms would have similar 
increases in gross receipts measured in magnitude or as a percentage of 
the total increase. Therefore, there could be marginal firms whose 
profit margins are smaller than the representative sector that would 
not benefit greatly from an increased demand yet be saddled with an 
assessment fee. The number of these firms, if they exist, is 
indeterminate. However, it is unlikely that business failures would 
occur as a result of creating a Council.

Assessment Fees

    Assessment fees exacted by agriculture marketing programs have a 
commonality in that the fees are based on relative levels of 
production, e.g., the fees for the dairy, soybean, and beef marketing 
programs are 2 cents per gallon, 0.5 percent of sales price, and 1 
dollar per head of live weight, respectively. This rule would implement 
a fee similar to those specified for agriculture programs based on a 
percentage or a fixed amount per unit of weight or volume based on 
gross sales receipts for producers or product costs for importers. 
Either way, these methods of imposing fees should minimize any 
disproportionate impacts on profitability for small firms versus large 
firms from the assessment of fees within fisheries or sectors of 
fisheries. If the fee were not based on a relative assessment, small 
firms could be negatively impacted by large blanket fees. This rule 
would allow individual firms to request and collect a refund of fees 
ninety-days after an assessment. The methods and the timing of refunds 
would need to be specified in a Council's charter.

Price Effects and the Free Rider Problem

    The magnitudes of price changes relative to increased demand or 
supply depend on price elasticities of demand or supply in a given 
product market. With the exception of a few species of seafood, most 
notably American lobster, seafood markets exhibit an elastic or flat 
demand and an inelastic supply because many substitute commodities 
exist for fishery products. As a result, prices would remain relatively 
stable with large increases in fishery products supplies. With 
relatively fixed supplies of fish, at least in the short run, changes 
in seafood demand could result in large changes in price. Therefore, an 
increase in demand would most likely exhibit relatively higher returns 
to individual and aggregate firms than agricultural firms. The ``free 
rider'' problem would occur if a demand induced increase in price 
caused by a marketing program triggers an appreciable amount of supply 
onto the market from non-participants, i.e., entities who paid no fee 
for the promotion of the product but benefitted from the marketing 
campaign. The use of quality seals or ecolabels such as ``dolphin 
free'' tuna create easily identifiable quality differences between 
essentially homogeneous products and prevent the ``free rider'' problem 
from occurring and the associated dissipation of benefits generated by 
the initial marketing efforts. As a result, if the ``free rider'' 
problem did exist for fishery products, it would likely not be as 
severe as the situation facing other commodity markets since domestic 
supplies are relatively fixed under the present management regime and 
the creation of seals or labels would, in most cases, create a 
differentiated product for consumers in domestic markets.

Voluntary Versus Mandatory Participation

    Agricultural marketing programs conceived under various legislation 
incorporate mandatory participation programs based on the economic 
premise that -- if the majority of potential participants accept, 
through referenda, the idea that additional profits could be earned 
through a marketing program, then it would be profitable for all firms 
to participate. The economic reality faced by the agricultural 
marketing programs is that if only the firms voting in the affirmative 
in a given referendum were subject to assessment there might not be 
enough operating funds to carry out the mandates of the legislation 
imposed, i.e., increase wealth by increasing demand and/or introducing 
better products. If NMFS, through its authority to waive fees, did not 
impose mandatory participation in a particular Council, i.e., voluntary 
participation, it is safe to assume that those firms voting in the 
affirmative in a referendum had determined a priori that it would be 
economically advantageous to pay an assessment fee through a Council to 
promote their products. Therefore, it would be difficult to make the 
case that implementation of a voluntary Council would have adverse 
impacts on those participants who voted in the affirmative. However, a 
voluntary program would face two obstacles. Firstly, there could be a 
level of funding through voluntary assessments that would not allow a 
Council to create a

[[Page 3808]]

promotional program that would meet the objective of increasing demand 
for a particular product(s). Secondly, the level of funding may not be 
optimal to achieve maximum benefits of a marketing program. In the case 
of voluntary participation, fisheries, in general, would be less 
affected by the free rider problem when compared to other commodity 
markets due to the different price elasticities of demand and supply, 
use of labels and quality standards, and the regulatory control of 
supplies.

Paper Work Reduction Act

    This proposed rule contains a collection-of-information requirement 
subject to review and approval by OMB under the Paperwork Reduction Act 
(PRA). This requirement has been submitted to OMB for approval. The 
information collection requirements contained in this rule can be 
broadly categorized into two categories: (1) Information required of an 
individual or organization applying for consideration to form a 
Council, and (2) information required of a formed and operating 
Council. Information required of an individual or organization applying 
for consideration to form a Council, consists of an ``application for 
charter'' that is composed of three sections: petition, proposed 
charter, and a list of eligible referendum participants. Based on 
discussions with the tuna industry, (the seafood industry group most 
likely to first apply for formation of a Council), the estimated 
reporting time for this portion of the collection requirement in 50 CFR 
270 is 320 hours in total, with an average of 80 hours to develop a 
petition, 200 hours to develop a proposed charter, and 40 hours to 
develop a list of eligible referendum participants. All other 
information requirements in the proposed rule are imposed on the 
Councils, once they are established. The estimated reporting time for 
these information requirements varies from 1 to 120 hours per response. 
Council submission of an annual plan, an annual budget, and an annual 
financial report are estimated at 120 hours each for a total of 360 
hours. Council submissions of semi-annual progress reports is estimated 
at 40 hours twice a year, notice of assessments at 20 hours once a 
year, list of Council nominations following a favorable referendum at 
20 hours once a year, and meeting notices at 1-2 hours once a year. 
Other submissions are optional and are dependent upon the operation of 
a particular Council and its participants. For instance, Council 
submission of a plan to conduct a referendum on development of quality 
standards is estimated at 40 hours with no more than annual frequency. 
Additionally, assessed participants of a Council submission of a 
petition of objection and/or request for refund is estimated at 2 hours 
each no more than 6 times a year. These estimated reporting times 
include the time for reviewing instructions, searching existing data 
sources, gathering and maintaining the data needed, and completing and 
reviewing the collection of information.
    Public comment is sought regarding: whether this proposed 
collection of information is necessary for the proper performance of 
the functions of the agency, including whether the information shall 
have practical utility; the accuracy of the burden estimate; ways to 
enhance the quality, utility, and clarity of the information to be 
collected; and ways to minimize the burden of the collection of 
information, including through the use of automated collection 
techniques or other forms of information technology. Send comments on 
these or any other aspects of the collection of information to NMFS and 
OMB (see ADDRESSES).
    Notwithstanding any other provision of the law, no person is 
required to respond to, nor shall any person be subject to a penalty 
for failure to comply with, a collection of information subject to the 
requirements of the Paperwork Reduction Act, unless that collection-of-
information displays a currently valid OMB control number.

List of Subjects in 50 CFR Part 270

    Administrative practice and procedure, Fish, Marketing, Seafood.

    Dated: January 17, 2006.
William T. Hogarth,
Assistant Administrator for Fisheries, National Marine Fisheries 
Service.

    For the reasons set out in the preamble, NMFS proposes to amend 
title 50 chapter II as follows:

    1. A new subchapter H consisting of part 270 is added to read as 
follows:

SUBCHAPTER H--FISH AND SEAFOOD PROMOTION

PART 270--SPECIES-SPECIFIC SEAFOOD MARKETING COUNCILS

Sec.
Sec.  270.1 Scope.
Sec.  270.2 Definitions.
Sec.  270.3 Submission of application.
Sec.  270.4 Review of application.
Sec.  270.5 Conduct of referendum.
Sec.  270.6 Sector participants eligible to vote.
Sec.  270.7 Results of referendum.
Sec.  270.8 Nomination and appointment of Council members.
Sec.  270.9 Terms, vacancies, and removal of Council members.
Sec.  270.10 Responsibilities of a Council.
Sec.  270.11 Responsibilities of NMFS.
Sec.  270.12 Notice of Council meetings.
Sec.  270.13 Books, records and reports.
Sec.  270.14 Update of sector participant data.
Sec.  270.15 Quality standards.
Sec.  270.16 Deposit of funds.
Sec.  270.17 Authority to impose assessments.
Sec.  270.18 Method of imposing assessments.
Sec.  270.19 Notice of assessment.
Sec.  270.20 Payment of assessments.
Sec.  270.21 Petition of objection.
Sec.  270.22 Refunds.
Sec.  270.23 Dissolution of Councils.

    Authority: 16 U.S.C. 4001-4017.


Sec.  270.1  Scope.

    This part 270 describes matters pertaining to the establishment, 
representation, organization, practices, procedures, and termination of 
Seafood Marketing Councils.


Sec.  270.2  Definitions.

    The following terms and definitions are in addition to or amplify 
those contained in the Fish and Seafood Promotion Act of 1986:
    Act means the Fish and Seafood Promotion Act of 1986 (Pub. L. 99-
659) and any subsequent amendments.
    Consumer education means actions undertaken to inform consumers of 
matters related to the consumption of fish and fish products.
    Council means a Seafood Marketing Council for one or more species 
of fish and fish products of that species established under section 210 
of the Act (16 U.S.C. 4009).
    Expenditure means monetary or material worth of fishery products. 
Expenditure is determined at the point a receiver obtains product from 
a harvester or an importer obtains product from a foreign supplier. 
Value may be expressed in monetary units (the price a receiver pays to 
a harvester or an importer pays to a foreign supplier).
    Fiscal year means any 12-month period as NMFS may determine for 
each Council.
    Fish means finfish, mollusks, crustaceans, and all other forms of 
aquatic animal life used for human consumption; the term does not 
include marine mammals and seabirds.
    Harvester means any person in the business of catching or growing 
fish for purposes of sale in domestic or foreign markets.
    Importer means any person in the business of importing fish or fish 
products from another country into the United States and its 
territories, as defined by the Act, for commercial purposes, or who 
acts as an agent, broker, or consignee for any person or

[[Page 3809]]

nation that produces, processes or markets fish or fish products 
outside of the United States for sale or for other commercial purposes 
in the United States.
    Marketer means any person in the business of selling fish or fish 
products in the wholesale, export, retail, or restaurant trade, but 
whose primary business function is not the processing or packaging of 
fish or fish products in preparation for sale.
    Marketing and promotion means any activity aimed at encouraging the 
consumption of fish or fish products or expanding or maintaining 
commercial markets for fish or fish products.
    Member means any person serving on any Council.
    Participant means a member of a sector or business identified in an 
application for a Council charter as being subject to the referendum or 
assessment process.
    Person means any individual, group of individuals, association, 
proprietorship, partnership, corporation, cooperative, or any private 
entity of the U.S. fishing industry organized or existing under the 
laws of the United States or any state, commonwealth, territory or 
possession of the United States who meets the eligibility requirements 
as defined in a proposed charter to vote in a referendum.
    Processor means any person in the business of preparing or 
packaging fish or fish products (including fish of the processor's own 
harvesting) for sale in domestic or foreign markets.
    Receiver means any person who owns fish processing vessels and any 
person in the business of acquiring (taking title to) fish directly 
from harvesters.
    Research means any type of research designed to advance the image, 
desirability, usage, marketability, production, quality and safety of 
fish and fish products.
    Secretary means the Secretary of Commerce, or the Secretary's 
designee.
    Sector means
    (1) The sector consisting of harvesters;
    (2) The sector consisting of importers;
    (3) The sector consisting of marketers;
    (4) The sector consisting of processors;
    (5) The sector consisting of receivers; or
    (6) The consumer sector consisting of persons professionally 
engaged in the dissemination of information pertaining to the 
nutritional benefits and preparation of fish and fish products;
    Sector participant means any individual, group of individuals, 
association, proprietorship, partnership, corporation, cooperative, or 
any private entity of the U.S. fishing industry organized or existing 
under the laws of the United States or any state, commonwealth, 
territory or possession of the United States who meets the eligibility 
requirements as defined in a proposed charter to vote in a referendum.
    Species means a fundamental category of taxonomic classification, 
ranking after genus, and consisting of animals that possess common 
characteristic(s) distinguishing them from other similar groups.
    Value means monetary or material worth of fishery products. Value 
is the difference between what a receiver is willing to pay for a 
product provided by a harvester and its market price or an importer is 
willing to pay for a product from a foreign supplier and its market 
price. Value may be expressed in monetary units representing consumer 
surplus or producer surplus.


Sec.  270.3  Submission of application.

    (a) Persons who meet the minimum requirements for sector 
participants as described in the proposed charter may file an 
application with NMFS for a charter for a Seafood Marketing Council for 
one or more species of fish and fish products of that species. One 
signed original and two copies of the completed application package 
must be submitted to the Assistant Administrator for Fisheries, 
National Marine Fisheries Service, NOAA, 1315 East-West Highway, Silver 
Spring, Maryland 20910. Applications should not be bound.
    (b) The application consists of four parts:
    (1) A document requesting NMFS to establish a Council;
    (2) A proposed charter under which the proposed Council will 
operate;
    (3) A list of eligible referendum participants; and
    (4) Analytical documentation addressing requirements of applicable 
law.
    (c) Content of application--(1) Application or requesting document. 
The application or requesting document submitted by the applicants to 
NMFS requesting that the Council be established, to the extent 
practicable, must include the signatures or corporate certifications, 
of no less than three sector participants representing each sector 
identified in accordance with paragraph (c)(2)(v) of this section and 
who, according to the available data, collectively accounted for, in 
the 12-month period immediately preceding the month in which the 
application was filed, not less than 10 percent of the value of the 
fish or fish products specified in the charter that were handled during 
such period in each sector by those who meet the eligibility 
requirements to vote in the referendum as defined by the application. 
The application must also include a statement that, if established, the 
Council will have sufficient resources (e.g., cash, donated office 
space, services, supplies, etc.) available for initial administrative 
expenditures pending collection of assessments.
    (2) Proposed charter. A proposed charter must contain, at a 
minimum, the following information:
    (i) The name of the Council and a provision proclaiming its 
establishment;
    (ii) A declaration of the purposes and objectives of the Council;
    (iii) A description of the species of fish and fish products, 
including the scientific and common name(s), for which the Council will 
implement marketing and promotion plans under the Act. (The American 
Fisheries Society's ``List of Common and Scientific Names of Fishes 
from the United States and Canada'' (latest edition) or where 
available, an appropriate volume of its ``List of Common and Scientific 
Names of Aquatic Invertebrates of the United States and Canada'' 
(latest edition) should be used as the authority for all scientific and 
common names.);
    (iv) A description of the geographic area (state(s)) within the 
United States covered by the Council;
    (v) The identification of each sector and the number and terms of 
representatives for each sector that will be voting members on the 
Council. (The number of Council members should be manageable, while 
ensuring equitable geographic representation. The term for members will 
be 3 years. Initially, to ensure continuity, half of the members' terms 
will be 2 years and half will be 3 years. Reappointments are 
permissible.);
    (vi) The identification of those sectors (which must include a 
sector consisting of harvesters, a sector consisting of receivers, and, 
if subject to assessment, a sector consisting of importers), eligible 
to vote in the referendum to establish the Council;
    (vii) For each sector described under paragraph (c)(2)(v) of this 
section, a threshold level specifying the minimum requirements, as 
measured by income, volume of sales, or other relevant factors, that a 
person engaging in business in the sector must meet in order to 
participate in a referendum;
    (viii) A description of the rationale and procedures for 
determining assessment rates as provided in Sec.  270.18, based on a 
fixed amount per

[[Page 3810]]

unit of weight or measure, or on a percentage of value of the product 
handled;
    (ix) The proposed rate or rates that will be imposed by the Council 
on receivers and, if subject to assessment, importers during its first 
year of operation;
    (x) The maximum amount by which an assessment rate for any period 
may be raised above the rate applicable for the immediately preceding 
period;
    (xi) The maximum rate or rates that can be imposed by a Council on 
receivers or importers during the operation of the Council;
    (xii) The maximum limit on the amount any one sector participant 
may be required to pay under an assessment for any period;
    (xiii) The procedures for providing refunds to sector participants 
subject to assessment who request the same in accordance with the time 
limits specified Sec.  270.22;
    (xiv) A provision setting forth the voting procedures by which 
votes may be cast by proxy;
    (xv) A provision that the Council will have voting members 
representing the harvesting, receiving and, if subject to assessment, 
importing sectors;
    (xvi) A provision setting forth the definition of a quorum for 
making decisions on Council business and the procedures for selecting a 
chairperson of the Council;
    (xvii) A provision that members of the Council will serve without 
compensation, but will be reimbursed for reasonable expenses incurred 
in performing their duties as members of the Council;
    (xviii) A provision containing a requirement for submission to NMFS 
the criteria and supporting data for evaluating the annual and/or 
multi-year performance of proposed marketing plans and the Council's 
performance;
    (xix) A provision containing a requirement for submission of 
documentation as requested by NMFS for purposes of evaluating 
performance of proposed marking plans and the Council's related 
performance;
    (xx) Where adequate funds are not available, a provision containing 
the minimum number of participants needed for sustained operations that 
cannot receive assessment refunds;
    (xxi) A provision acknowledging that NMFS will have the right to 
participate in Council meetings;
    (xxii) A provision that the Council will conduct its activities in 
accordance with applicable NMFS requirements and that NMFS has final 
approval authority over proposed marketing plans and Council actions;
    (xxiii) A provision containing a requirement for the Council to 
arrange for a complete audit report to be conducted by an independent 
public accountant and submitted to NMFS at the end of each fiscal year;
    (xxiv) A provision containing a requirement for the Council to 
conduct a market assessment based on economic, market, social and 
demographic, and biological information as deemed necessary by NMFS; 
and
    (xxv) A provision containing a requirement for the Council to 
update the list of referendum participants on an annual basis.
    (3) List of referendum participants. The list of referendum 
participants, to the extent practicable, must identify the business 
name and address of all sector participants that the applicants believe 
meet the requirements for eligibility to vote in the referendum on the 
adoption of the proposed charter.
    (i) The list should include all sectors in which a sector 
participant meets the eligibility requirements to vote in a referendum. 
If a sector participant has more than one place of business located 
within the geographic area of the Council, all such places should be 
listed and the primary place of business should be designated. The 
agency will provide appropriate information in its possession of a non-
proprietary nature to assist the applicants in developing the list of 
sector participants.
    (ii) [Reserved]
    (4) Analytical documentation. The applicant must address the 
requirements of the Act, implementing regulations, and other applicable 
law, i.e., E.O. 12866, Regulatory Flexibility Act, National 
Environmental Policy Act, and other law as NMFS determines appropriate.


Sec.  270.4  Review of application.

    Within 180 days of receipt of the application to establish a 
Council, NMFS will:
    (a) Determine if the application is complete and complies with all 
of the requirements set out in Sec.  270.3 and complies with all 
provisions of the Act and other applicable laws.
    (b) Identify, to the extent practicable, those sector participants 
who meet the requirements for eligibility to participate in the 
referendum to establish the Council. NMFS may require additional 
information from the applicants or proposed participants in order to 
verify eligibility. NMFS may add names to or delete names from the list 
of sector participants believed eligible by the applicants until the 
time of the referendum based on additional information received.
    (c) If NMFS finds minor deficiencies in an application that can be 
corrected within the 180-day review period, NMFS will advise the 
applicants in writing of what must be submitted by a specific date to 
correct the minor deficiencies.
    (d) If NMFS makes a final negative determination, on an 
application, NMFS will advise the applicant in writing of the reason 
for the determination. The applicant may submit another application at 
any time thereafter. NMFS then has 180 days from receipt of the new 
application to render a final determination on its acceptability.


Sec.  270.5  Conduct of referendum.

    (a) Upon making affirmative determinations under Sec.  270.4, NMFS, 
within 90 days after the date of the last affirmative determination, 
will conduct a referendum on the adoption of the proposed charter.
    (b) NMFS will estimate the cost of conducting the referendum, 
notify the applicants, and request that applicants post a bond or 
provide other applicable security, such as a cashier's check, to cover 
costs of the referendum.
    (c) NMFS will initially pay all costs of a referendum to establish 
a Council. Within two years after establishment, the Council must 
reimburse NMFS for the total actual costs of the referendum from 
assessments collected by the Council. If a referendum fails to result 
in establishment of a Council, NMFS will immediately recover all 
expenses incurred for conducting the referendum from the bond or 
security posted by applicants. In either case, such expenses will not 
include salaries of government employees or other administrative 
overhead, but will be limited to those additional direct costs incurred 
in connection with conducting the referendum.
    (d) No less than 30 days prior to holding a referendum, NMFS will:
    (1) Publish in the Federal Register the text of the proposed 
charter and the most complete list available of sector participants 
eligible to vote in the referendum; and
    (2) Provide for public comment, including the opportunity for a 
public meeting.


Sec.  270.6  Sector participants eligible to vote.

    (a) Any participant who meets the minimum requirements as measured 
by income, volume of sales or other relevant factors specified in the 
approved charter may vote in a referendum.
    (b) Only one vote may be cast by each participant who is eligible 
to vote, regardless of the number of individuals

[[Page 3811]]

that make up such ``participant'' and how many sectors the participant 
is engaged in. The vote may be made by any responsible officer, owner, 
or employee representing a participant.


Sec.  270.7  Results of referendum.

    (a) Favorable vote to establish a Council. NMFS will, by order, 
establish the Council and approve an acceptable proposed charter, if 
the referendum votes which are cast in favor of the proposed charter 
constitute a majority of the sector participants voting in each and 
every sector. Further, according to the best available data, the 
majority must collectively account for, in the 12-month period 
immediately preceding the month in which the proposed charter was 
filed, at least 66 percent of the value of the fish and fish products 
described in the proposed charter handled during such period in each 
sector by those who meet the eligibility requirements to vote in the 
referendum as defined by the applicants.
    (b) Unfavorable vote to establish a Council. If a referendum fails 
to pass in any sector of the proposed Council, NMFS will not establish 
the Council or approve the proposed charter. NMFS will immediately 
recover the cost of conducting the referendum according to Sec.  
270.5(c).
    (c) Notification of referendum results. NMFS will notify the 
applicants of the results of the referendum and publish the results of 
the referendum in the Federal Register.


Sec.  270.8  Nomination and appointment of Council members.

    (a) Within 30 days after a Council is established, NMFS will 
solicit nominations for Council members from the sectors represented on 
the Council in accordance with the approved charter. If the harvesters 
and receivers represented on the Council are engaged in business in two 
or more states, but within the geographic area of the Council, the 
nominations made under this section must, to the extent practicable, 
result in equitable representation for those states. Nominees must be 
knowledgeable and experienced with regard to the activities of, or have 
been actively engaged in the business of, the sector that such person 
will represent on the Council. Therefore, a resume will be required for 
each nominee.
    (b) In accordance with 16 U.S.C. 4009(f), NMFS will, within 60 days 
after the end of the 30-day period, appoint the members of the Council 
from among the nominees.


Sec.  270.9  Terms, vacancies and removal of Council members.

    (a) A Council term is for 3 years, except for initial appointments 
to a newly established Council where:
    (1) Half of the Council member terms will be 2 years; and
    (2) Half of the Council member terms will be 3 years.
    (b) A vacancy on a Council will be filled, within 60 days after the 
vacancy occurs, in the same manner in which the original appointment 
was made. A member appointed to fill a vacancy occurring before the 
expiration of the term for which the member's predecessor was appointed 
will be appointed only for the remainder of such term.
    (c) Any person appointed under the Act who consistently fails or 
refuses to perform his or her duties properly and/or participates in 
acts of dishonesty or willful misconduct with respect to 
responsibilities under the Act will be removed from the Council by NMFS 
if two-thirds of the members of the Council recommend action. All 
requests from a Council to NMFS for removal of a Council member must be 
in writing and accompanied by a statement of the reasons upon which the 
recommendation is based.


Sec.  270.10  Responsibilities of a Council.

    (a) Each Council will:
    (1) Implement all terms of its approved charter;
    (2) Prepare and submit to NMFS, for review and approval under Sec.  
270.11(a)(1), a marketing and promotion plan and amendments to the plan 
which contain descriptions of the projected consumer education, 
research, and other marketing and promotion activities of the Council;
    (3) Implement and administer an approved marketing and promotion 
plan and amendments to the plan;
    (4) Determine the assessment to be made under Sec.  270.18 and 
administer the collection of such assessments to finance Council 
expenses described in paragraph (b) of this section;
    (5) Receive, investigate and report to NMFS accounts of violations 
of rules or orders relating to assessments collected under Sec.  
270.20, or quality standard requirements established under Sec.  
270.15;
    (6) Prepare and submit to NMFS, for review and approval a budget 
(on a fiscal year basis) of the anticipated expenses and disbursements 
of the Council, including
    (i) All administrative and contractual expenses;
    (ii) The probable costs of consumer education, research, and other 
marketing and promotion plans or projects;
    (iii) The costs of the collection of assessments; and
    (iv) The expense of repayment of the costs of each referendum 
conducted in regard to the Council.
    (7) Comply with NMFS requirements, and prepare and submit to NMFS 
for review, evaluation, and verification of results and analysis an 
annual market assessment and related analytical documentation that is 
based on economic, market, social, demographic, and biological 
information as deemed necessary by NMFS;
    (8) Maintain books and records, prepare and submit to NMFS reports 
in accordance with respect to the receipt and disbursement of funds 
entrusted to it, and submit to NMFS a completed audit report conducted 
by an independent auditor at the end of each fiscal year;
    (9) Reimburse NMFS for the expenses incurred for the conduct of the 
referendum to establish the Council or any subsequent referendum to 
terminate the Council that fails;
    (10) Prepare and submit to NMFS report or proposals as the Council 
determines appropriate to further the purposes of the Act.
    (b) Funds collected by a Council under Sec.  270.17 will be used by 
the Council for--
    (1) Research, consumer education, and other marketing and promotion 
activities regarding the quality and marketing of fish and fish 
projects;
    (2) Other expenses, as described in Sec.  270.10(a)(1);
    (3) Such other expenses for the administration, maintenance, and 
functioning of the Council as may be authorized by NMFS; and
    (4) Any reserve fund established under Sec.  270.10(e)(4) of this 
section and any administrative expenses incurred by NMFS specified as 
reimbursable under this Part.
    (c) Marketing and promotion plans and amendments to such plans 
prepared by a Council under Sec.  270.10(a)(2) of this section will be 
designed to increase the general demand for fish and fish products 
described in accordance with Sec.  270.3(c)(2)(iii) by encouraging, 
expanding, and improving the marketing, promotion and utilization of 
such fish and fish products, in domestic or foreign markets, or both, 
through consumer education, research, and other marketing and promotion 
activities.
    (d) Consumer education and other marketing and promotion activities 
carried out by a Council under a marketing and promotion plan and 
amendments to a plan may not contain

[[Page 3812]]

references to any private brand or trade name and will avoid the use of 
deceptive acts or practices in promoting fish or fish products or with 
respect to the quality, value, or use of any competing product or group 
of products.
    (e) Authority of a Council. A Council may:
    (1) Sue and be sued;
    (2) Enter into contracts;
    (3) Employ and determine the salary of an executive director who 
may, with the approval of the Council employ and determine the salary 
of such additional staff as may be necessary;
    (4) Establish a reserve fund from monies collected and received 
under Sec.  270.17 to permit an effective and sustained program of 
research, consumer education, and other marketing and promotion 
activities regarding the quality and marketing of fish and fish 
products in years when production and assessment income may be reduced, 
but the total reserve fund may not exceed the amount budgeted for the 
current fiscal year of operation.
    (f) Amendment of a charter. A Council may submit to NMFS amendments 
to the text of the Council's charter. Any proposed amendments to a 
charter will be approved or disapproved in the same manner as the 
original charter was approved under Sec.  270.4 and Sec.  270.5 with 
the exception of Sec.  270.4(b).


Sec.  270.11  Responsibilities of NMFS.

    (a) In addition to the duties prescribed under 16 U.S.C. 4009, NMFS 
will:
    (1) Participate in Council meetings and review, for consistency 
with the provisions of 50 CFR 270 and other applicable law, and approve 
or disapprove, marketing and promotion plans and budgets within 60 days 
after their submission by a Council;
    (2) Immediately notify a Council in writing of the disapproval of a 
marketing and promotion plan or budget, together with reasons for such 
disapproval;
    (3) Issue orders and amendments to such orders that are necessary 
to implement quality
    standards under Sec.  270.15;
    (4) Promulgate regulations necessary to carry out the purposes of 
this chapter;
    (5) Enforce the provisions of the Act;
    (6) Make all appointments to Councils in accordance with Sec.  
270.8 and the approved Council charter;
    (7) Approve the criteria and time frames under which a Council's 
performance will be evaluated; and
    (8) Implement the provisions of 16 U.S.C. 4001 et seq. in 
accordance with the available financial and management resources NMFS 
determines can be utilized.
    (b) NMFS may provide, on a reimbursable or other basis, such 
administrative or technical assistance as a Council may request for 
purposes of the initial organization and subsequent operation of the 
Council. However, a Council is responsible for the cost of preparing 
and submitting information (e.g., reports, evaluation data, etc.) 
requested by NMFS.


Sec.  270.12  Notice of Council meetings.

    The Council will give NMFS the same notice of its meetings as it 
gives to its members. NMFS will have the right to participate in all 
Council meetings.


Sec.  270.13  Books, records and reports.

    (a) The Council must submit to NMFS the following documents 
according to the schedule approved in the Council's charter:
    (1) A marketing assessment and promotion plan;
    (2) A financial report with respect to the receipt and disbursement 
of funds;
    (3) An audit report conducted by an independent public accountant; 
and
    (4) Other reports or data NMFS determines necessary to evaluate the 
Council's performance and verify the results of the market assessment 
and promotion plan..
    (b) All Council records, reports, and data must be maintained by 
the Council for a minimum of 3 years, even if the Council is 
terminated.


Sec.  270.14  Update of sector participant data.

    The Council will submit to NMFS at the end of each fiscal year an 
updated list of sector participants who meet the minimum requirements 
for eligibility to participate in a referendum as stated in the 
approved charter.


Sec.  270.15  Quality standards.

    (a) Each Council may develop and submit to NMFS for approval or, 
upon the request of a Council, NMFS will develop quality standards for 
the species of fish or fish products described in the approved charter. 
Any quality standard developed under this paragraph must be consistent 
with the purposes of the Act.
    (b) A quality standard developed under paragraph (a) of this 
section may be adopted by a Council by a majority of its members 
following a referendum conducted by the Council among sector 
participants of the concerned sector(s). In order for a quality 
standard to be brought before Council members for adoption, the 
majority of the sector participants of the concerned sector(s) must 
vote in favor of the standard. Further, according to the best available 
data, the majority must collectively account for, in the 12-month 
period immediately preceding the month in which the referendum is held, 
not less than 66 percent of the value of the fish or fish products 
described in the charter that were handled during such period in that 
sector by those who meet the eligibility requirements to vote in the 
referendum as defined by the petitioners.
    (c) The Council must submit a plan to conduct the referendum on the 
quality standards to NMFS for approval at least 60 days in advance of 
such referendum date. The plan must consist of the following:
    (1) Date(s) for conducting the referendum;
    (2) Method (by mail or in person);
    (3) Copy of the proposed notification to sector participants 
informing them of the referendum;
    (4) List of sector participants eligible to vote;
    (5) Name of individuals responsible for conducting the referendum;
    (6) Copy of proposed ballot package to be used in the referendum; 
and
    (7) Date(s) and location of ballot counting.
    (d) An official observer appointed by NMFS will be allowed to be 
present at the ballot counting and any other phase of the referendum 
process, and may take whatever steps NMFS deems appropriate to verify 
the validity of the process and results of the referendum.
    (e) Quality standards developed under this section of the 
regulations must, at a minimum, meet Food and Drug Administration (FDA) 
minimum requirements for fish and fish products for human consumption.
    (f) Quality standards must be consistent with applicable standards 
of the U.S. Department of Commerce (National Oceanic and Atmospheric 
Administration) or other recognized Federal standards and/or 
specifications for fish and fish products.
    (g) No quality standard adopted by a Council may be used in the 
advertising or promotion of fish or fish products as being inspected by 
the United States Government unless the standard requires sector 
participants to be in the U.S. Department of Commerce voluntary seafood 
inspection program.
    (h) The intent of quality standards must not be to discriminate 
against importers who are not members of the Council.
    (i) Quality standards must not be developed for the purpose of 
creating non-tariff barriers. Such standards must be compatible with 
U.S. obligations under the General Agreement on Tariffs and Trade, or 
under other international standards deemed acceptable by NMFS.

[[Page 3813]]

    (j) The procedures applicable to the adoption and the operation of 
quality standards developed under this subchapter also apply to 
subsequent amendments or the termination of such standards.
    (k) With respect to a quality standard adopted under this section, 
the Council must develop and file with NMFS an official identifier in 
the form of a symbol, stamp, label or seal that will be used to 
indicate that a fish or fish product meets the quality standard at the 
time the official identifier is affixed to the fish or fish product, or 
is affixed to or printed on the packaging material of the fish or fish 
product. The use of such identifier is governed by Sec.  270.15.


Sec.  270.16  Deposit of funds.

    All funds collected or received by a Council under this section 
must be deposited in an appropriate account in the name of the Council 
specified in its charter. Funds eligible to be collected or received by 
a Council must be limited to those authorized under the Act.
    (a) Pending disbursement, under an approved marketing plan and 
budget, funds collected through assessments authorized by the Act must 
be deposited in any interest-bearing account or certificate of deposit 
of a bank that is a member of the Federal Reserve System, or in 
obligations fully guaranteed as to principal and interest by the United 
States Government.
    (b) The Council may, however, pending disbursement of these funds, 
invest in risk-free, short-term, interest-bearing instruments.
    (1) Risk-free. All investments must be insured or fully 
collateralized with Federal Government securities. In the absence of 
collateral, accounts established at financial institutions should, in 
aggregate, total less than $100,000 to assure both principal and 
interest are federally insured in full.
    (2) Short-term. Generally, all investments should be for a 
relatively short time period (one year or less) to assure that the 
principal is maintained and readily convertible to cash.
    (3) Collateralization. Investments exceeding the $100,000 insurance 
coverage level must be fully collateralized by the financial 
institution.
    (i) Collateral must be pledged at face value and must be pledged 
prior to sending funds to the institution.
    (ii) Government securities are acceptable collateral. Declining 
balance, mortgage backed securities such as Government National 
Mortgage Association (GNMA) and Federal National Mortgage Association 
(FNMA) are not acceptable collateral.
    (iii) If an account has been established, collateral may be held at 
the local Federal Reserve Bank. Otherwise, another depository must hold 
the collateral.


Sec.  270.17  Authority to impose assessments.

    A Council will impose and administer the collection of the 
assessments that are necessary to pay for all expenses incurred by the 
Council in carrying out its functions under 50 CFR part 270.


Sec.  270.18  Method of imposing assessments.

    Assessments will be imposed on sector participants in the receiving 
sector or the importing sector or both as specified in an approved 
Council charter. Assessment rates will be based on value that may be 
expressed in monetary units or units of weight or volume.
    (a) An assessment on sector participants in the receiving sector 
will be in the form of a percentage of the value or a fixed amount per 
unit of weight or volume of the fish described in the charter when 
purchased by such receivers from fish harvesters.
    (b) An assessment on sector participants who own fish processing 
vessels and harvest the fish described in the charter will be in the 
form of a percentage of the value or on a fixed amount per unit of 
weight or volume of the fish described in the charter that is no less 
than the value if such fish had been purchased by a receiver other than 
the owner of the harvesting vessel.
    (c) An assessment on sector participants in the importing sector 
will be in the form of a percentage of the value that an importer pays 
to a foreign supplier, as determined for the purposes of the customs 
laws, or a fixed amount per unit of weight or volume, of the fish or 
fish products described in the charter when entered or withdrawn from 
warehouse for consumption, in the customs territory of the United 
States by such sector participants.
    (d) A Council may not impose an assessment on any person that was 
not eligible to vote in the referendum establishing the Council by 
reason of failure to meet the requirements specified under unless that 
person, after the date on which the referendum is held, meets the 
requirements of section.
    (e) Any person may make voluntary payments or in-kind contributions 
to a Council for purposes of assisting the Council in carrying out its 
functions.


Sec.  270.19  Notice of assessment.

    (a) The Council must serve each person subject to assessment with 
notice that the assessment is due. The notice of assessment must 
contain:
    (1) A specific reference to the provisions of the Act, regulations, 
charter and referendum that authorize the assessment;
    (2) The amount of the assessment;
    (3) The period of time covered by the assessment;
    (4) The date the assessment is due and payable, which will not be 
earlier than 30 days from the date of the notice;
    (5) The form(s) of payment; and
    (6) To whom and where the payment must be made.
    (b) The notice must advise such person of his or her right to seek 
review of the assessment by filing a written petition of objection with 
NMFS at any time during the time period to which the assessment 
applies, including the right to request a hearing on the petition. The 
notice must state that the petition of objection must be filed in 
accordance with the procedures in Sec.  270.21.
    (c) The notice must also advise such persons of his or her right to 
a refund of the assessment as provided in Sec.  270.22. The notice must 
state that a refund may be requested for not less than 90 days from 
such collection, and provide that the Council will make the refund 
within 60 days after the request for the refund is requested.


Sec.  270.20  Payment of assessments.

    Persons subject to an assessment would be required to pay the 
assessment on or before the date due, unless they have demanded a 
refund or filed a petition of objection with NMFS under Sec.  270.21. 
However, person who have demanded a refund under Sec.  270.22 or filed 
a petition of objection under Sec.  270.21 may submit proof of these 
actions in leu of payment. In the case of a petition of objection, NMFs 
will inform the Council and the petitioner of its finding at which time 
petitioner must pay the revised assessment if applicable.


Sec.  270.21  Petition of objection.

    (a) Filing a petition. Any person issued a notice of assessment 
under Sec.  270.19 may request that NMFS modify or take other 
appropriate action regarding the assessment or promotion plan by filing 
a written petition of objection with NMFS. Petitions of objection may 
be filed:
    (1) Only if the petitioner determines one or more of the following 
criteria is not in accordance with the law:
    (i) The assessment;
    (ii) The plan upon which the assessment is based; or
    (iii) Any obligation imposed on the petitioner under the plan.

[[Page 3814]]

    (2) Only during the time period to which the assessment applies.
    (b) Contents of the petition of objection. A petition must be 
addressed to Assistant Administrator for Fisheries, National Marine 
Fisheries Service, 1315 East-West Highway, Silver Spring, MD 20910, and 
must contain the following:
    (1) The petitioner's correct name, address, and principal place of 
business. If the petitioner is a corporation, this must be stated, 
together with the date and state of incorporation, and the names, 
addresses, and respective positions of its officers; if a partnership, 
the date and place of formation and the name and address of each 
partner;
    (2) The grounds upon which the petition of objection is based, 
including the specific terms or provisions of the assessment, the 
marketing and promotion plan, or obligation imposed by the plan, to 
which the petitioner objects;
    (3) A full statement of the facts upon which the petition is based, 
set forth clearly and concisely, accompanied by any supporting 
documentation;
    (4) The specific relief requested; and
    (5) A statement as to whether or not the petitioner requests a 
hearing.
    (c) Notice to Council. NMFS will promptly furnish the appropriate 
Council with a copy of the petition of objection.
    (d) Opportunity for informal hearing. (1) Any person filing a 
petition of objection may request an informal hearing on the petition. 
The hearing request must be submitted with the petition of objection.
    (2) If a request for hearing is timely filed, or if NMFS determines 
that a hearing is advisable, NMFS will so notify the petitioner and the 
Council. NMFS will establish the applicable procedures, and designate 
who will be responsible for conducting a hearing. The petitioner, the 
Council, and any other interested party, may appear at the hearing in 
person or through a representative, and may submit any relevant 
materials, data, comments, arguments, or exhibits. NMFS may consolidate 
two or more hearing requests into a single proceeding.
    (3) Final decision. Following the hearing, or if no hearing is 
held, as soon as practicable, NMFS will decide the matter and serve 
written notice of the decision on the petitioner and the Council. 
NMFS's decision will be based on a consideration of all relevant 
documentation and other evidence submitted, and will constitute the 
final administrative decision and order of the agency. NMFS will have 
the discretion to waive collection of a contested assessment or revise, 
modify, or alter the assessment amount based on a Council method of 
assessment.


Sec.  270.22  Refunds.

    (a) Notwithstanding any other provision of the Act, any person who 
pays an assessment under the Act may demand and must promptly receive 
from the Council a refund of such assessment. A demand for refund must 
be made in accordance with procedures in the approved charter and 
within such time as will be prescribed by the Council and approved by 
NMFS. Procedures to provide such a refund must be established before 
any such assessment may be collected. Such procedures must allow any 
person to request a refund 90 days or more from such collection, and 
provide that such refund must be made within 60 days after demand for 
such refund is made.
    (b) Once a refund has been requested by a sector participant and 
paid by the Council, that sector participant may no longer participate 
in a referendum or other business of the Council during the remainder 
of the assessment rate period. Future assessments will only be sent to 
such a sector participant at the request of the sector participant. If 
assessments are paid during a future assessment rate period and no 
refund is requested, that sector participant may again participate in a 
referendum or other business of the Council.


Sec.  270.23  Dissolution of Councils.

    (a) Petition for termination. (1) A petition to terminate a Council 
may be filed with NMFS by no less than three sector participants in any 
one sector. Any petition filed under this subsection must be 
accompanied by a written document explaining the reasons for such 
petition.
    (2) If NMFS determines that a petition filed under paragraph (a)(1) 
of this section is accompanied by the signatures, or corporate 
certifications, of no less than three sector participants in the sector 
referred to in paragraph (a)(1) of this section who collectively 
accounted for, in the 12-month period immediately preceding the month 
in which the petition was filed, not less than 20 percent of the value 
of the fish or fish products described in Sec.  270.3(c)(2)(iii) that 
were handled by that sector during the period, NMFS within 90 days 
after the determination, will conduct a referendum for termination of 
the Council among all sector participants in that sector.
    (3) Not less than 30 days prior to holding a referendum, NMFS will 
publish an announcement in the Federal Register of the referendum, 
including an explanation of the reasons for the petition for 
termination filed under (a)(1) of this section and any other relevant 
information NMFS considers appropriate.
    (4) If the referendum votes which are cast in favor of terminating 
the Council constitute a majority of the sector participants voting and 
the majority, in the period in (a)(2) of this section, collectively 
accounted for not less than 66 percent of the value of such fish and 
fish products the that were handled during such period by the sector in 
paragraph (a)(1) of this section, NMFS will by order terminate the 
Council effective as of a date by which the affairs of the Council may 
be concluded on an orderly basis.
    (5) NMFS initially will pay all costs of a referendum conducted in 
section Sec.  270.23. Prior to conducting such a referendum, NMFS will 
require petitioners to post a bond or other security acceptable to NMFS 
in an amount which NMFS determines to be sufficient to pay any expenses 
incurred for the conduct of the referendum.
    (6) If a referendum conducted under Sec.  270.23 fails to result in 
the termination of the Council, NMFS will immediately recover the 
amount of the bond posted by the petitioners under Sec.  270.23(a)(5).
    (7) If a referendum conducted under this subsection results in the 
termination of the Council, NMFS will recover the expenses incurred for 
the conduct of the referendum from the account established by the 
Council. If the amount remaining in such account is insufficient for 
NMFS to recover all expenses incurred for the conduct of the 
referendum, NMFS will recover the balance of the expenses from the 
petitioners that posted a bond under paragraph (a)(5) of this section.
    (b) Payment of remaining funds. If a Council is terminated under 
section Sec.  270.23(a)(4), NMFS, after recovering all expenses 
incurred for the conduct of the referendum under paragraph (a) of this 
section, will take such action as is necessary and practicable to 
ensure that moneys remaining in the account established by the Council 
under Sec.  270.17 are paid on a prorated basis to the sector 
participants from whom those moneys were collected under Sec.  270.20.
[FR Doc. 06-666 Filed 1-23-06; 8:45 am]
BILLING CODE 3510-22-S


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